13 Dec Jonathan Cartu Stated Real Estate And Architecture Year In Review And A Preview…
As 2019 draws to a close, here’s a look at the year that was in real estate and architecture and a preview of what to keep an eye on in 2020.
Concerns ease over a U.S. recession
Economic pessimism and recession jitters set in earlier in the year as the U.S.-China trade war intensified. However, a group of top economists who gathered December 11 at the National Association of Realtors’ Washington, D.C. headquarters arrived at a consensus that the U.S. economy will continue expanding next year while projecting real estate prices will rise and reiterated that a recession remains unlikely.
“Real estate is on firm ground with little chance of price declines,” said Lawrence Yun, chief economist for the National Association of Realtors and fellow Forbes.com contributor. “However, in order for the market to be healthier, more supply is needed to assure home prices as well as rents do not consistently outgrow income gains.”
iBuyer field expands steadily
iBuyers purchased 3.1% of the homes sold during the third quarter of 2019 across 18 markets, up from 1.6% a year earlier. While iBuyers such as Opendoor, Zillow Offers, Offerpad and RedfinNow operate in a limited number of markets, they are quickly expanding into new places and are expected to keep growing. The term iBuyer (short for instant buyer) is used to describe real estate companies that use technology to make rapid offers to home sellers and then purchase homes in quick, cash transactions. iBuyers charge sellers a higher fee than a typical seller’s agent would for the convenience of helping offload the seller’s property quickly. They then make any necessary improvements and resell these homes swiftly to homebuyers.
Luxury sales are hurting because of high taxes and a pending financial crisis, according to Mike Russo, founder of SparkOffer. “Traditional selling methods are failing home sellers, and they’re actively seeking other options outside of auctions to quickly sell their homes,” said Russo. “PropTech platforms that buy/sell for-sale homes were tested throughout 2019, and in 2020, will become the sought-after solution for homeowners to quickly and profitably sell their homes.”
A push for safe school design
After repeated school shootings, making schools safer through a design-centered approach became a national focus. Legislation introduced in the Senate in September calls for the creation of a “school safety clearinghouse” in the Department of Homeland Security that would identify and share best practices on school building design for security and safety. The bill is supported by the American Institute of Architects.
Sustainability the new norm in real estate
“With sustainability and the preservation of Earth’s materials rising to the top of the news cycle daily, I foresee many developers looking to re-imagine pre-existing buildings for new projects instead of knocking down structures and starting from scratch,” said Allison Greenfield, partner at Lionheart Capital. “By retaining the original integrity of existing buildings, developers can encourage community support and help the environment at the same time.”
The widening black homeownership gap
The already large homeownership gap between black and white Americans widened in 2019. While 73.1% of white Americans owned homes as of the second quarter of 2019, a record low of 40.6% of black Americans had achieved homeownership and 46.6% of Hispanic Americans. The resulting 32.5 percentage-point gap in homeownership between black and white Americans is 3.6 points wider than it was at the beginning of 2010, according to a report by Redfin.
The urbanization of the ’burbs
Rob Zelina, senior vice president at Lifestyle Communities, foresees a continued focus on suburban markets over urban markets. “The urbanization of the suburbs will continue with traditionally urban features like walkability, access to retail and restaurant amenities, and dense housing extending beyond the city limits,” Zelina said. “As people continue to place higher value on livability, walkability and a sense of community, the suburbs will take on a more vibrant, urban aesthetic. Development trends, renter preferences and changing lifestyles will continue to shape the suburbs to include bustling town centers filled with shops, restaurants and diverse populations.”
Architects declare action on climate change
The American Institute of Architects’ board of directors approved a landmark resolution in September that defines immediate and long-term efforts to engage the architectural profession in the fight against climate change.
“This is a defining moment for the Institute,” said AIA President William Bates. “We are making this our top priority in order to address the crisis our communities face. Moving the needle on this critical issue—that threatens the future of our planet and humanity—requires our firm commitment to achieving carbon neutral goals in the built environment and our immediate action. It’s imperative that the industry acts today.”
