The HUGE LIE about the 2015 Real Estate Market That The “Experts” Want You To Believe [EPISODE #4]
What POPULAR PREDICTION for the 2015 U.S. real estate market is very appealing, very plausible… and 100% wrong – and could be very dangerous for you to believe? I’m Bryan Ellis, and I’ll tell you right now in Episode #4 of Self Directed Investor Talk.
Part of my mission here at Self Directed Investor Talk is to help my listeners separate truth from fiction where their investment portfolio is concerned. And right now, my friends, there’s a whopper of a lie being told by many very, very well known analysts. And it’s the worst kind of lie: It sounds reasonable… but it’s dangerous.
Ready for the lie? Here it is: Many well-known analysts out there are saying that the real estate market is going to experience tremendous growth in 2015 due entirely to the reentry of an enormous and previously inactive buying group called the Millennials. Millennials are young adults who have “come of age” during the fallout from the Great Recession. This population has not been buying houses or starting families. Instead, they’ve been trying – and failing – to get jobs using their worthless college degrees, and en masse have returned home to live with mom and dad… thus the alternate moniker: The “Boomerang Generation”.
However, according the “wizards of smart” in the real estate industry, the Boomerang Generation is about to save the the housing market by reentering the market in force over the next 12 months. And not just any 12 months, but specifically the 12 months of 2015.
As you’ll see in a moment, there’s no way this is true. But you’ll be interested to know who is pushing this nonsense. A few examples:
- The infamous Lawrence Yun, Chief Economist at the National Association of Realtors, claims: Housing will “rock” in 2015 because of the “millennial force” that is expected to drive two-thirds of new household formations over the next five years.
- Jonathan Smoke, chief economist at com, claims that new-home sales will skyrocket by a whopping 25 percent in 2015 while existing-home sales will rise by 8 percent, all because of the return to the market of the Millenials!
- And There are dozens more saying more or less the same thing, including Stan Humphries, chief economist at Zillow, Mark Zandi, chief economist for Moody’s Analytics, Les Christie at CNN Money, Diana Olick at CNBC, and many others.
With so many joining the chorus proclaiming millennials as the savior for the 2015 housing market, you’d think that the reasons for their predictions are substantive.
Curiously, that’s just not so… and there’s substantive evidence to the contrary.
There are 3 common factors being cited for the belief that millennials will save the market in 2015, and they are:
- Housing prices will decline, leading to more affordability
- Looser lending standards
- Perceived demand among millenials
I’ll concede the first of the 3 factors: It’s entirely possible that housing prices will begin to decline in 2015. It’s already happening in some local markets, and the true macro economic picture gives no reason for one to expect broad gains to continue.
But as for the other two factors – looser lending standards & perceived demand among millennials – reality simply doesn’t match the theory.
- Millennials are poorly qualified borrowers. The average millennial has about $30,000 worth of student loans. And while it’s popular to say that credit is more easily available, the reality on the ground appears to be totally different. Sam Khater, economist at CoreLogic made a very telling comment about those looser lending standards when he said: “While there has been much discussion about opening the credit box, it’s been just that – all talk.”End Result? Millennials can’t buy even if they want to.
- Millennials appear to be uninterested in owning a home. According to the U.S. Census Bureau, only about 15 out of every 100 millennials are actually even interested in purchasing a home in the next 12 months. To further complicate matters, the Millenials prefer renting to owning. According to the Demand Institute, 60 percent of millennials planning to move out in the next five years will rent rather than buy.
It’s entirely possible that millennials could be a major buying force. But the fundamentals currently don’t line up with that theory, as you’ve already seen.
What’s far more likely is that there will be very specific locales in which there is more first-time home buyer activity than in the past. Indeed, some of the large home builders are banking on this by expanding the construction of new homes, which should in turn serve to help moderate the prices of these entry level homes.
The bottom line: core fundamentals simply do not support the notion that Millenials can “save” the real estate market in 2015. And core fundamentals should always be basis for real estate decisions rather than fleeting opportunism.
Real estate is a LOCAL MARKET business. Rather than trying to predict what an entire demographic group is going to do in a single year, why not choose to buy investment property in locales where there’s clear job and wage growth that is outpacing the availability in housing? It’s exactly those types of markets with which we connect the members of the Self Directed Investor Society because, Remember: It’s all about the fundamentals.
So join me for the next episode – Episode #5 of Self Directed Investor Radio – where I’ll teach you how to sniff out 3 hidden red flags in whatever market YOU are considering. This data is easily available for virtually every market and I’ll tell you how to use it. Episode #5 is available right now here at SelfDirected.org, and on iTunes, iHeartRadio and on Stitcher. If you don’t want to risk investing in properties that will NEVER SELL, NEVER RENT and will suck up your cash FOREVER, go and download Episode #5 right now!
Bryan Ellis is host of Self Directed Investor Talk, America's #1 radio show and podcast for affluent self-directed investors. He's also an expert in self-directed IRA's, solo 401k's and turnkey rental property investing... at least, that's what his wife tells him 🙂 He's a contributor to well-respected publications like TheStreet.com, Entrepreneur and ThinkRealty. Bryan lives in metro Atlanta, Georgia with Carole Ellis - his wife, business partner and best friend - and his 4 children ranging in age from 2 to 19.