ABSTRACTTerritoriality leads to non‐random sorting of individuals into habitats of differing quality. This can affect empirical estimates of population growth rate (λ), a measure of habitat quality, such that habitat‐specific λ varies with population size. I present a simple model of territorial behavior in which territory acquisition depends on age and individual vigor. Under this model, with a low initial population, the λ associated with the best habitat stays constant until all territories are full. At that point, as less competitive individuals move to secondary habitat, the λ value in the better habitat increases. Similarly, as secondary habitat becomes occupied by individuals of successively greater vigor, λ can switch from a sink (λ < 1) to a source (λ > 1). This means that habitat quality is not a fixed quantity but results from an interaction of the characteristics of the habitat with competitive sorting of individuals. If all individuals are in a good habitat, its conservation value will be underestimated and likewise the value of secondary habitat may not be properly assessed. © 2013 The Wildlife Society.