Real Insight. Real Estate.

Its officially summer now, and birds have migrated back north. Humans? They haven’t been migrating anywhere. No, not even those elderly humans with an affinity for (early) birds. What once seemed like a rite of passage with retirement has stagnated due to several factors, which has caused a seismic shift in how demographics unfurl. And as any economist, or any developer will tell you, demographics are as key of a component to real estate as anything else. Office buildings need workers and affordable homes within an hour’s drive of the office. Strip centers need high traffic counts fueled by a sizable population. Multi-family needs, well, multiple families. So what are the main causes for this sudden lack of migration? Let’s take a look…

1. Inability to Sell

Although home prices have plummeted considerably in some of the hardest hit markets, making home prices very attractive to those with motivation and capital, transaction velocity has still taken a considerable hit, mostly due to the Catch-22 that is home buying in this environment.  Most buyers need to sell their house in order to be able to afford to buy their new house, and if their home doesn’t sell, they are not able or willing to buy. Furthermore, with many companies cutting back and pinching pennies, the days of providing incentives to prospective hires to move to a new city for a job in the form of temporary housing or home sale services have become more scant.

2. Fewer Retirees

As we are all likely aware, stock portfolios have been battered with the downturn in the economy.  This has affected those nearing retirement, who planned on using their nest egg to move to a warmer climate.  Not so fast.  With the average portfolio losing 30-40% of its value over the last 18 months, many people have stayed put and continued working, because they can no longer afford to retire and move.

3. Urbanism

More people are taking shelter in traditional urban centers like New York City, Los Angeles and Chicago, which have increased slightly in population.  Those who had previously fled for more up and coming urban centers in Florida and California, whose regional economies are now floundering, have returned to major metropolis’. While this phenomenon cleary produces some short term migration, the long term effect should slow seismic demographic shifts that we have seen in the past.

If you enjoyed this post, make sure you subscribe to my RSS feed!