Of the nearly 9 million Americans who relocated in 2020, a substantial number of them left California. That's according to moving contracts from Atlas Van Lines, which studied roughly 65,000 interstate and international moves to find out where people were flocking to, and fleeing from, in the pandemic.
The data defines "inbound" vs. "outbound" states, where of all the people who moved statewide, more moved in rather than away, or the opposite way around with a larger share leaving.
California was an outbound state for the first time since 1995: A total of 57% of its moves in 2020 were people exiting. For a lot of those people, the driving force was money. Cost of living and taxes were top reasons many people wanted to leave the Bay Area last year, according to more than 1,200 residents in a poll from the Silicon Valley Leadership Group and The Mercury News.
David Hampshere, the founder of Painless Home Buying and a North Carolina realtor, recently moved out of the state. "For me, it was very simple," he says. "I landed in another tech hub" in Raleigh. There, he says, "the salary is decent and the cost of living was a quarter of what I was paying in California. "
From a financial perspective, he says, "it was a no-brainer to move."
Hampshere is far from alone in lamenting the Golden State's high cost of living. The median home there costs about $625,000, according to Zillow. That's almost twice the $349,000 median in Idaho, where Americans moved to most last year. It's also much higher than the national median of $270,000.
In San Francisco, a home down payment itself could cost you $218,229, and the median home value exceeds $1 million. It would take more than seven years on average for someone saving 20% of their income to be able to afford that, according to a study from real estate firm Point2.
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And then, of course, there's taxes. California residents effectively pay about 1% for property taxes, putting it in the middle of the pack, according to a WalletHub ranking of all 50 states. New Jersey ranks highest with a 2.49% property tax rate while Hawaii ranks lowest at .28%. Income taxes in the Golden State, on the other hand, are quite high: Many Californians pay 12.3% for 2020-2021.
Groceries, utilities, and transportation all tend to cost more as well, according to Best Places' Cost of Living index. On a scale where the national average cost of living is 100, California scores 149.9.
If you're saving up to live somewhere new, experts suggest you take a steady approach. Even though mortgage rates have been at pandemic lows (the average contract interest rate on 30-year fixed-rate mortgages was 2.96% last month), home values are rising. They went up 9% in the past year and will likely increase another 10% in the next year, per Zillow.
Don't feel pressured to tap into your retirement savings or emergency fund to move quicker, as that could hurt you down the line if you face financial hardship or need expensive repairs. Instead, stash away a bit of money at a time until you reach the amount you need.
There are also other costs to consider beyond the down payment. Closing fees averaged $5,749 for a single-family home last year, according to ClosingCorp. That's more than twice what the typical American age 34 and younger had in savings.
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Be aware that if you leave a high-cost-of-living state like California, you could be leaving behind a higher salary, too. Jobs in more affordable areas tend to offer lower wages.
"You'll need to understand whether you'll incur a cost of living adjustment to your pay if you relocate," says Roger Ma, CFP, founder of financial help website lifelaidout.com. "If you get your pay adjusted downward, you'll generally pay less in federal taxes, and could even move to a lower marginal tax bracket. A lower cost city/state could mean less in state and local taxes."
In analyzing whether it's worth it, he adds, "I'd recommend people figure out what their expenses and net savings are if they stayed where they are and in the scenario they moved."
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Make sure you look at the full picture before you consider a move. Figure out if you can work from home in your desired town or if you'll need to find another job first. And if you're not sold on the culture there, signing a short-term lease can be a good way to see if the new place is a fit.
It's good to envision how your finances and your life overall would change, says Hampshere. "I look at the long game. What are my chances of making a decent salary? I then look at the cost of housing. I landed in Apex, North Carolina, which compared to Silicon Valley is supercheap," he says.
His property taxes are higher than in surrounding areas, "but we also have some of the best schools here," he adds. "It's all about trade-offs."
If affordability is a factor in your choice, it can be useful to look at price trends and compare current costs. While there's no one-size-fits-all approach to deciding where to move, consistent saving and careful budgeting can help no matter where you land.
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