P
eter Thiel, a renowned venture capitalist and co-founder of PayPal and Palantir Technologies, has recently expressed concerns about the American real estate crisis. He cites 19th-century economist Henry George's observations that runaway real estate prices can lead to wealth disparities in society.
Thiel attributes the problem to the "extremely inelastic" nature of real estate, particularly in areas with stringent zoning regulations. As a result, when population growth occurs, house prices surge while salaries remain stagnant, benefiting boomers and landlords but harming young people and low-income families.
The U.S., Britain, and Canada are among the countries experiencing this "Georgist real estate catastrophe." Home prices have increased by over 50% in the last five years, with a 3.9% annual return in December 2024. This has made it difficult for prospective homebuyers to enter the market.
Thiel argues that supply and demand are the root causes of the problem, exacerbated by zoning laws that restrict new construction. This leads to a wealth transfer from young people and low-income families to upper-middle-class homeowners and landlords.
Jerome Powell, Chairman of the Federal Reserve, has also expressed similar concerns about the housing market. However, there is a significant shortage of homes, with a projected 3.8 million deficit in the U.S. by 2024.
High mortgage rates are another barrier preventing Americans from entering the housing market. Despite this, interest rate reductions have made it easier for prospective buyers to access mortgages. New investing platforms and funds, such as the U.S. Home Equity Fund and First National Realty Partners, offer alternative ways for investors to participate in the real estate market.
These options allow investors to bypass traditional property ownership and maintenance, providing a hands-off approach with potential returns ranging from 12% to 18%. Crowdfunding sites like Arrived also enable non-accredited investors to access shares of vacation and rental properties with flexible investment quantities and straightforward procedures.
