Buffalo Bucks the Trend

March 6, 2012

The recent Global Metromonitor 2011 (download *pdf) by the Brookings Institute made for positively surprising reading for Buffalonians. Not only does Buffalo have the 19th highest per capita GDP in the world, ahead of Los Angeles and many other large US Metros (click here to see table 1), it also significantly over-performed the US economically (click here to see table 3) on income growth, with the 2nd highest income growth rise in the country.

Six U.S. metro areas, including three manufacturing centers in the great lakes region (Buffalo, Detroit, and Rochester), ranked among the ten metro areas that outpaced their nations by the largest margins.

So what does this mean for Buffalo real estate investors? While it’s a pleasant surprise to see Buffalo – with a reputation as a low income ‘blue collar’ city so far up the actual income charts, the statistic that makes me happy here is in table 3, where it shows Buffalo’s income growth as the 2nd highest in the US, after Houston (nearby Rochester came 4th) – income growth is one of the fundamental variables that affect both rental levels and house prices. Take away the booms and busts that seemed to evade Western New York, and the fundamentally correct house price and rental growth can be compared from there from metro to metro. For example, if a city’s income is falling, then people are earning less money, and so puts downward pressure on both house prices and rental affordability.

Buffalo showing up as the 2nd top riser in the whole country is great news for those of us wanting to see both improving rental levels, higher earning (and presumably better quality) tenants, higher levels of tenant affordability, and of course increasing house prices. Be sure to avoid metros on a downward income or employment trend.

Income: per capita GDP for an economy. It is not personal income or household income, and does not reflect the distribution of income distribution, but proxies the average standard of living in an area.

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