The number one question most people face is whether they should buy in a real estate market and, if so, when they should buy. Here is one trick you can use to make the decision.
If you did not know any better, you would be forced to assume that we Americans are a restless bunch. Unlike the 20th century, we rarely seem to stay in the same place for long. Factors that lead to this migratory conduct include job loss, tax issues, cost of living and so on. Given the fact we tend to move, most people fail to realize what impact this has on real estate markets.
When assessing a real estate market, population movement is something you should really focus on. In many markets, it is pretty hard to ascertain and is not really an issue in the valuation and appreciation rates of properties. On the other hand, if you can identify such a market, you stand to make a killing. Let’s look at a classic example.
One of the fastest, if not fastest, growing cities is Las Vegas, Nevada. Something like four people a minute move to the city. Why? Well, prices are generally cheaper than where they are moving from and there is no income tax collected by the state. As these people move into the area, the demand for housing becomes massive. This demand has been quantified in exploding appreciation rates in Las Vegas for the last few years. Alas, the market has cooled, but it does not mean you should avoid buying a property. People are still moving into the city at an amazing rate and they still need places to live. While the market has cooled for a bit, it will get hot again within a year. There is simple too much demand for housing.
A less obvious population movement has to do with homeowners moving from high property value areas to lower property value areas. For example, homeowners that live in Southern California have a habit of selling off their tract home for massive profits and moving to states where they can buy much bigger homes for a fraction of the price of their previous home. If you can identify where these wayward, but rich, souls are going, you can buy in that market before or while prices are being driven through the roof. One area that was very popular with these people was Seattle and the state of Washington. Prices have nearly doubled in that area given the influx of the Californians.
Population movement is an important trend in evaluating a real estate market. It is not always present in every market, but you can make a killing if it is.
About the author
Raynor James is with FSBOAmerica.org – FSBO – for sale by owner.