As we enter the fourth quarter of 2016, it is important for investors to maximize all of their investment efforts in today’s dynamic ever changing marketplace.
The first consideration for investors should be to determine what are the home buying trends of those currently active in the real estate marketplace. Millennials, also referred to as Echo Boomers or Generation Y, are the age group born between 1977 and 1996. They are today’s most transformative home buyers. Generation X is often referred to those latch-key kids, the lost generation of day care and divorce born between 1966 and 1976, but they are recognized as established home buyers and sellers, just not as influential, by the numbers, as the millennials. They do remain a solid market group as they earn the most and have attained their peak earning power. They have their established families and are most often in the marketplace, already in the suburbs, seeking an upgrade to a larger home in a more upscale neighborhood. They choose their neighborhoods for their access to the better school districts, and the convenience of getting to work, for shopping convenience, and access to health care. They set a great example for the millennials as they too seek homes they can raise their families in, with the same access and convenience just noted. These home buyers comprise some 26% of recent home buyers and are the most racially and ethnically diverse. Generation Z, born between 1995 and 2012, have yet to enter the home buying market in droves. Baby boomers, those born after 1946 and before 1964, still remain a very substantial market group as well, but dwarfed by the needs, goals, and aspirations toward home buying of the other two demographic groups, millennials and Gen X, as the other two exercise their more dominant status in home buying. Millennials, at about 35% in year 2016, as prospective home buyers with an ever growing market share, are the largest group. Millennials have now unquestionably emerged as the most dominant generation representing over one third of all real estate sales nationwide. This trend will continue to grow for two reasons in particular. For one, the improving financials and the rising income of the millennials as well as more and more, baby boomers, parents and grandparents, in laws and other family members, to a greater extent than ever before, are playing greater roles in millennium purchases, from down payments advanced to co-signing loans.
Buying trends further indicate millennials will maintain traditional buying habits where they are primarily seeking detached, single family residential homes in suburban areas. To a far lesser extent, they are choosing to own multifamily real estate of one form or another or attached town homes. In fact, consideration of long term livability seems to be driving millennials as it is now being reported that upwards of 75% of first time millennial buyers, often with family help, are choosing to skip more traditional starter home purchases seeking upgraded home purchases that will meet their future needs and aspirations. Millennials as prospective home buyers are unique unto themselves. Statistics suggest some 64% are married, only 12% are not, 45% have children under the age of 18.
It is also appears that this last quarter of 2016 and the first quarter of 2017 will continue the positive effect of both Gen Xers, again as they enter their prime earning years, and the baby boomers on the real estate market as both buyers and sellers, As players in the marketplace, affecting inventory and home sales in the process, the Gen Xers are choosing to relocate upward to better neighborhoods and locales, with their families in mind, while the baby boomers are comfortably downsizing as they seek a more comfortable and lower cost of living, all of which translates into more suburban inventory for millennials to fight over at a higher cost.
Predictors indicate healthy growth in home sales generally and prices to continue an upward track but at a slower pace than the year before. Homes are getting less affordable at the very same time mortgages are slightly easier to get. Inventory is tight and it is expected that trend will continue. Buyers are not looking intimidated by raising interest rates although higher mortgage rates will affect high cost markets the most and the good, pretty homes in the nicest neighborhoods will still go fast. Most sales seem to occur within a month, and bidding wars are becoming the norm not the exception, perhaps affecting the millennials and other first time home buyers the most as starter and more modest homes are gobbled up quickly. Courtesy of millennials and baby boomers, townhouses are having their star ascendant, their moment in the sun, as many millennials are okay in a restricted housing market with high density housing as baby boomers feel the same as they downsize.
For investors in particular, three trends are worthy of note. In many area, the hottest real estate markets have peaked. and for many smaller tier, secondary market cities like Austin Texas, San Antonio, Texas, Kansas City, Mo., Charleston, SC and Raleigh NC are among the best places to live and to invest. Many of the large institutional investors have left the marketplace as rising home prices contributed largely to their exit. Many remain as landlords benefiting from more rentals and higher rents. For investors, rentals with a buy and hold strategy is a great way to go. Lastly, cash buying sales, which peaked in 2011, are continuing to track downward, with less than one third of all sales being all cash, now the lowest since 2008.It is now predicted to be no more than one in four trend of this year and early into the next.
The eighteen-hour city, cities noted in the paragraph above exemplify this new trend, has blossomed as the ideal place to live and invest, replacing those gateway 24 hour cities that once had the greatest living demographic, where the most action was, once recognized to have the most desirable lifestyle. Their high living costs have now driven away enough skilled labor to make those secondary market cities the most ideal of all.
Suburbs are back. Their comeback ensures the suburbs are now among the best places to live and invest. Urban center costs to buy and to rent have increased so dramatically and so quickly, buyers have gravitated to the suburbs. It is important to qualify this move to the suburbs as there is an increasing emphasis to select the close in suburbs and make the maximum use of all the available city like amenities from shopping, to transportation, public and travel ways, to health care and hospitals, to easy access to the best the city has to offer. Savvy buyers of all generations willingly sacrifice home size to avoid commuter time and inconvenience.
Paying attention to these latest trends will be crucial to your smart investment decision making.
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