The American dream

The American dream, for the longest time, involves buying a house, preferably with a white picket fence and paying it off after maybe 30 years. In between those two points in time, you settle down, have a family, see the kids grow up, move out of the house when they’re 18 and get on with their lives. You then spend the rest of your time in retirement and enjoying the best years of your life.

Well, this is the plan. Just ask any American after 2008, the plan has changed. It really has.

First of all, the baby boomers, these are people born from 1946 all the way to 1962, are retiring. And this massive sea change in demographics is causing all sorts of distortion in the market. Eventually, a lot of those baby boomers would begin to die, so a lot of houses will be placed on the market and this can have all sorts of economic disruptions.

Second, given the tremendous amount of buyers from China buying up all sorts of prime real estate all over the United States, this has created multiple areas of housing inflation. In fact, this is not just a West Coast problem. This is not a simple matter of West Coast versus East Coast. Certain parts of the Midwest are also experiencing runaway housing inflation.

Given the economic disruption involved as well as the chain reactions that are often unleashed by such price movements, it’s not a surprise that a lot of people are thinking that the American dream is, for all intents and purposes, dead. Well, to paraphrase Mark Twain, the news of my death is a little bit exaggerated.

You have to remember that the American dream is not a historical fluke. It never was. When people immigrated to America, whether they come from Ireland, Scotland, Italy, Eastern Europe or, more recently, places like Korea, China, the Philippines, Singapore, Taiwan, India, they all subscribed to the American dream.

If you ask a typical first generation American of Filipino extraction what his or her big dream is, you probably would get a uniform answer. The person would tell you that they would like a nice paying job, they would like their own home, and two cars in the garage.

This is not much to ask for, given how big the American economy is, and given the fact that a lot of people who migrated to the United States from that part of the world often have a degree and are active law abiding participants in the market.

Accordingly, despite the demographic turbulence caused by the baby boomers retiring, I am confident that the American housing market will continue to remain robust unless and until it experiences another hiccup like we had in 2008. But barring such once in a century or even once in a lifetime disturbance, it’s smooth sailing.

If local demand does not soak up the local housing surplus inventory, you can bet that there’s a tremendous amount of demand from places like India, China and elsewhere. So if you put this all together, along with increased immigration from many parts of the world, it should not be a surprise to see that ten to twenty to thirty years on out, the pricing of housing will continue to grow at a healthy clip.

It may not be skyrocketing like it is now, but you can bet that it will continue to appreciate for some time to come. Don’t expect any fundamental changes any time soon.