In the immediate years after the end of World War II, America reached unprecedented economic heights.
With veterans from World War II largely re-integrating themselves into the economy and general society at large, questions about how they would be accommodated began to emerge. These veterans were already marrying and starting young families at increasing rates.
These factors put significant pressure on housing arrangements in the country at the time. Roughly two-thirds of Americans were living in urban areas in the late 1940s and city living space was at a premium.
In turn, these new young families were looking for an alternative housing unit to accommodate their needs for space outside of the big city.
Real estate developer William Levitt picked up on this market desire and rolled out several planned communities to provide affordable housing to returning World War II veterans and their families.
The first “Levittown” was established in Hempstead County, New York in 1947. Levittown became the first mass-produced suburb and soon became a model for suburban development nationwide. Within a few years, once suburban living became thoroughly established in America, Levitt earned the reputation as the father of modern suburbia in the United States
For families who wanted to live in a Levittown, they had to make a down payment of $10, roughly $120 in today’s dollars when adjusted for inflation. Similarly, the average Levittown home costs were around $8,000 ($96,000 in today’s dollars) in the 1940s. Now that’s what I call affordable.
Thanks to the crime spikes of the 1970s, many Americans dwelling in urban centers looked to greener pastures in the suburbs, which were much safer, cheaper, and more relaxed. As a result, suburbia became a fixture of the American Dream.
While suburban housing has greatly diversified since the advent of the Levittown, the same desire to live in the suburbs still exists.
To be sure, in the early aughts it became fashionable to move back to the cities as seen with the rise of tech hubs such as San Francisco and Seattle. The promise of high-paying jobs, trendy lifestyles, and cultural vibrancy made big cities appealing again.
However, the outbreak of COVID-19 is making the prospects of living in suburbia alluring again. Just look at the present Great Migration to suburbia.
Millions of Americans residing in high-density, coastal areas are packing their bags and heading to the American heartland and Sun Belt largely due to the COVID-19 pandemic and heavy-handed response by governments to combat it.
COVID-19 was clearly an accelerant, but people have been escaping big city life for a while. As mentioned before, high crime, high cost of living, and high-density environments which makes viruses easier to transmit, are all reasons people look to the suburbs as a potential escape.
For many people, COVID-19 was the straw that broke the camel’s back. Consequently, Americans are heading to “Flyover America” for more relaxed and affordable lifestyles.
Here’s another thing to keep in mind about lifestyles in the COVID-19 era: Many activities are going online now. For example, relationships on dating apps, homeschooling for children, and work meetings on Zoom.
As a result, the home reverted back to its mean as the center of the universe.
Again, it bears repeating. The home is the center of the universe.
I’ve long argued this on the Creating Wealth Podcast and now it’s playing out in real time. People can easily get on their laptops and work from home, all without having to endure tedious commutes to and from work.
While not all jobs will be done remotely, a significant amount of people will be opting for this work arrangement as they move to the suburbs.
What’s unfolding across America vindicates my investment strategy of focusing on income properties in linear markets.
Keep in mind, there is no single real estate market in the United States. When you peel back the onion, there are approximately 400 different markets in America, all which have their own unique features.
With inflation in the mix, things only become even more intriguing.
Always remember, investors in income properties thrive during inflationary environments thanks to inflation-induced debt destruction.
The way income property investors thrive in these environments is straightforward.
First, you go to your bank to request a loan to buy a property. Ideally, in a linear market.
From there, you rent the property out to a tenant.
In renting out the property, your tenant(s) assume the carrying cost on the property.
Over time, you pay the debt back in depreciated dollars thanks to inflation. Simultaneously, your asset (the income property) appreciates at a faster rate than inflation.
You benefit in a two-pronged manner: Inflation that depreciates your debt and the income property’s value rising faster than inflation.
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Eventually, you’ll encounter hurdles that require outside guidance so that you can continue your real estate journey.
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