Emerging technologies and shifting homebuyer demographics have begun to shake up the real estate industry in recent years. These factors have influenced all aspects of traditional real estate transactions ranging from the way properties are listed to average closing times. This has left many investors wondering where the future of real estate is headed and how to adapt to these changes. Keep reading to learn how to prepare yourself, and your business, for the future of real estate.
The Future Of Real Estate Technology
The real estate industry is experiencing rapid changes due to new technology and an influx of capital. This capital increase should serve as a signal that the real estate industry is preparing to undergo rapid changes with the creation of new digital resources. Most notably, investors should be prepared for the ways online property listing platforms, smartphone apps, virtual reality, and blockchain technology will impact all aspects of real estate transactions.
Investors will soon begin to see more competition among property listing websites, all aimed at enabling aspiring or existing property owners to buy and sell with ease. While platforms like Zillow and Trulia have dominated the market for several years, similar platforms will continue to be released.
The popularity of online listing platforms means buyers and renters will have strong ideas of what they are looking for when searching for properties. Investors hoping to stay ahead of the curve will need to adapt to buyers (and sellers) who can access hundreds of property listings at the touch of a button. One way to stand out is by joining the smart home trend and adding appliances and other features that are compatible with new apps. These features are appealing to the tech-savvy demographic because of their increased security and energy efficiency.
The development of real estate smartphone apps will also continue to change all aspects of the real estate transaction process. For example, existing apps like Docusign and Dotloop already allow real estate professionals to sign and send contracts and other documents on their phones. Other apps such as Buildium and RentTrack allow tenants to pay rent or communicate with landlords through an online portal. These apps are expected to grow in popularity as investors search for ways to automate deal acquisitions, property management, and communications.
Investors are also likely to see the release of apps that rely on blockchain technology to support the legal components of a transaction. These will focus on several areas, such as transferring deeds or titles and sharing important documents. Blockchain networks serve to increase trust and reduce intermediaries when buying and selling real estate.
Virtual reality is yet another technology that will influence the real estate world in the coming years. Though investors may be familiar with the idea of 3-D walkthroughs and 360-degree pictures, these resources are expected to increase in popularity. By giving potential buyers a new way to experience homes, investors can increase the number of property viewings without the time and hassle. Recorded 3-D property tours will allow buyers to tour homes without ever going.
Investors will be excited to know virtual reality software will not be exclusive to property viewings and may even help rehabbers plan renovations. For example, many apps could soon be aimed at allowing investors to preview staged rooms and remodels from their own phones. The future of virtual reality in real estate can help property developers and investors interested in raw land investing. According to Forbes, property developers should expect virtual reality programs that allow users to see finished properties before construction even starts.
As a whole, investors will see the launch of new technologies to improve real estate transactions for all parties. Rather than being worried about new resources, investors should think of these upcoming changes as ways to make business more reliable and efficient.
A growing disconnect between homeowners and real estate agents is among the biggest changes happening in real estate investing. Many find themselves asking: Is it better to list a property by yourself or enlist the help of a professional agent?
To this day, real estate agents have yet to become obsolete, and it is hard to imagine that their services will ever not be needed. They offer too much value to the average homeowner.
For starters, their negotiating skills and local market expertise will always help sellers receive the most money for their property. Homeowners that take on the task of selling a home could lose money with one single mishap. At the very least, the buyer’s agent may talk down the price. Any number of things could go wrong without a professional agent to represent your side of a transaction.
Outside of selling a home for its maximum value, agents have the potential to sell faster. In addition to marketing campaigns, there is a good chance they already have a competent buyers list. The right agent could have a buyer in place before the home is officially up for sale.
There is no questioning that a good real estate agent is worth their weight in gold, especially for those in the investing industry, but a few trends warrant your attention. Specifically, the advent of For Sale by Owner (FSBO) sites is beginning to carve out a niche among a select population of sellers.
According to a survey conducted for Redfin, approximately 17 percent of homebuyers in the last two years didn’t feel the need to enlist a real estate agent’s services. The same survey, made possible by SurveyMonkey Audience, identified an increasing trend in discounted commissions. Of the homeowners who did use an agent to purchase a home, one-third said their agent offered incentives in the form of a refund or savings excess of $500.
