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In this blog – which is third in a series I’ve written that compares the diverse market segment opportunity of various MSAs – I will be analyzing purchase mortgage opportunity for the Asian borrower segment. My first blog focused on our forecast for 2017 Hispanic purchase dollars, and the second blog reviewed purchase dollar opportunity for Black/African-American borrowers. This blog focuses on our forecasts for 2017 Asian purchase dollars. Let’s start with the basics by ranking MSAs by the size of purchase dollar opportunity for the Asian borrower segment. Notice in Table 1 below that some of the largest MSAs occupy the top ten spots in the table.
Let’s now incorporate our other variables: the size of Purchase opportunity (in loan count), the Mortgage Opportunity Index (MOI), and Purchase Mortgage Density (PMD). These three additional variables, coupled with the original Purchase Dollars, reshuffle the table in the following way, as detailed in Table 2.
Los Angeles is the only MSA that is common to both Table 1 and Table 2. While it is ranked first in loans and dollars for all MSAs in the U.S., and fifth in PMD, it is ranked 213th in MOI, making it the lowest ranked of the MSAs in Table 2. The Las Vegas MSA, by contrast, is more balanced, ranking 12th in loans, 16th in dollars, 88th in MOI and 13th in PMD. Since I gave each variable equal weight in this analysis, each of the four variables account for 25% of the overall ranking.
What happens when I use a different weighting, however? What happens to the rankings in Table 2 when twice the weight is placed on MOI (~33%) and PMD (~33%) while placing the same weight on loans and dollars (~16.5% each)? The results are captured in Table 3.
With these weightings, Las Vegas continues to hold the top spot, but Los Angeles and San Diego are no longer in the Top 10. Here’s an example that illustrates why this matters. IF you are a lender that is laser-focused on going after Asian borrowers in dense markets (captured by PMD) that are growing quickly over the next five years (captured by MOI), the list in Table 3 shows markets that might be in your Top 10. However, if you are a lender who places more emphasis on market size (units or dollars), your Top 10 list would look more like Table 1. The point of comparing markets according to what fits your strategic goals is to make sure that you, as a lender, target markets that make sense for you. Take advantage of your strengths as a lender and match them to gain the greatest competitive advantage in each and every one of your markets.