"We were working all the time just to afford to keep living where we were living," says Debbie. Neither a second child nor an executive MBA for David fit into their 5-, 10- or even 20-year budgets. Thoughts of another terrorist attack plagued them: Trapped in Manhattan, how would they get to Samantha, marooned in day care across the Hudson?
The answer came in the gold mine they were sitting on: the three-bedroom, center-hall colonial that had appreciated 50% in the three years since they bought it. In September, 2003, they sold the house for $505,000, plowed the gains into a jumbo downpayment on a Craftsman bungalow in a posh enclave in downtown Charlotte, N.C., and slashed their fixed expenses by nearly 75%.VALUE-PRICED REGIONS
In doing so, they became one of a growing group of real estate vanguards: the equity refugees. Their mortgage and taxes have plummeted from $2,600 a month to $850. Day care is down from $1,260 a month to $550. Debbie's commute to her home office, out of which she still does documentaries, takes five seconds. David's trek to TIAA-CREF, which reassigned him to Charlotte, is 20 minutes each way. In early January, Debbie gave birth to a second baby girl, Rachel. David is applying for executive MBA programs. They have also become refugees from tension, now spending weekends doing things like picking pumpkins and visiting horse farms. "We have dinner together every night," says Debbie. "I don't know a single married couple in New York who is able to do that."
With housing prices on both coasts at nosebleed levels, more and more professional-class migrants are cashing out of their homes in New York, the Bay Area, and Los Angeles as though from premium-heavy dot-coms. Motivated by favorable capital-gains rates, fears of a housing bubble, and worries of a sideways stock market over the next decade, they are moving to value-priced regions of the country, creating tiny pockets of blue America in the heart of the red states. Experts are calling the trend "geographic arbitrage."
With soaring health-care and tuition costs also pounding the middle class, demographers such as the Brookings Institution's William H. Frey predict bigger waves of inland migration. The price gap between urban coastal areas and the rest of the country is at an historic high. At the same time, the information gap is shrinking: The new wireless world, even in rural towns, is allowing more people to form long-distance relationships with employers, working remotely from anywhere. That means more people might be able to live in the cheap places but still get paid as though they live in the expensive ones.
The moves are also a response to mounting personal debt, battered portfolios, insufferable traffic, and angst-producing status competition. Some simply want to semi-retire. For others, the prospect of playing the housing market is too tempting to resist. Valerie Bent and her husband sold their 2,200-sq.-ft. house in Simi Valley, Calif., netting $300,000 in 2003. They then bought a 5,500-sq.-ft., Mediterranean-style showplace in Las Vegas for $495,000. It's now worth $900,000.
Retirees have been migrating to the Sun Belt for years. "What's different now is the phenomenon of people still in the prime of life or the middle of their working careers, uprooting themselves," says Nicolas P. Retsinas, director of Harvard University's Joint Center for Housing Studies, which is conducting a study of the trend. It also means that real estate is starting to change the shape of the workforce, affecting the flows of the professional class. Eventually, says Retsinas, the migrations of the equity refugees could start to even out housing prices across the country and create a talent exchange as knowledge workers disperse from the coastal cities to places such as Phoenix, Las Vegas, and Atlanta.TRADING UP
Already, in Los Angeles so many homeowners are moving to Nevada and Arizona that the waiting time for moving vans is often a month. In fact, one-quarter of Californians say the high cost of housing is forcing them to consider moving, according to the state's Public Policy Institute. About 42% of home sellers over 55 moved out of state during the second quarter of 2004 -- many to cheaper communities -- vs. 23% during the same period in 2003.
For some thirty- and fortysomethings, the Extreme Makeover: Home Edition glorified lust for all things house-related stirs desires to trade up -- yet they can't afford to do so in their neighborhoods. Shawn Shook Kornegay and her husband wanted to upgrade beyond the 1,200-sq.-ft., low-curb-appeal ranch they shared with their 6- and 7-year-old sons in San Diego. But they encountered a parade of overpriced dumps with filthy carpets and features such as tangerine linoleum and avocado appliances. One "four bedroom" for $675,000 looked promising -- until they discovered that two of those bedrooms were located in the garage. They ended up selling their house for $480,000 and using the $318,000 profit to start a college fund, pay off bills, fatten their retirement accounts, and buy a 3,400-sq.-ft. starter castle in Dallas with five bedrooms, a pool, jacuzzi, cabana, two fireplaces, and new furniture. Price: $241,000. Instead of their crumbling San Diego school with no air conditioners, the boys now attend a top-rated K-6 in a state-of-the-art building.
The transplants have their misgivings, though, ranging from sushi-delivery deprivation to political alienation. Some regret moving but have already gotten priced out of the places they want to return to. Incomes and benefits can be hard to replace for those who quit jobs. There's also often a social price to be paid in isolation, nonexistent career networks, and lost friends.
Still, becoming an equity refugee is something demographers say more and more may consider, especially since it's one of the few ways to transform the "balance" in the work-family equation from a Sisyphean campaign into something approaching reality. By Michelle Conlin, with Timothy J. Mullaney, in New York