When investors look at potential real estate assets to invest in, they typically take into account the current market trends, and a strong growth market can be key when selecting an investment property. So, what is a strong growth market and why is it a good thing? Here’s a closer look at strong growth markets and how they can inform your investment decisions going forward.
The Basics of Strong Growth Markets
The definition of a strong growth market is a market with an increase in demands for goods and services. In the world of real estate, this refers to a market with an increased demand for housing and/or commercial properties. Some strong growth markets might see higher demand for rental units, while others experience growth through the demand for single-family homes. The strength and trends of the market can depend on several key factors, such as:
- Population growth: an increase in the number of people in need of housing in an area
- Job growth: an increase of available employment attracting new people to the area
- Housing costs: affordable homes or apartments for new residents
- Location: proximity to essential services, leisure activities, and robust transportation options
When a real estate market reflects all these factors favorably, the situation may be ripe for a strong growth market. Of course, other factors may impact the strength of the market, such as inflation, interest rates, and even local rental unit and landlord regulations. It’s important to consider all these factors before making a decision on where to invest in a real estate property.
How to Spot Strong Growth Markets
There’s no one set of metrics that define a strong growth market, as different variables can impact the markets in each area of the country. However, you can use some of the tools we’ve already discussed in previous DiversyFund blogs to get a better understanding of markets you might be interested in investing in. For example, a comparative market analysis can provide excellent insight into a market you’re looking to buy or sell an asset in. The internal rate of return formula may make it easier to determine the potential profitability of a property in a strong growth market, so you can decide whether or not you should invest. You can also keep an eye on real estate blogs and newsletters to get a sense of which areas are experiencing population and job growth, which can provide a good indication of markets experiencing strong growth. REITs like DiversyFund use all of these indicators and formulas when looking at potential investments for their portfolios.
Which Markets are Hot Right Now?
Strong growth markets can be found throughout the country in 2022, and it’s important to consider the type of market you want to invest in while looking at lists of hot markets. However, we’ve compiled a few of the markets that have seen strong growth throughout the year to provide a little bit more insight for you. Realtor.com reports that the top three markets as of June, 2022 are Concord, New Hampshire, Manchester, New Hampshire, and Burlington, Vermont. Money Magazine’s assessment was a bit different, with Brighton, New York, Nashua, New Hampshire, and Worthington, Ohio, topping its list for 2022. While the Northeastern United States emerged as a hot area for real estate, other states topped a few lists as well. Rocket Mortgage reported Austin, Tampa, Florida, and Raleigh, North Carolina were its picks for best real estate markets, so snow doesn’t have to be in your real estate investment future.
Remember to look beyond the lists when investing. Talk to your financial expert, and take a closer look at any area you’re considering to help ensure you’re putting your money in a strong growth market. To learn more about DiversyFund REITs and how they can work for you, click here.