On the House: The shifting residential real estate landscape

The Counselors of Real Estate is a group of 1,000 individuals, invited to join, who are considered the crème de la crème of the industry. Over the last 26 years, the organization has provided considerable fodder for this column.

Today's focuses on the top issues facing residential real estate in 2015-16, as seen by the group. I'm skipping over commercial real estate issues, unless they affect residential or result from housing shifts.

First up: demographic shifts, with baby boomers and millennials having the greatest impact.

"This casts a spotlight on housing in all its forms: for seniors, the homes in which they choose to age-in-place, downsized homes, senior communities, or assisted living," the counselors said.

For millennials, "the decision to buy or postpone buying, and location most often being driven by amenities, such as urban walkable communities."

The real estate and service sectors targeting each of these age groups are adapting, too: medical facilities, retail, office, and entertainment venues, to name a few, as well as infrastructure and distribution.

Overall, the counselors said, demographic shifts will drive decisions across virtually all real estate sectors this year and for the foreseeable future.

Interest rates have been at near-historic lows - and the general view is that they will stay that way for a while longer.

Investors and home buyers alike are preparing for rates to increase, and when that occurs, "it will devalue future cash flows, thereby devaluing assets," the counselors said.

An interest-rate rise could spur short-term commercial development and slow home sales, but rising rates will cause higher mortgage payments, thereby decreasing home buyers' choices.

If millennials jump in and buy before interest rates rise too far, "it could create a second wind for the residential market," the counselors said.

As we have seen in Center City and reemerging boroughs in the suburbs in the last few years, an increasing desire to reside in "live-work-play" and "walkable" communities is not limited to young professionals.

Older generations are also drawn to such locations, the counselors said, which affects housing choice for all age groups.

Some suburbs are feeling market pressure, with home resale not easy when younger families don't want the kinds of homes that are in plentiful supply from a past generation of suburbanites, the counselors said.

As first-quarter data provided by local economist Kevin Gillen attest, and that real estate agents in and outside the city confirm, prices in the suburbs continue to lag those in Philadelphia itself - a complete reversal of what we experienced in the downturn of the 1990s.

Just look at residential construction in neighborhoods in and around Center City and compare it with what is happening in most suburbs.

Lagging overall, and behind that of many other countries, the counselors said, is infrastructure.

"Aging roads, bridges, and power/gas/water lines no longer satisfy the needs of a highly connected populace, let alone businesses and world economies," the group said.

Communities and cities do not have the available capital to invest in infrastructure. Public/private partnerships may be the answer. "However, in the short term, adaptive reuse is often constrained, the counselors said. "This impacts existing buildings and entire neighborhoods, where energy or water infrastructure cannot be readily improved."

"Development, too, can be limited because existing streets and bridges cannot accommodate increased traffic flow if denser housing or mixed-use development is built."