Like all economic predictions, there are no crystal balls; indeed, the future is always somewhat opaque, even in the case of real estate. But economists, business professionals and real estate professionals are circling around if not outright predictions, then at least a list of issues that will impact real estate in the next twelve months.
Here are some of the factors that will influence sales, prices, supply and demand in the real estate market:
Demographics: Two segments of the population, Baby Boomers (born between 1946 and 1964) and Millennials (born between 1980 and 2000) are the demographic groups to watch.
The Baby Boomers are retiring in droves. This should mean an uptick in demand for downsized homes, including one story homes and ranch type houses, condominiums and patio homes. In addition, of course, would be the selling of larger family homes as this group slowly moves into senior living facilities.
The Millennials are an interesting group to watch. They are more saddled with debt than their parents. They have been much slower than previous generations to purchase both houses and cars. Their lack of dependence on cars means that the suburbs and indeed the exurban areas are less attractive to them, and so these areas might see some oversupply as regards this slice of the population. In the same way, urban areas or areas that have a walkable, urban feel may become so appealing to this group that demand will drive higher prices.
Interest Rates always become a factor in home purchases. Right now, the interest rates are still quite low. If buyers perceive that the interest rates will be heading up, there may be a surge in purchasing. However, new regulations on home loans and home closings will continue to lengthen the entire process from loan origination to closing, so nothing will be felt immediately.
Foreign Investment isn’t something that lots of people think about. But the U.S. real estate market and indeed the economy as a whole, is still a bulwark of stability in an unstable world financial market. Foreign investors are buying up urban commercial property like crazy, causing a bit of a supply crunch. Will this investing move into regular neighborhoods or only be felt in high dollar city centers? That remains to be seen.
