Which State is the Best to Invest In?
We can argue why our home state is superior to others and why investment upside is forthcoming. Unfortunately, our subjective opinions matter little in the grand scheme of things. If you're a domestic real estate investor, it's best to look at the data to determine how population trends could shape the future outlook.
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I recently pulled the 2022 domestic migration statistics from the Census website to see how states fared as we put the pandemic in the rearview mirror.
The reason why I like domestic migration statistics compared to general population growth is that it excludes:
Births
Deaths
International Migration
While the above bullets are also essential, I would like to know which states are winning the battle for the current U.S. population. Where are people moving to, and where are they leaving from?
In a sense, it is a game of tug-a-war—People migrate domestically for better opportunities or preferences such as:
State Tax Benefits/Political
Lifestyle
Climate
Affordability
I want to know who wins these battles. With domestic migration data, we can determine which states are the biggest winners and losers—the states consistently winning new residents are likely winning economically, which bodes well for real estate investors.
Ideally, your state would see more people moving in than leaving (positive migration) rather than more people moving out of state than moving in (negative migration).
I have compiled a few columns of data from the Census Bureau. I break up the data set into three sections (from left to right).
2022 Population & Migration Statistics
2021 Population & Migration Statistics
Change in Migration from 2021 to 2022
I color-coded cells to make good and bad trends stand out.
I ultimately decided to rate each state by the "2022 Migration Percentage," which takes:
2022 Domestic Migration / 2022 Population
I do this because states have wildly different populations. Ranking by "Domestic Migration" alone wouldn't be as insightful because states with a more robust population base will always be on top (or on the bottom if experiencing domestic migration loss)
*For mobile users, turn the device sideways for optimal viewing*
For a better viewing experience, click “view full-size workbook” in the bottom right-hand corner of the worksheet above.
There are some great insights you can glean from the above table.
South Carolina Domestic Migration #1
Credit South Carolina for having the highest domestic migration percentage in 2022.
Florida & Texas Positive Migration
Both states are well above any other states for the sheer volume of domestic migration. Florida and Texas added +318,855 and +230,000 domestic residents, respectively, in 2022
California & New York Negative Migration
On the flip side, both states lost more residents to other states than any other state, at -342,000 and -299,557, respectively.
2022 Domestic Migration Similar to 2021 Migration
You don't see many states that have an exceptional 2022 domestic migration trend but a dismal 2021 domestic migration trend (or vice versa)
Most states appear to be locked in (for better or for worse) against their peers (with a few exceptions). Over a longer time frame, you would see more wild swings.
Comparing 2022 & 2021 Migration
I like looking at the last two columns to see if there's an imminent reversal in trends. The previous column calculates:
(2022 Migration - 2021 Migration) / 2022 Population
A great example is Idaho. Idaho ranked #1 in 2021 domestic migration percentage and was #2 in 2022. However, 2022 migration numbers are down -22,700 from 2021. While it's still seeing incredible domestic growth compared to its baseline population compared to other states, its domestic migration percentage is down -56% in 2022 compared to 2021.
Another state to look closer at is Wisconsin. Wisconsin had a dismal 2021, losing -18,901 residents. In 2022, it added +7,657 residents from other states. It's still "middle of the pack" in terms of domestic migration percentage ranking, but it could make a big jump if the 2022 trends continue into 2023.
California is another state that is still losing many residents, but at a much slower pace in 2022 than in 2021. Could it turn the corner in the next five years?
2023 will be a crucial year to pay attention to as we will see how "going back to work" affects domestic migration. I'm starting to hear about employers demanding that employees come into the physical office at least a few days a week. I plan to update this blog post with 2023 data.
If you want to go deeper with this data, the Census Bureau also provides domestic migration statistics at the county level.
If you're an investor in Texas, you could get the same data presented above for:
Harris County
Dallas County
Travis County
Bexar County
Or any other county in any U.S. state.
The state view is the starting point. Real estate investing is always hyperlocal, so unearthing the county-level trends is paramount for your submarket analysis.
Here are some excellent domestic migration heat maps and graphics in a recent article published by the Census Bureau that you may find helpful.
Summarizing Domestic Migration Statistics
The states that are enticing residents from other states and are consistently adding more population than they are losing are situated to benefit from the following:
More consumer demand and business opportunities catering to a growing population base
More labor supply, a higher-quality workforce, and new and expanding businesses looking to tap into the local talent pool
A robust real estate industry with opportunities to add to the existing collection of both residential and commercial units
A more robust tax base to support education, health care, and other public services
As water sustains life on Earth, population growth bolsters and fuels the local economy. The states that consistently attract working-age adults from the competition are positioned more strongly economically. As a real estate investor, this is where you want to be.
If you wantneed a tool for submarket analysis, check out our Interactive Labor Statistics Dashboard.