Thread: Saying Goodbye California Sun, Hello Midwest

www.nytimes.com

November 7, 2005
Saying Goodbye California Sun, Hello Midwest
By MOTOKO RICH and DAVID LEONHARDT
LEE'S SUMMIT, Mo., Nov. 3 - A year ago, Melanie Fischer, a lifelong Californian, was not entirely sure where Missouri was. So when her husband proposed that they consider moving there, she raced to locate the state on a map printed on her children's placemats.

Today, Mrs. Fischer and her family live in this suburb of Kansas City, in a five-bedroom house nearly twice the size of their former home near San Bernardino, with a huge yard and a lake view from the hot tub on their deck. Still, Mrs. Fischer, 28, and her husband, Nathan, 30, had enough money left after their move to pay off the debt on their two cars and buy a 21-foot motorboat.

Many of their new neighbors cannot fathom why the Fischers left sunny California for, of all places, Missouri. "You have to give up things," Mrs. Fischer said, "to get things."

A growing number of people are leaving California after a decade of soaring home prices, according to separate data from the Census Bureau, the Internal Revenue Service and the state's finance department.

Last year, a half million people left California for other parts of the United States, while fewer than 400,000 Americans moved there. The net outflow has risen fivefold, to more than 100,000, since 2001, an analysis by Economy.com, a research company, shows, although immigration from other countries and births have kept the state's population growing.

The number of people leaving Boston, New York and Washington is also rising, and skyrocketing house prices appear to be a major reason, said Mark Zandi, chief economist at Economy.com. From New York, the net migration to Philadelphia more than doubled between 2001 and 2004, with 11,500 more people leaving New York for Philadelphia last year than vice versa. The number of New Yorkers who have moved to Albany, Charlotte, N.C., and Allentown, Pa., among other places, has also increased sharply.

But the change seems most pronounced in California, which has long been a beacon that draws people from all over the country, with its sun-drenched coasts and dynamic economy. Popular culture has reinforced that image, with fictional characters from the Joads of "The Grapes of Wrath" to the Beverly Hillbillies coming to the state.

Today, however, the same factors that have made California so alluring have also made it unaffordable for many young families, retirees and recent immigrants to the United States. Some are heading to fast-growing cities like Las Vegas, as they have been for decades. But even less-glamorous destinations, like the Rust Belt and Texas, are on the receiving end of the migration.

The last few years appear to be one of the few times on record that California has lost domestic population when its job market was as healthy as the rest of the country's, economists and demographers said.

"People are saying, 'Even though I have to take a 10 percent wage cut to go to Vegas or Phoenix, it's actually a wage increase,' " said Ross C. DeVol, the director of regional economics at the Milken Institute, a research group in Santa Monica, Calif. "They look at what housing costs here, and they're making decisions to go elsewhere."

Far more Californians are staying - for the weather, the landscape, the culture and other reasons - than are moving, but it is also clear that California is losing some of its attraction.

In a survey of 2,500 Californians last year by the Public Policy Institute of California, a research group, about a third of residents under 35 said the cost of housing was making them consider moving to a less expensive area. Two-thirds of those people said they were thinking of leaving the state.

The current migration out of California is not as large as the one in the mid-1990's, which was driven more by job losses in aerospace and other industries than by real-estate prices.

Today, the most popular destinations for people moving from Los Angeles and San Francisco are less expensive parts of California, like Riverside and Sacramento. Las Vegas and Phoenix also remain near the top of the list, but Dallas, Houston, Atlanta, Nashville, Virginia Beach and Oklahoma City are becoming popular, according to Economy.com.

In the Kansas City area, which straddles Missouri and Kansas, a small band of Californians are discovering the plentiful supply of spacious homes for prices that would not buy a shack back where they came from.

"They just walk in and go 'Wow, we can have space,' " said Sandy Tasker, a real estate agent with Coldwell Banker in Overland Park, Kan.

According to I.R.S. data, the net population transfer to Missouri from California more than tripled, to about 2,200, from 2001 to 2004.

Guadalupe Osegueda, a 34-year-old ironworker who grew up in Los Angeles, recently chose Kansas City over the desert cities that have traditionally drawn Californians.

"I didn't want to go to Las Vegas or Arizona," said Mr. Osegueda, who lives with his fiancée and their two daughters. "Everyone is going there and the prices have gone up drastically."

