Analysing Markets ??? Next Class A market????

Question

Nathan Platter · Answer

Hi Mike,

The most often used search criteria are (local) immigration, unemployment rate, income growth, housing affordability. The less-but-still used criteria are Crime stats, Section 8 frequency, and Municipal investment.

(Local) Immigration - Properties Appreciate when more people want to live there.

Unemployment - If tenants lose a job, they need to find something quickly and that pays close to prior income levels.

Income Growth - Are businesses investing in this area? Are entrepreneurs setting up shop?

Housing Affordability - Can the residents even afford to buy if/when they want to?

Crime stats - is the market even safe? Do people go out after dark? Are households wanting to move and live in this area?

Section 8 - this state-run program caters to households who earn more than poverty line yet still struggle affording rent. Class A areas usually have lower Section 8 tenants for the area.

Municipal Investment - Does the city spend money in this region? Are they trying to boost the overall appeal by spending on bike paths, clean lakes, hiking trails,... Or is the city letting this area fall and allow litter and trash in the gutters?

Would love to see where you buy next!

Darwin Crawford · Answer

All great ideas listed above.

I would also add some school district research to my list of homework.

Do not underestimate the lengths and debts that parents will go to in order to have their children in good schools.

Changes in school board members, etc are also helpful.

I have a quote on my wall, which I think that Peter Lynch said, which goes about like "far more money has been lost by investors trying to predict corrections in markets than in the corrections themselves".

I probably butchered that a little, but I think its a good point to consider when trying to find the "next hot market" to purchase in.

Troy Gandee · Answer

I agree with @Jay Hinrichs and I think everyone that lives here in Charleston would, as well. I'm not quite sure about become class A because our metro area is still quite small and we have a hard time sprawling due to the water everywhere, but rents have certainly exploded. I think we're near critical mass for rent prices, though. All I hear from <40s that don't own is that rents are too high and they're thinking about moving.

Jennifer S. · Answer

Hi @Mike S., I posted something about data I'm trying to gather on the following post

https://www.biggerpockets.com/forums/80/topics/214...

(It's a bit Mass specific)

All the best

Jay Hinrichs · Answer

what I see is re gentrification.. IE developers moving back into areas that were run down for a variety of reasons..

in the suburbs  Schools generally are number one  in importance  followed by affordability and traffic flow.

in the inner city it seems like the under 40's and retiring boomers are shifting markets back to inner city .

just take a short trip down to Charleston SC that is a perfect example of old becoming new again and changing demographics .. 20 years ago.. very little activity today.. new builds everywhere and changing demographics.. old school moving out young and boomers moving in. catch the wave.

I went there about 5 years ago .. its quite amazing.. and I can tell you it was a leap of faith.. but it has been rewarded.

virtually every big city in AMerica has there little section that this is happening to.. and very easy to find  its self evident when you tour the areas.

Jim Goebel · Answer

@Mike S.

This sounds like a question for experienced policy makers, economists, and business leaders that are making decisions on where to locate.  I don't claim to have all the answers but a few of the fundamentals for a regional economy that I think really do drive the long term outlook for growth in an area include:

• Dynamic, diverse, and deep economy fundamentals including strong institutions
• Functional execution of Property Rights and the rule of Law 
• Transparency and limited corruption within the regulatory framework
• A commitment to 'smart regulation' when appropriate, ie: lack of ideological underpinnings (are practical decisions being made on a case by case basis?)

I'm not really familiar with the classification of A, B, C when referring to markets.  I just did a search and this terminology seems to be more regularly used when referring to specific properties even here on Bigger Pockets.  I don't want to make any assumptions about what you mean, so maybe you can share more specifically.

The above bullets are my view on what drives a healthy long term outlook.  They can be hard to determine and often take some time getting out 'in the game' yourself and making up your own mind.  I've found a certain class of people to be more likely to have developed a very cynical view of institutions and you obviously will get a better picture by getting out and getting real data points from across an economy.

Those are the things that generally speaking are under a regional economy's control.  There are often things outside of the control of decision makers including for instance socioeconomic and racial diversity (ie: a SoCAL, NYC, Miami, etc) which I generally view as a good thing when coupled with the above, and also location obviously drives a lot!

I'm biased but I do believe that Des Moines is well positioned for continued strong (not exorbitant) growth when looking out over the next 20-40 years.

Analysing Markets ??? Next Class A market????

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