This 2020 has been quite a year so far, hasn’t it?
From what this year has brought so far, knowing about current and emerging trends in real estate can give you a nice edge.
This is provided you consider them for your overall real estate business and marketing strategies.
So, as a real estate professional, you might wonder what is going on in 2020 with these trends.
Eight trends could be found to be influencing 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 up 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 in real estate
- Growing demand in logistics real estate (industrial/distribution) and multifamily housing
Read on to learn about these eight trends and what this means for your real estate marketing strategies.
Real Estate Trend 1 – Property Supply and Demand
Because of 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. They prefer to wait out a little bit.
On the one hand, properties stay longer on the market due to social distancing measures.
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.
The national inventory decreased by 15.3%, and 44.1% fewer properties were listed than in 2019.
This inventory decrease was even more prominent 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, they will likely not start new projects. Still, they will finish the projects they are currently working on.
Like 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 existing homes, which a study by Fannie Mae confirms.
This study finds a gap between seller motivation and buyer motivation to buy.
Only 32% of sellers think it’s a good time to sell; in contrast, 52% of buyers believe it’s a good time to buy (source).
This eagerness to buy on the buyer’s side is fueled by lower rates of a 30-year mortgage and 5-year adjustable ones.
According to Fannie Mae, this trend will likely continue to decrease throughout 2021 compared to 2020 and then rise again in 2022.
When applying the economic rules of supply and demand, this situation likely leads to a continuous rise in home prices because 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.
For example, for houses that provide the right features to Millennials (the largest buyer group), this likely means price increases in the double digits.
Nevertheless, that doesn’t necessarily mean that property sales will increase because real estate transactions are partially impeded due to the pandemic crisis.
Like the electricians or plumbers above, some appraisers and inspectors can’t come to the respective properties to do their job anymore. So often, this kind of work is delayed.
It feels a bit like a real estate transaction “bottleneck.”
With some AI-powered appraiser or inspector robot, or drone flying to and through the house, or coming by in a self-driving car, this could be different (provided they are Covid-negative).
But this 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 home sales is that throughout this year, 2020, and the first quarter of 2021, sales will stay lower than in 2019 but 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%.
What Does This Mean for Your Real Estate Marketing Strategy?
Some of the adverse effects of slowed-down real estate transactions can be mitigated by using remotely powered marketing methods, such as 3D virtual tours (covered in this article) and other strategies I discussed in my article about marketing ideas during Corona times.
Another approach is to focus on properties 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 less appealing to Millennials, sellers might not be that easily convinced and still prefer to wait out the situation before putting their homes on the market again.
But overall, I think that targeting Millennials in this situation is beneficial from a seller’s perspective because it caused somewhat of an artificial sellers’ market.
Real Estate 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%, now 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 Real Estate Marketing Strategy?
Depending on your target buyer group, price increases can lead to slight decreases in online traffic-to-lead conversion rates.
Why?
The properties you are promoting get more out of reach for some buyers that could have afforded them before the increase.
Regarding Millennials, this can happen because their buying power is not that strong yet (because of student loan debts, etc.), and many still prefer to rent and not buy. (source)
Real Estate Trend 3 – Millennials Are Still the Majority When It Comes to Buying Homes
Many don’t feel they can afford a home and will likely continue renting. Nevertheless, this 3rd trend confirms millennials are now the majority of home buyers (38%).
By the way, a millennial belongs to the generation born between 1980 and 1998 (I guess I belong to this generation).
You can learn more about this largest group of first-time homebuyers in this article.
In this one, you can learn how to take advantage of different demographics for your marketing strategies (HINT: Baby Boomers are the second largest group of home buyers, source).
What Does This Mean for Your Real Estate Marketing Strategy?
As often stated on my website, knowing your target audience is essential for effective marketing campaigns.
Since millennials are heavy internet and mobile users, this is where your marketing efforts should be focused on.
Real Estate Trend 4 – It Takes Properties Slightly Longer To Be Sold
You could already read in the section about trend number 1 that the real estate transaction process is delayed and impeded.
In 2019, it took homes, on average, 58 days to be sold. Now, it takes four days longer and, thus, 62 days.
When looking at weekly data, you can find an even bigger delay and longer times on the market.
Here, it shows not four days but nine days longer on the market.
