Tech Hubs Draw Fewer Out-Of-Town Renters While ‘Peripheral’ Markets Get More Attention
Yet another report on shifts in renter preferences across America’s vast housing market (where roughly half of Americans are still renters) is showing once again that renters continue to abandon over-priced “hubs” like San Francisco and Seattle while the number of out-of-towners moving to “peripheral” markets like Sacramento, Richmond and Raleigh is on the rise.
Stock photo: Richmond VA.
According to Apartment List, the ongoing pandemic has forced many renters to rethink their situation, as increasing shifts to remote work, and other disruptions some related to the pandemic, others not, change the landscape for remote work.
Of the 50 largest metros, 37 saw a YoY decline in relative inbound migration, while 26 of the 50 largest saw a YoY decline in relative outbound migration. Meanwhile, for both inbound and outbound shifts, the largest declines occurred in the places where the level of the given metric was highest in 2019. For example, from April through August of last year, the San Francisco metro area saw the second-highest relative inbound migration rate. But ever since, it has experienced the largest decrease in that share.
As a result, many of the hot markets that had been attracting significant interest from out-of-towners have cooled, while some less-popular destinations are now attracting more inbound interest. Because of this, San Francisco has seen the nation’s fastest decline in rents since the start of the pandemic, with prices down by 3.3% from March through July. Although San Francisco remains the nation’s most expensive rental market, local renters are likely finding better deals now than they have in some time, which may encourage them to stick around.
As inbound interest to San Francisco cools, another NorCal metro has seen inbound interest increase: Sacramento. In 2020, relative inbound migration to Sacramento increased by 3.8% compared to last year; this is the second largest increase among the nation’s 50 largest metros. San Francisco is the most popular source of inbound searches to Sacramento, and this migration flow has strengthened from 2019 to 2020. As more flexible working arrangements gain popularity, affordable metros on the peripheries of major job centers may become increasingly attractive, and Sacramento appears to be showing early signs of this trend.
A similar dynamic appears to be at play in a few of other major metros that renters consider more-affordable alternatives to some of the nation’s most expensive markets. Richmond, VA, which sits about 100 miles south of Washington, DC saw relative inbound migration increase from 31.4% last year to 34.6% this year.
However, this trend isn’t universal – some tech hubs are still seeing intense interest from out-of-towners. For example, Boston saw the biggest increase in the share of renters looking to leave the metro, with relative outbound migration increasing from 21.1% to 28.7%. The combination of these changes could mean that Boston is poised for more turnover in its renter population in the near future. This might in part be driven by the fact that Boston has always been a popular city among college students, who have increasingly shifted to remote learning over the past few years.