Data to Analyze a Housing Market Crash | Redfin | Part 1

In this video, I'm going to show you how to use data driven analysis to measure the performance of your market and how to spot warning signs.

Ariel Herrera 0:00

With interest rates and inflation on the rise, how do we know if our real estate market is at risk of crashing? In this video, I'm going to show you how to use data driven analysis to measure the performance of your market and how to spot warning signs. My name is Ariel Herrera, the analytics aerial channel reports the gap between real estate and technology. The data behind market analysis sometimes can feel secretive and hard to obtain. But it doesn't have to be this tutorial, we split into three parts first, understanding what metrics to view to gauge the health of the market. Second, how to get that data for your own market for free. And third, how to build a visualization tool like mine to do so if you also enjoy data driven solutions, and please subscribe, as well like this content if you want to see more market data analysis solutions. All right, let's get started. A lot of real estate gurus as well as content creators have recently stated that there's going to be a large crash in real estate, and it's already happening the summer of 2022. Well, I'm here to tell you that yes, we may expect a crash of in the US real estate housing market. However, it's not what you expect, instead of it being in housing prices, it will likely be in the amount of homes that are actually sold. And before we touch on that piece, you may be thinking well, how do I actually analyze if my market is going down? And if it's going down by what measurement should I look at? Well, you may have been told look at your city, look at your state stats. But the truth is, is that real estate is hyper localized. So not only should you be looking at your state, your city, but you should be going as granular as the zip code level as well. So that's why in this video, I pulled data from Redfin, their data center, which is free, and their data goes all the way down to the zip code level. And it's important to look at zip code or even neighborhood because you're probably aware, say I recently went to Yankee Stadium, and the Bronx has some good areas, and then some bad areas. And these areas don't transition between miles apart, it could be just a couple of blocks that you're walking, and then the whole neighborhood just changes and crime skyrockets. So that's why you can't just judge say New York City as a whole,

