Global Insights, Leadership

Winners and Losers in US Real Estate and the US Economy

14 Sep , 2018  

Just this week, we heard the good news that median household income grew by 1.8% to $61,372, a new post-recession high. Still, some 39.4 million Americans live in poverty, and that number improved. Unemployment has gone down, and the equity markets are banging on all-time highs.

Still, a few things are not working. Not everyone is having a party and Americans are moving (and not to Canada). Of course, there is growing income inequality. But let’s think about the typical American family. Most Americans have their wealth tied up in real estate – namely their principle residence. As real estate goes, so does the wealth of Americans.

Below, is the Case-Shiller Index, which is indexed to 100 in 2000. It tracks the price of US housing in 20 markets and considers a 10 city and 20 city index. Location matters – a lot! The results are clear. The West Coast, California, Seattle, and Florida are surging. The Midwest is barely breathing. Of course, this is just one sign of our complex and varied US economy.

Here in Illinois, about 33,000 people leave each year. In Washington state, there are some 80,000-100,000 people moving there each year. The policies of states, their debts, their tax rates, their climates, and their economic success is being examined by mobile Americans.

Consider the personal income growth, as published by the US Bureau of Economic Analysis (BEA)

Big raises in the West and in parts of the South. Not so good in the North.

We all know the money is in cities (and surrounding the suburbs). The US BEA tracks GDP growth in metropolitan areas. The growth in the West and South is striking.

Consider the predicted change in Congressional seats expected after the 2020 census. More power to Texas and Florida at the expense of the North.

When I was in a hydrodynamic class, the professor said, “Water Moves Sand.” Simple and profound. If you want to understand beach erosion, learn how the water moves. As it pertains the US economy, “People Move Money.” If you want to understand that movement of money West and South, look at why people are moving. It is not just for iced tea and sunny weather. They want better prospects for their families. The big question is: will they bring their Northern and broken economies to the South and West or will they embrace the surging economies of the South and West?

Professor Walker provides keynote talks, seminars presentations, executive training programs, and executive briefings.

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About Russell Walker, Ph.D.

Professor Russell Walker helps companies develop strategies to manage risk and harness value through analytics and Big Data. He is Clinical Professor of Managerial Economics and Decision Sciences at the Kellogg School of Management of Northwestern University. His most recent book, From Big Data to Big Profits: Success with Data and Analytics is published by Oxford University Press (2015), which explores how firms can best monetize Big Data. He is the author of the text Winning with Risk Management (World Scientific Publishing, 2013), which examines the principles and practice of risk management through business case studies.

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By  -      
Russell Walker helps companies develop strategies to manage Risk and harness value through Analytics and Big Data. As Clinical Professor at the Kellogg School of Management of Northwestern University, Russell Walker has developed and taught leading executive programs on Big Data and Analytics, Strategic Data-Driven Marketing, Enterprise Risk, Operational Risk, and Global Leadership. He founded and teaches the popular Analytical Consulting Lab and Risk Lab, experiential classes, which bring Kellogg MBAs together with real-world projects in Analytics and risk evaluation. His is the author of the book From Big Data to Big Profits: Success with Data and Analytics (Oxford University Press, 2015) which examines data monetization strategies and the development of data-centric business models in the new digital economy. He is also the author of the award-winning text Winning with Risk Management (World Scientific Publishing, 2013), which examines the principles and practice of risk management as a competitive advantage. Dr. Walker consults with firms on the topics of Big Data and Analytics, Risk Management, and International Business Strategy. Russell Walker can be reached at: russell-walker@kellogg.northwestern.edu @RussWalker1492 russellwalkerphd.com



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