Inflation in Atlanta, Phoenix Leads the Nation. Here is What That Means for Housing.
High inflation, including rising home prices, means the financial advantage of living in what are now relatively affordable places is likely to diminish.
Atlanta, the 10th most popular migration destination in the fourth quarter, saw prices of goods and services increase by 8.9% year over year during the same period, the highest inflation rate of all the metros included in Redfin’s analysis.
It’s part of a trend that the most popular US migration destinations tend to have high rates of inflation, at least as of now, according to the real estate brokerage firm.
Additionally, Phoenix, with an 8.4% year over year increase in prices, came in No. 2 for both inflation and migration in the fourth quarter. In Tampa—the fifth most popular destination—prices rose 8% year over year, the third highest inflation rate.
“Migration is one reason among many why the cost of everything from food to fuel is rising,” Redfin Deputy Chief Economist Taylor Marr said in prepared remarks. “An influx of people moving to a popular, relatively affordable place like Atlanta increases demand for housing and transportation, pushing up prices on those things and contributing to soaring prices on everything else, from food to utility bills.
“A person moving from New York City to Atlanta will probably enjoy lower housing costs in their new hometown. That means they’re able to spend more on other things, which in turn means local businesses can charge higher prices.”
The financial advantage of living in places like Phoenix and Tampa is likely to fade as more and more people relocate, which will eventually slow migration.
“Residents moving away and less demand for goods and services is one reason why inflation is lower in places like New York and Los Angeles,” Marr said. “Over time, higher inflation in Phoenix than Los Angeles, for example, will diminish the financial advantage of living in Phoenix. The flow of people moving from traditionally expensive cities to more affordable areas will slow down because, quite simply, prices are rising so fast that those places won’t be as affordable anymore.”
Inflation is Low in San Francisco
On the flip side, San Francisco, the place that Americans moved away from most during the fourth quarter, had the lowest inflation rate (4%). New York, which had the second-lowest inflation rate (4.6%), ranked number three on the list of places people are leaving, and Los Angeles—number two on the list of places people are leaving—had the seventh-lowest inflation rate (6%).
Home prices are rising particularly quickly in the most popular migration destinations, one contributor to inflation. For instance, Atlanta home prices were up 22.8% year over year in December, compared with a 10.3% increase in San Francisco.
As an example of varying inflation rates in different areas, gas prices were up 67.2% year over year in December in the Phoenix metro, and prices of cars and trucks were up 34.4%. Prices also rose in the Los Angeles metro, the number-one origin for people moving to Phoenix, but not as much: gas prices were up 46.5%, and the price of cars and trucks increased by 13.7%.
National consumer prices jumped 7% in December from a year earlier, reaching their highest level in nearly 40 years. Policymakers consider 2% an acceptable level of inflation.