Real Estate: What To Expect In 2013 And Beyond

After nearly 23 years of selling real estate, you might expect that I’ve seen it all.  I’ve sold through 2 earthquakes; 2 real estate bubbles and their subsequent bursting; 3 recessions from mild to severe like the one we’ve just come out of.  I’ve sold through 5 presidencies, military conflicts , the birth of the internet, the smart phone and yet through it all, people have bought and sold homes.  With that experience as a backdrop, I thought it a good time to give my estimation of what to expect in the coming years for real estate.

Currently there are two schools of thoughts among Realtors for 2013.  One group says it’s going to be a tough year for real estate professionals because the competition for listings is going to be intense.  The second camp believes that 2013 is going to be a banner year.  If you’ve been reading my blogs over the past few years, you can probably guess that as a “glass half full” kinda guy, I’m in the second group.  It’s not that I am a perpetual optimist, it’s just that I see some movement in home ownership that we haven’t seen before and lets face it, the economy is getting better.

Much has been written of late that as home values rise and fewer people find themselves underwater on their mortgages, mobility will become a greater reality than it has been since the financial meltdown that started in 2008.  Let me repeat that as a point of emphasis: Mobility.  In my mind, there are always going to be people buying and selling real estate.  Job changes, life cycle events, and retirement can necessitate the need to move and now with values rising, more people can sell and many will.  Think of it like we’ve been in a holding pattern and now it’s time to move on.   People will move because they can.

So yes, the ever improving economy is going to buoy housing because as values rise people will finally be able to sell and move.  But I believe it’s the demographic changes taking place that are going to play the biggest role in the housing market starting in 2013 and for that matter, years to come.  Consider this: the Baby Boomers, who in 2012 began hitting 65 years of age are still working.  This means they have an income at a later stage in life than every preceding generation.  Baby Boomers also represent the largest holders of our nation’s wealth.  So unlike previous generations who were staying put at 65 having long since retired, Baby Boomers have the unique flexibility to move.  Many will move out of their two story homes, into one story homes.  The shift towards a one story market will necessitate changes in new home construction.  Additionally, since one stories are less common as they were 40 years ago, baby boomers will be buying in communities where one stories exist and are being fixed up.  I also believe that the Boomers extensive wealth will  begin a slow flow toward helping out the grand kids or as demographers like to refer to them,  “Generation Y” or the “Millenniums.”  With their improving employment prospects, the Millenniums are going to be moving out of their parent’s home, buying a first home, starting their families but doing so with the aid of their Baby Boomer grandparents.  So while the Boomers may be spending less on themselves, they will be spending more on their kids.

Many economists believe that the U.S. is positioned to mimic the last 20 years of Japan; that is, to become an aging population that is going to tighten the purse strings because “that’s what older folks do.”  And that despite low interest rates and an improving employment picture, our economy will become stagnant; in a state of slow growth for the foreseeable future.  While it is true that our nation’s demographics sit on the precipice of dramatic shift, I do not concur with this assessment that our economy will stagnate.  Rather, I see the Baby Boomers as being different from past generations where the tendency to slow spending has been the natural progression.  Baby Boomers are not of the depression era mindset like their parents were.  The thinking “they have to make it on their own,” is just not the attitude of the Boomer generation.  Remember, we are speaking of the people responsible for the 1960’s and their attitudes are not that of their parents.  Because of the Great Recession, Boomers have had to help their children (often referred to as Generation X); letting them move back home when the recession left them jobless and unable to maintain their household.  The Boomers have also done the same for their aging parents which has led to their additional moniker the “Sandwich Generation.”  Interestingly, this too is leading to a change in new home construction from single family to multi generational.  This all adds up to more construction jobs and continuing economic recovery.

That said, while Generation X is relatively small, the Millenniums are not.  There are as many Millenniums as there are Baby Boomers, which means there’s a very large, upcoming generation only now moving into the home buying age group.  And while all this demographic movement portends to increased mobility and thus home sales across all age groups, there is also the additional impact of immigrants and their pursuit of the American Dream.  All this adds up to lots of home sales.

Is this going to lead to a boom in housing?  I believe it will.  We are already seeing the effects of tight inventory on home values.  We can’t help but see the signs that after 5 years of anemic home building, we simply don’t have enough homes to accommodate a rising population, so builders are building again.  This is great news for our economy since construction is the engine of every economic recovery.  But beyond that, the tea leaves I’m reading all point to a period in real estate characterized as a demographic explosion leading to increased mobility, more home ownership and more homes sales.  And more home sales means prosperity for all.

About Tim Freund

Tim Freund has been a licensed real estate agent/broker since 1990. He spent 14 years as a new home sales rep, ran his own boutique resale brokerage for 5 years and is currently an Estates Director for Dilbeck Estates/Christie's International Estates in Westlake Village, Ca. Tim is a Certified Residential Specialist (CRS), an Accredited Buyer's Representative (ABR), a Corporate Mobilty Specialist (CMS) and a Senior Real Estate Specialist (SRES). Tim has successfully negotiated a loan modification for a client and is a professional short sale negotiator. Tim has been married 28 years, has 2 children, is a native Californian and has been a resident of the Conejo Valley since 1991.
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