Issues Affecting Real Estate

Rising interest and capitalization rates top the list of issues that have future implications for real estate.

Historically low interest rates have driven the economy and real estate markets in recent years, but as rates start to rise, it could raise capitalization rates, the ratio between the income produced by an asset and its cost, which could create anxiety about investing in real estate.

 Healthcare is also an important issue that has implications for real estate. As the population ages, there will be greater demand for senior housing, requiring a change in the configuration and size of available housing, and for greater medical care, resulting in an expansion in medical facilities.

 In commercial markets, transaction volume is up, credit is available, underwriting has loosened and a full range of debt options is back. For residential markets, underwriting remains tougher but rates are near historic lows and affordability remains high.

Future housing demand from echo boomers, the 80 million Americans born between 1982 and 1995, will also impact real estate markets. Echo boomers often prefer a more flexible and active urban lifestyle, and are often willing to trade home size for location. However, the suburbs are fighting back with new bike paths, and repurposed properties to attract more future buyers.

Then there is such factor as globalization, foreign investment and the economies of other countries as variables that will continue to have a greater impact on the U.S. economy and real estate market.

Impact of the Internet on bricks-and-mortar retail stores is also a growing issue. He said retail demand is down across the country due to an increase in Internet sales, which are expected to rise from the current 6.5 percent to nearly 15 percent by 2020.

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