Where can I find the data that goes into assessing a market

Question

Hi guys,

One of the things I've been trying to find the answer to is how to "read" a market.

For example, I live in Austin, TX. Everyone tells me the real estate market here is "hot". That some 600+ people are moving in every day and that the central Texas economy is booming, etc etc... My question is where are people getting this data from? Are there government/state sites that document this information? If so, where are THEY getting their data from? How do I know the "experts" in the know aren't just echoing each other?

To get even more granular, suppose I was interested in investing in any location, not just Austin. Just off the top of my head, things I would consider to be relevant in assessing the "health" of a community are demographics like the average age of people living there, percentage of the population who are home owners (as opposed to renters), average household income, recent economic growth of the region, the kind of jobs coming in to the region.

I know none of the above will 100% predict any particular market's future behavior, and I'm not asking for a place to go that will give me 'predictions'. After all, unforseeable events, like a Zombie apocalypse or a plague of locusts, can upend a market and leave conventional wisdom by the wayside. I'm trying to figure out how best to get an objective, data-driven feel for where a market/community stands so I have something solid to wrap my mind around when I'm looking at a particular market and wondering if it's a good long-term (i.e. 5-10 years) real estate market. I don't want to just rely on folks in the area telling me that it's awesome and I should go ahead and dig in because humans in general are prone to affirmation biases.

Atif

Aaron Mazzrillo · Answer

Man, great question! Here is some outside the box research I do when I'm looking at markets out of state;

Call U-Haul and ask how much it costs to drive a vehicle one way from and to the market you're interested in. If it is more expensive to go there than it is to leave from there, they have a lot of extra U-hauls coming in there and not enough leaving. That means people are moving to that market.

Another way to find out some helpful info is to call the local high school and ask what the freshman enrollment looks like compared to years past. Increasing is a likely indicator that more people are moving to the area. Especially since the trend in families is having less kids later in life.

As for people moving to an area, I'm not 100% sure how they could possibly know that with the exception of maybe driver license transfers. To say 600 a day are moving into a city is probably more exaggeration than fact. Most likely they looked at census data, and just boiled population growth down to a daily rate. There's much smarter people on this site than I, so I'm sure others will be able to give you more pertinent information.

I look at the chamber of commerce site as well. I want to see major employers in the area. They should also have some good research reports on job growth, hotel statistics, sales tax receipts, housing prices, etc.

I was interested in one particular area recently, but when I went on Craigslist and did a map search for rental properties, I was overwhelmed by all the properties listed. One other thing I like to do is type in the city name in Google and click on "news." Lastly, I have even called local police departments and asked questions about particular neighborhoods.

I like these two sites and often start here:

http://www.city-data.com/

http://www.bestplaces.net/

Here's a good article for you as well to help you in your research:

http://apartmentvestors.com/blog/market-rental-sur...

Ultimately, you should do your own research and come to your own conclusions. Like good old Reagan once said and has been quoted millions of times since, "Trust, but verify."

Account Closed · Answer

@Atif F Shahnawaz

I will say that the real estate business is inherently speculative. Furthermore, the Austin and Greater Austin markets are and have been fairly volatile the past few years. BUT, if you'd like to see some very reliable data relevant to the Austin real estate market, the Real Estate Center at Texas A&M is the nation's largest publicly funded organization dedicated to real estate research and an excellent resource for quantitative economic data.

https://www.recenter.tamu.edu/

If you go to Research -> Market Research -> and select the Austin/Round Rock MMA, it pulls up a list of articles and posts from credible resources (sorted by topic) for the Austin market area. It is my go-to website for finding the data I'm looking for.

I hope I've been some help, if you have any more questions feel free to add me and send me a personal message.

Aaron Gordy · Answer

@Atif F Shahnawaz

I will concur with Account Closed. The single best source of data besides the U.S Census department is Texas A&M Real Estate Center's website. I like looking at data on a comparative basis. If someone says that a particular market is hot...well lets see it. I am a broker and practice what I preach. If the Austin market sucked and Timbuktu rocked then I will be seeing if the grass is truly greener over there. And then I will see about getting a real estate license for Timbuktu..haha! Look at historical data.

