According to leading real estate professionals, if the real estate industry is a baseball game, then it is in its fourth or fifth inning. If you are keen on the real estate business, here are a number of trends you should look out for this year:
Second-tier cities are leading the recovery
If you have noticed, builders, developers and investors have lost interest in 24-hour gateway cities, where the economy does not rest for the night, and have shifted their attention to second-tier cities, which are coming up and growing to become 24-hour economies, where they can find more housing deals. Therefore, if you are looking to invest in real estate, going for those big cities might not be a smart decision this year.
Multifamily apartments are waning
During the recession, there was a constantly growing demand for apartments. As a result, with a boost from heightened demand for homeowners-turned renters, multifamily apartments surged. However, this year, this rush is quieting down since supply and demand have switched places, and experts think there may have been too much multifamily construction the previous year.
Real estate recovery hangs on job growth still
The slow pace of job growth, wage growth, as well as income, is still holding back the growth of real estate, a fact that is not likely to change anytime soon. Many cities in some of the leading states in America and the world have experienced strong housing recoveries due to the strength of their economy. Hence, areas with lower unemployment can expect to recovery better this year, while places with economic challenges will not.
Shadow banking is coming up
There is optimism from citizens that lending standards will loosen up this year but financial experts are uncertain about this. To fill this gap, a trend known as shadow banking is emerging, which looks like it might take on a larger role in the lending market as the year progresses. Shadow banking has some similar aspects of traditional banking but it is down outside the bank and so can go around banking regulations.
Condo development is still slow
The recovery of the condominium market has not yet matched that of single-family units, and investors do not want to risk putting up new condominium units just yet. Instead, developers are investors are taking a dual-track approach, where they develop a rental apartment building with an option of changing it to condominiums within a 16-month period if the market picks up. High-end buildings are also problematic for investors.