you have to look at the zip code, and even try to analyze the streets that you currently invest in. So for this analysis, we're going to be looking at Brandon, Florida. Brandon is the city outside of Tampa to suburb town, and it has a large population. A lot of people choose to live in Brandon, because they have larger families. They want a three to four bedroom and a relatively new home. So they either look to rent, or to buy within this area as they come down from northern states. And they want to get accustomed to the area before they finalize where they want to land. Brandon in this case is two different zip codes. Let's imagine here that I am an investor for 335 10. And Brandon, which I have invested around the area not burned specifically but other towns nearby it so I'm pretty familiar with it. Now let's go over to this dashboard that I created. We're going to review what these high level metrics are, how to think about it and how to also quickly gauge is this a problem or not for my market. So let's imagine here that we have 335 10. We have some high level stats that we could dive deeper into by looking at some charts. So the first one here is average inventory month over month. Inventory is basically the amount of properties that are currently listed on the MLS or listed publicly by the seller in order to look for a buyer to make a transaction make a purchase. And the longer or the more inventory that we have on the market signals to us, hey, a lot of buyers aren't really interested in purchasing these properties, and it's becoming a buyers market. So this is a good metric to look at. If we want to see when things go towards the buyer or seller's favor. Right here we see that about 8% month over month change of inventory have an increase we've had from the previous month to this month. So initially, I might think oh, whoa, this is becoming a buyers market for short. And we have inventory increasing is now my time to go purchase a property in this area. Well this is when you look into the actual numbers behind it. month over month is very relatively easy to understand what are the numbers? So here we see the inventory has climbed from 26 to 28. Not sure about you but that's not her pig of numbers. We've only had two Do more houses on the market than we did for the prior month. It's not a big swing, if we had, say 1000 properties last month, and now we have 80 more. So that would still be about 8%. That would be a larger increase. So that's important for you to understand how big your zip code is. And do these numbers behind the percentages actually signal anything that's extreme or not after the next one we have here is average median days on market. This means how long is a property staying on the market, when the seller puts it up on Friday is it being taken off and possibly sold in only a couple of days, weeks, months, and so on, the longer property stays on the market, it also signals to us that buyers aren't as desperate to get properties, and maybe they're being a little bit more picky. They're shopping around and generally it's becoming a buyers market. Here now we have a more drastic change 17% month over month increase in median days on market. Now if we go down to our chart here, and we look at the actual numbers behind it, median days on market for a single family residential property in this zip code has gone up from six to seven, one single day people, this is not tell us that there's a crash coming whatsoever. If we actually look back for 2012. And we expand our chart, we could see that we're at historic lows, the crash and oh eight isn't on this chart. But we know that we had a relatively balanced market between 2015 to 2019. And we are nowhere near these numbers over here. And this was considered balanced. So I would only be concerned of this number if I start to see it increase to at least 30 days on market. Also a note here is that this zip code in particular has a lot of cash offers the fact that properties are being scooped up in such a short period of time signals to us that a lot of people are deferring using loans for 3045 60 days, and coming to cash offers a lot of them from either retiring or up north just being able to have lump sums of money and coming down. So this doesn't seem to be cooling off anytime soon. Now for the next step, average sold above list price month over month. Say if you are looking to purchase a property, the seller listed at $300,000. And you're going to put $330,000. So an extra $30,000 On top of list price will you'll be going over list price. And that's basically what it's signaling. How often are people going over list price. This gives us a good gauge of how competitive the current market is, are a lot of buyers swarming in to make numerous offers on a single property or not. And ultimately visited go above list price. Here we see that there's been a 5% Dip month over month of properties going over list price. And now if we dive deep into these numbers as well, we could see we're at again, historic highs. Let's modify this a bit to make it smaller. And from month to month, we've gone from about point six down to point five, which if we see we've had similar depths in the past. So that doesn't really mean anything because only happened for one single month. And it's not consistent for last six months. And if we go back, again, we're at historic highs. And I probably wouldn't be concerned at all until we get back to the normal. And so we're about around point two and I started to see it go below point two. So these are things to be aware of when you're looking at the month over month metrics. And note here that I do have everything filtered on single family residence, there can be completely different behavior for say townhouses or condos and you need to be aware of where your market is what you currently invest in or want to invest in and filter on that property type only. Now for the last pieces here we have median list price and median list price by square foot. So median list price helps us to quickly see what the list price is for the area. In this case the median is about 380 Meaningless per square foot shows us the size of the house and by the size of the house per square foot how much the listing is so safe we start to see median list price dip, but meaningless price per square foot is not dipping as drastically. This could signal to us that there's a particular type of property that is sorry Want to see a drop in prices, but it doesn't mean it's affecting all properties. So for example, say if we're in the car market, we're looking to purchase a car and we've been hearing prices for cars are dropping oversupply. Now's the time to go buy a car. So we walk into BMW for chest puffed, and we say, alright, we want this car for 10. Grand off, they may laugh us off. And they could say, well, this thing that you read in the news of prices dropping, that's not affecting luxury, or that's only for convertibles. There's so many different niches within here. So you need to be aware if you start to see say a drop in list price, but not price per square foot or reverse Is it because luxury is starting to have a cooling off is it because old properties are having a cool off or number of bedrooms, maybe Airbnbs that were selling that had five plus bedrooms, eight bedrooms are no longer selling as much because people are backing out of that niche. These are all things to further dive deep into if you start to see any drastic changes. Within these charts and numbers. I took this data from Redfin. And not only can we look at all property types, we could look at a series of zip codes as well and aggregate the state of buy it. We can also compare zip codes to within other charts that I have. And we could filter down the City and County. I'm going to show you in the next video how to actually get this data for yourself. It's free. It comes from Red fin every single month, how to get this data with Python. And then in the third video, I'll be showing you how to create the same exact visualizations so you can monitor your own market for free and have the right facts behind whether your market is expected to dip or to increase. This is relevant whether you're a real estate investor agent, wholesaler, even contractor to understand where demand lies. I hope this video has been super useful and if you want to see more content similar to it, then please like this video as well subscribe so you get the latest releases. Thanks for watching.