Political, economic fallout from California exodus
California lost 1 million residents over 10 years; William La Jeunesse reports from Los Angeles.
An outflow of wealthy residents from high-tax states – and some of the biggest U.S. cities – is leading to a rise in “secondary” luxury markets, a new report shows.
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M. Ryan Gorman, president and CEO of Coldwell Banker, said in the firm’s 2020 Global Luxury Market Insight Report that the main surprise in the luxury housing market has been the expansion of the affluent sectors in some less popular midsize markets – like Boise, Idaho; Charlotte, North Carolina and Fort Worth, Texas.
“Part of this is due to wealth migration from higher-tax states to lower-tax states,” Gorman said in the report. “These secondary luxury markets represent new pockets of opportunity.”
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The report said the $10,000 cap on state and local tax deductions, implemented as part of the Tax Cuts and Jobs Act, created an incentive for wealthy individuals to leave states like New York and California – and cities like Los Angeles, San Francisco and Manhattan.
Other factors that have contributed to the migration away from traditional “luxury hotbeds” include decentralized workplaces and new job opportunities.
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Austin is one of the cities benefitting heavily from the trend, according to Coldwell Banker. The city has seen a recent influx of technology companies – including Apple and Dell – boosting local job opportunities.
Nashville – where Amazon recently committed to building a new facility – is profiting similarly.
In Boise, where new luxury condos are selling for more than $1 million, properties are being snapped up not only by local wealthy individuals but also by those who have left California and Washington.
Minneapolis and Cincinnati are two other secondary luxury housing markets seeing an influx of wealthy homebuyers. Nearly half of the people moving to Cincinnati are from outside of Ohio, according to the report.
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As previously reported by FOX Business, the luxury real estate market faced a number of headwinds in 2019 – and some new challenges in 2020. The spread of coronavirus is one factor expected to potentially dampen U.S. luxury real estate sales, especially considering the U.S. has suspended entry into the country of foreign nationals who have visited China within the past 14 days. Chinese buyers showed the highest engagement of all non-domestic buyers from April 2018 through May 2019, even though they spent 56 percent less year over year – at $13.4 billion.
Trade tensions and tighter capital controls in China reduced luxury sales last year, despite low mortgage rates.
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