Property Crossroads - Real Estate Info

A Review:”America’s Best and Worst Housing Markets”

by Maricel Ferrer-Custodio on February 21st, 2007

A Review of America’s Best and Worst Housing Markets as reported in MSN.com

Exerpts from the article:

"Cities showing gains exhibited high job growth and positive net migration figures. They were also areas in which home affordability remained close to national averages through the boom, making them less prone to the corrections and adjustments seen in overheated markets."

"Cities most affected by the downturn were old-line industrial markets such as Detroit or Lansing, where local economies are suffering the effects of mass layoffs in the auto industry."

"Steadier, more tempered growth translates into a stable real estate conditions because affordability remains in line with local economic conditions."

"In markets with sharp transitions, there was a lot of speculative, short-run buying” says Lawrence Yun, a senior economist with the National Association of Realtors. “In places like Texas or North Carolina, home prices are affordable and there is a good job creating the environment.""

"What’s more, when home values grow too quickly, builders rush to keep up and when the party is over, construction slows and there is excess inventory."

BEST HOUSING MARKETS =

Availablity of Good Jobs + Good Income Trends + Population Growth + Limited Development

Analyzing the report from MSN, this formula is a quick guide on where to find the best housing markets.  Price increases that are fueled by a real demand for housing due to population growth and supported by a good local economy, proves to have a stable market more resilient to price corrections.

It is important to take note of "affordability" as mentioned in the report.  The price increase should be in a level that the market could bear.  If the price went up to record levels due to unfounded demand, such as those coming from speculators, it will trigger a market correction back to levels that the population can afford.  Thus, it is important to take note that an area should have high paying jobs that can accomodate any price increases and  interest rise. 

The strength of the local economy must not come from one business or industry alone.  Otherwise, if that one company started to lay-off its workers or worst decides to shut down, then the local real estate will also start to crumble.  A good but harsh illustration are the old-time gold mining towns. They became ghost towns when the mines shut down.  With no jobs to support the people, they had to vacate their properties and moved to the next town where there is available work.

For the developers, it is a necessity to study the demographics of an area, the needs and the price that the market can bear. If you can position your project to meet the needs of the population at a price they can afford, then you won’t have any problems regarding the demand. This developer is a testimony to this concept.  Their development is 70% sold before the actual opening date.

Real estate consumers and developers should learn to analyze the availability of supply and demand in the market place. 

For the real estate investor, just because an area is booming is not an indicator that the prices will continue to go up.  Check the factors affecting the boom.  Make sure it is driven by a valid demand such as a good local economy driven by abundance of high-paying jobs, attracting people to the area thus increasing the demand.  If the increase in prices is caused by speculation in the market and sudden surge of investors, then think twice before buying in the area. Analyze why you want to buy there in the first place.  Don’t follow the bandwagon, because if  that group packs up and leave, you will be left to look after yourself.

The same applies for developers. Check the demand in the market.  You cannot bank on investors alone to buy your project.  Even the investors are dependent on the local population’s need and financial capability, to either rent their properties or buy it later on.  Joining the bandwagon is good for as long as you have an audience, otherwise you might be left with unsold inventory just like this developer.

For further reading, you can check out this related article "Securing a Good Deal during a Real Estate Bubble".

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POSTED IN: Breaking News, Buying a Property