Yesterday, I continued my #demotivational speaking tour at Canadian Real Estate Association’s Annual General Meeting. It was a great time, seeing a few old friends and making new ones, and I appreciate CREA for the invitation.
A major theme of my talks these days is how the lack of affordable housing is driving birth rates lower. It’s a complicated topic, and I’m not aware of any really reliable academic studies on the topic… but it’s one of those things that is so obvious as to not require a study.
See, when people are living packed in like sardines in apartment-cum-warehouses, they don’t have kids. I have yet to see an ad for a tiny house that says, “And here’s where the crib will go!”
When I was researching the topic for a Canadian audience, I spent some time on the interwebz on places like Twitter, Reddit, and elsewhere just to get a sense of how the younger Canadians felt about the housing market. Um. It was eye-opening, at least for this ignorant American. Maybe it’s because I’m so used to thinking of Canadians as being so nice that it’s shocking when you read comments like this:
My home went up on average $55,000 per year....
FOR THE LAST 13 YEARS. That's every year on average since I've owned it.
Try out saving that pace. That's after tax.
Good luck next generation. Pretty sure you are fucked and the government is fully on board.
It’s shocking to read Canadians openly talking about societal collapse, economic ruin, and civil war. That kind of talk is something I thought we Americans kinda had a lock on. If you have any involvement in the real estate industry, or have an interest, it’s not a bad idea to just go check out the comments to various posts, YouTube videos on housing, etc. and see what people are saying.
So after my presentation, while meeting new people who are all in leadership at REALTOR Associations and MLSs across Canada, I started asking them one question. I’m going to ask it to all of you, because I think the question is the same whether you’re in organized real estate in Canada or in the U.S. Here it is:
What can organized real estate tell young people today?
The most common answer I got from people who are working REALTORS, who have years and years of experience helping people buy and sell houses, many of whom are younger themselves, was a variation of the following:
Save every penny
Ask parents for help
There are government programs that can help
Buy smaller houses/condos, farther away
But do everything you can to buy a house, because it is so worth every sacrifice.
That this answer is essentially “Don’t be poor” was not lost on either me or them. One Association Executive straight up admitted that we as an industry really don’t have anything to say to young people struggling with unaffordable housing.
It is Essential that the Industry Find Something to Say that Resonates
For the sake of discussion (and driving the point home), let me push to the side the incredibly obvious and important issues involved in this question. Push to the side the fact that housing is driving social unrest and societal instability, and that we all give a shit as Americans (or Canadians) about the future of the country and its people. Leave for another day the fact that we all care about young people having a real chance at a full life — call it the American Dream, if you wish. Put all such noble feelings and public sentiments to the side.
Let us, instead, focus like selfish bastards on self-interest as an industry. Because this exercise tends to highlight just how important it is that we find something that resonates.
As I write this, the real estate industry in both US and Canada are facing event horizon level threats from class action lawsuits claiming that NAR and CREA (and brokerages) have been conspiring to keep commissions high for decades. As I write this, both the Biden Administration and the Liberal Party have made clear their intent to regulate real estate more heavily because “housing affordability.” The connection is never made clear, but there it is.
Lack of housing affordability naturally leads people to seek a political solution. I still remember when an amusing man named Jimmy McMillan ran for Mayor of NYC on the Rent Is Too Damn High Party. He got 4,000 votes in 2005, then ten times that number in 2010. Funny example, but the point is that people look for political solutions.
Because the free market economic solution (a) takes too long, (b) is unpleasant, and (c) does not leave room to promote some ideology. Most people will not turn to an economic solution.
Ergo, the current housing crisis will result in some kind of political pressure and changes to the rules and regulations of real estate, of homeownership, of real estate investment, etc. etc. That’s fine, you say, because real estate is already so heavily regulated.
Two other factors are relevant here.
One, politicians as a rule never, ever take responsibility for a problem. They always blame someone else, and take the credit for a solution. They cannot win elections by saying, “Oh yeah, I screwed up; sorry about that.” The trick is for us not to be the ones that they point the finger at when looking for a scapegoat.
Two, it is a law of nature that more and more of the voters will be precisely the young people who are struggling with housing affordability. Because Father Time is undefeated. So the continually growing voting public is the one to whom the industry has nothing productive to say? That’s not a recipe for fantastic outcomes.
