Understanding Trends: Finding Where to Invest

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The market is constantly fluctuating– there are dozens of constantly changing factors to keep track of that each influence the supply and demand for the properties you own. Whether it’s population or economic growth, these market metrics are what investors must understand in order to choose an investment that will maximize their profits. 

Real estate is not a typical asset class because every transaction made is completely unique. There are several different sub-markets within the field: niche, geographic, and demographic just to name a few. The information made available to us about these markets at any given time is often at the national or state level, so it is crucial to be able to deduce this information down and understand what these high-level metrics mean to you. 

Primarily, when analyzing metrics, it is crucial that they are understood in context. For instance, it may be released that residential properties remained on the market for 40 days in each month of 2020. This may seem like forever to someone in a congested market like New York City, but to someone in rural Texas that sale could seem like it happened in the blink of an eye. This statistic can give false impressions at a national level that could be easily broken down locally  – something to keep in the back of your mind when looking at data. 

Most of the data you read will apply to a bigger group of properties than what is directly impacting your market and investment every day, and this large statistical set is needed in order to get enough information. Average home price and median home price are two important metrics with deceptively similar names. The median home price would be the price of the home in the ‘middle’ of the list of sorted home sales. This means that it is independent of the value of the highest and lowest prices. This is different from the average home price, which considers the price of every home sold in the market. 

Another interesting metric is net in migration. A positive value indicates that more people are entering the market then leaving. In other words, more homes are being purchased than sold. This is critical because a market where people are leaving results in a downward trend in both prices and demand. 

Despite what the media may illustrate, the real estate market moves very slowly. There is plenty of time to analyze your position in the market and collect the appropriate data. Supply, demand, and capacity to pay are the basic principles of real estate investing – market metrics impact all of these. Therefore, to maximize profits, it is essential that investors study these statistics and do their homework before buying.