By Jacob Passy
Inflation is running hot in virtually every corner of the country. But in America’s top housing markets for migrants, consumer prices are soaring at an even faster rate.
A new report from Redfin /zigman2/quotes/203726414/composite RDFN -2.93% analyzed the relationship between inflation and migration across the metropolitan areas where price data was available. To do this, Redfin compared the net inflow of residents from other cities based on its website search data to data collected through the Consumer Price Index.
Nationally, consumer prices had risen roughly 7% year-over-year as of December, well above the target rate of 2%. For the housing markets that are attracting the most transplants from other parts of the country, inflation was even worse.
Atlanta had the highest inflation rate in the country, according to Redfin’s analysis, with consumer prices rising nearly 9% over the past year. Phoenix was next with an 8.4% inflation rate, followed by Tampa, Fla., at 8%.
Phoenix was the second most-popular destination for Redfin.com users who were moving to a new city, while Tampa came in at No. 5 and Atlanta at No. 10 on the ranking.
“Migration is one reason among many why the cost of everything from food to fuel is rising,” Redfin deputy chief economist Taylor Marr said in the report.
In many cases people are relocating to these cities particularly due to their lower housing costs. Transplants from cities like Los Angeles, San Francisco and New York can stand to save tons of money on rent or mortgage payments — and get a larger house in the process.
Generally speaking those more expensive cities have seen far lower rates of inflation. Consumer prices have only risen 4% over the past year in San Francisco, for instance. New York and Los Angeles have also experienced a far smaller uptick in consumer prices than the national average.
“The new residents are winners because the cost of living is still low compared to where they came from, even with higher inflation,” Marr said.
Some local residents in the destination cities also luck out. In particular, homeowners in those cities stand to benefit from rising home equity — Phoenix has seen the fastest rate of home-price growth in the country for some time now — and business owners can reap the rewards in terms of growing profits.
“A person moving from New York City to Atlanta will probably enjoy lower housing costs in their new hometown,” Marr said. “That means they’re able to spend more on other things, which in turn means local businesses can charge higher prices.”
Not everyone in these cities wins though. Renters and people who commute longer distances for work will pay the price, thanks to the rising cost of living and higher prices for items like groceries and gas.
The longer this trend of people moving from high-cost areas of the country to these lower-cost cities continues, the less difference there will be between the two.
“The flow of people moving from traditionally expensive cities to more affordable areas will slow down because, quite simply, prices are rising so fast that those places won’t be as affordable anymore,” Marr said.