From small town newspapers to major Internet news services, discussion continues about the state of the current US housing market. Is it recovering? Is it slumping again? But there really isn’t a national housing market – only many regional ones, each with its own unique profile. And while these housing markets share features that, taken together, create a general picture of the state of housing in the country, investors searching for income property need to consider each area on its own merits.
“All real estate is local,” says Jason Hartman. So investors following his recommendations to diversify their assets in various areas around the country may find that a downturn in one area contrasts with an upswing in another, for reasons that may be actually very similar. A large population of renters, for example, may be due to new enterprises that are attracting new employees to the area – or it could mean that employment is flat and the population remains stable with no one able to purchase homes.
When looking for income properties, then, it’s important to consider a number of factors that contribute to creating the local housing market for a particular area. Some considerations unique to a given area may suggest an investment-friendly market with long-term potential; others may signal a riskier area.
The state of local schools and school districts can indicate whether an area is stable or growing, as families placing children in schools generally plan to commit to the area for a longer period. Stable families suggest a fairly positive employment outlook, too – and that can mean tenants able to make the rent and take reasonable care of properties.
A diverse employment picture spells good news for investments, too. The “company town” where one or two large employers account for most jobs poses the risk of a housing collapse if that company or industry falls on hard times or is forced to close, driving employees elsewhere and creating high vacancy rates that won’t improve if the company can’t get back on its feet.
Trends in future enterprises can suggest whether a market is risky, or a prudent place to invest. Areas expecting growth from future projects such as new construction or business activity could see a boom in housing as new workers relocate. Ambitious commitments in nearby areas could also suggest an upswing as new workers search for housing within commuting distance.
Because local and state housing statutes can vary widely, landlord-tenant laws in local markets can be either tenant-friendly or landlord-friendly in terms of housing codes, lease agreements, and issues such as eviction proceedings. For that reason, the amount and kind of local regulations governing rental housing in a given market also play a role in determining whether that market is appropriate for investing.
The US housing market is really many markets, each with its own set of desirable and not so desirable features. And for the prudent investor seeking to diversify investments, it’s important to see each potential area as an individual market, uniquely local and subject to change. (Top image: Flickr/dave_mcmt)
The Jason Hartman Team