Factors that determine Local Real Estate Market Trend

12 August 2019 Shared By AC

Real estate markets trend between times of boom and bust, depending on a host of influences, including the addition of new shops or schools to an area or changes in local regulations. But while these can have significant impact, they are not the only factors investors need to consider when looking at a market.

There are a number of elements, or combination of elements, that can strongly affect the growth of a district, and it’s up to the real estate investor to determine how much of an impact a change or trend will have. Below, members of Forbes Real Estate Council discuss how they keep their fingers on the pulse of the local market, as well as what factors they deem crucial to identifying growth. Here’s what they look for:

Real estate markets trend

1. New Business Developments

I talk to tradespeople and ask them to compare their level of business currently to what it was a year or so ago. Many times they will talk of new development or repurposing that the general public is not yet aware of. – Steven Caporale, Accel Realty Partners

2. Growing Employment

From our perspective, we look for growing employment and new employers moving into a local area. This is an indicator that new employees will be moving to the area to start work, set up the office and generally long-term travel that occurs between various company offices. – Chung-Man Tam, 2nd Address, Inc.

3. Population Growth

Perhaps one of the most important signs would be the population growth and the demographics of that population. Depending on the demographics, we would be able to plan our investment strategy—for instance, massive growth in university student numbers in an area would mean studying housing investment in the short term and rental apartments midterm. – Arian Nemati, ADEx AI

4. Number Of Showings

Look at the total number of showings across all price ranges. Not every showing will result in a sale, but when I see properties in all parts of our market and in all price ranges being shown consistently, then a high number of sales always follows and is the number one indicator of a hot market. – Mike Bails, Urban Acres Real Estate

5. Area-Specific Government Regulations

The most telling sign of market appreciation is changing in government regulations. This year alone, changes with regard to marijuana regulation and the implementation of Opportunity Zones have led to some pretty significant shifts in markets around the country. As investors start to really grasp and implement the advantages of Opportunity Zones, market conditions will continue to trend upward. – Danielle Pierce, Women, Wealth and Real Estate

6. Low Inventory

Inventory levels of the active properties for sale tell a good story. It also translates into a number of months of inventory in the marketplace today. Low inventory and having fewer months to get the inventory sold, means that the market is heating up. A slowing market will have higher inventory levels as well as many months of inventory in the market. – Amit Inamdar,Own Sweet Home Realty

7. Rent Growth In Renewals

Look at how much rent growth is occurring in renewals. New space is obviously going to lease at a higher rate, but you can really see the impact of the hot real estate market in how much rent growth occurs when leases come up for renewal. – David Murphy, CBRE

8. Absorption Rate

You look at the current inventory and demand. You want to calculate the absorption rate. First, determine the number of homes closed in your market over a specific period—say, 12 months. You can get this data from the MLS. Next, divide the number of homes by the number of months in the period—in this case, 12. Last, divide the rate into the number of current listings. – Ben Salem, Rodeo Realty

Source: Forbes

Factors that determine Local Real Estate Market Trend

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