How can home buyers and investors spot rising real estate markets?
While the U.S. property market is only headed upwards, it is clear that the country is full of very diverse sub-markets – each of which are in different parts of their own cycle. There is a little something for every real estate investor, strategy, and budget. However, everyone is looking for rising markets that promise growth and longevity returns. So how can real estate investors best cut through the cloudiness, and discover which markets are really on the verge of growth?
New construction can be one of the best tells of a rising real estate market. While it is true that over-building has been the sign of markets getting frothy, building is a very positive sign. This applies to multifamily construction, new home communities, retail, and custom home building. Builders have big research budgets, and normally do their homework very well before digging in and investing in the process. So look for neighborhoods that are quietly breaking ground. They should bring sizable equity gains in the near future.
While the real estate market is on fire, and many parts of the economy have been catching up, jobs and wages have been the one laggard many industry experts have been waiting for. Some, job markets appear to be as disparate as housing has been. Some areas and sectors seem to have plenty of jobs, while others have clearly failed to keep up with rising housing and living costs. Publicly published job and unemployment statistics can be tainted and seriously difficult to decipher. In contrast; local job ads, and talking to local employers about their hiring and interviewing experiences can reveal enormous amounts about the strength and direction of the market. How many jobs are being advertised? How tough is the competition for talent?
Population growth can be a side effect of strong housing and job markets, but it is also a sign of great growth to come. So is the population in the destinations you are evaluating growing or shrinking? While these trends are quite obvious, some markets can be very deceptive. For example; the population bleed California was experiencing a couple years ago has reportedly changed. Some older and well entrenched markets might now be dying due to a lack of movement among wealthy aging buyers. Others might be doing better than expected. Some off the beaten markets like Alabama and Wisconsin actually appear to have consistently grown since the 1800s, according to the U.S. Census.
What They are Talking About
What are locals at the coffee shop and gym talking about? When the conversation at the adjoining tables and treadmills is increasingly focused on real estate, refinancing, buying homes, and investing, you can tell there is action in the works. Don’t be shy about interjecting yourself into the conversation to get a better feel for how others feel about the current market. Note that this might be a great way to rack up some highly valuable local leads too.
When government and other entities are making heavy investments in a local market, businesses, buyers, and investors will not be far behind. That means more real estate transactions, jobs, money in the local economy, rising property values, demand for property and rents. However, once it has already happened, or is in action, a lot of the smart money may already be in. Getting ahead of this by joining the local Chamber of Commerce, sitting on planning committees, or at least networking with those that are on the inside can provide a significant edge for the serious investor, and those that want to lock in the most equity up front.
Lenders and banks may have the most exhaustive research and data sets on the planet. They frequently pull back lending and even stop lending in markets they are concerned about. In the reverse; they’ll offer deals and make borrowing easier and less expensive in the real estate markets they are the most bullish about. So keep an eye on where banks are promoting loans, where they are opening or closing branches, and even talk to mortgage brokers about where the easiest and most difficult places to get loans are at.
While incredibly easy to manipulate, what the media is saying about different markets can have a great impact. It is important to watch who is publishing what, and to look behind the headlines to double check the data and the motivations for publishing both positive and negative information. However, where there is attention, there will certainly be more investment too. Just as the masses will always follow where leading stock investors go. Recognize this for what it is and invest appropriately.