It is not uncommon for Realtors to charge six percent of the sales price for their services. On a $230,000 home (the median value of a single-family house), commissions can reach upwards of $14,000. At that rate, the prospect of foregoing a Realtor altogether becomes very enticing.
According to data provided by ForSaleByOwner, about half of all homeowners in America would consider selling their home without the help of a Realtor. At the same time, 55 percent of Millennials acknowledged that they would like to use the “for sale by owner” sales model to list their home.
“We’re seeing a dramatic transformation of the real estate industry with today’s consumers, especially millennials exerting more control over the buying and selling process than we have ever seen before,” said Lisa Edwards, director of business strategy at ForSaleByOwner.
Listings on ForSaleByOwner increased an impressive 57 percent in spring, the pinnacle of the 2015 selling season, and there is nothing to suggest that the trend won’t continue. It is important to note, however, that most of the sellers reside in the Northeast. Major metros like New York, Boston and Philadelphia appear to be more interested in foregoing the agent experience. Even the National Association of Realtors (NAR) has concurred that FSBO sales are more likely to occur in major metropolitan areas.
“Today [sellers] can quickly understand market conditions by using free online pricing tools, reviewing recently sold homes and homes currently for sale online without the help of an agent,” said Edwards.
Sellers have found sites like Redfin to be extremely helpful. In fact, Redfin charges sellers 1.5 percent of the sales price, whereas traditional agents can get away with charging twice as much. On a $250,000 home, the difference can save sellers as much as $3,750.
There is no denying that online listing services have changed the way people look at selling. Agents, in particular, have had to react to the advent of technology.
”Real estate agents are reacting to more competition in the market,” said a Redfin spokesperson, adding that traditional brokers have had to change the way they do business to stay competitive.
Of course, there is no reason to believe that any trends will result in the extinction of real estate agents. The creation of FSBO and other websites have made listing a home easier for the average seller, but real estate agents still have their place.
Real estate housing markets are expected to shift as a new wave of homebuyers hits the market: millennials. According to a study from the Urban Land Institute, millennials have started to enter the real estate world with a focus on suburban areas.
While suburban housing developments are nothing new, the future of real estate could include some interesting shifts for these areas. Millennial homebuyers are shown to have a higher interest in walkable neighborhoods and proximity to community resources.
This should serve as good news to investors hoping to break into the commercial realm, as suburban areas can represent new markets for mixed-use and retail spaces.
When it comes to metropolitan areas, real estate investors may begin to encounter renters of all ages looking for increased amenities. In today’s market, parking and trash pick-up may be considered amenities, but moving forward, these may no longer suffice. The future of real estate will involve an increased focus on added features, like roof access, common areas, and even designated workspaces.
Investors operating multifamily properties may see these changes as early as this year, though they will only continue to evolve. Those hoping to stay ahead of the curve should keep an eye on comparable properties and other neighborhood offerings.
The future of real estate will also see a rise in luxury properties. As housing demand continues to rise, inventory (particularly luxury properties) will increase to accommodate home buyers.
According to Realtor.com, investors in markets like San Jose, CA; Seattle, WA; Boston, MA; and Nashville, TN will see the biggest increases. However, investors across the country should still expect to see these changes.
Finally, all real estate professionals can expect to see an increase in green building practices and eco-friendly housing features.
While tax policies may have taken away some incentive for eco-friendly home renovations, investors should not entirely rule out this portion of the real estate industry.
According to the National Association of Home Builders, energy efficiency would positively influence the decision of 80 percent of homebuyers. The features included in the survey were Energy Star appliances, above-code insulation, and properly insulated windows.
Real estate investors focusing on new construction and flipping houses should keep these features in mind and incorporate them when necessary.
As a whole, the future of the real estate housing market represents several interesting changes. Investors should keep a pulse on their market areas to know the best time to act on emerging trends.
The COVID-19 global pandemic’s effect on the US economy has led many to question whether or not a housing market crash should be expected this year. The pandemic has greatly impacted the economy, and in turn, real estate investors are justifiably skeptical of the future of the housing market this year. Many homebuyers have reported a decreased interest in purchasing property right now and expect to see lower home prices this year. To accurately predict the future of the housing market, there are many signs to pay attention to that will indicate the approach of a housing market crash.
