As is true in every area of our lives, it is important to remain cognizant of the current and emerging issues expected to have the most-significant impact on us. As the political arena pursues its historical offering of turbulence and uncertainty, many aspects of our lives continue to experience the results of a pandemic hangover in the form of ongoing disruption.
Just as we settle into what feels like a new norm, a shift occurs, causing us to reevaluate our expectations and plans. Politics knows no bounds when it comes to its relevance, reach and impact, particularly in its involvement in and impact on the real estate market.
The most-pressing and trending issues affecting our current and future markets are inflation and rising interest rates, geopolitical risk, the implications of remote/hybrid work, housing imbalance, supply chain disruption, energy, cybersecurity interruptions, labor shortage strain, regulatory uncertainty, and ESG (environmental, social, and governance) requirements forcing change. For the sake of brevity, let’s focus on the top three issues.
Inflation and rising interest rates
While the pandemic years created an unprecedented sellers’ market and buyer frenzy, the past six months delivered an anticipated economic slowdown that has been felt throughout all sectors of real estate and are reflected in a tangible shift in the balance of power between buyers and sellers. Inflationary pressures have slowed the rise of home values, and increased interest rates have decreased buying power. Collectively, these effects can be seen in longer days on market, fewer multiple-offer situations, a lower list-to-sale-price ratio, and the full gauntlet of contractual contingencies back on the table.
Geopolitical risk
Direct implications of geopolitical risk can be challenging to isolate and measure, but generally materialize as local and global instability with an uncertain future impact on economies and financial markets. As it relates to real estate, the influence of geopolitical risk can be seen in stock market volatility, housing and rent regulations, supply chain stress, sustainable development, energy costs and changing standards and requirements for building and renovation, to name a few. These challenges weaken consumer confidence and stymie real estate considerations.
The implications of remote/hybrid work
What’s being called the “Great Decentralization” refers to the continuing permanent migration of people from our country’s few dense urban areas to more-remote areas, warmer climates and tertiary urban markets. Employers are forced to rethink their business models as employees demand remote/hybrid work opportunities.
The Monadnock region, in particular, has experienced this in exaggerated proportions, and our proximity to Boston lands us at the top of the list of ideal hybrid work locations. Compared to Boston, our area offers more living space at a lower housing cost and a more natural and socially distanced environment. While sellers greatly benefited from the influx of urban buyer interest in these less-populated areas, many existing residents looking to purchase a home experienced an inability to compete. As we look to the future, remote/hybrid work opportunities likely are here to stay.
Looking at the top three issues affecting the real estate industry through the lens of political influence, we are experiencing a market slowdown that is more accurately described as a refreshing return to pre-pandemic normalcy, rather than a recession. Fortunately, the real estate industry, as a whole, remains stable, vibrant and promising.
Lisa Riley is director of operations for Halliday Real Estate of Bean Group, Peterborough.