(8/22/2011) - Real estate is local, but there is some common ground to
cover when looking for signs of recovery, according to Greg Rand, author of
"Crash
Boom" (Career Press, $24.99), one of the latest proclaimed manual for
real estate investors.
Rand, founder of OwnAmerica.com, an information portal for real estate
investors, says the next boom is inevitable and now is the perfect time to
read the tea leaves.
Rand says it doesn't matter which market you are examining, it's all
about historic trends that tend to repeat themselves.
"The secret to making sure your real estate doesn't turn into a money pit
is to watch the trends so you can predict where the prices will rise and
where they won't," says Rand.
The more trends you can find that point to recovery, the merrier for
returns on your investment.
Rand says watch for these trends.
Short-Term Pain - Markets with home prices at or below where they were a decade ago
have over corrected and are poised for recovery.
Rand suggests using Zillow's Home Value Index to examine the prices of homes
sold now and 10 years ago.
"If home prices in a given market are below 2002 levels, there is a good
chance that market has over corrected. Meaning, it has dropped below the
level where the boom began. If it has not appreciated in ten years, it most
likely has upside coming to it," say Rand.
Over-development - Markets often over correct because they were
over-built and over-bought by speculators. Florida is an example. So is Las
Vegas.
Job Growth – Unemployed consumers can't buy homes. Rand says track employment trends to determine where companies are
moving (a la Austin, TX). That's a harbinger for long term housing demand.
An eroded job base contributed to over correction conditions in places like
Detroit and Las Vegas.
Lifestyle – Long term migration patterns are driven by the pursuit
of happiness. Look at climate (the Carolinas), leisure trends (Colorado) and
cost of living (Texas) for triggers on where the market may shift.
OwnAmerica.com points to a list of research tools to use to learn about movers, often
followed by shakers. CityData.com is also useful.
Responsible Government – Does local government encourage or
discourage investors? Does it have rent control laws that prohibit rents
based on market demand? Does it restrict short term rentals and make
vacation rentals a bad investment? Seek investor- and business-friendly locals
that offer incentives without barriers.
"There's nothing worse than putting your money on the table, only to have
it redistributed," Rand says.
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