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Top 10 issues affecting real estate

The Counselors of Real Estate® (CRE) announced on June 14, 2017 the CRE 2017-2018 Top Ten Issues Affecting Real Estate at the National Association of Real Estate Editors Annual Conference in Denver last week. In the presentation Scott Muldavin, 2017 chair of The Counselors of Real Estate,  revealed the Top Ten issues, and then broke out the impact on both residential and commercial real estate. Today I will cover how the Top Ten affects residential real estate according to CRE.

 

 

  1. Political polarization and global uncertainty

Watch any bit of news or fake news, and you know this one to be true, but how does this impact real estate? As we continue to see uncertainty about changes to trade, travel and immigration policy threaten cross-border investing, hospitality properties, retail and manufacturing supply chains. Middle class how ownership will also be impacted as interest rates rise.

The impact on residential real estate:

  • Consumer price index rise
  • Interest rate rise
  • Mortgages less affordable
  • Polarized communities.
  1. The technology boom

We have seen the boom in apps. It is now at an inflection point where the use of technology will totally effect the real estate industry. In 2016 2.7 billion was spent in real estate tech. This boom will change every aspect of buying and selling real estate, as well as the homes that we live in.

The impact on residential real estate:

  • Smart homes (thermostats, lighting, security…)
  • Wireless access and bandwidth key
  • Health and wellness attributes on the rise
  • Suburbs could benefit from new transportation models
  1. Generational disruption

Babyboomers and millennials are now about the same. According to CRE The Baby Boomers generation of approximately 74 million (born between 1946 and 1964) is now smaller than the Millennial generations of approx. 75.4 million (born roughly between 1980 and 1997.) A significant number of today’s real estate decisions, as well as those connected to the workplace and consumer spending are now made by people under the age of 40. For the first time people are living and working together (both old and young). Boomers are wanting to move to inner suburbs and want more of an experiential lifestyle. “Surban” areas are the new it. These are suburban urban areas that feel urban-esque. People are looking for an urban feeling in suburban areas.

The impact on residential real estate:

  • Younger renters/buyers’ income limits
  • Marrying later, moving to suburbs
  • Older owners downsizing, selling, moving back to cities
  • Design, amenities differ by age group, yet they will live side-by-side in the same properties and neighborhoods
  • “Surban” communities thrive
  1. Retail disruption

According to CRE, there is a trend toward transforming retail in to “experiential” continues and is offsetting the shrinkage in the physical “bricks mortars” consumer goods platforms. Half of all U.S. households are members of Amazon Prime. There is a fundamental behavioral change in how people shop. The emphasis is on “timely, fast delivery of goods to consumers. May retailers are adopting an “Amazon-like approach, creating new warehouses; new distribution methods; and new fulfillment models while, ironically “disruptive retailers” such as Amazon are opening physical stores. With these changes, up to 30% of malls expected to close, but with this comes opportunities to repurpose the malls Retails is not dying, it is just changing. It is resilient. This disruption is similar to when Sears had to reinvent themselves because of Walmart.

The impact on residential real estate:

  • Walking distance retail demand is up
  • Unique destinations in high demand
  • Retail disruptions is a residential value determinant
  1. Infrastructure investment

We don’t really know what is going on with infrastructure now with the political polarization. It is clear that infrastructure investment is critical. 200 billion was spent over 10 years. 80% of which was state and local government. Mass transportation is being zeroed out. Don’t typically do tax reform or infrastructure spending in a time of growth.

The impact on residential real estate:

  • More infrastructure jobs = more income for housing
  • Better access to housing, work, shopping; improved utilities
  • Improved delivery of purchased goods
  • Potential higher costs for access to privately owned infrastructure (roads, utilities)
  1. Housing: The big mismatch

Affordability is a big issue. In Cleveland you can still buy a house for 80K. But, where jobs are being created there are huge affordability issues, i.e. Denver, West Coast… According to CRE, “Safe, decent, affordable housing has been shown to have a stabilizing effect on urban economies, crime, and public health.  A current lack of inventory has  generated a spike in home prices and, as a result, declining affordability for many home buyers, particularly those in lower income sectors.   A critical disparity exists between housing needs and housing supply. Although improving home prices, economic growth, mortgage accessibility and rental development have improved housing access and affordability in many areas, a confounding series of supply-demand mismatches continues to severely impact markets worldwide.  While the United States increasingly wrestles with the issue, a recent study of 300 metropolitan areas around the world ranked North America as a market with far fewer affordability problems than most.”

