My 2024 white paper on internal migration in the U.S. detailed the ongoing shift in population from California, the Upper Midwest, and the Northeast to the Southeast, Florida, Texas, and several other Southwestern states. I ended with the caution that Americans were moving toward heat, hurricanes, drought, water shortages, flooding, and wildfires. These potential disasters led me to question whether there might ultimately be a reversal of the southward migration trend. Somewhat whimsically, I suggested that people might abandon the coastlines and other popular destinations in favor of moribund cities in the Northern half of the country such as Detroit, Rochester, Buffalo, and Milwaukee. While it is much too early to make a definitive call, there are some very scattered signs that this shift may in fact be in its early stages! (Gasp)
Climate Disasters
First, let’s review the recent explosion in expensive climate related disasters. In 2024, there were 27 confirmed weather/climate related disasters with losses in each instance of more than $1 billion. They included droughts, floods, severe storms, cyclones, and wildfires. Total losses were estimated at $183 billion and there were unfortunately 568 deaths. For perspective, the average number of annual disasters during the period 1980-2024 was nine. Beginning on January 7, 2025, the Palisades fire erupted in Los Angeles causing extensive damage before it was contained after twenty-four days. Forecasts of the ultimate cost of the fire vary significantly, but initial estimates of $40 billion have since ballooned to total economic impact of around $250 billion.
Of course, there is a raging debate as to whether all of this is caused by global warming. For whatever it is worth, average annual temperatures in 2023 and again in 2024 set all-time records, and January of 2025 set a new high mark for that month exceeding January of 2024 which was itself a record.
Impact
One cannot overstate the pain, suffering, and emotional trauma experienced by those who lived through one of these disasters. However, the financial impact is being felt by a much larger portion of the population. Across the entire country, property insurance premiums have risen 31% since 2019, and insurance costs as a percentage of mortgage payments increased from 7% to 20%. The most extreme increases took place in Florida where premiums rose 72% and are now roughly four and one half times the national average. Despite large premium increases, writing property insurance is risky and unprofitable for many companies leading them to exit higher risk markets in Florida, Louisiana and California. While quite controversial, these decisions are understandable given that forty percent of the nation’s natural disaster costs since 1980 occurred in Texas, Florida, and California. In total, two-thirds of states have created what are known as Fair plans to act as insurers of last resort. Some actuaries are concerned about the financial strength of these programs and question who will ultimately bear the financial burden of a major climate disaster. Finally, climate consulting firm First Street estimates that insurance premiums for 27% of America’s properties still do not adequately reflect climate risk suggesting that premiums will continue to rise dramatically. For example, it forecasts further premium increases of 196% to 322% for cities such as New Orleans, Tampa, Jacksonville, and Miami if not constrained by state regulatory bodies.
Long Term Outlook for Residential Real Estate
One of the most commonly cited reasons for the population migration was the availability and low relative cost of housing in some Southern and Southwestern states. However, First Street recently published a study that paints a dire picture for residential real estate in some of these locales. The authors identified what they term “climate abandonment zones” in which climate risks and rising insurance premiums will lead to population declines of as much as 38%. In turn, these population declines could lead to as much as a 25% decrease in home prices in those areas. The firm estimates that as many as 26% of all census tracts in the U.S. could lose population by 2055. During this period, it estimates a $1.47 trillion decrease in the value of residential real estate nationally although it is important to point out that real estate is highly local meaning that many areas will continue to enjoy appreciation. (The aggregate value of residential real estate in the U.S. is roughly $50 trillion) The outlook for home prices is critical in that 45% of the average family’s net worth is represented by home equity. Finally, First Street estimates that 55 million Americans will voluntarily relocate between now and 2055 due to climate issues including 5.2 million in 2025. In all fairness, it should be noted that First Street’s forecasts are simply projections that are subject to potential error. Moreover, while agreeing with the gist of that firm’s position, some other experts have more moderate views.
Current Trends
As stated earlier, it is risky to make grand pronouncements based on short-term trends. However, some Sunbelt Cities experienced the largest home price declines in the nation in 2024:
Austin -18% Miami -12.4% Jacksonville -6.1% Orlando -5.6% Tampa -5.5% Nashville -5.4% Phoenix -5.1%
In contrast, among the cities enjoying the largest price increases were:
Wichita, KS 21.2% Toledo, OH 16.4% New Haven, CT 12.8% Buffalo, NY 12.2% Newark, NJ 11.3% Providence, RI 9.8% Chicago, IL 8.6% Detroit, MI 8.5% Milwaukee, WI 8.1% Cleveland, OH 7.5%
The price declines in the Sunbelt cities may be at least partially attributable to large gains in preceding years, and gains in the Rust Belt may simply represent prices bouncing off of the bottom in depressed markets. On the other hand, could this be the first sign of a reversal in the migration trend?
Population data indicate continuing flow into recent beneficiaries but at a decreasing rate. Florida enjoyed inflows in 2023 of 637,000. However, 511,000 people left the state which was the largest outflow in its history. The net inward migration of 126,000 represented a 50% decrease from the prior year. Similarly, Texas had inflows of 612,000 and outflows of 480,000 leading to net inward migration of 132,000. While this was the largest net gain among U.S. states, it was down about 41% from 2022.
The Federal Reserve Bank of San Francisco recently published a working paper titled Snow Belt to Sun Belt Migration: End of an Era? Without getting into too much detail, the study reached two conclusions. First, historically hotter counties in the U.S. have experienced more extreme heat days in recent years while historically colder locations are experiencing fewer extreme cold days. Second, there is early evidence of migration away from areas exposed to extreme heat toward historically colder areas.
Conclusion
I may be grasping at straws given that the data is hardly conclusive, but it appears that the long running wave of migration to the South and Southwest is beginning to slow. Of course, large trends do not turn on a dime so we can expect further population gains in some of the warmer states. However, it will be very instructive to watch for signs of an actual change in direction. Interestingly, the Federal Reserve study found that the strongest indication of a reversal is occurring in the 20-29 and 60-69 age groups who are in the life stages involving long-term location decisions. Could these groups be in the vanguard? While I certainly understand the appeal of the Sunbelt, I tend to support the underdog and am therefore rooting for a revival in the Northern cities that have been left for dead.