Key Takeaways
- Entrepreneurs should take advantage of real estate market predictions, and plan their business and marketing strategies accordingly.
- National real estate trends are expected to shift in 2019, as housing markets shift in response to a focus on sustainability and inventory.
- Emerging technologies, such as cryptocurrency and artificial intelligence, are among the driving forces of the latest real estate trends.
While it is impossible to predict exactly what the 2019 real estate market will hold, anticipating the upcoming trends can help set your business up for success. Investors should examine the ways they adapted to the 2018 real estate trends, and determine which practices can be improved on in 2019. Economists and real estate experts are providing increasingly accurate forecasts for the upcoming year, and there are emerging real estate trends 2019 investors should prepare for.
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UPDATED 2019: Real Estate Market Trends
To accurately predict the trends of 2019, it is crucial to analyze how the housing market changed in 2018. According to Bankrate, 2018 saw the rate of home price increases go from 6.8 percent to 5.5 percent by the end of the year. The slowing prices are attributed to rising interest rates and an increased focus on property affordability.
2018 also saw an increase in mortgage rates—as high as five percent in October—with the year closing out closer to four percent. The fact that rates decreased before the end of the year could bode well for homebuyers, as many expected a much higher peak.
Further studies, such as the 2019 National Housing Forecast by Realtor.com, expect inventory increases and a continued slowing of home price growth in the new year. The demographics of homebuyers and renters will also change in 2019, as millennials are projected to account for up to 45 percent of mortgages.
The changes in the housing market have laid the foundation for a transformative year ahead in the real estate industry. Investors should expect to see new technologies and changing preferences among generational groups become two of the driving forces behind the real estate trends of 2019.
According to research completed by the Urban Land Institute, real estate investors will also see a diversification of investment opportunities across markets. All in all, 2019 will see the rise of several new trends, as real estate professionals of all types will shift to accommodate the ever changing housing market.
Here are the expected top real estate trends of 2019:
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Cryptocurrency: Real estate is yet another industry that will be disrupted by the emergence of cryptocurrency.
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Increased Inventory: Inventory is projected to increase throughout 2019, particularly among high-end homes.
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New Amenities: Landlords will respond to competitive markets by offering upgraded amenities.
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Technology: New technologies, including artificial intelligence, will shift real estate as a whole.
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Sustainability: Amid new climate reports, the real estate industry will see a renewed focus on sustainability.
Emerging Real Estate Cryptocurrency
Since its inception less than a decade ago, cryptocurrency has disrupted a number of industries—the most recent being real estate. In its simplest form, cryptocurrency is a digital asset created to act like any other currency; though it operates through blockchain networks. These serve as online marketplaces with high levels of security. So how does this affect the real estate industry?
The increased use of cryptocurrency could have a massive impact on real estate, as it aims to speed up the entire transaction process. In doing so, blockchain networks promise to reduce the number of intermediaries required when closing deals. The effects of this change will be felt by real estate brokers, lawyers and even lenders. For buyers and sellers, reducing intermediaries could result in quicker real estate transactions and smoother closing processes.
The increased pace of real estate transactions through cryptocurrency will also result in increased liquidity of real estate assets. Through the creation of blockchain networks, which essentially serve as online trading platforms, real estate will be bought and sold more quickly than ever before. While 2019 may only be the beginning of cryptocurrency in real estate, investors can expect to see the digital currency play a meaningful role in the industry. To learn more about what to expect this year, be sure to read this article on cryptocurrency in real estate.
More Luxury Homes For Sale
Inventory shortages have dominated the headlines for several years now, but in 2019 that is expected to change. According to a report from Realtor.com, inventory is expected to increase throughout 2019—particularly in upscale homes. The study suggests that higher prices are incentivizing sellers, leading to increased inventory.
While the projected increase is still less than seven percent, investors will notice the biggest changes in high-growth markets. Investors operating in San Jose, CA; Seattle, WA; Nashville, TN; and Worcester and Boston, MA may notice the biggest increases. Inventory is projected to grow nationwide, but these cities are expected to lead the way.
These projected inventory increases signal that 2019 could be a good year for those interested in luxury real estate. The basic principles of supply and demand are still in play: as inventory increases, high-end homes may experience slightly lower prices than usual. This means savvy investors have the opportunity to secure great deals when it comes to luxury real estate, possibly even finding homes below market value. Those interested in working with luxury real estate should consider the various benefits of flipping high-end houses.
Landlords Compete For Amenities
With housing markets becoming increasingly competitive, property owners, builders and landlords have started looking into unique amenities to attract tenants. Because parking and gym access are almost expected — particularly in the downtown area — landlords are now being forced to look into more unique offerings. In 2019, real estate investors may begin to notice an increase in property developments that include movie theaters, communal gardens, and dog runs.