This issue of housing cuts across all political spectrums. There does not appear to be a left and a right on this. I found this video from the UK extremely illuminating, because all of the things they’re pointing out apply to the U.S. and Canada and elsewhere in the world:
That these two guys are not leftists screaming for socialism and housing-is-a-human-right, but are capitalists considered “far-right extremists” in the UK might be relevant. You can easily find even more provocative sentiments on housing from the left, who blames the crisis on things like “end-state capitalism.”
Do you really want to have nothing to say to Millennials and Zoomers when elections come around?
Suppose that we as an industry decide that we don’t give a damn about the poors. It’s their fault that they didn’t study hard, didn’t work hard, didn’t save up, and were dumb enough to have failed to be born into a rich family. Say we only care about those who have already made it, could afford to buy increasingly more expensive houses, and/or will inherit all this money when their Boomer parents finally kick the bucket. (Seriously, the number of times that people referenced “biggest wealth transfer ever” at the CREA event was kind of amazing.)
If REALTOR comes to mean “handmaiden of the rich and privileged”… where does that path lead?
First, it means that increasingly few owners who buy up housing as investment. There’s nothing wrong with that per se, but it does mean a shrinking pool of potential clients.
The average (competent) REALTOR can add a lot of value to a young family looking to buy their dream home. That same REALTOR isn’t going to do a lot for a hedge fund looking to diversify their holdings with some SFR units to take their duration risk into account. I can say with some confidence that the institutional investment fund filled with Harvard MBAs and Stanford-educated bankers aren’t going to get the same value from a REALTOR.
If you are one of the special few REALTORS who have an MBA, maybe came out of investment banking, and can talk the language of finance, bond maturities, return on capital, risk management strategies, and the like… then maybe you don’t care. It does not follow that the rest of organized real estate shouldn’t care.
Second, one of the most important roles of the modern REALTOR is counselor. There are already people who think that agents are going to go extinct because ChatGPT can do most things a REALTOR can. What they ignore is that human beings have a fundamental evolutionary psychological need (maybe from our distant tribal past) to get approval for important decisions. The value of psychological reassurance that a great REALTOR gives to clients is enormous.
Let me assure you that the Rich and Privileged have plenty of other advisors who can provide that psychological reassurance. In fact, they might have actual psychologists on speed-dial who will approve of their major decisions. Furthermore, let me assure you that investors in particular do not have really deep psychological needs when it comes to buying a house. For them, it’s just numbers on a spreadsheet; it’s important, but not to the level where they would need an experienced REALTOR telling them they’re doing the right thing.
Third… I hate to be the guy to point this out but… as a certifiable member of the Credentialed Elite (with an Ivy League diploma and a JD from a Top Five law school), the Elites of this country don’t think of REALTORS as a “trusted advisor.” That “trusted and respected advisor” narrative comes from people trying to sell something to REALTORS. Most of the lawyers, bankers, company executives, academics, reporters, etc. who make up the ruling class think of REALTORS as unskilled workers who happen to make a fortune, often in unsavory ways.
What all these combine to mean is that it is in the industry’s self-interest to ensure that the TAM (Total Addressable Market) for brokerage services be as large and as broad as possible. When working class families can afford to buy houses, REALTORS benefit… and even with the advances in technology, more REALTORS will be needed. When only wealthy private equity fund managers can afford to buy houses, then we need far fewer REALTORS who will make far less money… because the rich and powerful have other options, like having their attorney do the transaction.
Finally, our self-interest should dictate that we get involved in the demographics conversation.
I talk about The Birthgap quite a bit. I show the trailer, embedded below. I urge them and now urge you (again) to watch this documentary, which Part 1 is available for free on YouTube.
As mentioned above, I believe that a major driver of lower birthrates in developed countries is the lack of affordable housing, especially for young people who are in their prime childbearing years.
Here’s a slide I use in my presentations:
That green band is the prime age range for family formation and having children. The US homeownership rate for that cohort:
I am led to believe that Millennials have finally surpassed 50% homeownership rate in 2023. Good for them, but… they are way behind previous generations. Zoomers are about to have it far, far worse.
Is it any wonder that birthrates have crashed?
It may be that those in leadership positions of organized real estate today who are in their 50s and 60s and older don’t much care about population collapse in 2050; they’ll all be gone. But the thirtysomething REALTOR starting out her career absolutely should care. She may not have much of an industry left if we don’t do something about population collapse.
