Future Shock: Demographic Trends Forecast Future Housing Demand
Google Labs introduced a nifty set of experimental tools for visualizing data. Although there are a lot of cool ones (government debt in Europe, anyone?), my attention was immediately caught by the U.S. population data set.
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That data is absolutely fascinating for any real estate investor who is interested in the demand side of the supply/demand equation. If you click on the button at the bottom, you can watch as the various states’ population has increased over the years. The dynamism of the moving chart brings a whole new meaning to this data. Did you know that Texas took over for New York as the second most populous state in 1994? Watch this chart and you can see the exact month in 1994 when the two swapped positions in the rankings.
What story do Google’s dynamic charts tell you? To me, they speak of the vitality of the border states, particularly Texas and California. Example: just one California city (San Jose) now has a population that exceeds the entire populations of Rhode Island, Montana, South Dakota, North Dakota, Delaware, the District of Columbia, Delaware and Wyoming, when counted separately. And San Jose is far from being the largest city in California—that honor goes to Los Angeles, which is more populous than 28 states!
Immigration is very much in the news these days – irrespective of where you come out on the debate, the amount of growth that has been (and will be) fueled by immigration is absolutely staggering. Author Roy Beck has an interesting video on the topic which demonstrates that immigration since 1970 has actually had a greater effect on the population than the natural increase of the population. Thus, according to him, the State of California now has to build a new school every day just to keep even with this skyrocketing growth curve. (If they need a new school every day, you can imagine how many new housing units are required.)
What does all of this mean for you, the real estate investor? Be patient and let your money follow the demographics. The areas most favored by immigrants will tend to have the highest demand for the foreseeable future. No matter how much you may happen to like a state like Alaska (where every immigrant coming in merely takes the place of someone leaving the state), it will never achieve the (rather shocking) growth rate of a state like California or Texas.