This assumption may be correct, but how much does it take into account all risks and opportunities in both regions-and for how long? DECONSTRUCTING THE SHORTHAND Investors assume that these migratory trends will continue. Of course, warmer weather doesn’t hurt, and as baby boomers, the largest demographic cohort, transition into retirement, they also drive-up demand. At the same time, taxes in those regions are minimal. Pandemic aside, why have people been migrating? There are many reasons, of course, but according to Harvard Economist Ed Glaeser, “Since the 1970s, increases in housing supply have been as important as increases in productivity in driving the increases in Sun Belt population.” Simply stated, homes cost less in the South. As with other cultural changes during COVID, this migration from North to South has proven to be consistent and, in some cases, accelerating. In Illinois, for example, residents have moved away at a rate of one person every ten minutes-for fifteen years. This picture becomes clearer with analyses such as the 2020 Migration Report from North American Moving Services, which showed that in 2020, even more people migrated away from Rust Belt states such as Illinois, Michigan, and upstate New York for Sun Belt destinations such as Arizona, Texas, Florida, and the Carolinas. The concept of Sun versus Rust paints a compelling picture: shrinking northern cities and expanding southern cities. Whether cloaked in language and metaphors, or in graphs, historical spreadsheets, and pro-formas, it’s important to know that the assumptions are always there and to understand what they are doing. “Everyone agrees” is usually a sign that assumptions need to be examined.Īssumptions are dangerous, of course, because they determine how facts are interpreted. Yes to the Sun Belt, No to the Rust Belt-end of story.Īnd yet, this universal certainty is concerning. The migration accelerated by COVID has only increased investor confidence. The “Sun Belt” investment strategy has become the standard for serious investors in the US property markets. Population shrinkage in northern “Rust Belt” cities has gone on for so long that it is no longer news-and many investors have simply lost interest in the region. Reports of a mass exodus from northern US cities have become ubiquitous during the pandemic, while southern cities, towns, and suburbs continue to grow. How are shorthand labels like the “Sun Belt” and the “Rust Belt” shaping investment decisions? Should they?
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