When analysing a real estate market, it’s essential to gather all relevant data about the area. Doing this will give you an accurate forecast of where things are heading and which investment opportunities exist.
What trends in the real estate market should you be aware of? These insights can help you make informed decisions on where to invest or rent in the future.
1. Price to Rent Ratio
The price-to-rent ratio is an important indicator used by real estate investors and prospective homebuyers to decide whether it makes more financial sense to purchase or rent property in a certain market. It also provides insight into the demand for rental properties based on house prices.
A low price to rent ratio may indicate that homeownership is more advantageous, while a high one indicates it’s better to rent. However, it’s essential to remember that the price-to-rent ratio does not take into account the quality of life advantages associated with owning property or the lifestyle advantages of renting a home.
Real estate investors can calculate the price-to-rent ratio in a given market using data on average prices and rental rates. Zillow, Redfin and the National Association of Realtors (NAR) all have research centers that provide this data.
2. Employment Rate
The Employment Rate is a statistic that measures the percentage of people employed in an area. A figure above 70 percent is considered healthy, while anything below 50 suggests there may be issues in the labor market.
The employment rate does not include individuals who are institutionalised, such as those in mental hospitals or prisons, nor those over 64 years of age. Furthermore, it does not account for underground market labor.
The employment-to-population ratio is considered a more reliable indicator of job loss or growth than the unemployment rate, which can fluctuate due to seasonal effects and short-term labor shortages. Lows in this ratio typically coincide with economic downturns.
3. Walk Score
The Walk Score is a tool that measures the walkability of an area. Its purpose is to make it straightforward for homebuyers to decide if a property fits their lifestyle and needs.
This innovative system measures the proximity of popular and essential amenities like grocery stores, nightlife venues, schools and medical services. On a scale from zero to 100, the higher your Walk Score the better.
Additionally, pedestrian friendliness is measured based on average block length and intersection density – or the number of intersections per square mile. Streets with shorter blocks and more intersections are easier for pedestrians to navigate, decreasing walking hazards and making a neighborhood safer overall.
4. Crime Rate
As a homeowner or prospective home buyer, it is essential to be aware of your local crime rate. Having this data can help you decide whether or not it’s wise to invest in certain areas.
Crime rates in cities can be affected by many factors, such as population density, poverty levels and economic conditions. Therefore, crime rates may differ significantly between neighborhoods.
The most widely-used indicator of crime is the number of crimes per capita. Unfortunately, this metric is flawed since it fails to take into account differences in people’s risk for becoming victims of crimes.
5. Cost of Living Index
Cost of living is an essential factor for homebuyers when relocating. It indicates how much money they’ll need to cover expenses like housing, food, healthcare and taxes.
Employers use cost of living data when calculating salaries across different cities. For instance, if your employer requires you to relocate in order to continue working, they’ll use this information when calculating your wage.
Furthermore, cost of living data is used by governments to inform policy and legislation. It may even assist private companies when allocating employees’ salaries and benefits.