It will surprise some that the technology I am referring to is not blockchain. While I am a believer that it is the technology that will obliterate the banks, there is something else that is on the horizon that could really impact the fraudsters.
This is also a warning to those who go to banks for this service. We could see advancements in the next 10-15 years that will wipe out a serious portion of one's wealth.
Around the end of 2017, the US average debt broke down as follows:
- Credit Card $15,654
- Mortgage $173,995
- Car Loan $27,669
- Student Loan $46,597
Data Source-Nerdwallet
It should come as no surprise that mortgage debt is the highest on this list. According to the Federal Reserve, there is $10T in outstanding mortgage debt at the end of March 2018. This is a serious amount of money that is passing through the banking system.
What if that was seriously reduced? Would would happen if the numbers I listed had average mortgage debt somewhere around car loans? How would that impact things?
On the flip side, what if you are one of those people who has a mortgage and you pay it off? While the asset you have is owned, what occurs when you go to sell it? Will what you amassed be there?
Of course, with real estate, there are always market cycles to contend with. However, there is something else that is taking place which appears to be gaining traction. Technology is moving in a direction that can literally make a house follow the same path as a car. Imagine buying a house and losing $2,000 the minute you close on it? With technology, that is a possibility.
In the last couple weeks, I came across a number of companies that are really making strides in contour manufacturing. For those of you who are not familiar with that, it is another way of saying 3D printing buildings. I will state this is at the really early stages of development yet, like many other technologies, advanced a great deal in the past two years.
A company in Italy is building Europe's first one bedroom, 3D printed house. The structure is building "printed on site and is going to be 100 square meters (roughly 1200 sq ft).
In France, a house was constructed which will start to be viewed on April 7th. This 5 room structure will be inhabited in June meaning that we are not seeing something built for show, but to actually live in.
The one that takes the cherry in my opinion, at this time, is a project by the non-profit group New Story. Based in Silicon Valley, the idea is to print homes in those areas where natural disasters here.
What is exciting about this is the house can be constructed in a day and costs $4,000 to make. While on the small side, 600-800 sq ft, it shows how rapidly costs can fall when using this technology.
Peter Diamandis talks about demonetization once something goes digital. This is the case in this arena. We are looking at one of the larger industries, in terms of money, entering the digital realm. Whenever anything moves under the laws of informational technology, prices plummet.
This could be of grave concern to people down the road. In the U.S., the home is usually where the greatest percentage of wealth resides. Unless people use their residences as ATMs, over time, people amass equity in their homes. What happens when downward pricing pressures start to take hold? The house that someone spent 15 years paying off might be worth a fraction of what it was.
All the numbers mentioned here are as of now, April 2018. What will they look like in April 2025 or 2028? While an 800 sq ft structure is not appealing to most, I believe you can count on the technology advancing to be able to construct larger homes. Also, we should see the prices drop even further as more innovation occurs in this realm.
One thing I can guarantee, whatever the price of the equipment and the cost per square foot is today, it will be significantly less 7-8 years from now.
What does that do to the $10T in mortgages the banks are accustomed to writing over time? If this technology become the de facto way to builds, a $175,000 construction cost in 2030 might get you a mansion.
Do not be surprised to see home prices drop by 90% in the next 15-20 years. The might sound like a long time but if you just bought a house and have a 30 year mortgage, this might be something to consider.
Just food for thought.
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