The last six years have been amazing for the housing market. Residential real estate sales continue to boom. Despite increased demand, the affordability of housing in most areas across the country remains favorable for home buyers.
Many factors contribute to this healthy market: strong economic growth, consistently low mortgage rates, and positive demographic change. Of course, along with the overall housing boom, there are certain trends that coast along riding on the momentum of current market conditions. According to industry analysts, the current boom is not predicted to go bust anytime soon.
In the face of such promising market indicators, the challenge in real estate sales is how to make a listing stand out from the competition. Or create an entirely new market. Here are a few fun and interesting ways homeowners, investors, and developers are doing just that.
Renovate, Remodel, Repeat
A healthy and expensive housing market, one that's tight on properties, doesn't seem to make a difference in homeowner spend. One reason: Construction projects are on everyone's list whether they're staying in their home or preparing it to sell. The former is that segment who don't want to deal with the insanely competitive market, so they're staying put in their homes, choosing to upgrade and enlarge. The latter are those who want or need to sell.
As far as which projects homeowners are spending money on, kitchen and bathroom models are still the most popular. Other projects gaining in popularity include energy efficient upgrades, accessibility renovations, entryway/mudroom updates, and connectivity/smart features. It's interesting to note there has been a shift in the top spot recently.
Joann Theunissen, 2018 Chair of the National Association of Home Builders, told Realtor Magazine “Small-scale renovations are slowly becoming just as popular as large-scale projects.” She points out how this trend is evidenced by data collected in the NAHB’s most recent survey. Bathroom remodeling has officially taken the top spot, over kitchen renovations.
The NAHB surveyed remodelers to find out what types of projects they’re being hired to complete:
- Bathroom renovations made a surge in 2017, accounting for 81% of all remodel projects
- Kitchen remodels came in just under that at 78%
- Remodeling the entire house came in third at 49%
- Individual room additions were the remodeling choice 37% of the time
- Replacing doors and windows accounted for 30% of 2017 renovations
Another trend within the trend is an increase in homeowners using small personal loans to fund renovation projects. A shift among younger families now buying homes (here come those Millennials, finally!) drives this trend. Still plagued by student loans these buyers have less financing options and little home equity. It’s one of the reasons this new niche among lenders is a wise financing alternative.
Harvard University’s Joint Center for Housing Studies (JCHS) publishes quarterly reports which are indicators used to project changes in annual spending for home improvements. The Leading Indicator of Remodeling Activity (LIRA) for 2nd quarter 2018 predicts the current pace of residential remodeling to remain strong through 2019. According to LIRA, “Homeowners are expected to increase spending on improvements and repairs at a solid clip over the coming year.”
The Micro Movement
Despite many Millennials taking the plunge to purchase a home, most of the generation continue flocking to urban settings. The steady influx has skyrocketed rental prices. To meet the growing need developers in large, population-dense cities are building micro-units. These mini apartments are typically 400 sq. ft. or less.
These properties are an attractive alternative to sharing an apartment with roommates who never do their own dishes. The affordability makes it possible for single, career-driven men and women to live in downtown areas of big cities.
Check out this list of major cities embracing micro-living.
As Nathaniel Kunes of AppFolio Inc. told Forbes: “Tiny apartments and mobile living will be a solution to increasing housing density in overpopulated areas. This will become more of a norm in big cities and will drive up operating income on existing apartment stock.”
Big city living done small is not the only type of micro living that’s increasing in popularity.
Enter the tiny house. These miniature homes attract a much different buyer than micro units. The typical tiny house is occupied by people who want a more secluded or nomadic lifestyle. To be “officially” classified as a micro home the structure must be freestanding and no more than 500 sq. ft.
Although the key to tiny house living is minimalism, that doesn’t mean tiny homeowners don’t decorate. Owners create a customized experience that’s designed for comfort and functionality. If you ever come across a client interested in buying their own tiny home, make sure to share these small space design tips.
