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Population & Residential Real Estate Values

Does a population boom automatically translate into skyrocketing real estate prices? In our first data-oriented newsletter post, we’ll take a closer look.

All the data used in this analysis are from the US Census Bureau and Zillow covering the period of 2000-2023.

Population Hot Spots

Population has changed a lot over the past 23 years, but the effects are far from uniform.

• The Northeast and Rust Belt states generally saw anemic growth.

• The Sun Belt mostly saw strong appreciation. States like Nevada, Texas, Florida, Utah, and Arizona saw growth of ~36-60%.

• Louisiana and Mississippi bucked that trend though, growing less than 3.5% each.

• Idaho and some of the Pacific Northwest also saw moderate growth, though this is partially due to their lower population. The smaller basis makes it easier to show higher growth percentages.

Appreciation

When we look at appreciation, we see a bit of a different picture. Many of the states that didn’t stand out for population growth seem to leap off the charts here.

Maine has one of the highest rates of appreciation? Seriously?

Also, whoa. Texas, Arizona, and Nevada collectively have below-average rates of appreciation.

Does any of this make sense? Is population growth just completely unrelated?

Population Growth Vs Appreciation

Let’s start by clearly saying that these two are related. The two black lines represent the median growth rates. Of the 25 states with above-median population growth, only 6 saw below median appreciation.

The more closely these two factors are related, the more we expect to see states clustered in the bottom-left and the top-right quadrants, which is mostly the case here.

States in the top-left and bottom-right quadrants are effectively our outliers, those bucking the expected trend. In the top-left quadrant, our deviants are still pretty close to the median, so I don’t think those are worth talking about too much.

What’s more interesting is the bottom-right quadrant. Here we have significant deviation from expectations. In fact, some of the strongest-performing states in terms of appreciation were ones we identified as having weak property growth earlier on.

Complex Relationships

Without getting into politics, those states from the bottom-right quadrant are mostly blue states known for higher costs of living. In some cases, many of the major metropolitan areas are already built or have laws that result in limiting the rate of housing construction.

This brings us to an interesting conclusion. While we might intuitively think that population growth is the cause and appreciating home values are the effect, the relationship can be the reverse as well.

Shelter is one of the main components of inflation and one of the largest expenses for most people. States with ample housing and the space and legislation required to continue building can offer a lower cost of living attracting new residents.

As housing costs continue to rise in other states, it drives some residents to try their fortunes elsewhere, suppressing population growth.

Conclusion

Population growth is absolutely correlated with the rate at which residential real estate appreciates. If you can forecast this accurately, you’re always in a better position than if you can’t.

However, as difficult as that may be, alone it’s not enough to find the best real estate investments.

Other factors need to be considered as well. Here are a few that come to mind for me:

• The rate of housing construction / housing starts

• The time required to complete a housing development project from start to finish

• The availability of land for future development near to major metropolitan areas

Basically, factors that affect how well and how quickly public and private parties can respond to population growth.

Limitations & Future Work

This is far from a perfect analysis. Here’s a few things I think would be good to focus on for future analysis:

• Location, Location, Location - They say real estate is hyper-local. So aggregating things at a state level can “hide” some potentially interesting insights. Doing the analysis based on county or MSA would be more intensive, but a lot more interesting.

• Population & Time - It’s possible that the effects of population growth on prices are lagged in some way. It might be interesting to see if stronger population growth results in higher rates of appreciation in the more distant future.

• Zillow & 2000 - Zillow is only a single data source, using a combination could provide a more accurate picture. Additionally, Zillow only provides data back to 2000, so an alternative source might allow for an analysis over a longer period of time.

• Property Type - It might be interesting to do the analysis across each type of housing individually (condos, multifamily houses, single family houses).

ALTERNATIVE INVESTMENT NEWS ROUNDUP
🏠 Real Estate

Arrived shared that their new Single Family Residential Fund is off to a good start. It’s already received $3.7M in investments and recently added 4 new properties.

Here announced that they were shutting down operations on January 3, 2024. They will attempt to dispose of properties over the next 6 months and return what funds they can to investors. In the meantime, a temporary portal will be provided by Templum Markets to allow investors to access their portfolio, and withdraw any funds.

Landa introduced a new detailed view of property income and expenses.

Lofty introduced a liquidity pool feature for their platform, which they state is the world’s first for real estate. This allows people to use cryptocurrency to interact with the platform (through staking) without KYC. To support this they developed what they call a “Proactive Market Maker” system.

🎵 Music Royalties

Hipgnosis

Struggles at Hipgnosis continue.

At the end of December, the fund lowered its valuation by over 9%. We first covered their troubles a few months ago. This reduced self-reported valuation is now more closely aligned with the public stock price and analysts, who never shared management’s rosy view of things.

That follows a $23M asset sale earlier in the month of over 20K songs to help raise cash. The final sale price represented a nearly 15% discount to the valuation from less than 3 months prior.

Other

Vinyl sales had a great end to the year. For only the third time since tracking began in 1991, over 2 million vinyl records were moved in a single week. Thanks Taylor Swift.

ANote Music sent a year-end update to investors. They highlighted the investor base growing to 30K, generating about €1.45M in new investments, and paying out €350K in royalties this year alone.

The ANote team also launched some updates to their marketplace to close out the year.

💡 Equity Crowdfunding & Startups

Republic sent their wrap-up of 2023. It’s light on numbers but highlights some activity and achievements for their portfolio of companies. Take a look here.

StartEngine Private reached over $5M in investments in 2023. These were highlighted by offerings in major companies like Discord, Airtable, and Epic Games.

StartEngine also shared some numbers from 2023. There were 205 campaigns launched on the platforms, ~108K new users, and $131M raised.

Wefunder announced the launch of their VIP membership program. It’s similar to StartEngine’s Owner Bonus. It provides bonus shares or better terms, reduced fees, access to exclusive deals, priority on oversubscribed deals, and more.

🎨 Other Assets

Alt has added a new Seller Dashboard to their trading card platform.

FarmTogether shared in their year-end update that they had surpassed $185M in assets under management. They also cited data from NCREIF showing that farmland had a 2.6% return in 2023 against a -5.1% return for real estate.

Finlete reported signing their first prospect. The deal will entitle investors to 10% of their future professional earnings and shares are expected to debut on the platform soon.

Masterworks - In a year-end update, they shared that 2023 saw the launch of a staggering 180 offerings. They also had 8 exits, which returned $3.9M in profits, which represents a 24.4% gain for investors, net of all fees.

Rally investors approved a buyout offer of 8 cars for a total of $1.05. The exit represents a reported return of ~11% since the IPO offerings of the vehicles, but almost a 50% return from the last traded price on the secondary market.

Untapped Global - In 2023, they funded over 19K micro-entrepreneurs in emerging markets through their investment platform - with a 100% repayment rate to note holders.

Vinovest introduced “Whiskey Lots” to their platform. This creates a vehicle to invest in the asset for as little as $300, with less whiskey for your $.

They also shared that the company reached over $100M in assets under management and 12K investors in 2023.

Vint - It’s January so Vint has switched over to becoming an accredited-only investment platform. Their first fund offering of the new year is also live.