Today at Morbid Romantic I welcome Eddie Godshalk, who has been kind enough to give us a guest post of great relevance to something a lot of us the US are experiencing. Let me tell you, as I drive through the condo complex I live in, I see 'For Sale' and 'For Rent' signs everywhere. The Housing Crisis we are experiencing is large and troubling, yet so few of us understand the complex factors in what caused this.
Macroeconomics (http://en.wikipedia.org/wiki/Macroeconomics) is the broadest view but important measure of the economic system. As applied to housing it would address influencing factors such as disposable income, migration, available usable land, interest rates, etc. Macroeconomics in real estate applies to national or regional data. The regional data typically being the MSA (Metropolitan Statistical Area), what is more currently called the CSA (Combined Statistical Area) or which there are approximately 400 in the US. The MSA or CSA, is often referred to as a “market.” All this data was available and many eyes were watching so how did all macro data fail? Part of the problem is that most professionals only have access to free or inexpensive data or information. You cannot make better assessments than the data available. Not only is much of the relevant data not free, it is very hard to find. Then integrating the data into meaningful results is a no-trivial task. In assessing a real estate investment decision, you can examine data from various sources that consider the property itself, the block, the Census Track, the Zip Code, the County, the MSA/CSA, the state, and the country. Certainly the farther and farther you go out, the less relevance and meaning you have in trying to assess any particular valuation.. Any of us in real estate know you can drive around any area beyond a very local area, and see that nothing homogeneous about any city or neighborhood in America. While this is intuitive, you cannot find any free data or readily available data to make a true assessment of a specific local market condition. The more uncertain or unstable the conditions the riskier and evaluation becomes. We have now gone through a time that exposes the weaknesses in the tools we have been using.
Macroeconomics (http://en.wikipedia.org/wiki/Macroeconomics) is the broadest view but important measure of the economic system. As applied to housing it would address influencing factors such as disposable income, migration, available usable land, interest rates, etc. Macroeconomics in real estate applies to national or regional data. The regional data typically being the MSA (Metropolitan Statistical Area), what is more currently called the CSA (Combined Statistical Area) or which there are approximately 400 in the US. The MSA or CSA, is often referred to as a “market.” All this data was available and many eyes were watching so how did all macro data fail? Part of the problem is that most professionals only have access to free or inexpensive data or information. You cannot make better assessments than the data available. Not only is much of the relevant data not free, it is very hard to find. Then integrating the data into meaningful results is a no-trivial task. In assessing a real estate investment decision, you can examine data from various sources that consider the property itself, the block, the Census Track, the Zip Code, the County, the MSA/CSA, the state, and the country. Certainly the farther and farther you go out, the less relevance and meaning you have in trying to assess any particular valuation.. Any of us in real estate know you can drive around any area beyond a very local area, and see that nothing homogeneous about any city or neighborhood in America. While this is intuitive, you cannot find any free data or readily available data to make a true assessment of a specific local market condition. The more uncertain or unstable the conditions the riskier and evaluation becomes. We have now gone through a time that exposes the weaknesses in the tools we have been using.
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