The Commercial Real Estate Alpha Site

Technology will continue to revolutionize the real estate transaction

BY CARA AMEER via Inman

Key Takeaways

• Low inventory will continue to create stress in many markets. Tax reform may redefine where people live and invest in real estate. Natural disasters will become more concerning for buyers and sellers and have direct financial affects on insurance and sale prices.
• Will inventory remain low? Will tax reform redefine where people choose to live? Will it make more sense to rent or own? How does the market move forward from so many natural disasters?

  Looking into my crystal ball, here are my top eight predictions for 2018:

  Affordability

  Affordabilty remains a challenge, and the word “affordable” is a relative term depending on the geography of one’s real estate market.

  In Silicon Valley that may mean buyers are challenged to find anything decent under $2 million, and for others in typically affordable but fast-appreciating cities like Nashville, trying to find a home under $300,000 may be nearly impossible.

  Builders aren’t building new housing to meet the needs of first-time homebuyers or those on fixed incomes, which includes many empty nesters due to rising land acquisition costs.

  Due to the upswing of the real estate market over the past several years, new construction is booming, and the developers are passing the cost of this demand on to builders in terms of more expensive land prices. And the builders, in turn, are sharing that love with buyers in terms of higher base prices and expensive lot premiums.

  It is growing more challenging, even in smaller to mid-size cities, to find an affordable property to purchase that doesn’t need significant work (like dwindling foreclosure inventory with multiple offers).

  Limited wage growth relative to real estate prices and rising interest rates may continue to push affordability that much more out of reach.

  Migration and mini real estate booms

  Once tax reform is implemented and people have had time to adjust to a “new normal,” look for potential migration and/or an increased exodus from states with a high cost of living, burdensome income tax rates and harsh weather in favor of states with lower cost of living, no state income tax and milder climates as further incentive to relocate.

  For those who have the flexibility to live anywhere, there could be an increase in people looking to move to no income tax states such as Florida, Nevada, Tennessee and Texas.

  These states have already experienced a significant increase in their populations due to the aforementioned reasons before tax legislation was passed, now those real estate markets may experience an increase in demand that could push their prices higher and tighten supply that much more.

  Conversely, states such as Connecticut, Illinois and New York may see a slow down in their real estate markets with less buyer interest as well as cost prohibitive reasons to move there altogether. It may make more financial sense for those living and working in these areas to rent.

  Conversely, buyers may seek out lower-priced homes to take advantage of the lower mortgage interest and property tax deduction limits.

  Owners of higher-end homes may put their homes on the market well ahead of their plans to move, recognizing it may take much longer than previously anticipated to sell.

   

  

• Cryptocurrency, blockchain and the ‘instafying’ of real estate

  With bitcoin becoming all the rage, look for the envelope to continue to be pushed in this regard.

  If it starts happening with more frequency in California, you can bet that other markets will start to follow the trend, particularly in regions of the country that have a lot of interest from foreign buyers as well as in technology rich employment areas with high wages and a savvy audience of forward-thinking buyers.

  Speaking of automation, can the real estate transaction be “instafied”?  Blockchain technology and several apps are in development attempting to boil down a 30-60 day process to a matter of days.

  Want to buy a house? There’s an app for that.

  Redevelopment

  With available land in prime areas at a premium or practically non-existent, look for developers and builders to continue to find more creative ways to redevelop property with old and outdated living structures in favor of newer and more functional living and work spaces.

  Those parcels of land upon which super-sized functionally obsolete homes sit are ripe for redevelopment.

 

 

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