Top 10 Challenges Affecting Real Estate

Househappy —  December 2, 2013 — Leave a comment

Home for sale in Seattle, Washington, via Househappy

As the housing market slowly heads toward the path of recovery, both real estate professionals and homeowners are becoming more optimistic. However, there are still a few bumps along the way that will need to be solved as the sector struggles to get its footing yet again.

Real estate consultant Scott Muldavin has outlined what he believes the top issues affecting real estate currently are.

Interest rates are cited as the top issue affecting real estate. Since rates were historically low for so long, now that they have been on the rise, capitalization rates are likely to follow, which could make people weary about investing in real estate.

Population ages Muldavin noted because there will be a greater demand for senior housing as the population gets older. This will require a change in size and availability and greater medical care services and facilities.

The capital market resurgence has positively impacted real estate. Credit is less restrictive for the commercial sector and while underwriting remains a challenge for residential markets, affordability still remains high.

Echo boomers represent 80 million Americans, which will provide a high demand in the future for housing. This segment of the population prefers an active urban lifestyle, rely on public transit, and often choose location over size – suburbs are catching up, Muldavin notes, with better mass transit and new bike paths.

Climate change and more extreme weather patterns such as Hurricane Katrina and Sandy will continue to have a strong impact on coastal homes and properties.  In these areas they will have to deal with changes in code and zoning standards as well as paying higher insurance premiums.

Major global events can also impact real estate markets. Such events include acts of terrorism, war, the global debt crisis and economic downturns. Muldavin notes that these need to be considered because their impact is often great.

Natural gas and oil production is on the rise in the U.S. and while it is creating job opportunities it is also contributing to climate change and environmental degradation.

Globalization is another issue cited by Muldavin and how the economies of other countries will continue to have a great impact on the U.S. economy and real estate market.

Technology in the future will continue to impact office spaces. Muldavin said “Many people are replacing physical items with electronics and free or virtual products, such as e-books and smartphones enabled with cameras, GPS and flashlights. This means businesses will continue to require less retail space, so I believe the trend in the future will be for fewer and smaller stores,”

Lastly the impact of the internet on brick-and-mortar retail stores also continues to be a growing issue as the increase in internet sales is expected to double by 2020.

This article appears in its original form on AG Beat

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