Top 3 Trends that are Reshaping the Real Estate Industry

Top 3 Trends that are Reshaping the Real Estate Industry

Every industry is changing rapidly due to technological advances, but the real estate industry remained largely unchanged until recently. With a growing number of tech investments in the real estate sector and the rising influence of millennials on the market, a few trends are emerging as ones that should be closely watched by industry professionals.

A study from the Consumer Reports Research Center found that 71% of millennials aspire to own a home, but only 26% already do. Since they are the largest consumer group in American history, it’s important to consider what real estate trends will impact the way the 71% enter the housing market. Alternatives to traditional investing and construction due to millennial influence are also driving a significant shift in the way the industry operates. Since millennials are getting married later many of them expect to be single when they purchase their first home. The result has been a shift toward smaller properties with more amenities for shared access.

Additionally, services like AirBnB have turned family homes into potential assets, helping middle-class families capitalize on previously unrealized earning potential. Gene Sperling, former Assistant to the President for Economic Policy, shares “For the median household, making the extra $7,530 income that is typical for an Airbnb host renting out a single property would be the equivalent of a 14% raise, bringing the household income to over $60,000.” Because millennials are a tech savvy generation they are more likely to utilize these services as both property owners and renters.

The following are three trends that will drive significant change in real estate over the coming year:

Predictive Analytics for Short Term Rental Investing

With more and more investors looking for short-term rental properties, the need for resources to help those investors calculate their decisions is growing as well. Until recently it would have been difficult for anyone who wasn’t a real estate expert to find the necessary data to make those decisions. A group of innovative startups, however, are aiming to solve that problem.

Bill Lyons, Founder and CEO of Revestor, a real estate search engine that uses data to help people find properties based on potential returns, shares why predictive analytics are changing the market, “It takes a lot of work to compile historical data, trends and predictions for the future in a way that is useful for potential investors. It gets even tougher for individual investors when trying to get data on short-term rental potential. That’s why we created a platform to help give people that information in a customizable format.”

Lyons pointed out that people do not just want to look a the price of a property when considering a purchase, they want to know important data like the cap rate, cash flow, cash on cash return and ROI in order make the most informed decision possible. “This is the same actionable and intelligent data that you would get when buying a stock. If you invest in the market you aren’t just looking at the price of the stock – you’re also looking at the market cap, p/e ratio, and dividend.”

Platforms like Revestor are aiming to make that data more accessible so investors can make better decisions in the short-term rental market.

The Rise of 18 Hour Cities

Millennials are also changing the way people think about real estate in cities. Despite common perception, millennials are not all city center types looking to live in highrise downtown apartments. A study by PWC indicates that between 2013 and 2014, more millennials migrated out of the city into suburbs than those who moved into cities.

For those that stayed or made a decision to move to the city, they likely moved to up and coming 18-hour cities that provide opportunities for work and leisure without the downsides of major 24-hour urban environments. Cities like San Diego, Austin, and Miami are all examples of places that have a large number of people looking for the benefits of city life without a loss of local culture. These same cities that are quickly gaining popularity happen to match up with data from the 2015 Kauffman Study which details areas with significant growth in startup business.

So while more millennials are leaving the city for suburban environments, those that are staying in the city are looking for the best of both markets.

Customizing Options and Expectations

Millennials are known for being a generation with high consumer expectations and a drive for personal actualization. The home is not excluded from these pursuits, which is why there has been an increased focus on providing top-tier amenities in new housing developments and construction.

The demand for walkable neighborhoods with local shopping, food, and entertainment options is growing. The National Association of Home Builders estimates that the amount of new condominium construction went up 18% in 2015. The millennial passion for a suburb experience close to work is perfectly timed for this kind of growth.

These increased expectations are driving significant competition and market growth in both traditional and emerging real estate investments. While AirBnB was early to the scene a growing number of competitors like VRBO, HomeAway and other boutique options are gaining popularity with consumers. The increase in brands indicates how much potential technology brings to the real estate market.

As the market changes due to generational and technological shifts, it is important for investors, consumers, and professionals to consider how these changes can benefit the industry. While it may require updates to old processes, it would seem that these advances are opening up real estate to new demographics by providing, data, access, and expertise much more efficiently.

By Drew Hendricks

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