MSA vs city vs county historic price performance. Does it matter?
This post looks at a somewhat newer investment philosophy/methodology, one that a lot of investors (and homeowners) are contemplating or embracing as housing prices and scarcity push some buyers out of the higher-priced city markets. The idea is to buy investments that are not directly in the expensive cities, but are 'close by'... as in neighboring counties. This post is single focused and looks at housing price performance and not historical data points like rental prices or builder margin. Arguably, comparing historical income streams would be more valuable, but I'll leave that for someone else or maybe I'll post later.
I'll put my commentary in for each of the four charts representing what I call the "Big 4". I obtained all this data (and charts) from the freely available Federal Reserve Economic Data (FRED) database, which obtains data from US FHFA. The gray vertical blocks are times of recession, with the latest being the GR (great recession). I tried to keep all the chart data consistent, starting with the year 2000.
Asheville is the largest city in Buncombe county. As the chart shows, the county and city housing price performance are reasonably consistent over time and outpaces the outlying areas. The housing price performance of surrounding counties has struggled to return to pre-GR levels.
Wilmington, located in New Hanover county, has on a price performance basis outperformed the greater area. The surprise to me is that Brunswick county performed better than Wilmington from 2000 until the GR. Maybe that's because of the off-the-charts Leland (in Brunswick county) growth. I put Jacksonville NC (the other large NC coastal city) in the chart as well to compare the long term housing price underperformance of this military town relative to Wilmington.
Raleigh, more specifically the RDU area, continues to perform above my expectations on a price performance level. The Orange, Durham, and Wake county performance mirrors the Raleigh-Cary MSA performance which really isn't much of a surprise. Wake county growth continues outside of Raleigh proper. The southern surrounding counties of Harnett and Johnston have historically lagged somewhat in price performance. The following table shows the counts of 2018 new construction property cards for the top dozen cities added in Wake county, showing that Raleigh isn't the only driver for development:
1593 APEX
787 CARY
467 FUQUAY VARINA
247 GARNER
318 HOLLY SPRINGS
153 KNIGHTDALE
149 MORRISVILLE
122 NEW HILL
1432 RALEIGH
793 WAKE FOREST
221 WENDELL
169 ZEBULON
In Charlotte. like Asheville, the 'play' has been in the city/county and less the surrounding counties. The city of Charlotte seems to have a big footprint in the county, hence perhaps the stronger correlation with county data.
As they say in the stock market, past performance is not a guarantee of future results. In general, from a historical price performance standpoint, counties outside of the Big 4 have underperformed the city and the county containing the city. Going forward, will this be the case? I'm curious to hear the opinions of BP Nation for each of these four scenarios.
I must admit that as I pointed out in What Macro Data Study Should BiggerPockets Provide to Investors? I'm not that much of a fan of macro housing data, simply because on a Metropolitan Statistical Area (MSA) level, city level, or county level the macro data doesn't provide me with actionable information. I will say, though, I do frequently use macro data since it may point me to the right ballpark. Well, I should say the right city that contains the right ballpark. Ultimately I want to get a preferred seat in the right ballpark, a seat that isn't in left field somewhere but one that gives me a good return on what I pay for my ticket. That trick, selecting areas, towns, and neighborhoods,... I'll leave that for another post.