Even before the recent tax bill passed in late December 2017, taxes were playing havoc on housing. Higher taxed states began losing people and lower taxed states began gaining people.
Here’s a snapshot on migration patterns already in play prior to January 2018 when the new federal tax bill went into effect.
(Median state and local tax data and corresponding migration patterns during 2016-2017 were collected and tabulated by United Van Lines.)
The five states that lost the most people, or experienced the most “out-bound migration,” were Illinois (the most), the Tri-State area consisting of New York, New Jersey and Connecticut, and Wisconsin. These out-bound migration patterns had a high correlation with higher median state and local tax rates.
The top states gaining the most people, or that experienced the most in-bound migration, were Oregon, Florida, Texas, Nevada, Wyoming, Tennessee and North Carolina. These in-bound migration patterns also had a high correlation with lower and/or no median state and local tax rates. For example, Florida has no state income tax and Oregon has no local sales taxes.
Consistent with these findings by United Van Lines of in and out-bound migration patterns is residential construction activity. Over 31% of all residential construction permits in 2016-2017 were in three states…Texas, Florida and California. Other states experiencing higher than average residential construction activity were North Carolina, Georgia, Arizona, Tennessee and Washington.
The major publically traded players in residential construction, Taylor Morrison, Lennar, Horton, etc., were concentrating on Texas, Florida, California, Arizona, etc. as well. In fact, 36.3% of their respective businesses were concentrating on these states.
Obviously, people and investors buying, selling, and building homes consider many factors such as job prospects, weather, school quality, etc., when choosing their respective residential locations However, tax rates, all tax rates, are highly influential when it comes to the decision making process involved in where and how much people want to invest themselves, their work and their money in “home.”
What influence the new federal tax bill has on the country’s “home” decision making processes may just be the housing story of 2018.