How to Read Your Market
As any rueful owner of a Las Vegas investment condo can tell you, real estate markets around the U.S. aren't created equal. National trends indicate that values have slipped by 4.9 percent since April 2007, according to a monthly house price index calculated by the Office of Federal Housing Enterprise Oversight (OFHEO). But the Pacific region has lost the most: Prices there are down by 14.5 percent since spring of 2007. Texas and surrounding states did best, squeaking by with a price increase of 0.5 percent.
It's true: Location is one of the strongest factors in real estate values. National statistics provide context, but how's the market where you're considering investing? How's the neighborhood within that market? Here's how to find out.
- OFHEO's index and related quarterly report on housing prices, broken down by metropolitan area (ofheo.gov), are widely considered to be the most reliable because they draw from public records and include all transactions.
- If you live in one of the 20 major metro areas tracked by the monthly S&P/Case-Shiller index, you also can track fluctuations published monthly at standardandpoors.com/ (click "Indices").
- You can view recent sales by neighborhood and street by navigating local maps on zillow.com.
Whether you're scouting locations for individual properties or analyzing the holdings of a REIT, be sure you also look at the underlying economic growth of the area. You'll want to track the area's employment trends, for one; such statistics are usually calculated by each state's department of labor. Population growth is another key indicator: The more people there are, the greater the need for residences and shopping. The Census Bureau (census.gov) releases regular reports and forecasts on population growth.
Finally, look at the location of the property itself. Is the industrial park near a major highway? Does the property have a monopoly location that is hard to replicate, or is it easily preempted by new development and conversions? If you can, drive around the property and check its condition. If you can't, Google Earth (earth.google.com) is a handy virtual way to zoom in.
Whether you're scouting locations for individual properties or analyzing the holdings of a REIT, be sure you also look at the underlying economic growth of the area.
