This 2020 has been quite a year so far, hasn’t it?
And despite or because of what this year has brought so far, knowing about current and emerging trends in real estate can give you a nice edge, if you take them into consideration for your overall real estate business strategies and also marketing strategies.
So, as a real estate professional, you might wonder what is going in this 2020 with these trends.
Eight trends could be found to be influencing this 2020, and they are:
- A decreased rate of median home price increases
- A gap between seller motivation to sell and buyer motivation to buy
- Millennials make the majority of home buyers
- Properties take longer to be sold
- Wider gaps between household income and housing costs
- The emergence of Hipsturbias
- More and more technological disruption of real estate
- Growing demand in logistics real estate (industrial/distribution) and multifamily housing
Read on if you would like to learn more about these 8 trends and what this means for your real estate marketing strategies.
Trend 1 – Property Supply and Demand
Due to the main event of 2020, which I even don’t like to call by its name anymore (constantly present, and begins with “c” and ends with “19”), home sellers are on the fences and prefer to wait out a little bit.
On one hand, due to social distancing measures, properties stay longer on the market and on the other hand, buyers are prevented from doing property tours.
Then, also fewer new properties were listed and some were even delisted.
So more and more sellers started to get in an observing position to wait things out and buyers couldn’t move as they wanted.
Overall, the national inventory decreased by 15.3%, and 44.1% fewer properties were listed compared to the year 2019.
This inventory decrease was even bigger in the largest U.S. cities.
In these areas, it declined by 16% compared to 2019. (source).
A similar situation is confirmed in the area of new construction projects.
In April 2020, the National Association of Homebuilders index fell by 42 points to 30.
To give you a perspective, with an index of 50 or higher, you can say that homebuilders are optimistic.
When they are rather pessimistic, it’s likely that they won’t start new projects, but would finish the projects they are currently working on.
Similar to appraisers and inspectors I mention further below, some professionals such as electricians are impeded in working as they were used to (social distancing, etc.,source).
Similar is the situation with sellers of already existing homes, which is confirmed by a study by Fannie Mae.
This study finds that a gap has developed between seller motivation to sell and buyer motivation to buy.
Only 32% of sellers think it’s a good time to sell, and, in contrast, 52% of buyers think it’s a good time to buy (source).
This eagerness to buy on the buyer’s side is fueled by lower rates of 30-year mortgage rates and 5-year adjustable ones, that according to Fannie Mae, are likely continue to decrease throughout 2021 compared to 2020, and then likely to rise again in 2022 (source).
When applying the economic rules of supply and demand, this situation likely leads to a continuous rise of home prices, because of the same or an increasing number of buyers compete for a reduced inventory of homes.
In some areas, this will be in the single digits and, for example, for houses that provide the right features to Millennials (the largest buyer group right now), this likely means price increases in the double digits.
Nevertheless, that doesn’t necessarily mean that property sales will increase, because due to the pandemic crisis, real estate transactions are partially impeded.
Similar to the situation with electricians or plumbers above, some appraisers and inspectors can’t come to the respective properties to do their job anymore or this kind of work is delayed.
It feels a bit like a real estate transaction “bottleneck”.
With some type of an AI powered appraiser or inspector robot or drone that would fly to and through the house, or come by in a self-driving car and do this jobs, this could be different (provided they are Covid-negative).
But this type of technology is not yet available (it probably exists only in my mind) and the reality is what it is.
One prediction in the context of homes sales is that throughout this year, 2020, and the first quarter of 2021, sales will stay lower than in 2019, but then increase again throughout 2021 from the second quarter onward.
Speaking in percentages, it’s a decrease of 10.1% from 2019 compared to 2020 and then again an increase in 2021 of 7.1% (source).
What Does This Mean for Your Marketing Strategy?
Some of the negative effects regarding slowed down real estate transactions can be mitigated by using remotely powered marketing methods, such as 3D virtual tours (covered in this article of mine) and other strategies I discussed in my article about marketing ideas during Corona times.
Another approach is to focus on properties that are especially suitable for Millennials, since it is easier to convince a seller that it’s still a good time to sell to this buyer group.
For housing types that are less appealing to Millennials, sellers might not be that easily convinced and still prefer to wait the situation out before putting their homes on the market again.
