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Late last year, Laird wrote a blog post about the top MSAs for 2017—and she focused on purchase mortgage opportunity and the speed of growth of purchase loans over the next five years in each market. In a series of three blogs, I will perform a similar analysis—except I will focus each blog on one of the three largest minority borrower segments.
The first part, covered here, focuses on the Hispanic market—specifically, the 2017 Hispanic purchase dollars. As usual, let’s start by comparing and ranking the MSAs in terms of Hispanic dollar opportunity. You can see in Table 1 below that many of the largest MSAs have risen to the top. Like we saw in the previous blog, when we compare solely the size of the opportunity a market or market segment presents, the same MSAs rise to the top. It pays to be big.
But as Laird shared in her blog post, it is problematic for lenders to observe only one variable when analyzing a market’s potential and how well it fits with their strategies. At a minimum, lenders should consider not only the size of the market, but also how quickly it’s growing. So, once again, I will incorporate the speed of dollar growth over the next five years (a.k.a., the MOI, or the Mortgage Opportunity Index) into the analysis. Once we include the MOI, the top 10 looks different, as seen in Table 2.
Table 2. 2017 Top 10 MSAs by Hispanic Purchase Dollars and MOI
The only Top 10 MSAs common to both tables are Los Angeles, San Diego, and Phoenix. How did this happen? Why is San Jose at the top of the list? Well, the results occurred due to my particular weighting strategy. In this case, I weighted the MOI to be twice as important as I weighted the dollar volume. The result is that San Jose, which ranks 12th in terms of MOI and 18th in terms of 2017 purchase dollars, nabs the top spot. Los Angeles, which ranks 23rd in terms of MOI and first in terms of 2017 purchase dollars, falls to the number two spot in the table.
The point is that this Top 10 list came out the way it did because of how I viewed its behavior in terms of a particular lending strategy. Performing this same analysis for another lender could increase the weighting of 2017 purchase dollars or choose to put more emphasis on a third (or fourth, or fifth, etc.) variable, and that lender’s Top 10 Hispanic MSAs would look different.
Those top 10 would be better matched with that lender’s particular strategy, which is precisely the point of buttressing a lending strategy with data. A successful market-driven strategy begins with incorporating data that helps inform which markets are headed in the same direction.