THIS ARTICLE FIRST APPEARED ON REAL TRENDS AUGUST 2020
7 Tips For Recognizing Market Trends Before They Happen
Some of us like to think that buying properties with the likelihood of an increase in value, due to market trends, is mostly about intuition and luck. However, it is the confluence of two factors; research and timing. Predominantly research.
Here are 7 key definitive factors that contribute to market spikes or drops.
1. Sport Stadiums
Multiple studies on the link between sports venues and new stadium constructions show that there is a direct correlation to the cost and demand of real estate in their vicinity.
Here are 3 cases where properties in the mentioned cities and the surrounding areas saw spikes in property values.
In March 2017, the UFC signed a 7-year contract with T-Mobile Arena as official tenants.
The new $2 billion Raiders Allegiant Stadium being built in Las Vegas.
The Ram Chargers’ new home, SoFi stadium, being built in LA, will cost $2.6 billion and will be the world’s most expensive sports arena.
Even humbler examples, like the modest Petco Park, home of the San Diego Padres baseball team, caused a population surge of 31% between 2000 and 2010, comparing to an 11% growth in the San Diego metro area.
At the same time, around the financial crisis of 2008, house prices in San Diego lost 206% in value, while properties near Petco Park only lost 33%.
2. Taxes & Legislation
Whether you are a home buyer or an investor, even if you know your Tax deduction checklist by heart, knowing what benefits are given by each state, their time period, and when new laws are legislated is crucial for investing your money.
It is proven that the tax changes that took place in 2017-2018 caused a major slump in the housing market. Two tax changes combined with higher mortgage interest rates, caused by higher federal budget deficits, are responsible for lower home valuations.
At the end of 2019, it was reported that the growth in house prices nationwide has fallen to about 3% from levels of 7% before the tax bill’s provisions took effect.
As of May of 2020, the flocking of New Yorkers towards Florida doesn’t seem to stop. Florida reported a net gain of 17.2 billion wealthy residents, while other states like New York, New Jersey, and Connecticut reported a net loss.
The new tax laws, which clearly favor low tax states, combined with Florida’s no capital gains, lead any individual with common sense and basic financial literacy to move his money accordingly.
Conventional wisdom tells you, that the better the education is in the area, the more demand for it exists in the market. And more demand means higher prices.
If you are an investor, there are cons that don’t apply to you - that will affect only homebuyers who will live there, like increased traffic in the area, and noisy neighbors.
Regardless of why you choose to purchase a property next to good educational institutions, the pros outweigh the cons, at least from a financial perspective.
Numerous studies show that areas next to good schools are coveted by homebuyers who are willing to pay premiums.
4. Crime & Police Funding
It is common sense to think that areas with more crime will be less desirable, and therefore cause a decrease in property values.
But here is a small twist.
Patterns show, that when crime goes up, property values can too.
They need to be occurring in the town next to you.
In cities where police funding was cut, and an increase in crime rates occurred, properties were soon to lose value. However, in cities as far as 15 minutes away, property values went up.
The shift in property value between San Bernandino and Ontario CA is a prime example.
Police funding is a trending topic nowadays, and you should be also looking at the topic as an opportunity for increased ROI.
People have a lot of wrong misconceptions about the ramifications of zoning.
Dreading zoning changes will create supply hurdles and diminish property values is logical.
But the data suggests otherwise.
New developments translate to a higher price per square foot, due to the fact they are newer. Providing the marketplace with new units raises the overall value because they raise the average cumulative price per square foot.
6. Tech Boom
“The Amazon Effect” has been trending in the real estate space for quite a while now. Where big tech companies go, money is soon to follow. They create jobs and increase the average pay in the cities they land upon.
In May 2019, the US Census Bureau, using market data from Zillow, showed just how geometrical the effect was on the property market.
According to studies, between 2011-2014, homes appreciated $29,800 in neighborhoods near Facebook headquarters. Furthermore, Zillow rent data shows that rent around the Seattle metro area had increased 17% from 2011 to 2015, right after Amazon moved there in 2010.
It might not be clear at first glance as to how the $10.6 billion marijuana industry intertwines with the real estate market.
In cities where recreational use is legalized, crime rates dropped, and the industry creates many jobs, therefore, creates increased demand for housing. Additionally, this lucrative tax collection source increases municipal spending on new infrastructure.
One of the most thorough studies on the matter was done in 2018 by the Univesity of Mississippi. It showed that legalizing retail marijuana in Colorado increased housing values by 6%, or $15,600 a property.
It’s important to note, cities that approved marijuana only for medical use did not experience the same gush as those who made it completely recreational. Home values in cities that allowed only medical use actually increased at similar rates to where marijuana is illegal altogether.
I used these 7 parameters to meticulously research the market, before putting lots of cash into condominiums in Las Vegas next to UNLV, back in 2017.
My Real Estate agent called me crazy.
The stars, or rather the market, aligned perfectly.
The Golden Knights were founded, the Raiders were moving into town, T-Mobile arena finished building, Steve Wynn spent $300 million on more land across from his hotel, crime in Henderson NV was rising, and marijuana became legal.
He no longer calls me crazy, and sometimes even calls me to brainstorm.
I hope you use these 7 tips for your next property purchase.