Real estate is often unpredictable. The market ebbs and flows, and it can be difficult to stay on top of everything. However, as a real estate professional or prospective investor, it’s crucial to know your local real estate trends before making any moves.
While it remains an inexact science, there are a number of clues that can help you determine whether a local market is on the verge of heating up. To find out more, members of Forbes Real Estate Council share some factors they look for. Here’s what they said:
Members discuss some things they look for when trying to determine whether a local market is near heating up.
Photos courtesy of the individual members.
1. Employment Growth
Employment is one of the key drivers of future appreciation in your market. Job creation will increase the pay that existing households bring in, as well as attracting new households to move, to take advantage of those new jobs. Both of these factors drive demand. As mysterious as moves in your market may seem, they can almost always be traced back to shifts in the supply/demand curve. – Mark Bloom, NetWorth Realty
2. Rising Rent Prices
A key to trying to get ahead of a hot buying market is the rental market. If the average prices of rent are rising, as well as new structures being built to house more renters, it’s a pretty good indication that the home prices are or about to rise significantly. When rents rise, renters will either leave or find a way to buy to stop the constant increase in cost. If rents are up, invest. – Ralph Dibugnara, Home Qualified
3. Watch For An Influx Of Creative People
Creative people like artists and musicians and typically lead the way to a neighborhood’s resurgence while searching for affordable rent. Younger demographics look to these tastemakers who bring new renters and home buyers to areas before the values skyrocket. – Beatrice de Jong, Open Listings (YC W15)
4. Increased Property Rehabs
Local markets generally heat from the bottom up. Look at the investment properties, tear-downs, vacant land, etc. If these are in high demand, chances are good that this will progress up the price scale, especially as the lower-end properties get rehabbed. It does not always make its way to the luxury market, but will usually permeate the lower and mid-level price range for a given locale. – Thomas McCormack, Resources Real Estate
5. Google Search Activity
It may be a bit unconventional, but in addition to rising rents we’ve looked at things like Google Trends search volumes, digital ad costs/competition, and social media activity to predict which markets will heat up. People always research areas before they move in, and the volume of that search activity can be a good forward-looking indicator of rising investment potential. – Marc Rutzen, Enodo Inc.
6. Fast Time-To-Lease
A key indicator of a local real estate market heating up is the average time it takes to lease properties. This is an often overlooked metric that can be an early sign, even before rents start rising, of increasing demand for space in a local market. As renter demand increases, rentals lease faster. This increasing demand means employment and job growth are strengthening in the local market. – Chuck Hattemer, Onerent
7. An Increased Number of Building Permit Applications
The true indication of a market heating up is an increase in building permit applications and remodeling activity. Check with building and safety guys or even stop in at the local building supply store. – Michael J. Polk, Polk Properties / Matrix Properties
8. Fast-Selling Properties
When properties start selling fast without lipstick, the avalanche starts. The speed at which it goes is based on how many properties are on the market and how many sales were in the past month. If you had 30 homes that sold last month, and you only have 60 homes on the market, you have two months of inventory, which is a hot market. Anything under six months of inventory is a seller’s market. – Chris Ryan, BEYOND Properties Group / eXp Realty
9. Social Media ‘Lifestyle’ Trends Among Renters
Follow the dynamic economic activity. Renters tend to share/post where they feel the experience is exceptional and that the visuals match their lifestyles. Where are economic investments being made in parking garages, food halls, new bars? Also, where do food trucks appear in off-hours? Consider that “lifestyle” dollar spend is as much of a factor as any traditional business model. – Diane Batayeh, Village Green
10. The Word Of A Hyperlocal Agent
Ask a hyperlocal agent what he or she is seeing. The top local go-to agents have their ears to the railing of the local market and can hear what’s coming — from major employment news, new retail developments, and trendy brands coming to town, to construction projects, and listings that are about to hit the market. They are at the heart of it all and hear it all before it happens. – Lane Hornung, zavvie
11. More Commercial Development
New businesses opening, such as restaurants, fitness centers, and other retail specialties, are a great barometer for predicting population and housing market growth. New proposals for large apartment complexes are another good indicator that a community is seen as desirable. Large companies perform marketing research before committing to new business and rarely fail, so when they act, I pay attention. – Joe Houghton, RE/MAX Results/The Minnesota Property Group Team
12. Population Inflow
Whenever there is net migration into a particular market, that market will generally experience growth. This is because all of these new people need places to sleep, work, shop, eat, etc., which increases the demand for housing and commercial real estate. When supply is constrained, new supply is created, hence encouraging the market cycle to keep moving. – Adam Finkel, Tower Capital
13. Public Transit Improvements
As major metros grow, there will be growth in the surrounding suburbs as corporate relocations and growth drive thousands of jobs (which often provide employees affordable living in the suburbs of the major metro). You can follow the major highways and transit systems to understand where new development is most likely to occur. This is a helpful way to “buy in front of growth.” – Chris Powers, Fort Capital, LP