With appreciation slowing, there are faint indicators of a market shift steeping—but for agents and brokers, prospects are ripe, and will continue to be in 2019, according to a report by the Urban Land Institute (ULI).
“The notion that real estate is a people business has, thankfully, not dropped out of the conversation,” the authors of the report state. “Human capital has been very much a part of the driving forces in real estate demand.”
From affordability to disruptors to the inventory shortage, challenges have emerged in housing in the last 10 years—challenges expected to lead to a normalization in two or three years, along with a broader economic stabilizing. According to the report, breakthroughs come from embracing, not fighting, the shifting tide.
“The real estate market is experiencing more than just a transition from one stage of the typical real estate cycle to another—the market is dealing with transformation on multiple fronts,” the authors state. “While all the changes may seem daunting, and there are increased risks, there are also opportunities for those who are prepared to move forward in the transformed real estate market.”
The most critical issues, according to the report, are the costs of construction, which has been impacted more recently by tariffs, and land, which is scarce. When it comes to affordable housing, the margins, simply, are slim.
For brokers, builders and other constituents, adopting creative fixes is key. Areas like Boston, Dallas-Fort Worth—No. 1 for opportunity, according to the report—and Denver are attracting a diverse pool of talent; builders are developing in response, with future homeowners and their interests in mind.
“Success will emerge from those markets that tackle their problems innovatively—requiring precision in providing the right real estate in an increasingly specialized economy,” the authors state. “Success will elude those markets remaining passive or stubbornly applying 20th century approaches—real estate expansion to ride economic growth—to 21st century challenges.”
In Boston, a combination of educational and employment opportunities, plus historic landmarks and sporting venues, is luring the masses. According to Case-Shiller data, home prices have risen 5.5 percent year-over-year.
“The Boston housing market continues to be very strong,” says Valerie Post, license partner at Engel & Völkers Boston. “There is record-low inventory of homes for sale. What is driving demand is not speculation, but a robust job market. Boston is one of a few cities in the U.S. that has a diversified economy—a knowledge-based economy that will continue to see diversified job growth well into the future.
“We are seeing considerable growth in the professional, science, technology and healthcare sectors,” Post says. “With world-class educational institutions and job sector growth in related fields, Boston is able to retain and attract top labor talent from around the world.”
In Dallas-Fort Worth, there were a collective 37,000-plus newcomers over one year, according to Census estimates from 2016-2017. In Dallas, home prices are up 4.7 percent year-over-year, but the amount of listings on the market is perking up, as well—a help to the millennial workforce. For millennials, a DFW-area home is easier, relatively, to save for: According to a RealEstate.com report, they can accumulate enough for a down payment on an entry-level home in about three-and-a-half years.
Millennials are not the only ones with promising prospects. DFW was named one of 2019’s Best Places to Retire by U.S. News & World Report for its affordable housing, among other factors.
In Denver, there is a brewing cooldown relative to the rest of the U.S.—but Kerron “K” Stokes likens it to a shift from “the speed of light to the speed of sound.” Denver home prices are up 7.7 percent year-over-year—ahead of the average nationally, 5.8 percent.
“Relative to the rest of the country, the Denver market continues to be strong in both appreciation as well as market activity,” says Stokes, broker, Resource Group with RE/MAX Leaders in Centennial, Colo. “Denver remains a very popular place for people for a lot of reasons: 1) it’s a central point in the country, with an international airport where they can easily access other parts of the country and the world; 2) the business environment here is very favorable; and 3) the work/life balance and community—and overall healthy, outdoor lifestyle—is really appealing for companies who are looking to attract talent.”
Additionally, with Colorado an early legalizer of marijuana for recreational use, Denver’s economy was and is fast-growing.
“Some of the subsidiary businesses that were created in technology and innovation were created out of the legalization of marijuana—that did have an influence on the economic boom over the last 3-4 years,” Stokes says.
Denver was also dubbed one of the “Most Fun Cities in America,” with amenities that draw new residents year after year.
“Almost nine months out of the year, there’s outdoor activities,” says Stokes. “There’s a really blossoming restaurant and cultural arts environment out here. It’s a beautiful place to live.”