JACKSONVILLE, FL – We examined Charleston’s time series data on the Regional Price Parity Index (RPP) and Resident Population using raw data from the Federal Reserve. Our goal was to uncover economic trends and correlations that could inform future demographic and real estate developments. The Charleston price parity index measures regional price levels as a percentage of the national price level, based on consumer prices for goods and services. By comparing these indices across regions, we can understand price level differences. The chart below shows how these two data sets have evolved over time, often moving independently.

Leading Indication

Interestingly, our analysis revealed a correlation coefficient of 0.720 with a three-year lag between Charleston price parity index and population growth. This suggests that changes in RPP can predict demographic shifts three years into the future. The raw data correlation chart illustrates this strong relationship, indicating that movements in the Charleston price parity index today are a reasonable predictor of population changes three years from now.

Refining the Lens: Year-over-Year Percent Change

To gain deeper insights, we also examined the year-over-year (YoY) percent changes in the Charleston price parity index and population growth. This approach eliminates seasonal variations and other short-term anomalies, providing a clearer picture of long-term trends. Our refined analysis revealed an even stronger correlation coefficient of 0.799 with a five-year lag. Initially, the YoY data for the Charleston price parity index and population growth appeared to move independently. However, when we applied a five-year lag, a significant correlation emerged, as shown in the chart below.

The YoY changes method is not just theoretical but practical. It helps eliminate noise and provides a clearer signal. In data science, a correlation coefficient above 0.50 is considered strong. Therefore, a coefficient of 0.799 is exceptionally significant and serves as a potent predictive tool.

Implications for Multifamily Real Estate

The observed correlation between the Charleston price parity index and population growth has practical implications for multifamily real estate investment. By understanding that changes in RPP today can predict population trends five years into the future, investors can make more informed decisions about market entry and exit. Higher RPP values today suggest increasing population and demand for housing in the coming years. This insight allows investors to strategically plan their investments and anticipate market conditions, reducing risks and maximizing returns.

This analysis transcends mere statistical observation; it offers a quantifiable methodology for assessing and predicting demographic and economic patterns. The key takeaway is that movements in the Charleston price parity index today are a reasonable predictor of how the population will change five years from now in Charleston’s multifamily real estate market. By leveraging this data, investors can make strategic decisions that align with future market conditions, ensuring better investment outcomes.

For a deeper dive into the analysis and to explore the detailed data and methodology behind these findings, read the full article here.

About Nuvo Capital Partners

Nuvo Capital Partners is a niche market-focused multifamily private equity firm operating throughout the Southeastern United States. As a dedicated sponsor (General Partner), we specialize in institutional quality real estate investments within these regions. Our team, with a combined 25+ years of experience, has facilitated over $700M in transactions (10,000+ units). Delivering a transparent investment process, we provide our investors with access to high-quality real estate opportunities, while also ensuring integrity throughout. Our commitment extends to providing monthly, quarterly, and yearly in-depth reporting for our valued investors. To learn more, visit nuvocapitalpartners.com.

If you are interested in learning more about Nuvo Capital Partners and the investment opportunities we are currently exploring, please feel free to contact us here.