What Happens When Population Goes Negative?

Dave:
There is a ticking time bomb in the US housing market that no one seems to be talking about and this isn’t clickbait. I genuinely believe this is one of the biggest risks to real estate investors and one of the biggest questions about the future of our entire industry. So what is it? Population decline, population and household growth drives demand for housing and rentals, but our population is not going to be growing much longer with lower immigration and quickly falling birth rates. Is housing demand at risk of drawing up in the future? Could we go from an undersupplied market to an oversupplied market in just the next couple of years? The answers to these questions are massively important to real estate investors and in today’s episode of On the Market, we’re digging into this question about population growth, how it’s going to impact real estate values. We’ll learn lessons from other countries in similar situations, and of course we’re going to talk about how you should position your own portfolio. I promise you this is an episode you do not want to miss. This is on the market. Let’s get to it.
Hey everyone, it’s Dave. Welcome to On the Market. We have a great episode for you today. It’s actually one that I’ve been wanting to make for a while. It’s definitely one that I’ve been researching for a while. We are talking about a potential declining population in the United States and what it means for real estate investors. And to be honest, this is an uncomfortable topic. I was a little nervous actually to dig into this topic because I think there is a bit or maybe more than a bit of an existential threat here. For real estate investments to perform, you need demand and for as long as we have had a country, demand has always grown as the population has increased. But what if that stops? What happens then if population in the US stops growing? This isn’t some hypothetical question. The data actually suggests it is going to stop.
In fact, by 2031, only five years from now deaths in the United States are supposed to outpace births. That’s only five years from now. And of course immigration also plays a role. It’s not just birth rates, but as you probably know and we’ll discuss in more detail, immigration is also declining. So this question of where the population is going and what it means for real estate is a legit question and it is something we frankly just need to discuss as uncomfortable as it may be. So that’s what we’re going to do in today’s episode. We’re going to talk about first the current balance between supply and demand and where we’re starting from. Then we’ll talk about forecasts for population and housing demand into the future. Then I’m going to dig into how housing markets in other countries with declining populations have behaved. Because this is not just a US phenomenon, this is happening all over the world.
We’ll talk about when and where risks actually exist for real estate investors and we’ll finish up with just how I think you might want to position your portfolios given this information going forward. That’s the plan. Let’s get to it. So first up, let’s just start where we’re at. You all probably know this, but we need to do a little review to set the stage for this entire conversation. There are two sides to the housing market. There is supply number of homes that exist in the United States, number of homes that are for sale at any given time. That’s the supply side. And then there’s demand side. How many people want to buy a home or who need to rent an apartment? And generally speaking, when there is more demand, then supply prices tend to go up and that is where we are today. You’ve heard this, but we are in a supply deficit in the United States.
It really depends and varies widely how big that supply gap is, depending on who you ask. The National Association of Home Builders, they have the smallest estimate at 1.2 million units. Then we have NAR, the National Association of Realtors. They’re saying it’s all the way up to five and a half million units, different methodologies. I think for real estate investors, I kind of just average all of them and assume that we are probably three to 4 million units short in the us and this supply gap has existed basically since the great financial crisis. We talk about that on the show all the time. A lot of builders went out of business, they couldn’t get loans. We had underdevelopment for over a decade. That’s how we got in this situation. And the interesting thing here is that it is actually getting works even though a lot of attention has been called to this situation over the last couple of years.
If you just do some basic math, it looks like the gap is not closing and is probably getting a little bit bigger. As of right now, we’re on track for about 1.6 million new housing units added per year in the United States, which is decent. It’s not terrible, but it is not enough to cover the estimated 1 million new household formations that is new demand, new people who need housing, right? That’s 1 million. Then on top of that, there’s demand for about 200,000 secondary homes or investment homes who’re at 1.2 million. And then the thing that people often forget about is that about 400,000 homes per year just become obsolete and are demolished or they’re left vacant. And so that gets us to about 1.6 million. So either we’re slightly improved closing that gap or it’s getting slightly worse, but it’s about even right now, just as an example, in 2023, there was only 1.4 million homes added, but there is an estimated 1.8 million new households formed, meaning that in 20 23, 1 of the years we had a lot of deliveries relative to recent years.
