Aceable Weighs in on the California vs Texas Debate

If you listen to enough Texans, you'll hear plenty of talk about the influx of Californians to their beloved state — most of it negative. Californians are blamed for ruining Austin's native vibe, making traffic worse, and bringing liberal values. 

Of course, not everyone feels negatively about net population growth. Many of the factors that cause people to move from one region to another actually benefit most people, including native residents. States that see a steady influx of residents from other states tend to have a lower cost of living, low unemployment rates, and lower taxes.

The trend also benefits certain industry sectors, such as hospitality and retail sales. In fact, it attracts businesses, like Tesla, which is building a $1.8 billion factory in Austin.

Real estate is another industry that capitalizes on net population growth trends. When people flood into an area from other parts of the country, that increases demand for properties, lowering available inventory and raising sales prices.

But hold on a minute.

Is it even true that Californians are moving to Texas in record numbers? Has the Golden State finally run out of steam, or is the California Dream still alive and well? 

Let's take a look at the 2020 Census figures to settle this great California vs. Texas debate.

2020 Census Results: In a Nutshell

The latest Census figures yield some interesting, but anticipated, trends: 

  1. The country is becoming more urban. The population of metro areas nationwide grew 9% from 2010 to 2020. A vast majority of Americans — 86% — now live in cities or their suburbs. In total, 312 of the 384 metro areas gained population in the past decade.

  2. Population growth has slowed down. Just over half of the counties in the U.S. reported a decline in population. The country added 22,703,743 people, for an overall growth rate of 7.4%.

  3. The adult population grew at a faster rate than the under 18 age group. That means more people are aging than being born. Adults now constitute 77.9% of the total population. The number of children under 18 actually declined 1.4% since the 2010 Census.

  4. White people aren't outnumbered quite yet. However, the white population decreased by 8.6% since the last Census. The Multiracial population grew the most — 276%! The "Some Other Race" alone, or in combination with other races, increased 123%. With 49.9 million residents reporting this category, it now surpasses the Black population of 46.9 million to become the second-largest racial group. Every other race reported increases in the past decade.

  5. Housing units increased, but not uniformly and not a lot. There were 140,498,736 U.S. housing units in 2020, an increase of 6.7% over 2010. Urban housing units increased 3.8%, while units outside the metro areas decreased 3.9%. Texas had the biggest increase in sheer numbers of new units: 1,611,888. 

Real Estate Trends in California

Ever since California first became a state 170 years ago, the population has increased by leaps and bounds. According to the 2020 Census, the total population is almost 40 million — 39,538,223 to be exact. Since the Census released its figures, however, something unheard of has happened: the population declined by 182,083 people in 2020. 

Although this small decline is probably an anomaly, it's something to take notice of as well. William Fulton, writing for the Kinder Institute, points out that whenever the median home sale price in California goes up, more Californians load up their U Hauls and head to Texas. 

The past two years, more Californians than ever have made the move, 86,000 in 2018 alone. But California has been beset with systemic problems, from the raging fires that encroach on residential properties to the ongoing drought and lack of water. It's conceivable that more and more people will want to leave.

The population in California increased 6.1% from 2010-2020, a rate of growth about half that of Texas. Moreover, new housing units only increased only 5.2%, not even keeping up with the rate of population growth. This has created a dire lack of affordable housing in prime areas like San Francisco, the Silicon Valley, San Diego, and the greater Los Angeles metro area. The problem is so bad that Californians have passed legislation to address it. 

Real Estate Trends in Texas

The population in Texas grew by nearly four million people in the past decade, a 15.9% increase. Most of these people flocked to the main urban areas: Austin, Dallas, Houston, San Antonio, and El Paso.

Theoretically, the housing market is not as tight in the Lone Star State as it currently is in California. Housing units grew 16.2% from 2010-2020, keeping pace with population growth.

Nevertheless, Texas has its own housing affordability problem. Real estate sales declined 2% in the second quarter of 2021, primarily because there is not enough inventory priced lower than $400,000. This is particularly true in Austin, where sales of luxury homes are booming, and the median sales price is $465,900. 

Once the building supply shortage brought on by the pandemic ends, analysts predict there will finally be enough inventory to slow home sale prices. That's because of robust new construction starts. This should not have a significant impact on the seller's market in popular metro areas like Austin and Dallas. There will still be enough demand to drive sales into 2022.

The Bottom Line

Both California and Texas continue to experience sellers' markets for some of the same reasons: low interest rates and tight inventory. In fact, the lack of inventory has actually led to a second-quarter real estate slowdown in both states.

However, California's market is driven primarily by a lack of affordable inventory. Only 23% of Californians can currently afford to buy a median-priced single-family home.

Affordability is also an issue in some Texas markets, particularly Austin. The fact remains, though, that median home price in the Lone Star State — $298,013 — is considerably lower than California's median home sale price, which is currently $712,100. Combine that with an ever-worsening fire season and higher tax rates, and it's not surprising that people are leaving LaLa Land and heading to the Lone Star State.

A wild card for both markets could be a surge in foreclosures now that the moratorium on evictions has ended. This could lower home prices and create new opportunities for buyers. Texas escaped the glut of foreclosures that followed the housing crisis in 2008. If it has fewer foreclosures this time as well, that could end up giving California markets an edge.

In the final analysis, the California vs. Texas debate comes up almost a draw. Both California and Texas are great places to become a real estate agent. Where you decide to hang your shingle depends largely on personal preference. That said, the affordability crunch and lack of new construction in California put Texas in a slightly better position, at least in the short term. How these trends play out beyond 2022 is unclear.

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