FUTURE RIPE FOR NEW BUSINESS MINDSET

Last week I reported that U of M economists have forecasted a return to stability in our core real estate market next year (see REWeekly 5/4/09). That is cause for celebration as we have all been looking for the bottom of this free falling market for over four years. Once stability has been achieved, much of the fear will be dissipated and consumer confidence will begin to rebuild.

This is all good news, but don’t be lulled into thinking that there will be a return to “business as usual” anytime soon. Even as the market rebounds in 2011 and beyond, it won’t look like the market we had in 2000. The way real estate is transacted will look entirely different than it did before.

We are already seeing a different lending model emerge. But moreover, the behavior of real estate consumers will be different. First time buyers will be a far larger component of the homebuyer demographic than before. This will be true for two reasons.

First, much of the current home-owning population going through foreclosures and short sales now will be locked out of buying another home for five years. These are primarily mature homeowners and families who will become part of a huge new rental lifestyle market. Second, there are 80+ million Y-Generation buyers, the oldest of which are now 32 years old, who are entering their prime consumption years.

These consumers will behave very differently from the more mature consumer we have been dealing with for the past 20 years. They have different expectations about everything. They are seeking a different lifestyle than that of their parents. More details about that in future editions of the REWeekly. For now, however, the message is that real estate practitioners at all levels will need to adopt new ways of thinking and behaving in order to do business with the new consumer.