The impact on residential real estate:

  • Lack of inventory
  • Few “starter homes” for young buyers
  • Spike in home prices
  • Rising rents
  • Declining affordability
  • Poor market for older, larger homes in suburbs hinders Baby Boomer downsizing and moves
  1. Lost decades of the middle class

According to CRE, “After successive post-recession years of insignificant gains, median household incomes in the U.S. rose in 2015 by 5.2% to $56,516. Still, despite this welcome increase, middle class incomes have yet to recover their pre-recession highs ($57,403 in 2007), and are actually hovering below inflation-adjusted levels from almost two decades ago ($57,909).  Battered by automation and outsourcing, middle class jobs are still under pressure as the U.S. economy transitions from manufacturing to services.”

The impact on residential real estate:

  • Lack of funds for home purchases = postponed home buying
  • Debt and rents of more than 40% of income makes saving for down payment difficult
  • Little disposable income to support retail, restaurants…
  1. Real estate’s emerging role in health care

According to CRE, “Building occupants are increasingly demanding that the space they inhabit be designed, constructed, and operated in ways that advance positive health outcomes. It makes intuitive sense that buildings could help or hurt health in that people spend 90% of their time indoors. Research from the Mayo Clinic also concludes that only 20% of health comes from health care, with environmental and behavioral factors accounting for 40%.”

The impact of residential real estate:

  • Rising health care costs put a strain on household spending and saving
  • Potentially increased access to medical services at malls
  • May see health buildings/homes increase in desirability
  1. Immigration

According to CRE, “New immigrants tend to rent, boosting demand for multifamily housing, especially in gateway cities.  Recent surveys suggest that immigrant populations aspire to own homes and to move relatively freely from cities to suburbs and back in the search for employment. Labor mobility and homeownership rates will be constrained by limiting immigration. Industries like tech that demand highly skilled workers may be forced to innovate and substitute capital for labor if they cannot fill vacancies by recruiting foreign workers – constraining job growth. Longer term, if the entry of immigrant populations that tend to have larger households is curtailed, there will be a limit on the so-called demographic dividend for economic growth, with less of a labor force to support an aging population.”

The impact on residential real estate:

  • Fewer immigrants = fewer new household formations
  • Fewer renters
  • Fewer homebuyers
  • Fewer larger immigrant families = fewer larger homes needed
  • Affects urban and suburban areas alike
  1. Climate change

According to CRE, “In January 2017, the National Oceanic and Atmospheric Administration (NOAA) released a new report based on the most up to date scientific evidence on sea level rise that more than doubles the 2013 forecasts of potential sea level rise by 2100 from 2.2 to 4 feet to 6.6 to 8.6 feet.  Sea level rise is caused by both the thermal expansion of the oceans—as water warms up, it expands—and the melting of glaciers and ice sheets.  These dramatic rises were due largely to new research on the role of the Antarctic in sea rises as well as improved forecast models.  The Atlantic (Virginia Coast North) and western Gulf of Mexico Coasts’ sea rise is projected to be greater than the global average by .3 to .5 meters by 2100.  Alaska and the Pacific Northwest are projected to be 0.1 to 1 meter lower.

While a potential rise of sea level by 6.6 to 8.6 feet by 2100 may seem far in the future, NOAA also estimates that annual frequencies of disruptive and damaging flooding would increase 25-fold with only a 14-inch increase in local sea level rise.  Major cities such as Miami, New York, New Orleans, Tampa and Boston are projected to have the most costly problems, with South Florida and most coastal areas all exposed to differing levels of sea rise risk and cost.”

The impact on residential real estate:

  • Property value declines
  • Property insurance too costly or not offered in impacted areas
  • Potential early home sales before next climatic event to protect ‘nest egg” equity for retirement
  • Particularly in cities like Miami, NYC, New Orleans, Tampa, Boston, South Florida

CRE also identified three issues to watch including: tax reform and monetary policy, other policy issues and the cannabis.

The CRE Top Ten list is developed annually by members of the CRE organizations’ External Affairs group. The Counselors’ 1,100 members around the world undertake an extensive dialogue on current issue and trends to identify the final list. Click here to see the full list or follow #CRETopTen on Twitter.

