Housing affordability, demographic shifts and e-commerce’s impact on retail spaces are among the top pressing issues Realtors® needs to be informed about heading into 2017, as outlined by a forum on the emerging trends affecting real estate at the 2016 Realtors Conference & Expo.
Two Counselors of Real Estate (CRE) speakers with leadership roles provided insight on residential and commercial real estate: Scott Muldavin, 2017 chair, and Peter Burley, chair of the group’s external affairs committee. For the past five years, the committee has identified and released a top 10 report on the concerns and developments that should define the real estate industry in the upcoming year.
Muldavin and Burley launched into the discussion talking about global and domestic opportunities and threats. Geopolitical and economic uncertainty, volatility in the energy markets and weaker trade volume could slow U.S. growth and result in fewer job gains in the year ahead. This set of dominoes – if prominent and prolonged – might have the potential to eventually trickle down and impact residential housing.
“The good news is that even with U.S. economic expansion at around 2 percent, the U.S. is still outperforming other major countries around the world,” said Muldavin.
Burley stated that demographic shifts also are poised to transform the real estate industry now that millennials have taken over baby boomers as being the largest generation. With a growing share of millennials now entering their mid-30s, an increasing number of them will be getting married and eventually having children. This points to strengthening demand for home buying.
Meanwhile, baby boomers’ tendency to age in position creates opportunities for commercial real estate by means of medical and assisted living facilities development.
Housing affordability
Burley said the lack of new supply has made home purchases more expensive. Furthermore, younger and older buyers must compete for the minimal listing inventory in several of the same places.
Adding more pressure: While apartment construction ramped up, rents still outpace incomes in several communities. This only adds pressure to aspiring home buyers attempting to save enough money for a down payment.
“Home prices have outstripped incomes, and it makes it very challenging for millennials looking to buy,” Burley said. “As a result, rental demand is expected to remain very strong.”
Suburban cities
The additional pressure on suburbs to become more urbanized was also discussed. According to Burley, cities are expanding as people would rather live in or immediately near urban cities. Those residing in the suburban areas still wish to be close to walkable areas with a variety of activities and unique experiences. For that reason, suburbs are trying to become more urban-like with mixed-used developments and office space.
“Suburban areas are adding urban amenities, so that there’s an environment where people can live, work and play right outside of the core part of the city,” said Burley.
E-commerce
In commercial real estate, the rapid surge in online shopping has led to major retailers adjusting by closing stores and shrinking their store footprints. One emerging trend in the industry is smaller “showroom” space with an online component where consumers can buy at the store and also have the item shipped to their home within a few days.
Another shift: Many new commercial construction projects are mixed-use developments with a variety of retail, food and housing. Muldavin stated that there’s huge opportunity in secondary and tertiary markets for this kind of development because retailers strive to be near walk-able residential areas.
CRE’s top 10 issues affecting real estate going into 2017
The changing global economy
Debt capital market retrenchment
Demographic shifts
Densification/urbanization
The political environment
Housing affordability and credit constraints
The disappearing middle class
Energy
The sharing and virtual economy
The rise of experiential retail
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