How to Evaluate Emerging Markets in Real Estate

How to Evaluate Emerging Markets in Real Estate | Blog | InvestingTE.com
How to Evaluate Emerging Markets in Real Estate | Blog | InvestingTE.com

What are you doing to evaluate new and emerging real estate markets? 

Is this apart of your deal finding strategy? 

Today we will cover some key characteristics to use in evaluating different markets.

Join us for today’s journey as we cover how to use data that is at our fingertips.

Forget all the expensive software… 

Today we will show you free tools that can help you navigate the market and tell you if markets may be emerging.

We all know that as markets and sub-markets grow, there are characteristics that can help us derive where this is happening. 

But how do you find this data? 

Let’s get started…

Data Analysis

How to Evaluate Emerging Markets in Real Estate | Blog | InvestingTE.com
How to Evaluate Emerging Markets in Real Estate | Blog | InvestingTE.com

Let’s analyze a few data points that will help you understand and identify markets that may be emerging.

1. Population Growth 

One of the first and most important factors of identifying an emerging market is population growth.

This is a key indicator to a growing market. A high demand for a new place to live, is easily recognized by how many people are moving there. 

As people settle in, their money comes with them and will be spent in ways to affect, local commerce, housing, and median income levels. Some investors are using rental truck data, like Budget Rentals, to see where most moving trailer travel is going/occurring. 

All walks of life could be moving in, which could include young adults looking for employment or retirees looking to make their final move.

Overall the monetary stimulus that new comers will bring, plays a significant role to a city’s expansion.

Across a 20 year span, you’d want to look for 20% growth or 1% average growth per year. Smaller cities versus larger cities, may reflect a larger percentage or a smaller percentage, respectively.

Use Google.com to locate a city’s growth over time by simply searching “Population of city, state” in a google search menu, comparing data from 2000 and current. 

2. Income Growth 

A key characteristic to check for next, is income growth. As people move in or accumulate tenure with an employer, you want to see income increasing. Otherwise, stagnant income levels could reflect a stagnant economy. Minimal growth in a city can be achieved without income increases, but the city won’t reflect enough growth to cause a city to emerge. Income growth stabilizes economic growth which reflects with higher values of real estate and a stimulus to overall commerce. 

Spending must increase in order to support the increases in the market and only statistical income increases support this. If income levels rise enough, you will see other components of the city rise as well. 

Over a 20 year span you’ll want to see at least a 31.5% increase in income, or a 1.5% increase per year. 

Use city-data.com to find this data by searching under the city of choice and looking for ‘Median Household Income,’ comparing data from 2000 and current.

3. Median House or Condo Value 

How to Evaluate Emerging Markets in Real Estate | Blog | InvestingTE.com
How to Evaluate Emerging Markets in Real Estate | Blog | InvestingTE.com

The next characteristic to check for is house or condo value growth.

If homeowners are not seeing appreciation of their assets, the signs of growth are not strong enough to elect the city as an emerging market.

If home values are rising at a high rate, it shows the demand is high and validates the income is present as well.

Any homeowner wants to achieve appreciation, and a strong economy shows appreciation growth in its real estate market.

High, low, or no appreciation is always identified in particular sub-markets in a metro area. However the presence of appreciation will outweigh its areas that lack appreciation

Across a 20 year span, you’d want to look for 42.5% growth or 2.5% appreciation growth per year.

Recall this average is for the entire city, so some areas will be well above 2.5% appreciation and some will be below.

A city with an average of 2.5% overall appreciation is a ideal city to elect as an emerging market.

Use city-data.com to find this data by searching under the city of choice and looking for ‘Median House or Condo Value’ comparing data from 2000 and current.

4. Crime Trend 

The next characteristic to check for is the crime trend. A city that has effective systems in place will show a decline in crime trends over time.

A city that is becoming popular, will not be popular for long if the city does not have effective systems in place to insure safety for it’s residents.

This data consists of many working parts from the community, but it displays if a city has a good pulse and connection with it’s patrons.

It takes a community to grow itself and that means great communication and follow through on key concerns.

Use city-data.com to find this data by searching under the city of choice and looking for the ‘Crime Rates Index Table.’ Look at the bottom of the table and look for a declining crime rate from left to right.

5. Job Growth

How to Evaluate Emerging Markets in Real Estate | Blog | InvestingTE.com
How to Evaluate Emerging Markets in Real Estate | Blog | InvestingTE.com

The next characteristic to check for is job growth.

This metric can be complex in nature because any city with good job growth will have a nice mixture of industries that employ its patrons.

This gives the patrons a diversity of job choices, along with upward mobility within many industries. A city with diverse industry support, will have great sustainability in maintaining it’s foundation.

Pay attention when major employers open locations in new cities.

When Americas top companies like are Facebook, Google, Amazon, Apple and Microsoft open new locations, usually those new openings will employ hundreds, if not thousands, of high paying jobs and careers.ย 

Also these companies put much effort in researching the demographics of a city to make sure it will support their industry over time.

You can expect that any corporation link those mentioned will have dome the necessary homework already to let you know, the market chosen is a great market.

Just think, a new employer that brings 1,000 full time jobs to a town and the average pay is $15 per hour.

That employer just brought $31.2M per year (pre-tax) to that economy, ($31,200 per employee/per year). As money begins to circulate the local economy, commerce and housing will be affected.

This is where the city will begin to grow. 

Cities will expand and new developments will take place to support the expansion.

Highly desired housing will increase in value, and city outskirts will become the new stomping ground for new homeowners looking to save a buck.

You will want to look for job growth above 2% annually.

This shows that the jobs available are outpacing the economic growth. This displays actual economic growth, as hiring always precedes any companies growth.

Use Department of Numbers to find this data by scrolling down to the city of choice, selecting it and reviewing the overall data.

Conclusion

Macro Investments LLC: How to Evaluate Emerging Markets (Real Estate Investing & Business Operations Education)
How to Evaluate Emerging Markets in Real Estate | Blog | InvestingTE.com

The following characteristics are a good start for identifying emerging markets. 

There are more factors to evaluate; like path of progress, unemployment rate, median contract rent percentage, poverty level percentage and ethnicity mix. 

However, these will get you started. 

A good source for reviewing many data points by state and county, can be found here. Its free and very user friendly.

We wish you great success in your future. 

Thanks for joining us faithful readers – future leaders!  

Love ya and keep striving for growth. 

Please comment if helpful or what you use to evaluate your emerging market quests.

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