🚀 Add to Chrome – It’s Free - YouTube Summarizer
Category: Real Estate
Tags: housinginvestmentmarketrealestaterentals
Entities: Anderson Business AdvisorsCensus BureauDeloitteElon MuskHarvard's Joint Center for Housing StudiesToby Mathis
00:00
Hey, everybody, Toby Mathis here with Anderson Business Advisors. And let's talk about the next ten years of real estate investing.
Where it's headed, who's going to win, and whether we're looking at another crash. Right.
And I'm not just guessing. This is coming straight from the Harvard's Joint Center for Housing
00:16
Studies, the Census Bureau and other big time data sources. And no, there is no crystal ball, but they've been pretty good as of late as of making predictions.
So now here's the kicker. Household growth is slowing dramatically.
00:31
It's down to just 820,000 per year predicted through 2035 for the next ten years. That's the weakest pace in decades.
In fact, I'm going to put up a chart to show you what it looks like compared.
00:47
So if you hear that, your first thought might be, oh, there's a housing crash coming. Well, maybe let's break it down.
Right. So let's go through some predictions. Number one, household growth is slowing, right.
Harvard's new projections say we'll add about 8.2 million households
01:05
between 2025 and 2035. So the next decade, which averages out to about 820,000 per year, for context.
And you can look at the chart again. And the 2000, we were adding about 1.35 million households per year.
01:21
Right. Even in the 20 tens, it was closer to 1 million per year.
1.2 million, right? So yes, growth is slowing and that means less raw demand pressure.
Prediction number two the renter nation is rising.
01:39
Harvard predicts that a low ownership world renter households would actually jump by 5.2 million people or households. That's millions of people looking for rental housing at a time when we're already short by millions of units.
01:56
And I'll go over this in a little bit, but it's a lot. It's 3.5 to 5 million units that were behind, even when we had that larger growth, we could not keep up.
That's what this really comes down to. But we'll get there.
So what happens? More demand for apartments, more demand for build to rent communities.
02:16
More demand for affordable single family rentals. I personally I've done videos on pad split and a bunch of these.
You know, that we teach over at infinity. you know, buying single families, duplexes for Plex, things like that.
That is where this is really there's still going to be demand for that.
02:33
If you are sitting on rentals. So you've been following us for the last 25 years.
Congratulations. You're going to do really well if you're ignoring rentals because you're stuck in a 1950s white picket fence ownership mentality.
You know you may be in for a rude awakening.
02:49
The next ten years are going to be kind of kind of wild, right? Prediction number three.
Slower growth equals crash or cushion. Better yet, crash your cushion right.
Will this slower growth cause the market to dump or
03:08
will it actually be like okay, thank God it's taken some of the pressure off. I'm going to lean towards that second, but let's get into it.
So this is the big scary question. If household growth slows to 820,000 per year, are we headed for a housing crash?
And let's just talk about it.
03:24
Slower household formations equals fewer buyers. This is that's it.
Right. We're not having as many households growth that we used to.
That reduces upward pressure. So I kind of think of it like a jet comes up and it's at 30,000ft.
And it was just really going up at a steep incline.
03:41
And we're having this massive inflation. And household debt is growing like crazy. It's pricing everybody out.
We're at all time highs for the values of these homes. It's leveling.
It's leveling up. It's not crashing but it's leveling off.
The younger households millennials and Gen Z's, they're priced out,
03:59
which means demand for ownership is softer. Where those people are going to go, they're going to be renters, guys.
Combine that with high interest rates. And right now, like yeah, we see it.
Yeah. You could see some downward pressure on home values in some markets.
Yes. But not where people are living and need and need rental properties.
04:16
There's always this difference between do you buy on comps or cap when you see prices go crazy, generally they're going up because the comps are going nuts in some of these cities. And I'm thinking like coastal cities, they went they went Bizarro world
04:32
like Miami is getting hit by it right now, right? They they might see some something come back down a little bit.
But other states. No, I'm going to say that's the cushion case.
Right. We're still under built between 3.5 and 5 million homes nationally.
So even if there's slower growth there's still not enough supply.
04:50
Aging boomers are also unlocking equity, but they're not flooding the market. They want to age in their homes.
They're not dumping these things all over the place they want. They're sticking to it.
Well, I look looking your interest rates really low. They're not going to give that up.
That's crazy right.
05:06
The renters aren't disappearing. They don't disappear.
They can't buy there's they still need a place to live. And that keeps landlords and investors in the driver's seat for now.
Right. But will there be a cash.
No not really I don't think so.
05:21
Yeah. There are some overheated markets that may correct, but nationally the shortage is just too big.
So I don't see a crash number for who drives this demand. The growth we do see is concentrated right.
Older households are growing and it's over.
05:37
I think it's 7.5 million in the next decade. So where would I be looking?
Well maybe they downsize of interest rates go down. Maybe they might go rent somewhere that they really want to live.
Maybe senior housing. Those might be things. But that's that's a concentration of a lot of those households or people over 75.
05:56
If you want to look at ethnicities, Hispanic households, we're talking about nearly 5 million new households by 2035. That's your biggest growth market, guys.
And then rental demand is strongest where affordability is worse. Right.
So your sunbelt cities, your metropolitan suburbs and rural off grid areas,
06:14
well, they can still find land, but cash flow is always going to be king. And there are great markets out there that cash flow.
It's your Indianapolis right. It's Kansas City's it's Charlotte, it's Winston-Salem.
It's Oklahoma City. It might be Birmingham right.
It's not what you're thinking right.
06:31
You're not going to go to LA and get a bunch of cash flow. You're not going to go to Miami and get a bunch of cash flow, right.
