INVESTOR INTELLIGENCE
3 Real Estate Trends to Watch
Prepare for success in 2018
I
ROBERT KIYOSAKI
Robert Kiyosaki is the author of best-seller Rich Dad Poor Dad
n case you weren ’ t paying attention , 2017 was an exciting year in real estate . According to Zillow , it was full of record-breaking home price growth paired with an inventory shortage of for-sale homes . The value of the entire U . S . housing stock increased by 6.5 percent in 2017 , according to Zillow — the gain in home values was the fastest since 2013 ( when real estate was just beginning to recover from the Great Recession of 2007-2009 ).
Obviously , I don ’ t have a crystal ball — but after spending decades as a successful real estate investor , I am pretty well versed in reading the tea leaves . So , what does 2018 have in store for real estate investors ? Here are my predictions for three trends to watch this year :
1 . New Buying Patterns
In real estate , it ’ s always important to know your demographic , and times , they are a-changin ’. Consider the following :
The baby boomers who once purchased all the traditional colonial-style homes are now ready to downsize . But they don ’ t just want less space , they are also looking for ranch-style homes so they don ’ t have to navigate stairs as they age . What does that mean ? Single-story homes will increase in value as demand rises .
Millennials — who , according to Realtor . com could make up 43 % of homebuyers taking out a mortgage by the end of 2018 — are finally ready to purchase their first homes . Because they are largely seeking affordability and quality of life , they are having to trade in the urban life they crave and head out to the suburbs . In 2017 , the undeniable shortage of affordable entry-level properties created a real barrier for this group , nation ’ s largest buyer segment .
During the Great Recession , more than 10 million Americans were forced into foreclosure — and their seven years of waiting to purchase another property ( due to foreclosure law ) is over . According to the National Center for Policy Analysis , approximately 1.5 million Americans will become eligible to re-enter the housing market this year . While some might still be licking their wounds , many are sick of renting and itching to own again .
2 . Inventory Shortages
It ’ s clear that more inventory is needed to meet buyer demand , which analysts expect to remain strong throughout the upcoming year . Inventory shortages will continue to drive up home prices and serve as a barrier for first-time homebuyers , many of whom have a tough time saving up enough for a down payment .
According to Zillow , there are 12 percent fewer homes to choose from nationwide than there were a year ago — and 51 percent of for-sale properties are in the top one-third of home values ( which are out of reach for firsttime buyers ). Hopefully we ’ ll start to see an increase in new home builds and ones that are on the more affordable end of the spectrum . Building more starter homes that first-time and lower-to-middle income families can afford will help bring home prices down . Of course , homebuilders are arguing that the high costs of land , labor and materials make it difficult to build inexpensive homes .
3 . Interest Rates Creeping Up
With a new Fed chair in place and President Trump ’ s new tax reform in full gear , mortgage rates will probably stay on the lower side for the immediate future . But who knows where they ’ ll go from there . The likely answer is up .
A panel of more than 100 experts surveyed by Zillow forecasted that rates would rise , on average , to 4.5 percent over the next 12 months .
U . S . inflation came in at 2.1 % in January compared with a year earlier , a sign that wages are rising for workers . For investors , faster inflation increases the chances that the Federal Reserve will raise interest rates more quickly this year .
From where I stand , when you couple still-low interest rates with some economists ’ predictions that there will be a moderate increase in inventory , it looks like we very well may have a seller ’ s market in 2018 .
So if you ’ re looking into becoming a real estate investor , 2018 could be a great time to do so . Investing in single-family rental properties may deliver strong returns . How do you begin ? Do your research and read everything you can — this will automatically increase your financial literacy . Learn how to invest using other people ’ s money in order to minimize your risk . Then , take action , so that you can lead the rich life you absolutely deserve .
60 MARCH 2018 SA Real Estate Investor Magazine