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Cliff Hockley, CPM
President, Bluestone & Hockley Real Estate Services
What is it that you might not know about American demographics that would affect your decision about when and where to invest in real estate?
We investigated some of the records from the US census bureau. They have current reports (2005) that show population projections by age, sex, state and region.
The most pertinent information will be the projected population growth over the next 25 years. We started with a table named “Interim Projections: Ranking of Census 2000 and Projected 2030, State Population and Change: 2000 to 2030 released on the internet on April 21, 2005.”
Over the next 25 years the top 20 fastest growing states are forecasted to be:
| Rank |
Name |
% Increase |
Population Change
2000-2030 |
| 1 |
Nevada |
114.3% |
2,283,845 |
| 2 |
Arizona |
108.8% |
5,581,765 |
| 3 |
Florida |
79.5% |
12,703,391 |
| 4 |
Texas |
59.8% |
12,465,924 |
| 5 |
Utah |
56.1% |
1,252,198 |
| 6 |
Idaho |
52.2% |
675,671 |
| 7 |
North Carolina |
51.9% |
4,178,426 |
| 8 |
Georgia |
46.8% |
3,381,385 |
| 9 |
Washington |
46.3% |
2,730,680 |
| 10 |
Oregon |
41.3% |
1,412,519 |
| 11 |
Virginia |
38.8% |
2,746,504 |
| 12 |
Alaska |
38.4% |
240,742 |
| 13 |
California |
37.1% |
12,573,213 |
| 14 |
Colorado |
34.7% |
1,491,096 |
| 15 |
New Hampshire |
33.2% |
410,685 |
| 16 |
Maryland |
32.6% |
1,725,765 |
| 17 |
Tennessee |
29.7% |
1,691,351 |
| 18 |
Delaware |
29.2% |
229,058 |
| 19 |
South Carolina |
28.3% |
1,136,557 |
| 20 |
Minnesota |
28.2% |
1,385,651 |
This does not mean that other states are not good places to invest in, but the appreciation and the opportunities for development in the states listed will be the strongest.
Many of the top 20 growth states have a warmer climate or have natural beauty that is attractive to potential inhabitants looking to retire. Statistically, in 2005 there were 36,696,000 Americans 65 years and older, while by 2030 there will be 71,453,000 -- a 51% increase of 34,757,000 in 25 years. This gives us a good idea of what to invest in.
Another important variable to look at is the balance between men and women. For 2005, there were 19% more women than men. This means that there is a market for women age 55 and older who may appreciate additional services such as security, a handyman or group cooking.
As medical advances prolong life, we can expect an increase in population of those men and women over age 65 growing from 36,696,000 in 2005 to an estimated 86,706,000 in 2050, an increase of 42% over 45 years.2 This projection is driving the movement to develop assisted living communities. On the other hand, we need to take into consideration that many of these people would prefer to live in their own home, or in a community that is close to medical care and activities. Most important to them in their retirement will be affordability.
This leads us to a discussion of the taxes people pay.
Personal Income Tax
A total of 41 states impose income taxes. New Hampshire and Tennessee apply it only to income from interest and dividends. Seven states (Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming) do not tax personal income.
Sales Tax
All states except Alaska, Delaware, Montana, New Hampshire and Oregon, collect sales taxes.
The five states with the lowest tax burden as a percent of income are: Alaska (6.4%) 50th, New Hampshire (7.4%) 49th, Delaware (8.0%) 48th, Tennessee (8.3%) 47th, and Alabama (8.7%) 46th. Alaska has the lowest tax burden because it levies significant severance taxes on oil extracted from the state. Taxes are included in the price of oil sold thereby enabling Alaska to collect taxes that are paid by consumers across the country. As a result, the state sends checks to all residents at tax time.
As you can see, states without an income tax are growing faster than those with an income tax. This hurts states where, as wealthy individuals prepare for retirement, they relocate to states without an income tax.
In summary, as you make decisions regarding where to invest, you have to understand what motivates growth and appreciation of real estate investments. Some of the key drivers, in no particular order of priority, are:
- cost of living,
- taxation
- temperature/ weather conditions
- medical care
- closeness of family, friends, relatives
- close to work
- job growth
- the availability of water
- established government infrastructure
- cost of land and new construction
As you invest across the United States make sure your investment decisions keep the above issues, the population statistics and the tax issues, in mind.
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