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Legacy Effect from the U.S. Housing Market Smash-up

0 101 Economic

by Alex Carrick

The map accompanying this article shows the 10 U.S. states with the largest dollar volumes of multi-unit residential starts so far this year (Q1 through Q3) versus their opposite number of ten with the lowest. The former are shaded red (for hot); the latter light blue (for cold).
2014 11 07 US Housing Graphic

It will come as no surprise that the “cold” states are those with relatively small population bases.

Absent a large city or two, there aren’t likely to be many multi-unit starts. The “cold” states quickly pass from our interest.

As for the ten “hot” markets with the largest dollar volumes of multi-family starts so far this year, they all fall within the 20 most populous states.

Of course, California, Texas, New York and Florida are going to appear among the “hot” states. What may be more worthy of notice, however, are those large-population states that don’t have a presence ‒ Illinois, Ohio, Georgia and Michigan. In other words, three states in the Midwest and one in the South, appear to be dragging their feet.

Since the head office of the company I work for, CMD, is located in Atlanta, I’m often asked to comment on the economy in the U.S. Southeast. (Two of the “hot” states – North Carolina and Florida –are in the Southeast.)

I usually confine my Southeast analysis to eight states. In alphabetical order, they are: Alabama, Florida, Georgia, Kentucky, Mississippi, North Carolina, South Carolina and Tennessee.

I leave out Virginia, West Virginia, Maryland and Delaware because they seemingly orbit in a Washington, D.C., solar system.

Among the eight, Florida (19.6 million) has, by far, the largest population. Georgia and North Carolina are almost tied at levels that are half as much, or just under 10 million each.

There are 10 cities in the Southeast to monitor closely: four in Florida (Miami, Orlando, Tampa and Jacksonville), two in North Carolina (Charlotte and Raleigh) and one each in Georgia (Atlanta), Kentucky (Louisville), South Carolina (Charleston) and Tennessee (Nashville).

One might also add Memphis, Tennessee, but that depends on how big an Elvis fan you are.

Continuing with a music theme, nearby Nashville is currently appearing in the national spotlight and receiving a publicity boost through the ABC television show of the same name.

Nashville currently has the best combination of low unemployment rate (6.1%) and fastest jobs growth (+3.1% year over year) among all the Southeast’s major urban centers.

What are some of the other major statistics helping to define the Southeast Region?

For the period April 2000 to July 2013, Florida (+4.0%) recorded the greatest population increase. North Carolina (+3.3%) and South Carolina (+3.2%) came second and third.

While no Southeast state is presently recording a jobless rate lower than the national average (5.9%), Florida (6.1%) is coming closest. Next best are Alabama and South Carolina (both at 6.6%)

Florida and North Carolina are tied (at +2.7%) for fastest year-over-year percentage gains in total number of jobs. The overall U.S. improvement in September was +1.9%.

At $47,171, Georgia wins in the median-income category, beating Florida’s second-place level of $46,175.

Georgia (35.3) and Mississippi (36.0) have the lowest median ages, while Florida (40.7) ‒ providing temporary lodging to snowbirds and permanent residency to many retired folk ‒ has the highest.

The overarching conclusion to be drawn is that Florida, Georgia and North Carolina are the economic powerhouses in the SE.

While this has been a fun digression, there is a bigger issue to consider.

The multi-family housing market in the U.S. has recovered faster than the single-homes sector.

It’s not hard to pinpoint a reason. The multitude of individuals driven from their “castles” or “cocoons” in the suburbs, due to mortgage foreclosures, have often sought shelter by means of high-rise apartment/condo living.

This begs the following question. Will single-family housing ever return to its pre boom-bust (a.k.a., “normal”) level of activity?

Having lived through the pain of foreclosure, it will be no small matter for many adults to take the pricey leap-of-faith that is a new home purchase.

As an unfortunate consequence of the sub-prime mortgage smash-up, it may be another decade or so before this “legacy” effect recedes into insignificance.

2014 Year-to-date (Q1 to Q3) Multi-family Residential Starts - CMD
The 10 States with the Largest Dollar Volumes

Q1 to Q3 2014 Q1 to Q3 2014
versus Q1 to Q3 in versus Q1 to Q3 in
2014 Ytd Previous National Previous 6 Years,
$ Volume Peak Year, 2007 2008 to 2013 (avg.)
1 California $8,716,564,281 33.8% 207.4%
2 New York $3,273,934,754 29.4% 0.0%
3 Texas $3,269,391,994 16.3% 113.5%
4 Florida $1,624,472,705 -73.5% 14.6%
5 Massachusetts $1,151,922,352 -30.1% -24.7%
6 North Carolina $992,125,177 -49.2% 21.9%
7 Virginia $883,738,133 -35.3% -11.2%
8 Pennsylvania $735,867,366 -24.1% 21.0%
9 New Jersey $718,161,319 -68.8% -6.1%
10 Maryland $709,074,432 -19.5% -19.2%

Source of actuals: CMD "Insight"/Table: CMD.

2014 Q1 to Q3 Multi-family Residential Starts Map

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