Real Estate Investors are About To Shoot Themselves In the Foot
If you haven't been watching real estate investors have been building and building for the high end. Of course, that is where all the money is. However, where the need is, is an "affordable housing" (a really bad term).
Add another piece, the commercial real estate market is getting hammered bad. With covaids, people are working from home, demanding to work from home, and so, those big, expensive commercial buildings are being left empty. The value of commercial buildings are cratering so bad, that well known buildings are being sold 10¢ on the dollar. And worse, commercial real estate has loans that need to be renewed ever 5 years. And the rates are HIGH right now. So, commercial real estate is in BIG trouble.
So, what is the commercial real estate investors about to do? Try to turn commercial buildings into residential.
And, most likely they are going to try to turn them into high end apartments / condos.
The thing we have an over-abundance of.
Affordable housing, isn't.
In America, we have cheap houses on expensive properties.
Most of the "value" in a suburban house is just about where it is located.
You would think that for a million dollars you would get a state of the art house. With automatic windows and passive cooling and heating. But no, what you get is a stick built house with all the corners cut, inadequate insulation and weather-proofing. Basically, you get a piece of garbage house, and you pay through the nose for it.
We don't have any difference in quality of houses (unless you have them special built) so there really isn't a good, better, best house, its all the same house, almost all the same price, and so there is no cheap houses. And thus, there is no affordable houses.
Our "affordable" houses are areas of town that the wealthy have abandoned. So, old, decaying houses on property that most do not want.
Commercial real estate and expensive houses
They are both overbuilt. And when the economy was good and everyone had the idea that you needed a job, it was the way to make money. So, both of these areas had too much being built, while the upper middle class was being destroyed.
So, the group that needs help the least, in housing terms, now has too much choice, while the rest has none
Now, i understand it. No other economic group was buying houses last year. The average sale price for homes was kept high because only the expensive houses were selling.
And now that that economic level has been tapped out and new construction is still being built, builders today are having to offer huge price cuts, or tons of amenity upgrades to sell what they just completed.
Into this market, the commercial real estate people are about to come.
What to do with all these big empty buildings?
There is just too much commercial real estate. Unless America suddenly creates tons of white collar jobs, nothing is going to fill these. And, even if they jobs are created, they will most likely be working from home employment.
(there may be a big increase in manufacturing being done in the States again, but that is industrial, not commercial.)
So, what do you do with all of these big, expensive buildings?
Well, you do what everyone keeps screaming about, make more housing! But, you really can't, because the plumbing was never designed/built for people cooking / cleaning / bathing, only going shit. So, you can't really turn them into high density housing, but maybe for high priced rentals, you could do it.
That looks like what they are going to do. Turn commercial buildings into luxury apartments.
Makes sense from a engineering point of view, but that market doesn't need more apartments. It is basically doomed to fail. But they are starting out already failing, so many will think that it is best to try. "It's got to be better than 10¢ on the dollar, right?"
These are the things i expect as real estate investors try to hold onto their empires. And really, how many people are able to see what they have always done, will no longer work?
People are still trying to make cities work (building bicycle lanes, etc.) while the cities are crumbling around them. Worse than crumbling, the need and desire for a city is going away.
It is really sad that we never solved the problem of building houses poor people could afford. But every force was arrayed against that ever happening. Now, in the future, we will build houses/housing for or offspring before they are old enough to need it. Further, we will probably plan childbirth to be in balance with deaths. So that we maintain a balance with the ground that is feeding us.
So, as the growth economy is replaced with a maintain economy, everything that has been behind real estate, goes away.