Buyers, sellers, investors, and landlords should be well versed in the top real-estate trends if they want to stay competitive. Every year, we see new trends that shape this market.
Although these shifts rarely happen immediately on New Year’s Day, if you’re aware of them at the changing of the calendar, you can develop goals to spur a strong investment year in real estate.
1. Millennials Remain Your Biggest Renters
Recently, the millennial generation nudged Baby Boomers out of position for the largest generation in the U.S. So, they will be key influencers in 2018’s real estate trends, particularly in rentals.
Millennials have owned the spot as the top renters for several years now. Out of the 45.9 million renting households in the nation, about 18.4 million are composed of millennial renters.
Landlords and property investors should seek properties that will appeal to the millennial generation. Smart-home automation, online rent payments, social media connection, pet-friendly accommodations, and central locations are among the top features millennials look for in rental properties.
2. More Millennials Will Buy
Although most millennials will remain in rental categories, we’ll see an upsurge of homebuyers in that group. Expect an upsurge of individuals in their 20s and 30s who are looking to buy.
“They’re at that point where they’re seeing their incomes grow, and that will help them take on bigger mortgages,” says Danielle Hale, chief economist for Realtor.com with reference to millennial renters. She recommends preparing houses to sell accordingly.
3. Supply Will Finally Catch Demand
The years 2014 through 2017 were notable by a high demand for homes but a massive shortage. Hale believes this will change in 2018.
“The majority of the year should be challenging for most buyers, but we do expect growth in inventory starting in the fall,” she says. “Once we start to see inventory turn around, there is plenty of demand in the market.”
This is great news for sellers because it means more profit for them, but a correspondingly tougher market for buyers. “Overall, prices are expected to increase, and we’re expecting to see more of that in lower-priced homes,” Hale says. “It will get a bit worse before it gets better for buyers of starter and mid-price homes.”
4. Suburban Areas Make for Great Investments
Rental properties in urban areas continue to rise, largely thanks to the high renting power of millennials who prefer downtown. But stiff competition is making it difficult for many renters to afford a space, so we may expect an increase in rentals in suburban regions.
Kate Konklin of Multi-Housing News recommends that investors take a closer look at what the suburbs have to offer in income properties. She counsels to look in areas you wouldn’t normally consider.
“People want a neighborhood,” she says. “They want livability. They want walkability. They want an environment that draws people together. Purchasing a building is an investment into the community. Buying distressed buildings, under-performing buildings or under-managed buildings gives an investor the opportunity to enhance those neighborhoods.”
5. Southern Homes Make Great Investments
We’re always interested in how the Houston market will perform against national standards. It looks like 2018 will be a great year for southern properties.
Economists are expecting a 6 percent growth in home sales, which is a significant jump from the 2.5 percent growth outlook on the national level. They add that the increase will largely be due to the allure of southern cities with their low cost of living, lower loan amounts, great weather, and generally low home prices.
6. Interest in Smart-Home Automation Will Grow
There’s already substantial research to support the installation of smart-home technology. A 2016 Coldwell Banker study indicated that 71 percent of homebuyers in a survey of more than 1,250 American adults were willing to pay more for a move-in-ready house that includes smart-home automation.
Although the numbers have indicated the appeal of smart-home automation for some time, it hasn’t really sunk in. The coming year may well be when we see the technology make heavy inroads in real estate.
Smart tech has become more affordable. More homeowners are including it in their plans, which means more buyers and renters will grow to expect it. Investors would do well to study the latest smart technology and prepare to offer it in their homes.
7. Generation Z Will Become Major Renters
Millennials may still get most of the attention, but as they steadily shift toward buying, the next generation will step up to bat.
In 2018, we’ll see the debut of Generation Z, which generally means individuals born after 1995. Gen Z will likely become the largest demographic in the U.S. within the next decade, and they’re expected to comprise 40 percent of all consumers by 2020.
If you invest in rental and income properties, you should be aware of the needs and interests of this youngest generation of adults, since they’ll dominate much of the rental market in the near future. They’ll expect even greater digitization than millennials, so connection via social media, text, and various online conduits will be a huge selling point for the group.
“Their ‘gadgeteria’ ethos and social-media second nature will put more and more pressure on retailers and retail landlords to create experiential stores with connectivity that respond to individual preferences,” predicts Patrick Sisson of Curbed.
8. Rent Estate Will Remain a Wise Investment
There are more renters now than at any time in the past 50 years, and that will not change in 2018. The rental scene is not just composed of college grads and unmarried renters; we’re seeing an increase of renters in every category, even families with children and high-income households who have traditionally been homeowners.
According to a Harvard study, mortgage rates and uncertainty from the 2008 housing crash are major factors in rent estate today. The study also shows that, although homeownership is strong, rental units remain an excellent source of income for investors.
“Rental markets are extremely tight despite the relatively strong pickup in multifamily construction,” says the Harvard report. “According to the Housing Vacancy Survey, the rental vacancy rate fell for the seventh straight year in 2016, dipping to 6.9 percent — its lowest level in more than three decades.
“MPF Research reports that the vacancy rate for professionally managed apartments was also just 4.4 percent. While some rental markets showed signs of softening in early 2017 — most notably in San Francisco and New York — there is generally little indication that increases in supply are outstripping demand.”
This will be an excellent year for real estate, particularly for investors who plan to rent out their properties to turn a profit. Being prepared to anticipate these trends is the first step to making your fortune in 2018.
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