by Broderick Perkins
(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.
Among other recent reports John Burns Real Estate Consulting's "Back to the Future: Median Home Prices Mirror Years Past," recently reported markets are yielding home prices dating from 2006 to as far back as 1997, 14 years ago.
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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