Freer home sales market draws Californians to Texas

HomePrices_Migration_California1Feb. 21, 2013

By Wayne Lusvardi

What draws working and middle class Californians to states like Texas is mostly a freer home sales market, which brings lower prices.  A zero state income tax rate and lower business tax rates that provide incentives for job creation also matter, but to a lesser extent.

The Texas advantage occurs even though its property base tax rates are double or triple those in California. However, although the tax rates are higher, because home prices are lower, the rates are applied to the lower values.

That is the conclusion of Jed Kolko, the chief economist for Trulia, an online home sales listing company.  Kolko found that net California out-migration (those leaving minus those coming in) is higher for the working and middle class than it is for the wealthy.  Kolko’s statistical analysis actually found that high-income households making $200,000 per year or more were holding steady in California.

Thus, the media hullabaloo about rich people fleeing California’s high income tax rates was not found, at least so far, after analyzing a large set of home price data.  Businesses may be fleeing California, but high-income households are not on a net basis.

Kolko’s study found that out-migration fell when home prices fell and vice versa. According to his analysis, Californians move to states like Texas because they have a freer real estate market and more market-produced affordable housing. It’s simple Econ. 101: Greater supply reduces prices.

In California, affordable housing is erroneously thought to be something that only government produces.  Actually, current median home prices in both California and Texas are nearly what they were in August 2008 before the Mortgage Meltdown and Bank Panic.

Texas still cheaper even with higher electric costs 

Expanding on Kolko’s findings, this writer additionally found that net out-migration from California to Texas is occurring despite higher property tax rates and electricity costs in Texas.  Because property taxes are higher in Texas, home prices are also lower.

Total housing costs — mortgage payment plus property taxes plus electricity bills — are 20 percent lower in Texas than California. That happens even though average electricity bills in Texas are $49.10 per month higher than in California. The Golden State’s lower cost is mainly due to more moderate weather and energy efficiency policies.

Total Housing Cost Comparison

California Texas
Median home price per square foot, 2012 $229,000 $84,000
Unemployment rate 9.8% 6.1%
Total state + local tax burden percent of income, 2010 11.04% 8.96%
Household median income $61,632 $50,920
Median home price Dec. 2012 (U.S. Census Bureau) $299,000 $175,000
Average mortgage interest rate per 3.79% 3.79%
Down payment 20% ($59,800) 20% ($35,000)
Monthly mortgage payment 30 years $1,113/month $651/month
Base property tax rate 1% 2% to 3%
Median property tax/year $2,900 $3,500 to $5,250
Total mortgage payment + property tax load/year $16,256 $12,187
Median Multiple(Median Home Price divided by Median Income) 4.85 3.44
Median Home Price Aug. 2008 $301,000 $170,000
Average electricity bill per month $81.10/month$973.20/year $147.32$1,767/year
Average electricity consumption in kilowatt hours 1,130 587


Texas has something that draws working and middle class residents from California. It is lower total housing expenses, not just no state income tax.  And this is primarily due to a freer real estate market in Texas that is unburdened by growth controls, environmental restrictions, rent controls open space requirements and historic preservation laws.


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  1. Jack
    Jack 21 February, 2013, 14:14

    I think the “Average electricity consumption in kilowatt hours” you have in your table are reversed.

    Jack, we’re checking. — editor

    Reply this comment
  2. The Modified Ted Steele Methodologies (tm)
    The Modified Ted Steele Methodologies (tm) 21 February, 2013, 17:44

    Leave Cali for Texas? LOL No Way!!

    Reply this comment
  3. Wayne Lusvardi
    Wayne Lusvardi 21 February, 2013, 18:13

    I inserted an embedded link for the data shown in the table on average monthly electricity bill for Texas and California. But somehow the link did not show up in the table.

    Here is the link to where you can find the data from the U.S. Energy Information Agency

    The data presented in the table is correct.

    Thanks for double checking.

    Reply this comment
  4. Hondo
    Hondo 21 February, 2013, 18:28

    The people may not all go to Texas, but the investment money is going there. The money is a lot more mobile. It likes less taxes. Less regulation. Less lawyers.
    In the last 5 years Texas has created a net 400,000 jobs. Kalifornia has lost a net 640,000 jobs. Kalifornia has more economic assets going for it than any place on earth. There is no reason why Kali’s unemployment rate should be higher than Texas’. Let alone the highest in the country.
    I grew up in Kalifornia. I lived in Texas. Texas is hot and flat and ugly. But I could find a job easy and the people were great. Texas culture is a combination of the Dallas cowboys, honky tonks, and WORK. Yes, work is a culture down there. The lowliest of workers and jobs are respected. If you don’t work, and have all your arms and legs, you aren’t respected.
    A low life like me was respected there, because I worked.

