Upcoming Real Estate Crash Will Lead to Recession



U.S. residential real estate is overvalued because its purchase is subsidized. It is the only good consumers can buy while writing off the interest. Builders also have a host of tax incentives to build. Most have been in place for generations. While there has been enormous abuse of these tax loopholes over the years they will have nothing to do with what is to come.

The whole idea of a home as an investment needs to be questioned. An empty home does not get more valuable. It falls apart. We have one on my street and, even in today’s white hot market, it’s falling apart. It won’t bring back the investment of the idiot who owns it.

What assets naturally rise in value? Those assets which produce valuable products, and can continue producing them, rise naturally in value. (Not all do, of course. You have to account for the Fiorina Effect, for Barbarians at the Gate, and Cluelessness.) Those assets which are naturally limited in quantity, like land itself, will rise in value over time.

But not homes. And the myth that homes always rise in value needs to die. It will die, sooner than you think.

About Author

Joshua Dorkin

Joshua Dorkin (@jrdorkin, Google+) founded BiggerPockets.com when he saw a need for free, trustworthy information about real estate investing online. Over the past 12 years, Josh has grown the site from self-funded hobby to full-time job and passion. Today, BiggerPockets brings together over 600,000 members, housing the world’s largest library of real estate content, iTunes’ #1 real estate podcast, and an array of analysis tools, all geared toward helping users succeed.

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