The US Housing Ladder Goes Nowhere… But There Are Others to Climb

The US Housing Ladder Goes Nowhere… But There Are Others to Climb
Looking beyond the U.S.: Overseas property markets still offer growth, income—and a clear path upward.|©iStock/Francesco Scatena

Last week I explained how rising home insurance costs are undermining the wealth of millions of Americans. As monthly insurance premiums skyrocket, buyers struggle to afford monthly mortgage/escrow payments. That forces sellers to lower their asking prices, undermining the market value of their homes and, therefore, their net worth.

Americans traditionally talk about housing as a “ladder.” When you’re young, you get on the first rung by buying a starter home or a fixer-upper. As you age and your income increases, you move up the ladder by buying progressively more expensive homes. Eventually, you reach your highest rung, with a valuable property that appreciates in value every year, which you can sell to fund your retirement, take a reverse mortgage, or bequeath it to your heirs.

The US property market is rapidly moving towards a situation where the value of one’s property stagnates because buyers can’t afford it. The rungs don’t lead anywhere anymore. But there are other property ladders, where the rungs still take you higher on the wealth scale.

The table below shows the capital appreciation, cash yield and combined yield of residential real estate in select parts of the world:

RegionCapital AppreciationCash YieldCombined Yield
Southern Europe7%-10%8%-10%15%-20%
Mexico8%-10%5%-8%13%-18%
Costa Rica12%-38%7%-8%19%-46%
Uruguay7%-13%5%-12%12%-25%

The S&P CoreLogic Case-Shiller US National Home Price Index increased just under 4% during 2024. The average gross rental yield for a three-bedroom home was about 7.5%.

So, the average combined yield in the US is about 11.5%. That’s below the lowest figure for the countries and regions in the table above. And that’s before the biggest impact of insurance-driven housing value decline starts over the next few years.

Bottom line: selling US residential real estate and reinvesting the profits in foreign residential markets is a sound investment decision right now… and will become even more attractive over time.

In the person-to-person consultation service I offer here at International Living, I meet more and more people who recognize this dynamic and want to invest in foreign real estate to preserve their wealth. Some people adopt an aggressive approach, buying properties in new markets at a low price and flipping them several years later for a big profit. But increasingly, my clients are looking for steady rental yield… and they’re finding it abroad.

But that's only one part of the puzzle. Equally important is where that foreign-sourced real estate income goes. To be blunt, there is little point in earning excellent rental yields in, say, the euro, only to convert them into dollars that are rapidly declining in global purchasing power. So then I explain how it's possible to have direct flows of non-US investment income into foreign trusts, potentially avoiding US taxation altogether. Yes, they'll have to pay the IRS when they start taking money out of that foreign trust, but in the meantime, they can reinvest it in other foreign income-generating properties… compounding their wealth much faster than if they left it in the US.

These things sound complicated. The truth is that wealthy Americans have been doing this stuff for generations. The only reason the rest of us haven't heard about it is because the benefits of adopting their strategies haven't been big enough.

The calculus is changing, and fast. If getting off the US housing ladder and boosting your future wealth prospects is something you want to do, give me a call, and I'll explain exactly how you can do it.

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