California home prices spur eastward migration

0 Comments | Oakland Tribune, Jun 28, 2004 | by Stephanie Simon, Los Angeles Times

and Lianne Hart

AUSTIN, Texas -- Soaring property values in California have made many homeowners there rich -- and many real-estate agents here delighted. In an exodus that some demographers say could reshape the American landscape, young professional families are increasingly fleeing the exorbitant coast for Austin, Dallas or San Antonio.

They're selling their cramped "starter homes" in California, some now worth $500,000 or more, and buying luxury homes, for cash, in the nation's interior.

John and Nicole Hutmacher will be moving here this summer, leaving a tract home in a jam-packed subdivision in Santa Rosa, for a 3,000- square-foot estate on an acre in a gated community overlooking central Texas' rippled hills. They'll have enough money left over to buy a boat and a pick-up truck, even to see the world.

"We wanted to do more with our money than pay for a house," said John Hutmacher, 27, an engineer who can work from anywhere in the country. "We want to travel. Eventually, we want to have children."

In California, he said, "we couldn't afford to."

It's hard to quantify exactly how many families are joining the Hutmachers in sacrificing day trips to the beach in favor of bigger homes, smaller mortgages and often, shorter commutes. The 2000 census tracked movement of college graduates around the country and found the metro areas around Atlanta, Dallas, Denver and Phoenix were top magnets. The Bay Area, too, made the list, though demographers say it's attracting more single dot-com workers than young families.

Inward migration

Experts say the migration inward has only accelerated since the census, as housing prices in California and New England have soared.

Calling the shift dramatic, demographer William Frey has dubbed the Southwest and the Southeast the nation's new "brain gainers." A scholar at the Brookings Institution, a think-tank in Washington, D.C., Frey sees a new "smart belt" emerging in the Sun Belt.

Although the colder, grayer Midwest has proved a less attractive draw, cities such as Minneapolis, Kansas City, Ann Arbor, Mich. and Madison, Wis., are also beginning to lure professional families from the coasts. Demographer Joel Kotkin, a senior fellow at Pepperdine University's Davenport Institute for Public Policy, predicts that the trend "may lead to a stabilization, or even a limited resurgence," of the long-declining Rust Belt.

Fly-over country

It's already reshaped the way some entrepreneurs view the vast plains once derided as "fly-over country."

Forbes magazine recently ranked Madison the best place in the United States to do business. A similar survey in Inc. magazine put Atlanta on top. Both lists were dominated by, as Inc. put it, not "the fashionable coasts," but "more prosaic places" where the cost of living is low enough to attract and retain well-educated workers, and companies don't have to pay them a fortune.

Steven Kiser, president of a San Antonio computer firm, calls that the "corporate greed standpoint" -- and he readily admits it's a huge factor for business owners.

When Kiser ran the research department of a software company in Southern California, some of his employees seemed constantly stressed, barely able -- despite what he considered ample salaries -- to afford more than the basic "hygiene factors" of minimal shelter, food and clothes, he said.

His 110 employees at SecureInfo in Texas earn less, but live better because they have more discretionary income for travel and entertainment. And Kiser can use some of the savings he reaps from a lower payroll to provide better benefits, such as retirement plans. As a result, he's noticed less turnover -- and more satisfaction -- in his work force. As for recruiting new talent, Kiser says a quick tour of San Antonio neighborhoods usually does the trick. "The (short) commute, land prices, education ... they ask, what's 40 days of heat and humidity compared to that?"

Home prices have so far outstripped income growth in California that the average worker would need to save every penny he earned for more than eight years to buy the average house. In Wisconsin, that worker would need less than 21/2 years of income to pay cash for a house.

"It's just amazing," said Robert Shiller, the Yale University economist who made those calculations for a recent study. "Californians must be so stressed out."

Flush with equity

On the plus side, Californians who stretched to buy a home now find themselves flush with equity as the market soars.

That gives them options owners in more stagnant markets can only dream of. They can draw a home-equity loan at a low interest rate to cover a child's college tuition or pay down credit-card debt. They can remodel, expand, refinance. Or cash out and call U-Haul.

That's not realistic in places like Fort Wayne, Ind., where housing prices fell 1.8 percent last year, or Salt Lake City, where prices dropped 0.5 percent, or even Austin, where property values eked out a bare 0.1 percent gain.

Such soft markets have created a sense of stagnation in the heartland -- the sad inverse of the California boom.