An exhaustive analysis of emerging real estate trends indicates prosperity for the industry will continue for the foreseeable future — with a caveat. Prudence on investments ranks high after the housing bust a decade ago.

The report, “Emerging Trends in Real Estate 2018,” by the Urban Land Institute and PricewaterhouseCoopers, updates previous in-depth studies based on myriad interviews, surveys and focus groups of knowledgeable industry insiders. Recently released, the 39th edition lists all the respondents across seven pages, an impressive indication of the depth of the research.

One major takeaway besides a solid performance in the near future is a quote from one of the anonymous participants: “We are in a long cycle, not in boom/bust. The key to the next few years is to expand horizons, market by market, property type by property type.”

In the first chapter, with an air travel theme titled “Navigating at Altitude,” the authors expand on that quote: “Fortunately, a sudden drop in altitude does not seem to be in the offing.” Furthermore, “demand is expanding real estate utilization rates across a process of generations … contributing to real estate’s forward momentum.”

The “unusual length” of the current real estate cycle has given investors pause about assuming too much risk. Based on survey respondents, buying and holding property earned good ratings while selling remained in the excellent category.

The moderate rise of the U.S. economy since 2010 lacks the historical components of a “boom” that would presage a “bust,” but the study does foreshadow an eventual decline, just not a collapse of the market.

“While it has been a very long time since economists have seen a ‘soft landing’ in their projections, we may indeed be on a glide path to that result,” the report states. “Importantly, it seems that many in the industry are implicitly anticipating such a scenario.”

“Hard landings” occurred during the collapse of the savings-and-loan industry in the late 1980s, the disintegration of the speculative dot-com investment bubble a decade later and the subprime lending crisis and ensuing financial meltdown in 2008.

• One important factor today is the tougher line taken by lenders to avoid the high risk conspicuous in the subprime mess.
• One institutional investor mentioned another positive sign of the current situation: “The markets we have always thought of as supply-constrained have added a lot of space in this cycle, while the markets we expect to overbuild have been uncharacteristically well behaved.”
• The study added that the only sector with more capacity under development in 2017 than in 2007 is multifamily.

One decades-long problem remains a Sword of Damocles hanging over the economy and real estate market — that of income inequality combined with wage stagnation.

“The long-term strength of the U.S. economy,” the study notes, “has been in the stability and growth in middle incomes. Upward mobility in both the blue-collar and white-collar sectors has fueled housing demand, consumer spending, and even office sector growth.”

Financial deregulation and tax reform could spark adverse consequences in the real estate market. For example, the low-income housing tax credits, a cornerstone for the development of affordable housing since their inception two decades ago, could disappear.

Sarasota, Manatee and indeed the entire country have a dearth of workforce housing, and additional pressures would exacerbate the situation.

Housing demand is shifting, and the report’s participants said opportunities exist in the development of mid-priced, single-family houses — including tract housing and urban rowhouses — that are affordable to a larger customer base than the luxury sector. Affordable rental units “should see solid demand.”

Sarasota-Bradenton

Metrostudy’s Sarasota-Bradenton market report, also issued this week, showed the number of housing starts in the third quarter of 2017 hit a post-recession high. The research company’s survey also found the problem of workforce housing is getting worse. “Affordability is getting squeezed in the lower price points as new home starts under $250,000 are down 20 percent year over year.”

The new “Emerging Trends” study also warned that the elimination of the home-mortgage interest reduction on income taxes proposed as part of tax reform threatens home ownership, developers and service companies linked to the housing market. The report cites the resistance to this game-changing shift among legislators from both major political parties, concluding, “This bears watching.”

The third chapter in the “Emerging Trends” study covers Markets to Watch. Southwest Florida picks up special attention along with the southeast. Both “see a need for more affordable housing units, as economic growth continues to skew the housing stock toward wealthier individuals,” according to the study.

Overall, one of the survey respondents said, “The rebound in Florida is very compelling; it is appealing to multiple demographics.” Southwest Florida made the list of the state’s regions experiencing economic growth and expansion.

One of the challenges in many regions is infrastructure investments to manage growth, a vexing problem in Southwest Florida as so many critical projects await funding that is years away. Connectivity between cities — the report cites linkage between Southwest Florida, Tampa/St. Petersburg and Orlando — is also vital for future growth. A good part of that link could have been well underway, if not finished, had Gov. Rick Scott not rejected federal high-speed rail money in 2011 for a Tampa-Orlando link.

This only touches on the wealth of survey material in the 107-page report, which also covers Canada. The office, retail and industrial real estate markets get the full treatment, too.

Herald Tribune, November 9 2017