Want to know why your California community loses or gains residents? Check the home prices

The persistent headlines captured a portion of California’s demographic shift during the last two years:

“California’s population declined for the first time ever.”

“California’s population decreased. Again.”

But the overall population decline does not tell the whole story. Also true: Cities where homes remain relatively affordable – most of them in the inland parts of the state – saw, on the whole, population increases, according to a Bee review of real estate and state government data.

Housing prices correlate with overall cost of living. The fact that many affordable places in California continue to grow is the latest illustration that people are fleeing the most expensive parts of the state – or choosing not to move there or start families there.

It’s also a warning: As inland California becomes more expensive, it sits on the cusp of a shrinking population, much like the coast.

When it comes to migration, “the biggest driver is the cost of living,” said Jeffrey Michael, director of public policy programs and professor of public policy at Pacific McGeorge School of Law. “I think it’s the biggest driver for business (moves) too because it affects their ability to attract and retain employees and what they have to pay them to live here.”

The trends have large economic implications. Growing population can have its drawbacks, such as more traffic or longer lines. But a shrinking population can mean labor shortages due to lack of workers, layoffs due to lack of customers, and cuts to public services.

“When your population is growing, your healthcare industry is growing, your education industry is growing, all sorts of services are growing,” Michael said. “When you have a declining population, you have pressure on all those associated industries as well.”

THE BIG PICTURE

More than 12 million people live in California cities where typical single-family home values exceeded $1 million at the end of 2021, according to a Bee analysis of data from Zillow and the state Department of Finance.

Those cities lost about 223,000 people, or 1.8% of their population, between April 1, 2020 and Jan. 1, 2022.

About 9.5 million Californians live in cities where typical single-family home values fell between $700,000 and $999,999

Those cities lost about 64,000 people, or 0.7% of their population.

By contrast, about 11 million Californians live in cities where typical single-family home values fell below $700,000.

Those cities, which include nearly all communities in the Sacramento region, gained about 10,000 people, or 0.1% of their population – not a boom, but also not a free fall.

A similar pattern appears when comparing population trends in counties along the coast – where homes typically cost eight figures – to inland counties.

Every county bordering the Pacific Ocean or in the San Francisco Bay area lost residents from April 1, 2020 to Jan. 1, 2022. The losses were substantial: a decline of about 369,000 people.

By contrast, inland California counties gained about 16,000 people – a far cry from past years but not the nose dive seen on the coast.

“There’s no denying the fact that coastal communities in particular have seen rather significant increases in housing prices and rents,” said Walter Schwarm, chief demographer at the California Department of Finance. “This, kind of coupled with the pandemic work from home or remote work options for a number of larger employers in these areas, has generated a movement of individuals to potentially more affordable environments – Sacramento, Placer, El Dorado, San Joaquin.”

Big Silicon Valley companies such as Facebook, Salesforce and many others remain flexible about working from home – and often pay salaries that make for a lux lifestyle in much of inland California, which motivates some employees to move.

Schwarm noted that the numbers aren’t seamless. Several inland counties in far northern California – Lassen, Plumas, Shasta, Butte – are still losing residents.

Sacramento County and, to a lesser extent, El Dorado County, also saw population declines, though neighboring Yolo and Placer counties saw large population increases, meaning the entire, four-county metro saw population remain essentially unchanged.

The population shifts are intertwined. A Bee review of census data from 2020 found that most new residents in inland California came from the coast. Many of them moved inland looking for cheaper housing and lower prices.

At the same time, movers from other states also played a role in the trends. While the number of people coming to California from other states declined during the pandemic, it fell significantly faster along the coast than it did inland, said Evan White, executive director of the California Policy Lab at UC Berkeley.

LOOKING FOR A BARGAIN

Holly Berneking and her husband wanted to buy a house last year but they lived near Seattle, one of the most expensive home markets in America.

The Bernekings are both nurses without children. But they couldn’t keep up with rising home prices.

“We rented for years while saving for a down payment, but housing prices shot up faster than we could save,” she said. “We felt compelled to move.”

The Bernekings wanted a place they could afford, and that required adequate nurse-to-staff ratios not found in more conservative parts of the country. And they wanted a spot that let them easily enjoy the outdoors.

So they moved to the Sacramento region, which checked all of those boxes.

“We were lucky – our first offer was accepted,” Berneking said. “We really loved the house so we offered slightly above list price. There were multiple offers.”

