Top 10 Issues Affecting Real Estate by CRENovember 6, 2017 2:48 pm
We had a great opportunity to participate in the National Association of Realtors Annual Convention this year located in Chicago Illinois. It was great to run into so many people we had not seen in a while and reconnect with them. We also got to meet a ton of new technology vendors and learn more about what makes their services great. One of the top topics we attended was the CRE’s Top 10 Issues Facing Real Estate. In past years they would do a David Letterman count down but this year was different because they said there were several new elephants in the room and wanted to start at the top. So we started out coverage of the session with the top issues too.
- Political Polarization & Global Uncertainty – The political polarization and uncertainty had the most to do with “the unkown” factors surrounding declines in cross boarder real estate investments, boarder community declines, consumer price index rises, interest rate rises, and additional factors such as Brexit, Catalonia, North Korea, US Politics, Middle East conflicts and South China Seas issues which are all making their way into boardroom conversations.
- Technology Boom – Security hackings, Internet of Things (IOT), Connectivity and overall Smart homes are getting ready to hit the market in mass.
- Generational Disruptions – There are more millennials than boomers now. Millennials are more interested in bars and restaurants compared to traditional dining room. The millennials are interested in suburban amenities too. The Xennial’s 1977-81 life stage was something new we had not heard much about in the past and their interests are very different from millennials.
- Retail Disruption – This isn’t anything you haven’t heard before but the way we buy things is changing. For example, Nordstrom’s is not adding anymore more brick and mortar stores, but they are focusing online more and anticipating a 50% increase in sales as a result. A shift in retail metrics is occurring with business becoming more interested in “cubic feet” versus “square feet” is gaining more interest for logistics and fulfillment purposes from retail locations. Online companies such as Amazon are going back to brick and mortar stores. This impacts residential real estate with buyers interests in unique community locations near Whole Foods and Trader Joes over Dollar General.
- Infrastructure Investment – The industry has been highlighting our aging roads and bridges for years. This will become more problematic as more natural disasters such as hurricanes, wild fires etc. occur.
- Housing Mismatch – Whatever happened to the starter home? There is a supply problem with starter homes as industry experts have been saying for a while now. The luxury market doesn’t have a supply problem, it has more of a demand problem. Two different consumers and tastes. Since millennial are doing things 10 years later like marriage, kids and purchasing a home which is different than other previous generations. The millennials are going back to suburbs motivated by things such as school districts. Boomers are moving downtown and renting more.
- Lost Decades of the Middle Class – Shrinking income growth and disposable income of the middle class has occurred over the last 4 decades. Defined as single person making $25k -$75k. Only 64% have a clear picture of their financial situation. 70% of GDP growth comes from middle class making decent GDP growth difficult.
- Real Estate’s Emerging Role In Health Care – Consider the rising healthcare costs with emergency care, urgent care and outpatient outcomes. We spend 90% of our time indoors so what opportunities are there to improve health thru real estate. An emerging trend of “Well Offices” emphasizing healthy air, lighting, desks, sitting rooms etc, are occurring. What opportunities are there for our homes? Technology can help with this as well.
- Immigration – The US proposals to reduce immigration will negatively impact the real estate industry broadly with 40% of legal immigrants owning homes. The tech industry is hiring immigrants for the higher income opportunities that could be more constrained in the future.
- Climate Change – 5 years later hurricane Sandy devastation in New York City still has 100’s of home that have yet to be rebuilt. Wild fires, super storms illustrate something is happening. Sea level rising forecast has doubled recently for Florida, Texas and Louisiana impacts.
From our perspective, these are all good things to be aware of. However, for the time being, the market fundamentals seem strong with overall supply under control, consistent income growth and low unemployment. We also see several opportunities for developers and builders to improve their offerings with proximity to the right food and beverage retailers, smart/well homes upgrades and of course providing the fastest internet connectivity. Thanks for taking a moment to review our coverages of CRE’s trends for 2018.
If your looking for more information on residential real estate trends below is a link to NAR’s Chief Economist presentation of the housing outlook: