One of the things that will put a fork in house prices (it's done) is bitcoin.
If you can make an ROI over 10% just holding bitcoin, then why would you invest in real estate, with all that having to maintain the house, and rent the house, and… and only earn 4%?
Now, what if your profit margin on real estate is going down because all of the expenses keep going up? House insurance is going through the roof in Florida as many insurance companies are pulling out. Insurance might be available in other places, but it is still going up.
Also, keeping paying tenants is getting harder. People are facing the choice of buying food or paying rent. And the model of raising rent every year by 3% is falling apart. The ROI on house rental is falling, and may be negative soon. (it is already negative in some places)
All, while bitcoin is going up in price 25% ever year (averaged). In which you have to do no maintenance. Have to deal with no tenants.
Which is a better investment?
Comparing Apples and Oranges
The main reason people haven't switched from real estate to bitcoin, en mass, is because bitcoin is this new fangled, magic internet "money". And, every KNOWS that real estate is a solid investment, because dirt won't disappear. And, also, the real estate investor believes that house prices always go up.
So, right now, you have, what is seen as, one of the safest, most secure, investments, and on the other you see one of the most volatile speculative asset. This, of course, will change. For a lot of reasons.
Further, real estate, currently, is a cash flow model.
Bitcoin on the other hand is only getting more valuable from price appreciation.
These two are also going to change, but right now, that is a hellava difference.
Currently, real estate, is one of the best investments, from a tax point of view. There is so much to write off. There is so many "official" ways to lower your tax burden. If you have other income streams that you need to minimize the tax liablity, there isn't much better than real estate.
Also leverage. Getting a loan for only 20%, 10%, 5% down is nomral. And you can structure your real estate in an LLC, so the max you can lose is what you put down. You really can just walk away from most crashes.
Bitcoin, on the other hand, is a completely different beast. (you might consider it as money in the bank)
The Real Estate Market Set to Go Away
The big move from real estate to bitcoin (or anything else) is when the investors start seeing that the market is crashing.
Boomers own 25% of the houses in America. That is ¼ of the supply that is about to be dumped on the market. No market survives this.
The real estate market is reliant on growth. And demographics is collapsing all over. The market will go DOWN, just from this fact.
And what about other population decreasing likelihoods?
The immigrants will be running for the borders. They have warn out their welcome. Soon it will be git, or be strung up. Even in Europe. There will be a lot of deaths, and a lot less people remaining. More empty houses.
If we have an actual pandemic, there will be even more vacant houses.
If we have unCivil Wars, there is going to be even more death.
Real estate hasn't experienced a huge decline in demand in our lifetimes. It has always been, "Real estate go up". No one even thinks about a large percentage of houses laying empty. But, this is what is coming. Each buyer, while they exist, will five empty houses to choose from… each.
Bitcoin becomes money
At some point bitcoin becomes money.
As in, people everywhere will see it, recognize it, and accept it for payment.
We aren't there yet, but one million dollar bitcoin is coming, and that will make this happen.
Bitcoin will be as good as "money in the bank". Well, better, because it will be better than only getting 2% interest in a CD. (on top of losing value every year from inflation)
Bitcoin will be appreciating. As secure as you make it. With a lot of people wanting to make trades in it. And, while you are holding it, you have to do nothing. No leaky water heaters, no disgruntled tenants.
So, which will you want to invest in?
- Bitcoin - You don't have to do anything, and your asset appreciates 25% a year
- Real estate - You have to maintain the buildings, rent them out, keep tenants happy… and your ROI will be going negative soon.
Soooo, which one will all the investors choose?
I see a lot of investor selling soon. And thus, house prices will be dropping.
(and dropping some more. There is much more downward pressure on real estate, besides investor dumping.)