Income growth is strongest in Sun Belt metros

Income growth in the Sun Belt easily surpasses income growth in Gateway markets, both in median income and aggregate income, according to real-time data provided by Markerr. Robust income growth is one leading indicator we use to determine where demand will be strongest for higher-end apartments.

Aggregate income growth refers to the combination of income growth and employment growth in a given market. Our analysts like to look at this measure because both income and employment growth are crucial measures for the performance of multifamily real estate.

Topping the aggregate income growth list is Tampa, with year-over-year growth in Q2 of 16.17%. Like most Sun Belt metros, Tampa’s labor market recovered quickly following the height of the COVID-19 pandemic, and income growth sprinted into the double digits by the second quarter of 2021. Professional and business service jobs, which pay relatively well, have grown significantly in the Tampa metro area over the past decade, according to the Bureau of Labor Statistics, but were added with particular pace in 2021.

Following Tampa are a string of Sun Belt metros: Nashville at 15.63% aggregate income growth year-over-year in Q2, and then Charlotte with 15.42%, Orlando with 12.03%, and Phoenix with 13.20% rounding out the top 5. Dallas hit 11.60% aggregate income growth and Austin reached 11.14%.

Meanwhile, the Gateway market of Los Angeles hit a 6.73% income growth year-over-year – respectable, but not quite as impressive – and Washington, D.C., New York City and Chicago garnering even less growth.

It’s worth noting that most of these metros are seeing a slowdown in year-over-year income growth from the first quarter of 2022. Incomes are still increasing, but at a moderating pace as employers react to the economic constraints created by price inflation.

The Sun Belt metros overall saw aggregate incomes increase in Q2 by 10.96% year-over-year – significantly more than more than coastal and Rust Belt markets. Tertiary markets also saw income growth of nearly 11%. Based on this information, we can conclude that there’s an ample segment of the population in Sun Belt metros who are financially fit enough to live in top-of-market apartments. These growth rates also indicate good things about the future earning potential of the populations in those markets. This level of demand and financial stability are components CONTI monitors in our ongoing analysis, and we believe Sun Belt markets hold the most promise in these metrics.