We still went net negative by 400,000 housing units. So we won’t go into this in any more detail, but just remember that we are starting at a deficit. This is a really important part of the analysis of what’s going on with population because as we now start turning our conversation to birth rates, immigration, how this is changing in the future, we basically need to think through how these changes in birth rates in immigration will impact the current deficit that we are already in. We need to frame our conversation in terms of how demographic changes will impact current trajectories. So to do that, we got to look again at both the demand side and the supply side going forward, and let’s just start with the demand side because it’s the scary part and we need to get this part out of the way. There are basically two pieces to the demand picture, birth rates and immigration.
Let’s just start with birth rates. There is an acronym TFR, which stands for the total fertility rate that hit an all time low for the United States in 2024. The last year we have data for it was at just 1.6 children per couple. Now, something I’m going to mention a couple of times in this episode is something called the replacement rate, which just basically means that you need two adults to make a baby and in order for the population to grow, the average couple of two adults need to have 2.1 children to have the population grow, right? If it’s exactly two, then the population will stay flat, right? Two parents create two children, population stays flat. Now what falls is anytime that this total fertility rate or the birth rate falls below two, that means that population is probably going to decline at least domestic born population.
We will get to immigration in just a second. Now, the fertility rate in the US, like I said is 1.6, meaning that we are well below the replacement rate and that our population of domestic born citizens is going to decline. This trend of fertility rates falling is pretty dramatic Since 2007, the fertility rate has fallen 22% and this is happening with all sorts of people. Every age group under 35 is declining. We’re actually seeing a small increase actually in fertility rates for women over 40. People are generally just waiting longer to have kids, but it is down a lot and there are government organizations that study this and they’re projecting that it stabilizes around 1.67 to 1.7. So a little bit up from where we are, what they’re basing that on, I honestly don’t know. They seem to think that people are just waiting and that there’s some pent up demand for having kids.
I don’t really know. It’s been falling in the United States for decades. It’s actually been falling all over the world for decades. We’ll talk about that in a little bit, but they think it’s going to get better. Now, why are birth rates falling? Well, when people are asked, the government tracks this kind of stuff, all sorts of think tanks track this kind of stuff and what they’re seeing is number one, economic anxiety. It is really expensive to have children. There are also cultural shifts just generally speaking where people are having fewer children, but the mostly commonly cited thing is just it’s too damn expensive to raise kids. Now we’ll see if people stick with that or maybe it’s just delayed and we’ll see a birth boom in the next couple of years. But I think it is unlikely and I have not seen any studies that suggest that is likely we are going to get back to that replacement rate.
Even the more optimistic forecast, say we’re going to get back to 1.7, not to 2.1, which is where you need to get to have a growing population. Now, I just want to mention that there are pros and cons to a growing and shrinking population, but economically speaking, most economists believe that a falling population is a problem for the economy. Basically to figure out GDP, you take the total number of people in the workforce, you multiply it by productivity, generally speaking, that’s how much economic activity you have in a country. And so when you have a falling population, that means there are economic risks. Now, there are good chances that productivity gains like stuff from AI will offset a declining population. We don’t really know, but I just wanted to call out that a lot of economists believe that a falling population is an economic problem.
This is probably why you see a lot of business people calling attention to the falling birth rate. Now, I’m not suggesting that birth rates or people should make decisions about their own families based solely on economics. I’m not saying that at all. There are plenty of other variables here, but this is an economics podcast. So I am just trying to frame the conversation and make clear that I am talking about this in economic terms because this is a real estate investing podcast and my goal in this episode is to understand how a potentially falling population impacts real estate. Okay, so that being said, I just want to reiterate that this trend of falling birth rates is not an American phenomenon. It is happening all over the world. There are very, very few countries where birth rates are actually going up. Some of this is likely due to just a wealthier world.
Research shows that as countries become more wealthy, less children are born, but whatever the reason this is happening everywhere. The global birth rate has fallen 50% since 1950 and western countries are seeing real population declines. It’s happening in Japan, in Canada, in Germany and Spain and Italy. It’s happening everywhere. Birth rates are below replacement rates. So for our conversation, unless something changes radically, we are going to have far babies in the United States and maybe something will change, but this is a long developing trend and there is no evidence is going to turn around soon. So I am personally counting on this continuing at least for now. Now population wise though, birth rates are just one angle. We also have to talk about immigration because that is a big factor in the total population and total housing demand in the United States, and as you know, immigration policy has changed a lot in the last couple of years. We’re going to talk about how that impacts demand for housing, but first we have to take a quick break. We’ll be right back.
