Tomas Pueyo Profile picture
Apr 27, 2024 24 tweets 8 min read Read on X
You think housing prices will keep going up because you've seen it all your life. But this is a historic anomaly that is likely to reverse soon: Prices might start shrinking in many places.

This thread is the case against investing in housing: Image
Our perception of real estate prices is extremely biased.
Most ppl alive today have only experienced them since WW2, but that's a completely anomalous period!

Prices before did not grow as much. Here are real prices for 14 countries
What happened?

Supply and demand
The last 80 years have seen a growth of housing demand never seen before. At the same time, supply has been shrinking consistently. These trends are all reverting now. Let's look at them in detail:
A. DEMAND
1. The number of humans has grown faster than at any other time in history (this graph is logarithmic!)

Many developed economies (this thread is mostly about them) have doubled or nearly tripled their population Image
But as you know this huge growth is reverting. Many developed economies are now shrinking, and that will accelerate

Fewer ppl, less demand

Who's going to inhabit all the houses that Baby Boomers will leave behind? Image
2. Urbanization
It's not just that there were more ppl. They all wanted to live in cities!

Urbanization nearly 10xed, from ~10% to 80-90%. But we can't go higher than that. The urbaniztion trend that pushed demand up in cities has now ended Image
3. Household size
For decades, we've shrunk our household sizes. We didn't want to live with other generations. Now each nuclear family has their home. In fact, the number of ppl per household might be even growing. No more demand coming from there Image
4. Bigger houses
We've been buying bigger and bigger houses, driving up demand for land

At some point, that will stop
In the meantime, the annual growth rate is slowing down
Image
Image
So the 4 biggest sources of housing demand used to be huge, and are now slowing down or reverting:
1. Population shrinks
2. Urbanization stops
3. Household sizes stabilize
4. The growth in house sizes slows down

And supply is going in the opposite direction!
B. SUPPLY
You can only grow your cities horizontally (more land) or vertically (more floors)

1. Horizontally
The size of cities is determined by transportation, because ppl don't want to commute much more than 30m each way. That's called the Marchetti Constant
When ppl could only walk to work (eg, Rome, Paris before 1800), cities were small

The train allowed ppl to live farther out, and cities grew (eg London 1870)
Then streetcars and bikes (eg, Chicago 1915)
The car exploded this growth (eg, Atlanta 2010) Image
And the surface available to build grows with the square of the distance! So if a car was 10x faster➡️cities could grow 10x farther➡️Their surface could grow by 100x! What a huge amount of new supply!

That's why suburbs exploded. But now they don't anymore. Why? Image
This growth came with car ownership. But now we have broadly as many cars as we want. People who need a car to work mostly have it

As people are forced to live ever farther, their commute becomes too long, limiting cities' horizontal growth potential Image
This growth in supply of land lasted in most developed countries until the 1990-2000s. As it ran out, supply dwindled, and prices started soaring

But now a new commuting technology has arrived: We can get to work instantly! Image
Since the Internet's speed is that of light, our commute time is reduced to zero, and cities become infinite. The only limit today are timezones

A huge amount of horizontal supply that was unreachable has been unlocked, flooding the market Image
2. Vertical growth
Something similar has happened with vertical growth
In the late 1800s, new tech like elevators and steel framing made taller buildings possible. They went from 4-6 floors to 12+ Now we can make them one km tall! Image
But the average size of our buildings stopped being limited by technology, and started being limited by regulation. In many places, the height of new buildings has *shrunk*!

The NIMBY movement has limited the vertical supply of housing in the last few decades, pushing prices up Image
That limitation can't really get any worse than it is, so supply can't be further restricted. But if the YIMBY movement (Yes In My BackYard) continues growing, these restrictions will be weakened, and more supply will reach the market Image
SUMMARIZING:
A. Demand used to grow a lot:
📈ppl
📈urbanization
📈houses/person
📈house size

B. Supply was limited
📉Additional horizontal supply (after cars)
📉Vertical growth (NIMBYs)

ALL THESE TRENDS ARE SLOWING DOWN, STOPPING, OR REVERTING!
Nearly all of us have lived through 75y of real estate prices going up. We have accepted it as a fact of life. It isn't. It was due to extraordinary circumstances that are now disappearing.

I go into details about this in this new article:
unchartedterritories.tomaspueyo.com/p/why-i-dont-i…
Of course, there's much more to consider: interest rates, wealth vs population, big vs small cities, housing vs real estate, timing, immigration... I'll talk about it in my premium article tomorrow
bit.ly/4aV7Lj2
If you learned something & want more, retweet and follow me!

