Demographic shifts are poised to transform the real estate industry now that millennials have taken over baby boomers as the largest generation.
As a growing share of millennials enter their mid-30s, an increasing number of them will be getting married and eventually having children. This points to strengthening demand for buying a home.
Meanwhile, baby boomers’ tendency to age in place creates opportunities for commercial real estate in the form of medical and assisted living facilities development.
Those opinions and trends emerged at a recent gathering in Florida of Realtors from across the nation.
Two speakers with leadership roles in the Counselors of Real Estate, Scott Muldavin, 2017 chair, and Peter Burley, chair of the group’s external affairs committee, participated in a forum reviewing trends impacting residential and commercial real estate.
For the past five years, the committee has identified and released a top 10 list of the issues that are likely to define real estate in the upcoming year. Here are the top issues likely to arise in 2017 according to the Counselors of Real Estate:
- The changing global economy
- Debt capital market retrenchment
- Demographic shifts
- The political environment
- Housing affordability and credit constraints
- The disappearing middle class
- The sharing and virtual economy
- The rise of experiential retail
Since consumers decide to buy or sell a home based on what they believe the future holds, Realtors need to be well versed on emerging trends.
Burley said the lack of new supply coming onto the market has made purchasing a home more expensive.
Furthermore, younger and older buyers are competing over the minimal inventory in many of the same places.
Adding more pressure is that while apartment construction has ramped up in some regions, rents still outpace incomes in many communities.
This only adds to the pressure of aspiring homebuyers trying to save enough money for a down payment.
“Home prices have outstripped incomes and it makes it very challenging for millennials looking to buy,” Burley said. “As a result, rental demand is expected to remain very strong.”
Cities, like Los Angeles, are growing with people preferring to live in or near urban areas.
Those living in the suburbs still want to be within close proximity of walkable areas that offer a plethora of activities and unique experiences. This has resulted in the suburbs striving to become more urban-like with mixed-used developments and office space.
In the commercial real estate retail sector the rapid rise in online shopping has led to major retailers closing stores and shrinking their store footprints.
One emerging trend in the industry is smaller “showroom” space with an online component where consumers can buy at the store and have the item shipped to their home within a few days.
Another shift is that many new commercial construction projects are mixed-use developments with a variety of retail, food and housing.
Dean Vincent is President of the Santa Clarita Valley Division of the 9,500-member Southland Regional Association of Realtors. David Walker, of Walker Associates, co-authors articles for SRAR. The column represents SRAR’s views and not necessarily those of The Signal. The column contains general information about the real estate market and is not intended to replace advice from your Realtor or other realty related professionals.