Real Estate Industry Trends

Real Estate Industry Trends

2016 has come to an end, and now it’s time to think about real estate industry trends for 2017. While predictions don’t always come true, it’s important to be prepared for what may lie ahead. The following trends are based on industry reports, historical evidence, and expert opinions across the real estate industry.

So stop sifting through the internet, and read on.

Rent Increases

According to our partner, Zillow, rent is expected to grow throughout the nation, particularly on the West Coast. With an appreciation of more than 6 percent, these areas are seeing some of the fastest growth in nation. This growth can be attributed to higher salaries in these tech hubs.

Throughout the nation, though, Zillow’s chief economist says “Renters should have an easier time in 2017. Income growth and slowing rent appreciation will combine to make renting more affordable than it has been for the past two years.”

The New York Times is calling 2017 “The Year of the Renter” for some major East coast cities. Notoriously expensive cities like Manhattan are seeing decreased rent prices due to inability and unwillingness of tenants to pay the astronomical living costs.

Rising Interest Rates

The recent hike and subsequent hikes in Federal Interest Rates are a cause for concern in commercial real estate (CRE), and real estate in general, for many reasons. The first reason being that the timing coincides with many maturing mortgage-backed securities. This means that many borrowers will want to refinance sooner rather than later. Forbes says another effect of the hike will be the higher cost of capital, leading borrowers to pay more interest. Subsequently, since it will be harder to keep up with higher interest payments, borrowers will only have access to smaller loans. These issues could make property deals more difficult.

Read more about this real estate industry trend here.

Smaller Houses

From the first quarter of 2016 to the second, median single-family square floor area decreased by 73 feet, according to CNBC – a trend that is only expected to continue. To industry experts, the main component of this seems to be affordability, since homebuyers are more interested in living closer to popular areas, rather than living in larger homes.

Millennials, being much more cautious with their finances than some generations, are not drawn to bigger homes, but smarter and sustainable homes. Micro-apartments are seeing an increase in demand, thanks in part to those preferences.

City Connectedness

According to PwC’s recent report, historic trends suggest that technological enhancements lead to better real estate performance, and some cities are focusing on that strategy. PwC is predicting that smart cities that take advantage of technological enhancements will attract more interest from investors, therefore driving economic growth. A smart city is defined as an urban development vision to integrate multiple information and communication technology (ICT) and Internet of Things (IoT) solutions in a secure fashion to manage a city’s assets.

High Construction Costs

There are many predictions about the construction industry for the next year, and all of them lead to one thing – higher construction costs. A contributor to this is the labor shortage in the industry, which has been a problem since 2006 when the construction industry cut 40% of its workforce, according to The Wall Street Journal. Not to mention, the lack of labor has forced employers to pay construction workers more than the national average. On top of this, material costs are also rising, potentially halting projects throughout the year.