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  • 9 New Real Estate Trends & Forecasts for 2020 and Beyond

9 New Real Estate Trends & Forecasts for 2020 and Beyond

Category: B2B News

The latest real estate trends are best described as a mixture of both positive and negative developments. For starters, the prices of real estate property continue to skyrocket, which is being driven by a variety of factors. Such factors include the looming economic downturn and the emergence of a new buyer demographic, in the form of Millennials. However, some sectors are not that comfortable with the increase in home prices, expressing worries that a housing crash may be on the horizon.

Here, we present to you the latest real estate trends for 2019 including research results that have many pundits remaining confident of the real estate market. You’ll also understand why the decline of home price increases and the rise in mortgage interest rates that marked 2018 are seen to result in changes in the US real estate market, particularly for homebuyers.

Furthermore, you’ll get to learn the changing buyer preferences and the onset of new tech that are expected to make further alterations in the real estate market. After this reading, you should be able to better plan any real estate purchase that you may have lined up. 

real estate trends

The commercial real estate sector is seen to grow, albeit, at a much slower pace. Commercial real estate has been receiving a healthy capital flow as evidenced by the increase in overall global transactions in 2018. Changes in monetary policy and real estate pricing are also expected to result in a “market correction.” This impending market transition, in turn, has prompted fund managers and investors to alter their strategies, depending on their willingness to take risks.

top cities for real estate investment

Source: PWC 2019

Key global real estate market, meantime, has managed to stay afloat, with investments remaining steady despite the economic slowdown, trade conflicts, and political instability. Spiking interest rates have been arrested given the economic uncertainty, which was further reinforced by improved monetary policy. Developments such as these and more are bound to impact both buyers and sellers who continue to be cautious yet harbor certain levels of risk. Besides, many property owners have also been using property management software to boost profits from their portfolios.

Ìncreased Investments

The economic decline of 2018 has increased real estate investment in the US, one of the most prominent real estate market trends. The industry received $470.7 billion, registering a 19% uptick in capitalization. Domestic institutions’ decision to boost their net holdings is seen to contribute to this development. Increased domestic activity is cited as the primary reason for the improved investment flow to the sector, which effectively turned around two consecutive years of decline. Additionally, new tech such as real estate management platforms has been boosting property owners’ management capabilities.

According to reports, logistics continues to be the most preferred investment destination in the real estate market, staying popular among investors despite over pricing concerns. This trend is forecast to continue, owing to the robust global industrial investment sales, which reached a height of $147 billion in 2018. Investors’ bullish attitude towards the industry has been attributed to the record low vacancy rates in numerous markets. Now, if you’re into home construction, investing in top construction management tools can help ensure that your investments go a long way.

Global Capital Investments by Property Type ($B)

Income Properties

Dev Site

Office

Apartment

Retail

Industrial

Hotel

Senior Housing and Care

Source: PWC 2018

Designed by

Housing Investment Trend Takeaways

  • The increase in the flow of market capitalization to the real estate sector has aided in the recovery of the industry from a two-year hiatus.
  • The uptick in real estate investment stemmed from increased domestic activity.
  • Investors have been focusing on real estate logistics.
  • Investors have been focusing on real estate logistics.

Slow Rise in Home Prices

Home prices are expected to increase at a slower rate, unlike the market jump of 2017 and 2018. The number of home listings is likewise seen to increase by only 1%. There are two main reasons for these developments. First, the ongoing economic uncertainty has constrained home sellers to hold on to their properties, at least until a rosier economic outlook pops up. And then there are the increased mortgage interest rates, which has home investors shying away from the market.