The one roadblock encountered by diminutive dwellers is zoning ordinances that often don’t allow for the structures to be permanent.
It's a niche market, for sure. However, it's more than a passing trend when it warrants its own HGTV Series where buyers search for the “perfect compact kingdom to call home.”
The “Micro” Wave
This next trend is somewhat of a combination of the first two. It combines a remodeling aspect with some of the micro-living lifestyle elements. It involves engineering an additional structure to maximize space on the property. These spaces are both functional and unique.
These tiny, yet classy structures are much more than a posh tool shed, storage area or sunroom. Called garden rooms or leisure buildings these individualized micro-rooms meet specific needs. They're becoming more popular because they function on many different levels.
First, then enable homeowners to add square footage to their property without the hassle of a major construction project. No need to apply for building permits or deal with noise and dust inside the house. Whether planning to sell or simply needing more room, adding square footage to a home (even in this creative way) helps boost the value when it comes time to sell.
These buildings are also attractive because of their versatility.
No longer used to stow away the summer lawn furniture, these buildings create additional functional living space. And people are getting creative. Some uses include:
- A detached guest house
- Separate dwelling for the in-laws
- A place for the “adult child who just won’t leave”
- Quaint summer garden workshop
- A yoga and meditation space
- The ultimate man cave
- The stylish she-shed
- A stand-alone backyard bar for entertaining guests
- A bright and airy art studio
- The work-from-home office that’s not in the home
- A writer’s cozy urban retreat
Large windows and natural lighting offer a tranquil atmosphere that is not always available in the rooms of a single-family home. Talk about a room with a view!
In addition to being versatile, the structures are built to last. The materials used for the tiny additions are much more durable than in the past.
Technology and innovation allow the micro rooms to weather the seasons much better than the rust-prone metal or vinyl-sided buildings of yesteryear. Double-glazed, toughened-glass windows are the norm. Insulation adds a level of comfort, allowing occupants to enjoy their garden home under all types of conditions.
Contemporary leisure buildings are also completely customizable. This means homeowners can literally think-outside-the-box because they’re not stuck with one boring, square as a choice. Garden homes can be designed according to a consumer’s preferred aesthetic. And they can be located just about anywhere. If the perfect spot is in the corner of the backyard, choose an octagonal style. If space is long, but not very deep, there are a variety of tall and wide options available.
An in-depth market review from AMA Research reports a positive outlook for the market. “The market has experienced growth since 2013 benefiting from improving consumer confidence and spending as well as factors such as an improving housing market, increased levels of homeworking, trend for secondary residential garden buildings and growing popularity in 'outdoor living' & spending time in the garden.”
Secondary Markets
After the Great Recession, secondary markets -- which were hit just as hard -- were slower to recover than their primary counterparts. Well, it looks as if they've finally caught up. And they're making a serious comeback.
Analysis from the Urban Land Institute (ULI) lists Seattle as the number one hottest market for investing in 2018. Not only did a secondary city lead this huge upset victory, only two primary markets remained in the top 10 (Boston and Los Angeles).
The ULI’s 2018 list of hot markets to keep an eye on:
- Seattle
- Austin
- Salt Lake City
- Raleigh/Durham
- Dallas/Fort Worth
- Fort Lauderdale
- Los Angeles
- San Jose
- Nashville
- Boston
Growing popularity, combined with affordable prices, make these markets very intriguing.
The factors leading to this upset are varied. Secondary cities do not suffer from being overbuilt. Second-tier cities boast lower unemployment rates. The economies within non-metro locations show a steady trend of increased growth.
Overall, these cities promise sustainability, which is key to investment. Realizing the potential these underdeveloped Urban markets present, interest from foreign investors has increased. And, as it is in economics, this increased interest has resulted in growing demand.
Are you paying attention to any of these trends? Or do you have others you find more interesting? What will you keep an eye on for the remainder of 2018 and into 2019?
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