For the first time, the Counselors of Real Estate provided a comprehensive dissection of the top 10 most important short and long-term issues to look for regarding the future of real estate in the United States. Among the most important trends to consider (macroeconomic health and climbing interest rates) we will examine the current trends to prepare real estate owners for 2019.
#5 Online Commerce and Logistical Uncertainty
Virtual shopping has skyrocketed in the past two decades, and the most recent figures point towards a continuance in that trend. Online shopping has moved from just one percent in 1999 to almost 10 percent in 2018. Many news outlets center around the death of “brick and mortar” institutions such as Costco or Food Lion, but the advent of E-Commerce has a direct influence in the longevity of these same areas of real estate. Although not used for luxury or leisure, these spaces are being repurposed for storage space and distribution in many cases.
#4 A Shift in Dominant Generations
The real estate markets have recognized, and are now reacting to, a shift in different generational needs. There is a stark difference in the Baby Boomer versus Generation X versus Generation Z mentality. Where there were once young, married homesteaders, there are now a generation of Americans who, as a majority, statistically form households later in life. Especially in the housing market, buyers and renters must understand the subtle nuances between the generations, and what they are seeking to obtain.
This problem is twofold, both from the supplier side and the demand from buyers. In the last twenty years, the United States has struggled to keep up with housing needs. Ironically, this underproduction is negatively impacted by a steady increase in wage disparity over the last four decades.
#2 Political Instability
Policy change is an ever-looming factor to consider in the real estate world. Domestic and foreign policies indirectly effect real estate figures through trade war, tariffs, global relationships, and investment spending’s of corporations.
With policy change comes new laws, which will directly correlate to the average American with real estate interests. Balancing out trade with global entities will have a more direct approach to affecting income and career security.
#1 Economic Health and Climbing Interest Rates
The most important factor to consider ushering in 2019. Keeping a pulse on the Federal Reserve is key to predicting an economic plummet or rise. For our readers, there are several factors that you must be ready to face next year. With the Omnibus Spending Bill signed earlier this year, Federal borrowing is at an all time high, meaning that interest rates are projected to increase to compensate.
After immediate factors are considered, responsible real estate stakeholders should have the below in the back of their minds for future success.
Energy and Water
Developing claims in real estate that have the ability to provide value are vital. Increasing yields, reducing waste and overhead, and preparing housing (residential or commercial) for manmade or natural disasters is key. Trends show that making “smart” building utilizing more green technology will provide security as well as increase value.
Ever changing foreign and immigration policy within the U.S. means a rise or fall in labor statistics. Tying into a change in demographics within the country, later generations of Americans have shown less interest in typical labor jobs, leading to a shortage in both residential and commercial development. The Reforming American Immigration for Strong Economy Act seeks to reduce the amount legal immigration, leading to a suppression in green card work.
Climate Change and Environmental Disasters
Rising sea levels, change in climate patterns, and an increase in global temperature have begun to show a dire increase in projected loss of real estate in the coming decades. Additionally, droughts and flooding have steadily increased, causing second and third order effects of business center relocation and market values to shift throughout the country. More so, increased considerations must be taken into effect concerning energy regulations, water consumption, pollution emissions, and local/state/federal laws and statutes.
Adjusting technology to quality of life both in the workplace and the home have become a factor to play into future business models. Many dimensions of both physical and e-commerce are rapidly changing including transportation, currency exchange, store locations, security, and system control measures. Forecasting how to best handle these emerging technological considerations will be a struggle, as the market ebbs and flows with “this will revolutionize” tech breakthroughs.
Arguably the most important factor when diving into long-term real estate considerations. Habitual underinvestment both at the state and Federal level leaves the country’s infrastructure at high-risk. Applying this to both a commercial and residential lens, it is key that stakeholders realize the value of maintaining property up to code. This provides safety, lower overhead, and stronger logistical features (keeping roads, bridges, and other key infrastructure intact and usable).
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