Is the need for affordable housing creating new markets?

[Cory J Thornton]

I have been thinking through housing, affordability, and the effect on what until the last few years have been dead markets. Any home with a decent commute to a decent market is not affordable. 

Over the last few years, and even now, I am seeing investors put their capital to work in areas that locals have previously ignored. 

It begs the question, in order to afford a rent, afford an investment property, or a primary home, will price start pushing people to forget the first three rules of Real Estate (location, location, location)? 

As a local example, a recent study showing the migration patterns of folks leaving Raleigh, the #6 city most likely to pick up those residents was Rocky Mount NC. Five years ago, this was not the case and even three years ago people were still highly suspect of that area (myself included). Now I'm starting to see people push much further out to 3-4 layers away from primary job markets completely sacrificing location for cost of ownership or cost of living. 

What do y'all think?

Is this something anyone else is noticing and if it is a trend, is there anything that will make it a short lived thing or is it going to continue longer term?

[Jay Hinrichs]

Quote from @Carlos Ptriawan:

Quote from @Jay Hinrichs:

Quote from @Carlos Ptriawan:

These are the cities if one wants to do land acquisition based on data center/AI conviction:

Northern Virginia

• Largest data center market in the world with over 300 data centers and nearly 4,000 MW of power
• Dense fiber connectivity and proximity to subsea cables
• Relatively low risk of natural disasters
• Competitive electricity rates and tax incentives

Dallas, Texas

• Third largest data center market in the U.S. with over 150 data centers
• Central location with excellent connectivity
• Low electricity rates and ample available land
• Minimal risk of natural disasters

Silicon Valley, California

• Hub of tech innovation with nearly 160 data centers
• Robust fiber connectivity and proximity to leading tech companies
• High electricity and real estate costs, but still in high demand

Chicago, Illinois

• Over 110 data centers with 805 MW of power
• Central location serving as connectivity gateway between coasts
• Reliable, mostly underground power grid
• Lower cost of living than coastal cities

Phoenix, Arizona

• Rapidly growing market with over 100 data centers and 1,380 MW of power
• Affordable power and real estate costs
• Robust connectivity and minimal natural disaster risk
• Access to renewable energy sources

once up an running though data centers dont employee very many people..

They don't, but it's one of the businesses inside the real estate that's extremely profitable and has a lot of growth for the owner. Datacenter's CAGR is about 20%. Compare that to the Multifamily biz which only has CAGR of 1%. Their business growth is not impacted by employment or interest rates or any changes in economic policy. Our Oregon DC only employed a quarter of the soccer team lol. However, due to this future AI explosion, we expect more DC to be built on-premise or over the cloud. For example, a lot of large S&P has HQs in Minnesota, then expect each of those companies has started to build one inside the state.

in the silicon forest ( hillboro Or) they are restricting new ones.. because the amount of power and the fact that they do not bring the jobs compared to other tech.  they are perfectly suited for central wa and or  were small farming towns have plenty of land appreciate the few jobs they bring and columbia river power grid.

[Wale Lawal]

@Cory J Thornton

We are seeing more people leave big job areas for places where homes cost less. This is because of high house prices, jobs you can do from home, and the cost of living. This move is also because investors are looking for more profit in new places, where there's a chance for growth, better roads and services, and more people renting homes. Yet, there's a tough side, like not finding the right job and fitting into a new place. But, this switch in where people live and work, what they want from life, and how they handle money is making a big difference. As long as it stays expensive to live in big cities and people can work from home, this change is likely to keep going.

Good luck!

[Carlos Ptriawan]

Quote from @Jay Hinrichs:

Quote from @Carlos Ptriawan:

Quote from @Jay Hinrichs:

Quote from @Carlos Ptriawan:

These are the cities if one wants to do land acquisition based on data center/AI conviction:

Northern Virginia

• Largest data center market in the world with over 300 data centers and nearly 4,000 MW of power
• Dense fiber connectivity and proximity to subsea cables
• Relatively low risk of natural disasters
• Competitive electricity rates and tax incentives

Dallas, Texas

• Third largest data center market in the U.S. with over 150 data centers
• Central location with excellent connectivity
• Low electricity rates and ample available land
• Minimal risk of natural disasters

Silicon Valley, California

• Hub of tech innovation with nearly 160 data centers
• Robust fiber connectivity and proximity to leading tech companies
• High electricity and real estate costs, but still in high demand

Chicago, Illinois

• Over 110 data centers with 805 MW of power
• Central location serving as connectivity gateway between coasts
• Reliable, mostly underground power grid
• Lower cost of living than coastal cities

Phoenix, Arizona

• Rapidly growing market with over 100 data centers and 1,380 MW of power
• Affordable power and real estate costs
• Robust connectivity and minimal natural disaster risk
• Access to renewable energy sources

once up an running though data centers dont employee very many people..

