Per Capita Income Leads House Prices and Rents: Data-Driven Atlanta Outlook

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Hi Nuvo Community,

_{We analyzed the Per-Capita Personal Income and House Price Index in Atlanta, Georgia from 1980 to 2020, focusing on year-over-year (YoY) percentage changes. Our data reveals a moderate positive correlation, particularly with a one-year lag, between these two metrics. This suggests that an increase in personal income could lead to a rise in house prices the following year. This correlation offers strategic insights for multifamily real estate investors, particularly in timing market entry and exit, as well as risk assessment.}

_{Data Analysis}

_{We evaluated the time series data of the Per-Capita Personal Income and House Price Index in Atlanta from 1980-2020. Our focus shifted from raw figures to YoY percentage changes to eliminate seasonal variations and short-term noise, revealing a clearer underlying trend. You can see the volatility in the data below (particularly in 1990, 2003, 2011, and 2014).}

_{Statistical Significance}

_{A correlation coefficient above 0.50 between YoY changes in Per-Capita Personal Income and the House Price Index indicates a statistically meaningful relationship. This is a signal, not noise, and warrants further attention. Notice in the chart below it appears that per capita income (solid) moves before the house price index (dotted).}

_{Now look at a similar chart, with a one-year lag in the house price index (this is what per capita income predicts for the house price index one year into the future). Notice how they move together in what appears to be real-time.}

_{Implications for Multifamily Real Estate}

_{The observed correlation suggests a lagged effect where a rise in personal income one year could predict an increase in house prices the following year. This pattern provides a strategic window for real estate investors. For multifamily properties, an increase in house prices usually leads to higher rental demand, enabling investors to better time their investment decisions and anticipate rent hikes.}

Risk Assessment

This data-driven methodology serves as one component in a comprehensive framework for real-time risk assessment. While these specific metrics offer valuable insights, they are part of a larger arsenal of indicators we monitor for agile market adaptation.

Conclusion

The moderate positive correlation between year-over-year changes in Per-Capita Personal Income and the House Price Index is a noteworthy data point among the various leading indicators we analyze. Although correlation is not causation, overlooking this particular signal in the complex and fluctuating real estate market landscape would be a missed opportunity for strategic insight.

Happy Real Estate!

All the best,

Yuri - Your Real Estate Investigator

Credit: Brian Underdahl, Chief Analytics Officer of Nuvo Capital Partners & Jackson Burks, Economic Analyst Intern

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