How the City Almost Came Back
The Story of Migration’s Recessionary Bubble
I’ve recently been critical of how many news outlets cover migration. But one perceptive reader asked me, if the “silly regionalist theories” I pan are wrong, and if the “urban comeback” story is wrong too, how should we explain the apparent trend in the data? Is it really just a fluke driven by underlying pseudo-random noise? And the answer is, well, kind of yes, but not entirely. There is some coherence to migration around the country. So for today’s post, I’m going to dig into the “urban migration bubble” of 2006–2015. I think the best single summary of this phenomenon is in a WonkBlog post I criticized last year. Here’s the core claim in an extended quote from that post:
During the housing bubble, Americans moved in droves to the exurbs, to newly paved subdivisions on what was once rural land. Far-out suburbs had some of the fastest population growth in the country in the early 2000s, fueled by cheap housing and easy mortgages. And these places helped redefine how we think about metropolitan areas like Washington, pushing their edges farther and farther from the traditional downtown.
In the wake of the housing crash, these same places took the biggest hit. Population growth in the exurbs stalled. They produced a new American phenomenon: the ghost subdivision of developments abandoned during the housing collapse before anyone got around to finishing the roads or sidewalks.
These scenes and demographic trends left the impression that maybe Americans had changed their minds about exurban living. New Census data, though, suggests that eight years after the housing crash, Americans are starting to move back there again.
So what are they talking about? Well, you can see the story visually in the associated graphs:
The left graph shows net migration by urban categorization, the right graph shows population growth. So let’s dig into this.
What Really Happened?
The Rent Got Too D**n High
Okay, so urban areas seemed to get more popular from 2006–2012. Migration consistently improved, though it was always negative. And, thanks to improving migration alongside higher immigration and natural growth, urban core areas saw much higher growth than exurban areas, though urban cores never surpassed suburban growth.
But what does this all mean? Does this mean that Americans “changed their minds” about suburban or exurban living? I don’t think so. Let’s look at some other graphs to see why.
The above chart shows Median Gross Rent by year according to the American Community Survey, compared to Median Selected Monthly Owner Costs. Both are indexed for 2005, the first year I had available. Owner costs rose faster than rent until 2009, then declined to 2013. That seems like a good match on face value if we think that renters are more urban, owners more suburban or exurban.
But we can get better than that.
The above chart shows the median monthly housing costs for renter-occupied housing units by census area classification. And lookee there! The metro principal city area, which is very similar to the “urban core” used earlier, was one of the slower-risers to 2012, but saw rapid growth even as rent in other places flatlined after 2011. The chart below shows the dollar gap between metro-principal and metro-nonprincipal, as well as micro-principal and micro-nonprincipal.
As you can see, there’s a dip from 2009 to 2011 where the non-core areas were relatively more expensive, which vanishes by 2013. As of 2014, principal cities are the costliest they’ve been compared to their suburbs at any point since 2007 when my data begins.
But that’s all just renters. We can look at owners too.
The above chart shows the dollar gap in median monthly housing costs for owner-occupied housing units between principal and nonprincipal areas for metro and micropolitan areas. Now, for micro areas, principal cities are getting relatively cheaper. So price can’t explain why people might be avoiding ownership in principal cities of micropolitan areas, if they are in fact avoiding such ownership. But the metro gap is remarkable for its repeated trend we saw in the rental data. I only have data back to 2009 here but, again, we see this dip into 2010 and 2011, then a rise as the principal city gets relatively more and more expensive.
So you should be convinced by now that the story of 2007–2014 is one of a brief blip in urban relative affordability from about 2007–2012, followed by a rapid return to suburban affordability.
But, hold on. Maybe migrants aren’t responding to prices; maybe prices are responding to migrants! If lots of people prefer urban areas, then prices could rise! Of course, people don’t broadly prefer urbanized areas, but hey, let’s see where this idea leads us.
Why Do People Say They Moved?
I Spy a Housing Recession and Massive Foreclosures
If only there were some large survey that asked migrants why they moved in a controlled, rigorous fashion across a long period of time.
Oh. Hello there, Current Population Survey.
Below is a chart of the percent of total migrants citing various housing-related reasons for migration.
Look at that “wanted cheaper housing” line. It’s low in 2006, rises to 2009, then declines ever since. Now look at that “wanted to own a home” line. High in the early 2000s, declines during the recession, rises a bit after. And of course notice that foreclosure/eviction line too: Census added that in 2011 because it was such a prominent reason.
