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Catching a Wave Out of Pricey California

Migration of young professional families may be creating a 'smart belt' in the Sun Belt.

June 27, 2004|Stephanie Simon and Lianne Hart | Times Staff Writers

AUSTIN, Texas — Soaring property values in California have made many homeowners there rich -- and many real estate agents here delighted. In an exodus that some demographers say could reshape the American landscape, young professional families are increasingly fleeing the exorbitant coast for Austin, Dallas or San Antonio, for Atlanta, Denver or Phoenix, for Charlotte, N.C.

They're selling their cramped "starter homes" in California, some worth $500,000 or more, and buying luxury homes, for cash, in the nation's interior.

John and Nicole Hutmacher will be moving here this summer, leaving a tract home in a jam-packed subdivision in Santa Rosa in Northern California for a 3,000-square-foot estate on an acre in a gated community overlooking central Texas' rippled hills. They'll have enough money left over to buy a boat and a pickup, even to see the world.

"We wanted to do more with our money than pay for a house," said John Hutmacher, 27, an engineer who can work from anywhere in the country. "We want to travel. Eventually, we want to have children." In California, he said, "we couldn't afford to."

It's hard to quantify exactly how many families are joining the Hutmachers in sacrificing day trips to the beach in favor of bigger homes, smaller mortgages and shorter commutes.

The 2000 census tracked movement of college graduates around the country and found the metropolitan areas around Atlanta, Dallas, Denver and Phoenix were top magnets. (San Francisco made the list, though demographers say it's attracting more single dot-com workers than young families.) Experts say the migration inward has accelerated since the census, as housing prices in California and New England have soared.

Calling the shift dramatic, demographer William Frey has dubbed the Southwest and Southeast the nation's "brain gainers." A scholar at the Brookings Institution, a Washington think tank, Frey sees a "smart belt" emerging in the Sun Belt.

Real estate agents see it too.

"I'm flooded with clients from California," said Larry Regan, a broker in Dallas.

"It's so exciting to work with them because everything looks great to them," said Kristal Kraft, who sells homes in Denver.

In Atlanta, Ellen Crawford recalls one gleeful refugee from high-priced New Jersey who kissed her hands after she sold him a four-bedroom house in the sought-after suburb of Alpharetta for $189,000. Compared to the coasts, Crawford said, "homes are practically for free here."

Though the colder, grayer Midwest has proved a less attractive draw, cities such as Minneapolis, Kansas City, Mo., Ann Arbor, Mich., and Madison, Wis., are also beginning to lure professional families from the coasts.

Demographer Joel Kotkin, a senior fellow at Pepperdine University's Davenport Institute for Public Policy, predicts that the trend "may lead to a stabilization, or even a limited resurgence," of the long-declining Rust Belt. It's already reshaped the way some entrepreneurs view the vast Plains once derided as "flyover country."

Forbes magazine recently ranked Madison the best place in the U.S. to do business. A similar survey in Inc. magazine put Atlanta on top. Both lists were dominated by, as Inc. put it, not "the fashionable coasts," but "more prosaic places" where the cost of living is low enough to attract and retain well-educated workers, and companies don't have to pay them a fortune.

Steven Kiser, president of a San Antonio computer firm, calls that the "corporate greed standpoint" -- and he admits it's a factor for business owners.

When Kiser ran the research department of a software firm in Southern California, some of his employees seemed constantly stressed, barely able -- despite what he considered ample salaries -- to afford more than the basic "hygiene factors" of shelter, food and clothes, he said.

His 110 employees at SecureInfo in Texas earn less but live better because they have more discretionary income for travel and entertainment. And Kiser can use some of the savings he reaps from a lower payroll to provide better benefits, such as retirement plans. He's noticed less turnover -- and more satisfaction -- in his workforce.

The surging interest in such moves reflects a deep divide in the nation's housing market.

Property values in California and in parts of Florida, New England and Washington D.C., have doubled or close to tripled in the last decade, gaining more than 20% last year alone. In the broad expanse of middle America, however, housing prices have tended to plod modestly upward at 3% or 4% a year.

Until the mid-1990s, "home prices in different regions were starting to converge," said Nicolas Retsinas, director of Harvard's Joint Center on Housing Studies. Since then, "we've seen an increasing disparity."

The disparity has created wildly different experiences for buyers.

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