One Drawback to the US Real Estate Bubble
Housing-Market / US Housing Jul 12, 2018 - 12:47 PM GMTBy: Harry_Dent
I’ve been ranting for weeks now about it… People don’t understand that sky-high home prices are bad for countries, cities, businesses, and consumers.
And only the 62% of people who already own homes are feeling the “bliss” of the bubble. They’re the ones who want prices to keep going up so they get something for next to nothing…
There’s another side effect of this housing bubble. We’ve seen it in the bubbliest areas for years…
Birth rates fall when bubbles make it even more unaffordable to raise a child.
Long-term data is crystal clear on this. People who move from rural to urban areas, and become more affluent as a result, have fewer kids. They strive to educate and raise them better as a result.
In rural areas, housing costs are much lower and the kids often help on the farms – even after elementary school, historically speaking.
But in urban areas, the cost of living is much higher – along with real estate prices – making it costlier to raise kids in the city. That cost then increases as they get older, especially if they decide to go to college.
But there’s more recent evidence to support this as the second housing bubble rears its head…
Births have fallen substantially with home prices rising again in recent years.
The five lines in this chart represent the five quintiles of degrees of housing appreciation. The darker the line, the higher the housing appreciation.
The highest quintile, or top 20% for home appreciation, have seen a whopping 13% decline in birth rates between 2010 and 2016. The next highest quintile has seen an 8% decline. The lowest three quintiles have seen between 5% and 6.5% declines.
It’s perfectly clear: Rising home prices correlate with falling birth rates, and the higher, the greater!
That’s just what we need with already falling birth rates and long-term demographicstagnation/decline in the developed countries: A housing bubble that makes that trend even worse.
The sooner this housing bubble crashes, the better…
Despite how difficult it will be for the banks, businesses, and households that own real estate, it’ll be a Godsend for the younger families that are our future. It’ll help lower costs for businesses as well.
All you can do is get out of the way of this inevitable – and ultimately healthy – reset in home prices, which is likely to hit us in 2019, or as late as 2025.
Harry
Follow me on Twitter @HarryDentjr
Harry studied economics in college in the ’70s, but found it vague and inconclusive. He became so disillusioned by the state of the profession that he turned his back on it. Instead, he threw himself into the burgeoning New Science of Finance, which married economic research and market research and encompassed identifying and studying demographic trends, business cycles, consumers’ purchasing power and many, many other trends that empowered him to forecast economic and market changes.
Copyright © 2018 Harry Dent- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
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