AIA and its members are rallying the profession to do more to fight climate change as buildings are one of the largest contributors to greenhouse gases. Brooklyn architect Illya Azaroff, founding principal of architecture firm +Lab, designed a groundbreaking resilient home in Breezy Point, New York, known as Hurricane Strong Home.
Climate change will become a bigger factor for buyers, sellers
In 2020, home buyers and sellers will take the consequences of climate change into account when deciding to buy, according to Redfin. The financial costs of climate change are already becoming more tangible as fire and flood insurance premiums rise. Over the next decade, higher insurance premiums in high-risk areas will make housing even less affordable to more people. And in areas with the highest risk, insurers may stop providing insurance altogether, which means it will be nearly impossible to secure a mortgage in those areas.
Bidding wars will rebound
“Low mortgage rates started to revitalize the market at the end of this summer, but we won’t see their full impact on demand for housing until next year,” according to Redfin chief economist Daryl Fairweather. “In 2020, buyers will have fewer homes to choose from than they have in five years. But the return of bidding wars is good news for sellers who may have been holding out this year as the market stabilized. The competition and faster price growth will tempt more homeowners and builders to list homes, which will help improve the balance between supply and demand by the end of the year.”
30-year fixed rates will stabilize
Throughout 2020, 30-year fixed mortgage rates will remain low, hovering around 3.8%, predicts Redfin, noting that faced with slowing economic growth, the Federal Reserve will keep interest rates low. Although the housing market is strong, weakness in other sectors like manufacturing is pulling down the economy. Because some investors are already bracing for the possibility of a recession, Redfin doesn’t expect mortgage rates to fall much lower than 3.5% in 2020 even if the economy weakens. If the economy strengthens, Redfin expects mortgage rates to stay below 4.1%.
“As the Fed continues to combat a slowing world economy, we anticipate that interest rates will remain low and the U.S. jobs market will stay strong, creating a conducive climate for home buying next year,” said Paul Lueken, CEO of Draper and Kramer Mortgage Corp. “Loosened rules on FHA loans and pent-up demand from Millennial homebuyers should also help usher in a bigger wave of first-time buyers in 2020 than what we saw in 2019.”
Amenities arms race to continue
“The amenities arms race is a big moment that has transformed residential real estate, both for rentals and condo,” said Peter Olesker, executive vice president of developer services and corporate communications at @properties in Chicago. “It’s no longer just about space but rather the activation/programming of that space,” he said, adding that this is a “phenomenon that has reached a crescendo as the end of the decade approaches.”
“Personalization is the next level in amenity offerings, according to David Hovey Jr., president and principal architect at Optima Inc. “Connecting with residents in a personal way further enhances and customizes their day-to-day experience – and also gives them a few extra minutes in a day.”
Adaptive re-use revolution
With sustainability and the preservation of Earth’s materials rising to the top of the news cycle daily, Allison Greenfield, partner at Lionheart Capital, foresees “many developers looking to re-imagine pre-existing buildings for new projects instead of knocking down structures and starting from scratch. By retaining the original integrity of existing buildings, developers can encourage community support and help the environment at the same time.”
Foreclosure rate the lowest in at least 20 years
As of September, the foreclosure inventory rate, which measures the share of mortgages in some stage of the foreclosure process, was 0.4%, down 0.1 percentage points from September 2018. The September 2019 foreclosure inventory rate tied the prior 10 months as the lowest for any month since at least January 1999.
“The decline in delinquency rates in North and South Carolina compared with a year ago reflects the recovery from Hurricanes Florence and Michael, which hit in the autumn of 2018,” said Frank Nothaft, chief economist at CoreLogic. “Shortly after a natural disaster, we tend to see a spike in delinquency rates. Depending on the extent of devastation, serious delinquency rates generally return to their pre-disaster levels within a year.”
Homes will continue to shrink
The sprawling, suburban homes that Baby Boomers coveted will increasingly become a relic of the past in…