Originally posted by @Rich Weese:
I have been involved in real estate for nearly 50 years and have always been very positive about the future. I started at a very young age buying real estate and investing in more and more as decades went by. If I was young and starting out today, I would not have the same positive outlook that I had previously. Still heavily invested in real estate and not acquiring more at the present time for various reasons.
I hope I'm wrong for the future sake of generations to come but here is my reasoning currently. Please feel free to join in the discussion and state your arguments as to why I am wrong.
1. It was very easy to purchase real estate when I was young especially using FHA and VA methods. These homes were also fully assumable and led to easy transfer ability for residents and investors. That has changed considerably now.
2. Young people were going to college for degrees and graduating with unlimited opportunities for job placement. They were also graduating for the most part with no debt, making a payment for a home mortgage much easier. That has also changed now removing many buyers from the pool of potential homeowners or investors. Financial institutions and government regulations have also made acquiring multiple homes more difficult. It was easy for me to acquire tens of homes and then hundreds of homes but now that would be nearly impossible. It also seemed much easier to find a starting job position with ability to grow in that trade or occupation. Much of that has now been replaced or will be replaced by AI.
3. Young people were also getting married with the possibility of both people working and qualifying for a mortgage at still relatively low price real estate. That has also changed now, with a large percentage of occupants being a single individual and also waiting longer to have children or deciding not to have children at all. I have six children and the most any of them have is three. ( see next item)
4. Re- population rate has continued to drop. Due to infant mortality, the necessary reproduction rate to replace the population is 2.08. The United States rate has continued to drop and is currently at 1.73. It doesn't take high education math to determine there will be a surplus of properties available to live in with this continuation in population reduction. Just take a look at Japan. There are now 8.5 million vacant homes in Japan and more than one in 10 vacant in the city of Tokyo. A simple Google search will show there are actually homes being given away for free in live in condition. Their birth rate has dropped to 1.44 over the past several decades and that is compounding their problem exponentially.
5. Rental rates may be less than paying your own mortgage now. Rather than just comparing the rent to the mortgage, it becomes necessary to add property taxes, insurance, maintenance, landscaping etc. The renter does not have these expenses to add to the rental rate and it is much easier to qualify for as a single individual or to share a home without major qualification necessary.
I'm sure I am leaving out many additional items that should be of concern. I have not even discussed the extreme increase in prices to purchase or construct a home with no stop in sight.
I'm well aware this is an investment site with tremendous interest in the real estate area. I'm probably one of the older posters on bigger pockets and have seen many ups and downs and changes in particular areas. I have lived in seven different states and have purchased real estate in even more that I guess I am just suggesting caution currently. As the government runs out of options for tax seen the population, the mortgage interest deduction will be looked at more and more seriously. If you did not have that deduction, would you still purchase real estate investment property?
Bring on the discussion and shoot your arrows!
Rich Weese
A quick look at my post history and you'd see I LOVE thought process posts like this.
As someone who doesn't have nearly the experience of you, and is in that younger generation I'll give my take on your points.
1. I can't speak to how easy it was for you in the past getting a loan, but in my experience and in my circle of family and friends, the FHA loan system that we have in place sometimes makes it too easy for people to get a house from what I've witnesses. In a sense that because someone can "afford" the low down payment the FHA allows, they wind up in entirely way too much house for their income and ultimately screw themselves. As far as property transfer laws, from what I've read and talked to family about, you're 100% correct. People still find ways to get around that though, but I've yet to personally reach that stage in my investment career so I can't speak to that.
2. Hit the nail on the head here. I can't add much more to this. Student loan debt is definitely a crisis and is impacting the economy in ways many people can't even imagine.
3. This ties in with #2 very heavily, a lot of people want to have children, but when your finances and life is so royally screwed that you can hardly afford, rent, a social life, and are struggling to find a career that is satisfying...it definitely pushes off the natural flow of when people would want to have children and buy a house.
4. This has actually peaked my interest. I'll have to look more into these figures and how that actually impacts the nation and population. I can see this tying into #2 & 3 though. I have a theory that with more of the world at peoples fingertips, more people want to "experience" the world before settling down/having kids/buying a house...or they may even decide, through their trekking through the world...that they in fact don't want ANY of those things. In the past, the knowledge and ability to access what was "out there" was not nearly to the level that it is today. Often that resulted in many people staying where they grew up, dating who they went to school with, living near the city they were raised in, and not really being exposed to much else unless they had a natural curious mindset. As people become exposed to more, the status quo of what life should be/how it should look shifts dramatically.
5. In major cities rental rates are definitely cheaper than trying to buy, but honestly not by that much. The prices are pretty much getting neck and neck. A lot of people choose to rent because of my answer to point # 4, the sense of freedom and the ability to "pack up and go" as they please. Combine that with the answers to #2 and #3 and you have a strong case to just keep on renting. You wanna see the world, you don't have money to really buy one of those expensive houses, you don't need the space for a house, you're not even sure if the job you really like is even in this city.
Great post and I'm glad I had the chance to give some input. Thanks for letting us into some of your thought processes.
