What’s The Difference In This Real Estate Investment Cycle?

The real estate climate is different in 2019 than in the last couple of years. We have gone through a time of rising real estate prices, with not enough housing on the market to satisfy the needs of buyers. This translated into fast, competitive sales at higher prices than expected. This surge in quick sales has slowed down due to rising interest rates and has ultimately resulted in less buyers. 


Who is the Buyer?

Millennials will be strong buyers in the year 2019, as well as baby-boomers. Both segments of buyers will be looking for some different things as well as some of the same things in purchasing.

Millennials have traditionally been renters, and many went to city centers to accommodate their desire for an active and walkable area, close to work, restaurants, and recreational opportunities. Many were without children. Now that millennials have aged to mid-thirties, many have families and are looking for their first home to buy in the suburbs. The rising interest rates are something that they may be concerned with as it may price them by reducing their purchasing price range. 

Baby-boomers are on the other end of the spectrum. Most have raised their families and no longer need large houses. What they’re looking for now is to downsize. The interest rates are not a shock to them, because they probably had a rate in the double digits in the ’80s for their first home. Many will not need a mortgage, or at least not a very large mortgage because of equity from the sale of their previous house.


Some Trends in Real Estate


  • Higher Construction Costs – According to the Bureau of Labor Statistics, Producer Price Index costs for new construction have increased 7.9% over a year. This increase is the result of higher material costs, interest rates, and higher labor costs.
  • Co-living and Short-Term Rentals – More needs for affordable housing will lead to more co-living arrangements. This will extend beyond college students. Short term rentals, as in vacation rentals and Airbnb, will be in demand. In California, a statewide initiative for more affordable housing has given more of a demand for accessible dwelling units or AUD’s. These granny flats, pool homes, backyard cottages, or in-law suites and converted garages are the units being used. More municipalities in California are loosening regulation on these types of value-added units, but throughout the country, it still will be a problem with local ordinances. Also, 3D printed housing is slated to become a reality soon in California in response to the new technology and the affordable housing need. Landlords wanting to have value-added investments should look at this trend to increase their rent revenues.
  • Baby Boomers – Besides moving down to smaller homes, retirement communities, and care facilities, many are opting to move into their children’s home. Either in a basement apartment or homes built as multigenerational.
  • Build to Rent – Entire new communities are being built to be rented. Amenities such are standard in apartment complexes will be the norm. Also, they boast active management available to the renters like they are used to in apartments. Millennials will be attracted, especially those who cannot buy or don’t desire to buy. Although some are being purchased in bulk by the mega rental companies, in many cases all or some are available to the smaller investor. The main complaint of millennial buyers is not having the amenities previously available to them or the luxury interiors in a home they would like to buy.

Experienced real estate investors are not scared off by changes in the market. They look at data and adjust to accommodate to changing needs of the consumer.

Opportunities are rampant. Millennials will be major purchasers at this time. They will be looking for housing that is affordable that has access to the amenities they are used to. Not all millennials that want to buy will be able to buy. Investors have opportunities with a fix and flipfix and rent, new build rentals in developed communities, as well as options to offer a lease to own. All of these options are viable for a profitable market in 2019. Changes in your focus may be needed, but profitability is still the outcome. We can help you achieve your real estate investment goals with a hard money or fix and flip loan for your next project. To learn more Contact us or call us at 800.208.2976.