With net population outflows and a slowing pace of company formation in advanced industries in recent years, California is losing momentum as a long-standing high-tech hub and, by extension, a housing hot spot, according to a recent report from Chapman University.

Conversely, new high-tech hubs and housing hot spots are emerging.

Jim Doti, president emeritus and professor of economics at Chapman University, recently spoke with Siyamak Khorrami, host of The Epoch Times’ “Market Insider,” about this ongoing shift in real estate hot spots.

Resale Market

Doti said the U.S. resale market, or existing-home market, is now “weaker than it has ever been,” as many homeowners are not putting their homes up for sale because they are locked into 30-year fixed-rate mortgages with ultra-low interest rates of 2.5 to 4 percent that they took out during the COVID-19 pandemic, a phenomenon known as the “golden handcuff” effect.

As a result, supply is limited while demand remains high, keeping prices high and sales low, he said.

Doti said that average rates were historically around 5.5 to 6 percent, so a rate of around 6 percent before the U.S-Israel war with Iran broke out on Feb. 28—which people considered high—was normal by historical standards. The average interest rate of 30-year fixed-rate mortgages is currently at 6.46, according to Freddie Mac.

According to the National Association of Realtors (NAR), existing-home sales totaled 4.09 million units in February, down by 1.4 percent from the same month in 2025 and far below the pandemic peak of 6.12 million in 2021 and the all-time high of 7.05 million in 2005.

The median existing-home sales price rose 0.3 percent year over year to $398,000 in February, marking the 32nd consecutive month of annual price increases, according to NAR.

Doti said that over time, as those low-interest-rate mortgages are ultimately paid off and the average rate stabilizes at 5.5 to 6 percent, supply will increase, so he doesn’t expect much price appreciation nationally.

‘A California Problem’

However, he said, with its affordability index well below the national average, the housing issue is most acute in California.

Chapman University’s housing affordability index, which measures the percentage of median family income needed to purchase a median-priced home, shows that California’s index was 75, according to Doti.

An index of 100 means an area’s median family income is just enough to buy a median-priced home; a reading below 100 indicates it is not enough, while a reading above 100 means it is more than sufficient, he explained.

As of February, Redfin listed the median home price in California at $819,800. Meanwhile, according to the Census Bureau, California’s household income was about $100,000 in 2024.

Doti said an affordability index of 75 means a California household with a median income would be about 25 percent ($250,000) short of affording a median-priced home of $1 million. The national affordability index was 125.

“So obviously it’s a California problem,” he said. “But increasingly ... even at the national level, it’s perceived as a problem.”

California has long been a hub for advanced industries—such as high tech, research and development, defense-related manufacturing, and pharmaceuticals—which pay higher wages, with key hubs including Sacramento, San Francisco, Santa Clara, Orange County, Los Angeles, Inland Empire, and San Diego.

“But that is changing,” he said, noting that the state’s share of jobs in those fields has dropped from 18 percent five years ago to roughly 15 percent today, according to the Chapman University report. “So, we’ve lost a 3 percent market share in all of these advanced industries.”

The number of advanced industry companies in the state increased by 21.6 percent from 2018 to 2025, about half of the 47.7 percent growth in the other parts of the nation during the period, according to the report.

Chapman attributed California’s slowdown in advanced industry company formation to the state’s less favorable tax environment. California ranked 48th in the 2024 State Business Tax Climate Index by the Tax Foundation, placing the state’s business tax system as the third least competitive in the country.

By comparison, metro regions in low-tax states saw 52.2 percent growth in the number of advanced-industry companies created during the period.

“High relative state taxes not only drive out jobs, but they also drive out people,” the report states.

Chapman University’s analysis of the Census Bureau data shows that California’s net population outflow from 2021 to 2023 exceeded 1 million, and the top five outbound destinations were: Texas, Arizona, Nevada, Idaho, and Florida, which have no or very low state income taxes.

“While the nation was growing at a historically low rate of half a percent ... California was actually beginning to decline [in population],” Doti said.

According to the Census Bureau’s January data, the U.S. population growth slowed significantly between July 1, 2024, and July 1, 2025, with just a 1.8 million, or 0.5 percent, increase. California was one of the few states that experienced population decline.

Doti expects further population declines in the state.

“Immigration is falling off a cliff because of immigration policy. And the natural birth rate, births minus deaths, is dropping,” he said. “What does that say about housing?”

Doti said the Bay Area, San Francisco, experienced rapid growth in home prices in the past due to job creation. “But now San Francisco is experiencing just the opposite. They have 40 percent vacancy rates,” he said, referring to commercial real estate.

According to a January Cushman & Wakefield report, the overall vacancy rate of office space in San Francisco was 33.1 percent at the end of the fourth quarter of 2025.

Doti said that some older housing hot hubs, including California and New York, will stagnate for some time, and other hot spots will grow, “because people are following where there’s economic development, where there are jobs, where housing is affordable.”

Housing Hot Spots in 2026

Doti said that the most important leading economic indicator his organization has considered in recent years in identifying housing hot spots is the number of companies being formed in an area. He added that housing prices typically rise three or five years after a company is established.

“First, you have the number of new companies, then increase jobs, and then increase wages,” he said. “As you recruit more workers, they demand housing.”

In areas with major economic development, housing demand is rising more rapidly, which will increase real estate values, he said.

“So if you have a new establishment, you start to add jobs in a particular area, let’s say Salt Lake City, and you can see the development taking place,” he said.

As a result of that development, more new companies move in, creating more jobs, and more people begin to migrate there.

‘The demand increase results in an increase in housing that eventually will lead to home builders increasing the supply, which will bring down the price.”

Chapman University’s list of the top major cities slated for growth this year includes Atlanta, Georgia; Tampa, Florida; Raleigh and Charlotte, North Carolina; and Salt Lake City, Utah.

The five leading smaller cities expected to grow in housing popularity are Louisville, Kentucky; Oklahoma City, Oklahoma; Providence, Rhode Island; Hartford, Connecticut; and Kansas City, Missouri.

The 2026 forecast found that the main factors leading to these “hot spot” migrations were income and affordability. Other factors included climate, proximity to water, and amenities.

However, Doti cautions that population growth over time can lead to higher housing prices.

“This window that I’m talking about in 10 years, where you have these hot areas, as more people move because of economic factors, population will increase,” he said.

“And as population increases, home prices will increase.”