Saturday, February 4, 2023 | The Latest Buzz for the Appraisal Industry

Will the Infrastructure Bill Affect the Real Estate Market?

The housing market has experienced a turbulent few years, so what can industry experts expect in the future? You can pay attention to many indicators, but the recent infrastructure bill will reveal the most crucial information. These are a few ways it will affect real estate in the coming months.
1. Construction Sites Will Stay on Schedule
Federal plans can move slowly, but that doesn’t mean they won’t make a splash. The Infrastructure Investment and Jobs Act — also known as the Bipartisan Infrastructure Bill — passed in November 2021 but will soon affect the country. After months of paperwork and organizing teams, many experts believe the allocated funding will start positively affecting the real estate market.

The most significant immediate impact helps current and near-future construction sites. About $17 billion will be used to strengthen ports that have suffered due to inflation, improving the supply chain for building and construction. Delays will become less frequent, encouraging more people to invest in new residential and commercial real estate and allowing construction firms to serve more customers more quickly.
2. Electric Grids Can Become Greener
Many people want their homes and businesses to use green energy as their secondary or primary electricity source because it saves people more money on their monthly electric bills.

Residential dwellings, in particular, would save $500 each year by using sustainable power. It can be an expensive upgrade for individuals to shoulder, but the infrastructure bill has a $65 billion investment for smart grid technology that makes national electric grids greener.

The infrastructure bill enables this expansion in renewable energy usage by building thousands of miles of transmission lines and investing in research and development into initiatives like carbon capture and electricity distribution technologies.

Many current and potential homeowners are burdened by the high cost of utilities, particularly in outdated housing stock, so the expansion of clean energy options is promising from both an affordability and an environmental standpoint.
The initiative will also enable city-level governments to enact ambitious energy goals. In New York City, for example, commercial properties over 25,000 square feet must post their energy efficiency benchmarks each year to increase transparency over green improvements. As energy efficiency becomes a more visible data point, it’s likely that this will become a marketing point for eco-conscious renters and buyers.
3. Secondary Real Estate Markets On the Rise
The residential housing market around cities of all sizes is becoming more expensive than most incomes, blocking new homeowners from getting out of renting. It’s why people are chasing more affordable houses in rural areas, but that type of move isn’t possible in places where people can’t commute due to crumbling infrastructure.

The infrastructure bill will invest $110 billion to repair roads and bridges, making automotive transportation more manageable for those who commute into cities. Others will view it as a more manageable future and purchase homes in rural areas because they won’t have to sacrifice their current employment to live in a house.
4. High-Speed Internet Will Improve
There are a few ways internet access will improve due to the infrastructure bill. Part of the $65 billion investment into advanced technology will pay for expanded internet access in rural communities. It will also make high-speed connections more affordable, impacting residential and commercial real estate markets.

Neighborhoods away from major cities will become more appealing to potential buyers who don’t want to lose great upload and download speeds just to find affordable housing. Business owners can also move anywhere. They won’t need to worry about losing customers due to their inability to access the company’s website or efficiently use virtual checkout services.

Homes in rural and urban areas become worth more money when they access high-speed internet. The infrastructure bill’s internet upgrades will permanently bring more rural neighborhoods into the world of affordable high-speed internet, and those houses will become more in demand. Prices will skyrocket as more people move into housing outside of cities because supply will soon become limited.

It will take time for upgrades like fiber internet to be completed due to installation timelines, but the impact on the housing market will be worth it. It may be the last thing holding some people back from looking outside of cities for their future houses.
5. More People Will Get Jobs
The significant investments into numerous sectors of the economy will result in more gainful employment than before. The bill specifies that this will create over 2 million jobs annually and remain that way for a decade. Approximately 20 million jobs over 10 years give more workers money to set aside for buying a home.

National and regional leaders are meeting to discuss how best to divide their funding to make these jobs available for graduates and those without degrees. There’s an especially critical focus on investing in training and upskilling a diverse workforce, which would open the market to underrepresented communities who are otherwise unable to access homeownership due to stagnant low wages and limited job opportunities.
What does this have to do with real estate? More opportunities and increased wage potential makes buying a house more attractive and feasible. Agents, appraisers and other industry professionals can reasonably expect a strong employment market to mean more Americans enter the real estate market for the first time.
6. What’s Happening With Inflation?
Inflation has been a common theme in recent news headlines. It began rising when the pandemic started in 2020 due to ongoing supply chain issues coinciding with changes in consumer demand. Inflation peaked at 7.9% in February of 2022 and has recently picked up due to Russia’s invasion of Ukraine — economic sanctions have put upward pressure on gas prices. The invasion is reported to account for a third of the price index increase from February.

Since part of the issue is related to supply chain issues and consumer demand, there is some hope here. The infrastructure bill’s injection of funding into the economy over a decade will improve the supply chain’s ability to keep up with demand and expand. Of course, this bill will not act quickly enough to alleviate immediate pressures.

It’s tough for any economic expert to make clear predictions, especially given its global scope — central banks around the world are looking to combat the same issues. The Federal Reserve is expected to attempt to curb inflation with increased interest rates this quarter.

It’s a good metric for real estate professionals to keep an eye on. Money is worth more when inflation becomes less of a concern. Anyone saving for a house or purchasing a property will get more for the same amount of money. Sellers will also have an easier time finding buyers because people can spend more freely.
Look for Upcoming Real Estate Changes
We’re in a period of conflicting economic trends. While unemployment rates are at impressive lows and many American professionals are well-poised to find good jobs and see wage growth as a result, inflation does put pressure on household budgets, too. We’re also still seeing a competitive housing market and dealing with supply chain confusion from the pandemic, global conflict and skyrocketing consumer demand.

There is a lot for the American economy to sort out. In the long term though, the infrastructure bill will affect the real estate market, and professionals can expect positive changes overall. Properties will gain value and sell more quickly than in the past few years as more people build their savings, find new jobs and watch rural neighborhoods become accessible.

Jeff Bradford

Discover Your Passion

What are you passionate about? Is it appraising? Do you find that time just flies by when you’re working on an appraisal? Appraising has a

Read More »