Some of the hottest pandemic migration destinations are also home to the highest regional inflation rates.
The relationship between migration and inflation has strengthened significantly as more people move from expensive coastal cities to more affordable metropolitan areas, according to analysis published by Redfin on Tuesday.
“We saw an acceleration in inflation happening, especially when we looked at inflation data at the metro level. We saw right away that inflation was highest in Phoenix and lowest in San Francisco,” Redfin deputy chief economist Taylor Marr told CNBC.
For example, Phoenix saw prices for goods and services rise 10.9% in the first quarter compared to the prior year period, making it the metro area with the highest inflation rate in the world. analysis of Redfin.
According to migration data from Redfin, Phoenix was also the second most popular destination for homebuyers looking to move between metropolitan areas in the first quarter, behind only Miami, Florida.
Meanwhile, San Francisco, which tops the list of metro areas from which homebuyers moved away in the first quarter, recorded an inflation rate of 5.2%, the lowest in the analysis. Redfin.
Inflation and migration in the first quarter of 2022 data charted by Redfin shows the annual change in the consumer price index and the net migration flow of Redfin users.
The Consumer Price Index, which averages prices across America, rose 8.5% in March 2022 from a year ago, the fastest annual gain in 40 years.
“We know a lot of the people we’ve tracked throughout the pandemic have gone to places like the Bay Area and New York or DC on the East Coast. And they’ve been flocking to these hot migration destinations throughout the pandemic, like Phoenix, Miami, Tampa, Atlanta,” Marr said.
Atlanta, Georgia had the second-highest inflation rate in the survey at 10.6%, while Tampa, Florida had the third-highest rate at 9.9%.
Redfin’s analysis showed that Atlanta ranked as the 10th most popular migration destination and Tampa was the third most popular migration destination.
Bucking the trend, New York City had both the second-lowest inflation rate at 5.4% and third-lowest inflation that homebuyers moved away from. Similarly, Los Angeles ranked number two for residents who move and generated an average inflation rate of 7.8%.
The influx of people moving to Phoenix, Tampa and Atlanta during the pandemic has also caused house prices to rise rapidly in those areas. And that’s just one contributor to the outrageous inflation there.
“When people move to an area, it creates additional demands on local goods and services, such as restaurants, and allows them to raise their prices,” Marr said.
Marr says the financial benefits of moving to relatively affordable areas could eventually diminish over time.
“Most of the people who move to these areas move there with higher budgets. They have higher incomes…So the cost of living could be really affordable for someone moving into the area. But, for an existing resident who is already there, they might feel more pain if they haven’t had significant income gains and are still facing higher prices,” Marr said.