The couple sold a three-bedroom house near Los Angeles for $450,000. They bought a four-bedroom house, with two kitchens and a swimming pool, for $185,000 in Gladstone, Mo., near Kansas City.

With a monthly mortgage payment of only $496, Mr. Osegueda said he hoped he could retire by the time he was 48. In California, he said, "people need to work all their lives to pay off their home."

The Fischers felt like they were running in place to keep up with their $200,000 mortgage, car payments and other expenses when Mr. Fischer, who managed a fast-food restaurant, heard about an arm of a new Christian group forming in Kansas City.

The couple, who met while training for overseas Christian missions, were intrigued by the idea of joining the group. They searched for homes online and quickly saw how much more they could get for their money. Mrs. Fischer realized she could quit her job as a medical billing supervisor and stay at home with their son, Cole, 7, and their daughters, C. J., 5 and Kendal, 3. Mr. Fischer applied for a job managing a bagel chain store in Kansas City. When they found their house, for $189,000, the move started to fall into place.

Mrs. Fischer said that leaving her extended family behind in California was "traumatic" and that she missed the warm weather. But she and Mr. Fischer also noted that they had friends who were leaving California for destinations that included Utah and Texas.

"Everybody is always like, 'California, oh, so cool,' " Mrs. Fischer said. "But all my friends who were raised there are trying to leave."

Perhaps more common than the Fischers' story, however, is the experience of families who leave the state even before they are able to buy a house. Mr. DeVol of the Milken Institute said there seemed to be a rise in the number of Mexican immigrants leaving California after just a few years there. Other young families are making the same decision.

Heather and John Franklin were renting a one-bedroom apartment in San Diego when they married last year. On Ms. Franklin's income as a real estate agent and Mr. Franklin's pay as a mechanic, they could not afford a house in San Diego, where the median home price is almost $605,000.

In Kansas City, where Mr. Franklin, 22, grew up, the couple, who have a seven-month-old daughter, bought a house for $134,000. Ms. Franklin, 24, who was raised in San Diego, never imagined she would leave California. Since moving to Kansas City, she has had to get used to tornado warnings and the concept of wind chill.

"But we are always told how lucky we are to be so young and already have what we have," she said, referring to their three-bedroom home. "We realized we had to sacrifice living in California to get that."

That appears to be the biggest cost of the nation's bifurcated real-estate market: some families say they have to make decisions based more on home prices than on jobs or family reasons. They end up with more space than they imagined, but they miss other things.

Sam Cannon and Velia Dayton left Los Angeles two years ago when they and their two young children outgrew their two-bedroom rental apartment. Even with a budget of $450,000, they quickly discovered they could not afford anything less than 70 miles from Mr. Cannon's office.

"The idea of living in the middle of the desert in a prefab 1,200-square-foot home, stretching ourselves financially and driving three hours a day, wasn't appealing anymore," Mr. Cannon, 34, said.

So the family moved to a suburb of Detroit, where Mr. Cannon's parents live, and he took a job at an Internet marketing firm. They bought a brick Tudor-style house for $310,000, near good schools and a 15-minute drive to his office.

Mr. Cannon and Ms. Dayton do miss California's "culture and excitement and food," he said. "We've been spending two and a half years trying to find good Thai food and still haven't found it yet."

They still talk about trying to get back to Los Angeles. But, he lamented, "housing isn't getting any cheaper there."

That's exactly what I did last year. I moved from Anaslime, CA to Phoenix, AZ. Unfortunatly, I got here just as home prices were on the severe incline so it took me a year to get a house but even though it is considered a bit pricey in Phoenix, I got something that was far less expensive than anything I could ever own in California. I had been living in California for several years and could never buy a house but I lived here a year and now own my first one. I wanted to move back to Dallas but the industry my husband is in has been pretty much wiped out there and everything is thriving here. Unfortunately we're up to our eyeballs in illegals but from what I understand in the near future that won't be a determining factor in where we choose to spend our retirement in 30 years because the rest of the country is going down the toilet anyway. Our goal is to have enough to own a condo outright and have money to live on from this and maybe 2 or 3 more houses that we plan on making money on and believe me, we won't be living in sunny California. It will be somewhere like Michigan or Nebraska or maybe even beloved Dallas if their economy never ever picks up again.