ULI Emerging Trends In Real Estate 2016

Want a jolt of good news on housing prospects—writ large--for 2016? Columbus Day may be a holiday for some, but for legions of home builders and residential developers penciling out budgets for 2016, and managing completions through the critical period of the next six weeks, it’s just another Monday on the job.

So, a little good news might be just the thing.

Have a look at the just-released Emerging Trends in Real Estate 2016, from the Urban Land Institute, and skip ahead (until later, of course) to page 39, the section that talks about market trends that will drive the fortunes of 75 of the United States’ leading real estate markets.

There, in the company of five other “market trends” ULI researchers feel are the noteworthy catalysts that will characterize foreseeable behavior over the next 12 months or so, emerges this one—Housing Outlook Continues to Improve.

Commentary on this assertion comes along with a broad-stroke insight that it’s secondary and tertiary markets both investors and developers may have the greatest opportunity to make hay. This is both because economic recovery has dispersed beyond “usual suspect” major market centers, and because the live-work (housing and jobs/wages) equation is still, at least for the time being, in balance.

  • “Housing Outlook Continues to Improve” nestles itself as a mentionable market observation among these other bullet-point trends.
  • Look Out for the “Villes” . . . and Pittsburgh
  • Florida’s Resurgence Continues
  • Respondents Get Cautious about High-Priced Markets Growth
  • Affordability Drive Market Sentiment Fall in Oil Prices Affects Energy-Dependent Markets

When was the last time we heard reference to that music-to-one’s-ears concept, “path of growth?”
Here’s the top line commentary on expectations for housing’s outlook.

Last year, we commented that housing was ready to step off the roller coaster. It appears that in a majority of markets, housing has indeed stabilized and is poised to begin a sustained upward trajectory. Another 2015 trend was that peak levels of millennials and baby boomers would be making housing decisions in the next five years. This could have a significantly positive impact on housing: millennials buying their first homes and baby boomers either downsizing orretiring to a new home or perhaps purchasing a second home.

The locales that will benefit the most from the movement of these two generational titans are still subject to a certain amount of speculation, but one thing is certain: most markets will need to add housing to keep up with any type of increase in demand. The increase in housing stock, both single-family and multifamily, has lagged household growth in many markets.

A much-watched feature of the ULI Emerging Trends analysis is the Markets to Watch rankings, which plots 75 of the U.S.’s most important market areas in a top to bottom order, based on relative expectations for investment, development, and home building.

Top 15 markets-to-watch for 2016 in real estate investment, development, and home building

Thanks to the give-and-take, fits and starts event and headline flow of global economics, Houston, and a number of other American oil and energy-center markets took a hit in growth expectations for the coming slog of 12 to 14 months, while more diversified yet less hyperbolic markets zoomed up the charts.

Here’s the commentary on that:

Dallas/Fort Worth climbed four spots from last year’s survey to take the top spot, leapfrogging state rival Austin in the process, which remains in the number two spot. Nashville, Atlanta, and Portland, Oregon, are new entrants into the top ten for 2016, while Minneapolis and San Antonio enter the top 20.
A strategic imperative surfaces amid all of the respective jockeying for positions—Houston, San Francisco, Los Angeles, Boston, and Manhattan all slipped from their 2015 spots in the rankings.

That is, consider carefully whether, for each market, you’re in grow mode, or not. Here’s how ULI analysts phrase the directive:

The result is whether one decides to play offense or defense, this real estate cycle is giving everyone a wide array of choices in a number of markets. It all comes down to calling the proper play and executing it to perfection.

And of course, given that real estate investment, development, construction, and completions either win or lose based on their occurrence, management, and execution in time—often within a limited “window” of opportunity gained or squandered—a second strong caveat underlining all of the ULI “Emerging Trends” is this one.

Take a Deep Dive into the Data
The era of big data can be a blessing or a curse. The avalanche of numbers pouring down each day creates a daunting challenge to separate “the signal from the noise.” Having a clear strategy is the key: a well-defined set of criteria for property characteristics, submarket qualities, and demand segments helps the investment focus. Deals that meet specific investment objectives will vary business by business. One size does not fit all.

All the more reason to take a fresh look at what BUILDER sibling company Metrostudy has going on at its new website. Of particular interest, giving the vagaries and challenges of matching product and pricing to new communities coming on line, in many cases where there hasn’t been new neighborhood development in some significant number of years, is Real Estate Economics’ lot optimizer capability, which can be critical in land planning, product development, and pricing strategies for the all important new community pipeline we’re going to see come about in those secondary and tertiary markets in 2016 and beyond.