Building, purchasing, or renovating commercial or residential real estate is likely the largest expense someone will encounter during their lifetime. Thus, understanding common issues associated with real estate can help you make an informed decision when building, purchasing, or renovating real property. Below are the most common issues affecting real estate today.  

Interest Rates and the Economy

When taking out a large mortgage, even a 1 – 2 percent difference in the interest rate you receive could have a sizable impact on the total cost you pay for the property.

The Federal Reserve is the governmental body that sets base interest rates which largely dictate the interest rates banks give to consumers. For almost a decade, the federal reserve has kept interest rates near zero—making buying a home with a mortgage more affordable than ever before. However, as the economy continues to improve, the Federal Reserve has discussed raising interest rates back to historically acceptable levels. If this occurs interest rates could again rise back to 5 – 7 percent. With interest rates that high, both consumers and project developers will have a more difficult time financing real estate projects.

Housing Affordability

Though interest rates have been low in recent years, issues such as wage stagnation, gentrification, and twenty years of low housing production have negatively affected the residential housing market. Fixing these issues within the residential housing market is extremely difficult. However, some experts simply state that if the production of affordable housing significantly increases, the majority of these issues would subside.

Another issue that plays in housing affordability is the local market conditions. The local market conditions refer to both the job market in a given area as well as an areas specific housing market. For example, if there are a plethora of well-paying jobs in a region, residents will not have as much of a problem with housing prices. On the other side, however, if the job market largely stems from jobs that require higher education, residents who lived in the area for generations may become priced out and have to sell their homes or give up their rentals.

Generational Changes and Demographics

Another issue that will affect housing availability and prices is that Millennials, Baby Boomers, Gen X, and Gen Y all have a substantial stake in the real estate market. The reason this factor affects property value is that real estate prices fluctuate with the companies and jobs within an area. However, as many different generations own homes, prices may stay high even if an area’s job market is not healthy.

E-commerce and Logistics

With the recent rise of E-commerce and the availability of cheap laptops, tablets, and other items necessary for many workers, certain types of businesses can have employees that work from home. Thus, workers can move anywhere in the country yet work for a company based in a major city. First and foremost, the work from home trend could have a serious impact on the commercial real estate market. This is due most commonly to the fact that employees are no longer restrained to always working in an office. Additionally, those working in E-commerce could hold a well-paying job yet move to a rural area. If enough high-earning individuals move from cities and suburbs to a rural area, the housing markets will drastically change.

Infrastructure

Reliable and affordable infrastructure is vital to the U.S. housing market. Infrastructure such as water, power, and sewer services are necessary for housing located in cities and suburbs. However, the majority of these utilities are old, failing, and unlikely to be fixed anytime in the near future. This threatens the viability of certain neighborhoods, thus, only increasing the need for more affordable housing. Finally, crumbling public transportation makes finding and getting good jobs even more difficult. This is especially true for those that live in areas that rely on these utilities.

Strained Relationship Between Buyer and Seller

Selling or buying a home can be an emotional time for many people. Whether one party is suffering from nervousness, uncertainty, excitement, stress, or sadness, these emotions can cloud logical judgment. This leads to difficulties as rational judgments are vital to complete the sale of a property. Additionally, when people experience these emotions, they may expect to sell their home for an excessively high price. On the other side, buyers may expect to only purchase a home on a deep discount. Furthermore, trying to educate an irrationally emotional person on the actual value of a home is a challenge in itself. Unrealistic home buyers and sellers may not be as bad of an issue compared to the failing infrastructure in America. However, these buyers and sellers only exacerbate the issues that already cannot be avoided.

Climate Change

Both natural disastrous and climate change play a major role in where people can live. For climate change, warming and rising sea levels may make certain coastal towns uninhabitable. Additionally, if an area frequently deals with hurricanes, floods, or other issues, a homeowner may be forced to move. While authorities may not force someone to move, the insurance company may simply stop insuring the home.  

Final Thoughts

With over 20 years of experience, Antonoplos & Associates real estate attorneys have the knowledge and experience required to assist clients with real estate litigation in DC, Maryland, and Virginia. Furthermore, because our attorneys have a strong background in real estate, construction law, and business law, we are uniquely equipped to assist clients with real estate litigation.

Contact Our DC Law Office for More Information

Finally, for more information regarding the most common issues affecting real estate, contact us at 202-803-5676. You can also directly schedule a consultation with one of our skilled attorneys. Additionally, for general information regarding real estate law, check out our blog.