Selecting Markets with Data: A Practical Playbook
Market selection can make or break a real estate investment. We share our framework for analyzing demographics, employment trends, and supply constraints—using data, not intuition—to identify where to deploy capital.
Location matters more than any other variable in real estate. You can fix a bad building. You can't fix a bad market.
Most investors pick markets based on familiarity or anecdote. "Austin is hot." "Phoenix has growth." True statements, but incomplete analysis. We need a systematic framework that combines quantitative rigor with qualitative judgment.
The Framework: Four Layers of Analysis
Our market selection process evaluates four key dimensions: demographics, employment, supply/demand dynamics, and risk factors. Each layer builds on the previous one to create a comprehensive market profile.
Layer 1: Demographics — Who's Moving and Why
Population growth is the foundation. We track net migration patterns, age cohorts, household formation rates, and income distribution. The best markets have:
- • Consistent net in-migration (people voting with their feet)
- • Growing millennial and Gen Z populations (future renters and buyers)
- • Rising median household income (ability to pay rent)
- • Diverse population growth across income levels (not just high earners)
Data sources: US Census Bureau, IRS migration data, local planning departments, and proprietary datasets tracking U-Haul rental rates and cell phone pings.
Layer 2: Employment — What Pays the Rent
Jobs create housing demand. We analyze employment growth rates, industry diversification, wage trends, and major employer stability. Red flags include:
- • Single-industry dependence (oil towns, manufacturing hubs)
- • Declining labor force participation
- • Stagnant wage growth despite job gains
- • High concentration in cyclical sectors
We look for markets with balanced growth across multiple industries—technology, healthcare, logistics, professional services—that provide resilience through economic cycles.
Layer 3: Supply and Demand — The Fundamental Equation
This is where most investors stop their analysis. Big mistake. Supply/demand is lagging, not leading. By the time you see tight occupancy and rising rents, institutional capital has already flooded in.
Instead, we model forward-looking supply constraints:
- • Entitled land availability (what can actually be built)
- • Permitting timelines and regulatory environment
- • Construction cost trends (can developers pencil new projects?)
- • Infrastructure capacity (water, roads, utilities)
The best opportunities exist where demand is accelerating but supply is constrained by geography, regulation, or development economics.
Layer 4: Risk Factors — What Could Go Wrong
Every market has risks. The goal isn't to avoid all risk—it's to understand and price it correctly. We assess:
- • Natural disaster exposure (hurricanes, earthquakes, floods)
- • Regulatory risk (rent control, zoning changes, tax policy)
- • Infrastructure stress (water scarcity, traffic congestion)
- • Political and fiscal health (pension obligations, budget deficits)
Some risks are manageable through property selection and insurance. Others—like California's regulatory environment—fundamentally change the investment thesis.
Putting It Into Practice: Texas as a Case Study
Why do we focus on Texas? Not because it's trendy, but because it checks all four boxes:
Demographics: Leading the nation in net migration, particularly from high-cost states. Growing across all age cohorts and income levels.
Employment: Diversified economy spanning energy, tech, healthcare, logistics, and manufacturing. Major corporate relocations provide high-wage job growth.
Supply/Demand: While construction is active, demand continues to outpace supply in key submarkets. Land constraints in core urban areas create long-term supply discipline.
Risk Profile: Business-friendly regulatory environment, no state income tax, manageable natural disaster risk outside coastal areas. Infrastructure investments keeping pace with growth.
This doesn't mean every Texas deal is good. But it means the macro tailwinds support property-level execution.
Conclusion: Data Informs, Judgment Decides
No amount of data can guarantee success. Markets are dynamic, and conditions change. But systematic analysis reduces the likelihood of catastrophic mistakes.
The investors who win long-term are those who:
- • Update their market models continuously
- • Follow leading indicators, not lagging ones
- • Understand the "why" behind the data
- • Have conviction to act when analysis supports it
At Mossback & Co., we treat market selection as infrastructure, not instinct. It compounds over time.
Interested in discussing market opportunities? Let's connect.
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