If you own properties or want to expand your landlord business, you probably have the following questions:
- Is the housing market is back to normal after the recession?
- Is it still recovering?
- Are we entering another housing bubble?
The answer depends on where you live.
As most real estate investors know, housing activity differs greatly depending on the market. Savvy investors like to keep up with the trends and understand which markets are the most stable.
Ask MiMi, Freddie Mac’s Multi-Indicator Market Index.
MiMi tells you how stable the housing market is in all 50 states, the District of Columbia, and in the top 50 metro areas in the United States. Area-specific information you’ll find on MiMi includes:
- How many people are buying
- How affordable each area is
- Whether people tend to be current with their mortgage payments
- Whether employment is strong or weak
The information updates monthly and is a great tool for any real estate investor to use.
How to Use MiMi
MiMi calculates whether a market is stable, or as Freddie Mac describes it in true Goldilocks fashion — “not too hot, not too cold, but just right.” In other words, if MiMi indicates an area is too hot, the market has risen to an unsustainable level. If the area is too cold, it is too weak to generate demand.
And besides telling you the temperature of an area, MiMi tells you which direction a location’s heading. So an area that is too cold but is going toward just right might be one of interest to you, but an area that is too cold and is getting colder might not.
MiMi uses a numerical composite system for each area based on four criteria:
- Purchase applications:
This tells you how many people are buying. It also tells you whether the market is elevated, as determined by more activity, or weak, as determined by depressed home sales. And it lets you know whether purchase applications are increasing or decreasing.
This tells you whether housing prices are rising faster than income, becoming unaffordable.
- Current on mortgage:
This tells you whether people are current on their mortgage. It also lets you know whether delinquencies exceed historical averages. The higher the number here the lower the delinquencies, and the lower the number the higher the delinquencies.
This lets you know what percentage of the market is employed. The higher the number the better the employment rate. Low numbers show a weak market with unemployment exceeding historical averages.
MiMi isn’t the only tool to use to determine whether you want to buy in a particular area, but it’s a good place to start. It provides some good insight into housing activity throughout the nation.
Other useful research sites include:
A basic strategy to get you into the landlord business or to increase your existing landlord business involves picking a good location that provides a good value for what you spend.
It’s typically easy to find and keep tenants in up-and-coming areas. It’s even better if you choose an area near your residence because you can show the property and visit it periodically. You can still invest in areas farther away, but you would then want to consider hiring a property manager or doing it yourself with a tool like Cozy.