The activity of previous recessions and housing market crashes have revealed patterns of market activity that lead to its crash. For instance, the effects of rising interest rates, housing bubble bursts, increased foreclosure rates, and risky mortgages and insurance are signs of an inflated market that should be expected to experience a shift soon. One of these elements should not necessarily raise any red flags, but the more signs that occur increase the likelihood that the housing market will crash. To analyze the future of the housing market for this year, you should have a solid understanding of the aspects that play a role in its growth or decline.
Rising interest rates are one of the more impactful factors that play into a housing crash. Higher interest rates make it more difficult to afford to buy a home, resulting in decreased housing demand. In general, slowly rising interest rates are manageable, but rapid interest rate growth would halt the housing market. Currently, interest rates are rising slowly, which is a positive sign for the housing market’s stability.
A bubble in any market is a sign that its growth will bust and crash. A housing bubble is created when the price of real estate rapidly increases over a short period of time. This is due to low-interest rates, high demand, and low supply. Housing prices rise to meet the demand of homebuyers who are looking to take advantage of low-interest rates. Eventually, the demand drops while supply increases, resulting in a decrease in price that bursts the bubble. Homes that were previously overvalued due to buyers’ inflated demand then lose value, and homeowners become unable to afford their mortgages, resulting in a market crash.
The increased presence of risky mortgages is another strong indicator that the market may crash. When lenders lower their standards for lending qualifications, mortgages are approved for homeowners who may not afford them. These high-risk loans artificially inflate home values, which will cause a housing bubble, leading to a market crash. When lenders start lowering credit standards and issuing high-risk mortgages, it indicates a housing market crash.
Another indicator of an upcoming market crash is an increased presence of mortgage loans requiring insurance. If a buyer cannot make the full down payment on a home, they are considered riskier and are required to purchase mortgage insurance. These homeowners are more likely to experience negative equity, meaning they owe more on the home than it is worth. When mortgage insurance becomes popular during a housing bubble that causes homes to be overvalued, this can lead to foreclosures and a housing market crash.
An increase in foreclosure activity is a sure sign that a market crash is near. Foreclosures occur when homeowners cannot afford their mortgage, causing the bank to take possession of the house and sell it at auction. When a home’s LTV (or loan to value ratio) is more than 100%, it means a homeowner owes more on the property than it is worth. A ratio of 50% means the home is worth double what the homeowner owes, and an LTV of 125% means the homeowner is in serious financial trouble. The national foreclosure rate is typically between 45,000 and 60,000 per month. You can compare your state and local area’s foreclosure rate to the national rate to better understand where your market is heading.
The likelihood of a housing market crash can more accurately be predicted with the above-mentioned signs. Still, one sign alone does not necessarily imply an impending crash. Pay attention to local, state, and national market trends to get a better understanding and the advice of experienced professionals in the field.
One of the best ways to learn about the future of real estate is from more seasoned investors. Those with ten or more years of investing experience have seen (and adapted to) dramatic changes in the way real estate works. These investors have become more attuned to where real estate’s future might be headed in many cases.
Than Merrill, real estate investor and FortuneBuilders CEO, has been investing for over 15 years. When asked about where he sees real estate heading, his main answer pointed straight to technology.
“In particular, the emergence and growing popularity of cryptocurrency and blockchain will greatly impact transaction times,” Merrill said in an interview with Disruptor Daily. He added that with increased access to these networks, buyers and sellers will work faster than ever.
On that same note, other investors have speculated on how technology will impact transaction times and relationships across the real estate industry. This includes buyers and sellers, landlords and tenants, even investors and contractors.
For example, Archilogic CEO Dominique Burgauer said that innovative companies are currently driving the adoption of new technologies. Burgauer said, “almost every stage of a building’s lifecycle will [soon] be managed online. From construction and furnishing to sales and maintenance, the real estate industry will be online.”
This commentary suggests many investors could be waiting for competitors to pave the way with new technologies. In reality, investors should focus on the best ways to adapt these new technologies before their competition has a chance to do so.
Investors hoping to adapt and innovate alongside industry giants should focus on research, education, and mentorship. There is a lot to learn about the future of real estate, but by consistently engaging in new ideas, investors can improve their professional judgment and act when necessary.
This article was written by Paul Esajian, FortuneBuilders.com.