SAN FRANCISCO
02/20/2013 09:27 pm ET | Updated Feb 20, 2013

California Migration: High Housing Prices, Not Jobs Or Taxes, Most Responsible For Pushing People Out, Report Finds

No one lives in California anymore, it's too popular.

That's essentially the thrust of a recent blog post by Jed Kolko, chief economist at real estate listing site Trulia. Kolko examined the root causes of the continued imbalance between the number of people immigrating into the Golden State from elsewhere in the country versus those leaving for greener pastures and discovered housing prices--not taxes or jobs--to be the single biggest factor pushing people out.

Looking at U.S. Census data, Kolko looked at how far California's housing prices were above the national average and saw that number's rise and fall track closely with the state's ratio of in- to out-migration. Both figures peaked in 2005, the height of the housing bubble, when California home prices were at nearly three times the rest of the nation's and 160 people left the state for every 100 people who moved in.

In the years since, as housing prices have dropped, those migration levels have begun to converge. Similarly, using a regression analysis to separate out the effects of each individual factor, Kolko discovered that overall housing costs were far more significant in inducing people to leave than the state's relatively high individual tax burden or unemployment rate.

This finding fits well with Kolko's other discovery that lower income Californians are much more likely to leave than the wealthy. Essentially, Koklo argues, poor and middle-class people are being priced out of the real estate market and, as the state's economy continues to work its way out of the recession doldrums, the trend towards out-migration will likely once again accelerate.

Kolko's research directly challenges a report put out last year by the conservative Manhattan Institute, which blamed California's migration imbalance on the state's high taxes, unemployment rate and a regulatory climate often viewed as less than hospitable to business.

"Will more Californians leave as the economy recovers?" Kolko writes. "Probably, yes. The most important factor slowing the out-migration of Californians in 2008 to 2011 was that home prices fell more in California than in the U.S. overall, making California more affordable relative to the rest of the country than during the housing bubble. However, the housing recovery is now lifting home prices in California."

That housing recovery is already starting to kick into high gear. A January report by Realtor.com found that Sacramento had the biggest year-over-year gains of any housing market in the country--followed closely by a bevvy of other California cities such as Santa Barbara, San Francisco, San Jose, Fresno and Riverside.

California's unaffordable housing prices are one of the primary reasons why, under a new measure of poverty used by the federal government that takes overall cost of living into account (unlike the standard measure, which solely looks at food prices), California's poverty rate was the highest in the nation--a staggering 23.5 percent. With nearly a full quarter of California residents unable to afford the basic necessities, it isn't surprising that many of them are choosing to leave.

However, thanks to immigration from overseas and a birth rate a hair over replacement levels, this migration imbalance doesn't mean that the state's overall population level is declining. A study by a pair of University of Southern California professors last year predicted the state to maintain a one percent annual growth rate for the foreseeable future.

"This is more manageable growth and that's good news for California," Dowell Myers, co-author of the USC report, told the Los Angeles Times. "We're returning to a more normal rate of growth [after the boom of the preceding decades]."

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