Big Cities to Become More Unaffordable
It’s difficult to imagine a city like San Francisco or New York becoming less affordable for the average person. Even with the recent market downturn, 2 bedroom/1 bath homes with around 1,000 square feet go for well above $500,000 in San Francisco. In Manhattan, you would be lucky to get a 1 bedroom/1 bath condo with under 1,000 square feet for less than $500,000. So, with prices way out of whack with the rest of the country, they can’t become much more unaffordable, right?
According to Chris Mayer, director of the Milstein Center for Real Estate at Columbia University, homes in these “Superstar” cities may become even more unaffordable. He sites three trends that he believes will occur to inflate home prices in these cities:
The aging population
As baby boomers begin to retire in the next several years, they will begin to look at where they want to spend the rest of their lives. Ask anyone that has been to Florida, and they will tell you that many of them will prefer sunny skies and sandy beaches. Cities in California, Florida, and other warm climate states such as Arizona will see a huge demand for property that is relatively fixed (or at least scarce) in supply.
The rich getting richer and the poor getting poorer
Those that are wealthy and already live in the aforementioned cities with rapid property value appreciation will continue to stay in those cities. This will cause them to become even richer at a faster pace than those with normally appreciating homes. In 25-35 years, the population in these “Superstar” cities may be overly rich. Of course, they will still need the rest of us as maids and chauffers, right?
Globalization
At first glance, this seems like a trend that would push the rich towards other countries thus putting downard pressure on the major cities. At the same time, though, millions of rich people from other countries will begin to compete for our best real estate as well. This increase in demand will surely drive prices upwards in the most desirable cities.
To make a long story short, if you want a home in a “Superstar” city for retirement, you may want to buy it sooner rather than later. If Mr. Mayer’s trend predictions come true, retirees may find it difficult to retire in style in any of today’s hot locations.
Source: CNN Money
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I guess the rental market in these areas will continue to thrive…
SavingDiva: My thoughts exactly. The non-wealthy will be stuck in a rental situation that will not allow them to accumulate any wealth through their home.
Baby boomers aren’t likely to stay in high price California, or in any cities for that matter — older folks like it quieter and cheaper (since theyll be living on deflated pensions, defunct social security, and whatever they have saved). There’s a large exodus of people right now leaving socal to texas. My family is no exception… Though IMHO Texas is a bad place to retire — property taxes? Yeah.. bad idea.