Peter Thiel warns of ‘catastrophe' in US real estate — but sees ‘windfall' for 1 class of boomers.
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As a co-founder of PayPal and the first outside investor in Facebook, Peter Thiel is widely recognized for his expertise in the tech world. But lately, the billionaire venture capitalist has been sounding the alarm on an entirely different sector: real estate.
During an interview with The Free Press, Thiel drew upon the insights of 19th-century economist Henry George to underscore the gravity of America's real estate crisis.
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'The basic Georgist obsession was real estate, and it was if you weren't really careful, you would get runaway real estate prices, and the people who owned the real estate would make all the gains in a society,' Thiel said.
The core of the issue, Thiel explained, lies in the 'extremely inelastic' nature of real estate, especially in regions with strict zoning laws.
'The dynamic ends up being that you add 10% to the population in a city, and maybe the house prices go up 50%, and maybe people's salaries go up, but they don't go up by 50%,' he said. 'So the GDP grows, but it's a giant windfall to the boomer homeowners and to the landlords, and it's a massive hit to the lower middle class and to young people who can never get on the housing ladder.'
Thiel warned that this 'Georgist real estate catastrophe' is playing out across many 'Anglosphere countries,' including the U.S., Britain and Canada.
The surge in U.S. home prices has been nothing short of alarming. Over the past five years, the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index has climbed by over 50%. More recently, the leading measure of U.S. home prices reported a 3.9% annual return for December 2024.
This sharp rise in home prices creates significant challenges for prospective buyers, but renters aren't immune to the impact either. It's all part of the broader cost-of-living crisis gripping many Americans.
Thiel broke it down, stating, 'There's a way you could talk about inflation in terms of the prices of eggs or groceries, but that's not that big a cost item, even for lower middle class people. The really big cost item is the rent.'
At its core, Thiel argued, the issue boils down to supply and demand.
'If you just add more people to the mix, and you're not allowed to build new houses because of zoning laws, where it's too expensive, where it's too regulated and restricted, then the prices go up a lot,' he said. 'And it's this incredible wealth transfer from the young and the lower middle class to the upper middle class and the landlords and the old.'
Thiel isn't the only one raising the alarm. Federal Reserve Chairman Jerome Powell has highlighted similar concerns.
'The real issue with housing is that we have had, and are on track to continue to have, not enough housing… It's hard to find — to zone lots that are in places where people want to live… Where are we going to get the supply?' Powell said at a press conference in September.
The gap in the housing market is significant. A recent report by Realtor.com estimated the U.S. housing shortage to be 3.8 million homes as of 2024.
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Beyond soaring home prices, elevated mortgage rates are another major obstacle preventing many Americans from 'getting on the housing ladder,' as Thiel described.
The good news? The U.S. Federal Reserve has been cutting interest rates, providing opportunities for potential buyers. Freddie Mac recommends shopping around by obtaining quotes from three to five lenders to secure the best mortgage rate possible.
New investing platforms are also making it easier than ever to tap into the real estate market.
For accredited investors, Homeshares gives access to the $36 trillion U.S. home equity market, which has historically been the exclusive playground of institutional investors.
With a minimum investment of $25,000, investors can gain direct exposure to hundreds of owner-occupied homes in top U.S. cities through their U.S. Home Equity Fund — without the headaches of buying, owning or managing property.
With risk-adjusted internal returns ranging from 12% to 18%, this approach provides an effective, hands-off way to invest in owner-occupied residential properties across regional markets.
If you're not an accredited investor, crowdfunding platforms like Arrived allows you to enter the real estate market for as little as $100.
Arrived offers you access to shares of SEC-qualified investments in rental homes and vacation rentals, curated and vetted for their appreciation and income potential.
Backed by world-class investors like Jeff Bezos, Arrived makes it easy to fit these properties into your investment portfolio regardless of your income level. Their flexible investment amounts and simplified process allows accredited and non-accredited investors to take advantage of this inflation-hedging asset class without any extra work on your part.
Another option is First National Realty Partners (FNRP), which targets necessity-based commercial real estate.
With a minimum investment of $50,000, investors can own a share of properties leased by national brands like Whole Foods, Kroger and Walmart, which provide essential goods to their communities. Thanks to Triple Net (NNN) leases, accredited investors are able to invest in these properties without worrying about tenant costs cutting into their potential returns.
Simply answer a few questions – including how much you would like to invest – to start browsing their full list of available properties.
Access to this $22.5 trillion asset class has traditionally been limited to elite investors — until now. Here's how to become the landlord of Walmart or Whole Foods without lifting a finger
Rich, young Americans are ditching the stormy stock market — here are the alternative assets they're banking on instead
Are you rich enough to join the top 1%? Here's the net worth you need to rank among America's wealthiest — plus a few strategies to build that first-class portfolio
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
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