In the 1990s a great movement took place across the world. It was not a philosophical or an ideological movement but its effects were revolutionary. It was a physical movement: The Move to the Sun. Warm climates suddenly began to attract large leisure, vacation and retirement communities, especially in Florida and Arizona, the Caribbean, and in the South of Europe.
In the US, the fastest growing states in terms of population are the warm, sunny states, collectively known as the Sunbelt States. There is no general consensus about which states are actually included in this category. Many authors include states lying below the 37th degree latitude, i.e., 13 states plus the southern parts of California and Nevada.
The lure of the Sunbelt
Dr. William Frey of the Brookings Institution refers to a 'New Sunbelt' national counterparts to the local, but now receding, 'city-suburb' dichotomy. The states he includes in the New Sunbelt are Georgia, North Carolina, Arizona, Nevada, Colorado, Tennessee, South Carolina, Virginia, Oregon, Washington, Delaware, Utah and Idaho. These states are among the fastest-growing states, mostly due to migration from the Frostbelt.
The Frostbelt states are 18 or so states are located in the New England and Mid West. A subset of the Frostbelt is the Rustbelt, focused on the Midwestern States of Illinois, Indiana, Michigan, Ohio and Pennsylvania.
Where the sun shines, the population grows.
Of the 20 fastest growing states, 18 are Sunbelt and/or New Sunbelt. From 1990 to 2000 the population of Nevada increased by 66.27%, followed by Arizona, which grew by almost 40%. At the other end, of the 20 slowest growing states, 13 are in the Frostbelt.
The move towards warmer and sunnier states is obvious from the net migration data. From 1995 to 2000 the number of people moving away from the Frostbelt almost equalled the number of people moving towards the Sunbelt.
A closer look at the data is also revealing. One good example is the move from New York to Florida. Between 1995 and 2000, 308,000 people moved from the financial capital to the 'retirement capital' of America, the highest state-to-state migration figure. New York was also the state with the biggest population loss due to migration, with 874,248 net out-migrants. The state which gained the most due to migration from 1995-2000 was Florida, with 607,023 net migrants. Again, the pattern is clear the cold states lost, while the warm states gained.
The sun shines on house prices too
Given the rate of migration towards the Sunbelt, you might assume that the same areas should experience rapid house price growth. If we look at house price growth data from the Office of Federal Housing Enterprise Oversight (OFHEO), the two states with the highest house price appreciation are Sunbelt States, Nevada with 31.22%, and California with 25.42%. The third place went to Hawaii, also sunny and coastal, which experienced 24.36% year-on-year house price growth during this period.
But some of the Sunbelt misses out
However, of the 15 states with lowest rate of growth of house prices, nine were in the Sunbelt. The rest were Frostbelt states. This might cause surprise. The explanation lies in the factors behind demand and supply. Migration, in fine, is only one element in effective demand.
According to a study by Glaeser et.al., land use or zoning regulations are more important in house price determination than even the cost of construction.
Glaeser et al classified US areas into three categories.
- Places where housing is priced far below the cost of new construction, primarily the central cities along the Frostbelt, such as Detroit and Philadelphia.
- Places which have experienced robust house price growth and where housing costs are quite close to the cost of new houses. These are usually at the edges of the cities, because of suburbanization.
- The third category is where house prices are much higher than the cost of new houses. Good examples are New York City and several cities and suburbs in California and the East coast. Homes are expensive in these areas because of regulation in the form of zoning and other building restrictions.
Zoning laws make the difference
According to Glaeser et al, the data suggests that there is plenty of land in these high-cost places and new construction might be able to bring down housing prices close to the construction cost. But barriers to building create a wedge between housing prices and building costs.
Of course, high immigration and rapid population growth might be expected to pressure local leaders to put more zoning and regulations to preserve the status of their cities. Current residents might want to limit the number of people coming into their area. Migrants could be discouraged by high prices of housing while residents are benefiting from rapid house price growth caused by the regulations. But somehow, this does not always happen.
So the relationship between migration, house prices and zoning is complicated. One possible reason that areas with high net immigration experience slower price growth, is the reverse correlation between house prices and the movement of people. It is possible that people are moving away from areas that are already expensive, and which are still experiencing rapid house price growth, such as New York and California.
People still prefer the safe and familiar
At the same time that Americans are moving towards the Sunbelt, Europeans are also moving towards the coast. The entire stretch of Mediterranean Sea is filled with holiday homes, villas, hotels, and resorts. Europeans, even from the northern tip of Denmark, can drive down to a villa in Spain for a warm summer vacation. The move to the sun has benefited mainly Portugal, Spain, France, Italy and Greece. Europeans, Americans, and Canadians also go to the Caribbean and the Pacific for their vacations.
If we look at the movement of people within Europe and America, people generally move to the closest sunniest place. New Yorkers prefer to move to Florida (both are along the East Coast) rather than California. Germans prefer the coast of France rather than drive farther to Spain. British tourists prefer Spain than France, even if the latter is closer, because while the cost of air travel is about the same, Spain is cheaper than France.
People also prefer to move to places with similar institutions, the same legal system, currency, language or colonial heritage. Looking at the data of outbound travel of Americans, their top destination is Mexico. In Southeast Asia, their clear choice is the Philippines, their former colony.
Travel to Eastern European countries has increased since their admission to the European Union. With the adoption of a common European currency, the standardization of entry requirements for foreigners, and relaxation of ownership rules, more Europeans are venturing to cheaper but sunnier places. Once again, proximity and familiarity are important.
Finally, there is a third trend. While Europeans, North Americans and Japanese are going around looking for the perfect paradise, people from the developing world such as China, India and the Philippines are moving to Canada, Australia, Europe and United States.
Modern life was first urban, then suburban; now international
The trend of the internationalization is not really a new phenomenon. It follows the general pattern of the development of cities. Initially there is a move towards the cities where factories and jobs are (urbanization). As the cities become crowded, and the economy shifts from manufacturing to service, people move to the outskirts (sub-urbanization). With increased connectivity of physical goods and data and the miracle of air-conditioning, water management, and urban planning, people can now live where they want, while doing the same work as before. This is internationalization.
So the move to the sun is a further extension of a long-established pattern: urbanization, suburbanization, and now internationalization.
Finally, if developing countries get it right, they can benefit. The rich will benefit, the poor will benefit. And the two will meet in the middle. Remember the Caribbean: some descendants of slaves are now among the richest people on the earth, courtesy of the move to the sun.