As seen on

PBS
Good Morning America ABC
CBBC
CNN
FOX News
FOX Business
Home Markets Real Estate

Real Estate

Real Estate

Real estate is different than other consumer sectors of spending. It’s obviously not consumable like food or clothing. But it’s not like a durable product either, like cars and washing machines. Real estate, with the exception of natural disasters or human insanity (arson, wars, etc.), tends to last forever.

The result in net housing demand, allowing for later retirement in the future is a whole different, and more sobering, picture…

Yes, residential real estate will never be the same. It most certainly will be nothing like what we experienced into 2005.

The same logic applies to commercial real estate. It gets hit harder in downturns as businesses voluntarily abandon leases and real estate faster than households do (after all, we’re more emotionally attached to our homes!).

Commercial real estate is driven by the combination of new entrants adding to the workforce at age 20 (on average) and leaving the workforce when they retire at age 63.

It should be no surprise that prime city real estate is priced sky-high worldwide. Buyers are paying so much for commercial buildings that their rental income is just too low. This is typical for the real estate cycle, but we’re approaching the top of the roller coaster. It all comes rushing down at some point.

But real estate, especially trophy buildings in the most important cities, is still one of the best ways to make fortunes. When economies soften, it’s these buildings that stay rented – and at top rates. Weathering the storm is key, regardless if you’re a regular investor or a billion-dollar CEO managing a brand.

The trends in commercial real estate aren’t as bad as they are in the residential space because baby boomer retirements peak in 2026 while their deaths don’t peak until around 2044.

Then there’s the retail sector that will be impacted by the natural spending trends reflected in our Generational Spending Wave. Those trends, in the U.S., peaked in late 2007. Only massive QE has offset those declines and limited the effects… but that can’t continue forever.

But besides the demographic challenges the commercial sector faces, there’s another demon out for blood. Amazon, among many other Internet-retailers, are taking market share from brick-and-mortar stores. Major warehouses skip the retail level and ship direct, don’t use as much real estate space, and certainly not prime/Main Street space. Unless we have some major catastrophe that sees us return to a world with no Internet, I don’t see this trend reversing!

So, what will do well, in an aging and Internet-intensive world with less need for brick-and-mortar real estate? Affordable rental residential real estate aimed at the younger millennials and retiring baby boomers. The same goes for vacation and retirement sectors, but only after they crash in the next three years or so, and only into around 2026 or 2027.

With regards to the aging boomer population, hospitals, healthcare facilities, nursing homes, assisted-living and funeral facilities should boom.

With a smaller generation (echo boomers) following a larger generation (baby boomers) for the first time in history, we’re caught in the trap of “diers” vs. “buyers.”

Essentially, millions more people will be leaving the housing market than entering it. With sellers drastically exceeding buyers, there will be a huge housing glut. And as we learned in Economics 101, when supply outpaces demand, prices drop proportionally.

That’s why we’re looking at another massive housing market crash just ahead.

But demographics also tell us other important things about real estate. Just as the aging of baby boomers and echo boomers will cause the next housing market crash, it will have widely varying effects on other real estate categories and geographies. That will create a number of profitable opportunities for those who are savvy enough to take advantage of these little understood trends, just like those we mentioned earlier.

Keep up with the changing real estate market, and where other opportunities will present themselves in Economy & Markets!

The Most Desirable Cities in the U.S.

There was an update to the rankings of the most desirable cities to live in the U.S. by U.S. News & World Report. Colorado Springs sprung into first place for the first time. I’ve been there, and can understand why...

The Death of a Dream, Part 2

In I showed how Japan’s first and more massive real estate bubble peaked in 1991. And then showed how it crashed right along our bubble model into 2013. The difference was, it never bounced. Even when its Millennial generation came...

The Death of a Dream, Part 1

It’s no secret that Millennials are not buying homes as early or to the degree that Boomers did. They saw the first major real estate crash since the Great Depression. So, rentals are up and home buying is down. But this...

Real Estate Is Going Nuts

China’s largest cities are so overpriced that migrant workers are going back to the rice paddies – and I predict urban unrest in the years ahead from the younger migrant workers who don’t know how to farm or want...

This Bubble Is All About Supply, Not Demand

I recently emailed you about how this latest real estate bubble looks just like the last one. It’s surged about the same, this time peaking a little higher, and has run for about as long. But what’s driving this bubble...

20 Cities Facing the Greatest Real Estate Risk

Guess where the greatest real estate gains have been since the Great Recession and the massive QE surge? Florida and California… surprise, surprise! California real-estate prices have exploded because there’s very limited supply there and Florida prices shot to the moon...
Don't get hung by the housing bubble noose! This bubble burst could kill your retirement!

Real Estate Storm Warning Upgraded to Severe

Manhattan has seen real estate sales fall 40% since the second quarter of 2017, with prices falling the most on the high-end. New condo listings are down 54% and existing condo listings are down 18%. Toronto has seen a similar...

4 Triggers for the Next Real Estate Collapse

Did you see the recent Bloomberg article about how Manhattan home sales have tumbled the most since 2009? How about Thursday’s Washington Post article about how new D.C.-area real estate firms have started offering sellers a commission (rather than expecting...

Real Estate’s #1 Weakness

Right now, Millennials are the largest cohort of homebuyers in America. And even though they’re waiting longer to get married, start a family, and buy a home… and they’re more likely to skip buying a starter home and opt for...

The Real Estate Doomsday Map

Jeff was a small business owner in New Hampshire. One Tuesday afternoon, his neighbor called… “You need to get home NOW! There’s a dumpster in your yard, a padlock on your door, and a bunch of guys are ransacking your...

We Will Never Share Your Information