9.14.07 - Issue # 288 Forward This Newsletter To A Colleague

Scott McDonald
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Dental Demographic Update: The NEW Migration

McKenzie Management likes to keep its Clients up-to-date on the changing world of demographics. As part of their services, they offer practices a detailed demographic analysis of their location including competition and lifestyles. 

New patterns of migration in the U.S. may have a profound effect upon existing practices. Traditionally, when people moved out of the big city to the suburbs, they merely expand the size of their metropolitan area. They moved from Manhattan to Long Island or from Los Angeles to Pasadena and The Valley. Now, something new is happening.

According to Brookings Institute’s Robert Puentes, the shift is “more significant than the migrations of the 1950s or 1970s.” Almost every demographic scholar agrees that something big is happening with the redistribution of populations within the U.S. The question they have is, “Why is it happening and What will it mean to Dentistry?”

The What: There is significant growth of cities and communities that are outside of these traditional “Big City” centers. Small communities are springing up in “fly-over” country that represent opportunities for young doctors and established practice expansion.

The Why: In our opinion, the catalyst is affordability of housing that is sparking this trend. It is demonstrated by taking the median home price divided by the median household income that determines the “median multiple.”  In short, it calculates how much house can one afford. The lower the number, the more affordable the market is. Atlanta, Dallas-Fort Worth, and Houston (all with growth-friendly public policies and few restrictions) grew fastest. These markets were at a “3.” Ten years ago, most cities were below 4.5. Now, Los Angeles is over 11 and San Diego is over 10.  Why would it surprise anyone that people are leaving?

Many of our older friends in Northern California discovered that they could sell their homes and move to Nevada or Utah where they could buy a home outright. Younger families found that they were almost forced to move to these lower ranked markets because their debt and expectations for a high quality-of-life demanded it.

What makes things more complicated is public policy to “fight sprawl.” Massachusetts, for example, has local regulations that encourage low-density housing (few people per square mile) to “fight sprawl.” This has the tendency to make whatever housing is available extremely expensive because more cannot be built. The result has been that young families have to move further and further away from the city centers (or out of state) to find a place that they can afford to live.

Raleigh, Atlanta, and Houston still have growth friendly practices in place. The question of employment cannot be ignored. But we see this as a “chicken and the egg” issue. Do people move to an area because jobs attracted them or are jobs available because that is where people are going? Increasingly, we find the latter to be the case. Factory situations (where factories are placed), are more often determined by available workers (the cost per worker is partly a function of how much housing will cost). Thus, the “Field of Dreams” saying should be changed, “If you come, they will build it.” Self-employment, telecommuting, and mega-commuting are also making this trend increasingly possible and desirable.

The implications for dental practice are significant. A practice that was once situated on the leading-edge of growth may now find itself in what is considered the “City Center.” Once the area has been “built out” and new housing is no longer possible, the demographic character of the local population may change. One practice in Glendale, California went from a predominantly Whites with young children area to White retirees, to Young Hispanics with few children, to Russian/Armenian with many children. All of this occurred within 25 years. Without ever moving his practice, the doctor found that he had gone through four significant changes in the demographic character of his patient-base. And all through this process, there was no significant increase in the number of households near the office. But the price of purchasing homes in the area has soared. San Jose is an example where even a very modest home will sell for more than $1 million dollars BUT homes may have twice the number of people living in them than was ever intended.

Because of these changes, we strongly urge dentists in established practices to get a demographic review of their area to know what they are facing in the near future.

Ultimately there are two results of this new trend in migrations: The first is that many established practices are considering satellite-offices and second-offices to take advantage of the new migrations. This trend is likely to continue for the foreseeable future.

The other primary result is an entirely new set of factors in determining where the best place to practice will be for younger professionals.

Scott McDonald is the largest provider of dental marketing research to dental practices.  For more information demographics@mckenziemgmt.com.

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