Is the impending recession weighing on your mind? As a real estate professional, you can’t afford to be complacent about future conditions. But the sheer number of factors that go into forecasting and preparing for future real estate market trends may be overwhelming.
You’re not alone in your concern for the future of real estate. What are others keeping in mind as they look toward the future of housing, commercial property and financing?
The number one concern for housing is infrastructure, according to an annual survey by the Counselors of Real Estate, an international organization of vetted and experienced real estate professionals, including appraisers, investors, financial professionals, academics, developers and others. The organization polled its 1,000+ membership base to come up with the ten biggest issues facing real estate in 2019 and beyond:
Top ten issues impacting real estate
| 1 | Infrastructure | An issue that often gets pushed to the back burner, dilapidated roads, bridges, power grids, levees and other necessary property elements are barriers to growth. U.S. infrastructure improvements are falling behind global competitors, making U.S. cities less desirable for places of business. Tax cuts make future investment in infrastructure less likely. |
| 2 | U.S. housing | The U.S. housing market is in crisis due to a lack of building, lessened demand from young adults burdened by student debt, low income growth and rising levels of income inequality. Recognized by survey respondents as an urgent matter, the fall-out from the failures of the U.S. housing market is being felt across all real estate markets both here and abroad. |
| 3 | Weather and climate-related risks | As damaging storms and weather extremes occur with greater frequency, the risks of climate change are weighing more heavily on property investors each year. 2017 was the most expensive year in history for property insurance losses and California’s losses in 2018 alone were over $12 billion, due primarily to wildfires. Insurance costs will continue rise for property owners, and strategies for safeguarding investments will need to be adapted in the years ahead. |
| 4 | The technology effect | Technology has an oversized impact on real estate because its presence is felt everywhere and at every stage of a property’s life. Demand is rising for real estate that keeps up with technological advances, including cybersecurity, building operations, valuation, document management, lighting and wireless services (to name just a few). |
| 5 | End-of-cycle economics | The economy — and real estate market — move in predictable cycles, punctuated by interest rate movements and job performance. Signs in 2019 point to an economic cycle past its zenith, meaning a downturn is quickly approaching. Real estate professionals and investors need to act now to avoid disaster when the next recession arrives. |
| 6 | Political division | Political disagreement has led to many of the issues facing real estate to be pushed aside and ignored. Politicians fighting tooth and nail over political ideals can’t find the time to address necessary improvements, such as infrastructure, income inequality and climate change. Global trade is one major casualty of political division that has dire ramifications in the real estate market. |
| 7 | Capital market risk | Acquiring and refinancing property and recapitalization of existing investments rely on liquidity from active capital markets participants. As transaction volume declines in 2019-2020, real estate professionals see their access to investment funds at risk. |
| 8 | Population migration | Demographic shifts across the U.S. are having a major impact on commercial and residential real estate. For example, a disproportionate number of people seeking to move to California cities are upsetting the balance of homes available to newly formed households. |
| 9 | Volatility and confidence | While confidence remains high in 2019, shifting economic conditions guarantee decreased confidence in the months to come. Construction starts are already down considerably and will continue to suffer with decreased confidence in future economic performance. |
| 10 | Public and private indebtedness | In the U.S. property investment sphere, $3 of debt exists for every $1 of equity in 2019. Consumer debt is also at an all-time high. Future growth is therefore limited as consumers and investors alike become maxed out on their debt-to-income (DTI) ratios. |
California real estate professionals: what do you think the biggest issues are facing our state’s real estate market in 2019 and 2020? Share your thoughts with others in the comments below.
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