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The Counselors of Real Estate (CRE) released its annual report last week examining the 10 most important issues presently affecting the real estate market.
CRE, a global professional organization for real estate advisors, described this year’s list as reflecting “a higher degree of economic uncertainty than in years past.”
“Anticipation of rising interest rates, continued currency devaluation, and excess capital flowing into the United States are all on the minds of our membership,” said Noah D. Shlaes, CRE’s chair for 2015.
“Combine this with a growing wage gap and major changes in demographics, and we’ve got a lot to think about this year.”
BuzzBuzzHome News has the highlights from CRE’s top 10 list below.
1. Demographic Shifts: “Large numbers of retiring “Baby Boomers” (born between 1946 – 1964), and the next large population wave, the Millennials (born between 1980 – 2000) — will have the greatest impact on real estate through the lifestyles they choose in coming years.” CRE sees Millennials as being amenity-driven while Boomers are seeking to downsize.
2. Excess Capital Supply: “Funds continue to flow from outside the U.S. to purchase U.S. real estate. The supply is driven by economies that have high savings rates, a shortage of mature financial markets and few safe assets.”
3. Rising Interest Rates: “Interest rates have been at near-historic lows – and the general view is that they will stay that way, for a while longer. But savvy investors and homebuyers alike are preparing for rising rates. When it happens, it will devalue future cash flows, thereby devaluing assets.”
4. Global Instability and Currency Devaluation: “The U.S. dollar remains strong – but the global economy is being affected by currency devaluation in many other countries.”
5. Urbanization: “An increasing desire to reside in “live-work-play” and “walkable” communities is not limited to young professionals; older generations are also drawn to such locations, which affects housing choice for all age groups.” BuzzBuzzHome recently reported on a new study examining urbanization that found that sprawl has been on the decline since the 1990s.
6. Energy: The decline in oil prices has an impact that reaches beyond those who simply work in oil production and exploration industries. As companies in the oil industry reduce their workforces, this decreases buying power, which impacts entire communities as residents spend less on goods, services and housing. CRE points out that oil boomtowns “are now the opposite” and that it is unclear how long this price slump, and its impact on housing, will last.
7. The Gap Between Rich and Poor: “The shift from homeownership to renting, and a decline in local small business ownership, contributes to fewer jobs and a lack of investment in communities, increasing the potential for the social unrest, we are seeing in cities and towns throughout the world.”
8. Infrastructure: “The condition and development of U.S. infrastructure lags behind that of a number of other countries. Aging roads, bridges, and power/gas/water lines no longer satisfy the needs of a highly connected populace, let alone businesses and world economies. Communities and cities do not have the available capital to invest in infrastructure. Public/private partnerships may be the answer.”
9. Real Estate Tech and Crowdfunding: The advancements in real estate tech are happening rapidly and could be revolutionary. “Real estate is one of the most dynamic sectors for technology innovation, positioning the real estate industry for disruption. While venture capital has poured into real estate technology startups, crowdfunding could increase opportunity for smaller investors as well.”
10. Changing Retail Model: “Despite steady increases in online shopping, there is still a role for physical presence, where shoppers can browse and try products. Retailers that incorporate e-commerce elements, including fast delivery options, are well positioned, at least in the short term.”