Don't let anyone fool you. There are stupid questions.

I'm well familiar. I ask them. Not infrequently.

Case in point. Recently, I asked a round-table of five or six residential real estate strategic pros, "what are you doing now to prepare for when the coming slowdown in the market occurs?"

Insert buzzer sound for "dumb question" here.

The responses of two or three of them made the magnitude of ignorance of the question clear. It was, roughly, "[Silly! ...] if you haven't been preparing for the 'next slowdown in the market' starting 24-to-36 months or more ago, then it's already too late to do much now."

Humbling, eh? I'd like to think I'll know better next time than to expose so little a grasp of so basic a principle in residential real estate investment strategy. However, the vagaries of this business--especially when it comes down to the money, time, and expertise it takes to secure, finance, entitle, and create value on each piece of dirt--make it more than likely that my naivety as to the intricacies of these matters will continue to prevail. Still, these are questions I feel need to be asked.

Ironic, isn't it, that while most U.S. and global businesses currently focus on preparing for recession, this business--because of the nature of how far forward investments put in place extend--needs to focus with some urgency on preparing for a recovery following a recession?

Yes, you read that correctly.

That said, a big honking conundrum of the moment--given that a deceleration or worse is inevitable at some point in the next couple of years--is that vacant developed lots are too scarce in too many places. This means that the ones that are either available or coming online soon are overvalued, and therefore difficult to make money on. This is not only the current state of things, but, saving for some natural or economic force majeure, will only intensify in the years ahead, if for no other reason that municipal and other local agencies don't have capacity to expand the flow of permits, approvals, inspections, assessments, etc. through their clogged channels.

So, I have a choice. Rather than wait two or three years to ask builders and developers what they'll do to--at that time--to respond tactically to the next major recovery cycle in housing, It may be the time now to be curious about those tactics already taking shape.

Of course, critical to understanding how builders are already literally laying the groundwork for growth just beyond the next down-cycle is a clear sense how American migration patterns are shifting, and what that means for tapping directly into that opportunity for future community development. Economic opportunity, wherewithal expectations, and lifestyle preferences have surged in recent years as shapers of what we call the new geography of new home markets.

Late post-Recessionary migration trends feature two macro patterns, both of which resume themes and trends that ante-dated the financial meltdown and its immediate aftermath. One pattern involves migration away from urban downtown centers to suburban markets, and the other is the uber attraction of the Sunshine States for movers. What's been interesting as these high-level patterns emerge is that they're exposing not just the new destinations toward which people, households, families, and influencers are gravitating, but, equally intriguing the places--and the reasons--from which they're evacuating.

Brookings Institution fellow and University of Michigan population expert William H. Frey writes:

The new numbers, which track annual population trends through July 2018, indicate that for the first time this decade, the nation’s three largest metropolitan areas—New York, Los Angeles, and Chicago—all lost population. At the same time, outer suburban, exurban, and non-metropolitan counties nationwide registered renewed growth. Although there are some exceptions in growing parts of the country, the latest data reveal that broad-based population “concentration” toward large urban areas in the early 2010s was an aberration related to the post-recession economy and housing crunch.

A chicken-and-egg mash-up of economic and lifestyle motivators--jobs, attainable housing options, climate, and other natural and cultural attractions--account for which zip codes are tracking upward as mover-magnets, and which ones are losing more than they're gaining.

Now, Dr. Frey's analysis unpacks the migratory data--showing the rates of change in both exits and destination areas--and exploring the drivers, root impetus, and social impacts of the emerging trends. All of this, of course, has direct bearing on where the buyers of tomorrow are moving today, and what their respective means, demographic, educational, and social situations look like, as helpful pre-indicators of future housing demand. Frey writes:

Changes in any area’s population result from three factors: domestic migration within the U.S., immigration from abroad, and natural increase (the excess in the number of births over deaths). Of these factors, domestic migration tends to change most rapidly, as movers are strongly sensitive to ups and downs in the economy. Immigration trends change more gradually, because immigrants tend to move to where there are existing immigrant communities of the same nationality, and respond to more long-term economic circumstances. Natural increase levels are the slowest to shift, though the aging of the U.S. population will lower its contribution to population growth over time.

