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Trends to follow in US real estate

March 21st, 2017
There is great diversity in the real estate markets across the US, with a wide range of property assets available for buyers and investors of all sizes, from the individual household to the biggest corporates. A multitude of factors which are driving growth in the real estate ecosystem. Five of these notable aspects include, changing demographics, suburban growth, demand for multi-family housing, migration to middle sized cities, and finally technology and social network investment platforms.

CHANGING DEMOGRAPHICS

There are a variety of trends within the framework of major US demographic changes which will continue to shape real estate development, investments and pricing trends over the next decade. The continued rise in immigrant population growth, women's changing role in our society, as well as the pivotal role that millennials play in addition to an aging population, are all key factors that are shaping our present and future.

Many of the immigrants who have arrived in the US over the past years are highly educated middle to upper class families with significant purchasing power. Immigration accounts for a large segment of US population growth and housing demand. Women in today's America are the majority of college degree holders and in a growing amount of cases have raised the glass ceiling, bringing home the same or higher salaries as men. We are also seeing more women enter the workforce in comparison to previous decades, with 46.8% of the workforce comprising of women according to the Bureau of Labor Statistics.

Leading the surge in demographics are the millennials, the upbeat generation who were born between 1982-2004. These millennials are looking to enter the housing market as first time home owners, although they are entering the market later than their predecessors due to a variety of reasons, which include less purchasing power due to inflation. Millennials will rent for a larger part of their lives in comparison to the generations before them. They also add to the heavy demand on multi-residential projects for students and young renters. Elderly America (above age 65), on the other hand, which accounts for 38% of the population, is a growing population segment and their changing housing and lifestyle needs also affect the market to a great degree.

SUBURBIA AS A DRIVER OF GROWTH

The US suburban market will continue to remain a dominant force in the residential real estate market for years to come. Following the bubble burst in 2008, many people moved back to the cities due to the low prices, however the current market inventory has become more expensive and many are looking out beyond the cities borders to acquire housing that is more affordable.

According to PWC's Emerging Trends in Real Estate, 79 percent of the population in the 50 largest cities in the US reside in the suburbs. Since 2010, jobs have also increased 9 percent in the suburbs versus 6 percent in urban areas. Furthermore, the predominant amount of 25-35 year olds live in the suburbs.

RISE OF MIDDLE SIZED CITIES

There has been a country-wide shift to secondary markets in the middle sized cities to acquire a higher standard of life. Property and rental prices in the major cities including New York, Chicago and San Francisco have spiked and there is also a constant strain on these markets due to the flow of millennials with high paid jobs arriving to these cities.

There is a major trend of millennials looking to middle sized American cities for the purchase their first homes. Middle sized cities are experiencing rapid job growth and higher levels of construction than in the past. Affordability, shorter commutes to work and a better standard of living are supporting the migration.

According to the recent US Conference of Mayors Survey, medium sized cities are leading the smart city project revolution which aim to improve quality of life, efficiency and government services to citizens. Of the current 237 smart city projects across the US, 168 of theses projects are in the middle sized cities.

RISE OF MULTIFAMILY

Residential multi-family projects continue to show signs of exponential growth, driven by a range of macroeconomic factors including supply constraint and rising demand. Millennials will rent for a longer period of their lives in comparison to previous generations due to increased housing prices. There is also increased demand from older residents for multi-family projects as many are looking to downsize to luxury urban apartments from their current private homes.

TECHNOLOGY AND SOCIAL INVESTMENT PLATFORMS

Social investment networks where real estate investors aggregate opinions and make investments, have become a well-developed and trendy industry. Technology, the democratization of the internet and an ease in regulations have opened the doors for a surge of new investors to enter the real estate market like never before.

The evolution of the real estate investment market online started as a phenomenon which only attracted the tech-savvy, but now has become a mainstay which industry experts predict will continue to thrive and we continue to see exponential growth and greater innovation in the years to come.

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