Welcome back to On the Market. Today we’re talking about a somewhat uncomfortable topic. What happens to real estate if the population in the United States starts to decline and before the break, we just talked about this through the lens of the fertility rate in the United States, which is declining, it is below the replacement rate and it is very likely that we’ll have fewer and fewer babies and smaller domestic born populations in the United States going forward. But as we mentioned before the break, there’s also immigration that is a major factor in population size in the United States, so we’re going to dig into that Now. We went through from 2020 to 2025, a really large surge in immigration. We actually had 11 million, over 11 million immigrants arriving from 2020 to 2025, 3 million alone in 2023, which I believe is the largest annual total ever. That is a combination of both legal and unauthorized immigrant populations.
We actually saw the unauthorized population hit a record in 2023 of 14 million. We’ll talk about this in a minute. Now the trend has completely reversed, but I just want to call out that we had a big surge in immigration over the last couple of years and that has actually been the primary driver of population and household growth in the economy and in the housing market. Like I said, we’ve been the below the replacement rate for births in the United States for quite some time, and so the main driver of our population growth has been immigration. You actually see this. It’s very regional, but I was just looking this up and you see in some of the fastest growing metros in the entire country, you look at Houston, you look at Miami, you look at Phoenix, you actually can see that over recent years, immigration has accounted for at least 50% of their population growth, if not more.
Now since January, 2025, there has been a really big reversal. January 20, 25, a little over a year ago, immigrant, total immigrant population in the US was 53.3 million. By June, 2025, it went down to 51.9 million, a decrease of 1.4 million in just six months. That is actually the first decline in US immigrant population since 1960s. And if you look at estimates for the total of 2025, and this is both, this is for both legal and unauthorized migration. There are studies that show that net migration last year in the United States was negative. It could have been negative by several hundred thousand. Now, I don’t want to get political with all this, but I did just sort of look into try to understand how this is happening and what I found is there was an estimate of 310 to 315,000 deportations in 2015. So that actually suggests that the bigger driver of lower net immigration is actually a slowdown in new arrivals.
So yeah, deportations are contributing to this, but also fewer immigrants are actually coming to the United States. Now the big picture here is that the CBO is actually just revised their population estimates for August, 2025 and they’re estimating that in the US in 2035. So they were looking 10 years out, they actually revised down their estimates for us population by 4.5 million. That’s a big difference. I mean it’s not crazy. It’s like one 2% of population, but that matters even on a national level and it’ll definitely matter on a regional level, which we’ll talk about in just a minute. So in aggregate, when we look at lower birth rate and we look at lower immigration, I think it’s hard to argue that demand is going to be sustained in the housing market. I think we have to accept the fact that demand is going to fall, and I know that can be scary.
It is a little scary. I will totally admit that, but there’s a lot of other variables that we need to account for. So let’s just go through those things. First things first though, let’s just remember from a birth rate perspective, babies born today, they don’t form households. They’re not going and renting apartments, so the stuff that’s going on with the birth rate is still probably 5/10/20 years out. We are actually still in peak millennial household formation. These are millennials right now are ages 26 to 42 depending on who you ask. Everyone has a different definition of everything that is the biggest cohort in history and the birth rate sort of falling off a cliff that is actually more likely to impact the housing market in sort of like the 2040 to 2050 kind of range. It’s kind of like a water pipe when you sort of turn off the faucet, but the water continues coming out for a while.
That’s kind what’s going on. The water pressure has been turned down, but we still have a lot of water coming through the pipes for the next couple of years at least. And so the way I have been thinking about this and I’ve been mapping this out and looking at demographic data and all that, basically from 2026 from where we’re today to 2030, I do not believe there is going to be an effect from birth rates on the housing demand. I just don’t think that’s going to impact us. Are still in peak home buying for a giant population bubble we have with millennials and older Gen Z. Then in 2030 to 2040, I do think demographics are going to start impacting real estate in a potentially negative way. We have the smaller Gen Z cohort starting to buy. They buy a lot of measures are not doing as well as millennials financially might not be able to afford to buy.
