#1 Shrinking Supply
While some indicators point to a slight uptick in the number of new homes being added to the market, most data reveals that the overall amount of homes available for purchase will continue to shrink into 2020. There are two fundamental reasons for this development:
1. More people are deciding to stay in their current homes for longer; and
2. Mixed-use apartment complexes are being prioritized over single-family homes.
In fact, according to research from real estate company Redfin the average homeowner is currently staying in their home for at least 13 years, up from eight years only a decade ago. If people aren’t moving, there aren’t homes for sale. You don’t need to do a regression analysis to understand that sort of simple math.
#2 Developing Demand
On the flip side, older Millennials are pushing hard to own their homes. Despite spending much of the 2010s preferring to rent in urban centers, they are now financially secure enough to feel that homeownership is an important goal. In fact, Millennials are the most active home-buying generation in 2019.
Plus, you have to consider the number of large tech and tech-related companies opening up satellite offices throughout the country. These new job opportunities attract people from around the world, meaning that these chosen cities are experiencing record peaks in housing demand. A few locations are experiencing exponential growth. Take, for example, Austin, TX, which was just rated as the #1 housing market in America for 2020, according to a recent PwC report.
#3 Affordability Angles
People want to move for jobs, and they want affordable housing when they secure that job. But as we all learned in Economics 101, the combination of high demand and low supply leads to higher prices. This creates what some experts are calling an “affordability gap” – new homes are being built, but they’re out of the price range of the people who really want to buy them.
Per a recent Curbed article, this growing divide could be described as “building 90 percent of our housing for 10 percent of our households.” In fact, politicians and companies alike are investing time and energy into pursuing solutions to this dearth in affordable single-family housing.
This trend exists for both urban professionals and lower-income workers. According to Forbes, not only are home prices predicted to increase by 5.6% by September 2020, but the prices for entry-level homes will increase faster than the pay of the people such homes are designed to attract.
#4 Generation Gaps
For all of those confounding trends in urban housing, both for established metropolises and fast-rising cities, Baby Boomers and Millennials are casting aside generational differences to point the real estate market in fun and interesting directions.
Active Living Apartments
As the average Boomer lifespan extends past 80, they seek new ways to enjoy their lives. For many, that means downsizing from a large family home they no longer want to maintain and moving into the city. But instead of buying a home, they’re seeking full-service apartment living where they can enjoy the culture of the city without the hassle of homeownership.
And who’s moving into those homes? Older Millennials who, only 10 years ago, flocked to city centers and apartment dwellings. However, they aren’t looking for your standard picket fence and long commute experience. They seek a holistic “live, work, and play” solution: affordable homes in areas with familiar urban amenities, complete with nearby jobs available by eco-friendly public transportation.
More Mixed-Use Facilities
To be sure, plenty of Millennials still remain averse to suburban living. They are much more interested in creating “live, work, and play” experiences in city centers, specifically for ecological and economic reasons. Their ultimate goal is to solve the “tragedy of the commons” by decreasing individualistic consumption for their own benefit and for that of the whole planet.
#5 Thriving Technology
We saved the most engaging trend for the end. Like many traditionally people-facing industries, real estate has been slowly digitizing for many years. Most obviously, the general public has access to a range of apps that help them search for available properties to buy or rent without talking to an agent. This has democratized the industry and increased the greater understanding of the hard work real estate agents do for their clients.
But the real transformation has occurred in how agents, title companies, and lenders have improved the entire home-buying process for people. Consider the following ways we can now help people by increasing the efficiency and accuracy of what we do:
- Digital applications
- Electronic documentation
- Online income verification
- Automated notaries
- VR / AR home tours
- Smart security services
The short-sighted among us will claim that technology takes the “personal touch” out of the equation. We believe technology serves to enhance the entire experience. Not only does it give clients access to more information (and on their terms), but it simplifies the tedious steps. This gives people-first agents the power to build strong relationships with truly engaged buyers.
At Patten Title, we couldn’t be more excited by everything 2020 has to offer. We are big fans of facing challenges head-on, whether we’re talking about interest rates, mortgage rates, housing bubbles, cross-country employee migrations, and more. No matter the state of the real estate market, it’s essential that you stay informed and partner with title companies and lenders who have your best interests at heart. Real estate truly is a team sport!