Population growth is a near-immediate indicator of which markets real estate investors should pay attention to. There are more complicated ways to put it, but said more plainly, where Americans are moving matters to the built environment. This is especially true for multifamily and retail, though it matters for all asset classes. Population growth can sometimes feel anecdotal, so having the cold, hard data to back up growth claims is essential.
The U.S. Census Bureau recently released new population estimates that reveal population growth nationwide and provide invaluable insights for the real estate industry. The data shows population changes for the second half of 2022 and the first half of 2023. The overall themes feel familiar, with the Sunbelt leading the way in population growth. However, new surprising trends signal a shift in migration patterns and a ‘new normal’ that feels much like the old normal.
The biggest surprise should be a welcome one for large metropolitan areas. Large cities that saw massive out-migration immediately after the pandemic have started to see outflows decrease. Not all major metro areas followed demographic recovery patterns, but many did. Among 56 major MSAs, 40 did better in 2022-2023 than in the prior year, with smaller population decreases, greater gains, or flips from losses to gains. Seven of America’s ten largest metro areas did better in 2022-2023 than in the previous two years.
New York City, Los Angeles, and Chicago are America’s three largest cities, and their population declines lessened considerably in 2022-2023. In Boston, population decreases shifted to gains. Washington, D.C., and Miami saw declines in 2020-2021 but have gained residents in the past two years. Plenty of other metro areas flipped from losses to growth last year, including Louisville, Kentucky; Milwaukee; Minneapolis; and Seattle. The new data doesn’t reveal a boom in major city populations, but it shows far less doom.
Challenging outdated perceptions
The gap between the cities that gained the most residents and those that lost the most narrowed last year. The new data suggests the pandemic-era domestic migration trend of people flocking from coastal big cities into Sunbelt areas is softening. Seven of the ten major cities that showed the most significant gains during the pandemic had slower growth last year, including Dallas, Atlanta, Orlando, Phoenix, and Austin, Texas. Many of these cities were still the fastest-growing in the U.S., but they didn’t grow quite as fast.
For the first time in 12 years, Austin no longer leads the nation in major city population growth on a percentage basis. The top major city was Jacksonville, Florida, growing by 2.2 percent. Austin is still ranked second with 2.1 percent growth and has remained the fastest-growing major metropolis since 2020. Other data reveal that Austin’s red-hot growth has softened. Relocation tech firm moveBuddha tracks moving interest in U.S. cities, and its data shows steadily declining interest in Austin since 2021. In 2021, Austin had a 1.92 move-in-to-out ratio, meaning that for every 100 residents searching for moves out, 192 were searching for moves in. Austin’s ratio in 2024 as of April 17th is 1.03, a significant decline.
The minor slowdown in Austin’s growth may have been due to trouble in the tech industry when the census data was recorded. “During economic turmoil, people may not want to or be able to make big moves,” said Sam Tenenbaum, Head of Multifamily Insights at Cushman & Wakefield. A Federal Reserve Bank of Dallas analysis revealed the Austin metro saw an ‘unusually high level’ of mass layoffs throughout 2023 compared to other Texas metros like Houston and Dallas-Fort Worth. The report noted the high volume of layoffs was due to substantial tech sector downsizing. The health of Austin’s economy is heavily tied to its tech industry, so a rebound in population growth may be, too. “If Austin bounces back to number one next year, that wouldn’t surprise me,” Tenebaum said.
Jacksonville’s growth wasn’t surprising for Tenebaum, either, who said the Florida city has been growing fast for years. It’s the most affordable of all major Florida cities, with great weather, and generally a good place for families to settle. What’s interesting about Jacksonville is that it’s a Florida market that is not usually on real estate investors’ radars. Tenenbaum said the same is true for other steadily growing areas in the U.S., including Knoxville, Tennessee; Lakeland, Florida; and Provo, Utah. This may lead some investors to reconsider market selection and challenge outdated perceptions. Multifamily developments in Provo, whose population grew by 2.4 percent last year, may not have made sense before, but they could now.
Tenebaum said there are other ways to examine demographic data even more thoroughly, which can benefit real estate investors. For example, he often looks for which areas of the country have the most births, which could signal bigger markets in the future. It could mean more parents and grandparents moving to the area to be around other families. Tenebaum also examines which areas have the most 10 to 24-year-olds. These cities could soon have robust multifamily markets because of many available renters.
Salt Lake City has the highest concentration of 10 to 24-year-olds nationwide. “Some of these younger people will move away from Salt Lake City, but not all of them,” Tenebaum said. Interestingly, Indianapolis also has more 10 to 24-year-olds than in Austin, Texas. “These are interesting data points that counter-act narratives about many cities,” he said.
A boost from immigration
Urban core counties were hit hard in the peak pandemic year of 2020-2021 but are slowly returning to life. A Brookings Institute report of the new Census data analyzed growth trends among urban core, inner, and outer suburbs within metropolitan areas. Urban core populations fell by 0.91 percent in the year the pandemic started. That was followed by a smaller decline of 0.29 percent the next year and a modest gain of 0.03 percent last year. Last year’s modest gain marked the first positive growth for urban core counties since 2019. The inner and outer suburbs are growing faster, but the departure from urban cores has slowed considerably.
Two examples are San Francisco County (the city of San Francisco) and New York County (the borough of Manhattan). Both areas became symbols of big-city pandemic-era flight, leading to predictions of an ‘urban doom loop.’ In the first year of the pandemic, San Francisco County’s population declined by 6.7 percent, and NY County’s dropped by 5.9 percent. San Francisco saw a significantly smaller decline the following year and a modest gain last year. NY County gained residents in 2021-2022 and saw a modest gain last year.
Many major cities’ demographic reversals have been due to an influx of international immigrants. Net international migration to the U.S. increased significantly in the past two years from near-historic low levels in the peak pandemic years and modest levels in the late 2010s. The areas that benefitted most from this shift were major metropolitan areas.
Eleven metro areas, including Seattle, Miami, Boston, and Washington, D.C., would have lost population from 2021 to 2023 without immigrants moving in. Other major cities that saw immense gains from international immigrants included Los Angeles, New York City, Dallas, Boston, and Chicago. Census data shows America’s foreign-born population has increased 15.6 percent since 2010. The foreign-born population is 13.9 percent (46.2 million) of the total U.S. population, compared to 12.9 percent (20 million) in 2010.
Immigrants are usually drawn to America’s biggest cities because they’re the most recognizable places and often have established communities where immigrants can easily find a sense of belonging. If someone doesn’t live in the U.S., they think of cities like Los Angeles, Chicago, and New York when they imagine America. The scale of economic opportunities is also often larger in the nation’s biggest cities. Native-born Americans may consider Austin, Texas, a moving destination, but it’s less likely for someone who’s never been to the U.S. before.
Major U.S. metro areas and their urban cores have not entirely come back yet, but they’re moving in the right direction. The new Census data shows that the pandemic’s visceral shock caused historic changes in migration patterns, but it may have only been temporary. This means the grim ‘urban doom’ theories about major cities like New York and San Francisco may be premature.
The natural increase in population has also rebounded nationwide as the spike in COVID-related deaths has eased, and births have rebounded. Additionally, international migration could be a significant driver of big-city growth in the years ahead. Many real estate investors would be wise to note these demographic changes as they reassess their investment theses. The new Census data has shed some light on the state of many American cities and cast doubt on the popular narrative of urban flight.