“I am happy with our move and plan to stay in this area for many years,” she said.

It’s a common story – though a bit more infrequent as the cost of living rises in places like Sacramento.

Twenty-three of the 25 fastest growing California cities during the last two years were where the typical single-family home was valued at less than $700,000 at the end of 2021, according to a Bee analysis of data from Zillow and the state.

These cities are largely attracting upper-middle class families fleeing higher prices elsewhere.

New residents who earned more than five times the poverty rate – about $105,000 for a family of four – saw relatively large net population gains in inland California during 2020, according to census data showing domestic migration. In other words, significantly more higher-income people came into those places than left them.

Net gains were more modest for residents earning 2.5 to five times the poverty rate – between $65,000 and $105,000 for a family of four.

New residents earning less than 2.5 times the poverty rate – less than $65,000 for a family of four – made up the biggest number of newcomers, but with a big caveat. About as many people earning less than that left inland California for other parts of America, many searching for even cheaper communities. That meant little net population change among lower-income households in inland California.

“I had a client that was paying $4,000 a month, in a studio,” said Rico Rivera, a real estate agent who specializes in helping people relocate from the Bay Area to the Sacramento region. “It was an 800-square foot studio. A $4,000 mortgage payment here? It’s a huge house, a 3,000 square-foot home, depending on where you’re buying.”

Another client of Rico’s recently moved from the Bay Area to join family members who had already made the move. “She bought a $640,000 house in Elk Grove – four bedroom, two bathroom, full, nice house. There’s no way that she could have bought that in the Bay Area.”

A TALE OF TWO CITIES

Two cities in the Sacramento region were on the list of the 25 fastest-growing in California during the last two years: Lincoln and Roseville, both in south Placer County. They both offer a high-quality suburban lifestyle at a fraction of the price found in coastal areas.

A typical home in Roseville doesn’t come cheap – $700,000 is a lot of money – but it is less than half the cost of a typical home in the San Francisco metro area.

Roseville’s population grew by about 2.6% from April 2020 to January 2022, faster than all but two of the 77 cities in California with at least 100,000 people. It has been growing for a while. Its population has nearly doubled since 2000.

Roseville is a low crime community. Its homicide rate during the last decade was about one-fourth of the statewide rate, FBI data show.

Its schools are excellent. Almost 80% of the graduates in its local public school district go to college, much higher than the statewide rate of 66%, the latest state data show.

Although many people live in Roseville and commute to Sacramento, the city has seen strong business growth over the last several years, a possible byproduct of its population growth, city officials said.

“We’re a net importer of jobs,” said Roseville Mayor Krista Bernasconi. “We’ve been, I think, diligent about who we attract to our community in terms of industries. We’ve got healthcare, technology, retail, service sectors – you can live and work in the same community.”

Roseville largely attracted upper middle class residents during the pandemic. The median household income of residents who moved from other counties or states to Roseville in 2020 was about $125,000, nearly twice as high as the nationwide median income of $67,500, census data show.

Lincoln grew by 3.1% from April 2020 to January 2022, even faster than Roseville. The two cities also have similar median home prices. Lincoln is about 18 minutes north of Roseville.

Lincoln is home to some of the premier retirement communities in Northern California. About 28% of its residents are 65 or older, nearly double the statewide rate.

“We are seeing a lot of retired-age folks coming because they can sell their houses in the Bay Area and get a large profit and come here and buy a house for cash and then they’re set up,” said Lincoln Mayor Holly Andreatta.

“The other reason is because we are part of the heart of South Placer and we are located right at the Sierra foothills and it’s just a great place to be,” she added.

Both Lincoln and Roseville have recently attracted residents from expensive parts of the state looking to work from home in a more affordable place.

“I think that the whole model of people reporting into an office five days a week, clock in eight to five, I think we know that’s been turned on its head,” said Bernasconi.

A CHANGE IN BIRTHS

Other factors also explain why cheaper, inland California counties have not yet seen large population declines.

First, the number of births fell faster in coastal California than in inland counties during the pandemic.

Coastal California saw about 48,000 fewer births in 2020 and 2021 than during 2018 and 2019, a decline of about 8%, according to the California Department of Public Health.

Inland California saw births drop by about 12,000 over the same period, a decline of about 4%.

Birth rates overall were about 20% higher in inland California than in Coastal California during 2021.

