pro finance blog
Menu
  • About Me
  • Hire Me
  • Contact Me
  • Submit a Guest Post
    • Privacy Policy
    • Disclaimer
Menu
Real Estate Worth

How Demographics Serve As Final Judge of Real Estate Worth

Posted on March 29, 2017June 9, 2020 by Tina Roth

James Dondero has become one of the most successful credit-focused hedge fund managers in the United States by using his profound understanding of the credit markets and fundamental analysis of asset value to make prudent, long-term-oriented decisions. Part of his investment strategy has focused on U.S. real estate, a space in which his firm, Highland Capital Management, has enjoyed considerable success.

Real Estate Worth

But, for Mr. Dondero, it’s not all about money. One of the looming problems he sees that the country will be faced with, into the foreseeable future, is the extreme menace to home prices that rapid demographic shifts pose. This is a multi-faceted problem not just for the homeowners who end up losing value but for those who don’t yet own homes and who may be faced with housing prices so steep that family formation becomes impossible.

Palo Alto versus Detroit – a case study

Palo Alto, California frequently ranks as the single most expensive real estate market in the United States. The epicenter of Silicon Valley, the city abuts Stanford University and is home to far too many tech companies to name. However, Amazon, Dell, Hewlitt-Packard and Lockheed Martin all have major presences there. It has often been referred to as the highest IQ town in America.

In the wake of the housing crash of 2007 and the ensuing market cool-off, which lasted everywhere until about the middle of 2012, the median home price in Palo Alto dropped from about $1,300,000 to $1,200,000. Since 2012, the median home price has exploded to $2,500,000, doubling in just five years and making Palo Alto the most expensive real estate market in the country.

Contrast this with Detroit. Since the late ’60s, Detroit has succumbed to what might be referred to as middle class flight. Most of the whites left. But the black middle class was right on their heels. The resulting brain-drain has left the city a burnt out shadow of its former glory. Detroit is one of the few cities in America where homes can regularly be bought for less than $10,000.

In the aftermath of the housing crisis, Detroit’s home prices dropped like concrete from the crumbling Ambassador Bridge. Falling from a median home price of $80,000, they didn’t hit rock bottom until the $30,000 mark, in 2012. They have since only picked up about $5,000 in total value. This is an astonishing fact. Detroit, as one of the worst hit cities of the housing crisis, has a real estate market that has not meaningfully recovered at all. The reader may be tempted to ask, so what?

Without even delving into why $35,000 is likely a severe overestimate of the actual median home value, the problem is that Detroit is 90 percent non-white, non-Asian. Palo Alto, on the other hand, is nearly 100 percent white or Asian. These cities are two sides of a rare coin but the truth is that this pattern can be seen across the entire country, just in somewhat less extreme form. The implication is that whites and Asians will not buy a home in a place like Detroit, where they could most afford it. They’re most likely to buy a home in a place like Palo Alto, where, statistically speaking, almost no one can afford it. As the nation’s demographics continue to change, this has dire implications for both whites and Asians to be able to afford homes as well as for increasingly wealth inequality.

Category: Real Estate

Leave a Reply Cancel reply

You must be logged in to post a comment.

About Me

finance blogger

The idea of starting a blog has been hitting me for long; I took it seriously after falling into a spiral of debt and recovering from it.

I have been anxious all through the financial difficulties. I see that same anxiety in the eyes of people, whose ill fate has put them at odd with financial repose.

It makes me compassionate. Out of this compassion and goodwill, I started this blog. I wanted to help all those, who are facing financial distress..




  • Stock Market
    Understanding the Gov Tech MarketFebruary 16, 2023
  • Phuket Real Estate
    Why You Should Invest in Phuket Real EstateJanuary 24, 2023
  • Corporate Governance
    Corporate Governance: What Are the 3 Core Principles of Good Corporate Governance?December 17, 2022
  • Successful Retirement
    How To Plan For Successful Retirement At 50: 5 Steps To Get Started OnNovember 4, 2022
  • Online Money Transfer
    Do You Still Transfer Money Internationally With Your Bank? There Are Better Online Solutions For ThatOctober 14, 2022
  • finance
    Important Roles of the Minister of FinanceSeptember 16, 2022
  • Avoid for New Businesses
    5 Forecasting Faux Pas to Avoid for New BusinessesSeptember 16, 2022
  • Affecting Pensions
    How Inflation Is Affecting PensionsSeptember 2, 2022

    ProFinance Blog is dedicated to help people who are struggling with their personal finances. We have learned the lessons first hand and know how real the struggle is. Being compassionate about the personal finances and blogging about is our way to help people know more about different situations and how effectively they can handle it. So take control of your finances now and take actions towards gaining financial freedom and security. Join us in the mission to self-educate, learn and help others by sharing valuable information on finances. Here you will find information, tools and techniques on various aspects of finances and learn how you can use the information and implement it to make your financial life better than ever.Join us in our mission to financial freedom.

    • Stock Market
      Understanding the Gov Tech Market
    • Phuket Real Estate
      Why You Should Invest in Phuket Real Estate
    • Corporate Governance
      Corporate Governance: What Are the 3 Core Principles of Good Corporate Governance?
    © 2023 ProFinance Blog | Powered by Minimalist Blog WordPress Theme