The Counselors of Real Estate® Look at 2018-2019 Real Estate Trends
In a recent special report, the Counselors of Real Estate® took a look at the Top Ten Issues Affecting Real Estate™ for the current and coming year, outlining five current and five upcoming trends the industry can expect to be influenced by. Below, you’ll find an outline of their five short-term issues.
Many speculated over the past few years that interest rates would be on the rise, which is now coming true as gradual increases have begun. As CRE reports, interest rate hikes have historically “been a powerful signal of market expectations of an economic down cycle,” which has many wondering whether investors should “focus on playing defense at the end of this long cycle.” There don’t appear to be any immediate affects, however CRE does anticipate a slight slowdown, pointing to nationwide transaction volume, which fell 13% over the past three years.
As Wall Street Journal writes, low unemployment rates and a strong economy are driving decisions by the Fed to increase rates, with a plan to gradually increase toward neutral levels, which “will seek neither to spur nor slow growth.” Market pundits say that a neutral level likely falls between 2.75- and 3-percent, and the Fed has already “penciled in two more rate increases this year and three more next year,” meaning we could achieve neutral status as early as Spring 2019.
Politics and government policy can be divided into two main categories: those that directly impact real estate and those with an indirect impact. Direct factors include S.2155, which “frees smaller lenders from the toughest requirements of the Dodd-Frank Act,” HVCRE, which “would exempt income-producing property” and HDMA, which “reduces the number of data fields collected by insured depository institutions.” Indirect categories include things such as the Tax Cuts and Jobs Act, which could potentially bolster the industry through spending, and growing trade wars with other countries, which ignite fear and slow consumer spending.
In the Seattle region, anemic inventory and growing demand has stifled affordability options, and CRE reports that cities are feeling the pressure, as more buyers turn to the traditionally affordable options that in the past, have served first-time homebuyers and downsizers. According to CRE, two main questions will be posed when it comes to affordability in the coming years, which are who is paying and how are they doing it.
This will be an interesting trend to watch, as Seattle Times reported in early July that “the total number of single-family homes on the market jumped an eye-popping 43 percent in June from a year ago across King County,” with the number of homes for sale growing “three straight months on a year-over-year basis.” Only time will tell whether this will serve as a sustained trend or if low inventory and high demand will commence once more when the fall sales season kicks up again.
In the past, real estate was driven by concrete age groupings, such as 25 to 34, 35 to 54, etc. Now, CRE says we are “seeing and reacting to the influence of FOUR groups,” which includes millennials, baby boomers, Gen X and Gen Z. It will be important to follow and understand the impacts these generations will have on the industry, and some of the main topics include how these generations approach the work space, where employers choose to settle, and the type of home these evolving groups desire.
It should come as no surprise that more and more consumers are spending their dollars in the online environment, grossing just under $125 billion in the first quarter of 2018 alone. Though many have heralded this time as the “death of U.S.” mail and the brick and mortar retail store, there are signs of life, with growth in the service-oriented retail sector and the hybridization of online and physical stores, such as Amazon’s acquisition of the popular Whole Foods grocery store. As CRE notes, by offering dual options to appease shoppers, real estate benefits as “discount retailers and high-end luxury stores” continue to “survive the onslaught” and e-commerce contributes to “a major boon for warehouse distribution properties” to serve shoppers around the nation.