Bank of America (BofA) Institute released a new analysis revealing that net flows of domestic migration—people moving within the United States—continue to follow pandemic trends. BofA internal data, which leads the Census Bureau population data by almost a year, found that as of Q1 2023, cities that saw a large influx of people during the pandemic are still growing faster than other cities in recent quarters, but housing prices are weakening even in cities with growing populations.
Among the major metropolitan statistical areas (MSAs), Austin saw the largest net inflow of population both during 2020-2021 with +5% and over the past four quarters with +1.5%. Also high on the list are Tampa and Orlando, both with a net increase of +0.8% between Q1 2022 and Q1 2023. While Phoenix and Las Vegas saw strong increases in population during the first two years of the pandemic, the pace of growth has slowed noticeably in recent quarters, up just 0.3% and 0.2% year-over-year (YoY) in Q1 2023.
Large population inflows usually increase both home and rental prices. However, home prices are slowing rapidly, according to data from Freddie Mac, even in cities with growing populations, including Austin. In 2020 and 2021, when both housing inventory and mortgage rates were low, cities with the most inward migration such as Austin and Tampa also witnessed the biggest increase in home prices. However, as Fed rate hikes pushed up borrowing costs for these homes, demand dampened despite continued population growth in these popular cities, which has led to a correction in home price appreciation.
Cities such as San Jose, San Francisco, and New York saw the biggest outflow of people during the early years of the pandemic, and the rate of decline in 2023 continues to be the highest among major MSAs.
In contrast, rental prices remain strong in cities with positive inflow of residents. In April 2023, median rent payments for BofA customers in Austin, Orlando, and Tampa were up 11%, 14%, and 14% YoY. This compares to the national average of 8% and just 3% for San Francisco.
In addition to the fact that population increases lead to higher demand for rental units, low affordability in the home purchasing market has likely also pushed some prospective homebuyers into the rental market, leading to even more upward pressure on rent levels.
The latest Home Buyers and Sellers Generational Trends report from the National Association of Realtors found that, for the first time since 2014, baby boomers overtook millennials as the generation with the biggest share of homebuyers. From July 2021 to July 2022, 39% of surveyed homebuyers were baby boomers, followed by 28% of millennials and 24% of Gen X.
The rise of baby boomers as the primary homebuyers can be attributed to three main reasons. First, as this generation retires, they move closer to family and friends. Second, demand for smaller homes increases as their children move out. Boomers hold the greatest wealth across generations at $73 trillion in Q4 2022—eight times that of millennials. In the current environment of high home prices and interest rates, boomers are better equipped financially for home purchasing. In fact, data shows only 49% of older Boomers (aged 68-76 years) financed their home purchase in 2022, compared with 93% of those aged 33-42 years, according to the report.
The generational breakdown of Bank of America internal data suggests baby boomers’ migration patterns over the past few years have been different from other generations. Specifically, while Austin continues to attract inward migration overall, the number of baby boomers in the city has declined over the past year. The exodus of the group with the most cash could have added to the downward pressure on Austin’s home prices over the last year.
Las Vegas, Phoenix, Tampa, and Orlando are among the most popular destinations for baby boomers, according to Bank of America internal data. Note that the pace of migration slowed for Vegas and Phoenix over the past year, but was relatively unchanged for Tampa and Orlando. This could partly explain the still resilient home price appreciation in Tampa and Orlando relative to other cities.
Alternatively, boomers are leaving some of the largest cities in the U.S., including the Bay area, New York, and Seattle.
For millennials, the most popular destination for domestic migration is Austin, Texas, with the number of millennial customers up 16% in Q1 2023, leading other cities by a wide margin.
Cleveland, Tampa, and Dallas each saw a 6% increase in the millennial population over the past three years. In Q1 2023, the home ownership rate for those younger than 35 years old was 39%, 23 percentage points lower than that for 35–44-year-olds.
“Domestic migration continues to be a key theme shaping the housing market,” said Anna Zhou, VP, Economist for Bank of America Institute. “While rising interest rates are dampening home-buying demand in the near term, the housing market in cities where millennial and baby boomers are moving could see strength in the longer term as the former enter prime home-buying age and the latter downsize their houses.”
To read the full report, including more data, charts and methodology, click here.