WHAT TO WATCH IN 2018 FOR THE HOUSING MARKET & PROPERTY MANAGEMENT INDUSTRY

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1 WHAT TO WATCH IN 2018 FOR THE HOUSING MARKET & PROPERTY MANAGEMENT INDUSTRY

2 As a property manager, the day-to-day responsibilities that demand your attention can be all-consuming. It s rare that you get the chance to press pause on the tasks in front of you and shift your focus to the larger context that your business inhabits. However, the start of a new year is the perfect opportunity to take a step back and ask, How do the larger forces at play in the real estate market impact my job on a daily basis and how can I leverage this knowledge to stay one step ahead of the competition? As you re thinking through your strategy for the coming year, we know that you don t have the time to find out what hundreds of experts have to say about the 2018 real estate market. That s why we did it for you and we ve boiled down our extensive research into 7 quick predictions to help you prepare for the challenges you can expect to face.

3 Whether you re a property manager trying to crack the code to keeping great tenants in your units in the long term; a property owner hoping to understand why your units gain and lose value from year to year; or an investor looking for up-and-coming markets to grow your business, this guide is for you. Inside, you ll discover answers to these pressing questions: Will home prices continue their steep climb in 2018 and how will this impact the rental market? Which American cities will see the most growth? How should property managers calibrate their strategies to attract new residents and retain current ones? And more

4 The Affordable Housing Shortage Across the country, there s a shortage of affordable homes for sale. Shortages lead to overvaluation because in a competitive market, consumers are willing to pay more for a desirable place to live than the home might be worth. The inflation we re seeing in home prices may feel reminiscent of the housing bubble we experienced a decade ago. However, our more conservative homebuying and lending process now prevents consumers from paying far more than a house is worth, or more than they can reasonably afford. Because the growth we re seeing isn t unrestrained like it was in the mid-2000s, we ll see a slow and steady glide toward more reasonable rates rather than a crash.

5 PREDICTION #1 In 2018, average home prices and rents will begin to moderate across the country after years of steep growth. This slowdown is part of our economy s natural cycle: When home prices and rents reach unsustainable rates, our economy seeks equilibrium through price correction until the supply can catch up to the demand.

6 PREDICTION #2 Primary markets that have seen extreme price growth in recent years particularly San Francisco and New York City will gradually glide back down to more sustainable long-term rates. Meanwhile, secondary markets like Raleigh, Charlotte, and Nashville will see an uptick in interest in 2018 as renters, homebuyers, businesses, and investors discover more affordable spaces in smaller cities.

7 The Construction Labor Shortage During the last recession, many migrant construction workers left the country in search of jobs; and today, restrictive immigration policies keep them from coming back. In addition, younger workers aren t entering the industry as quickly as older workers are leaving. 1 in 3 construction jobs remains unfilled, which slows homebuilding and drives up workers wages ultimately shrinking developers margins. In order to make a profit, developers are forced to build luxury properties that don t address the demand for affordable homes. Natural disasters further worsen the housing shortage by diverting labor and materials to rebuilding rather than creating new homes.

8 PREDICTION #3 In 2018, an already-tight housing market will continue to feel the impact of the diminished construction labor force. Affordable single-family homes will be hard to find, with new construction failing to meet the demand; current homeowners staying put for fear of entering a contentious market; and available homes selling at record speeds. We should also anticipate rebuilding efforts following natural disasters to become a regular strain on the construction of new single-family homes.

9 Moderation in Hot Markets After a flurry of multifamily construction in 2015 and 2016, new apartments are coming online across the country. As new supply is absorbed in hot rental markets like New York and San Francisco, vacancy rates are rising and rents are moderating in comparison with the peak levels they recently reached.

10 PREDICTION #4 Because home and rent prices in primary markets like New York and San Francisco have peaked, property managers and landlords will no longer be able to compete on rents without hurting their margins. Instead, in 2018, property managers and landlords should consider which amenities and concessions they can offer to remain competitive in attracting new residents and retaining current ones. If a new dishwasher or a free month of rent helps you to keep reliable residents in place particularly when you divide that cost by the length of the lease it s often a worthwhile investment.

11 PREDICTION #5 Meanwhile, as newly completed units come online in secondary markets like Charlotte, Raleigh, and Nashville, strong rent growth and rising occupancy rates present a great opportunity for property managers and investors looking to grow their businesses in 2018.

12 Technology as a Business Differentiator Technology is the future of every industry, and that includes property management. Mobile devices are changing the way we communicate and do business, and the Internet of Things is putting smart thermostats and personal assistants in the homes of millions of Americans. For property managers, leveraging these innovations may be the key to attracting and retaining residents in the coming years.

13 PREDICTION #6 In 2018, technology will continue to present major opportunities for property managers to differentiate their businesses from the competition. Renters of all demographics want convenient ways to communicate with you, pay their rent, sign leases, report maintenance issues, and more. A smart strategy to attract and retain residents in 2018 should include digital capabilities like mobile communication, electronic payments and leasing, online maintenance ticketing systems, and similar technologies. In addition, consider adding technologies like smart thermostats, locks, security systems, and personal assistants to your units.

14 Evolving Renter Demographics Millennials are entering the housing market, but they aren t becoming homeowners at the same rate as previous generations. This is due to factors like student debt, tight credit standards, the affordable housing shortage, and the disparity between wage growth and rent growth. Meanwhile, many Baby Boomers are retiring, downsizing, and becoming renters, resulting in a wide range of needs and expectations among today s residents.

15 PREDICTION #7 Renters will only become more diverse tomorrow than they were yesterday. This broadening of demographics challenges property managers to adapt their amenities to cater to all ages and abilities. In 2018, an apartment building may be home to a single young professional living with roommates; a family whose credit prevents them from becoming homeowners; and a retired couple who could no longer justify the costs and upkeep involved in owning a home. Listening to your renters diverse needs and adapting your properties and services to attract and retain them in the long term has never been more critical to the success of your business.

16 ABOUT BUILDIUM At Buildium, we understand property management because we are property managers. That s why we re trusted by more than 13,000 property and association managers worldwide, with over 1 million units under management. When you re ready to take your business to the next level, we re here to help with intuitive software and relentless support. Attract and keep tenants with the best services possible. Try Buildium FREE. Give us a call today at or visit our website to schedule a demo. SIGN UP REQUEST A DEMO READ OUR BLOG VISIT OUR WEBSITE CONTACT US or sales@buildium.com SIGN UP FOR A FREE TRIAL Buildium LLC 12.17