LOS ANGELES – The two most populous states in the United States, California and Texas, have long competed to attract companies and talent. Data from the 2020 U.S. census show that Texas is drawing more people, including Californians.
Texans have a saying: “Everything is bigger in Texas.” By size, it is the largest state in the contiguous U.S. There are many reasons why the state’s population is also getting bigger.
“Your quality of life is so much higher here in Austin,” said Alex Backus, who moved with his teenage daughter from San Jose, California, to the Texas capital almost two years ago.
Backus has been bouncing back and forth between the two states over the years. He said that while he missed the outdoor activities and mild weather in California’s Bay Area, it is not a financially friendly place for young adults such as his daughter.
“Most of the kids that are in the Bay Area and they graduate, they kind of need to leave the Bay Area because it’s so expensive. I kind of figured in Austin, there was a shot that she might actually choose to try to stay in Austin to go to college and start her life,” Backus explained.
Correlation between states
“They each have a singular history. Both of them were governed by Spain and Mexico. They both have a sort of a nation-state identity unlike any other state,” said Bill Fulton, director of Rice University’s Kinder Institute for Urban Research, in Houston.
Fulton moved to Texas from California for his current job. He has been studying the migration patterns between the two states through census data and noticed a correlation.
“When home prices in California go up, more people move to Texas. When home prices in California go down, fewer people move to Texas,” Fulton said.
Census and politics
While California still has 10 million more residents than Texas, the migration patterns of each state have been going on for years, and Texas has won the popularity contest, according to the 2020 census results.
For the first time in the state’s history, California, a Democratic bastion, lost one U.S. congressional seat determined by the state’s population. Republican-leaning Texas, the biggest winner of all 50 states, gained two seats.
While the impact will be felt in Washington, Fulton said its political significance depends on who is moving from California to Texas — whether they are conservative Republicans who do not like liberal-leaning California with its state tax and more regulations, or Democrats from California looking for better opportunities in Texas.
“It may well be that a flow from California to Texas increases the likelihood that at some point in the future, Texas will turn blue. And if it does, of course, that’s good news for the Democrats and bad news for the Republicans nationally because then the two largest states are locked in to be Democratic states. But that would still be a way off if it happens,” Fulton said.
Impact of pandemic
During the pandemic, out-migration from expensive states such as California and New York picked up. States with lower costs of living, including Texas and Florida, are seeing an influx of new residents, said Los Angeles-based Eric Willett, director of research and thought leadership for the Pacific Southwest division at commercial real estate firm CBRE.
He studied the impact of the pandemic on people’s decision to move by looking at data from the U.S. Postal Service. With people working from home, there was a trend of people across the U.S. leaving denser urban regions for homes in the suburbs.
“Whether it’s a backyard or an extra bedroom, those sorts of living environments became much more highly desired during the pandemic,” Willett said.
The urban dwellers who moved tend to be young, affluent, highly educated and childless.
While Willett found that most Californians who moved did so within the state, the migration patterns of people who chose to move out of state were consistent with pre-pandemic trends.
“The states that saw the most out-migration last year are also the states that saw the most outmigration in 2019. It just was an accelerated path of out-migration,” Willett said.
Elon Musk, co-founder of Tesla and SpaceX, moved last year from California to Texas, where his business priorities are located.
Tesla Cybertruck and SpaceX’s spaceport are in Texas. Tech companies Oracle and HP Inc., as well as CBRE, have relocated their headquarters to Texas. Japanese automaker Toyota also chose to relocate its North American headquarters from California to Texas, which is not only known for its ample housing and lower cost of living but also its business-friendly environment.
Nicknamed “Silicon Hills,” Austin has been an attractive location for many tech companies.
“There’s no question that Texas has fewer business regulations than California,” Fulton said.
Texas may be popular, but Willett said it does not mean there is a mass exodus of businesses from California.
“Increasingly, companies are looking to diversify their talent base, and California is a mature market in many industries. And it makes sense for these companies to look elsewhere to continue to expand their access to talent,” Willett explained.
“Facebook and Google are constantly fighting for downtown office space of more than a million square feet (92,903 square meters). They’re looking for additional properties, and it just seems like every company is trying to expand their presence here in Austin,” said Job Hammond of the Austin Board of Realtors.
Hammond, originally from Northern California, moved to Austin 14 years ago when he relocated for his then-employer Oracle. He is now a relocation expert who helps people from other cities find homes in Austin.
“They all seemingly want the same sort of thing — a good quality of life, a reasonable price in terms of a home, and, in some cases, to avoid state income tax,” Hammond said.
Texas Realtors, the state-level association of realtors, reported that in the first quarter of 2021, the median sales price of single-family homes in the state reached $275,000.
In contrast, the California Association of Realtors reported that the median price of a single-family home in the state in March was $758,990.
“A California family will cash in their home equity to get a bigger house in Texas, and they’re probably not going to reverse that pattern,” Fulton said.
Foreign investors are also noticing Texas. Hammond has helped investors from Malaysia, Nepal, China, Europe and Mexico find properties.
“I was on the phone about 12 o’clock midnight with somebody in Shanghai who’s interested in not having cash in the bank because she’s worried about things like inflation,” Hammond said.
Backus has enjoyed the live music and arts scene in Austin and picked up surfing on Lake Austin.
But Texas summers are a lot hotter than they are in Northern California, with its milder climate, diverse geography, and plentiful biking opportunities and outdoor activities, which Backus misses.
“I still have my home there. It’s rented out there, and I’m questioning whether I should keep it, because I might want to go back. I do miss going snow skiing,” he said.