Is real estate a bad long term investment with low birth rate & new immigration?

[kenmoremmm]

the US birthrate has been declining for some time. now, with current anti-immigration policies, i'm wondering if real estate investing has a poor long-term outlook. curious on your thoughts.

[maizefolk]

Unless you are looking at REITs, investing in real estate as an individual necessarily means you'll be investing in only a small subset of all the real estate markets in the country. There is still a lot of internal migration within the USA -- it gives us a big advantage at adapting and recovering from economic changes and depressions/recessions especially compared to places like the EU -- so markets where people want to live and where jobs are plentiful are likely to keep expanding so real estate in those markets will continue to be, on average, a good investment.

Markets where internal migration has already been shrinking populations for quite some time now can give a sense of what a real estate market with a shrinking local population looks like.

-Property values decline a LOT (single family homes selling for five figures rather than six or seven figures).
-Rents don't decline as much. Numerous posters living in the rust belt have talked about finding properties that don't just satisfy the 1% rule but the 2% rule (annual rent of at least 24% of the purchase price).
-So you can survive as a landlord in a declining market, but if you're leveraged up on mortgages betting on price appreciation rather than price decline before your market transitions from growth to decline it could end up a disaster.

The challenge is figuring out which real estate markets in the future will look like DC, Denver, or Bozeman (big, medium, and small markets that are currently growing) and which real estate markets in the future will look like Detroit, Syracuse, or Hamburg, IA.

Changes in the birth rate or immigration may slightly shift how common those two kinds of markets are.

[Jon Bon]

So is RE going to be a good investment in a low/no growth environment?

No it wont, but in a low/no growth environment nothing is going to be a good investment.

People are going to go where there is opportunity, laws are not really going to change that very much. So as long as there are good opportunities in the US people will want to come here.

Here are some of those pesky facts for us. I think we will be fine.

http://worldpopulationreview.com/

[EverythingisNew]

In the future more people will work from home/remote. Investing in real estate in scenic locations is a good bet.

[Laserjet3051]

RE is always local, thus generalizations are nearly impossible. National averages tell you nothing about the geographic or other subsectors you may be investing in. Where I live, residential RE values have been exploding beyond comprehension with the obvious 2008 exception, from which we have readily recovered.

For example: Buying Healthcare REITS vs. buying SFHs in Kansas are two totally different beasts.

[Mako52]

That low birth rate and low immigration thinking would dictate that any new investment would be a bad long term investment. 

[Chris Pascale]

With a long enough term, all places are bad investments at some point, and then there's the end of humanity.

Now the question is this: What will you invest in if not real estate?

Also, remember that Roberty Kiyosaki predicted with his "prophecy" that the stock market would be dogshit about now because all the boomers would be taking their mandatory withdrawals from their 401(k) accounts. He couldn't foresee that young people, like me and my kids, would be funding Roths, or that 30-somethings in federal service would be maxing out their TSP accounts.

[Car Jack]

I look into my plexiglas ball (I can't afford crystal) and see where in the future, farmers will scream that they can't get laborers.  New politicians change immigration and open the flood gates.  New housing demands go through the roof.  Your current rentals become gold mines.

How's that?  Did I make up a reasonable story?

[itchyfeet]

I think premium realestate in prime locations could be a good investment as there are more and more rich people who want somewhere “premium” to live and are not so price sensitive

For the mass market though, I don’t see realestate as a great investment as returns are limited to salaries growth, particularly as other sources of improved affordability eg lower interest rates and greater workforce participation by women seem pretty tapped out.

I do believe the trend of urbanisation will continue and apartments will become increasingly popular, so if you can buy land in downtown locations in sizeable cities that might also be a winner...

But for full disclosure..., my crystal ball was shattered a long time ago so now I am reduced to spit balling.

[Evildunk99]

Immigration is the secret economic sauce of the US.  We admit more (legal) immigrants annually than any other country, and this more than offsets our declining birth rate.  Without immigration and a declining birth rate, our economy might look like Japan's (stagnant or contracting).  So the key question is will US immigration continue in the long-run?  To me it's a resounding yes regardless of a border wall or other Trump policy ideas. 

[maizefolk]

We admit a lot of legal immigrants and, crucially, a lot of brilliant and hardworking people still want to move here. We need both and if we lose either we'd be in a lot of trouble.

[marty998]

A low birthrate off a high base could mean the absolute population number continues growing strongly, just not the %.

Bit like the argument about Chinese economic growth sliding from 8% a few years ago to 6%. Sounds bad, but 6% today is much more than 8% a few years back.

Also, remember that Roberty Kiyosaki predicted with his "prophecy" that the stock market would be dogshit about now because all the boomers would be taking their mandatory withdrawals from their 401(k) accounts. He couldn't foresee that young people, like me and my kids, would be funding Roths, or that 30-somethings in federal service would be maxing out their TSP accounts.

He also didn't see that people in other parts of the world might be buying up US stocks too as access to international markets improves...

I'd like to think by the same token that our market won't collapse as the baby boomers withdraw for the same reasons.

Also if the boomers are going to withdraw and spend, won't that, by definition, improve the profitability of the companies selling good and services in those countries and hence be a reason for the share prices to remain high?

[reeshau]

A low birthrate off a high base could mean the absolute population number continues growing strongly, just not the %.

Could be true, in general terms.  But the US is below 1.8 births per woman, so below the replacement rate.

https://www.nbcnews.com/health/health-news/u-s-birth-rate-falls-4th-year-row-n1091446

[roomtempmayo]

In the future more people will work from home/remote. Investing in real estate in scenic locations is a good bet.

This has been said for 15+ years, and I'm still waiting for it to become widely true.

Perhaps in a small group of coastal and mountain towns, there's been an influx of remote workers.

More broadly, though, it sure seems like the premium to live in bigger cities has only increased, and shows no sign of stopping.