Top 25 Housing Markets … What Markets Have Growth

Are you wondering where the business is? The phrase “go west young man” now needs to be “go south your man.” Especially when you think about how housing drives the market.

Going south is no longer about moving there for retirement (although that helps a segment of the southern economy).

Recent data from Zonda, reinforces this trend as they recently released their Q1 housing report.

This is according to a post from Ali Wolf, Zonda’s Chief Economist. And for those not familiar with Zonda, it is “the only company in the world that tracks and visually verifies U.S. housing starts across the country down to the subdivision level.” (And if you are a manufacturer focused on the resi market, it may be a data source as they offer a National Outlook report.)

Where’s Residential Opportunities

Consider the data:

Lots of southern cities. And we’re defining “South” as below the Mason-Dixon line and coast-to-coast.

While the residential market, historically, is only 8-12% of the overall electrical market (or about 15-20% of the construction market, and even less for some product categories like lighting, it is also an indicator of where other growth is … after all, people will live within a reasonable distance of work.

The YoY growth in most markets is not too significant, and some are down but are still generating a decent amount of construction.

Consider, as the homes get developed there, commercial construction is sure to follow … strip centers, c-stores, schools, medical offices and similar.

And where there are people there inevitably needs to be power! And, within a 30-60 mile radius, jobs … commercial and industrial work.

If you’ve been following some of the branch announcements for distributors, it correlates to many of these locations … not because the distributor is seeking residential business, but to follow market growth.

If you are thinking about expansion, or wondering about your market, Zonda offers a “snapshot” for 65 individual markets. Interested in the new home market (which is typically of interest for a manufacturer), Zonda recently released an update of the market highlighting activity in Q1.

Take Aways on the Housing Market

• As manufacturers set goals and measure performance, it is important to not “peanut butter” expectations across the country. Not every market has the same opportunities. Yes, density matters (so larger markets have more opportunities) but if you are seeking growth, you may need to tailor expectations geographically. It takes more work and regional managers need to know their market, but it enables tailoring of resources.
• The residential market can be a harbinger of where growth is. Recently I was speaking with a manufacturer who was targeting homes within X years old that fit a certain value. They further surmised that their buyer persona (for an after-market product) was a Whole Foods buyer. So, where to target? If you look at this Top 25 Housing Starts Market list, do you think many of these have a Whole Foods (or similar) in their area? And is it no surprise that they decided to focus their efforts on the Southeast?
• If you are a distributor, how can this information affect your new branch location strategy? If you are a national chain, perhaps areas for additional investment. If you are an independent, it may help you refine your market focus.

The electrical industry is unique in the sense that distributors can be very diverse in their customer base but not necessarily focus on some segments, other than the industrial area. This means, there are opportunities in every market, if you want to pursue them. The question becomes, is that segment large enough to warrant pursing.

Zonda highlights that, these 25 markets could be today’s, and tomorrow’s, growth markets.