Over periods of 5 to 10 years, nearly all types of properties gain in value because population, jobs, incomes, and wealth (buying power) grow faster than the amount of new construction. Over the long term, more people with more money consistently push real estate prices up.
"Okay" you retort, "but that was then and this is now. Surely prices can't continue to increase as they have in the past?" I answer, "They can and they will." To see the future, just weigh together these dominant trends:
1. Population growth. During the next 20 years, the population of the United States will increase by 40 million people.
2. Incomes. During the next 20 years, employees, entrepreneurs, professionals, and business owners will see their incomes rise by over 50 percent.
3. Vacation homes. During the next 20 years, at least 10 million more Americans (and foreign nationals) will choose to buy vacation homes within the United States.
4. Echo boomers. During the next 20 years, more than 60 million echo boomers (children and grandchildren of the baby boomers) will enter the housing market to buy homes.
5. Restrictions on development. During the next 20 years, zoning, environmental laws, building regulations, and land shortages will continue to restrict development in those areas where most people want to live.
6. Construction costs. During the next 20 years, the costs to construct houses (and other types of buildings) will follow their past trend line upward.
7. Immigrants and minorities. Currently only 40 percent of our fastest growing immigrant and minority groups (Hispanics, blacks, Asians) own their own homes. In contrast, more than 75 percent of whites live in homes they own. With government programs and lender outreach efforts in full swing, during the next 20 years people in these minority and immigrant groups will continue to buy homes in record numbers. Federal, state, and local governments in cooperation with private lenders will be working hard to close the home ownership gap.
8. Investors. During the next 20 years, more than 60 million baby boomers will need a retirement income. They will increasingly turn to investment real estate to meet this need. Demand for property as an investment will continue to explode - as it has during the past 5 years.
You don't need advanced knowledge of economics and demographics to recognize the fact that every major social trend is pushing real estate prices upward.
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