One of the great misconceptions of the real estate market is that it is in constant fluctuation. While real estate can certainly be a volatile sector, there are ways to predict changes that may be on the horizon. The key to interpreting future happenings in the market is to look at current trends, as well as those of the recent past, and analyzing what they may be saying about where things are headed. Accurately discerning what these trends have to tell you doesn’t always require an advanced analytical skill set. In many cases, you simply need to be aware of they are; they’re underlying issues will often speak for themselves.
With that in mind, here are some of the top trends observed in the real estate sector, and what they might be saying about the future:
The market still favors the seller: Those heading out to buy homes today are often finding the lifetime of today’s average listing to be relatively short. One of the major factors that has figured into the recent lack of inventory is the fact that many millennials are looking to finally get serious about home buying. This may seem to fly in the face of the popular notion that Generation Y prefers to rent more than buy. However, as many in this group are looking to settle down and start their families, the demand for housing has increased. Plus, given that federal programs like Fannie Mae and Freddie Mac began 2015 by offering down payment options as low as 3 percent in response to the first-time home buyer segment being the lowest it had been in over 25 years, it’s no surprise that buyers seem to be flooding the market. Expect that trend to continue into the new year.
Is rent’s hold on the market slipping? For the last several years, renting has been viewed by many as a more attractive option than buying, particularly to the younger generation. Whether this was a residual effect of the housing bubble bursting, or the fact that millennials enjoy freedom, access to urban walkability, or other factors may all play a part. In the end, it may have been simply because it was cheaper to rent than to buy. However, the rise in rental demand has seemingly started to shift opinion in the opposite direction. With the prices on prime rental properties, many are now looking back to the home ownership as a more affordable alternative. With rates currently the lowest they’ve been in a few years, it’s not a stretch to assume that 2016 will bring more buyer activity.
Real estate investing is going through a dry season: As the demand for properties increases, potential investors are finding themselves having to compete with residential homebuyers for prime properties. The resultant rising prices of homes means that buying low and selling high is becoming much more difficult. As a broker, your task in 2016 may be to steer your clients looking for properties for commercial purposes in other directions when it comes to securing successful CRE investments.
Though the trends of 2015 cannot tell us definitively what will happen in 2016. Many factors will determine how the real estate market will play out. With the upcoming presidential election upon us, foreign stock markets and investors affecting the real estate landscape, and a lull in the real estate sector; it’s best to expect the best but always plan for the worst.