How can I find the edges of the bubbles?

Question

Can you suggest where I can find data and what data I should be looking for?

Specifically, I want to identify geo areas in LA that are gentrifying and will have increased value in 10-20 years for SFR and plexes. I live in LA and have an idea where these geo areas are (hipster explosions)., but wonder if there is a way to pull stats to help identify fringes that aren't already hot but will be down the road.

Is there somewhere online I can pull data to identify trends by zip code?  I'm accessing multiple sites now (Zillow, Redfin, Realtytrac) but it seems rather hunt and peck (manually).

What data should I be looking for? Increase in rents? Increase in average home and plex prices?  Increase in school ratings?

Thanks in advance for any tips!

Vincent Crane · Answer

I see two main ways. 1) Really knowing your market, living there, driving around and seeing the neighborhoods. Googling price trends for each part of the city, and rent trends. I did this for Atlanta and got a very clear picture of what parts are appreciating better than others. And 2) Finding a mentor who knows the area very well who can give you their insights. This could even be experienced real estate brokers.

Account Closed · Answer

The hipsters have been a growing trend for the last 5 years or so I was amazed at the transformation of lower Manhattan and Brooklyn by the hipsters.I think you are on the right track but as soon as the establishment identifies a movement it can quickly morph into something else. Good solid numbers is the best investment basis you can make and not the latest fad

Kelly Maestri · Answer

Chris,

Thank you for the reply.  I had a hunch there was no magic data bullet.  Like you said, much of the data is lagging indicators.  I'm sensing for the LA market, I should leverage my experience as a marketer to understand what I'm seeing and invest accordingly.  Younger hipsters are moving into ragged neighborhoods because they can't afford and don't want the burbs. These gritty neighborhoods are slowly gentrifying one remodel at a time.  Just yesterday, I stood in line for an hour at a tiny hip restaurant in a very gritty neighborhood where a few feet away a trendy vintage clothing store opened along with another tiny retail store targeting millenials.  There's no way to see this type of info in data. You've got to have boots on the street to see it, then research/buy accordingly.

Thanks again!

Chris Martin · Answer

That's the $10 question. I can't answer the question for the stock market or for the housing market. I think if we (BP Nation) could answer your question, we'd all be millionaires.

Seems to me that seeing the fallout (e.g. 2008-2010) was not too hard. E.g., neighborhood defaults escalate before foreclosure, and foreclosure (forced sale) caused price collapse. So the metrics (for some of us) were defaults on a neighborhood basis, number of initial loan values in excess of early default "closing" (courthouse sale) valuation, and a 'foreclosure weight' that was a ratio of forced sales to arms-length sales over time.  A lot of us played that game, and coupled with tight money, it was easier to make money.

But what about post recovery? Sales closings at arms-length above the 12 month PSF (per square foot) neighborhood average? Volume of closings per neighborhood? But these are trailing metrics... and not leading metrics. Seems to only work when you see the curve change and that is after the event... so it's imperative to get in early. The cycle and market says we are not in the early stage anymore. At least where I am in central NC. In fact, I'd say we are now 1.5 to 2 years late, and prices are at or beyond fully recovered in the rising market.

In the stock market, on an industry group basis, a good market will lift all stocks. True too with housing to a large extent. But predicting? I'm not sure you can quantify or qualify the parameters. I'm all ears if you have a 'formula'... but I believe that algorithm is regional or local and may be difficult to produce.

How can I find the edges of the bubbles?

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