Is Flight from Big Cities Propping Up Trade?
This week brought a flurry of articles about people fleeing many big cities for places that are warmer or cheaper. Collectively, they don’t make much sense — but they may explain some of the changes in consumption patterns that have overwhelmed manufacturers’ and retailers’ value chains.
This all started with a Census Bureau press release reporting that a number of the nation’s most populous counties lost population between April 2020 and April 2021. The New York Times followed with an article asserting that movement out of places like New York and Los Angeles led to the slowest year of population growth in U.S. history. Many newspapers and TV stations piled on, publishing similar reports about their own communities.
On its face, the assertion that movement from some places to other places within the country should have any effect whatsoever on the national population growth rate is illogical. If there is any causality at all here, it probably runs in the reverse direction, with slow national population growth contributing to population declines in some areas.
More perplexing is that the assertions of population decline contradict other evidence. The average home selling price in Los Angeles County rose 19% last year, according to S&P — at the same time as the county’s population fell 2%, according to Census. Washington, DC, supposedly experienced the largest percentage population decline in the country in 2021, 2.9% — but at the same time, the median selling price of homes in the District rose 10% and average rents broke records. Also, according to Census data, the percentage of housing units that are vacant across the country is the lowest in at least 23 years. Those people who are supposedly moving out of big cities aren’t leaving empty homes behind. Somebody is paying high prices for them.
What’s going on here? What we may be seeing is that a lot of college students were living in their parents’ homes rather than in dorms as of April 2021; in that case, we can expect the numbers for 2022 to show a population boom in the same places that endured a bust in 2021. Another possibility is that an overheated economy has brought rapid growth in the number of families who own more than one home. Credible data on this point are scarce, but more people furnishing second homes could explain some of the outsized growth in spending on durable goods that has propped up merchandise trade and kept container ships full over the past two years.
Which raises some interesting questions. With energy costs, interest rates, and service workers’ wages on the rise, owning a second home is likely to become more burdensome for family budgets. If households have to direct more of their income to maintaining a second house, will they have less available for other sorts of consumption? If mortgage rates move even higher, will second homes lose value, leading the families that own them to be more cautious about their spending? If so, the greater popularity of second homes, which has boosted trade since the start of the pandemic, may turn into a drag on trade in the months ahead.Tags: demographics, housing