United States property is dirt cheap compared to other international real estate markets. The sooner you realize this fact, the better for your happiness and wealth. Once COVID is under control, foreign money will pour back into the U.S. Therefore, you had best accumulate your fair share of U.S. real estate now before you get outbid by a foreigner.
One of the biggest conundrums today is trying to understand why the mass media and housing activists keep droning on about how expensive the United Stats property market is. When in reality, U.S. property prices are amongst the most affordable in the developed world.
Actively Investing In U.S. Sunbelt Real Estate In Particular
Cheap US property is why I'm actively investing in real estate crowdfunding deals all across the country. Cheap US property is also why I will hold onto my physical real estate until my children become adults.
Anybody who has actually spent time house hunting in Hong Kong, Singapore, Tokyo, Mumbai, Paris, London, Zurich, Stockholm, Sydney, Vancouver, etc. realize how cheap the U.S. is, including our post expensive cities, San Francisco and New York City.
Do you think I'm just going to London to eat strawberries and cream at Wimbledon? Of course not! As a personal finance blogger who writes from first-hand experience, I'm diligently pounding the pavement to research the truth to share with all of you.
One of the reasons why the housing market will continue to stay strong is because foreign capital will wisely try and buy up cheap United States property. Capital is fluid and capitalists are always seeking the best values around the world.
Look How Cheap United States Property Prices Are
If you don't believe how cheap United States property prices are, have a look at this chart by the OECD (The Organization for Economic Development And Co-operation) as of 2021.
America is one of the richest countries in the world. Yet, America doesn't come close to having the most expensive property in the world. With a median home price of only $340,000 in America, American property is very affordable in a country as big as ours.
What makes New Zealand equal to United States property? Is the country's natural beauty, Lord Of The Rings, and fluffy sheep that valuable? New Zealand is the 69th largest economy in the world by GDP. No, it's clear that New Zealand property is in bubble land compared to United States property.
It makes no sense the 69th largest economy in the world has the most unaffordable real estate in the world according to the OECD? There must bee tremendous amount of policy mismanagement in the form of building restrictions, loose foreign investment regulations, and corrupt government officials who love receiving money under the table.
I'm not saying that all this shady stuff is happening in New Zealand, since they're consistently ranked one of the least corrupt countries in the world along with extremely expensive Denmark. I'm saying that something artificial is happening to cause such a pricing disconnect. Why else is there traffic around a toll road?
Why are Turkey, Hungary, Iceland, Mexico, Canada, Portugal and China more expensive than the United States? The GDP per capita in China is $10,300 versus $48,000 in America. American real estate is cheap relative to income.
House Prices To Rent Prices By OECD
Another way to demonstrate how cheap United States property is is by comparing house prices to rent prices. Once again, United States real estate is cheap in comparison to many other OECD countries.
Although United States property used to be cheaper on a global scale just five years ago. In the chart below, United States real estate is in the bottom third.
When prices are out of whack, a tremendous amount of social inequality occurs. When there's enough social inequality, a revolution isn't far behind (see Brexit, Trump, etc). The housing market will likely stay strong for years to come. It's up to you if you want to invest or not.
Platforms like Fundrise make it inexpensive and easy to do so. Personally, I've invested $953,000 through platforms like Fundrise to invest in the heartland of America.
Now let's take a deeper look at why the media continues to believe United States property is unaffordable. It sure seems like the media as an agenda and isn't looking objectively at the situation.
Biased Mass Media Manipulation
Take a look at this SF-based Wired magazine tweet. You don't have to read the article because it is the same populist verbiage about how it's becoming increasingly difficult for the middle class to afford homes now.
The magazine even goes so far as to write, “A family that makes $100,000 can't afford to buy a house in most U.S. cities.“
Are you kidding me? The median home price in America is around $340,000 today. Let's say you put down a typical 20%, or $68,000. Your $272,000 mortgage at 3% is $1,147 a month. Let's add another $200 for property taxes and maintenance for good measure.
Is Wired saying that a household who makes $100,000 gross, or $80,000 after taxes, can't afford $1,347 a month? $80,000 net a year equals $6,667 a month before any 401k contributions. Spending only 18% of your net income on housing is affordable.
Even if this household only put down 10%, a $306,000 mortgage at 3% still only costs $1,290 a month. Mortgage rates are very low today, which is why everybody should refinance if they haven't done so already.
I personally refinanced to a 7/1 ARM at 2.125% during the pandemic. I'm now paying less in mortgage payments than I was 10 years ago. Check out Credible, my favorite mortgage lending marketplace for no-obligation quotes.
Myopic Point Of View Regarding United States Property
Now you know why there's such distrust in the mass media. Either the writer at Wired magazine is incompetent, doesn't understand basic economics, or the writer has an agenda or all three. One of the best media strategies is to tap into populist angst to make life better for themselves. The more enraged the population, the more views the article will get.
The great irony is that those people who can afford to go into the journalism industry probably don't come from poor families. If you were poor, you'd study an in-demand major like engineering or computer science so you could land a well-paying job out of college and help support your parents who sacrificed so much for you! Only the well-to-do can afford to study a soft major and willingly enter a struggling industry.
Besides having a populist agenda, Wired magazine is also disrespecting all of you who don't live in San Francisco, New York, Seattle, Miami, Boston, Denver, Los Angeles, San Diego, and Washington D.C.
That's right. If you guys don't live in one of the 10 most expensive cities in America, those of you who live in the other ~4,000 cities with over 10,000 people don't count.