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SOURCE:
https://www.cre.org/
https://www.cre.org/news-releases/political-polarization-global-uncertainty-top-cre-2017-18-top-ten-issues-affecting-real-estate-list/
https://www.cre.org/external-affairs/alert-the-cre-2017-18-top-ten-issues-affecting-real-estate/
https://www.cre.org/external-affairs/cre-2016-2017-top-ten-issues-affecting-real-estate/

 

Cybersecurity: NAR Email Best Practices

As promised, I will be outlining the National Association of REALTORS® Best Practices from their NAR Data Security and Privacy Toolkit.  The National Association of REALTORS Legal Affairs Department outline the following Best Practices on Email.

Unsecure email accounts are open doors to cyber criminals.  Follow these guidelines to help keep that door securely shut and locked tight.

·        Whenever possible, avoid sending sensitive information via email.

·        If you must send sensitive information via email, make sure to use encrypted email.

·        Never trust contact information in unverified emails.

·        If an email looks even slightly suspicious, do not click on any links in it, and do not reply to it.

·        Clean out your email account regularly.  You can always store important emails on your hard drive.

·        Do not use free wi-fi to transact business.

·        Avoid using free email accounts for business.

·        Use strong passwords.

·        Change your password regularly.

These are quick and easy reminders of good email practices. I cannot emphasize enough the importance of secure email. We are in a very transaction heavy business full of NPPI (non-public personal information), and the information that we share should abide by privacy laws including Gramm-Leach-Bliley Act, should not include NPPI, and must be transmitted via secure, encrypted email. Here is a guide from the Federal Trade Commission on how to comply with the Privacy of Consumer Financial Information Rule. And, as a bonus, here is a webcast offered by the American Land Title Association on Best Practices: Protecting Non-public, Personal Information.

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RESOURCES:
https://www.nar.realtor/sites/default/files/handouts-and-brochures/2015/protecting-from-cyberfraud-handout-2015-11-24.pdf
http://www.realtor.org/law-and-ethics/nars-data-security-and-privacy-toolkit
https://www.ftc.gov/system/files/documents/plain-language/bus67-how-comply-privacy-consumer-financial-information-rule-gramm-leach-bliley-act.pdf

Two Top 10 lists in one: Top 10 New Year’s resolutions and the Top 10 cities for job seekers

A new year is full of potential – the promise of what is to come. People make resolutions and promises to themselves on what they want to accomplish or how they will improve in the year to come. Curiosity has gotten me when it comes to the resolutions people make, especially as we enter into the post-New Year’s Day weeks where these promises to ourselves begin to become less of a priority.

According to Inc.com the Top 10 New Year’s Resolutions are:

  1. Diet or eat healthier (71%)
  2. Exercise more (65%)
  3. Lose weight (54%)
  4. Save more and spend less (32%)
  5. Learn a new skill or hobby (26%)
  6. Quit smoking (21%)
  7. Read more (17%)
  8. Find another job (16%)
  9. Drink less alcohol (15%)
  10. Spend more time with family and friends (13%)

Not too far off from what I was thinking: be healthier, kick an old habit, save money, advance your career… I don’t think there are any huge surprises on the list. Today I want to focus on one in particular – finding another job. If your resolution happens to be in line with #8, one of advancing your career or finding a new job then, this will come as good news to you. According to NerdWallet, Austin is the best city for job seekers.

Here are the Top 10 lists of cities for job seekers:

  1. Austin, TX
  2. Denver, CO
  3. Nashville, TN
  4. Seattle, WA
  5. Durham, NC
  6. Atlanta, GA
  7. Minneapolis, MN
  8. Lincoln, NE
  9. Irving, TX
  10. Raleigh, NC

The report analyzed federal data for the 100 largest cities to see where there is the most potential coupled with affordability. Data included the U.S. Bureau of Labor Statistics, the increase in the working-age population from 2010-2015 with U.S. Census Bureau data, as well as census data for median earning and monthly rent in each city to factor in the cost of living.

Laura McMullen & Sreekar Jasthi at Nerd Wallet summarize the Top 10 list by saying job seekers should follow the young people, find fast growing hubs (like technology or healthcare), and head to the state capitals. And wherever you are, volunteer to grow your professional and friend network. They say to surround yourself by people who know and like you and want to help you. I could not agree with this more.

Two Texas cities made the list. Austin at #1 and Irving at #9.  Austinites understand this, but for those looking to change up your career or job here is a breakdown for you on why Austin and the Dallas area could help you fulfill your new year’s resolution.

