Not-As-Bad No Substitute for Good

After leaving my full-time job in September, my inital inclination was to immediately relocate to a faster growing city. This notion was influenced by two major hypotheses: 1) If I start a business, I want to do it in a market with plenty of demand for my products or services. 2) If I invest in real estate, I want to buy in areas where the rents will produce great cash flow even after paying for the mortgage, taxes, and repairs. Orlando has a lot going for it, but it's been hit pretty badly by our current recession. No. I reasoned that since I had nothing tying me to Orlando, I should select the best US metro area I could find, start from scratch there, and allow its rising tide to lift my boat as well.

A funny thing happened on the way to relocation-ville. As I researched cities according to their US Census Bureau growth statistics and monthly unemployment rates, I got a bit sidetracked from my primary criteria by the noise of the data. At first Atlanta looked attractive due to its high population growth from 2000 to 2008. When I discovered it had a higher unemployment rate than the national average, however, its luster faded. More recently, Austin, TX seemed promising due to its combination of high population growth and lower unemployment rate.

But digging deeper into Austin's data has revealed that while unemployment is lower there, it is still increasing on a monthly basis. "Slower slowing" is not the criterion I started with. I require growth. Data published on USA Today's website from Moody's economy.com shows that it may be well into 2011 before Austin or, indeed, any sizeable US city shows significant jobs growth. This correlates pretty well with our last recession: the market topped in 2000, it bottomed in 2003, and jobs began to return about 18 months later. In the current recession, the stock market topped at the end of 2007, hit bottom in March of 2009 and here we are, waiting for the jobs to show up again.

Let me mention why this is so important. Jobs are what fuel the kind of population increases that are attractive to real estate investors. As jobs grow and populations rise, people become willing to pay the kind of rental rates that can cover mortgage payments, taxes, and repair bills. Ultimately it is the prosperity of an environment like this that creates healthy growth in property values, since more and more people go for the dream of owning a home. On the other hand, when an area is simply losing jobs more slowly than others, you end up with less people in the area than there are rental units. Now your rental property is compared to others solely based on price and nobody wins in that environment.

My strategy remains the same. I will ultimately relocate to a major US metro area based on its growth in population and jobs. However, I'm not going to try to guess in advance which city that will be. I'm going to keep my finger on the pulse of the monthly data and allow candidate cities to emerge in their own sweet time. The second halves of recessions are like that: months and months of seeming inactivity, and then, POW, the heavens seem to open, corporate budgets are expanded, and jobs look like they're falling out of the sky.

A final note. I may yet relocate in the near term. But if I do, it will likely be because there was a better reason to hang out somewhere else during this current non-growth period of time than here in Orlando. I'll keep you posted.