How To Deal With Shrinking Markets?

The Real Estate Espresso Podcast

How To Deal With Shrinking Markets?

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How To Deal With Shrinking Markets?

Welcome to The Real Estate Espresso podcast. I’m Victor Menasce, your host. Today’s episode is focused on the crucial topic of ‘shrinking markets’ and how to navigate your investment moves in the realm of real estate in the face of such markets.

The Demographic & Economic Impact

One critical factor influencing real estate markets worldwide is demographics and migration. This is a universal law, as unerring as gravity. Countries with below-requirement fertility rates, such as Japan, can serve as telling examples of the impact of declining population on real estate. As the population shrinks and age, the demand for homes invariably decreases, leaving many vacant.
The takeaway here is to closely study such trends before investing, recognizing that fertility rates, paired with immigration data, can significantly shape a market’s prospects for growth.

The U.S. Market Scenario

While some argue that U.S. markets are immune to the issues countries like Japan face, reality paints a different picture. The U.S. population’s growth is largely through migration, and the national fertility rate is also dropping. Case in point, Memphis, Tennessee, despite reports of rising demand, shows a discrepancy in the vacancy rates reported by different agencies. Brokerages forecast rising rents in the face of high vacancy rates, a sign of potential oversupply. Such contradicting data warns of the dangers of clinging to historical trends when the market is evolving rapidly.

Ideal Market Conditions
Rising fertility rates
High levels of immigration
Balanced supply and demand of properties
Healthy vacancy rate

Conclusion

As a real estate investor, heed the patterns of supply and demand. Scrutinize data in real-time, and do not make decisions based on historical patterns alone, when, evidently, markets can shrink. Over time, the key is to stay updated, navigate wisely, and make informed decisions working with real and current data. Regardless of the market’s size, following these guidelines can help any real estate investor forge a path towards successful ventures.

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