Real Estate Trends Worth Watching in 2020

The final jobs report came out this past month, noting that 2019 added a total of 2.11 million jobs to the US – down from 2018’s more-robust 2.68 million and the lowest hiring year since 2011. Although these numbers seem to be trending down, unemployment still remains at an all-time low, and other reports indicate that pay is rising faster for the lowest earners. The New York Times recently reported that “recent growth for workers with low wages has outpaced that for high-wage workers by the widest margin in at least 20 years.”

We all know that job growth plays a central role in the need for housing. With the job market so tight, and as wages go up, the demand for attainably priced housing becomes greater than ever. With this updated data and more information available daily, I’ve compiled a list below of the insights we’re watching as the year gets underway.

Demand for new Housing Remains High

We’ve been in a decade long pattern of economic growth; however, for much of this time the availability of new housing has been at critical levels below demand. With predictions that the population will grow by over 25 million in the next decade and the recently released statistic reporting 71% of the average wage earners are still not able to afford to buy a home in the US. We are seeing a new generation of earners wanting to buy, but struggling to find homes priced within reach. Home prices rose 9% year-over-year in the last three months of 2019. This condition is further compromised by lack of supply, and home prices continue outpacing incomes even as wages rise because inventory struggles to keep up with population demand. In order for greater freedom of choice, more mobility and opportunity, the construction of new homes must increase at a faster pace.

Competition for homes fueled by lagging supply

Between 2015 through 2018, April was the top month for average views per listing on Realtor.com, while January lagged a full 16%. In 2019, however, January took the lead as the busiest month on the site for 20 of the largest 100 metropolitan markets (reported by CNBC.) Competition for homes is heating up across the country and more home buyers are starting their search earlier – especially in the largest 100 markets like New York City, Los Angeles, Chicago, Dallas, Houston, Seattle, San Francisco, Atlanta, Denver, and San Jose. Low mortgage rates, a healthy consumer and booming demand for new homes is a recipe for success. Yet, we will continue to see those within the city limits priced-out if more attainably priced housing does not come on the market sooner. 

At its heart, housing is a local issue

While it’s true that the housing crisis is taking place throughout most of the country, there are certain cities facing more dire conditions than others. In our quest to provide attainable housing solutions, we’re constantly tracking these markets and researching new ones. Places like the Bay Area and Seattle have seen an influx of higher-income workers migrating to a booming tech job market. But with land costs rising, and new housing projects restricted to the higher end of the scale, median to low-income earners are pushed further out of the city. This means added drive time, an increased carbon footprint and the stress of long commutes. Denver and Sacramento are seeing a spike in renter households as the cost for ownership rises and pent up demand for new multifamily and single-family housing misses the mark. You can read more about these different areas and how pricing has been impacted here.

Millennials are changing the landscape for housing

Millennials now represent the largest cohort of home buyers in the US and New Zealand – and with that comes new trends that affect housing. After waiting longer to become homebuyers, this new generation doesn’t want to settle when it comes to cost, design and included features. Understanding the priorities and preferences of millennial buyers is important as builders design new homes to fill the demand. Millennials are more tech-savvy and want homes that embody that and are ready to pay relevant in USD and NZD. For homebuilders this means creating new spaces with sleek designs, charging hubs and built-in security features, as well as mixed-used neighborhoods with walkable restaurants, businesses and transit nearby. Some of these growing trends are embodied within our portfolio in new communities in planning like Eastlake in Denver, located in a mixed-use community with close proximity to transit.

Housing is a social cause

One of the more substantial changes and trends we are seeing in the investment world of late is the interest in creating positive social impacts. While financial performance is always important, as I talked about in my recent blog post on Investing for Impact, we are seeing a huge shift in the thought process behind where people allocate their resources. More than 8 in 10 U.S. individual investors now express interest in sustainable investing. In the world of real estate, the social value of giving back and helping to solve the housing crisis is bringing the public and private sector together. You may have read about the many tech companies pledging to donate millions to help combat this crisis. Impact investing is moving mainstream and we’ll continue to work on making positive social impact by providing solutions to create attainable housing.

All strata of the housing market are vital to a healthy economy, but we believe the greatest impact, and the entryway for many Americans to experience the American Dream of homeownership, will be through an increased supply of attainably priced housing. At TTLC, by revitalizing neighborhoods, collaborating with cities and communities, and partnering with private capital, our hope is that we are doing work day-in and day-out to create the positive impacts that lead to better lives.

By Scott Clark
Chairman & CEO