It’s easy to tell that real estate in the US is booming. But with so many investments coming from undisclosed entities, and widespread contributions from both the public and private sectors, it’s becoming harder and harder to pinpoint the origin of the industry’s surge. So in an effort to highlight some of the key contributors, we decided to elaborate on 2 of the biggest pools of investment.
A massive portion of growth comes from foreign investors. This is in part due to the impending global macroeconomic and political uncertainty throughout Europe and Asia. From a worldview, real estate in the US is about as safe an investment as you can get. Although this looks great at face value, that may not be the case for domestic traders. Relying on foreign dollars stretches the internal dependence on exterior investment and increases our vulnerability to negative global economic externalities. By opening our doors to foreign money, we also open our doors to foreign conflict. Which, as we know, can be detrimental to both the overall economy and the real estate industry specifically.
Real estate is not only posed as a great passive income option, it’s also a promising career choice - #7 among those that are service-based to be exact. The majority of those come from maintenance and repair workers, and property managers and agents. This means two things – in a good economy, the massive employment stabilizes the industry even further, ensuring more people benefit from the upturn, and the overall economy sees an increase in investment. On the other hand, the short-term volatility of real estate pricing can lead to a ripple effect that spans beyond net losses in investments, and into the realm of unemployment. But with the industry’s annual mean wage increasing by about $2,000 in 2016, the immediate future looks promising.
The list goes on and on, but these areas have been two of the biggest contributors in the past decade. Not mentioned above is the influence that millennials have played on the industry. Overall, those aged 18-34 have shifted their purchasing behavior. Instead of looking to buy their own home in their mid-to-late 20’s like most generations before, they’re opting to rent instead. This could potentially affect the market in a couple of ways. In one scenario, investment in pre-developed residential real estate will see a climb to parallel the number of renters in the market. In another scenario, the industry will experience a sudden flow of first-time buyers that puts further stress on the scant supply of homes in the market, and raises prices even further.