FAQ: Frequent Questions

About Micro-Neighborhoods

What is a Micro-Neighborhood? How is it defined?

A Micro-Neighborhood is a small area. They are defined by major physical barriers (major roads, railroads, rivers) and political boundaries (they do not cross city, county or state lines).  

They are smaller than what most people think of for a “neighborhood” which helps us reveal nuances within a a market that get lost in a sea of averages. A typical “neighborhood” would have about 5-20 Micro-Neighborhoods. They are much, much smaller than ZIP Codes–another level of geography often used in real estate for convenience that also cannot reveal crucial differences within small areas that greatly effect value as well as near- and long-term prospects for change. 

When is the Micro-Neighborhood Data updated?

Currently, we update the Micro-Neighborhoods every 3 years.

Neighborhoods change relatively slowly over time. Even in parts of town that are rapidly changing (like a “path of progress” or a “node of progress”), it takes years for building permits to get approved, construction to be completed, and new occupants to arrive, and then a bit more time for these new uses to “show up” in various data sources.

There also needs to be a preponderance of data, a tipping if you will, for the totality of a neighborhood to change from one class to another. The scores for Micro-Neighborhoods are calculated by averaging all of the multi-family properties within the Micro-Neighborhood. So if one property substantially changes, it may not be enough to move the score for the entire Micro-Neighborhood. The more units in a property, the more impact that individual has on the overall Micro-Neighborhood score–in effect, a weighted averaging.

What data is used to classify the Micro-Neighborhoods

We use a proprietary process to gather, analyze, and then finally score each Micro-Neighborhood.  Generally speaking, Micro-neighborhoods with newer, more recently renovated, more amenity-rich properties have higher scores, and those with older, less well-kept properties with fewer amenities have lower scores.

There is an affect of weight-averaging to consider as well: in a theoretical Micro-Neighborhood with just two properties–one brand-new, “A-class” luxury 80-unit property on the northern side of the Micro-Neighborhood, and one older, not recently renovated “C-class” 410-unit property on the southern side–the overwhelming preponderance of older units tips the overall score to reflect a Micro-Neighborhood Score to a “C”. It would also be likely that the Micro-Neighborhood to the north would have a Score of “A” or “B”, while the Micro-Neighborhood to the south would have a Score of “C”, reflecting the overall environment in which each property operates.  Note that the Micro-Neighborhood assignments are calibrated within each Metro area to enable more apple-to-apples comparisons between Metros.


How can an area be a C or D neighborhood? There are million-dollar homes there!

We have seen a number of these cases ourselves. Here are two examples of what can be happening:

1. Looking at JUST the Multifamily 5+ unit properties: The data for the Micro-Neighborhoods is specific to, and reflects ONLY the 5+ multifamily properties within the Micro-Neighborhood. Look at each and every one of the multifamily properties within the boundaries of the Micro-Neighborhood and you will see how they as a group score, completely independent from the qualities of any other land uses, such as single-family homes, offices, retail, etc. As one example of how this can occur: in many metropolitan areas, there are often older (1940s-1960s), smaller (eg., 5-, 10-, 20-unit) multifamily properties scattered within them, particularly along the major streets. Many times, these properties are owned by small, “mom-and-pop” operations that do not want their retirement incomes to take a hit while a unit or property is renovated–they like things just how they are, they are not optimizing the property. While often well-maintained, they are not amenity-rich, substantially upgraded, and maybe even a bit functionally obsolete. These are often great opportunities for new owners, but until a majority of them turn over and get value-adds, they will remain classified in the lower ranks.

2. Looking at the boundaries of the Micro-Neighborhood: Sometimes some posh “A-Class” properties and areas are smaller pockets within a larger area of less desirability. We have seen many times how waterfront areas can sometimes have this extreme contrast effects.

About Markets

What is a Market? How is it defined?

We use Metropolitan Statistical Areas (MSAs), a very commonly used, standard geography.  The Office of Management and Budget defines the MSAs each year based on economic ties among and between counties, primarily focusing on commuting patterns. MSAs are one or more counties in geographic size, and must contain a central city of at least 50,000 residents. The annual changes sometimes have an impact on the ability to make market cycle determinations, because cycles are a reflection of trends over several years. When boundaries change, counties are added to or swapped between MSAs, or new MSAs are created, and these changes make running comparisons not possible. Thankfully, there are only a few changes each year, with one major overhaul every 10 years to incorporate findings from the decennial US Census.

When is the Markets Data updated?

Currently, the data is updated once a year, typically in July.

What data is used to classify the Markets?

We use a proprietary process to gather, analyze and classify each Market. Among the many factors considered are population, job, and wage growth, unemployment, and multi-family occupancy and rent changes.

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