An old adage in real estate is to buy property in the way of development. I’ve never really saw this clearly until a recent trip to Texas. My son and I were looking at colleges and our itinerary included a drive from San Antonio to Dallas. I have never spent much time in Texas so I was looking forward to seeing the countryside. Instead of an education on topography I got a major lesson on population growth with a minor in sprawl studies.
During our five hour drive I kept seeing a reoccurring pattern: city center, industrial area, mall, big box stores, strip malls, outlet mall. It was like a broken reel or an old time cartoon like Speed Racer where the action scenes show the characters driving past the same 6 buildings over and over again. I’d heard about the sprawl in huge cities like Houston but it seemed that along I-35 there was a constant stream of development. This got me thinking about whether investing in areas so far from the city core would be a good idea.
In my town, Boulder Colorado, the growth patterns have been unnaturally halted. There is a band of land between Boulder and its nearest neighbors where no development can take place. The City of Boulder isn’t annexing any land for development and Boulder County won’t approve any new subdivisions unless they are annexed. In addition the City and County have purchased tens of thousands of acres of rural and mountain land around Boulder as open space. This bubble has forced development east of town (can’t go west because of the mountains) to towns like Erie, Lafayette, Longmont and Broomfield. Thirty years ago would have been a great time to buy land in those areas.
We are fortunate to have an area that has a good economy, climate, and lifestyle. People want to live here, so the problem is managing population growth which includes housing, transportation and economic growth in a smart way. I would say that for the most part the foresight of our city leaders long ago has allowed us to maintain a good lifestyle, just with more people sharing.
Not all areas are as fortunate. The financial struggles of Detroit have been in the news lately. In 1950 there were over 1.8 million residents in Detroit now there are just over 700,000. Not only is this bad for the public coffers it is really bad for real estate investment. Simple supply and demand.
So if you are looking at investing in real estate it would be good to consider the population pattern of the area. Is it gaining or losing population? Luckily Forbes has put together a cool interactive map that uses US Census data to track population flow throughout the country. To view and use the map click here. All you need to do is to enter a county or a major city and the migration/immigration statistics will be displayed along with lines that indicate where people are coming from or where they are going to depending upon the pattern. Below are a few screen shots.
The first map shows the migration pattern for Boulder County. From 2005 to 2010 (last census data), Boulder County gained 14,326 people. A net increase of just under 5%. From the thick blue lines we can see that we have a strong contingent of new residents from the Eastern Seaboard.
The last map I will show is for Detroit. I’ve already talked about the population declines, but here is how it has looked over the past five years. The red lines show people moving out. Wayne County has lost 7% of it’s population over the past five years. This continues a longer trend as I mentioned earlier.
I would encourage you to play with the map. Put in your hometown. Put in areas like Phoenix and Las Vegas and Orlando. Then look at the rural Midwest. Once you become familiar with the trends think about how real estate values follow these trends. In the end you want to invest in an area that is gaining population. As a friend of mine says “the number of cheeks must match the number of seats”.