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Mapping the Mismatch: Analyzing Supply and Demand Disparities in Housing Across US


An increase in net migration, defined as more individuals moving into an area than leaving, typically escalates the demand for housing. When such an increase aligns with or is anticipated by a surge in building permits, it indicates that the construction sector is adjusting to the heightened demand, potentially leading to the stabilization of housing prices.


High net migration levels often reflect a strong local economy that attracts individuals seeking employment opportunities. A simultaneous rise in building permits denotes confidence among developers and investors regarding the economy's sustained growth.


Regions characterized by a significant number of building permits alongside positive net migration are likely to be identified as burgeoning growth areas, offering promising avenues for investment and development.


In our analysis, we focused on 130 Metropolitan Statistical Areas (MSAs) to compare net migration and building permit trends. Our findings reveal a positive correlation between these two variables, indicating that increases in one typically lead to increases in the other.

The regression analysis yields the following equation:


Building Permits = 634.35 + 0.017 * Net Migration,

This equation suggests that for every increase of 1,000 units in net migration, there is a corresponding rise of 17 building permits, underscoring the direct relationship between migration trends and construction activity.



Following our analysis, we aimed to identify Metropolitan Statistical Areas (MSAs) that are issuing more building permits relative to net migration and vice versa. To achieve this, we categorized the MSAs based on their position relative to the regression line derived from our analysis. MSAs situated above the line were classified under "More Supply," indicating that building permits exceed net migration. Conversely, those below the line were categorized as experiencing "More Demand," where net migration surpasses the number of building permits issued.


Out of the 130 MSAs analyzed, 42 cities fell into the "More Supply" category, whereas 88 cities were identified as having "More Demand." This indicates that the majority of MSAs are experiencing a higher demand for housing compared to the supply of new construction, highlighting potential areas of growth and investment.



The table provides a ranked listing of Metropolitan Statistical Areas (MSAs) based on their squared residuals from the regression trend line. These residuals help to identify which MSAs have a greater disparity between actual and predicted values based on net migration and building permits. The top four MSAs listed are classified under the "More Supply" category, indicating that the supply of building permits in these areas exceeds the demand as suggested by net migration data. This ranking is instrumental in pinpointing specific locations where supply and demand dynamics are most out of sync with the observed general trend.

Rank

MSA name

Status

1

Houston-The Woodlands-Sugar Land, TX

More supply

2

Phoenix-Mesa-Chandler, AZ

More supply

3

Austin-Round Rock-Georgetown, TX

More supply

4

Dallas-Fort Worth-Arlington, TX

More supply

5

New York-Newark-Jersey City, NY-NJ-PA

More demand

6

Chicago-Naperville-Elgin, IL-IN-WI

More demand

7

San Francisco-Oakland-Berkeley, CA

More demand

8

Charlotte-Concord-Gastonia, NC-SC

More supply

9

Washington-Arlington-Alexandria, DC-VA-MD-WV

More demand

10

Boston-Cambridge-Newton, MA-NH

More demand

11

Raleigh-Cary, NC

More supply

12

Cape Coral-Fort Myers, FL

More supply

13

Philadelphia-Camden-Wilmington, PA-NJ-DE-MD

More demand

14

North Port-Sarasota-Bradenton, FL

More supply

15

Nashville-Davidson--Murfreesboro--Franklin, TN

More supply

16

Jacksonville, FL

More supply

17

Detroit-Warren-Dearborn, MI

More demand

18

Baltimore-Columbia-Towson, MD

More demand

19

Myrtle Beach-Conway-North Myrtle Beach, SC-NC

More supply

20

Tampa-St. Petersburg-Clearwater, FL

More supply

The prevailing trend observed across the larger scale of Metropolitan Statistical Areas (MSAs) suggests specific patterns in the supply and demand dynamics of housing. In our forthcoming analysis, we will look into more detailed geographic subdivisions, examining the data at the county and zipcode levels to uncover more localized trends and variances.

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