So I just listened to Episode 250 of the BP podcast and it did not disappoint. Grant Cardone is as entertaining as he is intelligent. He makes some great arguments against the single family home and equally great points about buying middle income MF housing. Being on the older cusp of the Millennial Generation, his points about not wanting a long commute, a walkable downtown, and central location resonated. It's why my wife and I rented in Manhattan as opposed to moving to the burbs well into our early 30s.
I couldn't help but think that his general investment thesis that "the suburban single family home is dead" is a bit short sighted. Yes, Millennials have shown a much stronger preference to city life than Gen X and Boomers. One has to ask though, is this just due to a combination of factors, including the preference to wait much longer than prior generations to start families? Here are two articles that cite data and provide counterpoints to Grant Cardone's current investment thesis.
- Delaying Families - I just got married last year at 31, which is completely within the norm for the NYC area. A large chunk of my generation is delaying starting a family in order for both people to continue working on their careers. As the generation ages will that continue?
- Economics - As a generation we graduated college into the "Great Recession". I had an offer from my internship at an investment bank rescinded as that investment bank was in the process of imploding. Many of my friends with liberal arts degrees ended up jobless for years, went immediately to grad school, or took menial low wage jobs just to scrape together enough money to drink with their friends on the weekends. There are a few years of graduating classes '07-'09 that took on student loan debt, instead of mortgage debt. Does this mean that the shift away from home ownership is permanent or just another reason it's delayed?
- Pricing - The demand for walkable cities far outpaces the supply. Rents are finally coming down a little in Manhattan but they have been outpacing wage growth for a decade. So even if Cardone is right about the demand, will the constrained supply price out a lot of people? To quote the Bloomberg article above, "Additionally, the remaining “mega-elite” workers in top-tier cities like San Francisco will struggle to find adequate service labor -- teachers, police, firefighters, healthcare workers, not to mention restaurant and retail workers. And we’ll have to see how they end up dealing with that."
Those are just the top three anecdotal reasons why I question if the shift from white picket fences, to apartment complexes is permanent or just delayed due to a mix of factors. A market correction or recession would completely wipe out my points 2 & 3. Grant Cardone has $650mm in real estate and I just bought my first two investment properties this year (both SFR) so take my opinion with a grain of salt. I'm not saying Cardone is wrong, just playing devil's advocate. I'm curious what the BP community thinks.
More evidence to the contrary...
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