According to the latest report from Chapman University, as California’s population outflow in recent years and the slowdown in the establishment of advanced industry companies, California is losing its long-standing status as a high-tech center, which in turn affects its status as a real estate hotspot. In contrast, new high-tech centers and real estate hotspots are emerging.
Chapman University’s Honorary President and Economics Professor, Jim Doti, recently discussed this trend of real estate hotspot shift in an interview with the English Epoch Times’ “Market Insider” program.
Doti pointed out that California’s housing issue is particularly severe due to its affordability index being significantly lower than the national average. California’s housing affordability index is 75, while the national affordability index is 125.
He explained that an index of 100 means the median income of local households is just enough to purchase a median-priced home; below 100 indicates insufficient income, while above 100 suggests surplus income.
He said, “So, it’s clear that this is a unique problem in California.”
As of February, Redfin data shows the median home price in California is $819,800. According to the U.S. Census Bureau, the median household income in California in 2024 was around $100,000.
California has long been a center for advanced industries, including high-tech, research institutions, defense-related manufacturing, and pharmaceuticals, with higher salary levels concentrated mainly in Sacramento, San Francisco, Santa Clara, Orange County, Los Angeles, Inland Empire, and San Diego.
However, Doti noted that the situation is changing. According to the Chapman University report, California’s share of national employment in these areas has decreased from 18% five years ago to approximately 15% currently, meaning “we have lost 3% market share in all these advanced industries.”
The report indicates that from 2018 to 2025, the number of advanced industry companies in California increased by 21.6%, which is less than half of the growth rate in other regions in the U.S. (47.7%).
Chapman University attributes this to California’s unfavorable tax environment. According to the Tax Foundation’s 2024 State Business Tax Climate Index, California ranks 48th, meaning its business tax competitiveness is the third worst in the country.
In contrast, in metropolitan areas of low-tax states, the number of advanced industry companies grew by 52.2% during the same period.
The report states, “Relatively higher state taxes not only lead to job losses but also to population outflow.”
Chapman University’s analysis of U.S. Census Bureau data shows that from 2021 to 2023, California’s net population outflow exceeded 1 million people, with the primary destinations being Texas, Arizona, Nevada, Idaho, and Florida, states with no or very low state income taxes.
Doti said, “While the U.S. population is growing at a historically low rate of about 0.5%… California is actually beginning to experience a population decline.”
According to the January data from the Census Bureau, from July 1, 2024, to July 1, 2025, the U.S. population increased by only 1.8 million people, about 0.5%, with a significantly slower growth rate, and California is one of the few states experiencing a population decline.
Doti expects the California population to further decline. He said, “Due to immigration policy effects, immigration numbers have significantly decreased, while the natural growth rate (births minus deaths) is also declining.”
Doti noted that the San Francisco Bay Area, which experienced rapid housing price increases due to job growth in the past, is now experiencing the opposite, with a 40% vacancy rate in commercial real estate.
According to Cushman & Wakefield’s report in January, by the end of the fourth quarter of 2025, the office vacancy rate in the San Francisco area was 33.1%.
Doti said some earlier real estate hotspots, including California and New York, will stagnate for a while, while other hotspots will grow because “people will follow economic development, job opportunities, and affordable housing areas.”
Doti stated that in recent years, his research institution’s most important indicator for determining real estate hotspots is to look at the number of new companies established in a certain area. He added that housing prices usually rise 3 to 5 years after a company is established.
He said, “First, the number of new companies increases, then employment increases, and then salaries rise. When more workers are attracted, housing demand is generated.” In regions with faster economic development, housing demand rises more rapidly, pushing up real estate values.
Chapman University listed the cities expected to experience the fastest growth this year, including Atlanta, Georgia, Tampa, Florida, Raleigh and Charlotte, North Carolina, and Salt Lake City, Utah.
Five mid-sized cities expected to see an increase in real estate attractiveness include Louisville, Kentucky; Oklahoma City, Oklahoma; Providence, Rhode Island; Hartford, Connecticut; and Kansas City, Missouri.
Forecasts for 2026 indicate that the primary factors driving these “hotspot” migrations are income and affordability, with other factors including climate, proximity to water, and amenities. However, Doti warned that over time, population growth could ultimately push up housing prices.
“What I’m saying is that within a window of about 10 years, these popular areas will grow due to economic factors attracting population influx. And with population growth, house prices will also rise.”