Quote from @James Hamling:
Headlines can be deceiving and stories can be reported with a skewed perception or two. The rust belt didn't die overnight. It was a very slow deterioration that began in the 1950s, and by the 1980s, the rust belt's days of thriving were in the past. Residents of those former boomtowns held onto the idea and hope that the federal government would somehow intervene in a big enough way and could force the American auto industry back into the Midwest, as well as other manufacturing facilities that used coal and steel. They clung on to the idea that what was once good will be again, with a hard nudge from lawmakers, and then the steel factories and coal mines in PA, WV, KY, OH, etc would be able to get back to the business and operations that they were used to, and the American Dream would be alive and well again. They rejected the idea that they needed to regroup and retrain. They resisted diversifying their economies, repurposing their manufacturing facilities, closing dangerous mines, and they thought that if they just waited long enough, something would change. 20 years ago, the rust belt was dead, and some of those towns kept on waiting, and are still waiting. Others, like Pittsburgh, Cleveland, and sections of Detroit, have had many great successes revitalizing run down areas of town, have welcomed technology and new industries or employers, and have helped train and educate residents to be equipped to enter the workforce. They've offered major incentives to homebuyers in some neighborhoods, provided affordable loans and loan forgiveness for homeowners to renovated and revitalize run down properties and neighborhoods that were largely abandoned.
California's "declining population" is frequently misunderstood and misrepresented. Yes, it is true that the population has declined the last couple of years, losing 0.2% of its population from 2021 to 2022, and 0.6% from 2020 to 2021. COVID-19 deaths contributed towards the loss. New York State lost 1.8% of its residents from 2020 to 2021, and another 0.9% from 2021 to 2022, ranking #1 both years for highest % of population lost. Massachusetts, Hawaii, Illinois, Louisiana, and Washington DC also experienced a drop in population during these same years. Boston, DC, San Francisco, Los Angeles, San Diego, and areas of Chicago are all densely populated and high cost areas, where many residents have white collar jobs that were relatively portable during the pandemic. Many people saw the "work from home" orders as an opportunity to relocate to more affordable and smaller cities, even if just for a year or two. These states were also some of the states that had stricter COVID policies, paving the way for residents to work remotely for an extended amount of time. Prior to the pandemic, and also probably during the pandemic, California has watched many of its older residents and retirees relocate due to the high cost of living, congested and often fast pace of life there. With mild climates in places like Boise, Utah, New Mexico, Colorado, and states like Nevada and Arizona that are directly adjacent to CA but with lower taxes, a retired couple can relocate and upgrade their lifestyle, and save themselves a lot of money. That trend started long before the pandemic. The population decline is hardly a mass migration. Population changes in the US have been pretty insignificant in most cities and states for 20+ years. We hear of some cities and states that are "exploding" with growth, so you would expect the population change to be more than 1 or 2 % per year, but it's not. In 2022, Florida grew by 1.9%, followed by Idaho at 1.8%, South Carolina at 1.7%, Texas at 1.6% and Montana at 1.5%. The 5 states reporting losing the most in 2022 were New York at 0.9%, Illinois at 0.8%, Louisiana at 0.8%, Hawaii at 0.5%, and California at 0.3%. The average population change across all 50 states was +0.55% from 2021 to 2022.
I've lived in Arizona, then New Mexico, back to Arizona, then California for almost 20 years, and been back in NM for about 4 years. I've bought, sold, owned investment properties in each location. I've followed some basic rules of thumb and been satisfied with the outcome:
1) Mild climates save money and are more manageable. Extreme weather conditions, or areas prone to flooding, high wind, tornados, heavy snow storms, high humidity, wildfires, and long stretches of freezing temps add up to more maintenance costs, unplanned repair expenses, more insurance claims and higher premiums, greater risk of injury, higher utility costs, snow removal, and more strain on mechanical equipment, roofs, siding, and so on. These expenses and inconveniences add up are are often not accounted or budgeted for.
2) Nearby Never Hurts. Sure, you can buy a rental house anywhere you want, 2000 miles away in a city you've never visited. The numbers might look good now, but after years of not visiting it, minimal investment in keeping up with it, a mediocre property manager you feel stuck with, and several tenants later, you've got a problem on your hands. Purchasing nearby gives you the option of self managing responsibly. If you live in an area that is high cost or not conducive for acquiring rentals, check out other large towns, medium cities or adjacent suburbs that you can drive to easily. When I lived in San Diego, real estate prices were high and Phoenix was still pretty affordable. I was able to sell the one rental I owned in CA at the time, buy 3 in Phoenix for the same amount. It was a 5 hour drive or quick flight if I planned ahead, which wasn't always convenient, but I could get there the same day if I needed to.
3) You don't need to wait for the next silicone valley to sprout up in the Midwest or for a high tech economy to emerge from the hills and hollers of West Virginia and East Kentucky. There are stable rental markets, or cities with development opportunities, all over the place. Cities with colleges and universities that have medical schools, law schools, MBA programs, and engineering programs are a great place to start. Look for big employers like Amazon , Wal Mart, major airline hubs, federal and state agencies, and military bases. They provide people with stable employment and reliable incomes, but many will be in the rental market, not the homebuyer market.
I am in Albuquerque, NM. I've been back here for 4 years and own 3 single family rentals and a 3 unit townhouse style apartment, and I love my tenants and like each of my properties enough that I'd live in any of them myself if I needed to. 3 of my 6 tenants have security clearances and 800+ credit scores. I've got a teacher and medical resident couple in one of the units. I've got a couple that both work for Amazon in another. And, I've got an engineer that was new to town in the other, but just renewed his lease for another year. All of the properties are low maintenance by design -- desert landscaping/no grass, so tenants pay all utilities and can't complain that they are having to pay to water my lawn. Every unit has a 1 or 2 car garage. I've upgraded the floors to tile or LVP in 5 of the 6 units - no carpet. All have washer/dryer and prewired for home security if they wish to obtain their own service. All are located in good areas, convenient to major roadways or major employers, places to shop, go out to eat, etc. Within 48 hours of posting my most recent vacancy, I had 14 applications and 10 or 11 of the 14 seemed like they'd be great tenants. I have not had a single late payment on any of these properties, had no issue receiving payments during COVID, and wish I could buy more.
Oh, and on the Arizona water issue.... it's a serious issue. It's what happens when there are no regulations and when we sell out to the highest bidder and let them do whatever they want with our land and natural resources. AZ has allowed mega farms to move into the state, even leasing state land, and they have the resources to drill deep water wells that are taking the water from AZ residents and many of the smaller farms and agricultural communities, and they can’t do anything to stop it, and the state doesn’t seem to want to stop it. Underground wells and aquifers don’t have state boundaries, so these deep water wells stand to harm communities in neighboring states, along with Mexico, and all so that you can get the same fruits and vegetables year-round in the grocery store. There was an interesting story on 60 minutes, I think, about how AZ leased land to a Saudi alfalfa farmer. It’s illegal to grow alfalfa in Saudi Arabia due to the amount of water that it needs , so the alfalfa needed to feed their cows is shipped overseas, from farms like the one operating in AZ, leaving nearby residents and farmers without water. AZ has a long history of giving its middle finger to regulation, and when it comes to water, it is long overdue.
