Saturday, August 28, 2010

U.S. Birth Rate Now at 100-Year Low: Is Real Estate Your Retirement Plan?

It was announced on Friday that the U.S. birth rate has hit a 100-year low.  In other words, the rate babies are being born in the United States in 2010 is just about equal to the year 1910.

This is NOT good news for the United States for many, many reasons. 

But since this is a real estate blog I will stick to the rental property implications only.

I have met hundreds of people through my website and in my normal business life who have built their retirement plans on the ownership of rental properties.  This is, of course, an admirable and prudent program.  Counting on future price appreciation and increases in cash flows over years means a nice income when it is time to put down the briefcase and pick up the golf clubs.

But with the birth rate at about the same level as when the Wright Brothers were launching flying machines at Kitty Hawk, I can only ask WHO will be living in all those rental units and buying all those retirement rental properties from their owners?

This is simple demographics.  The U.S. population will continue to grow through immigration, and especially illegal immigration, but the U.S. birth rate and all its social implications will greatly affect all investment markets and business models, from people who sell baby things like diapers and cribs, to owners of condos and buildings they want to rent, in say twenty or thirty years.

Remember we are talking about 2030 and 2040 here, when most baby boomers have either retired or are about to retire.

It should also be noted that the concept of "sub-replacement fertility" has entered the debate.  It is a term and idea that you absolutely must know.

The declining birth rate worldwide but especially here at home has grave implications for America and, sadly to say, in the end the implications for real estate are just feathers in a hurricane.