Sources in articles
Of course, none of this is investment advice! Don't invest because someone on the Internet told you to. I'm sharing how I think. Take it as info and entertainment, and talk with investment advisors
the prices above are in *real terms*. They account for inflation.
The most common reply is: "This is due to money printing"
Yes and no

You can see prices shooting up after 1971, the end of Bretton Woods. But:
• Housing prices also grew before that, since 1945
• Housing prices grew in real terms after Bretton Woods
• Housing prices grew faster than incomes after Bretton Woods

So it's not just Bretton Woods
Why did housing prices outpace inflation, even income?
Because demand was higher than supply and coveted land demand is inelastic
I explore this in this week's premium article
unchartedterritories.tomaspueyo.com/subscribe

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More from @tomaspueyo

Jul 7
Did you know the West's trade deficits to China are not recent, but started 2000 years ago? This is the story of how silk, porcelain, tea, opium, and silver have determined the history of the world 🧵
The Romans already complained about deficits to China! Mainly because of silk Image
Back then the Chinese already preferred manufacturing and selling products than consuming foreign products. Chronicler Solinus ~200 AD: The Chinese "prefer only to sell their products, but do not like to buy our goods."Image
Read 12 tweets
Jun 25
Why did 🇮🇱Israel strike 🇮🇷Iran now, and not months or years ago or in the future?

A unique combination of a dozen factors converged to make the moment unique for 🇮🇱Israel: 🧵
1. No Hamas to its southwest
2. No Hezbollah to its north
3. No Assad threat to the northeast
4... Image
4. No more Syrian army to attack 🇮🇱Israel's planes: As the new forces of HTS took over Syria, Israel bombed all the existing Syrian military. No more fighter jets or surface-to-air missiles to threaten 🇮🇱Israel Image
5. Ability to fly over Syria to refuel
This is critical, because 🇮🇷Iran is ~600-1000 miles away from 🇮🇱Israel, so 1200-2000 miles round trip

The range of Israel’s stealth F35 is only about 1,350 mi
To operate inside 🇮🇷Iran, 🇮🇱Israel needed refueling over Syria Image
Image
Read 7 tweets
Jun 23
Was 🇮🇷trying to get a nuclear bomb?

1. From Feb 2025 to Jun 2025, it increased its amount of enriched uranium by 50%
2. It now had 400kg of highly enriched uranium, enough for 9-10 bombs
3. This is 60% enriched uranium. Fuel only requires 5% enrichment.
4... 🧵
4. It's easy to go from 60% to 90% (weapons grade), it only takes weeks
5. The only country on Earth with such enriched uranium and without a bomb is 🇮🇷Iran
6. The IAEA (nuclear watchdog) found 3 secret nuclear sites
7. When 🇮🇷Iran didn't respond to this accusation, the IAEA censured it
8. 🇮🇷Iran responded to the censoring by saying it would open a 3rd enrichment site in a secret spot
Read 9 tweets
Jun 22
Now that the 🇺🇸US has bombed 3 of 🇮🇷Iran's nuclear sites, where will the war go from here?
It depends on 🇮🇱Israel: 🧵
🇮🇷Iran never wanted the war, and its forces are being decimated. Its ability to send missiles to 🇮🇱Israel is being degraded every day. If it could sign a ceasefire while saving face, it would Image
Meanwhile, 🇮🇱Israel has kept striking Iran non stop. Its daily airstrikes didn't go down substantially in the first few days. Its ability to keep striking 🇮🇷Iran remains unabated

So when will it stop? Image
Read 13 tweets
Jun 19
Can there be an invasion of Iran? Hardly. Two maps explain why, and also why Iran is the way it is today, whether its regime will fall, what other superpowers will do, and in general why Iran is the way it is today

1. Iran is a mountain & desert fortress Image
Here's a topograhic map
West: Zagros
North: Caspian Sea + Caucasus, Albroz, & Kopet-Dag mountains + Karakum Desert
East: Mountains + Dasht-e Kavir / Lut Deserts
South: Sea

The only truly exposed area is the southwestern corner of Khuzestan, which is a swamp Image
The biggest superpowers lie to the west, and there the very broad Zagros make it really hard to conquer Iran. The mountain range is tall and wide, making logistics similar to Afghanistan. Very hard.

Iraq learned it the hard way when it tried to attack there in 1980 Image
Read 20 tweets
Jun 19
Was 🇮🇷Iran trying to develop nuclear weapons?

Listening to the debate, it looks like 🇮🇱Israel & the 🇺🇸US intelligence community disagreed, but that's not really the case!

Both thought Iran was weeks to months away from being able to develop the bomb

So what's the disagreement?
Here are more facts:
• Tehran had just announced a 3rd enrichment site in an undisclosed place
• The International Atomic Energy Agency (IAEA) had recently produced a report censoring Iran for the 1st time in 20y
• It accused Iran of 3 undisclosed nuclear sites
• It claimed Iran had enough enriched uranium for 9-10 nuclear bombs
• All the other countries in the world who have enriched uranium at the same level also have nuclear weapons. Iran is the only country that doesn't have these weapons yet enriches uranium as much
Read 7 tweets

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