Find Something to Say
Now… add back all of the altruistic, socially responsible, patriotic and just generally moral sentiments back in. As an industry, we must find something to say to young people caught in this unreal housing crisis that goes beyond “Don’t be poor.”
I think this task is far more important for organized real estate than 90% of the things that we spend time debating, discussing, and spending gobs of money on consultants for. Yet another member survey to discover whether they want Associations to get a TikTok account or not is irrelevant to survival; discovering what the REALTOR Association should message to frustrated young consumers is. Debating some arcane edge-case about Code of Ethics Article 13 for hours will not dictate the future of the Association. But discovering what all REALTORS can agree is the message to the youth will. Meeting with local legislators to educate them on housing issues is important yes, but today, it might be more important to meet with young couples and educate them on housing issues… while learning from them what they see, hear and believe about REALTORS.
Let me leave it there. It is not my place to dictate to REALTORS what their story to young people should be. You all are capable enough to figure that out. It might be my place to say to you that you have to find something to say to young people.
It is essential, and growing more so every day.
Thanks for putting this together. I appreciate your time and thoughts on this matter (and many others as well).
As a parent, I want my children, and theirs too, to enjoy the benefits of home ownership. Not just the hopeful increase in the home's value over time, but also the sense of pride over their little plot of land on this earth.
I find it curious that we (as an industry) are feeling pressure to make it easier for Millenials to buy real estate. I'm all for it, for the reasons above that I want others to enjoy their piece of land too. But the pressure we're feeling to smooth the road for Millenials seems like a distraction.
If you look at the overlap of the Millennials' ownership curve with that of the Gen X (my generation) ownership curve, you'll see that the Millenials started at about the same ownership rate (10%-12%) as Gen X (and likely of the Baby Boomers, and others before them). Home ownership is not a birthright, it must be worked for, it must be earned. Nothing good comes easy, they say. I would posit that 'the harder we work for something, the more we are able to enjoy and appreciate it', and it seems that the product marketing world has this nailed down. Look at any cheap item that the seller wants you to value more than you should, it's often encased in some blasted clamshell packaging that is frustratingly difficult to open. This, they say, adds value in the mind of the owner of said item. If you have to work for it, you will value it more. Perhaps, unless it's a piece of garbage to begin with. Then it's just frustrating. But I digress.
My point is that the Millennial generation is now on a very similar curve to Gen X's, just positioned 20 years into the future. If we look further back, I would predict that the growth curve is very similar to that of the previous generations.
Yes, prices have increased rapidly in the past few years, and that is challenging. But let's look at the Silent and Boomer generations. They are growing weary of mowing, raking, shoveling snow and general home maintenance, and are moving en masse to facilities designed to make their last years a bit easier, if not generally duller. This will open up more inventory, perhaps enough to meet the builders' push for additional housing (hopefully, because they have a LONG way to go). That may take a few years, but it's something.
The decline in birthrates is definitely alarming. My hope is that the housing situation is remedied as above quickly - which should allow for the easing of price pressure, more Millennials being able to afford a home, and the necessary structures to procreate and increase birth rates. Some of these structures will be external - finances, home inventory, jobs, etc, and some will be internal - psychological safety, maturity, and more. Maybe not enough, maybe not in time. But still I hope.
Should this not work out and we see continued declines in birth rates around the world, there will be tons of empty buildings, a la 'I Am Legend,' the great Will Smith film. Maybe then we can concentrate our efforts on reclaiming these vacant parking lots and buildings for the wilderness. Parks and playgrounds. Nature in general. A private thought I hold often is the idea that our overpaving of the world's surfaces has led to the frequent increased intensity of nature's storms, expressed as her displeasure at the clothes we are dressing her with, and also as an attempt at reclaiming her land. My 9 year old has a frequent struggle with clothes that don't fit right or have a weird seam. She refuses to wear certain clothes because of these feelings. It's a tantrum, quite a sight, really. Ok that's enough.
If you haven't already, you may enjoy listening to (or reading) 'The End of the World is Just the Beginning' by Peter Zeihan. In it, he illuminates the impact of declining birthrates specifically, along with how it impacts the world at large, along with geopolitical and commercial outcomes. Great read/listen.
Thank again. Hope all is well.