Interpreting Market Data

[Neil Schoepp]

So I found a spot in the country I would love to visit. It also happens to be a place I could see myself relocating to in the next 5 to 7 years. It has great weather lots of attractions wonderful write ups and from everything I've seen so far some really, really great people I would love to call friends. I believe we will agree it also has population AND employment growth. The area I so fondly speak of is North Carolina. Specifically right now the Raleigh-Durham and surrounding areas. I am also looking at Wilmington as I LOVE the salt air along the coast. I grew up on a small canal leading out to Jamaica Bay in South Queens (NYC by JFK airport) and spent my summers swimming, fishing and crabbing. I've digress though so on to my question.

I seek your help in learning how to interpret the market data I come across. A good example is these two reports On Apartmentupdate.com and this one also.

So for example in the second chart it shows Vacancy and rents merging together. I would assume this is a good thing because as vacancies decrease then rents should increase that's what I see, but one could look at this chart and say rents are increasing way to fast. Another concern is Permits and Deliveries. As I would be looking at smaller B+ to B- properties 15-25 units in the area should I be concerned with the amount of units coming on. As more units come on then doesn't that push my older B+ property to a B.

As a side note how do I determine if the market is just to hot right now. I would think this is more of a feeling got from reading and talking to people so what do you think about the market? What should I be reading ? Who should I be talking to?

As always thanks for the help.

[William Hochstedler]

I think your getting into waters of PhD statisticians and economists.  The data you are looking at may be useful to compare two markets side by side, but these are very macro numbers.  Think about how many Nobel Laureates got the housing crash wrong using data like these.

If you've determined that this area is the one you want to focus on, the information you should be looking at should be much more local, not stuff that the Department of Labor uses.

I'd recommend getting there physically and going to individual neighborhoods.  Do you feel safe?  Is there construction happening?  Is the neighborhood cool?  Would you want to live there?

Second, find a good agent who has been in the market and seen its ups and downs.  A savvy real estate agent can tell you a lot more than high level numbers.

Start reading the local papers.  What's going on in these communities?  What kinds of problems are they having?  Is the local calendar filled with quilting bees or Shakespeare in the Park?

Finally for some hard data sources, here are a few (remember that raw data is mostly free, it's the analysis you pay for and often wrong):

US Census This is THE source for median incomes, demographics and historical change

Trulia Local This is the coolest feature of Trulia by far.  It's an interactive map that you can zoom into a lot of data points.

Zillow Data It's pretty unanimous that the Zestimate is useless, but Zillow has compiled extensive data sets that are actual market data.

Search for the Comprehensive Annual Financial Report (CAFR) for the municipalities you are interested in.  This is the city's own municipal budget analysis.  It will tell you how the city thinks it's doing financially.

Recommended reading is David Lindahl's Emerging Real Estate Markets.  There's a lot of guru-ish language but he gives excellent pointers about what factors to look at and how to determine what cycle a given market is in.

Be careful to avoid analysis paralysis.  Your best bet is always going to be someone who knows the area.

Good luck.