Find out what the next year is looking like for real estate
If you’re like many real estate agents who have been in the real estate game for a while, you know that there’s an ebb and flow to the real estate market. This may have some newcomers a bit worried about 2018 and what the housing market may bring. For seasoned agents, you know there are drivers of demand growth you consider when moving into a new year to be able to foresee changes to avoid being blindsided.
According to Forbes, the “drivers of demand growth are population, changes in household size, and pent-up demand.” Let’s break these down so you can better predict the coming changes to the market.
Not surprising, population growth is the biggest factor that can affect the real estate climate. What is surprising is how soft population growth has been in the last few years. In 2017, the population grew by 0.7 percent. This is the lowest growth since 1937, which is a stark contrast from 20 years past the last recession that saw population growth at 1.2 percent. According to Forbes, “That may seem close to 0.7, but most housing is built for new demand, not as replacement. At 0.7 percent growth, new demand is just 58 percent of what it would be at 1.2 percent population growth.”
Change in household size
This may seem like an odd element to consider, but it’s a very important one. Just think, for instance, if a couple were to break up, both would then need to find housing individually, which would increase housing demand. Divorce and child births are both areas to consider in numbers. “We can measure this by average size of a household. When average size (number of people) goes down, demand for housing is going up,” says Forbes.
Pent-up housing demand
You’re probably wondering if pent-up demand will take up some of these homes. The average vacancy for non-rental homes is 1.4 percent, while for rental homes or apartments, it’s 7.3 perfect. According to Forbes, “The underlying data are not terribly precise, but we’re certainly in the ballpark of normal vacancy. This looks to me like we do not have too much or too little inventory relative to demand.”
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