This Real Estate Bubble Won’t Pop

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Jared A. Brock

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House prices are currently at an all-time high, but we are not in a real estate bubble — we’re in a pricing paradigm shift.

The old paradigm: A house’s price is the maximum amount that an area’s average local buyer can afford to mortgage over 25–40 years. But because wages have flatlined and purchasing parity is the same as in 1978, the only rational explanation for this current price explosion is a giant debt bubble… right?

Wrong.

The new paradigm: A house’s value is now the maximum amount of annual rental income that can be extracted from it by a global investor, multiplied by maximal institutional leverage.

It’s the biggest paradigm shift in the history of human shelter, and it’s the reason why the vast majority will never own a house in the future.

Because our family homes are just future hedge fund investments.

In 50 years, the average house will cost $10+ million.

Most people think that’s impossible, but I’ll show you the exact math on how it’s going to play out.

Sure, there might be more real estate price crashes, but they’ll just be bigger versions of 2008 — buying opportunities for the hyper-elites. Even with temporary price drops, expect overall prices to continue hard up-and-to-the-right for nine major reasons.

Our global family currently contains almost 7.9 billion, headed to 10.5 billion within fifty years. That’s a 33% increase in the number of people who need to be housed. While this doesn’t mean house prices will automatically increase by 33%, population growth does create more demand, which will certainly increase prices significantly.

The overall population will “only” rise by 33%, but look at the stats on where everyone is moving: Cities. 4 billion people currently live in urban areas, but that number is set to jump to 7 billion…