2024 Q1 Dakota Outlook

South Dakota is off to a great start in 2024. Employment growth is strong, incomes are rising, and the state’s strong economy is attracting new workers and residents from across the country. With everything going well, we thought now was the perfect time to innovate and find ways to improve the Dakota Outlook. This issue introduces a new format that focuses on more in-depth analysis and provides greater insights into some of our economy’s most interesting and important aspects. We’re also excited to introduce two new fellows to the Dakota Outlook.

Kyle Kopplin joins us from Black Hills State University where he is an Assistant Professor of Economics. Kyle’s research focuses on residential sorting, house prices, property taxes, and information networks. In this issue he shares his analysis of recent property tax trends across the state.

We are also joined by Devan Schaefer, a Wealth Management Officer at First Bank and Trust in Brookings. Devan’s work includes analyzing portfolios and internal data, as well as providing wealth clients with expert advice on economic trends, investment decisions, and estate planning. Devan recently graduated with his Master’s in Economics from South Dakota State University where he researched industry clusters and their impact on wages.

First up in this issue is a much-needed dive into South Dakota’s property tax system. Property taxes generate roughly three in every four dollars of local government tax revenues in South Dakota. Consequently, nearly all city and county government functions are funded through property taxes (e.g. schools, road maintenance, and elections), and South Dakota is once again looking at potential overhauls of the system. As we show, an overhaul will not be easy, given the complexity of the system and the number of stakeholders involved.

Following the analysis of South Dakota’s property tax system, we have a thorough analysis of the state’s housing market. The Dakota Outlook has always watched South Dakota’s housing market, but this issue goes deeper. We show South Dakota’s home prices have risen faster and higher than in surrounding states. We also provide some evidence that prices may be stabilizing as sellers across the region have started to lower prices to sell their homes.

Next is a labor market review that looks back at South Dakota’s recovery from the Covid-19 pandemic. As we’ve covered in the past, South Dakota’s labor market has been working overtime for the last few years. Job growth has been historically high, and the state’s problem has been a lack of workers rather than high unemployment. This issue provides more context by comparing South Dakota to other states in the region and shows where South Dakota stands out from the pack.

Finally, we provide an in-depth analysis of migration patterns and where our desperately needed workers have come from over the past few years. Using data from the IRS, we show net migration to South Dakota from 2020 to 2021 was 6,321 people. Only Montana had greater net migration than South Dakota. The same data also showed that Iowa, Nebraska, and North Dakota lost residents because outmigration was greater than inmigration. Clearly, South Dakota has been doing something right.