Most real estate investors would say it’s been a pretty good year in 2016. Although betterment investing has become popular, real estate remains a popular investment among all ages. Interest rates have been low, and the lending crisis of 2008 is now well in the past. There are many trends that might affect whether this strong real estate market continues. Millennials are flocking to the cities, raising urban real estate prices. They will be encouraged to borrow as interest rates remain low, but it remains to be seen whether technological change and global instability will sabotage local real estate markets.
Trend #1: The Urbanization Movement Rises in Popularity.
The urbanization movement is a trend of increasing demand for mostly young people living in urban areas. These live, work and play communities feature a vibrant mix of markets, restaurants and retail stores. The urbanization real estate trend affects the demand for both residential and commercial space. People can walk to work, grab a bite to eat and shop all within a small community. This trend is already well on its way. You just need to travel to a major city to see that it’s happening. Cities like Atlanta, Denver, Portland and Seattle all feature these new types of urban communities. They continue to pop up all over , typically attracting millennial buyers.
The urbanization movement in some way counters the popularity of families moving to the suburbs. It will be interesting to see how the two opposite movements (one towards the city, the other towards the suburbs) interact going forward.
Trend #2: The Increasing Prominence of the Internet in Real Estate Transactions.
The Internet continues to evolve in ways that affect real estate investors. This poses challenges and opportunities as more buyers are relying on the Internet to help them find their brokers and lenders. It seems like brokers and lenders currently have a love and hate relationship with the new connected real estate world that the Internet brings. Real estate professionals love it when it works in their favor, but they hate it when sites like Zillow steal their leads. The real estate world would be much happier cultivating their own leads, but they have to hedge their bets by purchasing leads that they can’t generate in-house.
Trend #3: World Instability Will Possibly Affect Local Property Values.
Global instability is a trend to keep tabs on for real estate markets all over the world. The ongoing refugee crisis in Syria, the instability of major European countries (including Italy, Portugal and Greece) as well as China’s mounting debt all could have global consequences. Couple those factors with fears over devalued currencies, terrorism, cyber-security and massive foreign money flows into America, one has to wonder how well real estate values will hold up. The stock market has been on the rise lately due to so much capital flowing into the stock market from abroad.
Trend #4: Low Interest Rates.
Long term and short term interest rates both ultimately factor into the rate that people pay for mortgages. Now the Federal Reserve doesn’t control mortgage rates. It’s the mortgage-backed securities market that controls mortgage interest rates. Interest rates have been very low recently, but that stability may soon vanish. The Federal Reserve does control short-term interest rates and has been hinting that they will hike the rate upwards. It remains to be seen if these rate hikes will affect mortgage interest rates and the real estate sector in general.
Get Your Real Estate Insured.
Your real estate investments are vulnerable to all kinds of unforeseen disasters. These include earthquakes and hurricanes. To be ensured you’re compensated in the event of a catastrophe, make sure you shop around for insurance quotes before investing in any property.
