Methodology

Overview

Understanding what drives real estate prices in different sectors is crucial for investors and analysts. Below, we break down key factors influencing price growth in Residential, Commercial, and Industrial real estate and highlight data sources for tracking these factors. A comparison table at the end summarizes these drivers, their impacts, and data sources for each sector.

Residential Methodology

Residential property values are primarily driven by local demand and supply dynamics, influenced by demographic trends, economic conditions, and housing inventory:

Population Growth & Demographics: Growing populations (or in-migration) in a ZIP code fuel housing demand. More people – especially in urbanizing areas – mean increased competition for homes, pushing prices up. For example, urban population growth has led to higher housing needs and rising values in many cities. Demographic shifts like age distribution also play a role (e.g. an influx of young professionals vs. retirees can change housing demand).
- Data source: U.S. Census American Community Survey (ACS) provides population and demographic data at the ZIP Code Tabulation Area level, indicating areas with rising housing demand. Population projections and migration statistics (e.g. USPS change-of-address data) can also signal future demand.
Employment & Income Growth: A strong local job market with rising incomes boosts home-buying power and demand. When employment grows and unemployment falls, more households can afford homes, driving prices up. Higher disposable income directly correlates with house price growth. In contrast, job losses or economic downturns weaken demand.
- Data source: BLS (Bureau of Labor Statistics) local employment and unemployment data (often by county or metro) can be applied to zip codes, and Census/IRS data on income levels by zip help gauge purchasing power.
- Zip Code Business Patterns data (annual establishments and employment by ZIPcatalog.data.gov) is useful to track local economic activity.
Housing Supply & New Construction: The availability of homes for sale (or rent) in a given area is a critical price driver. Low supply with strong demand leads to price appreciation, as buyers compete for limited listings. Tight inventory (few homes on the market or underbuilding of new homes) has caused decreased affordability and upward pressure on prices in recent yearscrsreports.congress.gov. Conversely, if new development increases housing stock faster than demand, price growth can slow.
- Data source: Zillow Home Value Index (ZHVI) and median inventory levels by ZIP (available via Zillow or Redfin Data Center) track local price trends and listing counts.
Interest Rates & Financing Conditions: Although mortgage rates are a national factor, their impact is immediate and short-term for local markets. Lower interest rates reduce borrowing costs, enabling more buyers to enter the market and bid up prices. Higher rates, on the other hand, cool demand by making mortgages less affordable, which can slow price growth or even put downward pressure in the short run. Credit availability (bank lending standards, FHA/VA loan limits, etc.) also affects how many buyers can purchase.
- Data source: Federal Reserve and Freddie Mac PMMS (Primary Mortgage Market Survey) for interest rate trends. While not zip-specific, combining rate trends with local data (e.g. share of cash buyers or average loan-to-value in an area) can refine understanding of this driver.
Infrastructure Projects & Amenities: Local infrastructure improvements – new highways, transit lines, schools, shopping centers, etc. – can have short- to medium-term impacts on nearby home values. Improved transportation access or utilities often makes a neighborhood more desirable, increasing demand and prices. For instance, a new commuter rail stop or highway interchange can quickly raise property values in adjacent ZIP codes as commuting becomes easier. Amenities such as quality schools, parks, and low crime rates also attract buyers. These factors may not always be captured in national data but are critical on the ZIP code level.
- Data source: Local government project reports (transportation departments, city planning documents) to monitor upcoming infrastructure.
- Amenities such as POIs from OpenStreetMap or school rating databases can proxy amenity values.

Commercial

Similar research as above

Industrial

Similar research as above

Validation

Validate the historic correlations of the engineered features and present hypothetical portfolios like what we did for Risk and Resilience Scores.

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Last updated 7 days ago

Overview

Residential Methodology

Residential property values are primarily driven by local demand and supply dynamics, influenced by demographic trends, economic conditions, and housing inventory:

Population Growth & Demographics: Growing populations (or in-migration) in a ZIP code fuel housing demand. More people – especially in urbanizing areas – mean increased competition for homes, pushing prices up. For example, urban population growth has led to higher housing needs and rising values in many cities. Demographic shifts like age distribution also play a role (e.g. an influx of young professionals vs. retirees can change housing demand).

Data source: U.S. Census American Community Survey (ACS) provides population and demographic data at the ZIP Code Tabulation Area level, indicating areas with rising housing demand. Population projections and migration statistics (e.g. USPS change-of-address data) can also signal future demand.

Employment & Income Growth: A strong local job market with rising incomes boosts home-buying power and demand. When employment grows and unemployment falls, more households can afford homes, driving prices up. Higher disposable income directly correlates with house price growth. In contrast, job losses or economic downturns weaken demand.

Data source: BLS (Bureau of Labor Statistics) local employment and unemployment data (often by county or metro) can be applied to zip codes, and Census/IRS data on income levels by zip help gauge purchasing power.
Zip Code Business Patterns data (annual establishments and employment by ZIPcatalog.data.gov) is useful to track local economic activity.

Housing Supply & New Construction: The availability of homes for sale (or rent) in a given area is a critical price driver. Low supply with strong demand leads to price appreciation, as buyers compete for limited listings. Tight inventory (few homes on the market or underbuilding of new homes) has caused decreased affordability and upward pressure on prices in recent yearscrsreports.congress.gov. Conversely, if new development increases housing stock faster than demand, price growth can slow.

Data source: Zillow Home Value Index (ZHVI) and median inventory levels by ZIP (available via Zillow or Redfin Data Center) track local price trends and listing counts.

Interest Rates & Financing Conditions: Although mortgage rates are a national factor, their impact is immediate and short-term for local markets. Lower interest rates reduce borrowing costs, enabling more buyers to enter the market and bid up prices. Higher rates, on the other hand, cool demand by making mortgages less affordable, which can slow price growth or even put downward pressure in the short run. Credit availability (bank lending standards, FHA/VA loan limits, etc.) also affects how many buyers can purchase.

Data source: Federal Reserve and Freddie Mac PMMS (Primary Mortgage Market Survey) for interest rate trends. While not zip-specific, combining rate trends with local data (e.g. share of cash buyers or average loan-to-value in an area) can refine understanding of this driver.

Infrastructure Projects & Amenities: Local infrastructure improvements – new highways, transit lines, schools, shopping centers, etc. – can have short- to medium-term impacts on nearby home values. Improved transportation access or utilities often makes a neighborhood more desirable, increasing demand and prices. For instance, a new commuter rail stop or highway interchange can quickly raise property values in adjacent ZIP codes as commuting becomes easier. Amenities such as quality schools, parks, and low crime rates also attract buyers. These factors may not always be captured in national data but are critical on the ZIP code level.

Data source: Local government project reports (transportation departments, city planning documents) to monitor upcoming infrastructure.
Amenities such as POIs from OpenStreetMap or school rating databases can proxy amenity values.