But overall, I think that from a seller’s perspective, targeting Millennials in this situation is rather beneficial, because it caused somewhat of an artificial sellers’ market.
Trend 2 – Still a Median Home Price Increase But Not at the Same Rate
At first glance, it looks like good news, the median home listing price increased by 0.6% so now it is at $320,000.
But in March, this rate still was at 3.8%.
So, with the first trend and this trend, we can already see an overall slowing down of the real estate market (source).
What Does This Mean for Your Marketing Strategy?
Depending on the buyer group you are targeting, price increases can lead to slight decreases of online traffic to lead conversion rates, since the properties you are promoting get a bit more out of reach for some of the buyers that could have afforded it before the increase.
When it comes to Millennials, this can indeed happen because their buying power is not that strong yet (because of student loan debts, etc.) and many still prefer to rent and not to buy (source).
Trend 3 – Millennials Are Still the Majority When It Comes to Buying Homes
Despite the fact that many don’t feel they can afford to buy a home and are likely to continue renting, this 3rd trend confirms again that millennials are now the majority when it comes to buying homes (38%).
By the way, a millennial belongs to the generation born between 1980 and 1998 (I guess then that I belong to this generation).
You can learn more about this largest group of first-time homebuyers in this article.
What does this mean for your marketing strategy?
As often stated on my website, knowing your target audience is essential for carrying out effective marketing campaigns.
Since millennials are heavy internet and mobile users, this is where your marketing efforts should be focused on.
Trend 4 – It Takes Properties Slightly Longer To Be Sold
You could read already in the section about trend number 1 that the real estate transaction process right now is delayed and impeded.
In 2019, it took a home on average 58 days to be sold. Now, it takes 4 days longer and thus, 62 days.
When taking a look at weekly data, you can find an even bigger delay and longer times on the market.
Here, it shows not 4 days but 9 days longer on the market.
Although in large cities average homes get sold faster, the increase in days on the market could be found to be more significant there. (source)
Trend 5 – Widening Income – Housing Cost Gaps
On the one hand, there is a recovery of single-family home pricing over the past seven or eight years, but on the other hand, household incomes can’t catch up with it.
This leads to an increased gap between household income and median home pricing (source).
This situation was confirmed by survey participants across the U.S. that stated that housing conditions were “challenging”.
This appears to be especially true in high-cost markets such as D.C., Boston, Los Angeles, San Jose, and San Francisco, where there is a lack of medium density housing.
Trend 6 – Hipsturbias
If you know what a hipster is, you might already be able to guess what Hipsturbias are.
Well, according to a good definition from Wikipedia about Hipsters:
“The 21st century hipster is a subculture that ostensibly emphasizes or fetishizes style, authenticity and uniqueness while paradoxically notably lacking authenticity.
Members of the subculture typically do not self-identify as hipsters, and the word hipster is often used as a pejorative for someone who is pretentious or overly concerned with appearing trendy.
Stereotypical elements include vintage clothes and other non-mainstream fashion, skinny jeans, checked shirts, an ironic mustache or full beard, and big glasses.”
The “Hipsturbia”, than, is where hipsters live.
Now, after the definition from Wikipedia, you might wonder, who the heck would like to live with people lacking authenticity and being overly concerned with appearing trendy?
Well, the definition might have picked out the ultra-hipster.
Considering the optimistic side of things, there are also hipsters that are not completely identified with their external image they try to display to the outside world.
The Hipsturbia is just a label of replicable 24-hour downtown models that can also be brought to suburban communities (I doubt that the ultra-super hipsters would move to a downtown).
According to survey participants, there is a desire of suburbs to create a variation of such 24-hour downtown live/work/play areas.
One participant mentioned that people want to work in a mixed-use environment.
Close to New York, you can find such examples of developing Hipsturbias in some New Jersey communities, such as Maplewood, Hoboken, and Summit.
Several others north of Manhattan can be found in New Rochelle and Yonkers.
What these developing Hipsturbias have in common are strong walk scores, great transit access, and plenty of restaurants, retail, and recreation areas (source).
What does this mean for your marketing strategy?
I would presume that these areas receive the most demand from Millennials closely followed by Baby Boomers that want to size down.
