When thinking about the real estate market, it is important to understand the big picture and the factors that affect it. These factors often have to do with long term changes that are not really noticeable in everyday life.
Why do you want a real estate agent with experience? There is a reason. That person knows more about the history of the city than an average citizen. An important part in where the market is going is where the city began and how it has changed over time. They are going to know what works and doesn’t work in the specific market, where the hot and upcoming areas are and how to make smart real estate decisions.
Early Beginnings of the City
A city is formed because of an intersection in transportation. Madison, however, became a city because they were chosen as the location for the state capital in 1837. In the very beginning, Madison was just a very small town with a big job.
“In the spring election of 1839, only 54 people voted. A year later, the village contained only two stores, three public houses, three groceries, one steam mill for cutting lumber, and a couple dozen houses — in all, 35 buildings surrounded by a thick forest. Wolves, bears, deer and game birds could all still be hunted on the capitol square, and during those years, Dane County government effectively served the citizens’ needs.” – Wisconsin Historical Society
It was not until the government welcomed Madison as a village within Dan County, that the city really started growing. After approval, growth increased and Madison eventually became a city.
The Economic Base of Madison
The University is the next big job provider, and it also has a huge impact on how the city grew. Just imagine Madison without the University. The 40,000 students enrolled need housing, food and drink, stores etc. There are more that 70,500 jobs created within all the affiliated campus facilities. This is 2.7% of total state employment. That generates a lot of money when you think of income, sales, and property tax revenues.
The photo below is an aerial view of the City of Madison in 1937. There are some interesting areas to notice. First is that there no hospital in the left hand corner. If you notice the railroad that passes through the city, there is much more area dedicated to the rail yard. It is something you don’t see today in Madison. Camp Randall also looks very different.
The city has grown a lot since then, but it also looks very similar. There is a reason for that. Notice how there are sections that are clearly defined residential blocks.
The Comprehensive Plan of City of Madison
The government has a large impact on how the city goes with the city planning that they do. The City Planning team creates a comprehensive plan, and all those wanting to build/buy, abide by the city plans. This plan includes projected future population growth, requirements for water and waste disposal, projected needs for public services, and projected demand for various land uses (public, residential, and Industrial). This is why we don’t see a factory in the middle of a neighborhood.
Other states do it differently. One of the most regulated cities is Portland. On the other hand, Houston does not limit who builds what where. Both cities are successful, so there is not necessarily a right or wrong answer.
The Future of City of Madison
Below is one of the maps of the comprehensive plan of Madison that shows future land use. It is interesting to see why the main shopping centers are all clustered, or why industrial areas are where they are. There are many more maps a part of the comprehensive plan, such as future transportation plans or potential redevelopment areas.
Potential Land Use of city of Madison
The planning that a city makes has a direct effect on real estate. A huge part for any person working in real estate is evaluating the market. The growth that this plan projects is in no way 100% accurate, but it gives you a pretty good idea. If the city plans to revitalize a street or part of town, chances are that the real estate in that area will increase in value. It also determines land use patterns which directly relates to real estate with where houses can be built and where it becomes more problematic. For any type of building, there has to be a market for what you build, because people will not come to you.
Why is it important to you?
It is likely that this could have an effect on you. Although an area is zoned to be residential, a business can always go to the government to try to get that changed. Recently, in Madison, the government approved the expansion of operation of quarries. Although it could have an effect on the health of the people, the quarries also brings jobs, low costs for construction and new roads (read the full article here)
Location is important to understanding the market, and it is more important than the building itself. Access to what is important directly relates to the value of a property. There are various linkages between land use. For example, single family homes have strong linkages with proximity to school or jobs. Student housing needs to be close to a university campus. The less amount of time that people want to travel or commute, the more they will pay for real estate with proximity. Understanding this concept is one of the first steps to understanding the real estate market in your city.