1.
4 INIDICATORS
O F A N U P - A N D - C O M I N G
Real Estate Market

2.
After all, when you’re sinking hard-
earned capital into an investment,
success is always balanced by
some degree of uncertainty. The
trick, then, is to do your due
diligence on the forces influencing
any given housing market; factor
these into play before you make an
investment, and your chances of
making a profitable, successful
investment will increase.
Let’s take a look at four indicators
of an up-and-coming housing
market.
N O W H E R E I S T H A T M O R E
T R U E T H A N R E A L E S T A T E
I N V E S T I N G .
LOOK
BEFORE
YOU
LEAP, AS
THE OLD
SAYING
GOES.

3.
CONSTRUCTION
SPENDING
Onegreatgaugeoftheoverallgrowthofarealestatemarkethasto
dowithconstructionspending.TheCensusBureaudoesrelease
residentialconstructionspendingstatisticsthroughitswebportal,
oftendisaggregatedbystateandregion.
Andsomeinterestingtrendscanbeseen,namelythatconstruction
spendingisprojectedtoslowdown:beginningin2017,estimated
increaseswillonlybeabout$10-20billionperyear–asignificant
slowdowncomparedtothequickgrowthfrom2013through2015.

4.
Atanyrate,it’salsoimportanttodisaggregatethedata,
especiallyforyourregionallocation.Forthat,therearea
numberofmoredetailedreports,somebylocalandstate
authorities,andothersbyprivateconsultingfirms.
Whateversourceyouchoose,besuretocross-reference
thesenumberstogetaclearer,moreaccuratepicture.

5.
CONSTRUCTION ACTIVITY
Butuserbeware:constructionspending,inandofitself,isn’tthe
wholestory.Ifitwas,youcouldisolateboomingmarketsonthat
alone–makingforapredictable,obvioussetoftargetmarkets
(coastalcitieswithalargeworkforceandadevelopedeconomy).
Yetthere’smoretothepicture.Forinstance,in2016,construction
spendinginNewYorkwasestimatedatanall-timehighof$43.1
billion,a26%increasefrom2015,andthefirsttimethatthe
indicatorsurpassed$40billion.Buthere’sthething:construction
costsinNewYorkCityarealsovastlyhigher,aswell,notjustfor
big,publicinfrastructureprojectsbutalsoforresidential
developments.

6.
Theculprit?Intense,unyieldingregulation,particularlyinthebig
coastalcitieslikeNewYork,whichstiflesnewdevelopmentby
inflatingcostsandaddingawholeraftofunnecessarypermitsand
oversight.It’sgottensobad,infact,thatonecornerstoneofNew
York’saffordablehousingplanistoreducethebyzantinezoning
rulesandcommunityplanningthatallbuilders,investors,
landlords,andresidentsmustworkaround–simplytoencourage
thedevelopmentofasmallhandfulofapartments.
Soremember:lookatconstructionpricesintandemwith
constructionrates,especiallyhowfastapartmentsarebeingbuilt,
andwhattypesaremostcommon.Otherwise,youmaybe
temptedtoinvestinmarketswhoserapidgrowthonlyservesasa
coverforother,moreseriousweaknesses.

7.
VACANCY RATES
B E C A U S E R E S I D E N T I A L R E A L E S T A T E I N V E S T M E N T I S B U I L T
O N T H E C A S H F L O W E A R N E D F R O M R E N T S , V A C A N C Y R A T E S
A R E A K E Y M E T R I C O F P R O F I T A B I L I T Y A N D M A R K E T
S U C C E S S . T H I S N U M B E R W I L L D E T E R M I N E T H E A V E R A G E
L E N G T H O F T I M E T H A T A N Y O F Y O U R A P A R T M E N T S A R E
L I K E L Y T O S I T E M P T Y , N O T E A R N M O N E Y , A N D T H U S ,
R E D U C E C A S H F L O W , I N C O M E , A N D T H E O V E R A L L V A L U E O F
Y O U R I N V E S T M E N T .

8.
T O R E T U R N T O T H E E X A M P L E O F N E W Y O R K , A N O T H E R
W E A K N E S S O F A S E E M I N G L Y S T R O N G R E S I D E N T I A L M A R K E T I S
T H E C I T Y ’ S G R O W I N G V A C A N C Y R A T E S . T H I S T R E N D I S M O S T
P R O N O U N C E D I N M A N H A T T A N , T H E C I T Y ’ S E C O N O M I C C E N T E R ,
W H I C H H A S A H I S T O R I C A L L Y L O W V A C A N C Y R A T E O F 2 . 8 T O 3 . 1
P E R C E N T . A N A L Y S T S S P E C U L A T E T H A T T H I S I N C R E A S E I S A
R E S U L T O F T W O T H I N G S : I N F L A T E D R E N T S A N D C O N S I D E R A B L Y
M O R E A P A R T M E N T S T H A N T H E R E A R E R E N T E R S . S T I L L , T H I S
T R E N D I S N ’ T S E E N I N O T H E R B O R O U G H S , S U C H A S B R O O K L Y N
A N D Q U E E N S , W H I C H B O A S T E V E N L O W E R V A C A N C Y R A T E S
T H A N M A N H A T T A N .
C L E A R L Y , V A C A N C Y R A T E S A R E A S T R O N G I N D I C A T O R O F T H E
O V E R A L L H E A L T H O F A N Y R E S I D E N T I A L M A R K E T .

9.
Migration vs.
Departure
Rates
Just as you can track a company’s reputation and
performance by its turnover, so too can you track a
city’s desirability by its migration. Taken in context
with other economic factors, such as wage growth
and rent increases, migration rates can help investors
can paint a clear picture of a city’s living conditions–
essential to gauging the long-term health of any given
development or portfolio of apartments.
The key here is to balance the migration rates (how
many people come) with the departure rates (how
many people leave). For instance, America is
undergoing a historic shift: millions of residents who
left the suburbs for cities at the height of the Great
Recession are now returning to the suburbs from
whence they came. Though there’s no single reason
for this shift, it boils down to increasing costs, more
space, lower gas prices, and a strengthening housing
market. In essence, many cities are increasingly being
treated as waystations for the native-born and
immigrants alike: they arrive in cities, work and make
some money, and then leave for wider, more spacious
shores.

10.
In the end, all these indicators
are here to help you make an
informed decision, and to
make the best investment
possible under the
circumstances. Needless to
say, there’s no magic formula
for spotting a strong
investment, and the best
investors will rely on
experience, data, and even
intuition.
Good luck.

11.
THANK YOU
V I S I T M I C H A E L Z A R A N S K Y . C O M
F O R M O R E