Americans are a moving target for the U.S. construction industry. Populations can grow quickly -- often before there are enough roofs over heads, presenting a difficult problem for home builders looking to identify and respond to those shifts.
Builders typically crunch numbers and look at everything from employment to school quality to competition before taking the plunge into a new market. Another popular formula builders use factors in an area's employment growth and affordability, as well as less metrical criteria such as walkability, good public transportation and a vibrant culture.
To get an idea of what cities Americans are moving to and where builders think they see the best opportunities, take a look at the following charts showing metropolitan areas with the highest employment growth, affordability and most vibrant housing markets. Where good economies and strong cultural attractions overlap -- in places like Dallas, Austin, Atlanta, Nashville, and Charlotte -- are where the most promising opportunities reside.
A number of builders, including Meritage, D.R. Horton and LGI Homes, are taking cues from data and are converging on the Sun Belt, an area peppered with cities experiencing population booms. The chart below shows the regional breakdown of 2014 home closings and which homebuilders are active in the hottest markets.
Tri Pointe Group, which is already nicely positioned, says it plans on expanding its current market share across its locations in the western U.S. rather than expanding into new markets.
For builders that are interested in new markets, acquisitions may offer the best path -- though it can sometimes take a few years to get up to speed in a new locale. Tri Pointe entered Denver on its own in 2012 and says it only reached its building goals last year. Meritage has taken varied approaches to new markets. It recently moved into Atlanta, Nashville and Greenville by acquiring building companies there, but used its own firms for expansions into Raleigh, Charlotte and Tampa.
Whatever approach builders land on, they'll need to keep an eye on the numbers and think about heading South.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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