BYTHE NUMBERS
DATA & ANALYSIS
Behind the Scenes with the Local Market Monitor HOW INGO WINZER CREATES HIS MONTHLY MARKET LISTS.
their business. They were always looking for risk, but they did not necessarily have good ways of evaluating it. Over time, looking at risk myself, I realized that risk is certainly part of the equation, but also that real estate investors do not want to hear all the time, “Don’t invest here. Don’t invest here.” People want to know where they should invest, and that is when I started looking at other variables, like favorable economic factors. TRM How is an individual Local Market Monitor list born? IW Well, we start out simply. We rate all our markets using a numerical rating system that we turn into a written system as well. We could easily give you the top-10-rated markets every month, but that would get pretty boring because they would generally be more or less the same markets. That is why LMM lists factor in a number of ways in which investors might want to look at markets based on investor risk profiles and many other incentives. For example, if an investor is interested in high growth, then they will probably be open to riskier markets. Other investors are much more interested in a 20-year investment,
so they are looking for markets that are more stable. Our lists reflect different investors’ tastes for investing. At this point, I have more than 20 different statistics that I find relevant to analyzing markets, but they are not all relevant to every list.
TRM Can you give us an example?
IW Sure! In last month’s Think Realty Magazine (December 2017 issue), we wanted to identify a different way of looking at markets that was also highly relevant in today’s environment, so we focused on the percentage of jobs in a market that are in the healthcare and business services industries. We called the list, “Top 10 Real Estate Markets for Business and Healthcare.” A lot of jobs in those industries are neither high-paying nor low-paying; they’re in the middle and, therefore, a lot of those people are more likely to be renters than homeowners. Also, we feel that areas where those types of jobs are already located are quite likely to show an increase in number of those jobs rather than a decline, and that is likely going to affect rental markets. After we went through that initial part where we identified our topic, it was just a question of sorting the markets. We looked at markets and ranked them by percentage of jobs in those two industries, and then we looked at other statistics like population growth, job growth, and the home price/rent ratio. We excluded extremely small markets from the list entirely because the statistics on those markets tend to be less reliable, and we excluded markets with very high home prices as well as very low ones. IW When we’re looking at markets for rentals, we tend to exclude markets with very high home prices because it is going to be almost impossible to find a property that you can rent out for the right amount of money in a very expensive market. In a very inexpensive market, you are not going to find a lot of people who are going to rent. If you can buy a home for $100,000 or even $80,000, you are not going to find a lot of renters. TRM It sounds like these Top 10 Lists are a lot more complicated than most people think. Any surprise insight for us? TRM Why the exclusions on markets with extreme pricing?
by Carole VanSickle Ellis
I
ngo Winzer founded Local Market Monitor (LMM) in 1990 as a quarterly print publication based around real estate data analysis of home values, employment growth, and population growth. LMM has successfully assessed and evaluated more than 300 local markets through two economic cycles and is known for making accurate, accessible predictions about market trends and home prices. This includes issuing a strongly worded warning in 2005 that multiple, specific housing markets were dangerously overpriced.
Winzer is a long-time contributor toThink RealtyMagazine. We sat down with the MIT and Boston University alumnus to learn about the thought process behind his creative, highly actionable lists.
THINK REALTY MAGAZINE
How did you get started making
Top 10 lists of real estate markets? INGO WINZER I started off working for a mortgage insurance company, and they were entirely focused on risk because risk is
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IngoWinzer is the founder and president of Local Market Monitor. He has analyzed real estate markets for more than 20 years. He may be reached at info@localmarketmonitor.com.
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