INVESTING IN HIGH GROWTH SUNBELT STATES
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PEOPLE ARE “VOTING WITH THEIR FEET”
Americans are a mobile people. They move much more on average than people living in other parts of the world. People can “Vote with their feet” and move to different states for a number of reasons. The main population movement trend since 1950 has been from colder-climate northern states to warmer sunbelt states. As I write this, it is -6 degrees Fahrenheit (-21 Celcius) outside in the Chicago area and 75 degrees (24 Celcius) in Palm Beach Florida.
It is not only the weather that continually attracts people south, it is also the lower taxes, lower cost of living and, most importantly, the pro-growth, lower-regulation governments that make it easier to start and operate businesses. Those businesses create job growth and employment opportunities. As Andrew Henderson likes to say, “Go where you are treated best.”
USA MIGRATION PATTERNS GO NORTH TO SOUTH SINCE 1950
Researcher Matt Larriva calls this trend of people moving to a warmer climate “Swarm To Warm” in his study tracing US population migration patterns. Larriva charts the change in direction from north to south since the 1950s as “a persistent southern migration of Americans which some historians credit to the invention of the now-ubiquitous air conditioner. Since then, one of the largest determinants of population growth has been a city’s mean January temperature.”
SWARM TO WARM STATES POPULATION MOVEMENT
PACK UP AND MOVE
According to U-Haul, the United States’ No. 1 do it yourself moving truck/trailer company, the TOP 10 STATES RANKED BY MIGRATION GROWTH* are:
- Ohio (outlier because of midwest location – pro-growth policies have improved employment)
- Colorado (mountains and outdoor lifestyle make Colorado attractive)
- North Carolina
This list is compiled by U-Haul every year based on one-way rentals of people relocating. While not comprehensive it is a good indicator of which states are experiencing the most in-migration and growth. Conversely, it is also a good indicator of the biggest losers, those states that are experiencing the most population loss. California, Illinois, New Jersey, Massachusetts, Connecticut and New York are experiencing the largest population losses and are at the bottom of the list for in-bound migration and moves.
For example, Texas grew by more than 12 million people from 1990 to 2020 to more than 29 million people. Additionally, Florida grew by close to 9 (8.7) million people from 1990 to 2020 to almost 22 million people. Conversely, according to the U.S. Census Bureau data, Illinois lost 79,487 people from July 2019 to July 2020 alone.
TOP 15 MARKETS BY FIVE-YEAR POPULATION GROWTH
Also notable is the outsized population growth of some tertiary market cities, once considered sleepy backwaters and now the center of innovation and job growth. This dynamic growth is a natural hedge against inflation, pushing property prices up faster than the national average.
COVID ACCELERATED EXODUS FROM NORTHERN STATES
The pandemic of 2020 has pushed southern migration to all-time highs. Northern states, especially large cities in the Northeast and Midwest handled the health crisis poorly. To compound those problems, governors and governments locked down their populations for long periods of time. The problems were exacerbated by civil unrest, spikes in violence and looting. The population losses accelerated in 2020 for hard-lockdown states to states with more personal freedoms.
Anecdotally, markets which had not seen apartment vacancies for years are now seeing for-rent signs, including places like New York City, Boston and San Francisco. At the same time, houses for sale in Austin, Texas Tampa, Florida; and Nashville, Tennessee have bidding wars with up to five competing offers.
The 2020 Pandemic has also increased the trend of moving from urban to suburban cities, which has been evident since the 1940s in the US.
LOWER COST OF LIVING
Governments that have lower taxes usually also have less regulation. The dramatic rise of Hong Kong going from subsistence level per-capita incomes to a thriving financial center of 7.4 million people tells the story of how an area becomes a “people magnet” when they flourish.
In the US, lower taxes and less government regulation translate into lower costs of living. For example, a gallon of gas in Los Angeles is currently $3.40 ($0.89/Liter) while a gallon of gas in Houston is about half the price at $1.83 ($0.48/Liter). Taxes and regulations create a drastic difference in price.
