When C.P. Morgan Communities chose Charlotte, N.C., as its first expansion market, in 2004, it selected it from 25 cities the builder had analyzed along seven statistical categories and 25 subcategories. Since entering Charlotte, the builder has broken down that metropolis into 20 submarkets and reapplied its analytical model to each with an eye toward spotting demographic and growth trends and developing a price curve for its products.
These analyses have shown that job growth is "the single most reliable" factor in determining a market's potential sales volume, says Tom Eggleston, Morgan's CEO.
Traves Bonwell, market development manager for the Indianapolis builder, created this model to compare the economic personalities of different metropolitan areas. For example, under "demographics," Morgan breaks a market down by total households, household incomes, and the age and growth of its population. Employment data compare two years (2002 and 2006), as well as net changes and growth over five years.
Bonwell adds that while employment is a "key metric," Morgan can weight the data any way it chooses. He acknowledges, though, that this model is historical and, therefore, doesn't anticipate economic changes. He points specifically to Greensboro, N.C., where job growth isn't that strong now but could be down the road, as HondaJet and FedEx open new facilities there. "We learn about that by talking to the economic development folks in these markets," he says.
Here are the categories C.P. Morgan uses for its market analysis.
Building and Existing-Home Markets
- Annual permits (2006)
- Single-family permits as percentage of total population
- Employment change/permit ratio
- Total households
- Number of households $30K-$100K income
- Percentage of households $30K-$100K income
- Total population
- Population age 25-34
- Percentage population age 25-34
- Total population (1990)
- Population growth, 1990-2005
- Monthly mortgage expense
- Utility expense
- Median existing-home price
- Median family income
- Affordability index
- Percentage of renter households
- Number of renter households
- Employment (2002)
- Employment (2006)
- Net employee change in past five years
- Growth percentage in past five years
- Average daily commute to work
- Number of cities serviced by non-stop air service
Herfindahl Index (a measure of market concentration)
Learn more about markets featured in this article: Charlotte, NC.