When The Levee Breaks: Historic Migration To Sun Belt Is Coming To An End

Housing Overvaluation Impacts Coastal And Low-Income Communities Most
The Natural Snow Belt To Sun Belt Migration Has Stopped
Migration Northward Is Expected In A Few Decades

The proliferation in the use of air conditioners that began in the 1970s accelerated migration to hotter climates in the Sun Belt. As a result, home building in states like Florida, Texas, and Arizona has been booming because of the warmer climate, baby boomer retirees, lower cost of living, and economic declines in the Rust Belt. In fact, twelve of the fifteen fastest-growing cities are located in the Sun Belt. The surge in Sun Belt migration has been significant for the last half-century, especially recently, after the pandemic. However, according to the San Francisco Fed, awareness of climate change is suggesting a reversal of this long-term trend, which has already begun with seniors.

Correlation Between Hot Counties And Migration Ended

The SF Fed study looked at temperature versus population in decade-long increments to track migration patterns. They clearly drove the migration to the Sun Belt. From the Yahoo Finance writeup of the study, they:

…analyzed temperate and population trends by decade, starting in the 1970s. They defined “extreme heat” as a day where the 24-hour average temperature was above 80 degrees, and “extreme cold” as a day when the average temperature was below 20. Then they looked at population changes by county, excluding Alaska and Hawaii.

And the spread between hot and cold locations as a motivator to move evaporated over the past decade. Of course, short term patterns established after the pandemic because of Work From Home (WFH) are continuing, but the larger macro trend is ending.

In other words, the hotter Sun Belt temperatures and the warmer Snow Belt temperatures are reducing the motivation to move south, among other factors. When raising our four boys, we always sought out the colder weather for Spring Break vacations, like skiing in Canada or Vermont. My wife is from Michigan, and I love, love, love the cold weather. You can see the skew in temperatures over the past half-century in this New York Times piece.

Whether One Believes In Climate Change Or Not Is Immaterial. Everyone Is Facing Rising Disaster Insurance Costs

As time passes, the planet is experiencing more weather volatility. And more weather volatility brings more exposure to storm damage. And more storm damage brings higher housing-related insurance costs. Last year was one of the worst climate disaster periods on record. It’s all about the higher frequency of weather events and the cost to repair the damage they cause that is pushing insurance higher, and in same case, forcing some insurance companies to leave high-risk states.

Risk Of Housing Overvaluation Isn’t Widely Understood

There was a super cool study at Nature.com Unpriced climate risk and the potential consequences of overvaluation in US housing markets. The study estimated that 100-year flood zone properties were overvalued by 8.5%. By ignoring the impact of housing overvaluation, coastal properties, and low-income households are more exposed to losing home equity by living in lower-cost areas (Think the Ninth Ward in New Orleans after Hurricane Katrina). And those locations have a large swath federally insured mortgages using those properties as collateral.

I’ve mentioned this in previous posts, but I find it interesting how FEMA continues to underprice actual disaster risk and encourage homebuilding in high-risk locations, shifting the cost exposure to the taxpayer. I saw this firsthand in the aftermath of Superstorm Sandy. Political pressure forced FEMA to withdraw the flood map updates in the NYC metro area after costs were projected to spike.

Because political pressure doesn’t allow FEMA to anticipate insurance coverage risk when the levee breaks, the song version you prefer is probably not that important.