New Column up at Real Money (05/26/05)


My latest Real Money column, Don’t Buy Housing Bubble Propaganda, looks at some of the numbers driving the real estate boom.  While anecdotal evidence of regional excesses are always interesting, that doesn’t mean we are about to see home prices get cut in half (or worse) over the next 6 months.

While its interesting to note that a Playboy bunny gave up her modeling career to go into real estate speculation (mentioned previously here), it doesn’t mean the end is nigh. Also, for those of you missed the weekend’s round up of interesting Real Estate factoids, you can see them here.

Here’s an excerpt:

The second factor is demographic trends. Here’s a little-known fact: The U.S.
has the fastest population-growth rate of any industrialized nation. According
to NPG, the U.S. average fertility rate is currently 2.1335 births per woman –
the highest fertility rate since 1971. For comparison, the U.K.’s fertility rate
is 1.7, Canada’s 1.4 and Germany’s 1.3. If this rate is maintained, the U.S.
population will double every 35 years.

Further, the kids of the baby boomers — the echo generation — are now at
home-buying age. Thanks to the intergenerational wealth transfers, they can buy
bigger and more expensive homes than their parents could at the same age. Their
purchases also have been impacting the housing market. (Some analysts believe
that the life cycle of the boomers has been a key driver in equities also — so
on this point, there may be some parallels between the two asset classes.)

Take this organic increase in U.S. population, add to it a healthy supply of
legal immigration, and that’s a formula for a rising demand for housing. And,
there are no warehouses stocked with homes awaiting more births and naturalized

There’s more data points worth reviewing.

UPDATE May 30, 2005 9:43pm: 

The full column is available on Yahoo:


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