High home prices are making Americans more reluctant to move

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Blame increasingly unaffordable housing in wealthier areas — and relatively meager wages in less-affluent ones — for the long-run decline in the share of Americans relocating around the country.

Exorbitant home prices have outweighed the benefit of bigger paychecks for households deciding whether to move to areas with greater job opportunities, while the allure of cheaper properties in less-prosperous regions has failed to make up for smaller salaries in those places, according to an International Monetary Fund working paper released this month.

"Increasing house price and income inequality" accounts for about two-thirds of the fall in long-distance migration between rich and poor U.S. areas in recent decades. Using Internal Revenue Service data, as well as figures from real-estate data provider Zillow Group Inc. and the U.S. Census Bureau, authors Tamim Bayoumi and Jelle Barkema tracked migration flows between areas of varying affluence, monitoring some 200,000 moves over 20 years between regions at least 200 miles apart.

About 72% of the decline in moves from poor to rich areas can be explained by regional house-price differentials, the authors found after controlling for other variables, with 66% of the drop in relocations from rich to poor attributable to rising income inequality.

Recent research has attributed the multi-decade decline in domestic migration rates to factors such as an aging U.S. population and the rise in national homeownership, with Americans less inclined to move as they get older or after taking on a mortgage.

Interstate migration declined to 1.5% in 2016 from 3% in 1981, according to Census data reviewed by the authors. The new figures highlight how regional inequalities and the emergence of so-called superstar cities have helped anchor many Americans in place, suggesting dwindling options for those chasing new opportunities or looking to downsize.

The decline in mobility also carries consequences for the labor market, the authors note, citing past instances of mass migration such as the California Gold Rush and the push north by African Americans after World War II. Those transitions increased productivity and output and fostered a more efficient allocation of labor.

"The United States' status as the global poster child of dynamic labor mobility is waning," the authors write, adding that a decrease in migration "reduces labor market churning, rendering downturns longer and recoveries slower."

Bloomberg News
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