Population Growth and Home Price Appreciation

Freddie Mac recently published an excellent report called US Population Growth: Where is Housing Demand Strongest? Similar reports underscore the growth in sunbelt states and highlight the MSAs that are growing fastest. The report highlights that US population growth is slowing. Therefore, real estate investors must focus more carefully on the composition of growth drivers (net migration vs. natural increases) and mobility trends within the US.

The theme of migration from the north to the south is as powerful as ever, but it’s useful to remember that it’s happening within the context of a declining rate of domestic net migration. Even within the sweet spot for apartment dwellers, 25 to 34-year-olds, people move less than they did. Market selection matters even more than ever.

Within the report you’ll see many other slices of the data, including some neat charts like this one:

The final section of the report includes a statistical analysis showing that per capita income growth is by far the most important driver of home price appreciation. Population growth alone can’t do it as supply inevitably meets demand. For this reason, we focus on population growth but also on job growth as a proxy for economic growth. This factor leads us to business-friendly markets like the Carolinas and Texas, among others.