The real estate industry is subject to fluctuations of the economy. Low interest rates encourage people to seek mortgages and buy property, which stimulates the real estate industry. The real estate market can be strong in some parts of the country and weak in other parts of the country. Often, an area will be strong for a certain amount of time, followed by a decrease in the number of real estate transactions.
The coronavirus pandemic, which started in late 2019, had a significant impact on the U.S. real estate industry. The business lockdowns and social distancing requirements forced many people to spend more time at home, which in turn led many people to realize they wanted to live elsewhere, generally with more outdoor space and in less congested neighborhoods. Those who could afford to move during the pandemic did so. The National Association of Realtors, in fact, reported that by late summer 2020, sales of previously owned homes in the U.S. had increased by nearly 25 percent. Home sales were expected to reach 5.52 million in 2020, the highest reported since 2006. In spite of this growth, the research group IBISWorld anticipated a 6.2 percent decline in revenue for the U.S. real estate sales and brokerage industry in 2020. The NAR predicts that as the economy rebounds in 2021, due to the rollout of the COVID-19 vaccine, the price of homes will rise and home sales will also continue to grow. As of September 2020, the U.S. real estate sales and brokerage industry was valued at $164 billion, with 955,055 businesses employing more than 1.1 million people. Post pandemic, the industry will have solid growth through 2025.
The U.S. Department of Labor indicates that overall employment in real estate should grow through 2028, with real estate brokers and sales agents projected to have 7 percent job growth in that time frame, which is faster than the average for all occupations. Technology is improving the productivity of agents and brokers. Real estate companies and sellers have made most information available on the Internet and agents are able to serve a much larger number of customers. The use of advanced technology is likely to discourage part-time and temporary real estate work because of the investment costs and the competition with full-time workers.
The U.S. Department of Labor forecasts job growth for brokers and agents due to population growth and mobility. People will continue to need brokers and agents to find homes, whether they are first-time home buyers, searching for a larger home, relocating for a new job, or other reasons. As the job market improves and consumer spending rises, there will be increased demand for brokers and agents to handle commercial, residential, retail, and industrial real estate transactions. Another factor that will contribute to job growth is that within the next decade, millennials will be in the job market and of household-forming age. Their entry into the housing market will increase the need for real estate agents and brokers.
There is a trend among real estate customers to want more of a partnership with their agents instead of turning over all aspects of transactions to their agents. Agents who are willing to be flexible in how they serve clients will be more successful. Competition will be keen for beginning brokers, and their success will depend on their personal drive and motivation to make sales.
Opportunities should be good for experienced property managers. The Department of Labor predicts that property, real estate, and community association managers will have 7 percent employment growth through 2028, which is faster than the average for all occupations. Employment growth is expected because property management companies are operating more residential buildings, such as apartments, condominiums, cooperatives, planned communities, and senior housing. Also, new properties are being created that offer community services and have jointly owned areas that are managed professionally by community or homeowner associations. The DOL points out that "property owners are becoming increasingly aware that property management firms help make properties more profitable and improve the resale value of homes and commercial property."
Property managers who hold a bachelor’s degree in business administration, real estate, or a related field and/or who have professional certification will have better odds of securing work. Job opportunities are also expected to be good for property managers who have experience in managing housing for older people or with managing healthcare facilities. The aging population will affect residential and commercial real estate in the coming years. More baby boomers are starting to retire and the demand for multi-family senior housing and other facilities is increasing. Property managers and other real estate professionals will be needed to meet the needs of this growing age group.
Millennials are also expected to play a larger role in the real estate market in the 2020s. The PricewaterhouseCoopers (PwC) "Emerging Trends in Real Estate" predicts that although this demographic has postponed homeownership, their attitude could change as the economy continues to stabilize. The smaller Generation Z, born after the millennials, is also expected to affect the real estate market down the road, according to the PwC report. "Planning for a nation with lesser household formation, fewer new consumers, and a meager number of workforce entrants is the challenge ahead for a real estate industry with its eye on the 2020s." Generation Z is entirely focused on the virtual world because they’re growing up with the Internet, smartphones, tablets, wearable tech devices, etc. They’re technologically savvy and accustomed to having instant access to data. Real estate professionals need to be prepared for this group.
The outlook for real estate appraisers and assessors is also bright. The Department of Labor predicts 7 percent employment growth through 2028 for this group. Mobile technologies are helping appraisers assess and appraise properties more effectively. Workers have also improved their productivity through the use of automated valuation models that help with property appraisals for mortgages.
Employment opportunities for real estate appraisers and assessors will be best for those with experience and certification, and in areas with active real estate markets. The demand for appraisals decreases during times of recession, when fewer people buy or sell real estate. Appraisers and assessors who have a flexible approach to their work and can appraise different types of properties rather than specializing in one area improve their chances of landing jobs.
The commercial real estate sector is expected to have modest growth in the next few years, according to the market research group IBISWorld. A stronger labor market and increasing household formation will help to increase the demand for commercial real estate. However, office rental vacancies are projected to increase, which could cause a slowdown in construction of new commercial properties. On a positive note, interest rates are projected to continue coming down, which could enable more builders to secure financing for commercial real estate projects.
The residential real estate sector is expected to have modest gains. In a report by the market research group Kiplinger, a 4.8 percent increase in national home prices was expected in 2019. The sales of existing homes had dropped by 7 percent from November 2017 to November 2018, but sales were expected to stabilize going forward. The Kiplinger report also pointed out that although builders have experienced recent labor shortages and other issues, a growing number of them are "offering incentives to buyers, and they're slowly starting to build smaller, lower-priced homes that are affordable."
The National Association of Home Builders (NAHB) reported that housing affordability will continue to be of top concern in the United States. The exurbs are the only region that has had continued growth in registered single-family homes. (Exurbs are the outlying counties of large metropolitan areas with 1 million or more residents.) Nationally, only 9 percent of single-family home construction comprises the exurbs, but steady growth is expected to continue. The challenges that will continue in this sector include finding buildable land and skilled labor.