They don't, but it's one of the businesses inside the real estate that's extremely profitable and has a lot of growth for the owner. Datacenter's CAGR is about 20%. Compare that to the Multifamily biz which only has CAGR of 1%. Their business growth is not impacted by employment or interest rates or any changes in economic policy. Our Oregon DC only employed a quarter of the soccer team lol. However, due to this future AI explosion, we expect more DC to be built on-premise or over the cloud. For example, a lot of large S&P has HQs in Minnesota, then expect each of those companies has started to build one inside the state.

in the silicon forest ( hillboro Or) they are restricting new ones.. because the amount of power and the fact that they do not bring the jobs compared to other tech.  they are perfectly suited for central wa and or  were small farming towns have plenty of land appreciate the few jobs they bring and columbia river power grid.

 Really ? we have one data center in city of Quincy, Hillsboro OR and Quincy is seems within one hour driving to Portland. I know from long time ago I heard the cost of electricity is cheaper in OR then AI told me the cost in OR is actually half of Virginia DC. In oregon the avg cost is about 5-6 cents/kWh. Also after I ask this question to AI the city is going to relax these rectrictions by allowing more DC in Meek Rd Parcel. lol You may be familiar with the location.

[Carlos Ptriawan]

Quote from @Marcus Auerbach:

Quote from @Jay Hinrichs:

Quote from @Carlos Ptriawan:

These are the cities if one wants to do land acquisition based on data center/AI conviction:

Northern Virginia

• Largest data center market in the world with over 300 data centers and nearly 4,000 MW of power
• Dense fiber connectivity and proximity to subsea cables
• Relatively low risk of natural disasters
• Competitive electricity rates and tax incentives

Dallas, Texas

• Third largest data center market in the U.S. with over 150 data centers
• Central location with excellent connectivity
• Low electricity rates and ample available land
• Minimal risk of natural disasters

Silicon Valley, California

• Hub of tech innovation with nearly 160 data centers
• Robust fiber connectivity and proximity to leading tech companies
• High electricity and real estate costs, but still in high demand

Chicago, Illinois

• Over 110 data centers with 805 MW of power
• Central location serving as connectivity gateway between coasts
• Reliable, mostly underground power grid
• Lower cost of living than coastal cities

Phoenix, Arizona

• Rapidly growing market with over 100 data centers and 1,380 MW of power
• Affordable power and real estate costs
• Robust connectivity and minimal natural disaster risk
• Access to renewable energy sources

once up an running though data centers dont employee very many people..

 4,000 MW of power for Northern Virginia data centers? That's the equivalent of a city with 4 million people.

 I give you some numbers and why this is actually creating jobs lol.
Typical search engine require power of 0.3 w/h. Let say this requires 1kbps transmission
Now AI query requires 2.9 w/h. This requires 10kbps transmission.

With AI, imagine that the whole dataset is one Biggerpocket library or Wikipedia library, so each time there's query, it has to re-read the whole library again and again. This is different than how google works because it works by indexing. In AI, like Peter mentioned above, there're lot of inefficiencies, out of those 1 trilun data, only 0.05% that can be useful. The remaining 99.9995% is garbage. But everytime we query, we force the computer to read the whole thing again and again. This require exponential needs in transistor in chip, electricity, bandwidth capacity and also storage/hard-disk capacity. Now someone and somewhere, all these data/logs need to be saved somewhere, but these are junk data. Now datacenter need to buy more and more storage so either this data has to be kept somewhere or being added/deleted continously. There're lot more engineers required just to maintain those junk lol. 

Our current internet is actually not being designed to be capable to handle AI.

one of my job is analyzing these traffic pattern profiling for typical data center / netflix and AI. Most systems today are not optimized for AI. Most technology today still use 1980 paradgim lol ..... This itself would require lot and lot more demanding product if we want the world that's optimized for AI as it create so much garbage.

[Marcus Auerbach]

Quote from @Carlos Ptriawan:

Quote from @Marcus Auerbach:

Quote from @Jay Hinrichs:

Quote from @Carlos Ptriawan:

These are the cities if one wants to do land acquisition based on data center/AI conviction:

Northern Virginia

• Largest data center market in the world with over 300 data centers and nearly 4,000 MW of power
• Dense fiber connectivity and proximity to subsea cables
• Relatively low risk of natural disasters
• Competitive electricity rates and tax incentives

Dallas, Texas

• Third largest data center market in the U.S. with over 150 data centers
• Central location with excellent connectivity
• Low electricity rates and ample available land
• Minimal risk of natural disasters

Silicon Valley, California

• Hub of tech innovation with nearly 160 data centers
• Robust fiber connectivity and proximity to leading tech companies
• High electricity and real estate costs, but still in high demand

Chicago, Illinois

• Over 110 data centers with 805 MW of power
• Central location serving as connectivity gateway between coasts
• Reliable, mostly underground power grid
• Lower cost of living than coastal cities

Phoenix, Arizona

• Rapidly growing market with over 100 data centers and 1,380 MW of power
• Affordable power and real estate costs
• Robust connectivity and minimal natural disaster risk
• Access to renewable energy sources

once up an running though data centers dont employee very many people..

