Most people know that real estate is the investment vehicle that has made more ordinary people wealthy than anything else. Well, you know what? It’s only going to get better. With technology and innovation, some people like to say that today is “A great time to be alive.”
Whether it’s 3-D printing of human tissue, phone apps that enable banking for Sudanese villagers, or the advent of chocolate-dipped bacon, they’re right.
Well, if that’s true in other industries, it’s even more true for U.S. residential real estate investors. As we progress toward the year 2020, here’s why demographics and trends make this “A great time [for real estate investors] to be alive.”
1. Mortgage rates remain historically low. Borrowers paid 10, 12, 15, 18% in the past few decades.
2. More Millennials are entering prime “renter age.” They’re the largest generation, surpassing the Baby Boomers in 2015.
3. College costs are rising faster than inflation. This means that Millennials are saddled with student loan debt. With no housing down payment, a greater proportion must rent.
4. There’s a psychological component. Years ago, Millennials saw their parents lose their home in the Mortgage Meltdown of 2009. Because this happened in their formative years, some Millennials have a “negative association” with home ownership. This drives rental demand.
5. Wage growth has been tepid. Many of the jobs that are added are actually part-time jobs, and are low-paying. This means that fewer would-be home buyers can form a home down payment. This keeps them renting.
6. Also, if you don’t have a great job, then you’re less likely to commit to “stay put” (buy), and more likely to rent. That way, you retain the mobility for a better job opportunity.
7. These trends have resulted in the U.S. now having the lowest homeownership rate since 1965. Economists and demographers expect that trend to continue. Fewer people buying homes equates to more people in the renter pool. This drives rental demand.
8. Rental occupancy is high. Monthly rental amounts are rising even faster than inflation in many U.S. markets. This enriches real estate investors.
9. Technology trends. The enhanced ability to work from home with conferencing software like Skype or workflow software like Slack makes going to an office less necessary. Increases in Amazon-like home shopping activity likewise continues to eat away at retail space demand. This means people can spend more time at home, driving residential demand.
10. The overall population of the U.S. continues to increase. This drives the “Economics 101” of Supply vs. Demand. You might take this for granted, but population losses in places like Japan and Germany are creating excess housing capacity there.
11. With more economic uncertainty in places like China and the Great Britain – more of these foreign buyers want to invest in the U.S.
12. The maturity of turnkey real estate investing makes it easier than ever for you to get started by controlling your own income property. “Turnkey” means that your property is already rehabbed, tenanted, under management, and cash flowing from Day One.
Real estate will continue to serve an essential human need. Even futurists like Peter Diamandis and Ray Kurzweil don’t see it disappearing anytime soon. It’s even more fundamental to human life than chocolate-dipped bacon. Real estate investors, the trend is your friend.
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