Back With certain states reopening, companies resuming office work, and schools reinstating in-person classes, society is boldly moving towards a post pandemic world. While Americans are excited to recover and return to normal daily activities, in many instances, COVID-19 has served to greatly accelerate existing trends that will continue to persist beyond the pandemic. Trends towards digital and virtual connectivity, consumer convenience, working from home, e-commerce shopping, and sunbelt migration were all accelerated due to COVID-19.
For years, Florida and Texas have benefited from people fleeing high tax states with less desirable weather in favor of warmer climates, low tax legislation and a better quality of life. The work from home movement enabled people to be less geographically tied to major urban areas and thus, during the initial stages of lockdown, people left these dense urban areas in favor of suburban locales that provided more open space, greater access to the outdoors, and, in certain cases, less limitations. There is no place that benefited more than Florida, which saw a record high level of residential real estate transactions. In fact, a CBRE study on COVID’s Impact on Resident Migration Patterns found that out of the top 20 cities with the largest net population gains, 11 are in Florida and four are in Texas, accounting for 75% of the list.
During the initial stages of pandemic related restrictions, the transition of school and work to a remote format allowed the occasional Florida resident or visitor to stay in the state for extended durations. Additionally, this dynamic allowed a younger generation of new residents to consider and explore Florida’s great cities, ultimately driving demand for residential transactions. According to the National Association of Realtors 2021 Home Buyers and Sellers Generational Trends Report, younger millennials (buyers 22 to 30 years) and older millennials (buyers 31 to 40 years) make up the largest share of home buyers, at 37%. Moreover, of those two groups, 82% of young millennials, compared to 48% of older millennials, were first time home buyers.
Florida migration is not a new trend. During the last decade, Florida has had one of the fastest growing state population counts in the country, increasing by an average of 300,000+ new residents per year. Furthermore, Florida’s Office of Economic and Demographic Research recently released projections expecting 308,497 net new residents per year (845 per day) over the next five years. Additionally, according to the IRS, Florida gained $16 billion in Adjusted Gross Incomes (“AGI”) from migration in 2018, and also led in 2017, when it brought in $15.5 billion. In a recent Wirepoints article, migration patterns of individuals fleeing progressive income tax states to flat and zero income tax states is best highlighted by tracking the cumulative net change in AGI over time. Florida, a zero-income tax state, has seen consistent year-over-year net in-migration from high tax states like New York and New Jersey. Additionally, Florida has experienced a cumulative increase in AGI between 2010 and 2018 of $95 billion (20.3%), the most of any state. Meanwhile, New York and New Jersey lost a combined $75.6 billion in taxable AGI.
This trend has only been exacerbated, as the pandemic caused many to consider making a permanent move, adjust their timeline for retirement forward, or find a way to live in multiple locations. According to Bloomberg, contracts in South Florida soared across all price ranges compared with a year earlier. In the $1 million and above range, deals more than doubled in Palm Beach and Broward counties and rose 68% in Miami-Dade County. The same Bloomberg article suggests that people who were thinking of relocating to Florida in three to four years, due to tax policies, sped up their decision due to COVID-19. According to Florida Realtors, single-family home sales in 2020 were up 5.8% year-over-year in 2020 and median sale prices were up 9.6%. Condo and townhouse sales benefited from similar trends with sales up 2.5% and median price up 12% from 2019.
Halstatt has seen comparable trends play out with increased transaction activity across its entire residential portfolio. The trends are steady across the state in both condos and single-family homes. This demand has not eased in the last 14 months since COVID-19 first arrived and Florida Realtors are predicting that this increased activity will continue into the second half of 2021.
Lower Cost of Living & Business-Friendly
It is not just an exodus from densely populated states that is driving Florida’s growth. The state has done an exceptional job of attracting and retaining younger residents. Florida benefits from having a large population of high-income earners who provide a stable and predictable tax base for the state and make up much of the backbone of the economy, allowing the state to be more nimble with incentives in order to attract businesses, build infrastructure, and keep its highest achieving students in-state for college.
Florida is known as business friendly and affordable:
- Business Friendly – The state invests heavily in recruiting companies to move to Florida and take advantage of its favorable tax legislation and affordable housing options for employees. According to Forbes, Texas and Florida have ranked #1 and #2 in Chief Executive’s “2020 Best and Worst States for Business” survey, positions each state has held since 2004. Business leaders continue to be attracted to each state’s lack of an individual income tax, low corporate taxes, robust business incentives, streamlined regulations, and diverse and growing labor force. Recently, Charles Schwab, Apple, Oracle, Hewlett Packard, and Tesla have either relocated or expanded their presences from California to Texas and the Blackstone Group, Deutsche Bank, Goldman Sachs, Icahn Enterprises, and Elliott Management from New York to Florida.
- Affordability – There is a huge demand for build-for-rent housing, a new asset class comprised of single-family rental homes in a professionally managed and highly amenitized community, and condos for a younger generation of residents due to companies permanently relocating to Florida and COVID-19 induced migration. The Southeast United States and Texas are generally more affordable compared to other geographies and a lower cost of living will continue to pull residents from more expensive regions. An analysis of regional price parity by state illustrates that seven of the top 10 states where $100 will buy more goods and services than the national average are located in the Southeast, suggesting a comparatively lower cost of living. Specifically, Florida’s cost of living index is at 97.9% and Texas’ is 91.5%, meaning they are 2.1% and 8.5%, respectively, below the US national average.
Florida Fundamentals
While the country continues to chart a new post-COVID normal, Florida will benefit from the same fundamentals that have long attracted residents to the state, including its favorable climate, outdoor lifestyle, and desirable cities. On average, temperature across states in the Southeast U.S. is 60.1° Fahrenheit as compared to 48.4° Fahrenheit in states not in the Southeast which enables a more active and outdoor lifestyle. Moreover, Florida boasts an impressive 175 state parks and all parts of Florida being located within 60 miles from a body of salt water. It is no surprise that Florida gained an estimated 241,256 residents from July 2019 to July 2020, according to the Miami Herald. Only Texas saw a bigger jump, adding an estimated 373,965 residents. While people come for the weather, they stay for the tax benefits, and Florida is prepared to welcome them with open arms
