Last week I had the privilege of attending two real estate forecasts for 2017. One was with Ted Jones, chief economist for Stewart Title and Steve Harney, CEO of KCM. During the Recession I poured over economist’s forecasts and found most of them less accurate or entertaining than the weatherman. The opposite is true of both Ted Jones and Steve Harney. Though their points of view are different, each echoed the direction of the other, and it’s all backed by data. There may be some thunderclouds, but we’re in for a sunny real estate market.
- Millennials surpassed Boomers as the largest generation, (Born 1981-1997) there are 83 million of them. Why does this affect real estate? Because the average first time buyer is about 31, and some are younger. 70% of them would like to buy, but they are cautious after the recession, and know what they don’t know. They don’t want to live in their parent’s basement, they need you.
- There are more jobs than ever historically. Unemployment declined to 4.6% in November, payroll employment increased by 178,000 jobs. Even better, new jobs are in the professional, business service, and health care industries.
- We’ve seen a 14 year retail boom. Brick and mortar stores are not disappearing, they’re popping. At www.thestorefront.com, you can find a pop up rental for a few hours or days in 7 cities around the world. SnapChat, Nike, and startups take advantage of vacant spaces to test pop up shops without a long term commitment. Retail is literally a moving target. Millennials will research online, but prefer in store experience where they can bag a bargain to go.
- Renting costs have way outpaced owning. Benefits of renting pale in comparison to having a place of your own. Where’s the best place in Minneapolis for Millennials to dine on a Friday night? In their own brand new town home with Ikea cabinets! By Mid-March they’re waiting for their tax rebate to spend on remodeling the basement.
- Entry level buyers are back. The surprise is that they aren’t buying entry level homes, they are going for the move up home. They intend to stay longer. Before the Boom, average time in a home was 6 years, post Boom, it’s over 9 years. There are layers of reasons, but buyers are expecting to stay longer in their first home.
Cheap energy is here to stay. The Permian Basin is 800,000 acres in west Texas that competes with Saudi Arabia. Technology has production costs down to $2.25 per barrel, so low that you can keep driving that gas guzzler forever. Shame on you. Cheap gas means more jobs, cheaper travel, building costs, heating, and lighting your home. It also means that there isn’t a lot of incentive for alternative energy. Shame on us.
This is pointing to a banner 2017 for real estate for both buyers and sellers. Prices in the Twin Cities rose 5.9% during 2016, took a 1% hike in October which is unheard of. The only drag on the market was a lower than average number of homes for sale. If you have any thoughts of selling, please give me a jingle to chat about strategy. It’s more than just a how much question.