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11 issues that will impact the future of real estate

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For those who owned homes and had employment throughout the pandemic, there is much for which to be thankful. Home values are up across most parts of the nation, along with consumer confidence. Unfortunately, we live in a nation divided across many boundaries. Although the pandemic might have been a boon for some, it has been a curse for others, not just economically but in human terms as well.

Having just returned from overseas, the abundance and freedoms available here in the U.S. are palatable. What we take for granted is, in many cases, only available on wish lists for the majority of the rest of the world. With this in mind and choosing to focus on our numerous blessings, we choose to be thankful.

Amid the holidays, however, is a modicum of concern. We are living today in a United States that is dramatically different than just a few short years ago. We are seeing societal and economic shifts that are very troubling and, when paired with the apparent absence of real and effective leadership on city, state and federal levels, portend a dimmer future. 

Here are the top 11 issues that I believe will be affecting real estate in the future — in no particular order:

1. Global warming

Whether you believe in global warming or not, one thing is very clear: Our climate is changing. With the change are increased wildfires, hurricanes, tropical storms, flooding — it’s a growing list.

To even a casual viewer, changes will be required in where we put homes and how we build them. We also need to come up with an effective plan for dealing with those currently living in hazard zones. Some municipalities have refused to issue permits to rebuild, which brings up another entire set of issues.

2. Division between the haves and have-nots

Google “wealth in America” and any number of articles pop up about the ongoing redistribution of wealth to an emerging “wealthy” class. This redistribution is at the expense of those on the bottom of the economic ladder, and the pandemic has only made the divide larger. 

As housing prices continue to rise along with a significant portion of Americans living on government subsidies of some kind, this will have ripple effects in the future. One of the most visible manifestations is the growing homeless encampments visible in most major American cities.

3. Increases in violent crime

Whether it’s driving a car into groups of peoplesmashing and grabbing robberies or the overall increase in violent deaths, there has been an increasing level of crime across the country. In 2020, homicide rates climbed 25 percent higher than what we saw in 2019, according to data by the FBI

As The Washington Post reported in July of 2021, “The reasons for the large increase in violence are a matter of speculation and are likely to remain poorly understood for years to come.” Considering that, a significant number of people are second-guessing where they live or choosing not to buy homes in areas where they believe the chances of crime will be high.

4. Cybercrime is up

Despite our best efforts, cybercrime is still on the rise, and no one appears to be safe. This has title companies and other entities in the real estate space scrambling to ensure transactions are safe and funds get to where they are intended to go.

5. Continuing racial tensions

Led by recent tragic events, racial tensions have escalated across the country. This is not just a white versus black issue; we see other ethnic communities being affected.

A cry has gone out to level the field, especially in the homeownership arena, where the percentage of homeownership by minorities is dramatically lower. Although we have fair housing laws in place, it is still taking far too long to remedy a difficult situation centuries in the making. 

6. Supply issues

There are no end of supply-chain issues at play: containers being washed overboard at sea, the inability to unload container ships once they hit our ports, pandemic-related factory shutdowns, wildfire-induced lumber mill closings, global stainless steel shortages, labor shortages everywhere, increasing fuel costs, a 30-year high inflation rate — it’s a perfect storm.

Bottom line, housing starts are down, new home completions are delayed, upgrades to prepare homes before sale are taking longer, and overall residential remodeling is being hampered by empty shelves for many items at local home improvement stores. 

For example, a recent trip to a local IKEA revealed an astonishing number of furniture items that were temporarily unavailable along with most counter options, some appliances, lighting fixtures and other upgrade-related items. There did not appear, however, to be any shortage in plastic plants. 

7. Shrinkage of the labor pool

There are three significant issues here: 

  1. Older tradespersons (electricians, carpenters, plumbers, etc.) are retiring and leaving metropolitan areas. 
  2. Many existing tradespersons can no longer afford to live in urban areas or are moving out for geopolitical reasons.
  3. With our country’s focus on the tech sector, we are seeing those emerging from high schools heading toward university and tech jobs instead of trade schools.

Whatever the reasons, it is becoming increasingly difficult to find qualified trades, adding extreme angst to the housing market.

8. Failure to address the housing shortage with meaningful solutions

As mentioned above, increasing homeless populations are just one signal that we have a housing crisis. Redfin also cites a projected increase in rents, which will only deepen the predicament. 

Pandemic-related moratoriums on evictions and the resultant drop in rent payments (I own multiunit rental properties and can attest to this fact) has forced many landlords to throw in the towel and liquidate much-needed rental inventory. 

Additionally, rising prices are causing a growing number of investors to sell to maximize their returns. Developers are pushing back against low-cost housing mandates, insisting rising building costs and permitting fees are causing reduced profitability, which no longer warrants their continued building, especially in the large multiunit market. 

No municipality I am aware of has an effective handle on dealing with the increasing housing shortage. 

Increasing state-level taxation regulations (California) forcing landlords to keep profits in California is causing creative solutions where landlords refinance their properties to the max, pull the money out of state, and don’t leave enough cash flow to maintain the properties adequately.

9. Growing divide between the left and the right

I personally have friends who have decided to abandon their current locale to move to areas more in alignment with their political views. They are tired of the increasing hostilities between the left and the right. They are looking to live in areas where the majority are on their side of the political aisle. 

There are two fundamental issues here: 

  1. Instead of having communities with a healthy mix of political views to help balance things, the country is being polarized in a dramatically unhealthy way. 
  2. With large-scale moves in place, destination cities (like Boise, Idaho) are seeing dramatic home prices due to supply-and-demand economics, causing deep frustration and anger in the pre-existent populace.

10. Increasing division over the COVID-19 vaccinations

Although, in some ways, the vaccination divide is also along political party lines, the effect is much the same as the previous item. 

More tragically, the vaccination crisis is dividing families and alienating life-long friends. Families are packing up and moving to areas they believe are safer (regions with the highest vaccination percentages) or regions more favorable to unmasking.

11. Growing insurability concerns

As natural disasters increase in ferocity, numerous insurance companies are pulling out. Whether in high fire areas or flood zones, it’s becoming much more difficult to purchase insurance, which will, in turn, affect the ability to own or build homes in certain regions.

It’s the holiday season, and I again want to reiterate that we are incredibly blessed as a country. I am thankful. I am concerned, however, as I see hard-won ground slipping into the morass as we cannot seem to handle these emerging crises effectively. It seems to some that the pandemic has caused many of these issues. 

I believe COVID-19 has simply escalated issues that were simmering in the background. Put differently, the pandemic has been a magnifying glass that has brought these issues out into the open. My hope is that we work in earnest to tone down the hostilities between the left and right and strive to work together to bring America back from the edge of the precipice.

Carl Medford is the CEO of The Medford Team.