How Population Trends Impact Your Investments with Ken Gronbach

Kathy Fettke hosts the Real Wealth Show, discussing the impact of demographics on real estate with renowned demographer Ken Gronbach. They explore population growth as a key pillar of real estate success, emphasizing the movement of baby boomers to the South and the rising demand from millennials. Gronbach highlights the economic implications of these demographic shifts, noting that millennials, despite their delayed life milestones, are poised to drive housing demand. He also discusses the critical role of Latinos in sustaining U.S. labor and economic growth, while expressing optimism about the nation's future prosperity amidst demographic changes.

• The four pillars of success in real estate are job growth, population growth, infrastructure growth, and affordability.
• These pillars are used to evaluate real estate markets for investment opportunities.

"If you've listened to the Real Wealth Show for some time, you know I often talk about the four pillars of success in real estate: the first being following job growth, the second population growth, the third infrastructure growth, and the fourth pillar being affordability."

• The host emphasizes the importance of these four factors in determining successful real estate markets.

• The episode focuses on the second pillar, population growth, specifically examining demographics.
• Understanding demographics is crucial for predicting market trends and making informed investment decisions.

"On today's show, we're going to focus on the second pillar, population growth, and specifically demographics."

• The host introduces the main topic of the episode, highlighting the significance of demographics in real estate.

• Generational demographics are typically analyzed in 20-year increments, aligning with the time it takes for a person to reach reproductive age.
• This method allows for accurate comparisons between generations.

"The only way you can compare Generations is looking at them as 20 years long period. It's the length of time from which when a person is born to when that person can produce another person, and that's 20 years."

• The guest explains the rationale behind using 20-year periods for generational analysis, emphasizing its effectiveness.

• There is often disagreement and subjectivity in defining generational labels and boundaries.
• Some generational definitions are arbitrary and not based on demographic data.

"There are people that make Generation X and Generation X was born 65 to 84, nine years long. How can you compare a nine-year generation to the Baby Boomers which you're 20 years long? It's impossible."

• The guest critiques the arbitrary nature of some generational definitions, advocating for a more standardized approach.

• COVID-19 has accelerated demographic shifts, with noticeable migration patterns in the U.S.
• Baby Boomers are moving south in large numbers, significantly impacting real estate markets in those areas.

"Baby boomers are going south, and they're going south in very large numbers. I live in South Florida, I mean you could feel the ground shake right now with the construction that's going on because they're building everywhere all around us."

• The guest describes the significant migration of Baby Boomers to southern regions, highlighting its impact on construction and real estate.

• Generation X, being smaller in number compared to Baby Boomers, has had a different impact on real estate markets.
• Their reduced numbers led to a slowdown in housing demand during the 2007-2008 period.

"Generation X almost shut down real estate around 2007 to 2008 because they simply were not starting houses at the same level that the Boomers did."

• The guest explains how the smaller size of Generation X affected housing markets, particularly during economic downturns.

• There are currently 170 million people under 40 years old in the U.S., indicating a significant market for real estate.
• This demographic trend presents opportunities for real estate investment and market growth.

"We currently have 170 million people under 40 years old."

• The guest highlights the substantial young population in the U.S., pointing to potential growth in real estate demand.

• Millennials, also known as Generation Y, have been noted for achieving significant life milestones later than previous generations.
• This includes moving out of parental homes, graduating from college, starting households, getting married, and having children.
• The trend of delaying these milestones is seen as a defining characteristic of this generation.

"They moved out of their parents' homes late, they threw away all those trophies they didn't deserve late, they took their time getting through college late, started households late, getting married late, having kids late, late, late, late."

• The quote highlights the pattern of delayed life events among Millennials, emphasizing their tendency to take longer to achieve traditional milestones compared to previous generations.

• Millennials are a large demographic group, with 88 million individuals contributing to significant demand in housing, goods, and services.
• The movement of Baby Boomers to the Southeast creates economic opportunities due to their substantial wealth and consumption needs.
• Boomers hold approximately $100 trillion in assets, making them the wealthiest demographic, which influences where businesses and younger generations relocate.

"Why Millennials are 88 million strong... they’re going to consume so it looks very good... the economy of the United States is in a good position."

• This quote underscores the substantial size of the Millennial generation and their potential impact on the economy through consumption and demand for housing and services.

"Wherever they go, Generation Y Millennials will follow opportunity... Boomers have about a hundred trillion dollar 100 trillion with a T in assets."

• The quote illustrates the economic influence of Baby Boomers and how their relocation patterns create opportunities that attract Millennials.

• Both Millennials and Boomers are moving to areas with better opportunities, notably the southern United States, including Texas and Virginia.
• The movement is driven by job availability, services required by Boomers, and the transfer of wealth from Boomers to their children.
• Businesses in sectors such as restaurants, automobiles, and housing are expected to thrive in these regions due to high consumption levels.

"Well, Texas is picking up, you know, a lion share of them... Boomers need services and products."

• The quote indicates where Millennials and Boomers are relocating and the economic opportunities that arise from these demographic shifts.

"Restaurants are going to do very, very well down here, automobiles are doing unbelievably well down here, houses... the consumption levels Kathy are going to be very high."