Although average homes get sold faster in large cities, the increase in days on the market could be found to be more significant there. (source)
Real Estate Trend 5 – Widening Income – Housing Cost Gaps
On the one hand, there has been a recovery in single-family home pricing over the past seven or eight years.
Still, 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).
Survey participants across the U.S. confirmed this situation, that stated that housing conditions were “challenging.”
This is especially true in high-cost markets such as D.C., Boston, Los Angeles, San Jose, and San Francisco. In these markets is a lack of medium-density housing.
Real Estate Trend 6 – Hipsturbias
If you know what a hipster is, you might already be able to guess what Hipsturbias are.
No?
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,” then, is where hipsters live.
Now, after the definition from Wikipedia, you might wonder, who 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, some hipsters are not completely identified with the 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, suburbs desire to create a variation of 24-hour downtown live/work/play areas.
One participant mentioned that people want to work in a mixed-use environment.
You can find examples of developing Hipsturbias near New York in some New Jersey communities, such as Maplewood, Hoboken, and Summit.
Several others north of Manhattan can be found in New Rochelle and Yonkers.
These developing Hipsturbias have strong walk scores, excellent transit access, and plenty of restaurants, retail, and recreation areas. (source)
What Does This Mean for Your Real Estate 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 acquiring buyer leads easier but acquiring sellers more tricky.
An affinity to the kind of generations looking for these areas will likely help more easily persuade a seller to put their property in a commission contract.
This means not necessarily using “old school” offline marketing methods to promote a particular property but communicating your marketing messages efficiently to the right demographics.
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.
Real Estate 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.
Have you been in real estate for a fair amount of time? Then, you, too, might have experienced that adapting to new technology can be a slow game in this industry.
Many technology evangelists suppose 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 regarding real estate transactions; for example, properties might be registered in the blockchain soon, facilitating such transactions.
Right now, the major impact of technology can be found in retail and industrial properties.
Other disruptions are happening concerning property managers that are increasingly using technical solutions to increase their productivity and automate 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 faster.
On the consumer side of things (especially in the multifamily sector), tenants and owners expect, for example, package handling to be speedy and smooth.
By the way, I covered several real estate apps used in this article and how a real estate business can be automated in this one.
This information comes from the same survey already mentioned in the source above.
They also surveyed participants from different real estate sectors about the various technologies and ranked them in order of importance (from most important to least important):
- Construction technology
- Cyber Security
- Big data analysis
- Coworking
- Internet of Things
- Sharing/gig economy
- Artificial Intelligence
- Workplace automation
- Autonomous vehicles
- 5G Implementation
- 3D Printing
- Augmented/Virtual Reality
- Blockchain
- Drone technology
What Does This Mean for Your Real Estate Marketing Strategy?
Promoting real estate offers, including some sort of technology that consumers more and more expect, can increase the conversion rate of such offers.
And implementing technology in your real estate business to increase 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 than offline ones.
Also, as mentioned in this article, more and more offline marketing methods, such as open houses, can be supported by technology to collect leads more quickly.
Real Estate 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 major catalyzation was caused by the double-digit growth of e-commerce in North America.
An essential factor for a good logistics real estate offer is providing convenience, choice, and speed.
Since this segment, on the 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, higher rewards (returns on investment).
The U.S. economic growth sped up the logistics real estate needs, which needed a faster logistics chain.
The last factor and accelerator were trade policies that affected and increased inventory levels.
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
- Offices
- Hotels
- Retail
What Does This Mean for Your Real Estate Marketing Strategy?
Marketing logistics real estate is slightly outside this website’s scope and my own (marketing) experience.
However, due to the high demand rate in this sector, my assumption is that it is also a stronger sellers’ market.
As a logistics real estate investor, you probably have ties to a particular industry.
How so?
Each property needs to fulfill a company’s specific needs (e.g., a company from the chemical industry will require silos, etc.).
You will likely find more buy-and-hold investors in this field on a more corporate level.
Moreover, acquiring deals from sellers will be similar to acquiring luxury properties.
In this field, the marketing method of referrals takes on a much more critical role than other property types and real estate niches.
Multi-family housing (the second strongest growing property type) mostly appeals to first-time home buyers and the downsizing baby boomer generation.
Hence, focusing on these home buyers would be most beneficial in marketing this property type using all the proper marketing methods that best reach them (already discussed in this article).
This article has been reviewed by our editorial team. It has been approved for publication in accordance with our editorial policy.
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