Now, for smarter decision-support on what the trends and patterns Frey's talking about mean for investors, developers, and builders of residential real estate and new-home community planning, there's Meyers Research director of economic research Ali Wolf. Meyers, of course, is a BUILDER sibling company, so, to be transparent, we're biased. Still you'll want to check out Ali's insights on the data, impacts, and implications of in- and out-migration patterns, because that's where the smart money in home building investment is going.

Meyers' Ali Wolf writes:

Of the ten markets with the most positive domestic net migration*:

  • All are in more southern states, with Nashville being the northern-most point
  • 50% are on the East Coast
  • Texas, Florida, Arizona, and North Carolina are home to two of the top ten each
  • Phoenix, the fourth highest for net migration, is the largest as the 11th most populous metro in the country. Tucson, the other Arizona market, broke into the top 10 for net migration this year and is the smallest, landing as the 53rd most populous metro in the US.

The really good part comes, however, when you check out the drill-down take-aways Ali extracts from the data. These give real insight into how developers, land strategists, and builders need to look not just at the next-12-month horizon, but 36- to 48- to 60-months ahead as they place their land and vacant developed lot bets.

Here's a what those take-aways conclude:

Las Vegas, Austin, and Jacksonville hold the top spots for positive net migration and are also among the top performing housing markets so far this year.

Las Vegas is the new #1. Las Vegas has been in the top ten for positive net migration since 2013 gradually moving up. For 2018, Las Vegas bumped Austin, the reigning champ for five consecutive years, down to the second spot. Las Vegas averages about 100 people moving to the metro a day and Redfin search data suggests the new residents are coming mostly from the West Coast, including Los Angeles, the Bay Area, and Portland. This contributed to Las Vegas having one of the best average sales rates per community in 2019, at 3.06, according to Zonda.

Austin hits the relative affordability sweet spot. Austin's new home communities have the biggest year-over-year jump in average sales rate among top markets year-to-date, up 19% from the same period in 2018. The average new home list price in the metro of $328,000 is 26% higher than the average of the 10 best-selling new home communities over the past three months. In the metro, nearly 61% of households can afford the median-priced new home, a relatively high percentage compared to other top markets due, in part, to two reasons:

  1. Inbound Austin residents are from expensive coastal cities like New York, DC, Seattle, Los Angeles, and the Bay Area.
  2. The metro leads the nation in business service job count, up 37% since 2012. These jobs tend to be highly paid.

Jacksonville's fourth year in the top 10. Jacksonville first appeared on the list four years ago at the fifth spot before moving up to number three last year. The market averages nearly 60 people moving in a day, up 6% from last year. Like Austin, this trend has aided Jacksonville to a place amongst the biggest growth markets year-to-date with an average sales rate of 1.82 per community, up 8% YOY.


The data allows for trends to be seen in multiple categories, including daily, international, and negative net migration. Here are some other notable takeaways from the newly released stats:

  • Consistently in the top 10. 50% of the top net migration markets have been the same over the past six years, including Austin, Raleigh, Nashville, San Antonio, and Charlotte. Orlando, Las Vegas, and Tampa have made the list five out of six times.
  • Most daily net migration. Dallas and Phoenix have had the highest daily net migration over the past three years. Tampa held the third spot the past two years before Las Vegas bumped it to fourth last year.
  • Top international locations. The inbound international locations have barely changed over the past six years with Miami, San Jose, Orlando, DC, San Francisco, Boston, Seattle, and Houston making the top ten every year. Tampa moved into the top ten for the first time last year, pushing New York out.
  • Negative net migration. San Jose, New York, Miami, LA, and Chicago are seeing the biggest negative net migration trends. New York is losing 600 people on average per day, LA: 300, Chicago: 230, Miami: 130, and San Jose: 70.