Changes that Affect Real Estate

Four Demographic Factors Affect Real Estate The Urban Land Institute predicts there will be two major changes beginning in this new decade in our country that will affect the housing market.

The first is that home appreciation will slow. The report predicts annual appreciation of 1 percent to 2 percent. The second change is that the record-high U.S. homeownership rate will decline from 69 percent to 62 percent.

Four other demographic trends are likely to have an impact as well. Aging baby boomers, those 55 to 64 years old, will keep working, and, some may stay put in their current suburban homes until the values recover. And, just as I wrote about last week, those in this group who do move will look for comfortable, easy homes (first-floor master bedroom), but the report indicates they’ll look for mixed-age living environments that cater to active lifestyles.

The second major demographic trend could impact the second-home market. Those between the ages of 46 to 54 years old, according to the report, are in their prime earning years; however, they lack home equity and may not be able to afford second homes (unlike the older baby boomers).

There are approximately 68-million people that make up Generation Y. This group is even larger than the baby boomers. But the report indicates this group is less interested in homeownership. The author of the report, John K. McIlwain, wrote, “They will be renters by necessity or choice for years ahead.” Not surprisingly, this tech-savvy group places high value on communities—real and virtual—where information and ideas can be shared.

This generation likes walkable, close-in communities. They’re not seeking to escape to the outer edges of town, unless they can’t afford anything nearby. Another big draw—“net zero” homes—green and powered exclusively by alternative energy.

The fourth major demographic trend involves immigrants. This group is often attracted to multi-generational housing in areas that have a strong sense of community. So, larger homes are preferred, if affordable.

Overall, the lasting stability of the U.S. housing market, according to McIlwain, will depend most on the structure and revitalization of the private home mortgage finance system.

"Re-establishing a robust private mortgage market will require both strong market fundamentals and a reformed mortgage securitization structure that eliminates past abuses," McIlwain said. Bye-bye suburbia, study says. Well, not completely. But the study does indicate that several factors are escalating the popularity of urbanization: two-person household growth (including those households without children), fewer baby boomers moving to the suburbs, Gen Y opting/forced to rent rather than own, and public policies that encourage compact development.

However, the author of the study says that urban infill development can’t accommodate all the housing demand from the demographic groups. McIlwain cautions that suburban development "must adapt or it will be obsolete.” A new era is blossoming, “The suburban century is over. This is the urban century."

Phoebe Chongchua
		About the author:
		Phoebe Chongchua is an award-winning journalist who appears on TV, in print, and on the Internet. She's a former ABC affiliate News Reporter/Newscaster who founded Live Fit Magazine in 2004, recognizing how the journalism industry is rapidly moving online. The magazine has evolved frrom producing content only for LFM to producing much-needed video feature news stories and documentaries for companies and associations. Phoebe discovered an unfulfilled niche market and expanded LFM in order to meet the needs of a growing marektplace. Her clients are happy she did! Live Fit Magazine produces video news stories that entice viewing audiences to watch the video, spread the message, buy the product or visit the establishment. It's a creative, credible approach to marketing companies, products, and services. Few companies offer what Live Fit Magazine can do for your company in a single feature video story. Phoebe works with clients to seamlessly integrate their newly produced video into their current marketing materials. She offers expert advice on new marketing strategies and call-to-action campaigns. Her innovative efforts keep companies positioned for success and their customers regularly watching new and informative videos.
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