U.S. inflation hot spots happen to be pandemic-migration hot spots
Some of the hottest pandemic-migration destinations also happen to be home to the hottest regional inflation rates.
The relationship between migration and inflation has strengthened significantly as more people relocate from expensive coastal cities to more affordable metro areas, according to an analysis released by Redfin on Tuesday.
“We saw an acceleration of inflation happen particularly when we looked at the metro level inflation data. We saw right away that inflation was highest in Phoenix and lowest in San Francisco,” Redfin deputy chief economist Taylor Marr told CNBC.
For example, Phoenix saw prices of goods and services rise 10.9% in the first quarter from the year-earlier period, ranking it the metro region with the highest inflation rate in Redfin’s analysis.
According to Redfin’s migration data, Phoenix was also the second-most popular destination for homebuyers looking to move from one metro area to another in the first quarter, behind only Miami, Florida.
Meanwhile, San Francisco, which tops the list of metro areas that homebuyers moved away from during the first quarter, had a 5.2% inflation rate, the lowest in the Redfin analysis.
The consumer price Index, which averages prices across America, rose by 8.5% in March 2022 from a year ago, the fastest annual gain in 40 years.
“We know a lot of people that we’ve been tracking throughout the pandemic have been leaving in places like the Bay Area and New York or D.C. on the East Coast. And they’ve been pouring into these hot migration destinations throughout the pandemic, like Phoenix, Miami, Tampa, Atlanta,” Marr said.
Atlanta, Georgia, had the survey’s second-highest inflation rate at 10.6% while Tampa, Florida, had the third highest at 9.9%.
Redfin’s analysis showed Atlanta ranked the 10th-most popular migration destination, and Tampa was the third-most popular migration destination.
On the reverse side of the trend, New York City had both the second-lowest inflation rate at 5.4% and was the the top third place homebuyers moved away from. Similarly, Los Angeles clocked in at number two for residents relocating and generated a middle-of-the-road inflation rate at 7.8%.
The influx of people moving into Phoenix, Tampa and Atlanta during the pandemic also has led to rapidly rising home prices in those regions. And that’s just one contributor to outsized inflation there.
“When people move to an area, it puts additional demands on local goods and services, such as restaurants, and that enables them to raise their prices,” Marr said.
Marr says the financial benefits of moving to relatively affordable areas may eventually diminish over time.
“Most of the people moving to these areas are moving there with higher budgets. They have higher incomes… So, the cost of living might be really affordable to someone who is moving into the area. But, for an existing resident who is already there, they might be feeling more of the pains if they haven’t had strong income gains and they are still facing higher prices,” Marr said.
