How to analyze RE markets?

Question

Hi,

Because of the area I live in (Los angeles) I'll have to look elsewhere to do the type of investing I want to do. The benefit of looking outside my own area is that I can research various markets and pick a strong one to invest in. I don't know how to do this though, and I definitely don't want to depend on those CNN articles to pick my market. Does anyone know where I can learn to do market analysis myself?

Thanks

Richard Warren · Answer

You have to do a lot of research.  One website that I like has  periodic reports from agents in different parts of the country and the site is free.

http://www.narreia.com

8)

Ricky Bobby · Answer

Here's an unbiased site:

http://www.housingtracker.net/

For my area (SE Virginia)
* Single Family Homes + Condos (asking prices)
http://www.housingtracker.net/askingprices/Virginia/VirginiaBeach-Norfolk-NewportNews/

Pretty interesting stuff, especially when you see the trends. 100% plus increase in listings in the past year alone.

Ricky Bobby · Answer

I'll leave your reasoning for ignoring the massive increases in property for sale alone. I just don't agree with your conclusion. Going from ~1000 properties for sale (in this area) in 2004 to ~6000 in 2007 is NOT a good indicator IMO. I personally would much rather be in a steady market if you have the luxury of going out of state (I do not).

You've got to take everything that I wrote in as "one" and not piece by piece. Use those cities are target markets, then learn why they are growing. Presto!

:roll:

We're both saying the same thing, you just wrote it in different words.

N/A N/A · Answer

Are listening to yourselves...

Analyze this and that and whatever....
Good or bad the only thing to research for is the right deal...I think you're making it all to hard...

K.I.S.S
Remember that theory

Ashan D · Answer

Actually I'm saying the opposite of what you're saying. You say

I don't like this approach because you rely on other sources to find target markets and then attempt to analyze the market based on potentially misleading information. IE buy in southern florida because population/prices are booming! If you were early you did fantastic, if you were in the middle you did good (which is where your approach would get you in)

I would rather learn all the indicators of an emerging market (not just the broad strokes like population increase, supply/demand, job growth etc. I want more depth than that) and then use that knowledge to find emerging markets myself. That makes a whole lot more sense to me at least.

Ashan D · Answer

[i]
What about a doubling of the current inventory within 12 months screams "hot market" to you? How does that NOT give you insight to what is going on?
[/i]
I can think of a couple possibilities.

1) As I learned in a real estate class, inventory levels are a lagging indicator which may not signal drops in prices for YEARS. If sellers can sell for the same price by waiting an extra month or two, many of them generally will.

2) As you can see from the above relying on any single indicator to call the direction of the market is a bad idea. What if your example of a 2x increase in inventory was due to a record heat wave in dallas? Will that apply to the future? (it might)

Probably the easiest way would be to look at census data showing the net growth or decline in regions. Communities that are growing and have people moving into the city would be a good opportunity for flipping. On the flip side, communities that are showing negative growth would probably not be a good investment.

This is a good start but it is too general and ignore many other indicators that could give someone a competitive edge. That is why I take this subject seriously.

Find some target markets, then look to each community to find out why the growth is going on.

This is like saying "find a strong stock, and then figure out why it's going up" Wouldn't it be a good idea to learn what factors go into the pricing of that stock before I throw my rationale at it (which BTW is why many people fail at stock investing)

Now I know RE is less volatile and easier to predict than stocks, but I still want to approach it as I would any other investment and that is to learn as much as I can before I make any novice decisions with my money.

Ricky Bobby · Answer

Here's a clip from a blog I found interesting:

Ricky Bobby · Answer

What about a doubling of the current inventory within 12 months screams "hot market" to you? How does that NOT give you insight to what is going on?

Probably the easiest way would be to look at census data showing the net growth or decline in regions. Communities that are growing and have people moving into the city would be a good opportunity for flipping. On the flip side, communities that are showing negative growth would probably not be a good investment.

Find some target markets, then look to each community to find out why the growth is going on.

Ashan D · Answer

All nice websites guys, but none of them really address my issue of how to analyze and research these markets for myself. I've searched for this information online and it seems hard to find also. Why is this? Are RE investors supposed to just know what factors signal a strengthing or weakening market based only on experience or intuition?

If someone has a good reference to learn market analysis I'd greatly appreciate it!

Moshe Dahari · Answer

Any Market is based on the simple concept of Supply and Demand.

To do research you just need to read a lot and keep gaining knowledge.

I did actually see some books on amazon that study RE market anaylsis using case studies. Its definetly something I would be interestd in reading.

How to analyze RE markets?

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