REMI Recommends Diversification Following Private Construction Boom

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The Real Estate Marketing Insider recommends diversification of property portfolios for realtors. Following a recent report in that highlighted a spike in private construction, REMI takes a close look at the data and defines its meaning for real estate professionals.

The Real Estate Marketing Insider recommends that its realtor readers diversify their portfolios to include residential and non-residential properties. REMI analyzed the numbers from a recent report published by that showed explosive growth in the private construction sector and the connected housing market, and explained what this growth might mean for real estate marketing agencies and other real estate professionals.

According to data obtained from Sageworks, private construction in the United States has seen huge spikes in sales recently. The construction sector is growing faster now than any other private company sector, with orders for new residential properties up 18.2 percent since 2012. The activity in the construction industry trickles down to countless other industries, including materials providers, contractors, and of course, home and property sales. So it’s no surprise that CFO also reported a 9-percent jump in average home prices year-over-year from February’s S&P/Case-Shiller report. To add even more good news, the National Association of Home Builders went on record with a prediction of over 1 million new housing starts in 2014.

But what do these numbers mean for realtors and realty firms? The Insider took a closer look at the data, and here’s what they noticed:

  •     Residential properties have had the most new construction starts. They also had the biggest year-over-year spike of almost 15 percent between 2011 and 2012. The industry has long been complaining of a drum-tight inventory in the housing market. However, it looks like this is on its way to being filled. Realtors already in residential properties will enjoy this new wealth before too long. Realtors who work primarily in other markets might want to think about diversifying.
  •     Architectural and engineering office spaces were next on the list with a 14-percent growth, but their 2012 progress was much closer to their 2011 progress, with only a 3-percent shift. This is still impressive growth, but suggests a leveling out to constant growth. There’s plenty of money to be made in commercial real estate, but these properties won’t move with the same urgency. Office real estate is a stable industry with steady growth, and forms an important piece of the portfolio when pent-up demand for residential properties runs out.
  •     Diversification becomes even more important when one considers the differences in residential and office properties in the last few years. Residential real estate has had a hard time growing out of the recession, with miniscule growth in 2011 and 2010, and steep losses in the years before. Meanwhile, architecture and engineering spaces began growing at the same time, but in much stronger percentages. Furthermore, they didn’t take as steep losses in the preceding years. The best combination for realtors is a bit of the high potential of residential real estate, and a bit of the stability of engineering offices.

The Real Estate Marketing Insider advised real estate businesses to diversify their property portfolios. REMI analyzed data suggesting strong growth in the construction sector over the last year, and concluded that realtors can best benefit from the construction boom by diversifying their portfolios and including both residential and commercial real estate properties.

About the Real Estate Marketing Insider:
The Real Estate Marketing Insider is an online publication with offices in La Jolla, Calif. REMI is a magazine for real estate specialists, delivering breaking news and market analysis.

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