Real Estate – Part 2: Geographical Potpourri

“Find out where the people are going and buy the land before they get there.” -William Penn Adair

If you needed to waste a weekend afternoon in the ‘80s (or me to waste your time today)

Before we get deeper into today’s topic, I forgot to elaborate on a brief allusion I made to “Home Interiors,” which was all the rage in my youth. With sales of over $450 million by the mid-‘80s, I know I’m not the only one who remembers everyone’s homes being accented with candles, sconces, fake flowers, and smells of potpourri [if you want to see or smell some for yourself, check out eBay!]. And the way that stuff ended up in our houses was via someone’s mom or aunt hosting the infamous home interiors party for a group of ladies (I don’t even know if men were allowed at these things, but they certainly weren’t lining up to attend). Children were banished to the outdoors or other areas of the house to entertain themselves with friends and cousins, and they seemed to last FOREVER.

Nostalgia aside, I brought up this topic because I was curious about what happened to Home Interiors. Its official name was Home Interiors and Gifts, and the answer is that “private equity happened,” so the story actually has an Alts tie-in. The company was acquired via a $1 billion leveraged buyout in 1994 (“LBO,” for short, perhaps the most common form of private equity transaction). After eventual bankruptcy in 2008, it was acquired again and still exists under the Celebrating Home brand. Who knew!? I highly recommend checking out the link, as it brings back memories: random “art,” sconces, frames, candles, and – my favorite – the ridiculous pinecone in a bowl that has stood the test of time (I’d bet money it smells like potpourri). And, for those who care: Tupperware parties – the highly functional version of Home Interiors – also still exist, but it sounds like the company was on the brink of failure as of late 2022. Anyway, now back to real estate. Here we go!

Location, location, location

I’ll go out on a limb and guess that most people have heard this real-estate adage. But it does hold true in multiple respects. The obvious interpretation is that if a property can be purchased in the right place at the right time (similar logic applies to the holding period and selling of that property), there is money to be made in the real estate game. However, I prefer to think about that same phrase differently: there are many specific attributes to consider when assessing real estate markets and properties. For example, just because the media tells us that mortgage rates are much higher than they were, it doesn’t mean that prices will fall everywhere. Some markets will have a magnified impact, some may stay the same, and others may continue seeing increased values. Thus, “nuance, nuance, nuance” could be a better way to convey the same concept, but it’s certainly not as catchy nor “real estate-y.”

Geographic “Regioncy”

Practically speaking, there are an endless number of real estate locales worldwide. Currently, I’m planning to focus on the US, as that will give us plenty to talk about. In case you’ve never spent time trying to get a handle on the regions of the US, I’m here to let you know that it’s not very cut and dry. For instance, here are some ways America can be “regionalized” (with the new regions in each successive category highlighted in bold):

  • 4 regions: North, South, Midwest, and the West
  • 5 regions: Northeast, Southeast, Midwest, Southwest, and the West
  • 7 regions: New England, Mid-Atlantic, Southeast, Midwest, the Rocky Mountains, Southwest, Pacific Coastal
  • 8 regions: New England, Mideast, Southeast, Great Lakes, the Plains, Southwest, the Rocky Mountains, Far West. Note: this is the standard used by the Bureau of Economic Analysis
  • 9 regions: Northeast, Southeast, Midwest, North Central, South Central, Northwest, Southwest, Alaska, and the Pacific Islands

The last one (9 regions) makes the most intuitive sense to me (and would be most applicable from a climate perspective), but feel free to use whichever methodology you deem appropriate for all of those cocktail-party conversations you’ll have on this topic. I think I owe you an apology for putting you through that, but I do have a couple of takeaways:

  • In NONE of these segmentations is Pennsylvania or, more importantly, Pittsburgh (where I was born and raised) included in the Midwest…though I’ve often heard it referred to as “the Midwest.” To be fair, it is only a 45-minute drive from Ohio, which is ALWAYS in the Midwest segment, so…
  • None of the above regional breakdowns seems particularly useful for citing common Real Estate characteristics. So let’s look at some other potential solutions.