However, there remains a real estate market segment that hasn’t lost interest in buying homes–those who prefer newly-built ones. An anticipated 8% increase in new home construction is also expected to contribute to this development. So what does this mean for sellers? Real estate sellers may very well rake in profits at the end of the day, albeit, at a much slower rate. But sellers should be wary of the potential decrease in offers and try to resolve this issue by working with real estate agents.

housing spent in US

Home Sales Trend Takeaways

  • Housing sales in the US has increased by 4.5% in June 2018. (census.gov)
  • Homebuyers take an average of 30 to 45 days to purchase a property. (moneyunder30.com)
  • Americans spend 50% of their incomes on purchasing homes. (pwc.com)

Millennials Make Up the Majority of Home Buyers

Millennials, believe it or not, are dominating the residential real estate buyers’market. Members of this generation have been finding stable jobs, with household incomes reaching $88,200. Most Millennials have been found to prefer middle- and upper-middle class homes and are expected to account for 45% of the market and lead the mortgage pack.

So what should sellers do to tap into this burgeoning market? One thing for sure is to leverage the use of the Internet. Millennials are known to research online first before making purchase decisions. Sellers should also offer homes that are sustainable and have plenty of usable space. Also,  consider offering properties located in bustling cities where the cost of living is more affordable. For buyers, the current market means improving communication with sellers, being straightforward with what they want in a home and enlist the aid of a real estate professional.

Home Buyers' Share by Demographics 2019

45%

Millennials

37%

Gen Xers

17%

Baby Boomers

Source: realtor.com

Designed by

Millennial Home Buyer Trend Takeaways

  • Millennials have been securing stable jobs, contributing to their home purchasing capability.
  • Millennials prefer mid- to upper-middle class homes.
  • Millennial homebuyers willmake up 45% of the market.
  • Marketers are advised to leverage the Internet as a way to reach the Millennial market.

Need for Affordable Homes

These days, house rents still beat home purchases by a large margin in 59% of the housing markets in the US. Residential real estate prices are not helping as they continue to displace wages increases in 80% of markets. High home prices are expected to drive demand for rental housing. 

Affordable housing shares have likewise fallen despite an uptick in residential real estate listings. Such is true in typically strong housing markets, which have been affected by higher mortgage rates and increased home prices. For real estate markets with populations of over one million, affordable homes have proved to be scarce.

media house price in Ohio

Affordable Home Trend Takeaways

  • House rents still lead home purchases in the US.
  • Home prices continue to displace wage increases.
  • Affordable housing shares continue to decline despite increased listings.

Shift to Second-Tier Cities

Real estate investors and buyers have been setting up shop in second-tier cities because of the high real estate prices in first-tier ones. Investments in these cities have increased significantly, contributing to higher real estate prices. Large companies have likewise been leaving first-tier cities, moving to second-tier locations. These capital movements are seen to result in economic growth and greater value for real estate properties in second-tier cities.

The influx of investments to second-tier cities is expected to more or less equalize capitalization rates in both markets, resulting in an increase in the value of real estate property in second-tier locations.

Housing market growth has stalled in Los Angeles, Chicago, and New York. (pwc.com)

Housing Market Indicators, 2019

64%

Homeownership Rate

22%

Existing Home Median Price Appreciation

8%

Single-Family Housing Starts

2%

Existing Home Sales Down

Source: realtor.com

Designed by

Shift to Second-Tier Cities Trend Takeaways

  • Investors move to second-tier housing market.
  • The mass movement to second-tier cities is being driven by high home prices.
  • Economic growth is forecast to follow the shift in real estate investment location
  • Capitalization rates in both first- and second-tier real estate markets are expected to equalize.

Use of New Technology

The real estate sector is no stranger to technology. The industry is expected to continue adopting new tech in the coming years. Technologies that are expected to find applications in the sector include smart home tech, online home selling platforms, and apps. An uptick in the number of startups and high-technology companies servicing the sector is also on the horizon, with many paying close attention to making transactions faster.

Artificial intelligence is likewise expected to play a role in real estate with building organization, design and management being eyed as potential areas of application. Also, machine learning is increasingly being used in public spaces concerning property design and urban planning. Even office space construction has been benefiting from AI use. Making matters even better is the fact that many property owners have been embracing the best facility management solutions to help them handle their properties.

home purchase trend

New Technology Trend Takeaways

  • Both real estate buyers and sellers are seen to continue using new technologies.
  • Technologies like online home selling polatforms, apps, social media and smart home technology are now being used by members of the sector.
  • Technology firms and startups servicing the industry are expected to increase.
  • AI will play a major role in real estate.

