Predicting the future of real estate prices for any market in the world can be difficult.
Historically, real estate has proven to be cyclical and trying to determine when prices are going to go up or down can be challenging.
Real estate investing consists of a few different components, of which the most important are strategy, vision and your hypothesis.
To best identify if a particular market is ripe for a boom in price, consider the following factors.
Low Inventory Combined with High Demand
Check real estate listing sites such as Zillow, and Trulia to collect information on any neighborhood you are thinking about investing in.
These sites show you comparable listings to give you a great overview of any real estate market.
If there is a limited supply of homes for sale or rent in your desired market this could be a good sign.
The websites listed above will help you determine how strong the demand is in the area based upon how long homes are staying on the market for rent or for sale.
New Residential or Commercial Projects
Large developers and commercial businesses generally do their due diligence on the growth of an area because they have such a large capital investment at risk.
For example, COSTCO is well known for selecting areas they think are poised to grow over the long-term.
Usually you can find out about the developments via driving a neighborhood, asking people who live in the area or looking online for news coverage of the specific area.
If there are a number of big brand names moving into the area this is a positive sign for your potential investment.
Crime rates for any area in The United States are public record and can easily be found on websites like CrimeReports and SpotCrime.
Areas high in crime will inevitably be less desirable to live in than those without crime.
Determine if the amount has gone down over the past few years and if that trend is likely to continue.
Also, consider what type of crimes are being committed.
Small petty theft is drastically different from homicides.
Great Public School System
Since parents want the best for their children, access to great public schools in the area is an appealing feature for any family while hunting for a home.
Historically there has been a strong correlation between home prices and school capital expenditures
A study done by the National Bureau of Economic Research showed that school spending increased property values substantially.
Specifically, for every dollar spent on public schools of an area, homes in the same area increased by $20.
Therefore, be sure to tour the schools of any neighborhoods you like to make sure they are in good condition or are making any new renovations or additions.
There is no exact science to picking the best neighborhoods for real estate investing but the tips above should get you on your way to narrowing down your selection pool.
Take your time with this process and make sure to do your due diligence and the perfect gem could be right around the corner.