4 ms·

We've got a LOT of runway before the "big one" in the US. In other countries (Japan, Italy, some parts of France) the slow decline is already well underway. Th

We've got a LOT of runway before the "big one" in the US. In other countries (Japan, Italy, some parts of France) the slow decline is already well underway. The answer to when the big crash happens is in the population data. At some point population starts to decline. As with everything, the boomers will ride in the sunset with bags of gold. In 30 years housing will be fundamentally different in the US and just about everywhere in the Western world. Outside of the major cities it won't even be much of an investment anymore. If you buy a house today for $500k on a 30-year you'll spend close to a million dollars before you own it if you ride the loan out, and adjusted for inflation, you will probably take a loss on it. Possibly a large loss. Unless we see mass immigration the market 30 years from now is simply going to be smaller.

opportune 7y ago
Does this account for mortgage interest rate deduction and the cost of renting a similarly sized home? I think the boomers will trigger a sell off but as long as population grows due to immigration, there will probably never be a glut.
- patrickthebold 7y ago
  Mortgage interest rate deduction is much less important since the standard deduction doubled under Trump. There's lots of home owners will will take the standard deduction now.
- themagician 7y ago
  Net immigration is also declining. There is no indication I can see that these trends will reverse. If anything it seems like the rates of decline may accelerate more rapidly like they did in Japan. Perhaps when the boomers die off the next generation will open the borders so someone can pay for their entitlements. Perhaps.
notfromhere 7y ago
The US is forecasted to add 100m people by 2050
- themagician 7y ago
  Based on what assumption? Current population growth?
- throwaaway69 7y ago
  By 2050 Earth will have carrying capacity of 2bln people at most.
refurb 7y ago
If you buy a house today for $500k on a 30-year you'll spend close to a million dollars before you own it if you ride the loan out, and adjusted for inflation, you will probably take a loss on it. What's the basis for that conclusion? Just like the last 30 years, some markets will decline, while others will appreciate. Not sure why you think things will be so drastically different.
- themagician 7y ago
  Because population growth is decreasing in almost all western nations. Our models don’t really have good data for this since it’s never really happened since we started modeling off census data.
  - vonmoltke 7y ago
    How does population growth affect my note? My amortization schedule is fixed and I know exactly how much I will pay to close it out, unless I choose to change that in some way.
jurassic 7y ago
> If you buy a house today for $500k on a 30-year you'll spend close to a million dollars before you own it if you ride the loan out, and adjusted for inflation, you will probably take a loss on it. Possibly a large loss. Unless we see mass immigration the market 30 years from now is simply going to be smaller. It really depends where your $500k house is located. "Location, location, location" is the saying for a reason. If your home is in an area with continued economic opportunity and growth and it has not been destroyed by climate change related severe weather events, it doesn't matter that much what the macroeconomic housing market is doing; your property will be in demand.
- themagician 7y ago
  “Outside of the major cities it won't even be much of an investment anymore.”
planteen 7y ago
30 year mortgage rates are around 3.65% this week. So if a buyer puts down 20%, that will be around $259k in interest over the life of the $400k loan, putting the total interest at half of what you said (~$760k total the life of the loan versus $1 million). While certainly the US population is aging and slowing in growth rate, I have not seen any predictions for a population decline by 2050 or even 2100. You are right that further urbanization is expected and buying outside of cities may not be a good investment.
- themagician 7y ago
  Today’s rates, assuming perfect credit. Silly assumptions.

opportune 7y ago

Does this account for mortgage interest rate deduction and the cost of renting a similarly sized home? I think the boomers will trigger a sell off but as long as population grows due to immigration, there will probably never be a glut.

patrickthebold 7y ago
Mortgage interest rate deduction is much less important since the standard deduction doubled under Trump. There's lots of home owners will will take the standard deduction now.
themagician 7y ago
Net immigration is also declining. There is no indication I can see that these trends will reverse. If anything it seems like the rates of decline may accelerate more rapidly like they did in Japan. Perhaps when the boomers die off the next generation will open the borders so someone can pay for their entitlements. Perhaps.

notfromhere 7y ago

The US is forecasted to add 100m people by 2050

themagician 7y ago
Based on what assumption? Current population growth?
throwaaway69 7y ago
By 2050 Earth will have carrying capacity of 2bln people at most.

refurb 7y ago

If you buy a house today for $500k on a 30-year you'll spend close to a million dollars before you own it if you ride the loan out, and adjusted for inflation, you will probably take a loss on it. What's the basis for that conclusion? Just like the last 30 years, some markets will decline, while others will appreciate. Not sure why you think things will be so drastically different.

themagician 7y ago
Because population growth is decreasing in almost all western nations. Our models don’t really have good data for this since it’s never really happened since we started modeling off census data.
- vonmoltke 7y ago
  How does population growth affect my note? My amortization schedule is fixed and I know exactly how much I will pay to close it out, unless I choose to change that in some way.

jurassic 7y ago

> If you buy a house today for $500k on a 30-year you'll spend close to a million dollars before you own it if you ride the loan out, and adjusted for inflation, you will probably take a loss on it. Possibly a large loss. Unless we see mass immigration the market 30 years from now is simply going to be smaller. It really depends where your $500k house is located. "Location, location, location" is the saying for a reason. If your home is in an area with continued economic opportunity and growth and it has not been destroyed by climate change related severe weather events, it doesn't matter that much what the macroeconomic housing market is doing; your property will be in demand.

themagician 7y ago
“Outside of the major cities it won't even be much of an investment anymore.”

planteen 7y ago

30 year mortgage rates are around 3.65% this week. So if a buyer puts down 20%, that will be around $259k in interest over the life of the $400k loan, putting the total interest at half of what you said (~$760k total the life of the loan versus $1 million). While certainly the US population is aging and slowing in growth rate, I have not seen any predictions for a population decline by 2050 or even 2100. You are right that further urbanization is expected and buying outside of cities may not be a good investment.

themagician 7y ago
Today’s rates, assuming perfect credit. Silly assumptions.