Micro Maps - Users Guide

Micro Maps are the very definition of granular data in the Real Estate Investing world. These start at the "County" level, move to "Zip Codes" and then zoom down to the "Neighborhood" level.


Locating the Micro Maps

To find the Micro Maps, simply click on the Maps tab on the menu bar, and select Micro Maps from the drop-down list.

Micro Maps - User Guide

Or, you can locate it in the Dashboard (Silver section).

Micro Maps - User Guide

Using the Micro Maps

Micro Maps - User Guide

Once you have accessed the Micro Maps tool you will see the full-screen map tool presented and ready for use.

  1. Click "Tools" in the upper right corner of the map.
  2. A box will appear; it provides options to select county, zip code or neighborhood, change the year, search for a specific zip code, and/or change the dataset for the desired output.
  3. You can also adjust the transparency of the map by sliding the "Overlay" button left or right. (Located at the bottom right corner of the map.)
  4. To zoom in or out of the map, click on the '+' or '-' buttons, located in the lower right corner of the map. (Your mouse's scroll wheel will zoom too!)

Please note that upon launch, this map defaults to the "County" view setting.

Interpreting Micro Market Data - Insufficient Data

As you decrease a market's geographic size (for ex, from City to Zip Code level) you get fewer house sale transactions in a given time period. Statistically speaking, you need a minimum of 25 transactions to get a useable sample size.

Micro Markets with fewer than 25 transactions do not have enough useable data and are not shown in color. Obviously, sparsely populated rural areas account for most of these, but you will also see it in urban city-centers where land values are high, leading to fewer houses and more commercial real estate.In some cases, the zip code or neighborhood boundaries (set by the Post Office or Census Bureau) are so small, there were not sufficient home sale transactions to meet the minimum threshold.

Interpreting Micro Market Data - Statistical 'Noise'

An extreme example of 'statistical noise' would be flipping a coin 3 times, having it come up heads all 3 times, and concluding coins ALWAYS come up Heads. The incorrect conclusion arose from too small of a sample size. If you increase your sample size by flipping the coin 100 times, the 'true' conclusion would become apparent: coins land on Heads 50% of the time.

As you move from big to small market areas, for ex, from CountyCityZip CodeNeighborhood the statistical noise can increase depending on how many actual houses sold during the period (but not anywhere near the error rate in the coin flipping example above).

We can mitigate the statistical noise in two ways:

  1. Develop a sophisticated scoring algorithm for micro markets.
  2. Use multiple period CAGR (Compound Annual Growth Rate) data.

Here's how you can use CAGR to reduce any noise:

Micro Maps - User Guide

The 2 yr CAGR is set as the default indicator because it gives the best overall view if you only look at one indicator. Of course, you can and should look at ALL of the indicators (it only takes a few seconds). Using Seattle as our example and drilling down to the NEIGHBORHOOD (Census Tracts) level…


Look at the 1 year results below...

Now identify hot neighborhoods in the area shown.

Seattle - 1 yr. Appreciation - Neighborhoods

Micro Maps - User Guide

Note all the color variation and ' extreme' results in some micro markets using the 1 yr data. Some of that is likely 'noise' from small sample sizes in some neighborhoods.

Focus your efforts on those micro markets that are consistently stronger across multiple time periods!


Look at the 2 year results below...

You will note the hot areas and compare to the previous 1 year list.

Seattle - 2 yr. CAGR - Neighborhoods

Micro Maps - User Guide

Note that there is LESS color variation in this 2 yr data compared to the 1 yr map.

Using the 2 yr CAGR helps to smooth out ' statistical noise' from small sample sizes.

Focus your efforts on those micro markets that are consistently stronger across multiple time periods!


Now look at the 3 year results below...

Seattle - 3 yr. CAGR - Neighborhoods

Micro Maps - User Guide

Note that there is significantly less color variation in this 3 yr. data compared to the 1 and 2 year maps.

Using the 3 yr CAGR smooths out ' statistical noise' but also stretches the time period being observed.

Focus your efforts on those micro markets that are consistently stronger across multiple time periods!

When looking for hot micro markets within a city-level (macro) market, you want to look for strong RELATIVE performance (i.e. - compared to other micro markets in the same city).


Micro vs Macro Markets

An individual zip code or neighborhood is NOT a market. They are sub-markets and STRONGLY trend along the same lines as their 'parent' or city-level market.

While there can be strong and weak sub-markets WITHIN a particular city, you should ALWAYS start your search in this order:

  1. Locate a strong Macro (City-level) Market.
  2. Then (and only then) drill down INSIDE that market for relatively stronger micro markets.

You should NOT START at the micro market level. (unless of course you have intentionally limited yourself to a single city-level market).

Generally, you will get dramatically better results in a stronger CITY level market (even if the micro market is mediocre) than investing in a weak city-level market (even if the micro market is red hot).

In a hot macro market, a rising tide lifts all boats. In a weak macro market, sub-markets can rarely go against the tide for any sustained period and eventually perform in line with its parent market.

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