05-06-22 | Tech in Real Estate News | Downsizing Trends

Americans are choosing to live in smaller size homes to combat rising mortgage rates and competition. In this video, we cover downsizing trends and top digital nomad cities.

Transcription

Ariel Herrera 0:00

Hey everyone, welcome to the tech and real estate Podcast. Today we're going to be discussing some trends related to mortgage interest rates. We're starting to see behavior of buyers change going from larger homes to smaller homes, and actually an uptick in condos as well. There are some cities in the world that are actually exploding and growth in terms of being favorable for digital nomads. This could be a great strategy if you're looking to focus on that particular niche. My name is Ariel Herrera with the analytics area channel where we bridge the gap between real estate and technology. We recently started this new segment on Fridays of summarizing tech and real estate news for the week. If you want to get this news firsthand and join the Facebook group. It's called Tech and real estate, and you could join in the link below. Alright, let's get started. The first article I want to highlight was from Bloomberg, and it stated Lisbon, Miami and Dubai ranked to be the best places to work for high earners, and high earners, they're mostly focused here on those that are digital nomads, meaning that they could do their work with just requiring Wi Fi and a laptop. This has been a big push. Since the pandemic, a lot of companies went from either no remote structure to semi remote structure going towards full remote structure, it benefited both sides of the employer and the employee, for the employee, you're able to get a lot more time back instead of doing lengthy commutes. As well as monetarily, you may not be spending as much money on gas, bus, whatever transportation you are taking. And on the other hand, for employers, a lot of them no longer have to have as many offices, they're able to reduce their footprint and a physical space, but then be able to grow remotely and acquire top talent since they're don't have to focus just on those individuals in that city. And I think this market is going to grow even more, a large segment of these remote workers really enjoy working remotely and there are some that come out of college are in their 20s. And they're single, meaning that they're just one individual, maybe a couple, but no children yet. So they're not tied down to a specific neighborhood due to schooling systems. So in this case, they have the availability monetarily as well as flexibility with work to work anywhere in the world. And it's really intriguing to see which cities ranked the top because these could be really great markets potentially, to look at properties that really geared towards one to two people. And in this we have Lisbon as the top spot than Miami and following Dubai, the remainder are variable from being in Europe as well as more Island D. So St. Lucia, Malta, Barbados, as well as the Bahamas, I love the way that Bloomberg broke out how they assessed, these emerged hybrid spots, they looked at internet speed, which is huge. We see some of these locations like Antigua are not ranked as high. And that's mostly due because they don't have that fast internet speed that's required, especially for those remote workers that are maybe downloading a lot from the web, maybe creating videos or heavily utilizing that web interface. Then we also have second to internet speed, we have quality of life, then climate, as a lot of people who choose any place to work type usually do not want to be in freezing cold. So unfortunately, Alaska does not make this list. And then we have air conductivity. So AC is very important. And Prime rents for this research prime rents received half the weighting and I would believe that because some of this data for Prime rents may be lagging that could be a contributor why they didn't push this up as much. So overall Portuguese city is taught for remote senior staff and I've been to Lisbon before it's really great city was super affordable to have an Airbnb, me and my partner. We were out there and we were able to get a two bedroom for like 70 bucks a night which was awesome. They also state that low cost of living is Luring in foreign buyers and that's really true. Even for myself. I

recently purchased a property and Playa Del Carmen which is another big digital nomad space within Mexico, with the idea of air being being it out short term as an Airbnb one to two days but also longer term for those that are digital nomads and want a place to stay for several months and maybe even myself. The next article that I found really interesting was from Redfin, and it was labeled downsizing. and trend taking root as home prices begin to rise. So in March, a typical home under contract was seven teen 100 square feet, which is down 1.8% About a year ago. So this might not seem like a big drop. But if we look back over the last four years as this chart does, we could see in comparison to 2020 and 2021. The typical home square footage was a lot higher. There could be a lot of influences here, which I'll mention in the next slide. The chief economist for Redfin, Daryl fairweather states, buyers are purchasing smaller homes because usually the bigger the home, the more expensive it is, typically, we can measure homes by price per square foot, and the larger the property, the larger downpayment it's going to take and usually the higher the price that it sells at, so I could definitely see this being true. And as we continue to see mortgage rates climb up, if there are those who need to buy immediately the can't wait on the sidelines, then they may forego a bigger house in order to get something that's smaller, and within their price range. Now on this article, there was even deeper information which stated condo prices jumped to record high as buyers seek relative affordability. And they go through an entire article of in depth research of condos. They also look at the top markets where condos have been selling the most, which I believe Miami or one of the Florida South Florida cities were at the top, but they also state that condos still aren't as competitive as single family homes. So the whole idea of people are downsizing that we see condos increasing in price. However, single family home is still the number one. Another statistic that they add on condos are that condos are selling two weeks faster than they were a year ago. So looking at February of 2021. In comparison to February of 2022, we could see that condos were selling about 7% Faster, meaning that 7% more properties were off the market within two weeks. Now although I could definitely make the case for why the data backs up that downsizing is occurring and condos can have a very big impact on that now that we see that people are purchasing condos at a more rapid rate as well as at a higher price. I still am a little bit skeptical if that's really the only variables that are driving this. So some of the influences that I think are driving people towards downsizing are baby boomers moving post retiring, baby boomers comprise of one of the largest groups of Americans and a lot of them are in the stage of either retiring right now or have already been retired from a study done by Merrill Lynch survey in 2017. They surveyed Retired Americans that have already moved and over half downsized to reduce the cost and effort of home ownership. And this makes complete sense. As you start to get to your later years of life, you likely don't have your children living with you for one, so you may not need that four bedroom and you can go down to say a two bedroom. Secondly, you may not have the stamina or just the interest to keep up with all the house chores that go into a single family home like cutting the grass, and just the general maintenance that occurs. And for the second piece here,

I also think that smaller spaces like tiny homes have really become a trend. I have some friends who are actually two travel nurses, and they decided to get their own RV living it while they do travel nursing. I also have another pair of friends once an accountant and he does something very similar and different states on the west coast. So this is becoming something that you saw maybe just see in a movie was actually a lot more prevalent today. In addition, tiny homes, there are a lot more companies that provide this type of service, even adding ad use so additional dwelling units to backup a house like a mother in law suite as well. Even on TV, we see there's tiny home shows on TLC and more. So I definitely think that as a generation, we're generally going into a downsizing culture, not just because of rising interest rates, but because we're starting to realize as a nation, it becomes very difficult for someone who's a retiree to maintain a large home. It also may not be cost effective to go into a 3000 plus a month rental when you could have an RV or you can take an adu at someone's property. Great. So now for the weekend segment. So this weekend I'm actually in piled a car in Mexico came back and going to be attending a friend's wedding in Riviera Maya super excited about that. Why? I'm in Playa Del Carmen though I will be checking out the development of the condo that I purchased and probably getting a lot of beach time in. In addition, some future videos to watch out for. I will have some tutorials on Podio as I've been ramping up getting everything set up for my wholesaling business, and I made a tutorial to make sure you'd be able to replicate it with easy to follow directions. And secondly, I'm still doing a major push to get a lot of my internal tools that I have to be external. One of those is a Buy Box tool, where I basically run a script in order to assess what homes have come into the market every single day within my particular Buy Box and not all Tampa, Florida, for example, but only homes that are within a price range, square footage, bedrooms, etc. That way I can monitor trends and see if I need to pivot at all and also complete the course that I have promised to me which is almost done, which will allow you to build a similar tool on your own if you'd like to get that type of Python and data experience. Alright, thanks so much for watching and have a terrific weekend.