Scrutinize national housing trends all you want, but influences in your local market are really what determine whether home values rise or fall, NAR Chief Economist David Lereah says in his latest book All Real Estate is Local (Currency/Doubleday, 2007). He delves into an array of factors that can impact local markets — from success of sports teams to what Oprah says about the city — and provides lists and rankings of metro areas that can help you evaluate an area’s DNA. Buy This Book
FROM THE BOOK: 5 INDICATORS OF A HEALTHY LOCAL MARKET
The key to finding a good real estate investment is to figure out what’s affecting supply and demand. But the factors aren’t always as obvious as you might think, Lereah says in his book.
1. Youth drive. A community that has a low average age for the population, such as a median age of 35, is a likely indicator of growth. After all, a younger population is more likely to have children, experience more demand for housing (trade-up buying), and an overall increase in the population, when compared to an older community.
2. Shopping choices. Plans for a new mall or supermarket can greatly increase the draw to certain neighborhoods. In turn, stores or businesses that are closing may be indicative of a sagging market. Gather information by ZIP code of new business start-ups at the U.S. Census Bureau’s Zip Code Business Patterns.
3. Investors stake. Too many investors flocking to a market can cause housing prices to dive if a good market turns bad. Investors can add risk to a market, since they tend to be the first to sell when a market slows.
4. Politics. Never underestimate the power of local government. Political decisions — such as plans to revitalize the downtown or raise property taxes — can jump-start or sink a housing market. Look into zoning restriction changes that can affect residential and commercial building activity.
5. Media. City ranking lists widely reported by the media can influence where people choose to live, too. These lists may include everything from the “best places to live” to “most affordable.” For example, if your city comes up No. 1 for the highest crime rate (like Sumter, S.C., did on the 2006 metro crime rankings), that will likely scare some potential buyers off. However, if your city averages the lowest crime rate (such as Bangor, Maine, in the 2006 rankings), more people will be attracted to the area.
“All real estate is local. I have found that home buyers and real estate investors who ignore these five potent words eventually make costly and avoidable mistakes. They either purchase real estate in the wrong location … or they purchase property too late. There are always buying opportunities. You just have to keep your focus on local activity in the regions and neighborhoods in which you are interested in buying.”
ABOUT THE AUTHOR
David Lereah, senior vice president and chief economist for the NATIONAL ASSOCIATION OF REALTORS®, is often the media’s go-to person for talking about the state of the housing market. He’s also the author of Are You Missing the Real Estate Boom? (Doubleday, 2005).
Read a Q&A with David Lereah about this book.