It’s a theme that keeps popping up: California’s loss is Arizona’s gain.
We reported a few weeks back that Arizona’s second home market stood to benefit from the recent move by several California cities to eliminate or regulate short term rentals. By contrast, Arizona has moved to protect homeowner’s rights to earn income from their properties.
But increased regulation on vacation homes isn’t the only problem plaguing California’s real estate market to the benefit of the Phoenix Valley market. Home prices in California have skyrocketed, outpacing wages and forcing many younger, lower earners to relocate to other states where their dollars can stretch further. More than a decade of state budget crises affecting education, high taxes and other problems have also convinced many Californians that they and their families would be better off elsewhere.
Arizona is one of the chief states benefiting from this trend. According to a recent report by the California Legislative Analyst’s Office, between 2007 and 2016, 5 million new residents moved to California. However, more than 6 million people left the state, resulting in a net out-migration trend of more than 1 million residents.
Where did all those Californians go? More than a third of them moved to two states: Texas and Arizona. During the studied time period, more than 150,000 Californians moved to Arizona. Here’s who moved, and why.
Who Moved and Why?
Of those who moved to Arizona, the largest percentage of movers were those who earned between $40,000 and $55,000 per year. Here in Phoenix, that’s aligned with the median income. However, in some parts of California, it’s well below the threshold for low income. For instance, in Orange County, California, the low income threshold is $84,000 for a single person living alone. In the Bay Area, the low income threshold is more than $105,000.
Taxes may be another determining factor
California’s income tax rates are among the highest in the nation, between 9.3 and 13.3 percent. By contrast, Arizona’s income taxes are considerably lower, between 2.59 and 4.54 percent.
Other factors may come into play as well
Families with children and individuals aged between 18 and 25 made up the largest demographic groups choosing to move to Arizona, according to the Legislative Office survey. Education may be one reason why: Arizona classrooms are less crowded, and students perform better on standardized tests than those in California.
Quality of life is another crucial difference
As California’s real estate market becomes more difficult for working families to afford, many Californians have been forced to move to locations far from where they work. California has the 5th worst commute times in the country, with workers spending an average of 29 minutes commuting each way, every day. The Bay Area, in particular, has seen a stunning increase in so-called “super commuters,” or those with commutes in excess of 90 minutes. In Stockton, California, more than 10 percent of commuters are super commuters.
Numbers like these make Arizona’s commute times seem paltry by comparison. In fact, Phoenix has one of the nation’s shortest urban commute times, with just 25.9 minutes per trip.