Low unemployment

Unemployment in Austin was 3.2% in October 2016 and 3.6% in Irving. Texas unemployment held steady in December at 4.6% overall. And, according to Sterling’s Best Places, “the unemployment rate in Irving, Texas, is 3.60%, with job growth of 3.09%. Future job growth over the next ten years is predicted to be 42.59%.”

High quality jobs in technology

Bureau of Labor Statistics’ 2014-2024 employment projection says that technology is one of the fastest growing in terms of output. Austin is no stranger to technology, being the home of two major technology companies, Dell and IBM, with many other companies following suit, like Apple. Forbes argues that Austin is the most attractive tech hub attributing the draw to the “young, educated population, large VC presence and burgeoning restaurant and music scene”. Companies see the potential of Austin’s labor pool and are taking advantage of this to grow their tech advantages.

According to Christopher Calnan at the Austin Business Journal, “Texas ranks No. 2 in the nation for number of tech jobs, 585,614, second only to California. And, tech companies accounted for 6 percent of the Lone Star State’s private sector jobs, the report by Computing Technology Industry Association found.”

Attractive salaries

So, the jobs are here, and per CIO.com Austin salaries are 106% of the national average. Not too bad. For a detailed look at wages, here is snapshot of tech salaries by industry from the Austin American Statesman. In addition, the Salary Increase Forecast for U.S. Jobs projects a 3.3% increase in tech salaries from the 87K median salary as reported by the Economic Research Institute.

This is exciting news for our city.

Job growth in healthcare

On the healthcare side Will Anderson with the Austin Business Journal says that, “in the health care sector, the opening over the summer of the Dell Medical School is expected to accelerate the development of a business ecosystem that combines the city’s existing care centers with entrepreneurial startups and innovators in medicine.”

Irving attributes much of its growth to technology. According to the Irving Chamber of Commerce, “Irving was recently ranked number three for tech startups per capita in the United States by American Express through research conducted by SizeUp.com. In addition, the City of Irving is the first city in Texas and the second in the nation to earn the Malcom Baldrige Quality Award.”

The Irving Chamber of Commerce also notes that “five of Irving’s approximately 50 Fortune 500 companies have chosen Irving for their global headquarters: Celanese, Commercial Metals, ExxonMobil, Fluor and Kimberly-Clark. Irving is home to more of the DFW Metroplex’s largest private and public companies than any other city except Dallas, including Citi, Microsoft, Verizon, NEC Corporation, Allstate Insurance Company, Time Warner Cable, RIM (BlackBerry), Aviall, Michaels Stores, Pioneer Natural Resources, CEC Entertainment and TXU Energy.” These companies choosing Irving, TX as their home base no doubt makes it a hot bed for career opportunities for job seekers.

So, how about it, are you ready to make the move to one of our great Texas cities? The opportunity is definitely here.

And, of course, I would love to help you with Resolution #7. If you are trying to read more, please subscribe to my updates.

SOURCE:
https://www.nerdwallet.com/blog/finance/best-cities-job-seekers-2017/
https://www.bls.gov/news.release/ecopro.nr0.htm
http://dfw.cbslocal.com/2017/01/20/texas-unemployment-holds-steady-in-december/
http://www.bestplaces.net/economy/city/texas/irving
http://www.erieri.com/nationalcompensationforecast
http://www.bizjournals.com/austin/blog/techflash/2016/03/texas-among-tops-in-nation-for-technology-jobs.html
http://www.irvingchamber.com/edc/
http://www.irvingchamber.com/edc/economic-profile-demographics/
http://www.bizjournals.com/austin/news/2016/12/20/with-low-unemployment-and-relatively-affordable.html
http://www.inc.com/peter-economy/10-top-new-years-resolutions-for-success-and-happiness-in-2017.html
http://www.512tech.com/technology/which-tech-jobs-pay-the-most-austin/9ZmYz20mz9KxfAm8u2eemN/

 

The proof is in the patents

So, we know that Austin is the Silicon Hills of the South and leads the tech corridor in microchip development, tech startups and venture capital funding, outside of cities like San Francisco. I recently received the Patent Activity Report produced by Beverly Kerr, VP, Research at the Greater Austin Chamber of Commerce, and it became ever more evident to me why we are the incubator of tech development and why inventors, developers and top technology companies flock to our great city. The opportunity and the amazing talent pool is right here in our backyard.

