“Forecast your misery,” I read on a financial blog I love.

 

What that meant was, no matter how much you love your job, working late, and being a career person, just know that someday you will be tired of the grind and your boss. You’ll be older, maybe a little disillusioned, and you’ll want out. 

 

So, the writer advised, invest accordingly. Your job will not be forever. Also, take care of your health and relationships, and build passive income. 

 

It was an excellent point. And I loved the expression “forecast your misery.”

 

Because a forecast is not a prediction or a guess. A forecast is based on data, and it’s pretty firm. If the forecast for tomorrow is for rain, you can bet rain is coming.

 

You don't think you'll tire of work? Neither does my workaholic wife.

 

But rain comes in other forms: forced retirement, shrinking industry (hello LA entertainment industry), ageism, illness, family problems…at some point, we will all be faced with a rainy day called retirement where the income stops and you'll have to rely on the investments you made when you were making it rain (are the metaphors now too mixed?).

 

If you forecast your misery, you make a plan. Ours is composed of a 401k, 529 accounts, pensions, Social Security, savings investments, and, of course, my steel, mile-wide umbrella - real estate.

 

The forecast for real estate values is that they will continue to rise.

The enormous appreciation of homes in LA can be attributed to Georgism, a 19th-century economic theory making the rounds that I just discovered.

 

The key part is this: something weird happens when housing growth is limited in a city. If the population grows 10% and there are no new houses, prices don’t go up 10%—they go up 50%. Not what you’d expect.

 

In technical jargon, price growth is exponentially higher than population growth in a supply-constrained market.

 

We have all seen this firsthand in Los Angeles. In 1950, the population was 2 million, and the median home price was $7,354. Adjusted for inflation, that’s around $80,000 now.

 

Fast-forward to today. The population is 4 million, and the median home value is over $1 million. 

 

So, while the population has doubled, home values have increased by 13 times. These are real dollars, adjusted for inflation. Wow.

 

We live in a highly populated, extremely housing supply-constrained city in the country. Los Angeles is Georgism on steroids.

This is why no one moves. Once you buy a house, similar homes become exponentially more expensive.

 

So you're stuck, thinking, “I'm sure glad I bought ten years ago because I sure as hell can't afford this neighborhood now.”

 

The problem is that this math is not intuitive, which is why everyone seems constantly baffled and surprised by rising home values, and we hear people “waiting for prices to adjust.” Not happening.

 

My mentor Leslie gave me great advice early in my career. She said, “Always keep up with prices. You have to adjust your brain. Otherwise, you’ll be that old real estate agent on the corner pointing to houses, saying, I remember when that was $200,000. I remember when that was $500,000. You’ll be paralyzed.”

Adjust your brain. I forecast $5 million homes everywhere by the time my kids are in college.

 

I might be wrong, but I know I won't be far off. As expensive as it seems, I’m still buying real estate to send my kids to college (here's the plan) and retire comfortably.

 

If the forecast calls for rain, pack a raincoat.

       -Brock

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