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Take a quick look at a graph of population growth from 1870-2015. It has an incredibly steep curve. Now think about how that graph will look from 2015-2100. L
by sandover 9y ago
Take a quick look at a graph of population growth from 1870-2015. It has an incredibly steep curve. Now think about how that graph will look from 2015-2100. Likely, it will be drastically flatter.
Wouldn't this have a huge effect on real estate -- indeed, isn't that population graph the primary driver of what happens in the real estate market?
I'm not sure the last century provides a meaningful guide here.
- antisthenes 9y agoYes, it will have a huge effect on real estate, but probably not the way you think it will. Real estate prices in desirable urban areas will continue to grow at the same, or higher pace. If you look at urban zip codes in desirable economic areas, they were barely affected by the 2008 downturn, and by 2010 the prices were recovered. Today, those prices are much higher than they were in 2007. Land supply is an almost straight line with a slight growth, probably something on the order of y = 1.2x, mostly due to innovations in transport speed, cars & metro. So unless we get maglev metro that travels at 200mph, RE prices will continue to reach new highs.
- beebmam 9y agoUnless it becomes more appropriate for more people to work remotely, which is the case. I imagine is one of the main reasons people move to urban cities is because of employment.
- pascalxus 9y agoYes, there are still many areas with a lot of potential to get worse. but there are certain areas that can't go much higher and sooner or later each area will reach a price point where prices can't go any higher. Ultimately, it just depends on how much people can afford to pay: which comes down to salaries, commute distance and # of wage earning people per roof. Sooner or later all the coping mechanisms will be exhausted. The bottom line is, RE prices can't outpace salaries forever. If you double the number of wage earners per roof, you can double the RE price. But, after that it becomes harder and harder, as people aren't willing to live with multiple families per house.
- mdorazio 9y agoDon't discount the impact of investors who have no intention of living in their owned real estate, though. For these individuals, there is no salary or commute distance factor to consider, so price sensitivity is very different. Thanks to globalization this is an increasingly large factor in rising real estate prices. See cities like Vancouver as an example.
- philwelch 9y agoExcept, in order to profit, the investors have to eventually sell or rent the homes to actual residents, who would have to worry about salaries and commutes. Otherwise it's just a speculative bubble.
- jjeaff 9y agoDo they? Lots of homes in places like BelAir sit empty, visited once or twice a year. Either as status symbols or a place to hide I'll gotten gains.
- philwelch 9y agoBelAir is also a desirable place to live--at least if you're rich--which means eventually the homes can be profitably sold to an actual resident. (And part-time residents are still residents.)
- rubidium 9y agoMy bet is driverless cars, whenever they arrive, will actually increase the value of rural/small town land that's ~1 hour from a city center. Hypothesis is many people live close to the cities because they hate commuting. But if commuting means work on a laptop or watch a movie, then the commute time is less significant. It's the near ring suburbs that will take the biggest hit. Small towns outside the suburbs will increase.
- digi_owl 9y agoIf this was the case, could one observe such a trend already in places with proper public transport (light rail etc)?
- linkregister 9y agoI suspect that commuting traffic will increase to eliminate this advantage. Already in major metros, long commutes suffer low speeds due to congestion during rush hour periods. Without a commensurately vast increase in infrastructure investment, I do not foresee a significant change in commute experiences from self-driving cars. I predict that most people would not elect to live 2 hours away from offices despite being able to have access to entertainment and work while commuting. The evidence is already here: various tech companies run shuttles to far-flung areas (Google has shuttle service from Stockton to Mountain View), yet employees aren’t moving to these lower-cost areas in large numbers. Workers with families will have upper bounds to how long a commute they’ll endure. Their families are more important to them than being able to have entertainment, and meeting times limit the amount of time that can be used for work done while commuting. At that point, it’s approaching remote work, which is a promising idea, but isn’t a solution for long commutes by itself. I see self-driving cars changing last-mile and replacing hub-and-spoke commutes as a replacement to taxi services and short-distance shuttles.
- raducu 9y ago3D routes scale much better than 2d roads; also airplane autopilots are much easier to imolement. I think self-flying electric vehicles will do what self-driving cars cannot.
- 9y ago
- BonesJustice 9y agoYou're quite right about desirable urban areas. Example: The first apartment I rented in midtown Manhattan was a 1BR condo in a fairly new building. The owner had bought it in 2006 for about $775k. In 2010, I looked it up on Zillow to see if I could afford to buy the place (I could not), and it was around $850k. Within a couple years of the crash, it had not only recovered, but appreciated a fair bit. He sold it in 2014 for $1.2M, and according to Zillow it's now worth nearly $1.5M.
- FabHK 9y agoSo, about doubled. Worth nothing that S&P500 also about doubled in that period (and quadrupled since the 2009 bottom), while paying dividends.
- charlesdm 9y agoIt's unlikely he purchased that property with cash though. And while you can use margin debt to achieve similar returns, you can't generally get margin called on a mortgage -- which I guess is the one main advantage.
- yters 9y agoThe doomsday argument implies it will also be steep, but in the other direction, making real estate not so valuable.
- tgb 9y agoI don't think anyone is planning their retirement savings based off a 95% chance of the only being 2 trillion to ever live - even at 10 billion living people you're looking at thousands of years for that prediction to be relevant.
- stale2002 9y agoI certainly hope so. The biggest expense that the average person pays for is rent and home mortgages. The world be auch better place if a >1/3 of everyone's paycheck wasn't going to rich landlords.
- fred_is_fred 9y agoWhy not move somewhere cheaper? You don't have to live in SF or NY or Seattle to work in tech.
- stale2002 9y agoThings work fine for me, because I am in tech. It is everyone else that I am worried about. Housing costs are the biggest transfer of wealth in the world, and the higher costs are, the less money there is in the average person's pocket.
- all_blue_chucks 9y agoThe biggest factors in economic productivity are labor and technology (aka efficiency). Labor growth may be slowing, but technology growth is accelerating.
- fred_is_fred 9y agoBesides your personal opinion, why would it be "drastically flatter"? Do you have a citation or any insight into the next 85 years that you could share?
- drsopp 9y agohttps://www.un.org/development/desa/publications/world-population-prospects-the-2017-revision.html https://www.un.org/development/desa/publications/world-popul...