Per the report:

  • More than 4,000 patents to Austin area inventors in 2016 – this is the most ever awarded in Austin in a single year.
  • In 2016, Austin patent awards were 11.2% higher than 2015.
  • Austin garnered 30.8% of patents granted to Texas inventors in 2016, up from 28.7% in 2015.

These are some fantastic stats for our city and the future of tech development. According to Beverly, “patent activity is a primary indicator of Austin’s climate for innovation and is key to the region’s ability to sustain its competitive edge. Austin’s economic growth, exports, and job creation are uncommonly dependent on the concentration of high tech industries in our economy.”

Now, let’s get into the details and what this means for us.

The tech talent pool is right here
Patent growth is a direct result of the talented developers who work tirelessly to improve not only technology, but also processes and product design. We see this in Austin. According to Avalanche Consulting, Austin ranks #5 in the United States as The Most Talented U.S. Metros. We know we have a great workforce, but it is nice to have it confirmed.

In addition, according to the American Community Survey (ACS) 2015, the Census Bureau’s Population Estimates Program, the Austin MSA has a 89.2% educational attainment – this is the percent of the population that attended high school or higher. 69.5% of Austin’s population has attended some college, 42.6% has a Bachelor’s Degree or higher, and 14.8% have a Graduate Degree. Austin stands above other major metro markets, ranking 6th out of the 50 largest metros for percent of the population with at least a Bachelor’s Degree according to the Austin Chamber of Commerce.

Patent growth and its tie to jobs
Austin has the perfect environment for this talent. According to Innovate Austin, Austin has 46 tech incubators, accelerators, maker and co-worker spaces, and 5,485 high-tech companies, providing a hot bed of activity for our workforce.

It is noted in the Patent Activity that IBM is consistently the top patented company in Austin. The Austin location has in the past had the highest number of patents, beat out only by Yorktown Heights, IBM’s largest research lab. Recently there has been a decline by 52% in Austin IBM patents compared to New York, but Austin still ranks above the San Jose and other major U.S. lab locations.

Business leaders have witnessed companies’ success after success in Austin. Since 2000, IBM and Dell’s success have been drivers to bring other companies to Austin. In 2016, we have seen companies like Amazon, Google, Facebook, Apple and other giant California-based tech companies expanding in Austin or looking to setup shop. Companies moving to Austin will not only stimulate the economy, but also create jobs and, as a result, increase housing demands.

Technology trends in line with recent influx in patents
“Among the larger patent classes in Austin, ‘Semiconductor Device Manufacturing: Process’ has seen the greatest decline in patents issued,” said the Patent Activity Report. This is in line with what we are seeing with rumblings of semiconductor company declines and acquisitions.

The report continues, “a smaller but growing ‘life sciences’ grouping made up of what the U.S. Patent and Trademark Office (USPTO) calls ‘body treatment and care’ plus selected classes under ‘life and agricultural sciences and testing methods’ shows significant growth (210%) in Austin between 2001-2005 (211 patents) and 2011-2015 (443 patents).” This patent growth can be attributed to the over 200 life sciences companies now in the region fueling this growth in new products.

Virtual reality (VR) and artificial intelligence (AI) companies are on the rise in Austin. If you look at the Top 20 Hot Austin Startups to Watch in 2017, you will see that several VR and AI startups are in the rankings.

With our talent pool, technology prowess and entrepreneurial spirit, I am excited to see what new technology comes out of Austin. The proof is in the patents.

Check out Beverly Kerr’s full report here. The Austin Chamber provides great research and market intel. Simply go to www.AustinChamber.com for more information about your local market.

For more real estate news and blog posts like this, please subscribe to my updates.

SOURCE:
https://www.austinchamber.com/blog/01-11-2017-patent-activity
http://www.siliconhillsnews.com/2017/01/08/20-hot-austin-startups-to-watch-in-2017/
http://www.mystatesman.com/business/amazon-grows-does-demand-for-austin-workers/FraUXWDZbO8FJEE6PgW17L/
http://www.avalancheconsulting.com/americas-got-talent/
https://www.austinchamber.com/innovation
http://www.mystatesman.com/business/austin-economy-2017-still-strong-but-facing-some-challenges/IR4qyVWATLQLDF5ZsXUfdI/
https://www.austinchamber.com/economic-development/key-industries/life-science

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