A new study finds New York”™s exodus of residents slowed precipitously during the recession, with the authors suggesting the real estate markets as a major factor.
Observers cited another possible cause: baby boomers forced to delay retirement due to the recession”™s impact on their savings and portfolios.
Whatever the reason, the economic impacts are significant as those leaving the state had incomes 22 percent higher, on average, than those moving in.
Nearly 70,600 New York taxpayers moved to other states in 2009, the most recent year covered in the report from the Empire Center for New York State Policy, a project of the Manhattan Institute for Policy Research. That was by far the smallest number leaving the state in the past decade, down 29 percent from 2008 and by nearly half from 2007. Migration from the state peaked at nearly 180,000 taxpayers in 2005.
New York had a net loss of nearly 1.2 million taxpayers from 2001 through 2009, according to the report, which used Internal Revenue Service data.
The researchers do not break down migration patterns to the county level, but do show the impact on counties of people relocating to or from other states.
In the case of Westchester County, nearly 8,400 residents moved to other states between 2008 and 2009 versus just short of 5,900 coming in. The incomes of those moving into the county were $2,200 higher on average than those relocating to another state from Westchester.
Westchester was an exception to the statewide trend in migrants”™ income levels. The average adjusted gross income of households leaving New York between 2008 and 2009 was 22 percent higher than that of those moving into the state.
Add up the counties and years, and the impact to New York is significant.
“New York”™s annual net income losses from 2000 through 2009 totaled nearly $37 billion,” wrote the report”™s authors E.J. McMahon and Robert Scardamalia.
“Incomes change over time, so this does not necessarily mean New York was $37 billion worse off at the end of the period than it would have been if no moves had occurred during this period. At the very least, however, the average incomes of migrating taxpayers reflect New York”™s ongoing loss of earning power ”“ and, in many cases, job skills ”“ to other states.”
Housing, stock market factor in
The Empire Center suggested the reeling residential real estate market of 2009 as one likely culprit, with homeowners unable to offload their properties and so squelching any longstanding plans to move, whether for professional or personal reasons, including retirement.
And those very retirement decisions were delayed in many cases, as workers nationwide saw their 401(k) plans and other holdings plummet along with the value of their homes, forcing many older Americans to reassess how long they would have to keep working to maintain a comfortable standard of living in retirement.
Larry Gottlieb, director of economic development for Westchester County, for one is buying the idea.
“Within the past five years, the flight of Westchester residents to Southern states went from typical, retiree-based ”˜snowbird”™ wintertime migration; to a high tax-induced, year-round ”˜go birds”™ youth flight exodus; to where we are today, which is housing a flock of ”˜no birds,”™ broken-winged individuals who want to leave, but cannot, for several reasons,” Gottlieb stated in an email.
He said escalating health care costs, shrinking retirement funds and difficulties with underwater mortgages have likely forced residents on the verge of retirement to prolong any planned move.
Scardamalia said plummeting real estate values in several Southern states ”“ none more so than in Florida ”“ are the culprit for the significant drop in New Yorkers leaving for the South.
“What stands out from the report is that flows to places like Florida were seriously affected,” he said, pointing to the high percentage of homes and condominiums in Florida that were built “on spec” and that are still largely vacant. “Once people start to question whether that is a good long-term investment it will have a definite impact” on migration to those states.
Changes in retirement destinations
Notably, 2009 was the first year on record in which more New York residents moved to North Carolina than to Florida.
Chris Jordan, president and CEO of Lexco Wealth Management in Tarrytown, agreed the perceived value of a home in Florida has fallen off significantly since the recession hit.
Whereas in the past Florida was viewed as a significantly cheaper alternative to New York while still having a high quality of life, “Suddenly the perception is that the quality of that investment has dropped considerably,” Jordan said.
Of course, the same scenario could draw buyers to Florida if they felt they had a chance to upgrade into a better neighborhood from when they first mapped out their retirement plans.
It is unclear which theory explains differences seen in 2008 and 2009 between New York”™s exchanges of households with neighboring states versus those of states considered retirement havens.
While New York saw a 5 percent increase in residents moving to New Jersey, Connecticut, Pennsylvania and Massachusetts ”“ its nearest jobs rivals ”“ between 2008 and 2009, the migration to the three most popular Eastern retirement states was down by more than half. Those states, according to the North Carolina Center for Creative Retirement, are Florida, Georgia, and North Carolina.
McMahon and Scardamalia note the significant changes in New York”™s migration patterns with Florida the past several years, but do not attempt to connect the dots to retirement decisions.
ALEXANDER SOULE ALSO CONTRIBUTED TO THIS ARTICLE.
