For those of you who know me IRL, or have met me at my various meetups – then you know I always like to read and soak up info like a sponge… so here’s another nugget for you guys regarding one of my favorite topics: Real Estate.
[Question] Housing affordability is at all time lows – but are these high prices sustainable? Can the housing crisis be fixed?
Every discussion I’ve come across is filled with the usual “armchair quarterback” comments – often from people with very little knowledge and shouldn’t really be dispensing advice nor suggestions on how things should be fixed. The biggest culprit I’ve seen simply comes down to a single root of ignorance:
A lack of GLOBAL perspective.
Allow me to inject some points, because it’s about time someone speaks truthfully about the topic to reach a real resolution – not just for clickbait and ad views.
[1] Common Knowledge: We aren’t building enough homes to keep up with the population.
- Pretty straight forward, nothing special here
[2] Modern Building Codes are making new homes much more expensive
- Known only to folks in the construction / RE trade – but not common knowledge. I recently re-built my primary residence, and was required to put in expensive additions like $16k for (2) drywells… but I live in the center of an island where there’s been no flooding. Ever.
Analogy: Shall I start wearing a bulletproof vest everywhere I go, in the unlikely event I encounter an active shooter?
(You get my point.)
[3] Housing is no longer just a utility (i.e. used to live in), but as a favored investment vehicle
- While this may seem like common knowledge, I don’t believe the masses understand the extent at which investment dollars are being pulled in. Some (global) facts to consider:
- [a] US property law is extremely strong (for the moment) – i.e. someone can’t just take your property rights away from you. This is not true for other wealthy countries/nation-states (e.g. China, India, Russia, Hong Kong) Thus, you see alot of foreign investment dollars coming in.
- [b] Everyone is fretting that US incomes are not catching up to US home prices… so why is this happening? (See chart below) Is it really true that evil CEOs and corps are keeping profits away from their employees?
Unfortunately, the lack of global perspective is what’s hurting most here in terms of an inaccurate viewpoint. Take a look at this chart for Global Median Daily Income over Time.
Source: https://www.zippia.com/advice/average-income-worldwide/
Do you notice a pattern?
I’ll pause for now and let this info set in your mind for a while as it’s a tough pill to swallow. The fact is:
- The USA has lost a HUGE amount of its strategic earnings advantages circa 2 generations ago (i.e. 1950-1975, 1975-2000, 2000-Now). The lost in income isn’t happening in the rest of the world – while earnings and living standards are lowering slowly year over year in the US.
Some questions to ponder in the meantime:
· Why & how did this happen?
· Is it possible to reverse this trend & “fix” these issues?
More on that, on the next post…