Real estate in your market area is affected by influences outside of your own region. For example, when I sold real estate in Portland, Oregon, what was happening in terms of inventory, appreciation, and activity in Seattle, Washington had an effect on my own marketplace. The two metropolitan areas are less than 200 miles apart, and one influences the other due to the easy and frequent population movement between the two cities.
The largest regional influence for my market, however, was California. There was a massive influx of people from California to Oregon, particularly from the bay area of San Francisco and the greater Los Angeles area. These geographic areas drove tens of thousands of people into the Portland metro area annually, increasing the demand for homes and raising values and prices as a result.
The population exodus started because the difference in price between the Portland market and the California market triggered the law of cause and effect. The appeal of Oregon’s lower real estate prices caused California residents to want to move, either to cash out of expensive California properties and apply the profits to better homes at lower prices in Oregon, or to relocate to an area where they could finally achieve first-time home ownership.
To determine how neighboring regional markets are affecting your market area, study migratory patterns and then research the reasons behind the population movements you discover.
Studying population migration patterns
To quantify population migration trends that affect the buyer and seller pool in your market area, determine the answers to these questions:
- Is your marketplace growing in population or losing population?
- Are people migrating into your area or leaving your area?
- Where are new residents coming from geographically?
- Where are current residents going when they move away?
- At what rate are people arriving or leaving your area?
- What are the economic factors that are driving population changes (i.e. jobs, unemployment, business growth) in your marketplace?
If your answers lead you to believe that a population boom is pending, prepare yourself and your clients to take advantage of a seller’s market and the positive affects of a high demand, low supply market situation.
Conversely, if your answers lead you to believe that a population exodus is beginning to take place, you can steer buyer and seller decisions with that knowledge in mind.
Identifying and capitalizing on market trends
To understand your marketplace and its economic condition, compare current market activity with correlating statistics from the previous year, using the following questions as your guide: