We’ve been here before

Last year, we wrote about the top 10 largest MSAs in terms of mortgage units. This year, I am writing about the top 10 largest MSAs in terms of projected mortgage dollars. Here’s the list in Figure 1

Same as last year, no big surprises. The largest metro markets rise to the top of the list. However, when you include the speed of growth for these markets, the list changes. Last year, since we were looking at the top 10 largest MSAs in terms of units, we included the Mortgage Velocity Index (MVI), which is a market’s rate of growth in units over the next five years compared to the U.S. purchase market’s growth over the same five years. This year, since we are looking at the top 10 largest MSAs in terms or dollars, we are including the Mortgage Opportunity Index (MOI), which is a market’s rate of growth in dollars over the next five years compare to the U.S. purchase market’s growth over the same five years. To be clear, the MOI is the same concept as the MVI but it applies to dollars instead of units. So, let’s look at the above chart again in Figure 2 but with the MOI included.

So, what does this mean? Simply put, with an MOI of 1.49, Los Angeles is growing at 1.49 times the U.S. purchase market. Houston, with an MOI of 1.00, is growing at exactly the same speed as the U.S. purchase market. Boston, on the other hand, with an MOI of 0.76 is growing at approximately ¾ of the speed of the U.S. purchase market.

Now, let’s look at MOI in Figure 3, which captures the tops 10 MSAs ranked by highest MOI. According to the table, the Fernley, NV MSA is growing at almost twice the speed (1.93) as the U.S. purchase market. Obviously, the top ten markets all have healthy MOIs. The trick comes when we pair these MOIs with their 2017 purchase dollars. As you can see, only two markets are over $1 billion. So, what’s the solution? Do we look solely at purchase dollars? Solely at MOI? You guessed it—let’s look at a blended view.

When we incorporate both purchase dollars and MOI, the top 10 MSAs in Figure 4 look different:

When we compare the data in Figure 4 with the data in Figure 1, we notice the absentees from Figure 1. New York City, Chicago, Dallas, Seattle, Atlanta, Houston, and Boston all drop out of the top 10. Instead, Riverside, Stockton, San Diego, Naples, Santa Rosa, Las Vegas, and Modesto take their spots.

What can we conclude? When we go beyond just sheer size (in terms of just 2017 purchase dollars) and include the speed of the market over the next five years, smaller but nimbler markets make their way into the top 10 MSAs. Next time you are in a strategy session, remember that sheer size doesn’t only matter exclusively. When considering other important market attractiveness factors, make sure you understand how those factors align with your go-to-market plan.