In 2015, real estate agents across America rejoiced, as last year was the strongest year for the housing market since it all but collapsed in 2007. Experts predict that we can continue rejoicing through 2016. With unemployment steadily declining and consumer confidence up, people are once again ready to trade up for a bigger home or settle into their very first properties. Here are five major real estate trends that will affect the industry in the coming year—and what you can do to stay on top of them.
1. It’s becoming more affordable to buy than rent
Rent prices have been soaring across the U.S., and that trend is expected to continue. Vacancy rates are at low levels, as would-be buyers over the last few years have opted to rent long-term instead of buy. Landlords and property owners can push the rent up—often to prices that are higher than a mortgage would cost.
Additionally, while every market is different, many experts are expecting only moderate price gains this year. Buying will be more affordable than renting in many markets, and people will choose to invest their money in a property they may own someday.
Many of your clients will be re-entering the real estate market after financial hardships during the economic downturn forced them to sell or foreclose on their homes. Others will be overly cautious first-time buyers. Put on your kid gloves, and be prepared to carefully walk them through the process.
2. Quality inventory is on the rise
Second on our list of real estate trends for 2016 is an increase in quality inventory. We are seeing fewer distressed properties on the market, and at the same time single-family home median sales are expected to continue to climb. This year, buyers will have a large inventory of quality homes to choose from.
If you don’t truly understand what your clients want, you will spend way too much time looking at homes that don’t meet their expectations. Spend a great deal of time early on learning exactly what they need so that you can narrow the options and focus on those properties with true potential.
3. The Millennials are coming
Millennials are officially the largest generation in the U.S. labor force, and many experts predict that this will be the year that a good portion of them invest in real estate. In fact, Jonathan Smoke, chief economist for Realtor.com, predicts that Millennials will buy one out of three homes in 2016, up slightly from last year.
While a larger pool of clients is rarely a negative, real estate agents are going to have to figure out how to work with this new type of client. You’ll have to attract them online and be willing to work with the apps they trust and love, such as Zillow. Most important: Prepare for yourself for clients who have done loads of online research and deem themselves experts in real estate. It’s going to take a great deal of patience on your part.
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4. Mortgage rates are likely to increase
In December, the Federal Reserve raised interest rates, and that is expected to boost mortgage rates. That, of course, will increase monthly mortgage payments and affect debt-to-income ratio, which will make it harder for some people, specifically first-time buyers, to afford homes.
Additionally, current home owners will opt to remodel and expand their current homes through home equity loans, rather than move up to a bigger or nicer property. “People aren’t going to trade in their historically low mortgage rate at this point for a higher one,” says Kermit Baker, an economist with the American Institute of Architects.
You will need to work within—and under—people’s budgets, and avoid the temptation to show them properties just outside their price range.
5. Your online presence will matter more than ever
The final item on our list of real estate trends for 2016 is the increasing importance of online marketing. Forty-two percent of clients first look for properties online, while only 14% contact an agent to begin their home search. And 82% of buyers find online websites to be the most useful source of information on properties, according to the National Association of REALTORS 2015 Profile of Home Buyers and Sellers. With Millennials taking the market by storm, that number is expected to rise.
If clients can’t find you online, they may never find you. If you haven’t yet, now is the time to invest time and money in a user-friendly website, social media, search engine optimization, online ads and more.
These are the real estate trends that will shape the real estate market in 2016. Are you starting to see evidence of real estate trends in your neck of the woods? Share your insights with us in the comments section.
Interested in growing your real estate knowledge and expertise? Learn about Real Estate Continuing Education Courses at McKissock.