Gauge Long-Term Health of a Real Estate Market
As a Realtor, the number one question I am asked is “how’s the market?” There are many factors that go into answering this question. Most people only look at sales numbers and inventory, but you have to go beyond this if you want to make a solid investment.
To get a more holistic picture of the state of local markets around the world—and avoid being misled about its long-term prospects—investors must turn to other factors, like inventory, infrastructure and cultural attractions and the strength of the economy.
“Price trends are what happens when the dust settles,” Mr. Miller said. “Really, when you’re looking at the health of markets, you want to see balanced inventory.”
For homes with the potential to offer strong returns on investment, then, look toward markets with a limited amount of space for new development.
Given a trend toward urbanization around, real estate markets that offer walkability and plentiful transportation and entertainment options, are strong bets for investors—particularly those who will rent out their properties. “For younger renters, being close to transit, restaurants, bars, and coffee shops is very important,” Ms. Richardson said.
Local infrastructure should be another major consideration, said Philip White, president and chief executive officer of Sotheby’s International Realty Affiliates LLC. “Investors want to see that a market has kept up with the times,” he said.
Buyers should take a broad view of a market’s economy to gauge an investment property’s potential for appreciation.
Population growth is also a reliable indicator of a strengthening local economy. Buyers should investigate the number of people moving into a city and where consumer demand is coming from, Ms. Richardson said. Wherever Amazon HQ2 ends up, she added, would be a smart bet for investment.
When thinking about purchasing a property, whether as a home for yourself or an investment property, don’t forget to consider these factors: local economy, walkability and transportation, infrastructure, and population growth.