Investment Property Outlook Through 2030

I wrote an article recently about which property investments were looking good based on analyst outlooks. Income property was definitely at the top of the heap.

Higher mortgage rates are coming, and with them opportunities for landlords.

After writing that, I read another good article by Peter Giardini on BiggerPockets.com, where the impact of 10-year treasuries on the real estate market in general and investment properties in particular were analyzed. Read Peter’s article for the details, but the punchline was that higher mortgage rates are coming, and with them opportunities for landlords.

I agree, and like to see multiple analyses pointing to the same conclusion. This got me thinking of expanding on my earlier analysis to laser-focus on each specific type of income property we invest in, so that’s what I did.

How the Data Was Collected and Analyzed

I based my analysis on a method published by economic expert Harry Dent. It was his idea to track demand over history using birth rates and life cycles. I took his idea, pulled my own numbers from US census data where available and the Statistical Abstract of the United States where census data was missing, and then expanded to analyze each investment property type.

The method is based on the following assumptions:

1. People are born and progress through life in waves (aka booms).
2. Using averaging with real estate data (from the National Association of Realtors), we know when people buy certain types of real estate.
3. Natural and economic disasters still don’t change the predictable spending based on age and life cycle.

Today we have a peak in rental demand.

Think about it… if people hit the peak of renting at age 26 (they do), then if 26 years ago we had a peak in births, today we have a peak in rental demand. Likewise, if they buy starter homes at age 31 (they do), then if 31 years ago we had a peak in births… well, you get the idea. Here is the life cycle as a wave:

Charting of the Data for Specific Investment Types

Now, here’s where it gets fun… I compiled all the data on births, adjusted for the lagging indicators (i.e. rental spending is greatest at age 26), then charted each type of investment property. I narrowed it down to 1990-2030 to get a clearer picture, and here are the results…

Summary – Investment Properties Outlook

• Rentals look good… we’re at the bottom of the rollercoaster headed straight up in demand.
• Starter homes are next, but not for a few years… may be good to buy rentals that would make good starters later.
• Move-up homes look weak for awhile… I’ve experienced this first hand, and have further researched with the building industry… not an area I’ll invest in (though luxury homes seem ok – it’s the McMansions that will continue to be weak).

OK. That’s it. I spent a LOT of time putting together the data behind the charts, so I hope you find it helpful. Please let me know what you think in the comments section below, and forward this on to your fellow investors.

No related posts.