The CU Leeds
School of Business released its 2016 Economic Forecast for Colorado last week,
and the report has a predictably upbeat tone to it. Record low unemployment, record high
population growth, record high home prices and record high per-capita income
are all in the forecast for next year, continuing Colorado’s emergence as one
of the country’s elite regional economies.
There is a
lot to sift through in a 133 page report, but when talking economics
my focus is always drawn to employment, income and migration.
Employment
looks great – according to Leeds, we have 2.46 million jobs in the state, and
that number is expected to increase by another 100,000 in 2016. Per capita personal income is also at a
record level, $48,869. The state picked
up over 101,000 new residents in 2015 and we are expected to grow by more than
95,000 in 2016. That’s crazy growth, and
it fuels unbelievable expansion and opportunity.
California
has now supplanted Texas as our top importer of new residents. In 2014, more than 24,000 Californians moved
to Colorado. Nearly 30,000 more came
this year, and next year the number may top 30,000 for the first time.
That’s
nearly 90,000 Californians in three years, a number equivalent to the
population of Boulder or nearly three times the population of Wheat Ridge. Californians now account for 30% of our
population growth.
Because of
my own California roots, this trend is one I’ve been paying close attention to
for many years. We left because it was
my belief that the value proposition of living in California at inflated
bubble-era prices simply wasn’t worth it anymore. Housing was too expensive, the public schools
in most areas were a wreck, traffic was a never-ending irritation and too much
of life was spent fighting to support a lifestyle that simply didn’t deliver
enough value.
Ironically,
the collapse of the housing bubble actually created a brief era of renewed-affordability (if you still had a job), but by 2011, home prices began surging
and the same issues began to surface again.
Today, with
California home prices back to their bubble-era peak, the middle class must
once again decide if marginal schools, ridiculous traffic, and endless urban
sprawl are worth a $4,000 per month mortgage payment and an occasional trip to
the beach.
Since
leaving 10 years ago, I’ve maintained that California is a great place to visit. It's a fine place to live
if you’re super rich or super poor. But
if you’re in the middle, the battle is real and the returns are diminishing.
It’s
Millennials and the middle class that are fleeing California in the largest
numbers.
Face it, if
you’re 25 years old, fresh out of college with $80,000 of student loans and
looking to stay in Southern California or the Bay Area, your options are
extremely limited. Pay $2,500 - $3,000
per month to rent an apartment, live with your parents, or find a partner and buy
a tiny little two bedroom ramschackle condo backing to the interstate.
For the same
money, your housing options in Colorado seem like utopia. Your job prospects are unbelievably bright here
as well. And while rush hour traffic on
I-25 has definitely worsened, it can’t hold a candle to twelve lanes of
gridlock at 5 o’clock on the 101.
I was
recently talking with a client about the impact of the California exodus on the Denver housing
market, and I put it this way. The
problem California has is that people can stay there and people can leave there…
but it’s darn near impossible for anyone to go there. California’s top two
export items are the iPhone and the middle class.
While I
still have many friends who remain behind, my desire to go back is zero.
Each morning,
when the sun rises up over the eastern plains and brilliant Colorado sunshine comes pouring into our home, I give thanks for the decision we made a decade ago. And with each spectacular sunset over the Rocky Mountains, my gratitude flares again.
