https://www.financialsamurai.com/why-the-housing-market-wont-crash/
I’m bullish on the housing market over the next decade. It’s one of the reasons why I’ve invested $800,000 in a real estate fund focused on Southern and Midwestern properties. Real estate price and rents should continue to go up for years due to positive tailwinds I’ll discuss in this post.
In addition to my real estate fund investment, I’m buying San Francisco ocean-view rental properties as well. Real estate is one of the most attractive asset classes to build wealth in a low-interest rate environment. As the pandemic subsidies, the demand for big city living will increase again. People want to be where the jobs and action are.
In this article, you will read 16 reasons why the average homeowner will likely grow richer over the next decade. I have so much conviction in my housing market thesis that I’ve not only put my money where my mouth is. I’ve invested over $10 million in real estate so far.
Yes, with higher mortgage rates, the demand for real estate will slow. In areas where home prices went up 40%+ in two years, I can certainly see a 10% – 15% decline in prices. However, this just gives savvy real estate buyers more opportunities.
Before I share all the reasons why the housing market won’t crash any time soon, let me first share some more background so you know where I’m coming from. After all, we all have our biases, and I am positively biased towards housing.
Roughly 50% of my net worth is exposed to real estate. If I only owned stocks and real estate, real estate would account for a 60% weighting. My real estate portfolio consists of properties in San Francisco and Lake Tahoe, three publicly traded REITs, and a real estate crowdfunding fund focused on heartland real estate.
These assets generate roughly $150,000 a year in relatively passive income. If it wasn’t for real estate, I’d probably still be working a traditional job.
I’ve been buying real estate since I first came to San Francisco in 2003 because I found valuations to be cheap compared to Manhattan real estate. I had worked in Manhattan from 1999-2001 and never imagined being able to find a 2/2 park-view condo for under $600,000.
I kept buying real estate because I also realized U.S. real estate was, and still is, cheap compared to international real estate. Working in international equities enabled me to explore various countries while working. And I always checked out the various local real estate markets while on business trips. Not only is U.S. real estate cheap on a global context, we also have jobs that make U.S. real estate affordable.
Take a look at the real estate statistics from one of our biggest foreign buyers, Canada. Cities like Vancouver and Toronto are equally as expensive as the most expensive cities in America. Yet, there are hardly any big Canadian companies that come close to paying as much as U.S. companies.
Go ahead. Try to name just three Canadian companies that pay new college graduates over $100,000 a year.
Finally, I followed my own advice and bought a forever home in 2Q2020. I put my money where my mouth is. Otherwise, there’s no point talking so much about finances.
For existing real estate investors, you should feel great about the risks you took to buy. It takes discipline to save up for a down payment. It also takes guts to buy a large asset with debt. My default recommendation for real estate is to hold on for as long as possible.
For new real estate investors, things are a little trickier. With strong demand, low inventory, and higher prices, you need to be careful running with the herd. Good economic times have clearly returned.