Over the last few months, I wrote some articles about 3D printing and its impact upon the construction industry. Like most things, it starts out slow before really kicking off.
The key to success is seeing where things are going so as to be on the right side of trends. Those who got it wrong are legendary. Between Kodak, Blockbuster, and General Electric, the companies that misread things are examples of how expensive things can be. Ultimately, many of them ended up out of business due to this.
What we are seeing in construction is truly disruptive. It is also totally revolutionary.
The following link contains a short video that is very informative. Give it a look to see how things the potentially changing.
https://www.cnbc.com/2021/02/25/you-can-now-buy-a-3d-printed-home-heres-a-look-inside.html
The company behind this is getting a ton of interest on all ends.
To start, notice how they are getting a lot of offers on the property they created. This is due to the fact that they are undercutting the market by a significant margin. Also, due to the efficiencies the printer brings to the construction process, the company has better margins.
Therefore, we see a company that is able to push their product out for half of the competition while maintaining better margins.
Think about that for a second. How are the traditional builders going to compete? The answer is that, unless they change their ways, they will end up like Blockbuster and Kodak. There is really no other alternative.
We also see how much interest was drawn from around the country. The process is appealing to others in the industry who are looking to build out entire subdivisions. Here is where we see the truly revolutionary impact that could be unfolding.
The key to disruption is, eventually, mass adoption. Having other developers and builders wanting to follow suit is what will spread the technology like wildfire. A couple of houses in New York are not going to radically alter things. Developers all over the country, however, is another story altogether.
Which brings us to the bigger issue: residential real estate in general.
Here is where we see the major danger that could impact things on the macro level. Consider the numbers with a countries residential real estate in total. It gets into trillions of dollars. The problem is the deflation that we are facing will eradicate a lot of that wealth in a few short years. This is exasperated by the fact that real estate tends to be funded through debt.
Since people take out long term loans when buying real estate, what happens when the values drop significantly, and not for just a short period of time? In other words, what if the value if residential real estate drops permanently 70%-80%? How are people going to handle the debt when the value of the underlying asset is worth a fraction of what the note is?
This is truly unprecedented in terms of the numbers. When the video cassette industry (Blockbuster) got wrecked by streaming, the impact across the economy as a whole was minimal.
We will not see the same with real estate. It is vital to understand the video cited 50% savings versus new construction using traditional methods is 2020 technology. What will the technology look like in 2030 or 2035? Consider not only 3D printing but also robotics and AI to uncover the potential impact on prices in the future. Could we see the price of real estate drop by an ever greater amount down the road?
And how does that affect all the homes that are already built and bought with debt?
There is also the potential popping of the artificial urban real estate bubble that was in place for more than a half a century. The urban areas had the advantage of a monopoly of high paying jobs. Of course, that pushed up the cost of living for all including real estate.
As we move further into the digital world, transitioning to the virtual, more people will be making their living in this medium. That means that where they live, in terms of the job, is of less importance.
Combine all these factors and we can see there are some major questions with the future of residential real estate.
Based upon this analysis, along with the impact of technology historically, it is hard to dismiss the idea that this industry is going to suffer anything other major deflation. Prices simply will not be able to hold up in the face of these pressures, all of which are going to push them downward.
As the above video shows, this is already starting to take place.
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