• This quote highlights the sectors expected to benefit from the relocation of Boomers and Millennials, driven by high consumption needs.

• The U.S. economy is bolstered by population growth through birth rates and immigration, in contrast to countries like Japan and China, which face challenges due to declining birth rates and restrictive immigration policies.
• The presence of 67 million Latinos in the U.S. is seen as a crucial factor for economic sustainability and labor force availability.
• The U.S. benefits from a diverse and growing population, which supports economic growth and stability.

"We are creating babies, we're having babies, and we allow immigration... best thing that ever happened to the United States was Latinos."

• This quote emphasizes the importance of population growth and immigration in maintaining the economic strength of the United States.

"Without them, we can't function... we wouldn't have enough labor."

• The quote underscores the critical role of the Latino population in providing the necessary labor force for the U.S. economy, highlighting potential challenges faced by countries with declining populations.

• China currently manufactures 30-40% of the world's goods, but faces labor shortages.
• The United States has a significant labor force, especially among younger populations, including people of color and Latinos.
• Mexico is emerging as a manufacturing hub due to reshoring from China, with competitive labor costs and favorable demographics.

"Mexico is picking up manufacturing from China... They have just the right amount of everybody and they have Labor, and it's about the same price as the labor in China."

• Mexico's labor market and demographic advantages make it an attractive location for manufacturing, drawing investment from China.

• Prosperity in Mexico could lead to reduced crime and cartel influence as economic conditions improve.
• Tariffs between the US and Mexico could impact manufacturing decisions, potentially incentivizing companies to relocate factories to the US.

"Prosperity wipes out crime... When Mexico reaches a Prosperity level necessary where they can do law enforcement at the proper level, the cartels are going to go away."

• Economic growth in Mexico is expected to reduce crime rates, diminishing the power of cartels.

• Several Asian countries, including China and South Korea, face labor shortages due to declining birth rates.
• The Americas, including the US, Canada, and Latin America, are positioned to become major manufacturing centers due to available labor and resources.

"The world is going to need stuff... It's going to be made in the Americas... where we have Labor and we have resources."

• The Americas are poised to capitalize on global manufacturing needs due to labor availability.

• US fertility rates are declining, with a current rate of 1.6 children per couple.
• Latino populations contribute significantly to maintaining US fertility rates.
• The labor force is expected to remain robust as both men and women participate in the workforce.

"Our labor is going to double... because men and women both can work... we're going to have Boku labor."

• Despite declining birth rates, the US labor force is projected to grow as more individuals enter the workforce.

• A housing boom was anticipated between 2020 and 2024 due to Millennials reaching home-buying age.
• The housing demand continues as Millennials move out of parental homes, increasing the need for housing solutions.

"I had always predicted... that 2020 to 2024 would be a housing boom because of the age of the Millennials coming into first-time home buyer age."

• The housing market is driven by the large Millennial population transitioning to independent living.

• The conversation begins with a discussion on the demand for prefabricated houses, which are expected to remain popular due to affordability and the size of the new generation.
• There is a concern about housing portfolios becoming less needed in certain areas due to population shifts.

"I spoke recently to houses that were fabricated you know they build them in pieces and they're doing incredible they're doing wonderful."

• Prefabricated houses are gaining popularity due to their efficient construction and cost-effectiveness.

"You don't want to be stuck with a big portfolio of housing when it's no longer needed right."

• There is a need for caution in real estate investments to avoid holding assets in declining markets.

• The Northeast is experiencing a population decline as people move to warmer regions, affecting housing demand.
• Boomers and Millennials are moving south, impacting regional housing markets.

"New England is losing population people are moving south."

• The movement of populations from colder to warmer climates is influencing housing market dynamics.

"The boomers are leaving the Northeast and they're leaving South and North Dakota and moving to where it's warm."

• The trend of relocating to warmer climates is prevalent among both boomers and millennials.

• Previous predictions about the political leanings of younger generations and Latinos were incorrect.
• The unexpected political outcomes have led to a need for further analysis and understanding.

"I thought that the Liberals and progressives would have won the election would have won the presidency they did not."

• There was an expectation of a liberal political shift that did not materialize as anticipated.

"It's mysterious to me to see which way the Latinos went I don't get it."

• The voting patterns of Latinos were unexpected and require further study to understand.

• There is an undercurrent of social change emphasizing ethical business practices and community support.
• Examples include companies giving back to the community and reducing waste.

"We're going to see a different place we're going to see a Kinder gentler United States unless I'm completely wrong."

• There is a belief in a shift towards more socially responsible and compassionate business practices.

"The whole bomas socks thing you know one for every pair they sell they give a pair to a homeless shelter."

• Businesses are increasingly adopting models that contribute to social welfare.

• Investors are advised not to fear change but to adapt and embrace the opportunities it brings.
• The demand for housing remains strong, and investors should stay engaged in the market.

"Don't suffer from anxiety and change because you're going to see a lot of change big change."

• Embracing change is essential for success in a rapidly evolving market landscape.

"You tell your Real Estate Investors stay with it don't be afraid the demand is huge."

• Despite uncertainties, the housing market demand is robust, offering opportunities for investors.