You're going to have to go to some of the places where flying over. It's usually not in the Sun Belt.
They are the coast because the prices are just too high. So if you want to be a landlord,
06:47
you might be looking at some of these other cities. Number five and this is a big one right.
There's new asset classes that are going to take center stage and real estate by 20. I think it's 2030 for alternative properties.
And this is some really interesting data. The these are places like cold storage logistics, data centers.
07:04
They could make up to 70% of real estate portfolios. And that's up from 40% today.
That's Deloitte and making that prediction right. We already see it.
The investors are chasing only or I should say this, if investors
07:21
if that's all you're looking at, is apartments and off and building and office buildings and that's your niche and you're kind of ignoring that, do that at your own peril. Right.
That's an area that's going to blow. So real estate right now I believe is becoming infrastructure, AI, e-commerce,
07:37
cloud storage, warehouses, data hubs, towers. Those are going to be prime real estate.
And that's not a fad. That's a backbone of the new economy.
And I think you're going to really see that playing center stage. What is it going to continue to do.
07:52
And it's going to be a savior on many on the commercial side. Right.
Because it's we need this. We're seeing it.
You're seeing our president right now. Really emphasizing on it.
You see Elon Musk and a bunch of others talking about it all the time, when the world's richest people and most influential people
08:07
are talking about this stuff, you might want to listen. Prediction number six stealth wealth anonymity will protect you.
And they're going to be more important because that's an easy prediction. And this is a very personal prediction right.
As wealth concentrates and people are becoming renters,
08:24
that's more renters that are going to sue, more renters that are looking for paydays, more renters that are going after things. So alternative assets lawsuits, it's going to they're going to follow the money which could lead them to your table.
And that's why I keep pounding on that table,
08:40
which is anonymity, stealth, wealth, security through obscurity. Don't let people know what you have owned through LLCs.
Trust structure that keep your name out of the public records the best lawsuits, the ones that never gets filed against you. Right?
So future investors who ignore this are walking around with it.
08:59
Pretty much a giant "sue me" sign taped to their backs. Don't do it as wealth concentrate.
There are people that are going to follow that money and try to take it. Here's number seven.
See if I can follow the right number of fingers. Right?
Builders can't keep up.
09:15
I don't think they can keep up. The housing starts are already down, so the truth is we're still millions of homes short.
So the builders are we under built over this last decade since the Great Recession? Right.
It shook it out. We did not keep up.
09:31
So what's going on right now? Multifamily housing starts this year are down nearly 30% over the last year.
Right. Housing starts are down. Why?
Because interest rates are really high. It's everything's really expensive. It's affordability. There's all sorts of stuff.
09:47
But what does that mean? It means that we're not building enough houses to keep up with growth.
So even if growth slows, if we can't keep up with it, we still end up with a shortage and we're already in a shortage. So even if household growth slows,
10:02
supply is still way behind. That imbalance means rents are going to keep doing what it's going to climb, and it's going to cushion against a nationwide crash because you get people buy on cap, investors buy on the cap rate.
What it's returning to me,
10:18
they don't buy on comp what the neighborhood's selling for. They buy and what it is.
And how do I know that I live in Las Vegas, where during the Great Depression, recession, whatever you want to call it, in 2008, big crash, we lost 75% of our values.
10:34
But you know who was here buying everything. Investors were here.
Wall Street was here buying everything they get their hands on, and they're glad they did. They absolutely raked it in because they were buying on return on their investment.
Not by what the neighborhood and my neighbors are selling for.
10:50
They ran the numbers. And that's what you should be doing too. And that's what landlords do.
Good investors buy on cap, not on comp. And there's going to be opportunity for you.
Predicted number eight. Well or the interest rates that we're going to be in a locked market.
11:08
So mortgage rates jumped from 3%. And I think I was 2021 to over 7% today.
No buyers can't qualify. And the sellers don't want to give up their 3% mortgages either.
Right now we're kind of at a standstill right now, not going up or down any meaningful way.
11:25
So we're stuck. Stagnation, right?
That's why you inventory really is frozen at historic lows, right. You're not seeing a lot because people don't want to give up their homes.
I think most like 80% of the houses out there have interest rates that have mortgages below 6%.
11:43
About a third of the property is being purchased right now or for cash. These people aren't selling guys.
They're not they're not in a situation where they're forced to. So there's not going to be a big old crash from that.
But with it for investors who have cash partnerships or credit financing, that that this is a golden opportunity, right?
12:03
You're competing against fewer buyers while rents are still poised to go up. Right.
So here's the big takeaway. Slower household growth doesn't equal a housing crash.
It equals a shift. The shift towards renters, towards new household types,
12:21
towards new asset classes. If you adopt, the next decade is going to be the single greatest wealth building opportunity you've ever seen in real estate.
If you don't, you'll be the one selling to those who did. All right, I'm going to leave it with this.
12:36
If you could smash the like button, I need it, right? Subscribe, I need subscribers, it helps.
And then tell me in the comments. Are you betting on rentals, senior housing, or the next wave of alternative real estate?
Let me know what you're doing. I know we have a ton of people out there that watch these videos
12:54
that are really smart. Share your knowledge down in the comments.
Please let me know what you're looking at. I read them and I'm interested in what you guys have to say.
Please go down in those comments so let me know what you think. If you think I'm all wet, let me know.
If you think that there's better data out there
13:09
that I should be paying attention to, let me know. I got thick skin.
It doesn't hurt my feelings at all, but please put something down in the comments and let everybody know where you're headed and what you think. And if you see comments, comment to them, respond and let me let them know what you think.
13:24
I'm very curious as to what goes on. Thanks guys.