At the same time, I am not someone who believes in the silver tsunami that we’re all of a sudden going to see a ton of boomers selling their homes, but they are going to sell their homes. That transfer is already starting and is going to continue in the 2030. So I think in the 2030s to 2040, we’re going to start to see some demographic headwinds in the housing market and then what happens in 2040 to 20 beyond, I don’t really know. It’s really hard. I don’t really even pretend to be able to forecast 15 years from now, but that is when we will see the impacts of lower fertility rates. That is going to be a major variable in 2040 and beyond. But as you know, there are so many other things that will impact what’s going on 15 years from now. For example, immigration.
Immigration policy can change. We saw it change very dramatically from 2024 to 2025 and I don’t know what will happen in the future, but it is possible that it will swing back in the other direction and we don’t know what’s going to happen with supply, which we’re going to talk about in just a second. I just want to go back to that timeline though where I was saying twenty twenty six, twenty thirty, I don’t think birth rates are really going to be impacted. Immigration though is going to be impacted immediately. This is something that impacts the market right away. If there are fewer immigrants, we have fewer new renters, we have fewer owner households, and we are seeing this in a lot of areas. If you look at, I’m picking on Houston because there’s some studies about what’s going on in Houston, but Houston’s low rent apartments are seeing more vacancies, fewer applicants.
We see a 24% year over year drop in Houston home searches from international users. So we’re seeing that in Houston and if you look at these studies, Harvard put out a study, they are sort of modeling out what they call a low immigration scenario where we have 420,000 immigrants per year instead of 870,000 baseline. They’re just saying straight up that there’s going to be lower housing demand over the next decade. Now of course that is going to be regional. It is not national, but the market’s most exposed are ones with large immigrant populations, Houston, Miami, Phoenix, la, New York City, other immigrant dense metropolitan areas. So it reasons that we are going to have lower demand for housing because of lower immigration in the next couple of years. But there are two things that I think we need to remember here before people start freaking out.
Remember that we are starting from a deficit. I started this episode by framing that we are in a large deficit in the United States, and so having lower demand for housing overall does not mean we are going to see the market crash, but it is one of the many reasons I’ve been saying that I think we’re in for probably several years of a housing market correction because I think we’re going to get closer to balance between supply and demand. I think that the lower immigration will probably eat into that supply deficit that we have if construction keeps up, which is a big if because that brings us to the other thing I wanted to mention is that lower immigration is also going to negatively impact supply. We’ll talk about that in just a minute, but immigrants make up a quarter of construction workers so that mitigates some demand weakness and we could see lower construction rates because there just isn’t enough workforce or we are going to see rising cost of construction because that’s what happens when there is less labor, that labor demands more wages, that increases the cost of construction and that in itself could slow down the pace of construction.
Even though lower immigration we know will lower demand, it will probably also lower supply, not proportionally, I don’t think it’s, but that lower supply impact will mitigate some of the softer demand. Okay, what does this mean for your investing, right? We covered a lot of the demand side, but we need to also look at the supply side before we draw any conclusions and we’re going to do that right after this quick break. We’ll be right back.
Welcome back to On the Market. I’m Dave Meyer. We are now going to turn our discussion about potential population declines and what it means for real estate investors to the supply side because everyone always misses the supply side, right? Everyone always talks about demand, but they miss the supply side. Now remember, we’re in a shortage right now, but will the demand decline softening demand erase that? Could we go from a supply shortage to a supply glut? Let’s discuss. Well, first of all, like I said, we’re actually in the supply glut that actually might get worse before it gets better. I ran you through the numbers, but roughly we’re at 1.6 million units right now and that’s about what demand is and so depending on the year, we might actually get a little bit worse and at best it’s getting a tiny bit better. So even with lower immigration, I do not think that it’s likely that we’re going to see a shift from a shortage to a glut in the near future, but that’s really going to depend on immigration in the short run, if it really just gets huge net negatives that could change, but based on numbers that we saw from 2025, I don’t think in the next couple of years we’re likely to see that shortage get erased.
But what about in the long run with declining birth rates? Won’t we inevitably see a glut? This is the question people are always asking me when we talk about population is that if we have all of this housing and even though we have an oversupply right now, the population keeps declining and declining, won’t we eventually have too much housing for the amount of demand that we have? There could be. That is definitely risk. That is why we’re talking about this today. There is a risk to that, but I want to just remind everyone that there is sort of this hidden variable in supply that is often forgotten that is obsolescence, that is that every year obsolescence a demolition remove 400,000 units from housing supply and that happens regardless of population growth. Everyone always forgets that nearly half a million homes get destroyed each and every year, and we have a lot of old houses in the United States.