Real estate investors will also have added competition from new smart home offerings and firms that provide amenity services, like laundry pick up. In order to fully prepare for this increase in amenities, investors should do two things. First, investigate surrounding properties to get an understanding of which amenities add property value before making any big changes. Second, take a careful look at their marketing strategies. All the amenities in the world will not attract (or retain) tenants if they go unnoticed. Investors should be sure to advertise all that a property has to offer, and inform existing tenants of any new amenities.
Artificial Intelligence Technology On The Rise
Technology has long been a driving force in the real estate industry, and it shows no signs of stopping in the year ahead. Real estate investors can expect to see increases in the number of online home selling platforms, apps and even smart home technologies to name a few. According to Curbed, investors will also see an increased presence of tech firms and startups catering to the real estate industry. Investors should pay careful attention to the resources that are sure to pop up throughout 2019, as many are predicted to be geared towards speeding up the transaction process.
Regarding the rise of artificial intelligence, real estate investors can expect to see the biggest potential for AI technologies in building management, organization and design. Machine learning is increasingly being used to analyze the practicality and safety of public spaces, which has opened new doors in urban planning and property design. Companies, such as WeWork, are even utilizing AI technologies of their own to improve office spaces.
Additionally, new AI technologies will be aimed at increasing security and efficiency throughout the real estate industry. Most notably, investors may notice new marketing opportunities, as AI aims to improve targeted campaigns. According to the Urban Land Institute, residential and commercial real estate will both be affected by the adoption of “AI-driven buyer targeting.” One of the most important things to remember as these technologies roll out is to always mind due diligence. With the influx of new tools, it is crucial that investors discern which technologies will actually improve business operations.
Prioritization Of Sustainability
Environmental issues have been a hot topic in recent years; however, the focus on sustainability appears to be more urgent than ever before. In the midst of new environmental research, including a climate report issued by the UN in 2018, investors can expect to see a push towards better building and construction practices. These changes are intended to decrease the environmental impact seen across the housing industry.
The prioritization of sustainability in the real estate industry will be a mix of self-regulation and legislation. For example, in 2018 California passed a requirement mandating all new homes to have solar power. Though the requirement will be gradually introduced over the next two years, real estate investors can expect to see changes as the housing market accommodates the regulation. The impact of this bill will be felt throughout the country, as clean-energy practices are emphasized throughout 2019.
Smart investors should also consider upgrading existing properties to include sustainable features. According to a Gallup News study, Americans have become increasingly concerned about environmental issues since 2016. This means investors can expect potential tenants and homebuyers to seek out more green-friendly properties in the upcoming year. Investors hoping to boost their focus on sustainability should look into green building practices and energy efficient home appliances.
Real Estate Market Trends 2018
Before jumping into an in-depth analysis of predicted 2018 real estate trends, it is important to briefly reflect upon the key highlights from 2017.
According to Zillow, 2017 was full of record-breaking home price growth coupled with an inventory shortage of for-sale homes. The California Association of Realtors cited a median price increase from $502,300 to $538,500, representing a 7.2 percent increase year-over-year.
Millennials represented the largest proportion of buyers at 34 percent of the market, according to the National Association of Realtors. Of this proportion, 66 percent were first-time homebuyers. Needless to say, the shortage of affordable entry-level properties created a problematic barrier for the nation’s largest buyer segment. In 2018, investors will continue to witness millennials take center stage in driving housing and real estate market trends.
Although it is impossible to predict future real estate market trends with 100 percent certainty, these key insights from 2017 provide the context for future shifts in the market.
Below are several real estate 2018 trends expected to come to prominence:
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Aspiring Millennials home buyers will gravitate towards suburban areas.
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Generation Z will begin to enter the post-college housing market, forcing real estate investors to get creative with their marketing.
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Boomerang buyers will emerge as homeowners forced into foreclosure during the Great Recession are able to reenter the housing market.
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The rise of fractional investing will see entrepreneurs pooling their funds in order to purchase properties.
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Driven by changing consumer demographics, smart home technology is on the rise.
The Millennial Peak
Millennials make up the largest proportion of homebuyers, a majority of which are buying properties for the very first time. According to Realtor.com, this generation could make up as much as 43 percent of the buyer’s market by the end of 2018. Moving into their mid-20’s and 30’s, millennials are beginning to experience some income growth and are able to take on larger mortgages.
Because home prices have continued to rise, millennials are increasingly moving to suburban areas, exacerbated by the shortage in affordable homes for sale. As they come into the age of forming households and having children, more and more of the nation’s largest cohort of homebuyers is looking to the suburbs and secondary markets for affordability and quality of life. According to the Census Bureau, millennials are roughly one-fourth more likely to move to the suburbs. Investors should prepare to accommodate this 2018 real estate market trend by planning their marketing strategies accordingly.
