If you are like most property investors, you are already looking forward to next year’s prospects. You may be tracking market trends from a buyer and seller’s point of view. You may also be evaluating supply and demand in the industry. Although it is difficult to accurately predict what the market will be, several factors can give you a good idea of the success of future real estate investment opportunities.

Economic Health

The market economy is one of the strongest predictors of the real estate market’s future. When you analyze the market, look for the number of high-paying jobs in the area and whether the number of these types of jobs is growing. You should also analyze new career opportunities. Employment and unemployment rates have a direct impact on the housing market. Also, look at the local tax structure, especially property and income taxes. Finally, look for increases in foreign investment, including real estate investors.

Strong economies encourage people to purchase new homes. They feel secure in their earnings and career opportunities. They tend to raise their risk tolerance and spend more.

Home Price Trends

You should also watch the pricing trends in the real estate market, especially in the markets you hope to invest in. For example, you may find a previously run-down area with properties that are increasing in price. Look for how long homes are on the market as well. Rising home prices may suggest that people would prefer to own property than rent from others.

If you purchase properties for rental income, you should also look at local rental rates. Are there more vacancies than in the last 12 months? Has rent increased or decreased? Can rentals be found easily in the market, or are they scarce? Rental rates tend to increase with home prices, so these are key market indicators.

New Construction Trends

You start to see new construction grow when a community experiences housing shortages. These shortages drive up housing and rental prices. Analyze whether the construction increases are meeting current demand.

If you see sudden expansions in construction, you know the market is experiencing a shortage and prices are increasing. However, when construction begins to slow or stops altogether, you know that current supply meets current demands, and this may not be an ideal market for real estate investment.

Your State’s Real Estate Data and Analytics

Each state has a database with current and past real estate data. Because property purchases and sales are part of the public record, you can get a good idea of how the current housing market compares to past markets.

Although these are only a few factors you can investigate to determine the profitability of your real estate investment, they will give you a foundation for your future market predictions.