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Why the Real Estate Boom Has a Decade to Run | The Mesh Report

Why the Real Estate Boom Has a Decade to Run

John Thomas January 19, 2018 Comments Off on Why the Real Estate Boom Has a Decade to Run

I hear that Apple (AAPL) is planning on building a second new research and development campus that will need 20,000 new high-tech workers.

The housing crisis here in the San Francisco Bay area just went from bad to worse.

It is all fresh fuel for a continuation in the bull market for US residential real estate, not just for this year, but for another decade, or more.

Although prices seem high now, I am convinced that we are only at the beginning of a long-term secular bull market in housing.

Anything you purchase now is going to make you look like a genius ten years down the road.

The best is yet to come.

The big driver will be demographics, of course.

From 2022 onward, 65 million Gen Xer’s will be joined by 85 million late blooming Millennials in bidding war for the same houses. That will create a market of 150 million buyers, unprecedented in the history of the American real estate market.

In the meantime, 80 million baby boomers, net sellers and downsizers of homes for the past decade, will slowly die off and disappear from the scene as a negative influence. Only one third are still working.

The first boomer, Kathleen Casey-Kirschling, born seconds after midnight on January 1, 1946, will become 76 years old by then. A former school teacher, she took early retirement at 62.

The real fat on the fire here is that 5 million homes went missing in action this decade, thanks to the financial crisis. They were never built.

This is the result of the bankruptcy of several homebuilding, and the new found ultra-conservatism of the survivors, like DR Horton (DHI), Lennar Homes (LEN), and Pulte Group (PHM).

Did I mention that all of this makes this sector a screaming “BUY”?

Talk to any real estate agent and they will complain about the shortage of inventory (except in Chicago, the slowest growing market in the country).

Prices are so high already that flippers have been squeezed out of the market for good. Bottom feeders, like hedge funds buying at the bankruptcy auctions, are a distant memory. Some now own more than 40,000 homes.

And let’s face it, ultra-low interest rates aren’t going to be here forever. Borrow at 3% today against a long term 3% inflation rate, and you are essentially getting you house for free.

The rising rents that are turning Millennials from renters to buyers may be the first sign of real inflation beyond the increasingly pricey health care and higher education that we’re are already seeing.

And Millennials are having kids that demand a bigger living space! Who knew?

I may become a grandfather yet!


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