How to Find a Growing Real Estate Market

Learn how to find a growing real estate market. Virtual real estate investors need to know how to research to achieve financial independence.

With so many U.S. real estate markets to choose from you must find the ones meeting your financial goals. Let’s explore how to begin your investment journey.

Here are suggestions from the HomeUnion® investor services company which uses “Big Data to analyze properties and neighborhoods across the U.S.” They recommend using three indicators for real estate investing:

1. Know what to look for;
2. Use economic factors; and
3. Keep up with trends.

Let’s explore these three and more.

 

Know-How to Recognize a Growing Real Estate Market

 

According to Cushman & Wakefield, a commercial real estate advisor, the 4 key ingredients for recognizing a great real estate market are:

1. Low vacancy rates;
2. Strong job growth;
3. Diverse population; and
4. High consumer confidence.

Adding these four elements creates a growing real estate market. Where the demand for homes is strong and stays that way.

 

Consider Local Economic Factors

 

Number crunching isn’t fun but is necessary to bear fruit.

Look at indicators like:

1. What are the local growth indicators and how do they impact real estate values?;
2. Interest rates rose or fell over the past six months and year?; and
3. Which locations offer affordability and growth?

These three indicators should get you good returns over time without too much risk.

 

How to Find Up-and-Coming Real Estate Markets

 

Besides HomeUnion®, other real estate investment advisors make more suggestions. One company called Roofstock makes these suggestions:

1. Don’t look for the current “hottest” home value markets; and
2. Instead, look for other areas catching up.

You must look for signals and indicators to identify a real estate market with growth potential.

 

Traditional Indicators

 

Two traditional indicators are important to consider.

 

1. Population Growth

 

Whenever a market’s population grows, it increases housing demand.

Explore these resources to see population growth:

The World Population Review of the “Fastest Growing Cities in the U.S. 2021”; and the

U.S. Census Bureau 2020 Statistics Highlights website (released August 12, 2021) shows population changes across the country from 2010 to 2020.

 

2. Home Sales, Rent Increases, and New Construction Data

 

Examine the following resources to see existing home sales, rent prices fluctuations, and new housing construction data:

The National Association of Realtors (NAR) “Existing Home Sales Metric 2021” showing August 2021 data. NAR updates this metric every month on or near the 25th;

The Zillow Rent Index showing national/regional rent prices. Their August 2021 Rent Index shows the rent data from July 2021. Zillow often updates their rent index; and

The U.S. Census Bureau “New Residential Construction Index” displays two monthly surveys: building permits issued and new construction started and completed.

 

Unconventional Indicators

 

Look at these 3 unconventional indicators:

 

1. Big Companies Announcements

 

Pay attention when a big company releases a press release announcing the creation of a new plant, headquarters, or expansion. It means new jobs for that location and a boost in their economy.

A good example is Amazon when it announced a new second headquarters. In May 2021 Amazon announced its new second headquarters in Arlington, Virginia to add 1,900 new employees.

 

2. View Supply and Rate of Sales

 

Basic Economics: Assess future price growth by looking at how many months of supply exist and how fast inventory sells. Economists claim that a five to six months inventory supply usually causes a downward pressure on prices. This results in lower prices and more sales.

NAR claims that the same principle applies to home sales. According to NAR, “inventory levels and months’ supply are measures of housing supply”. Six months of unsold listings tend to push prices down leading to increased sales.

Reuters took this principle a step further in its June 22, 2021 news story titled, “Record-high U.S. house prices, tight supply weigh on sales”. U.S. home sales fell for four straight months because of low inventory and record-high prices. This will encourage more homeowners to put their houses on the market. Eventually, leading to lowering sales prices and more sales.

Thus, they predict a future buyers’ market especially with the COVID-19 restrictions easing causing more Americans to return to work.

 

3. How Affordable is the Market for Locals?

 

A simple indicator is to see how affordable is the housing market for locals.

Tip: Compare median income growth to housing costs to see if a family with average income can afford to buy an average-priced home.

 

Have questions?

 

More Resources for Finding Growing Real Estate Markets

 

View the following 4 Real Estate Trends Reports:

 

1. Urban Land Institute Emerging Trends Reports

 

The Urban Land Institute (ULI) is the largest and oldest platform for all types of land use and real estate experts in the U.S. and globally. Over 40,000 members offer expertise in housing, real estate finance, and investments.

For the past 41 years, ULI works with accounting giant Price Waterhouse Coopers (PwC) to publish the Emerging Trends in Real Estate report. They study transaction volume, population size and growth, investment capital flows, and development opportunities.

 

2. RealWealth Network List

 

The RealWealth Network since 2003 assists people with wealth creation. They publish a “Best Places to Buy Rentals” list based on appreciation and cash flow.

 

3. Realtor.com List

 

Realtor.com partners with NAR and publishes an annual Top Housing Markets list.

They use macro-economic factors like the Federal Reserve’s effect on mortgage interest rates, monetary policy, GDP, and economic outlooks to make housing forecasts.

 

4. Motley Fool List

 

The Motley Fool company owns Million Acres which provides real estate investing advice. Million Acres publishes a yearly top real estate markets list.

 

How Does San Diego Rank as a Fast-Growing City in 2021?

 

The World Population Review in its “Fastest Growing Cities in the U.S. 2021” ranks San Diego #3 on its list. Check out the screenshot of the Top 3 below:

Since San Diego is the 3rd Fastest-Growing City in the U.S., you should check it out.

Contact us now so one of our Realtors at Big Block Realty can save you time knowing where to invest in the greater San Diego housing market.

 

How to Find a Growing Real Estate Market – Conclusion

 

Let’s summarize how to find a growing real estate market post.

Recognize a great real estate market by:

1. Low vacancy rates;
2. Strong job growth;
3. Diverse population; and
4. High consumer confidence.

 

Consider Local Economic Factors

Number crunching isn’t fun but is necessary to bear fruit. Examine indicators like:

1. What are the local growth indicators and how do they impact real estate values;
2. Interest rates rose or fell over the past six months and year; and
3. Which locations offer affordability and growth?

 

Explore traditional indicators like

• Population growth;
• Home sales;
• Rent Increases; and
• New construction data.

 

Observe unconventional indicators like:

• Big companies’ announcements;
• View supply and rate of sales; and
• How affordable is the market for locals?

 

All the Information You Need is Online

 

If you got the time, visit all the websites mentioned above and crunch the numbers.

However, if you don’t have the time and math is not your forte, work with an experienced local Realtor.

Our Realtors at Big Block Realty offer you experience, competency, and knowledge of the San Diego market at your disposal.

Contact us to discover more about how and why our 985+ Realtors make us one of the largest real estate brokerages in California.

 

Steven Rich, MBA – Guest Blogger

 

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