The real estate market has seen several major shifts since the collapse of 2008. While many experts in the field are predicting strong growth for the next few years, there are several specific trends currently dominating residential real estate sales.
1. Prices Rising
For several years, home prices have been creeping up at a steady rate, and this will obviously have a tremendous impact on the market. According to The Fiscal Times, home prices rose an average of 6.3 percent in 2016 and are expected to rise another 5.2 percent in the beginning of 2017. This increase means that, as a homeowner, your equity will continue to build. It also means that even though mortgage rates are currently low, many individuals and families will be priced out of the housing market.
2. Low Inventory
There has recently been a shortage of homes and rentals across the country, and this shortage has seriously affected the real estate market. Fortune reported that builders are struggling to find skilled workers at all levels of construction. The downturn in housing in 2008 drove many in the construction field to new careers. Even when builders are able to step up and meet the higher demand, there is still a lag because of the time it takes to build. The labor shortage has affected the market in several ways. Not only are builders struggling to keep up with demand, but they're building higher-end homes to accommodate increased labor costs while maintaining their margins. This ultimately means an even greater shortage of options if you're in the market for a starter home.
3). High Rents
For years, renting has been notoriously expensive in cities such as New York and San Francisco. In some cities, rents have been rising at 10 percent or more each year. High rents, however, are also spreading into smaller cities. Forbes reported that since 2000 rents have grown about twice as fast as actual wages. Renting is often thought of as a stepping stone to home ownership, but increased rental prices may actually prove to be a barrier to buying. With home prices still extraordinarily high and inventory low, this leads to a higher percentage of people looking to rent. With an increase in renters and a shortage of space in many cities, paying even higher rent is the end result.
Even though prices have been rising, there is still a demand for townhouses. There are several reasons these types of residences are incredibly popular right now. There is little to no maintenance, yet there is often a lawn and bigger living areas that are associated with traditional homes. There are usually more amenities and greater security than what is provided in many apartment complexes. Whereas you only own the airspace inside your condominium, with a townhouse, you actually own a small amount of land. This "best of all worlds" aspect of townhouse ownership has created an increase in demand.
5). Sustainable Homes
Consumers are increasingly seeking sustainable homes for a variety of reasons. Concern with climate change and desiring homes that can withstand natural disasters are two driving forces behind the trend. What House? stated that research has shown homeowners are more interested in sustainable homes than was previously believed. These types of homes have moved beyond just building a structure with eco-friendly materials and installing solar panels. Sustainable homes can include everything from being able to harvest rainwater to installing geothermal HVAC systems. More home buyers are realizing the long-term benefits of owning a sustainable home. Initially, they may be more costly than a traditional home, but they often provide substantial savings on heat and water bills.
These five trends will likely affect residential real estate sales for several years. Understanding and adapting to the changes in the market will enable you to make smarter, more profitable decisions.