As we venture into this promising horizon, we set out on a journey that will undoubtedly transform the way we purchase, sell, and interact with real estate. From the bustling metropolises to the serene countryside, a wave of transformative trends is sweeping across the market, leaving no corner untouched.
In this comprehensive exploration, we will delve into the cutting-edge technologies, sustainable practices, and changing consumer preferences that will define the future of real estate and offer unprecedented opportunities for investors, homeowners, and industry professionals alike.
Let’s take a look at some of the key transformations shaping the industry over the next 18-24 months.
Top 5 Trends for 2023 and Beyond
1. Urban Exodus
There are 2 underlying reasons why people are moving from the cities to the suburbs — individuals who lack the means to stay are departing out of necessity, while those with financial means are choosing to relocate.
Individuals who have faced job losses and find themselves unable to bear the high costs of city living are relocating in search of more affordable housing alternatives. The suburbs, with their lower taxes, more economical housing and rent prices, present an appealing choice for these individuals.
Some who are moving away from metropolitan areas choose to seek “middle neighborhoods” in the suburbs that offer a mix of big-city conveniences, such as multifamily housing, excellent public transportation, high walkability scores, and access to shopping and restaurants.
On the other hand, those with ample financial means often choose to move to the suburbs for various reasons. The suburbs typically offer larger homes and properties with more space, providing a sense of privacy and tranquility away from the busy and often congested city life. Suburban areas tend to also have better schools, lower crime rates, and a generally quieter and family-friendly environment, making them an attractive option for those seeking a more peaceful and family-oriented lifestyle. Additionally, the lower cost of living in some suburban areas can allow people to get more for their money in terms of housing and amenities, contributing to their decision to relocate to the suburbs.
2. Real Estate Grows Digitally
The popularity of “virtual staging” witnessed steady growth before the pandemic, but in 2020, it experienced a significant surge. The demand for this service is expected to decrease somewhat after the pandemic. However, Millennials, known for their heavy reliance on social media, are embracing technology to explore and gather information about their prospective neighborhoods. Platforms like Zillow, which allow online browsing and listing of homes for sale, are becoming increasingly popular among this demographic as they seek seamless digital solutions for their housing needs.
The digital revolution has extended beyond just virtual home tours; it has also transformed the mortgage application process. Nowadays, securing a mortgage can be completed entirely online, allowing prospective homebuyers to apply, submit documents, and receive approvals or rejections from the comfort of their own homes. This shift to digital mortgage processes has streamlined and expedited the home-buying journey, making it more convenient and accessible for individuals seeking financing for their dream homes.
3. Surging Single-Family Housing Demand
The shift of people from cities to suburbs has led to a surge in demand for single-family homes. In 2021, house sales witnessed a remarkable 10% increase, reaching the highest level since 2006. Another contributing factor to this trend is the millennial generation entering the phase of homeownership, further driving the demand for single-family properties. Consequently, the inventory of single-family homes has reached its lowest point in nearly four decades, though the duration of this condition remains uncertain. However, experts project that the market will eventually stabilize, and the pace of new construction is expected to catch up with the heightened demand over time.
4. Unstoppable Ascend
The real estate market continues to see upward momentum in home prices on a year-over-year basis. According to Realtor.com, the national median home price for active listings experienced an 11% increase in November 2022, compared to November 2021, reaching $416,000. Although this growth rate is slower than the average 16% annual growth seen in June and July, it indicates a potential calming of the rapid price escalation for 2023. However, strong buyer demand and a shortage of homes for sale will likely prevent significant price drops. While prices may dip slightly due to normal seasonal trends after peaking in early summer, they are still projected to remain higher than they were at the beginning of the year.
5. Accessible but Risky Buying Options
If you’re eager to buy a home but lack the funds, some sellers offer a rent-to-own arrangement as a potential solution. In this scenario, you agree to rent the home for a period, varying from several months to several years, before transitioning into the role of the owner.
The benefit of rent-to-own is the ability to swiftly enter a house without having to wait to save up for a down payment or immediately qualify for a mortgage. However, there are drawbacks to consider. Rent-to-own arrangements can make your monthly rent more expensive since a portion of it is allocated toward future homeownership. With rising rent prices nationwide, this could exacerbate your financial burden.
Another risky trend to avoid is taking out a personal loan to finance a down payment, equivalent to buying a home with 0% down. This entails borrowing the entire cost of the house from two different companies at different interest rates, resulting in increased complexities and potential headaches.
It’s important to aim for a down payment covering at least 5% to 20% of the home’s value. Purchasing a house with anything less can hinder your progress toward other financial goals due to higher interest and fees. Moreover, most mortgage lenders do not support such practices, and attempting this route may even disqualify you from obtaining the mortgage you need.
Bottom Line
The current state of the real estate market is complex and influenced by factors such as the pandemic and the new normal. Nevertheless, experts anticipate a healthy outlook for the sector in the coming years. The increase in homeownership, driven by the emergence of the Millennial demographic and pandemic-related concerns, contributes to the ongoing stability of real estate listings.
These trends hold significance for both home sellers and buyers, as evidenced by the adjustments made by fund managers and investors to adapt their investment strategies to market developments. If you are considering a property purchase, utilizing the insights from these real estate market trends can help ensure that you make a well-informed decision and obtain the maximum value from your real estate investment.
