The downturn in the housing market may be having unintended effects on the movement of the population. And that change could, in a vicious cycle, end up slowing the recovery in the housing market. Migration to the hottest growing areas of the country has slowed, even though the U.S. population continues to move toward the South and the West.
Los Angeles, for example, remains the second largest metropolitan area in the country with a population of ne Sales of new signle-family homes arly 12.9 million people, but that level barely changed from 2006-2007: the population rose by just 8,753 people, or 0.1 percent. In metropolitan Miami, the population actually slipped by 2,228 people over the year to 5.413 million in 2007. Across all of hard-hit Florida, annual in-migration slowed to just 35,000 in 2007, down from an average of 230,000 per year in the three prior years.
The most likely reason for the slowdown in population gains is that these areas are steeped in foreclosures. This prevents many would-be migrants from moving there for fear of even more weakness in home prices.
And there's the rub: until home prices begin to improve, the population will stay put and home buying won't recover.
Table 1: Metro areas with the largest gains in population 2006-07
New growth areas
Conversely, areas with the strongest gains in the population from 2006-2007 were often located in metropolitan areas that were less affected by the strong upsurge in the housing market during the previous five years. For example, Texas did not see the huge run-up in home prices that was rampant along the nation's coastal areas. And yet from 2006-2007, four Texas metros were among the 10 areas with the largest absolute gains in population Dallas ranked in the top spot with an increase of 162,250 people, Houston tipped in with an increase of 120,544, Austin had gains of 65,880, and San Antonio completed the line-up with 53,925 people added to its population over the year.
Texas was not the only state that missed the housing surge and is now benefiting from stronger population growth. Atlanta, Ga., ranked second in population growth over the period from 2006-2007, with a 151,063 gain in its population, and Charlotte, N.C. ranked number six as its population grew by 66,724. Both of these metropolitan areas saw much more moderate increases in home prices than other areas of the country during 2000-2005. Now these housing markets hold the most potential for growth.
- Retail construction spending
- Existing home resales, single-family and condos
- Sales of new signle-family homes
Some areas still growing
At the same time, three metropolitan areas that were at the heart of the housing bubble Phoenix (Ariz.), Riverside (Calif.), and Las Vegas (Nev.) remained areas with thriving growth in the population from 2006-2007. The population in Phoenix gained 132,513 from 2006-2007, while those in Riverside grew 86,660 and Las Vegas advanced 59,165. Despite the strong gains in Phoenix and Las Vegas, the rates of growth for these metro areas have slowed considerably from earlier in the decade. Riverside's population remains more robust because, to a smaller extent, it continues to be a migration destination for the ravaged Los Angeles metro area. While the demand for housing may remain moderately healthy in these areas thanks to the growing population, home buying will not return until home prices stabilize.
Table 2: 10 largest metropolitan statistical areas as of July 1, 2007
According to the Brookings Institute, 2006-2007 was "a year when the extremes [were] reined in." This proved to be true for both the housing market and the population, which are so interdependent. That "reining in" process continues in 2008 and will continue until the housing market's "extremes" are fully worked off. Unfortunately, that's likely to take a while.
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