What Macro Data Study Should BiggerPockets Provide to Investors?

Question

Hi Everyone,

Last year, @Alec Neita and I built the BiggerPockets  Investment Market Index - a study of rent and value increases, year over year, in the 50 most populous U.S. metros.

I think that study is useful for investors as a historical look at property appreciation and rent increases. I plan to update that again this year and take another look sometime in July (the data requires a full first half of the year to pass).

My question for you all is this - what would be the next most useful (macro) dataset I could produce for you here in 2016? What would you like to know?

The criteria for this project are:

1)  I'm only looking at the largest metro areas of the country. Sorry - great data just doesn't exist for non-populous regions - plus I want to help the most people possible with this project.

2)  I must have the ability to source this data from credible sources.

This means that I can't do things like "landlord friendly metros" - as that would be subjective and require an exhaustive look at state by state legislature.

Other than that - what do folks think would be useful to investors?

Chris Martin · Answer

The Macro numbers don't do much for me. The MSA level data sets are too large and diverse for me to gain any measurable or actionable results.

I looked at the study methodology, specifically this Raleigh Feburary 2016 report http://files.zillowstatic.com/research/public/realestate/ZHVI.Raleigh.395012.pdf and
had one of those 'blink' moments when looking at Garner numbers. The report identifies Zillow Home Value Index (ZHVI) for several cities. The highlighted 5 cities are:

Raleigh Current: $200,300Cary Current: $306,700Garner Current: $163,700Clayton Current: $173,700Wake Forest Current: $269,000

The annual change of 6% is the question mark in my mind, as is the viability of $163,700.

I couldn't help myself. I had to see if and how these numbers could be accurate. So with a handful of queries against the new (post reassessment) local data sets, I set out to see if I could validate the above 5 numbers. The general query is this: SELECT `LandAssessed`,`BldgAssessed` FROM `property` WHERE `city` LIKE '$city' AND `BldgType` LIKE '01' AND `YearBlt` >= $sinceYear. The idea is to pull the assessed values (current as of 2015Q4 valuation reassessment) for
single family residential property. Running this on the above cities yields:

AV median for RALEIGH: 205932 across 146529 data points.
AV median for CARY: 287233 across 42777 data points.
AV median for GARNER: 153216 across 9655 data points.
AV median for CLAYTON: 173490 across 347 data points.
AV median for WAKE FOREST: 278355.5 across 17962 data points.

And I'll be damned! The numbers were close enough for me to initially say that maybe Zillow methodology is not far off. $200,300  vs $205,932. Very close. And Garner at $163,700 is reasonably close to $153,216.  But here's the rub. The value of an individual Garner property isn't increasing 6%... the collection of homes in Garner is going up 6%. And here's the statistical reality:

AV median for RALEIGH: 211675 across 50265 data points, years since and including 2000.
AV median for CARY: 363426 across 14119 data points, years since and including 2000.
AV median for GARNER: 228028 across 2565 data points, years since and including 2000.
AV median for CLAYTON: 171294 across 46 data points, years since and including 2000.
AV median for WAKE FOREST: 334948 across 9949 data points, years since and including 2000.

AV median for RALEIGH: 242168 across 7293 data points, years since and including 2010.
AV median for CARY: 354149 across 4327 data points, years since and including 2010.
AV median for GARNER: 303688 across 313 data points, years since and including 2010.
AV median for CLAYTON: 0 across 0 data points, years since and including 2010.
AV median for WAKE FOREST: 346889 across 2731 data points, years since and including 2010.

My Conclusions:

• Sales amounts are higher in Wake county (specifically in areas like Garner) because newer (more recently) built houses are selling, not because all the housing stock is increasing.
• The median value of houses built in Garner since 2010 are double the median of Garner as a whole.
• 27% of Garner SFR consists of 2000 or newer houses, and these houses are 49% higher in value than the median of Garner SFR housing stock as a whole.
• Without clear understanding of what the MSA level numbers represent, their value is of limited utility for actionable REI purposes

My 2 cents.

Bob Pattersonly · Answer

I think Macro numbers and creating cool infographs are great for many different domains, but at some point it just becomes cool things to look at and nothing more.    There is a rent site out called rentjungle that has some good rental information and different markets and sub-markets and very useful at times,  but other times the median numbers are rather useless.   There is one city near me where the average rents are over $2400 per month and that makes sense for that area, but if you are buying or renting out the numerous places that only rent out for $1600 max per month, that entire macro stat is useless.   And rentjungle has a ton of other details that are useful.     And that's a very small area and one zip code. So if i spread that out to a hundred zip codes and the entire City/County instead of that small little town,  it would be interesting to look at as far as media costs and rentals, growth, etc, and it might make me want to dig deeper into that market.  However it would be almost useless in helping me make a decision. Where I'm at every zip code can be far different and even within zip codes, there could be plenty of $10K per month rentals and $1K per month rentals much less $2 million homes and $500K homes.  And if you looked at the square footage, the bedrooms and baths, you'd be confused why they were so different in price.   And things like this happen in many areas, not just mine.    Macro info on major areas can be cool to look at, but it really wouldn't be all that valuable in making REI decisions for many many areas due to such differences in costs and prices for various reasons.

Kalo (Kyle) Atanasoff · Answer

Suggestion - find out if any correlation between residential real estate / comodities (oil, metals) / inflation / $ value exsist...overall or for state of your choice ?

Chris Martin · Answer

My own. Based on public record. I'm sure you have better tools with MLS... same information.

Jack Farrell · Answer

What database are you running that query against?

Adam Schneider · Answer

@Chris Martin -- that's great analysis. If you ever want some Triangle MLS perspective, feel free to reach out and I can take a look (sales, not rentals--too little rental data).

What Macro Data Study Should BiggerPockets Provide to Investors?

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