Higher Mortgage Interest Rates

Mortgage interest rates are rising after years of stagnation. And they are projected to continue to do so at a rate of 4.4% for 15-year mortgages and 5% for 30-year mortgages. The US Federal Reserve decided to temporarily increase short-term interest rates as a way to stabilize inflation and the economy as a whole. Higher interest rates reflect people’s continued willingness to borrow and spend.

For home sellers, higher interest rates necessitate early planning to anticipate lesser offers. Higher rates are also an additional burden that may make buyers postpone their purchases. But canceling a purchase is not the answer. For those who are using credit, the conventional 15-year fixed-rate mortgage should be considered.

Ave. US Home Prices January 2018 to February 2019

In Hundreds of Thousands (USD)

Jan 2018

Feb

Mar

Apr

May

June

July

Aug

Sep

Oct

Nov

Dec

Jan

Feb 2019

Source: keepingcurrentmatters.com

Designed by

Mortgage Interest Rates Trend Takeaways

  • Mortgage interest rates have risen.
  • People are willing to borrow and purchase homes.
  • Home sellers must plan in advance in view of the high mortgage interest rates.

More Listings for Luxury Homes

The real estate inventory of high-end homes is expected to get a boost. The availability of more luxury homes is seen to result from the incentives that sellers get from high home prices. High growth cities such as Nashville, San Jose, and Seattle are expected to register the most increase in home inventory and are expected to spearhead the nationwide luxury homes inventory growth.

High-end residential real estate may see a small reduction in prices. As always, the law of supply and demand rules the market, with luxury home prices being driven by high inventory levels. This could prove to be good news for investors who may want to cash in on luxury homes, which they may even see as undervalued.

luxury home price

Luxury Home Trend Takeaways

  • The market for luxury homes is expected to expand.
  • Increase home inventory are expected in cities like San Jose, Nashville and Seattle.
  • High home prices are credited for the luxury home market growth.

Use of Amenities to Attract Customers

Property owners, landlords, and even builders are seeking to capitalize on amenities to attract new tenants. The staple gym and parking access, it seems, are no longer of critical importance as they are expected of most properties. Now, property owners are looking into offering unique amenities like communal gardens and movie theaters, among many others.

Smart homes are also making an entrance, courtesy of savvy real estate investors. Investors’push to provide amenities may very well signal the need to identify amenities that could have added value on their properties. They should likewise revisit their marketing strategies as amenities alone cannot attract tenants. All property offerings must be advertised while old tenants should know of any new amenities in the offing.

use of amenities trend

Use of Amenities Trend Takeaways

  • Real estate players seek to attract tenants using amenities.
  • Unique amenities will be demanded for new homes.
  • Investors are investing in smart homes.

Trends as Basis for Property Purchase

The real estate market is truly a mixed bag at this point, taking into account the rising home prices and mortgage interest rates. However, the sector is seen to remain sturdy in the next few years, owing to the steady influx of capital flow. Despite the decline in homeownership, real estate listings continue to endure, reinforced by the emergence of the Millennial demographic as robust homebuyer group. Meanwhile, small businesses that maintain properties have been investing in top property management tools.

And we’re just about done here. The trends presented here are expected to serve as a guide for both home sellers and buyers. And this is true, considering the fact that many fund managers and investors have redefined their investment strategies in response to developments in the market. If you are planning to purchase property, you can utilize the data from these real estate market trends to make sure that you get the most value from your real property purchase.

By Louie Andre

B2B & SaaS market analyst and senior writer for FinancesOnline. He is most interested in project management solutions, believing all businesses are a work in progress. No stranger to small business hiccups and drama, having been involved in a few internet startups. Prior to his for-profit ventures, he has had managed corporate communications for a Kansas City-based Children International unit.

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