The average house price in northern New Jersey (outside of New York City) is $444,609 while the average home price in Jacksonville, Florida, is $249,357. Again, almost double the cost. Home values are also typically experiencing higher appreciation in Sunbelt states. Jacksonville appreciated close to eight percent (8%) in 2020.
Southern states typically have the lowest state income taxes with several — including Florida, Nevada, Texas and Tennessee — having no income tax for individuals. Texas and Nevada also have no state tax on corporations. Southern states that are losing population include Louisiana and Mississippi, both of which have higher taxes and higher levels of government (mis)management.
Political corruption and government waste/inefficiency drive up taxes and are a drag on productivity and human capital.
Swarm To Warm describes the Liberty Real Estate Fund strategy of picking geographic markets for investment. Through extensive analysis, Liberty researches the performance of state and local markets across the United States.
This provides an understanding of the macroeconomics impacting the local microeconomics that creates job growth, rising household income, new construction, cost to build per square foot, commercial rental rates, low vacancy and other supply and demand factors. This in-turn pushes capitalization rates lower and exit prices on our investments higher.
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* Based on one-way U-Haul trucks entering the state. See: https://www.uhaul.com/Articles/About/22746/2020-Migration-Trends-U-Haul-Ranks-50-States-By-Migration-Growth/
*Note: Liberty Equity Management, LLC, Liberty Real Estate Fund L.P. and Liberty Capital Management LLC have made every attempt to ensure the accuracy and reliability of the information provided. Concordia cannot not accept any responsibility or liability for the accuracy, content, completeness, legality, or reliability of the information contained herein. The information herein considered legally-binding legal advice, tax guidance, or financial counsel.
ABOUT LIBERTY REAL ESTATE FUND
Liberty Real Estate Fund is a specialized investment fund that acquires Single-Tenant Net-Leased properties. LibertyFund is a real estate fund structured for investors to achieve: Geographic Diversification; Industry Diversification; Tenant Credit Strength and is comprised of hard assets with intrinsic value. Our portfolio of Net Lease properties is constructed with brand name necessity businesses operating in high growth markets throughout the United States. Net Lease assets have long term contractual rents backed by excellent brand name companies.
LibertyFund was founded by an experienced real estate team who believes that Security Tokens are superior to traditional investments because investors will benefit from liquidity, cost efficiency and transparency provided by real estate on the blockchain.
LibertyFund.io is a new way to obtain the cash flow and stability of high quality commercial real estate combined with the liquidity and security of Blockchain technology.
Michael J. Flight is a founding principal of Concordia Realty Corporation in 1990 and more recently CEO of Liberty Real Estate Fund LLC, the World’s First Net Lease Security Token Fund. Michael is a real estate entrepreneur and Security Token evangelist who is an expert in retail real estate (Single-Tenant Net-Leased and Shopping Centers) investment, redevelopment and real estate on the blockchain. He has an extensive record of partnering with some of the world’s most well-known banks, insurance companies, hedge funds and institutional investors in many successful projects. Michael has been active in commercial real estate over the past 35 years.
Michael has been featured on CNBC and CEO Magazine and these quality podcasts: The Real Estate Guys Radio Show, Cash Flow Connections, CashFlow Ninja, and Bitcoin.com podcasts and many more. Michael is also a well-known speaker at Global Family Office Summit Dubai, FreedomFest, Investor Summit at Sea, the Intelligent Investors Real Estate Conference, the Multifamily Investor Network Conference, the CRE Power Players Summit, the LA Blockchain Summit and the Liberland 5th Anniversary Conference. He is currently finishing a book on the benefits of Single-Tenant Net-Lease (STNL) real estate investments. Michael is co-host of the Nothing But Net podcast – an educational podcast about Net Leased (“NNN”) properties and the Chicago Blockchain Real Estate Collective.
Michael has been elected to public office, also serves on the real estate investment advisory boards of two non-profits and is a founding board member for Freedom of Life, a Romanian NGO helping women achieve liberty and build new lives while recovering from human trafficking.
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