I am a bit puzzled by the jump in “other housing reason” in 2012, but I think the case from the actually specified housing migration reasons is clear. Migrants moved in pursuit of cheaper housing during the recession, with many foreclosed on, and fewer pursuing ownership. This wasn’t because they wanted a better home or a better neighborhood: those reasons became less prevalent. It’s because the relative costs of urban renting suddenly became much more favorable.
There are other factors involved here too, like gas prices, rose steeply from 2000 to 2008, then crashed, then rose again, then have moved lower in recent years. As transportation is cheaper, commuting becomes relatively more preferable.
It’s the Economy, Stupid
Don’t Allege a Shifted Demand Curve Without Cause
The basic claim of those who thought 2007–2012 was a new normal was that people, especially Millennials, were rediscovering a love for the city. And I’m sure that’s true in some cases. Maybe urban outflows will manage to avoid a return to the lows of the early 2000s. But mostly, changes in nationwide migration trends were driven by nationwide economic factors. Want to know why Millennials (who are mostly low income) are moving into cities? Housing costs! That’s it! If the rent rises and mortgages don’t, you know what’s going to happen? Those hipsters are gonna leave your city in the dust.
There’s two stories here. The story of “new preferences for urban areas” is arguing, theoretically, that the demand curve for “urban living” has shifted outwards, while the demand curve for “suburban living” has shifted inwards. This means more people will live in urban areas, even at higher prices. But I think the case for that demand curve shift is extremely weak. We have numerous attestations here showing that migration patterns responded to given price/quanity constraints; i.e. rather than a preference shift, all we did was slide along a given demand curve to equilibrate with prices.
Now of course no demand curve is perfectly fixed, and it’s likely that some people thrust into the city by need have discovered that the industrial decay of yesteryear has turned into charming neighborhoods, bohemian markets, and an overall good standard of living. It’s possible some preferences have changed. I’m not arguing here for total stasis in the demand curve. But more plainly, I’m arguing that those who claim we’re seeing a fundamental shift in the demand curve have not made their case, and recent evidence greatly undermines their claims. There is no evidence yet that dense urban cores are about to be revitalized.
Census has not, as best I can tell, released the 2015 county population estimates yet. That’ll come in a few months. So we don’t know yet what 2015 will show. But you know, if I had to guess, I’d say that the last year has been characterized by falling gas prices, a recovering economy, continuing low interest rates up to recently, and continuing increases in urban rents. All that suggests to me that we’re most likely going to see another year of declines in urban core migration. And that decline will basically be a return to normalcy.
Migration’s Recessionary Bubble
A Concluding General Theory
As much as I hate the grand generalizing narratives of migration, I’m going to offer the beginnings of one here. When we look at the last few years of migration, we should see it as a bubble. It was never going to last very long, and was always the product of essentially transient imbalances of in costs that migrants rapidly arbitraged. We are now returning to the normal state of suburban and exurban inflows, and urban outflows. This tendency is likely to continue for some time, especially as long as immigrant fertility exceeds native fertility, and as long as immigrants disproportionately arrive in urban areas, and as long as young people and universities congregate in urban areas, and as long as urban areas remain generally governed by political regimes committed to a higher cost model of community life.
Commentators should take care when explaining data to remember Occam’s Razor. If you can explain a price/quantity shift without altering your “givens” (i.e. underlying preferences), that is probably preferable. Before you offer grand narratives that also conveniently validate certain lifestyles and political preferences, it’s important to run through the list of more run-of-the-mill explanations such as “The relationship between renting and ownership really changed.” And this has some big follow-on effects: the Midwest and Northeast are more urbanized than the South or West, so the regional trends I criticized yesterday are, in some part, merely an echo of regional variations in urban density. Distinctly non-regionalist factors can create the illusion of regional trends if the composition of relevant factors varies widely across regions, as it basically always does.
In sum: migration is way more boring than you thought.
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I’m a graduate of the George Washington University’s Elliott School with an MA in International Trade and Investment Policy, and an economist at USDA’s Foreign Agricultural Service. I like to learn about migration, the cotton industry, airplanes, trade policy, space, Africa, and faith. I’m married to a kickass Kentucky woman named Ruth.
My posts are not endorsed by and do not in any way represent the opinions of the United States government or any branch, department, agency, or division of it. My writing represents exclusively my own opinions. I did not receive any financial support or remuneration from any party for this research. More’s the pity.