Inflation Rising In High-Migration Cities

The Great Migration is driving up inflation in the most popular destinations, a new Redfin report reveals.

Looking at the correlation between inflation and migration in the metros, Redfin users are looking to move. Their analysis showed that high migration rates are linked to rising inflation.

The tenth most popular destination in Q4 2021, Atlanta, saw inflation rise by 8.9% year-over-year in the same period, the highest inflation rate of all metros in their analysis.

“Migration is one reason among many why the cost of everything from food to fuel is rising,” said Redfin Deputy Chief Economist Taylor Marr. “An influx of people moving to a popular, relatively affordable place like Atlanta increases demand for housing and transportation, pushing up prices on those things and contributing to soaring prices on everything else, from food to utility bills.” 

Another hot-ticket city, Phoenix, saw an 8.4% YOY price surge correlated to an influx of new residents. Tampa also saw an 8% price increase, the third-highest inflation rate in the analysis.

New residents can enjoy a cheaper lifestyle than in more expensive cities like New York and Los Angeles. Some locals win out as well, through higher equity for homeowners or increased profits for business owners.

But Marr notes that some locals are negatively impacted by rising rents and high inflation.

“[S]ome locals, especially renters and people with jobs that require them to commute, are worse off due to rising rents and soaring prices on everyday expenses like gas in the car and groceries and wages that haven’t kept up,” he said.

The report suggests that inflation and home price appreciation will eventually slow migration into these areas. Metros like Chicago, Los Angeles, and New York City have seen some of the lowest price growth nationwide.

The number-one place Americans moved away from during Q4 2021, San Fransisco, had the lowest inflation rate at 4%.

Inflation worries led to US consumer sentiment falling nearly 5% in January, hitting its lowest level since November 2011. Respondents felt worse about both the current economic outlook and their near-term prospects.

“Residents moving away and less demand for goods and services is one reason why inflation is lower in places like New York and Los Angeles,” Marr said. 

“Over time, higher inflation in Phoenix than Los Angeles, for example, will diminish the financial advantage of living in Phoenix. The flow of people moving from traditionally expensive cities to more affordable areas will slow down because, quite simply, prices are rising so fast that those places won’t be as affordable anymore.”