4 Key Factors To Conduct Market Research

Careful analysis of the market can give you a pretty good idea of what you can expect from an investment property. We will discuss the 4 Key Factors that will make up the bulk of Market Research.

1. Demographics

Demographics show the composition of the population and can predict real estate demand in a particular area. Age, gender, migration patterns and income all play a part. Analyzing demographics can explain the pricing of real estate and indicate which kinds of properties are in demand. Shifts in demographics can have a great impact on real estate trends. An example would be Baby Boomers born between 1945 and 1964 who are now retiring and downsizing their homes.

2. The Local Economic Area

The local economic area is a large geographic area, often centered around a city, that affects the market value and investment potential of properties. A booming economy in the area will generally have a positive impact on property values, and conversely, an economic decline will have a negative effect. Investors can look at the entire metropolitan area or analyze a portion of the larger economic area such as the eastern end, a particular county, a set of zip codes or several census tracts.

3. Employment

The boundaries of the local economy are considered functional since people travel across county and city lines for work. As a general rule, the reach of an employment center is one hour, since that is the outer limit of the amount of time most people are willing to commute to work. Keep in mind that the average commute in the US is under 30 minutes, with the majority of all economic activity for an individual occurring within 20 minutes of their place of work. A geographic area can have numerous magnets reaching across counties into different cities, creating a maze of commutation and linking the areas economically. Ease of transportation to these employment centers can greatly affect real estate values.

4. Growth Patterns

Geographic growth patterns can also help investors evaluate opportunities for real estate ventures. Patterns predict how the market is changing and moving into the future. Real estate maps show how land use has changed over the last several years. For example, farmland may now be industrial, industrial warehouses may have transitioned to residential lofts and residences may have morphed into office space. Traditionally, land use developed in a circular pattern around a central downtown hub. More recently, axial growth has occurred along major corridors. New development may also be centered around secondary hubs at the intersection of major roadways for multiple nuclei growth.

Tips for Researching a Market

Looking at demographics and the local economic area is important when researching a market. Transportation also plays a role in determining growth patterns into the future. Make sure to consider any barriers to growth in the local market such as protected natural areas, zoning changes or negative public perception. At the end of the day, it’s employment that draws residents and contributes growth to the area.