After slowing down during the recession, migration from California to Arizona is gradually beginning to increase.
About 50,000 people made a move in 2011 that is around 3,000 people more than the year before.
People tend to move within the United States looking for lower livings costs, better business opportunities and jobs.
California lost 22 percent of its state tax revenue because people fled its higher tax burden, higher living expenses and stricter regulations, said John Chiang, California State Comptroller office’s report for the last fiscal tax year.
For Californians, Arizona is somewhere between Texas and Nevada on the scale of top migration destinations. Recently its housing market had started showing signs of a rapid recovery, especially in Phoenix, where residential house prices rose 23 percent in 2012.
Rick Navarro, 35, moved to Arizona from San Diego after his wife had to relocate because of her job. They settled in Phoenix with their three young children. Navarro said that they start feeling financial pressure when they were living in California, which made it easier for them to move.
“The problem is that we had two kids and we were just basically living paycheck to paycheck,” he said. “So we did research and saw that the cost of living in Arizona was far less taxes-wise.”
California has a tough tax burden— 11.2 percent, 2.8 percent higher than Arizona’s, according to the Tax Foundation. The highest income tax goes up to 10,55 percent in California, when in Arizona it is 4,54 percent. That encourages people to move out of state.
Navarro, who is a PR Director for the Salvation Army, was transferred to Phoenix in July 2012. He said that since his family moved, they feel relieved about money issues and can even start saving.
“We were able to get about twice the size of the house, where my kids, all of them, have their own room, and we are able to save $700 or $800 in rent monthly,” Navarro added. “And obviously with the cost of homes here, we will be able to afford a far larger home half the price in San Diego.”
The best-selling properties in Phoenix right now are homes priced at $100,000 to $250,000, according to Tucker Blalock, a Phoenix real estate agent for Bortman & Blalock realty. “They sell well because they are cheaper and people can rent them out with a better return,” he said. “They stay less then 30 days on the market.”
As the housing market is recovering in Arizona, construction firms have started hiring again. Last year Arizona added 64,300 jobs, according to the U.S. Department of Labor Statistics. The optimistic prediction is that 60,900 jobs will be created in 2013 based on the Arizona Department of Administration’s forecast.
California’s unemployment rate was 9,8 percent in January 2013, which is 1,8 percent higher then Arizona’s rate. This can be an explanation why out-of-state residents might find these opportunities appealing and decide to move.
“We are seeing private investors across the country interested in the residential market,” said Nathaniel Karp, chief economist at BBVA Compass. “Most tend to be local, as they are the ones that know the market better, but we are also seeing out-of-state investors that are returning in search of higher returns.”
But Arizona’s home market supply fails to meet existing demand, even though the state’s construction industry added around 7,000 jobs in 2012 and was ranked fourth nationwide.
“New home construction is up sharply but still close to historic lows,” said Michael Orr, director of the Real Estate Center at the W.P. Carey School of Business at Arizona State University. Even though there is a big demand for houses, he explained, construction is picking up slowly because “undocumented labor used to be a large source for the construction industry and this source is now severely restricted,” resulting in unfilled vacancies in construction and labor shortages.
Economists said that California’s migrants used to account for 15 percent of home purchases in Arizona in 2006, but since the recession that number has dropped to 4 percent. But still, without these moves, the market would be weaker.
“The effects could be larger if the cohort tends to be professionals with kids, and even more if they are highly educated, which may be the case for people more concerned on paying higher taxes in California,” said Karp.
Economists don’t expect the migration from California to increase dramatically anytime soon, but its sustainable growth is expected to increase yearly. Orr said the largest source of investors outside Arizona are people from California and Canada, and if the migration flow “appears as predicted, the demand on housing will increase.”