Where a Belt

A more pragmatic perspective can be arrived at by forgetting about the above regions and letting other common attributes guide us. Speaking of which, did you know there are around 20 “belts” in the US? Most readers are probably familiar with the Rust Belt, Bible Belt, Snow Belt, and Sun Belt, but have you heard of the Lead Belt, Unchurched Belt, or Stroke Belt? Some of the names (e.g., the Rust Belt, Cotton Belt, and Corn Belt) relate to past or current industries, which can have real estate implications. For example, the Rust Belt (which Pittsburgh is definitely a part of) is an area formerly known for steel/coal/industrial production, which then became challenged as the economy and globalization evolved. Thus, “from the mid-20th century, the area experienced de-industrialization, a decrease in population, and urban decay.” As many of those areas have slowly reversed course and undergone a renaissance in recent decades, there has also been significant wealth to be made in real estate.

A similar but more extreme scenario played out in Detroit, due to the declining auto industry and the 2008 Financial Crisis. Remember the stories of the broken real estate market that no one would touch? Detroit has since gotten so hot that it’s “cooling off” again. As with the Rust-Belt scenario, difficult times ultimately presented opportunities for those with grit, capital, and know-how to take advantage.

While we’re on the topic of belts, over the past couple of years, I’ve heard real estate managers consistently cite the Sun Belt as an area where they are most excited about investing. Crowdstreet would agree, as 17 of its top 20 real estate markets in 2022 were in that stretch of the US. The migration has been apparent to me, with people moving for a lower cost of living, lower taxes, and nicer weather. It also isn’t surprising, as those are all very relatable factors – especially when combined with the newfound freedom of full-time remote work in some professions. But I didn’t realize that this was just a continuation of an ongoing population shift that has been in place since World War II! And, in reference to today’s quote, I’m sure many people have taken advantage of this incredible trend.

The Tracts of My Tiers

Once we dig deeper into the aforementioned geographical swaths, we start to find even better ways to classify areas in a real estate context, one of which is the “tiering” of cities. Tiering represents development and amenities along a continuum, and that variation (shocker!) directly impacts real-estate cost and opportunity. Rather than reinvent the wheel, here’s a solid breakdown with examples directly from Investopedia:

  • Tier I cities have a developed and established real estate market. These cities tend to be highly developed, with desirable schools, facilities, and businesses. These cities have the most expensive real estate. [e.g., New York, Los Angeles]
  • Tier II cities are in the process of developing their real estate markets. These cities tend to be up-and-coming, and many companies have invested in these areas, but they haven’t yet reached their peak. Real estate is usually relatively inexpensive here; however, if growth continues, prices will rise. [e.g., Pittsburgh, Seattle]
  • Tier III cities have undeveloped or nonexistent real estate markets. Real estate in these cities tends to be cheap, and there is an opportunity for growth if real estate companies decide to invest in developing the area. [e.g., Akron, Biloxi]

Putting it all together, we now have helpful real-estate jargon to describe target markets or better interpret real-estate managers talking shop. E.g., “we focus on Tier II cities in the Sunbelt, and we’ll even dip our toes into Tier III markets in some other areas if we find the right opportunity. But we completely steer clear of Tier I markets, as we think you end up overpaying for mediocre yield with no upside.”

Until next time, this is the end of alt.Blend.

Thanks for reading,



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About the Author

Steven Tresnan, CAIA®, CFP®

Private Wealth Advisor

Steve is a Certified Financial Planner as well as a Chartered Alternative Investment Analyst®. He is also an Accredited Investment Fiduciary, which helps him offer guidance to clients with fiduciary responsibilities, such as board members of trusts, foundations, and endowments. Steve earned a Bachelor of Science degree in Industrial Engineering from Penn State University.

Steve serves on the board and finance committee of New Music USA – a national nonprofit devoted to the development and appreciation of new music in the U.S. – and volunteers as the Treasurer for Campus Fun & Learn, a child development center on the campus of Rockland Community College in New York.