If you did not know whether you should buy in a real estate market or when you should buy, you would be forced to assume that the people this days are restless bunch. Unlike the 20th century, we seldom seem to stay in the same place for long. The main factors which lead to this migration process include job loss, tax issues, and cost of living and so on. Given the fact we tend to move, most people fail to realize what impact this has on real estate markets.
When evaluating a real estate market, movement of the people is something you should really focus on. In many markets, it is pretty hard to establish and is not really an issue in the valuation and appreciation rates of properties. On the other hand, if you can identify such a market, you stand to make a killing. Let’s look at a classic example.
There are many cities which growing fast. In fastest growing cities something like four people a minute move to the city. The reason for that movement is on one hand prices are generally cheaper than where they are moving from and on the other hand there is no income tax collected by the state. As these people move into the area, the demand for housing becomes massive. This demand has been quantified in exploding appreciation rates in some cities for the last few years. Alas, the market has cooled down, but it does not mean you should avoid buying a property. People are still moving into the city at an amazing rate and they still need places to live. While the market has cooled down for a bit, it will get hot again within a year. There is simple too much demand for housing.
A less obvious population movement has to do with homeowners moving from high property value areas to lower property value areas. For example, homeowners that live in Southern California have a habit of selling off their tract home for massive profits and moving to states where they can buy much bigger homes for a fraction of the price of their previous home. If you can identify where these wayward, but rich, souls are going, you can buy in that market before or while prices are being driven through the roof. One area that was very popular with these people was Seattle and the state of Washington. Prices have nearly doubled in that area given the influx of the Californians.
Population movement is an important trend in evaluating a real estate market. It is not always present in every market, but you can make a killing if it is.
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