Cheap mortgages help deter workers from moving to South
Manager recruits in the industrial Midwest are shunning offers to move to the South — in part because they’re locked into superlow 30-year mortgages.
A tight labor market that’s allowing workers to stay closer to home, rising housing costs and a post-pandemic shift toward remote or hybrid-work arrangements are making it a challenge for employers to entice managers, according to Andy Challenger, the senior vice president of Challenger, Gray & Christmas Inc., an executive coaching firm.
What’s more, recent data signals the amount saved on potentially lower taxes and costs by moving to the South is shrinking. All that helps explain why the number of U.S. job seekers who relocated for a new job fell to 1.5% in the fourth quarter last year, the lowest level on record, according to a Challenger survey.
Domenic Calagna, a sales director for a major automotive supplier in Macomb County, Michigan, said he turned down an offer last year to relocate to South Carolina.
Recruiters still reach out at least a few times a month, but his family is established in Michigan — plus he’s got a low-interest mortgage.
“The incentive wasn’t significant enough,” he said.
Potential hires paying low-interest mortgages are often reluctant to move unless they’re offered relocation packages that account for the differential in housing costs, said Janet Rivera Jones, founder of Florida-based 5 Star Global Recruitment Partners.
About one-fifth of homeowners have a mortgage with less than 3% interest, and almost 35% have a rate between 3% and 4%, according to a Bloomberg analysis of Federal Housing Finance Agency mortgage data. Current rates for a fixed, 30-year mortgage are at around 7%, and have more than doubled since hitting their historic lows of 2.85% in December 2020.
“They don’t want to sell that house that they bought for a 2% or 3% interest rate and buy down here at 8%,” Jones said. “Companies have to offer relocation, that is a must.”
At the same time, the cost of worker relocations is on the rise.
For midlevel managers, the average U.S. relocation costs have been increasing since 2020, hitting $78,330 for homeowners last year and $33,349 for renters, according to data from ARC Relocation, a consultancy that relocates employees for federal agencies and corporate clients.
“You have to offer relocation, and then it’s still a 50-50 shot that the person will take it,” Jones said. “They don’t want to move at this time.”
Then there’s the matter of pay.
The average annual pay for an automotive plant manager in the Southeastern U.S. can run $150,000 to $250,000 in salary, bonuses and other perks, according to Jones. Other managers can earn $120,000 to $130,000 annually, and senior-level managers can make more than $160,000.
But salaries in Michigan for all manager roles are typically around 15% to 20% higher than for comparable roles in the South, she said.
The problem of attracting talent to the South is being felt most acutely by automakers and suppliers, who are building anew or expanding massive campuses across the region. Companies like Hyundai Motor Co., Kia Corp. and Ford Motor Co. have steered billions of dollars of electric vehicle-related incentives into building or expanding manufacturing facilities.
Automakers announced $133 billion in EV-related investment alone in the United States between 2018 and 2023 — more than half of which went to Southern states, according to the Center for Automotive Research in Ann Arbor, Michigan.
The investments have translated into new or expanded electric vehicle and other automotive plants across the region.
To fill entry-level positions at these facilities, recruiters have found local workers.
But hiring experienced senior and midlevel managers in the region has been a much steeper challenge.