Is birth rate the key to this crazy real estate market?

[James Carlson]

If you like Malcom Gladwell or Freakonomics, you'll probably like this. What if birth rates 33 years ago are the cause of this historically hot market right now? 

As a real estate agent in two of the hottest markets in the country -- Denver and Colorado Springs -- I get this question all the time: When will prices go down? My stock answer is two-fold: One, cheap money and remote workers are fueling record demand in Denver and Colorado Springs. Two, older folks were scared to move during a pandemic and others already in a home didn't want to sell and then enter this crazy market. "Basic economics." I tell my clients. "High demand and low supply equals rising prices." All plausible and true, I think.

But what if it's all about birth rate?

Okay, I've heard this premise one or two other places and do not imply this is my original thought. That said, what does the BP universe think. The theory is this: 

• People enter their prime home-buying period at age 33. So to see how many people might entering the buyer pool in a given year, you look at the birth rate 33 years prior.

Birth rate, for starters, is the number of births per 1,000 people in the U.S. Looking at the birth rate reveals some possibly telling tidbits.

• Birth rates dropped basically every since post-WWII -- from a high of 24.2 in 1950 to a low of 14.7 in 1978. 
• And 33 years after 1978 was 2011, in the middle of the real estate crisis. (Here in Denver, for instance, where a balanced market had about 15,000 homes for sale at any given time, there were actually 24,000 homes for sale. That's because of a lot of factor, but maybe partially because there were fewer people to buy them.)
• Birth rates after 1978 started to rise again, and when did they hit another peak? In 1988, exactly 33 years ago this year. Kind of crazy, right?

So when will prices drop? If we adhere to this birth-rate theory, then we may be able to glean an answer. Birth rate (fueling high demand today) peaked in 1988. After that, birth rate started dropping, but only by relatively small percentages. Starting in 1994, the percentage decreases got steeper. So that would say ... what? That prices won't go down for another five or six years? That seems an unlikely stretch.

I'd really like to see stats on gross number of births, not just birth rate, but it was hard to find going back that far. Here's where I'm pulling my birth rates from. 

What are your thoughts?

[Andrew Freed]

@James Carlson Interesting theory and I am sure there is validity to this argument. My personal philosophy on real estate is it will always be more valuable in the future due to the exponential growth of the human population. Every day, more humans populate this Earth. As a result, the average plot of land on this planet is being diminished on a per person basis. As long as human growth keeps at this pace, real estate and subsequently land will invariably be more valuable. My perspective is more long term compared to yours (you are utilizing birth rates to get a view of the short term demand for real estate), but I believe my theory holds true. That is why I plan on buying and holding as much real estate as possible in the foreseeable future.