I have done enough of these blogs for you to know that I have a few biases when it comes to looking at dental sites for practice.  Specifically, if you are thinking about a start-up, you need a location that is growing (in terms of population) and developing (in terms of employment, demographic character, and infrastructure.) The idea is that you want to want to find sites that will be positive as you go to all the hard work and make investments of your time and money.  In short, I want you to have a high rate of success.  As for those of you who are considering the purchase of an existing practice, I want to make sure that the community will continue to show positive signs of growth and developments to justify your investment.  So, what I am doing so often in these podcasts is looking at the factors and trends that are going to indicate that a location will work for you.  I don’t see my job as merely telling you how many competitors there are.  Ultimately this business of site selection and analysis is a little more nuanced than that.

I have mentioned in several podcasts the trends regarding the cost of doing business, growth, and your investments.  There is one new trend that we are seeing that continues to throw up warning signs in some locations that I just want to review one-more-time.  We can generally call it “priced out of the market.”  It is one big reason why the middle-class is on the move in the U.S. The news media is not really touching on it because, frankly, those in the communications world network news and business magazines don’t really rub shoulders with the people most affected by this trend.  In fact, they don’t see it first-hand.  I make it a point that we do.  Next week I will be speaking in Virginia for a few days and while there, I am going to make it a point to do some face-to-face interviews to understand this trend.

In a nutshell, in several urban areas the price of housing has made it impossible for middle-class residents to afford to purchase a home.  Just as bad, rents have increased to the point that a large segments of the middle class cannot afford to rent anywhere near where they work.  The impact of this trend is going to be big when it comes to those who currently serves middle-class patients and most especially upon those who want to open a practice from scratch to serve them.  Let me refer to the demographic trends that will explain my concern.  The April 12 WSJ article, “Teachers, Police Priced Out of America’s Big Metro Areas” is a good summary. It quotes how certain middle-class workers like school teacher and first responders cannot afford to live in any houses (or very few) near their work.  San Jose has been subsidizing teachers for more than 10 years.  The net effect is that if you don’t personally know a school teacher or a cop (or anyone in the middle class), you tend to be isolated from the larger society and this has a strong, negative effect.  If you are in a very poor neighborhood, the same thing happens.  There are many people who do know personally know anyone in law enforcement, retail, education, or any of the myriad jobs that average Americans have because the housing situation has so stratified us. It used to be that people would mix with those in other than their own social class at Church, at their kid’s soccer game, or at the grocery store.  But this is not occurring as it once did because people are priced out of the neighborhood by great affluence on one side and great poverty on the other.

Let me quote from the article: Teachers in the Denver and Austin metro areas could afford just 13% of the homes for sale in those markets, according to a study released Wednesday by real-estate website Trulia. That is down from 20% and 16%, respectively, in 2014. In all, teachers can afford less than 20% of the homes for sale in 11 of the 93 major U.S. metro areas studied.

The Trulia study defines affordability as a household spending 31% of its monthly income on housing, assuming a 20% down payment and a 30-year fixed rate mortgage at current interest rates. It looks at entire metro areas—not only at trendy downtowns but also at the surrounding suburbs, which long have offered more affordable housing options.

First responders such as police officers and firefighters, who sometimes need to report for work on short notice, face significant housing challenges. That is true even in some of the country’s more affordable metro areas, because wages there are lower as well.

First responders could afford just 19% of homes in Madison, Wis., and Raleigh, N.C., and just 23% of homes in Salt Lake City, according to Trulia. In 2014, first responders could afford 32% of homes in Madison and 30% of homes in Raleigh.

 The article goes on to quote locations that are both affordable and those that are not.

San Francisco, $1,249,000. Affordability for a typical teacher – 0.4% of housing

San Jose, $917,903 – 2% of housing

Orange County, CA, $799,999 – 7.1% of housing

If you want the full list, write to us at Info@doctordemographics.com

Most affordable.

Dayton, OH 83%

Akron, OH 78%

Camden, NJ 78%

Detroit, MI 76%

I am not suggesting that the solution is to the artificially increase the salaries of teachers and fire-fighters.  I think this would terrible counter-productive and, besides, it is a little above my paygrade.  And I also don’t think that you can make artificial or arbitrary adjustments to society.  But from the point of view of a demographer who helps dentists figure out where they should practice, the more immediate answer is to search out places where the negative side of the trends won’t overwhelm one’s chance of creating a practice. For example, Ohio continues to have places that are affordable and reasonable.  And while the Central Valley in California has some spots, for the most part, we can find this situation in a large number of states.  Just keep in mind that what we are doing is looking for a balance: a place that the income level is moderately high but the cost of living is also acceptably moderate. Austin, TX, for example, is not as expensive in terms of housing but the incomes are not particularly high enough to make the metropolitan area easily fit the middle class.  That is not the same, however in the outlying suburbs.

Now, let me be specific.  California is not off the table. One just has to be careful to search for locations with the cost of living are not so high relative to incomes to make it prohibitively expensive to make things work out.

Check out our podcast: The Perfect Place to Put a Practice on I-Tunes and soon on Dental Towne. Scott McDonald owns www.DoctorDemographics.com and works with offices in every neighborhood in the United States.