California and Texas have a few big things in common: they are the two most populous states in the United States, and the second and third largest by land mass. Both enjoy year-round mild to hot temperatures. But, there are significant differences as well. Those differences may explain why people (and even celebrities like Joe Rogan) are flocking to Texas while the trend in California is to move out–or, at least, to talk about it.
Moving from California to Texas though is a big deal, consider these things before packing your bags.
At the end of 2018, the Austin Statesman published U.S. Census Bureau data showing that the population of Texas had increased by nearly 3.5 million since 2010. That’s 13.7% population growth in less than a decade. Meanwhile, here in California, news reports are filled with stories about people who have left, plan to leave, or wish they could leave. The 2019 Edelman Trust Barometer California Supplementary Survey revealed significant concerns of California residents throughout the state. For instance:
- 62% of survey respondents said the best days of living in California were in the past
- 72% said the cost and availability of housing was a very serious issue
- 53% overall and 63% of Millennials said they were considering moving out of state due at least in part to the high cost of living
Recent economic trends and concerns over the economic impact of COVID-19 have accelerated the move from California to Texas. In the last year, the number of Californians moving to Texas is up 36%!
Let’s run down a few things to consider if you are a Californian thinking of packing up and heading to the Lone Star state.
Why Choose Texas?
The high cost of living may explain why so many Californians are ready to make a move, but why Texas? Here are a few reasons the Lone Star state beckons Californians:
Both Texas and California are large in terms of land mass and population, but Texas is considerably bigger and has a smaller population. Texas’s borders encompass 261,914 square miles and just over 29 million people. California, at 155,973 square miles, is home to more than 40 million.In addition to lower congestion, the abundance of space in Texas translates to one of the state’s most significant benefits as compared with California: lower housing costs.
According to Trulia, the median home sale price in Los Angeles is currently $825,000, or about $675 per square foot of living space. Home prices in Texas’s largest cities are considerably lower. Dallas, at a median home price of $612,324 comes closest, followed by the fast-growing Austin at $545,758. But, Houston’s median purchase price is less than half that in Los Angeles–just $377,404. And, the median home buyer in San Antonio pays $260,188.
The difference in housing costs extends to renters, as well. While Los Angeles renters pay a median rate of $4,200 per month, median rents across San Antonio, Houston, Dallas and Austin range from $1,445 to $1,995. Even without other advantages, cutting housing costs by 50% or more can have a dramatic impact on quality of life.
The highest marginal individual income tax rate in California is a whopping 13.3%–the highest in the country.While the 13.3% rate applies only to the state’s highest earners, some Californians earning less than $50,000/year may pay rates as high as 8%. In comparison, the Texas individual income tax rate tops out at…0. That’s right: no individual income tax at all in Texas, regardless of income level. Just five other U.S. states can say the same. Sales tax rates are also lower in Texas, though the difference is far less dramatic.
Greater Protection for Property
While California and most other states protect only a limited amount of equity in your home from creditors or in bankruptcy, the Texas homestead exemption is unlimited–provided you come in under 10 acres in an urban setting or 100 acres in a rural area.
Lower Unemployment Rates
The Texas unemployment rate is at a historic low right now: 3.7% compared with 4.3% in California. The Los Angeles metro area is above the U.S. average, while the Dallas/Fort Worth, Houston/Galveston, San Antonio and Austin metro areas are all posting unemployment rates slightly or significantly below the national average. And, the favorable comparison isn’t just a blip. Texas’s all-time high unemployment rate was 9.2%, all the way back in 1986. California reached 12.3% unemployment in late 2010.
It’s easy to see why Texas appeals to Californians who are stretched thin financially and looking for lower a lower cost of living–especially lower housing costs. However, when making a decision as significant as an interstate move, it’s important to research thoroughly. That means considering all income and expense-related data, not just high level cost-of-living figures or housing prices. Depending on your income bracket, family size and other factors, different data points will impact you more or less. And, practical considerations may also impact your cost of living. For example, with the wide open spaces in Texas, a reliable vehicle may be critical, even if you’re in an urban area.
Plan ahead before considering a move
It’s also important to look ahead. Though you can’t know exactly what the future holds, the influx of new residents to Texas may alter some of the state’s most appealing characteristics. The city of Austin alone receives about 35 new residents every day–that means the city’s population grows by more than 12,000 per year. Surrounding counties are experiencing even faster growth. As that growth continues, more people may mean more competition for jobs and a growing market for both homes and apartments. Over time, that competition could drive unemployment up, wages down, and home prices up.
Finally, if you’re already experiencing financial difficulties, you’ll want to educate yourself about your options for managing those difficulties while you’re still in California versus after moving to Texas. For instance, while the unlimited homestead exemption in Texas can provide powerful protection, it’s not available to new arrivals. The homestead exemption doesn’t take effect mid-year, and a bankruptcy petitioner can’t opt for the unlimited state exemption until he or she has resided in the state for at least 40 months. If you’re unsure of the specifics as to this particular aspect of bankruptcy law, give us a call and we’ll happily help you sort it out.
While the allure of Texas is real and relocation may be the right move, be sure you’ve thoroughly done your homework before you start packing.