Buying a residential property is hands down the biggest investment most people will ever make. But too often people think of real estate strictly in terms of a living space and fail to consider appreciation potential.
Real estate markets are constantly changing, but if you play your cards right, owning property can help you grow your wealth quicker than other investment vehicles. There are indicators that investors, flippers and buyers can use to gauge how a market is trending. The more accurately you can predict real estate trends the better chance you have of making a profit when it comes time to sell.
Age of the Population
One of the first things to consider is the age of the neighborhood population and whether it’s changed in recent years. The age of residents tells you a lot about the makeup of the neighborhood and what buyers are looking for in the area.
For example, if there is a growing number of retirees in an area, features like a stair lift and age-in-place design could be a sound investment. After all, a curved stair chair lift provides great avenues for accessibility that most homes will lack, and will therefore make your home a worthy candidate. On the other hand, if the neighborhood is attracting Millennials you’re better off investing in smart home features that automate systems and devices.
Homeownership Rate
A general rule of real estate investing is look for the worst home in a really good neighborhood because there’s plenty of appreciation potential. However, when it comes to selecting the neighborhood itself, homeownership trends can provide valuable information.
Typically, homeowners are going to take better care of their homes and are more invested in the upkeep of the neighborhood than renters. Homeowners are thinking long-term improvements while renters are looking at the property as a temporary living situation. If homeownership rates are on the rise, that’s a good indicator the neighborhood is on the upswing and being revitalized.
Area School Performance Metrics
Another key indicator for the vitality and demand of an area is the performance ratings of nearby schools. Resources like GreatSchools.org provide an array of data on local elementary, middle and high schools. High performance scores across a number of years is a positive trend.
Looking for an up-and-coming neighborhood? Another trend to watch for is schools that have progressively performed better over the last several years. It’s another indication that parents and teachers are invested in improving the community.
Home Pricing Movements
Of course, one of the most obvious things to watch out for is how home prices are trending. In a larger city or metro you’ll need to drill down to the neighborhood to get the most accurate pricing data. Month-over-month trends give you a snapshot of how hot a market currently is, while year-over-year pricing trends tell you what kind of long-term appreciation can be expected. Keep track of the sales price and the price per square foot.
Kitchen Design
Buyers and renters are always going to scrutinize the kitchen since it’s the heart of the home. It’s one of the few rooms that they’ll directly compare before deciding to move forward on a home. Quartz countertops are a perfect example. Just a few years ago, this type of kitchen countertop installation became a must-have in many areas. In certain neighborhoods anything less was a major turn-off.
Exterior Features in the Surrounding Area
Any professional house flipper will tell you curb appeal is extremely important in terms of maximizing value. If buyers aren’t wowed when they walk up to the door selling the rest of the home is a lot harder. It’s even more difficult for them to see value when the neighbors’ homes have beautiful exteriors.
Transportation Trends
Is the city expanding its light rail? Is there a growing demand for walkability? Is the local workforce fine with an extended commute from the suburbs? How people prefer to get around says a lot about their lifestyle and the type of living spaces that will have broad appeal.
Smart real estate investing takes time and a fair amount of market research. The more you can understand about how things are trending in an area the better positioned to you to make a sound investment.