What Wired and other media organizations writing about unaffordable housing are really trying to say is:
“Families making $100,000 a year have a difficult time affording a home in the top 0.01% most expensive cities in America.“
“Because I can't afford to buy a home where I work and live, most people can't either.“
Talk about being myopic. It's interesting how the largest media organizations in America who like to complain about high real estate prices are mostly based in New York City, Los Angeles, Boston and San Francisco. Their writing clearly ignores the 50% of you who do not live where they live.
Being biased is unavoidable. It's why organizations are so homogenous in their demographic makeup. I’m proud of most journalist who seek to report the news in a just manner. I’m annoyed at biased media who conveniently ignore facts, such as income and job growth as a reason for a fundamental rise in prices.
To consistently ignore the heartland of America is INSULTING. The brazen disregard for half of America is exactly why Hillary lost.
Why Some Americans Don't Understand How Good They've Got It
Here are reasons why I think Americans don't realize why United States property is so cheap. If Americans knew how cheap U.S. property is, they'd buy a lot more. At the moment, foreign real estate investors are buying up U.S. property.
1) They believe everything they read by the mass media.
If you live in one of the most expensive cities in America and only earn $48,000 a year as a journalist, then of course you're going to write about how unaffordable housing is, and extrapolate your situation with your company's platform.
If you start believing everything you read in the news, then of course you're going to take on their biases. Instead, it's up to all of us to read with a more critical eye. Be just as critical with my writing as well.
2) They haven't traveled around the world.
Once they get outside the country, they'll realize how truly awesome America is. Everything from real estate, to cars, to gasoline, is so much cheaper here in the States. Do you really want to pay $85,000 for a Toyota Corolla in Singapore? Do you really want to pay $1,500,000 for a 500 sqft studio in Knightsbridge, London?
If you don't have money to travel to London or Singapore to see how truly outrageous prices are, just surf the web and see for yourself. Supposedly, only 60% of Americans own passports.
3) They're too lazy to do any research.
Even surfing the web for comparison property prices in Stockholm takes moving your fingers about 50 times. Instead, it's much easier to just trust a headline. We expect everything to come to us in America.
As a result, we fail at speaking a second language fluently while many of our friends in Europe can often speak three languages quite well. Just look at 18X major champion Roger Federer. He's a professional tennis player, not a professional linguist, and he speaks three languages fluently (German, French, and English).
4) They want to believe what they want to believe.
Have you ever believed in something so hard, only to later realize it wasn't? Have you ever been so adamant in your belief that you disregarded reality? Like seeing the light after breaking up with your crazy girlfriend or boyfriend. What were you thinking?
Obviously, you weren't when you thought you were in love. Once we believe something to be true, it's really hard to change our minds.
5) They're frustrated at their own situation.
Just because they can't afford to buy a $1.6 million median-prices home in San Francisco or New York City on a $100,000 salary doesn't mean you can't buy an awesome middle class home for $350,000 wherever you live.
As we come out of the long pandemic, the demand for United States property has never been higher. Finally, Americans are waking up to how good they have it! Real estate is my favorite asset class to build wealth by the average person.
Long And Strong United States Property
The reason so many foreigners are rushing to buy U.S. property is because they realize how comparatively cheap U.S. property prices are. Foreigners also believe America offers one of the world's best lifestyles with the most upside opportunity.
Therefore, if foreigners realize the U.S. value proposition, it's a good idea for Americans to realize our own country's amazing value proposition by owning a piece of America too. Domestic institutional real estate investors are already trying to buy up as much U.S. property exiting the pandemic as possible.
To appreciate how cheap American real estate real is, Americans need to gain perspective. Go inhale some toxic air in Beijing for a month or hopelessly try to find a well-paying job in Milan. Or try and get a high-paying job in Canada while you freeze your butt off. Only then will we truly appreciate our good fortune.
If the U.S. housing market gets as hot as the Canadian housing market, I could easily see another 30% rise in U.S. real estate prices.
So Why Is American Real Estate So Cheap?
The reason U.S. property prices are so cheap is because we have a large land mass, a stable government, a world currency, a deep bond market, strong IP protection, incredible productivity, a strong work ethic, property rights, human rights, a desire for equality, clean air, drinkable tap water, a deep education system, and innovative technology.
Not owning at least a primary residence in such a great country when foreigners are beating down our doors to buy is foolish long term. We're going to hear the same complaints from the same people 10 years from now.
Foreigners see U.S. coastal city property like U.S. coastal city inhabitants see middle America property: great overall value. But before the tidal wave of new foreign money comes crashing down on the heartland on top of fluid coastal city money looking for new opportunities, I want as much exposure to the heartland as prudently possible.
Easiest Way To Invest In American Real Estate
The easiest way I can do so is through a real estate crowdfunding platform like Fundrise, where you can invest as little as $10 per fund. Fundrise eREITs have performed well and with low volatility since the company began in 2012. The company currently manages over $3.3 billion and has over 400,000 investors.
You can also check out CrowdStreet, a real estate platform that focuses on individual deals in 18-hour cities. 18-hour cities have lower valuations, higher cap rates, and higher growth rates. The spreading out of America is a real trend thanks to technology and the pandemic.
Sooner or later the money is going to start pouring in. With inflation picking up post pandemic, the demand for real estate is heating up!
I've personally invested $810,000 in real estate crowdfunding to ride the wave and earn income 100% passively.
For reference, I have lived in Manila, Lusaka, Osaka, Washington D.C., Taipei, and Kuala Lumpur for the first 13 years of my life. Then studied abroad in Beijing, Shanghai, Rio de Janeiro, and Sao Paulo for undergrad and business school. Traveled to over 50 countries (most recently Czech Republic, Austria, Hungary, and France) and speak Mandarin, English, and terrible Spanish. If you can't trust me, then trust Rick Steves! I'm always on the lookout for cost of living comparisons.
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