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Why Phoenix keeps attracting Southern California residents

March 5, 2020

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Affordable rental rates and home prices in metro Phoenix continue to attract Southern California residents in droves, according to a report by the University of Southern California Lusk Center for Real Estate.

While it's no surprise to local real estate experts, the USC Casden Multifamily Forecast shows how the lack of Southern California's affordable housing is impacting that area's economy.

He ran some numbers for the Phoenix Business Journal and found that of the total 367,913 people moving to metro Phoenix in 2017 and 2018, about 37,000 moved from the Los Angeles, Orange County and Inland Empire areas in 2017 and 2018.

"This is gross flow, not net," Thornberg said. "We haven't subtracted people moving from Phoenix to LA, Orange County and Inland Empire."

The majority of those Californians coming to metro Phoenix are lacking in higher education degrees, with 3,308 coming with graduate degrees, 6,554 with bachelor's degrees and 12,601 with only some college. Meanwhile, 5,623 have high school diplomas and another 9,454 have less than a high school diploma.

"Young people are moving there, moving with their parents. Those are people making choices about housing," he said. "A massive inflow of people makes Arizona one of the fastest growing economies in the nation because people are moving there."

Typically, when residents left Los Angeles, they would move to Riverside, San Bernadino and other less expensive areas nearby, said Richard Green, a professor at USC and director of the Lusk Center.

Now that those areas are becoming more expensive, residents are moving to Phoenix and Las Vegas, said Green, a co-author of the multifamily forecast.

For Californians with posh jobs at Netflix Inc., Amazon, Facebook and other social media companies, they don't have much choice but to stay in Southern California, he said.

"If you want those jobs, you come here," he said. "They push up the rent for everybody."

But if you have a back-office job earning $60,000 a year, there's not much of a salary difference between living in Southern California or Phoenix, he said.

"California is gaining the high income people and losing everyone else," Green said. "In Southern California, you're either doubled up in your housing or you have a really miserable commute."

While home prices and rental rates are more affordable in metro Phoenix than other coastal areas of the country, rents continue to increase.

With a 6.5% year-over-year price increase, Phoenix topped the nation in annual home price gains, according to the latest results of the S&P CoreLogic Case-Shiller Indices.

"We may be a cautionary tale for Phoenix," Green said. "Phoenix is now getting so big physically, that you are seeing house prices and rents in the more job-rich areas rapidly rising in Phoenix. But it's still much less expensive than here."