You don’t have to look hard around the New Year for all kinds of Best of lists. They’ve got them for everything you could possibly want, and undoubtedly more than you care to hear about. But one that interests us is Best Neighborhoods, Best Real Estate Markets, and the like. These can be based off a few different factors, but one common theme is often home values and more specifically their appreciation from year to year. This price appreciation matters especially, since the properties we want to invest in are those that would gain the most value over time, ensuring borrowers ability to pay back the loans.
There’s Lies, Damn Lies, and Statistics
But a pitfall that a lot of these lists fail to account for is the 2008 crash. A housing market that’s seen a 25% year over year increase over the past five years is fantastic, until you see it dropped by significant margins during the bubble burst and only works out to a small gain from those prices. Other lists compile data from a more narrow sample, using only their own websites as reference. This limited sample size creates obvious problems, especially with smaller websites that don’t receive the traffic and therefore necessary user data. What this really is about is nothing more than a reminder to take statistics with a grain of salt.
Ways to Improve
This info graphic from the California Association of Realtors is helpful in picturing exactly what we’re talking about. It provides an overview of housing markets that are “leading the nation”. It does fail to take into account the initial drop, but uses other metrics to compensate, such as average days on the market. Using alternative measurements such as these gives potential buyers or investors a better picture as to what is happening in the area, and makes for a much more viable resource than some other alternatives.
All in all, it’s great to see such positive numbers in a variety of markets. A strong sign of recovery is seeing solid growth through the nation. While this chart is heavily skewed towards the West Coast, other lists present several markets growing in similar fashion and continuing to post strong numbers.
On a side note: Go California for having 6/10 of the top towns. Not a bad place to be. Or to invest for that matter.