Housing affordability, demographic shifts and e-commerce’s impact on retail spaces are among the top pressing issues Realtors® should be knowledgeable about heading into 2017. That’s according to a forum on the emerging trends affecting real estate at the 2016 REALTORS® Conference & Expo.
Providing their timely insights on residential and commercial real estate were two speakers with leadership roles from the Counselors of 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 list of the issues and developments that will define the real estate industry in the upcoming year.
Muldavin and Burley launched into the interactive discussion by talking about the current 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 lead to fewer job gains in the year ahead. These set of dominoes – if prominent and prolonged – could 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 pointed out that demographic shifts are also poised to transform the real estate industry now that millennials have taken over baby boomers as 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 buying a home. Meanwhile, baby boomers’ tendencies to age in place creates opportunities for commercial real estate in the form of medical and assisted living facilities development.
On the topic of housing affordability, Burley said the lack of new supply coming onto the market has made purchasing a home more expensive. Furthermore, younger and older buyers are competing for the minimal available inventory in many of the same places. Adding more pressure is that while apartment construction has ramped up, rents are still outpacing incomes in many communities. This only adds to the pressure of aspiring homebuyers trying 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.”
The added pressure on suburbs to become more urbanized was also discussed during the session. According to Burley, cities are expanding as people prefer to live in or immediately near urban cities. Those living in the suburbs still want to be within distance of walkable areas with a plethora of activities and unique experiences. This has resulted in the suburbs striving 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,” added Burley.
In the commercial real estate retail sector, the rapid rise in online shopping has led to major retailers adjusting accordingly 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 have the item shipped to their home within a few days. Another shift is that many new commercial construction projects are mixed-use developments with a variety of retail, food and housing. Muldavin said that there’s huge opportunity in secondary and tertiary markets for this type of development because retailers strive to be near walkable residential areas.
According to CRE, the full top 10 issues affecting real estate going into 2017 are:
- The changing global economy
- Debt capital market retrenchment
- Demographic shifts
- The political environment
- Housing affordability and credit constraints
- The disappearing middle class
- The sharing and virtual economy
- The rise of experiential retail
“Realtors® are futurists in the sense that you’re advising someone what may happen in the next few years as they’re in the process of buying or selling a home,” Muldavin said to the crowd full of Realtors® in attendance. “Understanding these top 10 issues can increase your value to your clients while giving you a competitive advantage within your market.”
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.