Actually nearly 50% of all of our housing stock is built in 1980 or earlier. The median age of owner occupied homes right now is over 40 years old. That’s up from 31 years old in 2025. So this trend is absolutely going to continue and it matters because it sort of creates this floor on the amount of construction that we need that doesn’t go away. Even if population growth slows as more and more housing stock ages replacement demand could actually go up from 400,000 to 500,000 and 600,000. So the inevitability of a supply GT is not really true, but it’s going to depend a lot on construction trends. If we have a declining population and construction keeps growing at 1.6 million units per year, yeah, we’re probably going to be in a supply glove, but I do think the construction industry is likely to adapt. They’re not dumb.
They know what’s going on. These are big sophisticated companies and so they will probably have to adjust maybe not in the next five years, but 10, 15 years from now, we will probably see big shifts in what is being built and where in the construction industry in this country. So I do think some of that obsolescence will and presumed adjustments on the construction side will offset some demand issues, but there are demand issues. I don’t know how else to say that. I just think that is going to happen, but this isn’t necessarily a disaster. It does not mean you can’t invest in real estate. We just kind of need to put this all together and figure out what this means for real estate investors and to do that, I’m going to sort of just break it down into three different segments. We’re going to talk about near term, which I’m going to just define as 2026 to 2030 just to the end of the decade kind of makes sense.
Then I’m going to do medium term, which is like 2030 to 2040, and then we’re going to do long-term, which is 2040 to 20 50, 60. I don’t know, long term longer than we can imagine right now. So let’s just start with that. Near term 2026 to 2030, what I think we’re going to see for the next couple of years, the most likely outcome is diverging markets and the great stall, this thing that I’ve been talking about for years, my opinion has not changed for the short term. We still have a national housing shortage that is very large and it is probably not going to get resolved even though we have lower immigration rates, we’re actually seeing construction capacity going down due to immigration enforcement, so that will probably slow construction. We also just have really undersupplied big markets, New York, Boston, dc, Seattle, undersupplied markets, and that is going to continue and so I think prices are going to be somewhat flat nationally.
This is what I’ve been saying for a while and I still think that is likely in the medium term. Now, I will say that for markets that are immigration heavy, I think we’re going to see demand moderate, right? We’re probably going to see some rental softness, especially at the lower end. These are in cities. I’ve called out a bunch of them in Texas, in Phoenix, in Miami. These are immigration dominant kinds of cities and we’re probably going to see lower prices. These are markets that are already seeing some of the biggest corrections in terms of home prices in the United States, and I think that is likely to continue, but I also think for any investors who operate in these kinds of markets, you probably want to count on lower rent growth or maybe negative rent growth because there’s going to be lower demand. That said, I’m not freaking out about the short term.
I still think there are great deals to be bought out there. I think rentals in any of these markets that are a bit supply constrained have strong economic growth. All the fundamentals that we talk about on the show all the time, those are still true and personally, I plan to keep doing what I was doing before I did all this research, so I’m not immediately worried. I did say at the beginning, I think this is a big question for real estate investors and there are risks in the housing market and that is true. I really do genuinely believe that, but I think they’re more medium term to long term. I don’t think they’re coming in the next couple of years, but that’s just my opinion after doing all of this research. So with that, let’s talk about the medium term. Again, this is kind of like 20, 30 ish, 2040.
These aren’t exact dates. Everyone, I hope you realize that I’m just kind of generally talking about the medium term. Let’s generally say it’s 2030 to 2040. Now, I think that’s when things, the question marks really start to come up because we basically have two different things. We’re probably going to work our way through this massive glut of millennial home buyers and start to get into the Gen Z peak home buying age, and they are a smaller generation and we don’t know what their financial picture is going to look like in five years. So I think that’s one thing that could create some headwinds for the housing market. The second thing is that the boomer transfer is going to continue, I think it is already started. I do not think it’s going to be some cliff that causes a crash, but I do think it could provide sustained downward pressure or moderating pressure on housing prices.
