Deurbanization or the great reshuffle?

July 14, 2021 – When the COVID-19 pandemic hit last year, forcing many businesses to embrace work-from-home arrangements with their employees, did it also trigger a massive move out of urban areas as was widely reported? Change-of-address data suggested an exodus from New York, Chicago and San Francisco, so we decided to leverage VisaNet data to see how widespread the outmigration from urban centers had become over the last year and which areas benefited. Our analysis suggests there is little evidence of a widespread deurbanization trend, but rather a great reshuffling¹ of the population. Specifically, among those who relocated, the majority moved from a high cost-of-living area to a lower cost-of-living area. Those who were able to work remotely, and did not have to consider commute time, had the added incentive of relocating to the suburbs and other areas that were less expensive.

This geographic resorting will have implications for the housing and commercial real estate markets in higher-cost cities. While the evidence is still early, it suggests that many of these higher-cost metro areas could suffer for a while should some remote work arrangements become permanent. The lower-cost areas, on the other hand, could present new opportunities for merchants and issuers as consumers who have migrated there increase their discretionary spending potential. These newly-relocated individuals could help boost growth for both the communities and the businesses that serve them.

Highlights:

• There is evidence that larger cities have lost population during the pandemic
• Middle income, older millennials, and boomers are leading the reshuffle
• Implications for marketing to customers

Sources: Visa Business and Economic Insights and U.S. Department of Commerce.

The motivation to move

At the onset of the pandemic in March 2020, concerns developed about the health and safety of densely populated areas. As many of the larger metro areas in the U.S. were among the first to impose restrictions, it became obvious that more densely-populated areas would be disproportionately impacted. In addition, the dramatic negative economic impact of the restrictions imposed by state and local governments in order to contain the pandemic led the Federal Reserve to cut interest rates and begin making asset purchases, which put downward pressure on interest rates, including home mortgage rates. As the pandemic continued, another motivation for relocating emerged—the opportunity to work from home and thus the need for more space. Combined, the virus concerns, low mortgage rates and remote working served as the motivating factors for many households. According to a survey conducted by the Pew Research Center², 22 percent of U.S. adults relocated, had someone move into their home or knew someone who moved. According to U.S. Postal Service change-of-address requests, between February 1, 2020 and July 31, 2020, nearly 16 million households relocated. While temporary change of address requests rose more than permanent changes (nearly 26.7 percent vs. 1.9 percent for permanent), permanent address changes accounted for the bulk of the requests (14.4 million). 

Evidence of the great reshuffle

So where did these households move from? Using the power of VisaNet, we looked at the number of active, anonymized debit cards used in places associated with spending where people live (grocery, dry cleaning, etc.) at the card level. Cards used in December 2019 were compared to those used in December 2020, which allowed us to calculate the number of cards that were active in different metro areas over the two time periods—a total of 6.5 million people identified as “movers” in the analysis (based on a large sample of Visa debit card users). Among the top areas with the greatest net outmigration were the metro areas of New York, Los Angeles, San Francisco, Boston and Seattle. This was also consistent with many of the media reports of outmigration from these metro areas. Our analysis also identified where these “movers” were relocating to. Roughly 42 percent of the relocations were into metro areas with greater than 1 million in population size. Thus, there was little evidence to support the argument of an emerging deurbanization trend. Recent data from the U.S. Census Bureau also confirmed that net migration into suburban areas, which for the purposes of this analysis were included in the metro area to account for this trend, was the largest.

• 1 Zillow Q2-2020 earnings call, August 2020.
• 2 Cohn, D. (July 6, 2020). About a fifth of U.S. adults moved due to COVID-19 or know someone who did. Pew Research Center. About a fifth of U.S. adults moved due to COVID-19 or know someone who did.
  

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