| See Which Markets Are in Better Shape |
| Written by Jonathan Smoke | |
| 01.14.2009 | |
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Discuss this article on the forums. (0 posts) The conditions at the end of 2008 were horrible in most markets in the country. What we’ve seen in the last two years, but especially at the end of last year, was unprecedented as first home prices, then sales and now economic fundamentals deteriorated all over the country. Housing got a one-two punch followed by a credit crisis and broad economic decline. But it’s not the same scenario in every market. Some markets have only limited and temporary issues while others have systemic longer term problems that may take several years to fully recover. Some markets didn't see declines in 2008. Some markets have local economies that are doing quite well. Indeed, housing is impacted by many variables, which makes it one of the most complex investments to analyze. The world is currently fixated on home prices, but our calculations reveal that many markets are more impacted by sales risk, or extremely high volatility in the level of sales that a market experiences, just as the visual map above shows. The markets in dark green had the least amount of historic home sales volatility while the markets in bright red had the highest historic home sales volatility. What does this mean to a real estate investor? For many markets in the country, especially those in the south and in the west, historic sales volatility is relatively high. That means that these markets tend to go through large swings in home sales. So if history is any guide, if you are investing in residential land or foreclosed homes in these markets, you should take into account a higher level of sales risk when you analyze a potential investment in these markets. Even though some of these markets have limited likelihood of future price declines, it may take time for sales to recover. Even though the media and Wall Street tend to follow only 10 to 25 of the largest markets, there are hundreds of markets in the U.S., and from a housing perspective they are very different and thus offer vary different return and risk profiles. Since I’ve been focused on a broad portfolio of housing markets throughout my housing career, I have always been interested in ways to analyze and compare markets against one another. With help from business partner Robert Eyer of Map Systems, we’ve put together a great new tool that enables quick, visual identification of the relative strengths and weaknesses of hundreds of markets in the U.S. Our new Visual Market Analyzer enables review of 27 different metrics that provide key insights into the relative conditions of the largest 363 markets in the country. We are making this tool free for a limited time to show off the kind of analysis we can do for every market and county in the country. Just click on the map on the homepage of HousingIntelligence or the link to get the Visual Market Analyzer to appear in a popup window (you may need to allow popups). Then choose a variable to review. Scroll down to see all metrics defined. We’ve intentionally designed these metrics so that cross market comparisons are reasonable and informative. No market is green on every metric, but in general the more green colors a market earns on all of the metrics, the better its current condition and future prospects look. 
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