    Reply this comment
    • j
      j 1 November, 2013, 13:29

      So the fact that an upper middle class couple who has proper assets…Real and financial, come to visit and look at properties in the houston area, are obviously not a part of “their” work culture, or lack their of, are treated with less respect? That must be the reason why we got rushed after about 9 am for no reason on a consistent basis because they had to go to some dead end job that lacks any form of people skills.
      How does anybody actually embrace working as a culture as it’s own? Our lifestyle takes care of that.

      Reply this comment
      • j
        j 1 November, 2013, 13:37

        Why is this article written from an economist’s perspective on the lower working class and middle who give up in Ca, consisting of comments written by actual lower class individuals who attempt to correct it?

        Reply this comment
        • j
          j 1 November, 2013, 14:01

          why do these comments take so long waiting for moderation? lol

          Reply this comment
  5. SkippingDog
    SkippingDog 21 February, 2013, 19:16

    Texas has the highest birth rate in the U.S., but much of that birth rate is within the immigrant community. Texas has the highest level of immigration from Mexico in the entire U.S.

    Texas has the highest share of minimum-wage jobs of any state, with nearly 10% of the working population at that compensation level.

    Over 18% of Texas families live in poverty, over 3% higher than the national average right now.

    Texas ranks second-to-last among states in the percentage of the population with a high school diploma. Only Mississippi is worse.

    Texas invests less in education, workforce training, and critical infrastructure such as roads and utilities than 48 other states. Texas is also having a problem with water, which will restrict future growth, substantially raise water prices, or both.

    It’s like a whole other country, but a third-world one.

    Reply this comment
  6. SkippingDog
    SkippingDog 21 February, 2013, 19:21

    Oh yeah, Texas is nearly a “minority-majority” state, with hispanic and african americans being the largest percentage of the population. That means Texas will slowly and surely turn more purple and then blue in the decade to come, since the Republicans and TeaNuts have done such a fine job with their minority outreach.

    Reply this comment
  7. Wayne Lusvardi
    Wayne Lusvardi 22 February, 2013, 14:33

    I went to a nursery yesterday looking for a succulent plant.

    The owner told me that a customer who identified himself as a site locator for California In-‘N-Out Burger chain told her that he could get permits on ten of their fast food buildings in Texas in the same time it took to get one permit in California. So In-‘N-Out is expanding in Texas.

    I’m sure the land was also more reasonably priced.

    Reply this comment
  8. James Willis
    James Willis 25 February, 2013, 01:34

    SkippingDog seems a little bitter. Third world? Really? I would say taxifornia has that title.

    Reply this comment
  9. James Willis
    James Willis 25 February, 2013, 01:54

    And btw texas is not flat, hot and ugly. Almost everyone Ive seen who have said that are out of towners who are ignorant about all the state has to offer. SkippingDog, texas obviously isnt perfect, but they are doing something right. Texas isnt the only state people from taxifornia are flocking to, but texas just so happens to be at the top, low unemployment, low cost of living, growing economy, business friendly is what texas offers, no matter what articles or statistics you look up to try and make texas look bad, at the end of the day businesses and hard working people are moving to texas in droves for the reasons I mentioned. Atleast these people are able to get jobs right? I mean you should be happy for them. According to californians, california has it all hollywood, nice beaches, disneyland, mountians, and even lots of natural resources, but yet they still found a way to mess it all up for themselves, and you have the nerve to try and make texas look bad while they are creating jobs and helping our economy? Typical selffish california attitude. P.s California teachers are the highest paid in the nation but yet their students constantly rank near the bottom of the rest of the nation, california has more issues right now then texas.

    Reply this comment
  10. SkippingDog
    SkippingDog 26 February, 2013, 22:52

    Not bitter at all, James. I’ve been to Texas many times and it looks quite a lot like a third-world country: Gated communities of the very wealthy surrounded by bands of lower-middle class workers, with about half of the remaining population comprised of the uneducated and often unemployed poor. Many people even have the requisite third-world calf or goat in their front yard, along with some kind of vehicle on blocks or otherwise inoperable.

    Add to that the weather, the fact that Texas is a net recipient of federal funds, and the effort to further arm the entire populace in a state with already high rates of violent crime and you have the U.S. equivalent of a third-world hellhole.

    The only things that really can be said for Texas is that it has Austin and it isn’t Mississippi or Alabama. Otherwise, it’s a whole other country.

    Reply this comment
  11. V. Miller
    V. Miller 14 November, 2013, 05:37

    Why is this article titled as “Freer home sales….” when there is no mention of Freer? And as far as I know, there are only a couple of families in Freer that are linked to California, only one of which has moved from California back to their hometown of Texas. Another member of that family still lives in California but has 3 properties in Texas. But these “changes” occurred well before 2013.

    Reply this comment

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