There are several current and emerging issues that will likely impact the real estate industry in 2020. According to the Counselors of Real Estate, an advisory organization that monitors real estate in the United States, infrastructure, rising interest rates, and changing population dynamics are among the top issues that will likely affect the growth of real estate in the United States.
This write up will help explore some of these issues:
Infrastructure has been ranked as one of the top issues affecting the real estate industry today. It has become a chronic issue that has forced industry players to lobby the government to prioritize infrastructural repair and modernization over the years. There is an urgent need for government Policymakers to give more attention and priority to roads, bridges, tunnels, power grid, railways, and water and storm way systems.
Poor infrastructure hampers the growth of real estate. It also triggers the slowing down of the overall economy of the country. Industry experts believe that America lacks behind when compare to leading economies of the world when it comes to modernization of the real estate infrastructure. This has, in turn, created drag in the country’s economic competitiveness. Sound infrastructure will always attract more and more real estate investors to the country.
If the nation fails to improve its infrastructure, large US cities such as Washington DC and New York will not experience any significant corporate expansions and top talent.
Rising interest rates
Another issue that will likely impact on the growth of real estate in 2020 is the rising interest rates and the economy. In the past year, the Fed has raised rates at least twice. The increasing rate will hamper efforts being made at making affordable housing accessible to all. The high rates will also likely trigger a recession shortly. Recession in the economy will result in job losses or deficient creation of job opportunities across the economy.
Besides, an increase in interest rates will undoubtedly lead to a lower number of new home purchases or resale. It will also result in higher mortgage rates, which may trigger high inflation.
Generational change and demographics
Unlike in the past, there are new groups of the population that are influencing residential and commercial real estate. These groups include the millennial, baby boomers, gen x, and gen y. experts reckon that millennials are nowadays influencing the real estate industry in a big way.
Besides, millennials have overtaken baby boomers in numbers. They are now the biggest real estate consumers. Real estate developers have to come up with products that will suit the needs of this new population group. They need to develop multifamily properties that have evolving amenities. The real estate developers also need to develop more experimental shopping and entertainment destinations that will meet the expectations and preferences of the millennial.
Technology is continuing to disrupt the conventional way of doing business. The real estate industry is not an exception. Technological advancements have seen an increase in demand for connectivity by potential homeowners. There is now more demand for smart homes which will effectively make older structures to be less desirable. Besides, new technologies such as blockchain have a significant potential to disrupt real estate in a big way, which includes transactions to titles.
Natural disasters and climate change
Natural disasters are unpredictable and can be a cause of untold suffering to both homeowners and developers. Natural disasters present a real risk to the real estate industry. Climate risk is emerging as a new aspect of fiduciary to most developers and investors. This has seen an increase in several investors who demand that climate risk should be assessed before they put their signature into any real estate deal.
Experts have opined that natural disasters and climate risks are influencing investment decisions now than ever before. Some of the natural disasters and climate risks in the crosshairs of most investors include hurricanes, flooding, wildfires, extreme snow, drought, and heatwaves.
Real estate developers should come up with new strategies to mitigate these risks. These include hardening assets, installing backup generators, and strengthening emergency preparedness and strategy.
The Prevailing political issues currently affecting the country has been identified as another setback to the growth of real estate. Political infightings such as the recent impeachment proceedings against the POTUS will frustrate ongoing attempts to find solutions for issues affecting real estate such as poor infrastructure, climate change, and affordable housing.
Political instability will also affect governance in a big way. It will result in the frustration of specific bipartisan policies aimed at improving the real estate industry. It will also lead to America’s erosion of competitiveness in the world stage. If the current political woes are not solved, it will be hard to get policymakers to focus on long-term goals that would have benefited the industry. Uncertainty in government will also likely lead to uncertainty in real estate demand.
The migration of the population has the potential of changing the economic landscape of the state and the country at large. It will also impact on the property demands. People move due to many reasons, including business conditions, technological advancement, and tax policies. People also relocate due to climate change and extreme weather conditions.
The result of this migration is that some regions of the country may experience a population increase than other areas, which will be experiencing net population loss. Currently, there are demographic gains in major coastal cities of the country. These include California, Boston, and Washington cities.
A rise in the population of an area will trigger high demand for housing. This new demand comes with new opportunities for real estate developers. On the other hand, a shrinkage population in a city will result in low housing demand and losses to developers.
If you are a real estate developer or investor, you need to consider the issues we have raised in the article when making significant decisions on their businesses. The article has presented both risks and opportunities that will help you make an informed decision on real estate.