All Forum Posts by: Nick Gerli

Thanks Taylor!

It's amazing how much information is actually out there between the Census and Bureau of Labor Statistics. It just takes a bit of a learning curve to find and use the data. That's what I specialize in doing. 
 

The terms Housing Shortage and Housing Bubble get thrown around a lot. And for good reason. Areas with a Shortage tend to see higher rent and value growth. Areas in a Bubble situation tend to see slowing growth and eventually a loss of rents/value.

So it's important to be able to understand the dynamics in your market. Knowing what markets are facing a Shortage or Bubble scenario can lead to much better decisions on where and when to buy. 

Fortunately, you can use publicly available data through the Census to understand these dynamics. 

First Step:

-Gather data on new single-family and multifamily permitting in your market. You can do this through the US Census Bureau, which tracks monthly permitting across metros. https://www.census.gov/construction/bps/

-Aggregate this data historically and see how your market's permitting situation has changed over the last 10-15 years. https://www.census.gov/construction/bps/msaannual.html You'll be shocked to see how much things have shifted in certain markets.

-The more permitting goes up, the more likely a Bubble situation is developing. The more permitting goes down or stays the same, the more likely a Shortage situation is developing. Looking at Permit data is great because it also gives you a window into what the supply situation looks like in 12-24 months, since that's how long it takes to usually complete the units after a permit is pulled.

Second step:

-Layer on data on Population/Household growth in your market to see how it compares to permitting. This is a bit trickier to pull. Head to the Data.Census link below and go to "Filter" then "Geography" then "Metropolitan Statistical Area" and pick yours. https://data.census.gov/cedsci/table?q=households&tid=ACSST1Y2019.S1101&hidePreview=false

-If Household Formation greatly exceeds permitting over the previous five years (as is the case in a place like Phoenix), then it's a Housing Shortage. Expect higher rent and value growth. If Permitting greatly exceeds Household Formation, then you're more likely in a Bubble scenario, where the supply of new housing is exceeding demand. Expect lower, and perhaps negative, rent and value growth.

I put together a "how-to" video for how to use this data here if you would like more information.

That's a great question, Mason!

I pulled this data from Zillow. They have a great data section where you can analyze values and rents across the country. 

https://www.zillow.com/researc...

Residential real estate has held up surprisingly well during the COVID pandemic. But five markets have performed especially well. I call these the "All-Star Markets". 

They are the only ones to have eclipsed 8% value growth AND 5% rent growth over the last 12 months. 

It's a surprising list:

Syracuse (+8% Value / +7% Rent)
Spokane (+12% / +6%)
Tucson (+10% / +5%)
Phoenix (+12% / +6%)
Memphis (+9% / +7%)

Perhaps Phoenix and Spokane make some sense, but the others left me head scratching. They definitely aren't topping the list of hot markets that people talk about.

I'd love to hear some on the ground perspective from those owning and working deals in these markets. Are you seeing what the data is saying?

@Walter Antonio For rentals I typically like areas that have:

1) Strong income growth

2) High millennial presence

3) Existing base of rental demand.

Below are the Vegas ZIPs that meet those criteria.

You seem to be onto something with 89138. 

Thanks for the comment, Alex.

You are right - real estate is local and ultimately success comes down to finding the right property and managing it well. I'm certainly not advocating that anyone in Austin invest in Pittsburgh, or vice versa, because of this data. 

I agree Ericka! Austin does need more housing to account for that growth. 

And it will most certainly get it. The Austin metro (which includes the suburbs you mentioned) is permitting more new housing units than any other metro area in the country (over 4% of existing supply in 2020).

Thanks for the comment, Marcus!

The figures presented in this thread are all "Metro Level" and include the following counties for Pittsburgh - Allegheny, Armstrong, Beaver, Butler, Fayette, Washington, and Westmoreland. 
 

@Anthony Angotti

I think some of these markets do have the growth to absorb the permit supply. But my question would be:  what does appreciation look like? It's going to be hard to achieve the appreciation rates of years past when growing supply at 3-4% per year.  

Pittsburgh is an interesting market. It's in negative population growth territory but has so little new supply that it experiences strong rent growth in a lot of markets. I like Shadyside/East Liberty in particular. 

That's very true. It's important to compare permitting to population and household growth. Look up a couple posts to see those comparisons in Columbus and Nashville.