We can assume that in those areas, seller markets could arise.
As a realtor, this would make the acquiring of buyer leads easier but on the other hand acquiring of sellers more difficult.
An affinity to the kind of generations that are looking for these areas will likely help to be able to better persuade a seller to put their property in a commission contract.
This means not necessarily use “old school” offline marketing methods to promote a particular property, but communicate your marketing messages efficiently to the right demographics.
If you like to dig deeper into this topic, in this and this article I already discussed the importance of including demographics in your marketing strategy and how to market to first-time home buyers, hence Millennials most of the time.
Trend 7 – More and More Technological Disruption
I think many might agree that technological change is often underestimated and, at the same time, often overhyped.
If you have been in real estate for a fair amount of time, you too might have experienced that adapting to new technology can be a slow game in this industry.
Many technology evangelists suppose that there will be a wholesale technological disruption of real estate soon.
One of those disruptions might be the blockchain that could make the real estate service sector obsolete.
This could be especially true when it comes to real estate transactions, and, for example, properties might be registered in the blockchain soon, facilitating such transactions.
Right now, the major impact of technology can be found in the field of retail and industrial properties.
Other disruptions are happening with regards to property managers that are using technical solutions more and more to increase their productivity and automate the operational processes.
This happens when they, for example, digitize more and more information and analytics data are shared with their whole organization.
By doing that and introducing such technologies, decisions can be made in a faster way and on the consumer side of things (especially in the multifamily sector), tenants and owners expect for example package handling to be speedy and smooth.
This information comes from the same survey already mentioned in the source above.
They also surveyed participants from different real estate sectors about the different technologies and ranked them in order of importance (from most important to least important):
- Construction technology
- Cyber Security
- Big data analysis
- Internet of Things
- Sharing/gig economy
- Artificial Intelligence
- Workplace automation
- Autonomous vehicles
- 5G Implementation
- 3D Printing
- Augmented/Virtual Reality
- Drone technology
What does this mean for your real estate marketing strategy?
Promoting real estate offers that include some sort of technology that is more and more expected by consumers can increase the conversion rate of such offers, and by also implementing technology in your real estate business to increase the level of automation and analysis can give you a competitive advantage.
And, of course, you will be able to collect more data faster when using digital marketing methods compared to the offline ones.
But even increasingly more offline marketing methods such as open houses can be supported by technology to easier collect leads for example, as mentioned in this article of mine.
Trend 8 – Logistics Real Estate
Another new trend can be observed in what is called logistics real estate.
According to the analysis from the same source, this sector shows the highest growth rate.
One of the major catalyzation was caused by the double-digit growth of e-commerce in North America.
Its availability even reached the lowest point in history, which would additionally explain the strong growth.
An important factor for a good logistics real estate offer was to be able to provide convenience, choice, and speed.
Since this segment on one hand implies several challenges, due to the fast growth and expansion needs of e-commerce businesses, it presents, on the other hand, a higher risk for investors, and thus in turn also higher rewards (returns on investment).
The logistics real estate needs were further speeded up by the U.S. economic growth, which needed a faster logistics chain.
The last factor and accelerator were trade policies that affected and increased level of inventory.
The following is a list of property types sorted from the highest growth rate to the lowest:
- Logistics real estate (industrial/distribution)
- Multifamily Housing
- Single-family housing
What does this mean for your real estate marketing strategy?
Marketing logistics real estate is basically outside the scope of this website and, to be fair, also outside of my own (marketing) experience.
My assumption due to the high rate of demand in this sector is that it is also a stronger sellers’ market.
As a logistics real estate investor, you probably have ties to a particular industry since each property needs to fulfill specific needs for a company (e.g. a company from the chemical industry will require silos, etc.).
You will likely find more buy and hold investors on a larger corporate level in this area and acquiring deals from sellers will be similar to acquiring luxury properties, where the marketing method of networking takes on a much more important role compared to other property types.
When it comes to the second strongest growing property type, multi-family housing, we could already learn above – that it’s most appealing to first time home buyers, and then to the downsizing baby boomer generation.
Hence, focusing on these types of home buyers would be most beneficial in marketing this property type using all the relevant marketing methods that best reach them (already discussed in this article of mine).
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