If there is more and more inventory on the market because this demographic group is selling, that will put down more pressure on pricing, right? If we have lower demand and higher supply, that is downward pressure on pricing, does that mean they’re going to be a crash? No. Does it mean prices are even going to fall? No. But when we talk about the direction of the housing market and where prices are going, we need to think about all the different things that impact prices, things like inflation, demographics, interest rates, all of these things. What I’m saying is that there will probably be demographic headwinds for the housing market, whereas over the last 10, 15 years we have had demographic tailwinds. The demographics in the US were helping us in the housing market in terms of appreciation from 2010 to now, and I think that will continue probably till 2030 after 2030.
I think that’s a much bigger question mark, and it’s something that we need to recognize as real estate investors. Now, this won’t actually hit in 2030 to 2040, but studies are projecting that in 2031 we will see deaths start to exceed births, which means that starting from that point going forward, we are very likely to see decreasing population unless there is some policy change in terms of immigration. Now, in terms of what markets actually become at risk for 2030, because I do not believe this will cause a national crash that is five years out, I make my predictions one year out, so I’m just saying right now from what I understand about the market, I don’t see anything that says, oh my god, now everything’s going to decline. But I do think certain markets will be more at risk during this demographic shift. I think instead of seeing immigration dependent markets suffering, I think the questions are going to be areas of the country where there’s just older people.
If you look at places in the northeast or the Midwest, they’re largely in the suburbs. A lot of them are coastal metros, just older populations. We are going to probably see more and more inventory, which could again lead to slower appreciation. It could also lead to slower rental demand. We just don’t know, but those are the kinds of things that I would start looking for is those kinds of demographic indicators as you look at and potentially select places to invest. That is of course, if you’re looking to hold onto them for 10, 20 years if you’re flipping, probably doesn’t matter right now, but if you’re looking at something to buy for five to 10 years from now, I would start looking at this. In fact, it’s something I wrote down after doing this research as one of the metrics I look at it, but to pay more attention to is the age of the average homeowner age of the average renter, because I think investing in places where there’s a younger population is probably going to be a good risk mitigation strategy going forward.
For example, some of the sunbelt metros that are struggling right now may seem really good recoveries because these are areas with strong employment, they are attracting a lot of domestic migration people moving within the us, a lot of them are moving to the sunbelt areas, and so that is going to matter, and I just want to say that in every market, some people see, hey, new inventory from boomers being an issue, it’s also probably going to be an opportunity, probably going to get a lot cheaper cash flowing kind of deals in this next era of real estate investing that will probably start somewhere around the 2030. So just remember this doesn’t not mean that you cannot invest, but it does probably mean there is going to be a shift in strategy that is necessary when these demographic trends make their big shift in the next couple of years.
Now, lastly, let’s just talk about long-term 2040 and beyond. I’m just going to be honest. I don’t know. I do not know, but I will just say if fertility stays where it was, we are going to have structurally lower immigration in the United States unless we really change policy on immigration and start having a lot of immigration. So we don’t know any of that’s going to happen. It is almost impossible to predict, but I did just want to call out that there are some lessons we can learn, or at least there are some indicators from other countries that are facing similar issues, right? In Japan, they have had a declining population for a while. There was not a national crash. One of the reasons I don’t think that there is a national crash, but what you saw is that a lot of rural and suburban property value did decline when the population started to decline.
There was not enough demand to sustain prices for every type of asset class in every market, but you saw prices go up in major economic hubs in major cities. I think that is a potential avenue that could happen in the United States. United States I actually think is even more insulated from a national crash than Japan because it just has a bigger deficit right now. US obviously is the biggest economy in the world. There’s a lot of economic dynamism and resilience in the United States, not that Japan isn’t resilient, but I think the US has that going for it as well. And so my guess just looking at this, I also looked at Germany. I looked at Italy too, and basically what you see is that economically powerful metro areas that attract talent and internal migration continue to win. It is probably suburban and urban areas in secondary and tertiary metro areas that will decline.
So let’s just talk about big picture Demic. Graphic declines in my opinion, are probably coming unless there’s a massive change in policy, which I can’t predict, right? I think demographic declines are probably coming and we are probably going to see a shift from demographic tailwinds that support appreciation and rent growth to demographic headwinds that put downward pressure on appreciation and rent growth. Now, I do not believe that is going to create a national crash, but I do think it will create more variance between markets. We are going to have more differences between how one market performs and the other. So to me, this is really a lot about what this show is about, which is market research. You need to be in the right places if you’re buying for the long term, you need to dig deep into population and demographics. If you’re a buy and hold investor, and I’ll just be honest, researching the show has made me think pretty hard about where I want to invest going forward.