 4,000 MW of power for Northern Virginia data centers? That's the equivalent of a city with 4 million people.

 I give you some numbers and why this is actually creating jobs lol.
Typical search engine require power of 0.3 w/h. Let say this requires 1kbps transmission
Now AI query requires 2.9 w/h. This requires 10kbps transmission.

With AI, imagine that the whole dataset is one Biggerpocket library or Wikipedia library, so each time there's query, it has to re-read the whole library again and again. This is different than how google works because it works by indexing. In AI, like Peter mentioned above, there're lot of inefficiencies, out of those 1 trilun data, only 0.05% that can be useful. The remaining 99.9995% is garbage. But everytime we query, we force the computer to read the whole thing again and again. This require exponential needs in transistor in chip, electricity, bandwidth capacity and also storage/hard-disk capacity. Now someone and somewhere, all these data/logs need to be saved somewhere, but these are junk data. Now datacenter need to buy more and more storage so either this data has to be kept somewhere or being added/deleted continously. There're lot more engineers required just to maintain those junk lol. 

Our current internet is actually not being designed to be capable to handle AI.

one of my job is analyzing these traffic pattern profiling for typical data center / netflix and AI. Most systems today are not optimized for AI. Most technology today still use 1980 paradgim lol ..... This itself would require lot and lot more demanding product if we want the world that's optimized for AI as it create so much garbage.

I thought AI reads it once while trained and then stores the data locally? I get that we are creating a few jobs in data centers and that our infrastructure needs work.But these things don't look like they can create mass-employment. The need for energy seems to be a much bigger factor

[James Hamling]

I found this threads theme.... 

[Cory J Thornton]

Quote from @Cory J Thornton:

I have been thinking through housing, affordability, and the effect on what until the last few years have been dead markets. Any home with a decent commute to a decent market is not affordable. 

Over the last few years, and even now, I am seeing investors put their capital to work in areas that locals have previously ignored. 

It begs the question, in order to afford a rent, afford an investment property, or a primary home, will price start pushing people to forget the first three rules of Real Estate (location, location, location)? 

As a local example, a recent study showing the migration patterns of folks leaving Raleigh, the #6 city most likely to pick up those residents was Rocky Mount NC. Five years ago, this was not the case and even three years ago people were still highly suspect of that area (myself included). Now I'm starting to see people push much further out to 3-4 layers away from primary job markets completely sacrificing location for cost of ownership or cost of living. 

What do y'all think?

Is this something anyone else is noticing and if it is a trend, is there anything that will make it a short lived thing or is it going to continue longer term?

 There has been a lot of great conversation on this post. In case someone was interested, here is the link to the migration study I mentioned in my initial post. Study 

[Ameet Mehta]

You’re spot on, man. The housing market is in a fascinating dance between affordability and traditional priorities. With skyrocketing prices in major metros, many investors I know are looking beyond the usual hot spots.

The "first three rules" are still important, but location might be getting redefined. I think this trend could have legs because:

1. Remote Work: The ability to work remotely is loosening the tethers to traditional job centers. People are now considering areas that were once off-limits due to higher commute times.
2. Lifestyle Shift: The pandemic has sparked a reevaluation of our priorities. Affordability can buy me more living space, a better quality of life in a less expensive area, or access to amenities that were previously out of reach, all of which might outweigh the energy and excitement of a city center.
3. Investor Interest: As you mentioned, investors are taking notice, which could lead to a revitalization of formerly overlooked areas. This could mean more amenities, better infrastructure, and all-around better places to live. That just makes these areas even more appealing for folks looking for a change.

However, there are some counterpoints to consider:

• Limited Inventory: Even "dead markets" have a finite supply. A surge in demand could quickly push up prices, diminishing the affordability advantage.
• Job Market Uncertainty: While remote work is here to stay, some industries or roles are aiming for a hybrid work setup. So, the location could still matter for career growth.
• Amenities and Infrastructure: Can the infrastructure in these areas handle a population boom? Are there enough schools, hospitals, and entertainment options?

So, is it a short-term trend? It's hard to say. In the long run, a bunch of things will play a role, like how many people stick with remote work, if areas invest in infrastructure and the overall economy.

But hey, this whole situation opens up some cool possibilities! Investors might snag hidden gems in up-and-coming areas. And of course, a thorough research is essential to understand the local economy, job market, and potential for growth.

On the other hand, homebuyers might have to redefine their priorities. Maybe a longer commute becomes a fair trade-off for a bigger house or a more chill vibe.

I think, in the end, it's all about rethinking your priorities.