Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

Market Commentary

Where will Coronavirus Boost Real Estate?

The coronavirus pandemic could boost real estate prices in some parts of the United States. Conversely, coronavirus will destroy property values in many other regions.

For instance, coronavirus could increase demand property values in some rural and Sunbelt areas. To explain, people who work from home will want to move to safer and more pleasant areas.

For example, some professionals will abandon their apartment in Brooklyn or their ranch home in Aurora, Colorado, in favor of a house in Florida. Additionally, many people will realize that they no longer need to live within commuting distance of their jobs.

Hence, many people will move farther out in the countryside or to a high-quality-of-life smaller city or small town. More people will move from Naperville, Illinois, or Levittown, New York, to Salida, Colorado, or Saint George, Utah, for example.

Coronavirus will fuel Migration

I think coronavirus will help places with low taxes, low housing prices, low density, good climates, and a higher quality of life most.

In particular, many work-from-home professionals will move from high-tax states; such as California and New York, to no-income tax states such as Nevada, Florida, Tennessee, New Hampshire, Texas, and Wyoming. Additionally, small cities and towns that offer urban amenities such as ethnic restaurants, old buildings, outdoor recreation, parks, excellent schools, old houses, live entertainment, colleges, shopping, and sports will see more in-migration.

For instance, families could move from Boston to Charlottesville, Virginia, Santa Fe, New Mexico, or Jacksonville, Florida. Warmer climates will be one of the major focuses of that migration.

Families with children and seniors will pioneer the migration, but many singles will follow. I predict many older singles who are sick and tired of apartment-living will decamp from cities such as Chicago and head for locales like Galveston or Boise.

Shift Back to Public Schools

One factor driving the out-migration could be a shift back to public schools by the upper class. To explain, Scott Galloway or Prof G predicts that many upper-class parents will realize that private schools are expensive yet do not provide a better education.

Galloway believes many families will see the inferior quality of some private school education through their kids’ Zoom (NASDAQ: ZG) lessons. Thus, many parents will wonder why they are paying extra for something the government provides for free; K-12 education.

Consequently, many families will move to rural or ex-urban areas or smaller cities with good public schools or Charter Schools. I think families will make the move because they could stop spending several hundred or several thousand dollars a month on private school tuition.

Hence, a family that moves from Brooklyn to Butte could increase its income by several hundred or several thousand dollars a month. Cynics will note many families will make the move to send their kids to a white school. However, I think money will be the principal driver of the migration.

Regions where Coronavirus will Boost Real Estate Prices

Some regions where I think coronavirus will increase real estate prices include:

  • Florida. This state has no income tax, great beaches, and lots of sunshine. However, I think climate change could generate super hurricanes and high temperature that could depopulate sizable areas of the Sunshine State. On the other hand, I think  the depopulation is a generation away.
  • Colorado. My home state is already seeing a huge in migration of younger professionals seeking rural life and outdoor recreation. Expect to see a massive population boom in areas of Southern Colorado; such as the San Luis Valley and Pueblo, that offer beautiful scenery and lower property values.
  • Wyoming. Expect many rich people to move to this no-income tax state with beautiful scenery and great hunting. Many rich people will move to Wyoming because of its low density, low exposure to future pandemics, and lack of riot-prone cities.
  • Montana. The in-migration of wealthy and upper-class people seeking outdoor recreation, great trout fishing, and small town lifestyles will grow. Like Wyoming, Montana is low density and lacks large cities.
  • Vermont, Maine, and New Hampshire. These rural states are in the Northeast, a short drive or train ride from New York City. Yet they are low density and offer a lot of history. Expect to see many professionals from New York and Boston head to these states. New Hampshire has the attraction of no income tax.
  •  Upstate New York. This region has great scenery, lots of history, and many small towns and cities full of colorful old buildings. Expect to see many Hipsters from Brooklyn move Upstate.
  • Western Massachusetts. Similarly to Upstate New York, this region has historic buildings and a small town lifestyle. Expect to see migration here from Boston and New York.
  • Rural Pennsylvania, particularly the Poconos. The attractions here will be low property values, historic towns, and a rural lifestyle. Yet it is within easy driving distance of New York City.
  •  Nevada. This state is a few hours’ drive from Los Angeles and the San Francisco Bay Area. Yet it has no income and a lot of scenic beauty. Las Vegas, in particular, has a lot of housing stock that will be attractive to middle-class people priced out of LA.
  • Arizona. A warm climate and lots of cheap real estate in some areas. This state will attract lower income home workers seeking a middle-class lifestyle and low heating bills. However, water shortages could throttle in migration.
  • New Mexico. This state will also attract lower income home workers seeking more house and higher temperatures. Historic cities such as Albuquerque and Santa Fe will attract many high-income work-from-home professionals from the Coasts.
  • Rural Wisconsin, Michigan, and Minnesota. These states feature many historic old towns and great outdoor recreation. Yet they are within driving distance of Minneapolis, Chicago, and Toronto. In particular, expect to see more interest in smaller cities such as Green Bay, Wisconsin and Duluth, Minnesota.
  • Western and Northern Ontario. This area offers great outdoor recreation and some old towns such as Sudbury and Thunder Bay. Many Toronto area residents could move here from overcrowded Southern Ontario.
  •  West and Central Texas. Expect to see migration away from bigger crowded cities such as Austin, Houston, and Dallas to smaller cities such as El Paso. The Rio Grande Valley; in particular could attract many low-income home workers seeking low property values.
  •  The Piedmont. This pleasant Plateau stretches South from Central New Jersey to eastern Alabama. The Piedmont contains many pleasant old small towns and historic small cities such as Scranton, Greenville, Greensboro, Roanoke, and Chattanooga. Importantly, much of the Piedmont is within easy driving distance of cities such as Atlanta, Washington, Philadelphia, Pittsburgh, and New York.

These are some regions that could see coronavirus in-migration. There are many other communities and places that will see some in-migration.

However, I think the pandemic will hurt expensive, crowded, big cities, and cookie-cutter suburbs. Expect rolling waves of falling property values across suburbia as large segments of the country realize they no longer have to live near their work.