Jul 01

5 Issues That Will Impact Real Estate

5 Issues That Will Impact Real Estate

5 Issues That Will Impact Real Estate. Image courtesy of Idea go / FreeDigitalPhotos.net

5 Issues That Will Impact Real Estate. Image courtesy of Idea go / FreeDigitalPhotos.net

Demographic shifts from retiring baby boomers and the increase of millennials buying homes will have the most profound impact on the real estate industry in the coming years, according to a new survey of real estate professionals from the Counselors of Real Estate. CRE’s survey identifies the issues that will have the most significant impact on real estate near and long-term.

“This list reflects a higher degree of economic uncertainty than in years past,” says CRE chair Noah D. Shlaes. “Anticipation of rising interest rates, continued currency devaluation, and excess capital flowing into the United States are all on the minds of our membership. Combine this with a growing wage gap and major changes in demographics, and we’ve got a lot to think about this year.”

Issues topping the list include:

1. Demographic shifts: Retiring baby boomers and the population surge of  potential millennial home buyers are expected to have a big impact on real estate. For example, for seniors, housing needs will shift to homes where they can age-in-place or they may search for downsized homes, senior communities or assisted living. Millennials will be making choices on whether to buy or postpone buying and the location will have a big impact on their decision.

2. Excess capital supply:  U.S. real estate remains attractive to investors across the globe. “Funds continue to flow from outside the U.S. to purchase U.S. real estate,” BUILDER reports about the survey results. “The supply is driven by economies that have high savings rates, a shortage of mature financial markets and few safe assets. The investment rate is approaching record highs, presenting the potential for pressure on investments in the future.”

3. Rising interest rates: Interest rates have been near record lows, but are expected to rise later this year. An increase in interest rates could prompt an increase in short-term commercial development and slow home sales. However, if millennials get into the housing market before interest rates rise too much, they could help create a “second wind for the residential market,” BUILDER notes.

4. Global instability and currency devaluation: The U.S. dollar remains strong but the global economy is being affected by currency devaluation in many other countries, the report notes. Investment from foreign buyers helps to boost the U.S. housing market, but there is a risk if currency devaluation continues in other countries too.

5. Urbanization:  Young professionals as well as older generations are showing an increasing appetite for wanting to live in walkable communities in the city. On the commercial front, urban vertical shopping configurations are growing more popular. Also fueling the urbanization trend, greater corporate relocations have been occurring recently that are moving away from the suburbs to cities as companies try to lure more younger, urban professionals.

 

Source: “Top 10 Issues Affecting Real Estate Pros,” BUILDER (June 24, 2015)

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