Ruthie Rocks and Marketing Max talks about important facts regarding the real estate industry.
We featured an article by Jared A. Brock titled "This Real Estate Bubble Won't Pop"
How house pricing has radically change?
House prices are currently at an all-time high, but we are not in a real estate bubble - we're in a pricing paradigm shift.
The old paradigm: A house's price is the maximum amount that an area's average local buyer can afford to mortgage over 25-40 years. But because wages have flatlined and purchasing purity is the same as in 1978. The only rational explanation for this current price explosion is giant debt bubble...right?
Wrong
The new paradigm: A houses value is now the maximum amount of annual rental income that can be extracted from it by a global investor, multiplied by maximal institutional leverage.
It's the biggest paradigm shift in the history of human shelter, and it's the reason why that vast majority will never own a house in the future.
Because out family homes are just future hedge fund investments.
Even with temporary price drops, expect overall prices to continue hard-up-and-to-the-right for nine major reasons.
1. Population is growing
Our global family currently contains almost 7.9 billion, headed to 10.5 billion within 50 years.
2. People are moving to cities
The overall population will "only" rise by 33% but look at the states on where everyone is moving: Cities.
3. More people are living alone
As more people live alone, we'll need far more housing units. When there's more demand without adequate supply, price increase.
4. Multiple house ownership
Looking at you, small-time landlords and non-resident Airbnb hosts. More than 23 million American landlords own more than one house.
5. Housing Construction isn't keeping up
The US housing supply has been under built for over a decade and we're building just six houses for every ten new households.
6. Building costs are soaring amidst material shortages
Lumber,paint,concrete,glass,labor,land are all rising faster than average wages. We live on a infinite planet with limited resources, and those resources are becoming expensive to extract.
7. Real inflation is soaring
It's almost certainly 10-20+% per year. And real estate always tracks with inflation. These days, in fact, shelter prices are outpacing inflation.
8. The monopolists are here
When you allow speculation and investment in residential real estate, you end up where every other capitalist sector ends up- with a handful monopolists owning all the assets in the industry.
9. Outrageous Leverage
This is where things truly ugly. Once monopolies form, they utilize the power of financialization to drop an economic atomic bomb on their competition
Listen to the podcast and find out more