Peter Thiel is well known for his computer knowledge as the first outside investor in Facebook and a Co-Founder of PayPal. However, the multibillionaire venture capitalist has recently started raising concerns about a completely different industry: real estate.
In order to emphasize the seriousness of the American real estate crisis, Thiel cited the observations of 19th-century economist Henry George in an interview with The Free Press.
“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.
Thiel clarified that the “extremely inelastic” nature of real estate, particularly in areas with stringent zoning regulations, is the root of the problem.
“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 also cautioned that the U.S., Britain, and Canada are among the numerous “Anglosphere countries” where this “Georgist real estate catastrophe” is taking place.
Home Prices Surge as American Renters Hesitate to Purchase
The increase in property prices in the U.S. has been quite concerning. The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index has increased by more than 50% in the last five years. In December 2024, the leading indicator of home values in the U.S. showed an annual return of 3.9%.
Prospective homebuyers face several difficulties as a result of this dramatic increase in housing prices, but renters are also affected. All of this is a component of the larger cost-of-living dilemma that many Americans are currently experiencing.
“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,” Thiel said. “The really big cost item is the rent.”
Thiel maintained that supply and demand are the fundamental causes of the problem.
“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.”
But it’s not just Thiel who is “sounding the alarm.” Jerome Powell, Chairman of the Federal Reserve, has expressed similar worries.
Powell said at a press conference in September: “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?”
However, there is a substantial disparity in the housing market. According to a recent Realtor.com analysis, there will be a 3.8 million home deficit in the U.S. as of 2024.
What More is Preventing Potential Homebuyers From Taking the Leap?
In addition to skyrocketing property values, high mortgage rates are a significant barrier that keeps many Americans from “getting on the housing ladder,” as Thiel put it.
The good news? Interest rate reductions by the U.S. Federal Reserve have opened doors for prospective purchasers. To get the best mortgage rate available, Freddie Mac advises comparing quotations from three to five lenders. Accessing the real estate market is also now simpler than ever thanks to new investing platforms.
Through the U.S. Home Equity Fund, investors can directly access hundreds of owner-occupied properties in major U.S. cities with a minimum investment of $25,000. This allows investors to avoid the hassles of purchasing, owning, or maintaining real estate. This strategy offers a successful, hands-off method of investing in owner-occupied residential properties across regional markets, with risk-adjusted internal returns ranging from 12% to 18%.
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