Great Digital Migration

A new migration pattern is accelerating in this country right now. One that our grandchildren will read about one day. People adapt to solve problems. The catalyst of this migration pattern was solving a major problem. How to continue working when offices closed for Covid-19? In March of 2020 the corporate office structure changed forever. People adapted to VPNs, zoom calls, virtual coffee breaks, remote interviews and skype calls. For some the transition has been great, for others more difficult. Regardless, a remote/hybrid work structure is here to stay. We pulled it off. We did something that would have been impossible 20 years ago. Offices and people went remote over a weekend in some cases. Internet advances over the last two decades made this possible. Covid-19 would have sent our country into a depression 20 years ago. We avoided it.

Gained Flexibility

Not only has our work structure changed, but also how we live our lives. We have gained flexibility to move to other locations on an unprecedented scale. When you’re not required to work from a specific location, you have new options. Our housing needs will continue to change as a result of this migration. Home office space is more important than ever before. Now that we are spending more time in our homes – we’ll desire more space. As people seek more space, I predict an accelerated migration to the suburbs and beyond. Before Covid-19, proximity to work centers was a big consideration due to commute distance.

Housing Needs Changed

As people realize how much further their housing dollars stretch in smaller communities. We will see acceleration out of crowded, cramped mega-cities. They can get the space and lifestyle desired, while avoiding a daily commute. More people will make that move. There is something about space and land to spread out that appeals to people. In the past it has not been easy to get that space and land without major career trade-offs. Remote work is changing this.

FI Opportunity

With housing as the largest expense for most people. The Great Migration gives those with a FI Mindset some interesting considerations. If you lower your largest monthly expense and don’t reduce your income, you can accelerate your path to FI. For example, if you currently have a 5% savings rate and move to a lower cost of living area reducing your expenses by 25%. And instead of inflating other areas of spending, you increase your savings rate to 30%. See the effect on your FI path below:

You reduce your working years by 58% from 66 to 28 years! A FI Supermove. Maybe your savings rate already has you on the timeline you want. You could use this opportunity to improve your quality of life. Or use monthly housing savings to fund another income stream and speed up your path to FI that way.

Housing Cost Comparison

In my analysis I’ve attempted to find arbitrage housing opportunities by state. Consider using my research as a starting point. I compiled average home prices, property taxes and homeowners’ insurance cost by state. I calculated average all-in cost (PITI – Principal, Interest, Taxes, Insurance). Then I compared PITI to the 28% max debt to income ratio (DTI) banks allow for conventional mortgages using average US household income. Read about this ratio in greater detail: Buying a Home – Which Ratio is Best? | FI Chronicles.

With the interactive map I’ve created you can filter this information by region. It is interesting to see the wide dispersion in total housing expense within regions. A few high-level observations:

• Pacific region is the most expensive
• East South Central is the least expensive
• The Midwest regions in general are less expensive than the coasts

Here’s an image of the entire US. I encourage you to filter by region for deeper analysis. This is where the housing arbitrage opportunity gets interesting. Suppose you are flexible on location but want to live in a general region for family or weather reasons. Filter to that region and see the surrounding states, the results may surprise you:

See my home region below – West South Central:

Where are People Moving?

As the Great Migration continues, home prices in lower cost of living states will rise as people move in. I have seen this in my home state of Texas. Businesses and people are flocking to the Lone Star State. Texas’ population has risen 16% over the last decade. This is the 2nd highest state percentage increase during that time – only behind Utah. See the West South Central region below:

People are migrating from the Middle Atlantic and New England regions to the Mountain and South Atlantic regions and Texas. People are moving out. Any increase over the last decade is natural population growth generally offset by migration away.

Middle Atlantic:

New England:

Where they’re going:

Moutain region:

South Atlantic region:

Americans have a long history of exploration and expansion. We formed a nation of 13 colonies along the Atlantic Ocean. Then migrated westward across the mighty Mississippi river to the Pacific Ocean. The nation grew. Recently, our technological developments have enabled US companies an unparalleled global reach. We were first to the moon and with Elon Musk pushing will be first to Mars. As a nation we are in the midst of a Great Digital Migration. Maybe you live exactly where you want to. But today we have more mobility and location freedom than ever before. If your high cost of living area makes your path to FI difficult, explore other locations. Time is precious and if your fixed housing costs prevent you from saving as you’d like. Ask yourself, is your location worth it?