The future is an amazing place

Human creativity is the most valuable of all scarce resources. As AI and robots replace repetitive, predictable work, humans will be freed up to satisfy more of humanity’s infinite wants with newly additional finite resources. A product of this productivity is already influencing how people are choosing to live their lives.

The sharing economy has converted under utilized resources into lower cost options, on demand. The trend is away from large capital investments in order to use the resource, and towards renting when needed. An added benefit is the user is no longer responsible to maintain the capital asset.

Real estate will be a good, boring investment in this future.

Why does this favor real estate? If I can get an Uber on demand, I can rent a place to stay on Airbnb, or ride a Divvy or Citi bike from point A and drop it off at point B, why buy what many consider to be the largest financial decision of all, a home?

As more people utilize Uber and fewer own cars, I believe fewer people will own their primary residence and more will rent. Renting has its advantages, lower transaction costs for an increasingly mobile demographic.

The data backs up the thesis. Home equity percentage has declined among those less than 45 years old from 29% to 19%. Home ownership percentage has declined from 42% to 31%.

Declining ownership and equity by younger demographics

Looking at the “Homeownership Rate for the United States”, we see the trend over the last 10 years has been down.

The Urban Institute produces population forecasts for the United State, given birth rates, death rates, and migration rates for local geographies. In the United States the projection is that from 2010 to 2030 population growth will be 15.8%. The population change will be 309.5 million to 358 million. [Source: Urban Institute]

As more people rent, and more people live in America, rental properties will continue to be a good investment.