I’m probably going to put a lot more waiting on population and age and birth rates in specific areas going forward because it’s going to be increasingly important. But remember, many, many markets will still prosper, but there are some that are going to stagnate or decline. I feel pretty strongly that that is going to happen if these trends continue. Now, of course, you can still invest even in declining markets. People do it all the time. It’s more of a cash flow play or a tax play, right? You’re probably not going to want to do a burr in that kind of market, but there are still ways to invest in those markets, but it’s just super important to recognize I’m investing in a growth market. I’m investing in a cashflow market. Here are the strategies that work in those markets that is going to be increasingly important, maybe not in the next year or two, but when we look 5, 10, 15 years out, it’s going to be more and more important.
Now, of course, I am saying this if current trends continue, and there are of course some questions about whether they will to me, I think there’s a couple big wild card questions that we need to keep an eye on and we will keep updating you on the show. Number one I’ve said a bunch of times is just immigration policy reversal. This is the biggest variable We’ve seen different presidents, different administrations have totally different immigration policies that could happen again in the future. The second possibility is potential fertility rebound. I don’t see that happening, but people are talking about baby bonuses or tax credits or helping Americans with IVF stuff like that to try and get the fertility rate back up, but personally I think it’s unlikely we get close to that replacement rate and it’s just really a question of how quickly our birth rate and domestic born population starts to decline.
Other options are more on the supply side. If we see much like a housing construction boom, well that will obviously impact things. I think that is unlikely. And then the last one, which we haven’t talked about at all is inflation, and I think this is a really important thing because this is one of the big things that could put upward pressure on pricing. We’ve talked mostly in this episode about things that will put downward pressure on pricing, but there are plenty of other variables and inflation if we choose to print our way out of our debt just as an example, I don’t know if that’s going to happen, but that is a potential. If that happens, that will probably put a lot of upward pressure on housing too, and there will be appreciation in almost every market if that happens. So there are more things than just population demand.
We have to look at the big picture, and although we’re focusing on population in this episode, we have to look at these other things like inflation. This is a big question in my opinion. So bottom line, next couple of years, shortage is real in the housing market. It’s massive and durable. I personally think the great stall is still likely, and I still think there are going to be good deals for people to buy who are looking for long-term upside in 2030 to 2040. I think we shift from demographic tailwinds to demographic headwinds, and it is going to be increasingly important for people to pick strategies that work in their kinds of markets. There are going to be cashflow markets that probably have declining appreciation, but probably have decent cashflow. Then there are going to be growth markets, and they’re probably not going to be markets that have really strong in both.
That’s what things used to be like, and I think that’s what they’re going to be. Again, 2040 plus, I don’t really know, but I do think we’re going to see lower demand, and so we’re just going to have to track supply and how fast demand is declining over the next 10 years before we could really realistically forecast what’s going to happen 2040 and out. So that’s how I see things overall. Doing research, doing the show, it’s given me a lot of things to think about, but overall, I still believe in real estate investing. I’m still going to keep looking for deals. I’m just going to think about hard about where I want to buy, the type of assets I want to buy and make sure my strategy is aligned with the type of markets that I’m investing in. I’m probably going to underwrite generally for low appreciation like I probably will underwrite for deals that I think work and are solid even without appreciation at all.
I think that makes a lot of sense. Still going to focus on value add. I think that’s going to work even if there are populations to decline. So just remember, even though this is a little bit scary, there are some big questions out there. There are absolutely still ways that you can invest in real estate. You just need to know this stuff is coming, so you pick the right tactics, the right markets, the right portfolio moves for yourself. Hopefully this episode has been helpful for you. This is something I’m going to keep thinking about and researching, and I will definitely provide updates whenever we get information. I think this is just a huge question we should all be talking about on the market community. If you think someone else would benefit from this research, please share with them and make sure to subscribe to on the market wherever you listen to this podcast so you don’t miss any updates that we have. Thank you all so much for listening. I’m Dave Meyer. I’ll see you next time.