If you want to look at demographics then hands down American Factfinder of the US Census Department is the best.

If you want to boil it down to zip code then one will need to go to the Perry Castenada UT Research Library, probably to do extensive research if you want free. There are companies that do exhaustive market research on zip codes, income levels, demographics etc. and sell their research to companies primarily and research institutions secondarily. A great example of a company that does that is based in Austin and is super huge: Hoovers. I believe that the corporate office is airport road but I don't believe that you can walk up and get research. However, I have not tried to do it.

Personally, if someone asks me if an city is hot then I go to a&m's site. If someone wants to know if a city, neighborhood or even street is hot and getting hotter then the absolute best source is the mls of the austin board of realtors. And if that isn't enough data and you want to see it anecdotally then the best way is to get on a bike and ride through the neighborhood. I know one investor that has about 10 houses the last time I checked. He is about 60 and is in excellent shape because he is a bike riding fool looking at neighborhoods... Good guy.

Another good anecdotal source is the post man/woman. Chat it up with him or her and they will give you a bunch of information.

I like going to the chamber of commerce too. That is an excellent source too. They compile data from various sources to make their marketing spiel to businesses considering moving their operations here to Austin Metro area. They are downtown Austin. If you go downtown, hmu and I will buy you coffee. My office is downtown and I am a quantitative fellow. It would be an interesting chat, I believe.

If one wants to get more research then universities are the best. Talk to a business librarian and they will guide you. I know as that is what I studied at the graduate level at UT. For most investor's purposes even my own there is such a thing as information overload and is totally unnecessary.

I hope that the info above is helpful.

Aaron

Atif F Shahnawaz · Answer

Wow, thanks so much for the replies. This is all gold, a lot stuff for me to sink my teeth into.

@Aaron Mazzrillo- just curious about one point. When you looked at that area you were interested in an saw a bunch of properties on Craigslist, why did that turn you off? Did you think there was too much supply?

Account Closed - went to the America factfinder site and looked up a random town. I managed to find the % of the population of the town that were renters vs owners, which is pretty cool. I'll definately explore the site. And yes, I'd love to connect and chat, and the coffee is on me. I'll PM you.

Christopher Phillips · Answer

If you want real data, not just "gut" feeling from anecdotal stories, you have to learn how to analyze supply and demand. Some sites like Trulia will have some decent market or neighborhood reports. Most agents have access to more in-depth analysis. Caveat, not all agents are analysis people, so not all will even know how to get you the data or know how to explain any of it.

Things that should be considered:

- Days on market analysis (DOM). Basically how long are properties taking to sell. Best to also break this up by price ranges.

- Absorption rate. Looks at how much inventory is on the market. Total homes + new homes less sold homes. This will give you a monthly number so you can look at trends. Ultimately, if no new homes came on the market, how long would it take to clear the inventory. 6 months is normal. Less than 6 months is a seller's market. Longer than 6 months is a buyer's market. It's helpful to look at 6 month, 1 year, 2 year trends in graphs. And break up by price ranges.

- Median price for sold homes. How has that changed over time.

- Market analysis should include: counts of new listings, pending sales, expired listings, and distressed activities (shortsales, REO).

Eventually, you have to look at things like neighborhood items: people states, economic stats, quality of life stats, regulation and legal things.

Jared Watson · Answer

I don't want to get too far ahead of myself but I am in the process of creating a database/website/entity that will hopefully be a game changer in the industry

Stay in touch

Josh Miller · Answer

@Atif F Shahnawaz if your looking 5-10 years out I would highly recommend you read "Big Shifts Ahead" by John Burns & Chris Porter. The book just came out and is gold. After you finish the book you can find plenty of free data to get you started here

http://www.zillow.com/research/data/

Where can I find the data that goes into assessing a market

Where can I find the data that goes into assessing a market

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