The Gen Z Effect
While it seems like just yesterday that millennials came of home buying age, investors should be made aware that Generation Z is sneaking up quickly. Born between the years of 1995 and 2001, Gen Z’s oldest bracket is soon expected to enter the post-college housing market. Marketing towards millennials already poses no easy feat, and the highly individualized tastes and preferences of Gen Z will be a wild card for the real estate industry.
Immersed in technology from birth, “Gen Z-ers” will most likely gravitate towards an urban lifestyle, and will appreciate social-media worthy experiences that respond to their unique, individual preferences. Much like millennials, the latest cohort will be encountering a housing shortage while bearing hefty school debt. Because Generation Z grew up in the sharing and gig economies, investors have an opportunity to market more affordable, energy-efficient options such as small starter homes or multifamily properties.
The consumer behavior of Gen Z is still unknown, and should be closely monitored as their market share increases. Investors should be vigilant about keeping a pulse on their preferences and adjust their marketing strategies accordingly, particularly when marketing to renters.
Boomerang Buyers
It would be unwise to ignore the growing segment of homeowners able to re-enter the housing market after foreclosure. When the housing market crashed, thus catalyzing the Great Recession of 2007-2009, over 10 million Americans were forced into foreclosure. As many investors know, anyone forced into a foreclosure must wait seven years before they are able to purchase a property again. In 2018, this segment of potential homebuyers will be too significant to disregard. According to the National Center for Policy Analysis, roughly 1.5 million Americans will become eligible to re-enter the housing market in the next year.
A majority of Boomerang Buyers will hail from Generation X, so investors should take time to understand their preferences and devise a competitive marketing strategy. For example, one might expect someone who has gone through foreclosure to be practical and cautious. Potential buyers may appreciate plenty of testimonials and success stories in order to help build trust. These 50-somethings routinely use social media and online reviews, so investors should also pay special attention to their online reputation and marketing strategies. In addition, investors might get ahead by helping educate potential buyers regarding changes in the mortgage process, as standards have become much more strict in comparison to the mid-2000s.
Fractional Investing
As home prices continue to appreciate indefinitely, both investors and mainstream home buyers alike have a need to finance properties creatively. Although creative financing tools such as peer-to-peer lending and crowdfunding have entered mainstream attention in recent years, fractional investing will emerge as a noteworthy 2018 real estate trend. Investors looking for diversification or passive income opportunities will increasingly engage in group investments. Individuals looking for alternative funding sources may leverage crowdfunding or partnerships to pursue ownership of properties. In addition, fractional investing may potentially allow some entrepreneurs to pursue properties in the luxury market.
However, fractional ownership does not come without potential downsides. For example, selling a property with multiple owners, or with multiple funding sources, will add complexity to an already intricate process. Entrepreneurs should mind their due diligence and obtain legally-bound agreements before diving into any type of investment project. On the other hand, buying properties with multiple partners comes with the benefit of helping spread and reduce risk. To learn more about real estate partnerships, be sure to read this article.
Smart Home Technology
It is no secret by now that millennials, and in the coming years Gen Z-ers, are at the forefront of the home buying market. A clever entrepreneur should develop an understanding of these potential buyers’ preferences and outfit properties in a way that caters to each generation’s consumer preferences. Smart home technology has already created a buzz in the housing market and is among the top real estate trends 2018 has to offer.
According to a study conducted by NPD Group, 41 percent of millennials report having an interest in owning smart home products. This is in contrast with Gen X’s 28 percent and baby boomer’s 19 percent. Moreover, one out of four millennials have installed at least one smart home product in their homes, compared to the mere 12 percent of the rest of the population. Gen Z-ers reportedly show even stronger preferences for gadgets and interconnectivity. Recent smart home products are relatively easy to install and connect, and are increasingly affordable over time. As more players enter the smart home and automation space, niche markets for various products will also develop. Sellers will notice increasing access to different varieties of affordable smart home products so that they may attract these younger generations of buyers.
In addition to smart home technology, technology in general will shape the real estate market in 2018. A recent article published by The Close discusses innovative technology trends that are taking the industry by storm like predictive data, social media usage, and 3D and mobile applications. These advances in technology are expected to change the way real estate professionals generate leads and appeal to buyers. For example, investors who focus on “mobile first” advertising will see a rise in millennial leads. Focusing on the different benefits technology can offer is sure to help investors adapt to housing market trends 2018.
Summary
Although it is virtually impossible to predict the real estate trends 2019 with absolute certainty, they are nonetheless helpful in anticipating likely shifts in the market. Investors should strive to gain an in-depth understanding of the latest technologies hitting the market, and cater to shifts in consumer preferences in order to get a leg up on competitors. Through a careful evaluation of their past performance and an anticipation of new market trends, investors will be able to plan 2019 business strategies accordingly—and hopefully achieve success throughout the new year.
What are your real estate predictions for the next five years? Share your thoughts in the comments below. And be sure to check back next year for our 2020 real estate trend analysis.
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