The trend also ties back into affordability, Schwarm said. Many coastal California residents likely moved inland for economic reasons before expanding their families.

“With affordability issues … and with some of the changes in the pandemic, there probably is the case that individuals are delaying or otherwise putting off having children even further in the coastal communities,” he said.

Birth rates are correlated with education level. Women without a college degree tend to give birth more often, federal data show. Women who identify as Hispanic also have higher birth rates than non-Hispanic women.

The highest birth rates in the state are in the Central Valley and the Imperial Valley. Seventeen of the 25 fastest growing cities in California from April 2020 to January 2022 are located in the Central or Imperial Valleys, state data show.

Rising and falling birth rates can have profound effects on particular areas, said Michael, the economist and public policy expert.

“When there’s been baby booms and baby busts, those have implications economically that last as long as the generation is,” he said. “We’ve certainly seen that to be true of the baby boom and to some extent the millennials.

“We’re seeing the education sector being squeezed by the declining demographics now. We’re seeing the healthcare industry facing higher demands as we have an older population entering those ages where they have more healthcare needs.”

OTHER FACTORS

California has long relied on international migration – people moving to the state from abroad – for population gains.

International migration into California had already declined from levels seen in the 1990s and 2000s. The pandemic brought further, huge declines, at least temporarily.

The State Department suspended visa services worldwide at the start of the pandemic. Those services remained hampered for many months, leaving hopeful immigrants out of luck. The situation has improved for immigrants in recent months.

But there is still a large backlog.

The largest group of immigrants comes to California from Asia, Schwarm said. Many stay, at least initially, in coastal California, where there are multiple established immigrant communities. So disruptions to international migration hit coastal areas a little harder.

Net population gains from international migration fell about 62% in coastal California from July 2019 to July 2021 when compared to July 2017 to July 2019, state data show. Gains fell by about 54% in inland California.

Deaths also play a role in population change. COVID, combined with the fentanyl crisis and rises in homicides and driving fatalities, brought a lot more deaths to the state.

Coastal California saw 65,000 more deaths in 2020 and 2021 than it did in 2018 and 2019, an increase of 19%, according to data from the California Department of Public Health. Inland California saw 46,000 more deaths in 2020 and 2021 than it did in 2018 and 2019, an increase of 24%.

LOOKING FORWARD

Many of the same economic factors causing population declines in coastal California are weighing on residents of inland California. Home prices are ballooning out of reach for many middle-class families. Cost of living overall is increasing at a quick pace.

However, experts and city leaders said they expect inland California to continue to add people, only at a slower pace than in years past.

“As far as projections over the next couple years, I have heard that this next fiscal year shows a slightly slower pace as a result from the economic uncertainty – interest rates, high inflation, supply chain issues – but I think that we will still continue to grow,” said Bernasconi, the Roseville mayor.

Andreatta, the Lincoln mayor, said growth will continue in her town because there is a backlog of approved projects.

“A lot of the developments that are happening now were things that were approved years and years ago,” she said. “They’ve just sat dormant because of the market,” she added, referring to the years-long slowdown in construction following the 2008 housing bust.

However, Lincoln has grown so fast for so long that its infrastructure is starting to feel strains. Problems like traffic have become worse amid a lag between getting more revenue from population growth and building the systems necessary to accommodate that growth.

“We’re going to have to just slow down a little bit so our staff can catch up and so we can make sure we’re growing responsibly. We can’t just explode and then stop and look and go, ‘Oh my gosh, what have we done?’” Andreatta said. She later added, “It is our responsibility to protect the culture of Lincoln while we grow.”

Michael, the economist, said that demographers will likely look back on the pandemic as something of an outlier.

“I’ve been talking about slower growth in the future in California for some time and how important it is to our economy, but I had never projected population loss in the state and here it’s happened two years in a row,” Michael said. “So I have a hard time seeing it continue to go down significantly from here. But I do believe that we won’t see the levels of growth that we’ve seen in the past.”

Schwarm, the Department of Finance demographer, said that inland California’s continued growth is largely contingent on its continued affordability relative to the coast and the rest of the nation.

“I think inland will still have significant growth but will it be far above the (rest of the) state? I don’t think so,” he said. “I think what we saw there was affordability. Interest rate changes and also overall home prices – they have gone up in the Central Valley. It’s not as quite as obviously affordable.”

This story was originally published September 11, 2022 at 5:00 AM.