Is California Exodus Real? Where are Silicon Valley Residents Buying?

Reasons for Leaving California Across the board, many who leave California share similar reasons for doing so. California has high taxes with little-to-no state deductions or exemptions, as well as heavy governmental regulations, astronomical real estate prices, sky-high rents, high cost of living, and bad traffic (at least pre-pandemic). For example, California has the highest state income tax in the nation, going all the way to 13.3% (FY 2020-2021). The median home price in Palo Alto in 2020 was around $3.0 million1, while the average rent was over $2,900 for an 822 square foot apartment.2 In San Francisco, the median home price in 2020 was around $1.6 million3, while the average rent was over $2,900 for a 739 square foot apartment.4 Based on PayScale, the cost of living in San Francisco is 80% higher than the national average, and the cost of living in Palo Alto is 50% higher than the national average.5

Due to the pandemic, perspectives on workplaces have changed. Companies realize they do not need to provide office space to house all of their employees as people can work remotely, and meetings and communications can be done online. Following on the heels of McKesson Corporation (previously one of the Bay Area’s top employers), in 2020, Oracle, HewlettPackard Enterprise, and Palantir – just to name a few – announced they are relocating their headquarters to another state. Other companies, like Dropbox, Twitter, VMware, and Facebook, offered alternative work structures and policies that embraced workfrom-anywhere arrangements.

Given that many employees do not need to physically be in the office every day, they now have the option of moving to lower cost areas while remaining with their company. Many prefer to trade in California sunshine and the convenience of being close to the office for places with cheaper real estate, lower taxes, and a lower cost of living.

The Pandemic’s Impact on Migration Throughout last year, rumors circulated of a mass exodus of Californians due to the pandemic. Research released in March 2021 by the nonpartisan California Policy Lab provided no unusual pattern of mass exodus;6 rather, the number of Californians leaving the state followed recent historical trends. So yes, many people are leaving the Bay Area, but it does not appear that COVID has resulted in a huge spike.

Interestingly, the pandemic brought about a few atypical deviations. There was a noticeable movement of Californians within the state. In particular, the net exits from San Francisco between the end of March and end of December 2020 “increased 649% as compared to the same period in 2019, from 5,200 net exits to 38,800. Approximately two-thirds of people who moved out of San Francisco remained within the 11-county Bay Area economic region, and 80% remained in California.”7 For this reason, the DeLeon Team dramatically enhanced our marketing efforts last year in San Francisco for our Silicon Valley listings.

A number of Bay Area residents also moved to the Sierra Nevada Mountains, with many remaining on the California side despite the tax advantages in Nevada. In fact, these areas saw between 50-100% increase in migrants in 2020 as compared to 2019.8 Many of my sellers have moved to places like Placerville, Grass Valley, Truckee, and most notably Martis Camp. The silver lining is that Silicon Valley has also benefited from many people moving out of San Francisco in favor of places like Palo Alto, Menlo Park, and Los Altos.

Why do Californians Move to the Sierra Nevada Mountains, particularly Lake Tahoe? It is quite understandable why Californians, particularly those from San Francisco and the Bay Area, have rushed to purchase properties in the Sierra Nevada Mountains, particularly Lake Tahoe. Lake Tahoe was the #1 most searched community on Redfin’s “2021 Hottest Neighborhoods.”9 A report published in December 2020 showed Lake Tahoe home sales increased 87% year-over-year from October 2019 to October 2020, with the median sale price ($945,000) increasing 28%, median views per listing surging 280%, and the median number of days on the market decreasing from 48 to 25 days during that same period.10

Two-thirds of Lake Tahoe is located in California, with the remaining third in Nevada. From Silicon Valley, Lake Tahoe is around 4–5 hours by car and 35–60 minutes by private plane. This close proximity to Silicon Valley enables an easy commute for those who need to physically be in the office once every couple of weeks or months. Lower home prices, lower cost of living, more space, access to countless outdoor activities, and slower pace of living are among the attractions of Lake Tahoe. For instance, one can hit the ski slope or go kayaking around the lake in the morning, and come back home to work afterwards. Depending on locations and types of property, the home prices range from the low $200,000s to over $40 million.

There are also exclusive and private communities on and around Lake Tahoe that offer residents bountiful amenities (e.g., golfing, skiing, hiking, horse riding, fishing, watersport activities), while enabling the residents to build networks and relationships. These communities, which are located within California, include Martis Camp, Lahontan, Schaffer’s Mill, and Mountainside at Northstar. My wife and I visited these communities late last year and discussed the amenities at length with the executives there, and they commented on a noticeable trend of San Franciscans and Bay Area residents purchasing properties within these communities. They also lamented the short supply of properties on the market, while also celebrating a dramatic increase in sale prices and a decrease in days on the market of these homes.

Why do Californians Move to Nevada? Nevada is an excellent choice for those who still want to be close to California, but are looking for a tax break. Since 2017, Nevada has been in the top 5 states for Californian migration. Between 2017 and 2019, around 47,000 to over 50,000 Californians had migrated to Nevada each year, with many choosing areas such as Incline Village (Lake Tahoe), the East Shore of Lake Tahoe, Las Vegas, and Reno. As the most innovative and exclusive real estate brokerage in Silicon Valley, DeLeon Realty has taken notice of this trend, with many of our sellers relocating to Lake Tahoe and Nevada. In fact, this trend became so prevalent we opened an office in Incline Village, Nevada earlier this year. On a personal level, I even purchased a property on the shores of Lake Tahoe to take advantage of the amazing recreational opportunities and the exceptional appreciation.

There are several reasons why Californians are drawn to Nevada. First and foremost, the tax benefits Nevada offers its residents are extremely tempting. Nevada has no state income tax, no corporate income tax, no estate or inheritance tax, and low property tax (about half the percentage of California).