So here’s something weird: everywhere you look, developers are building luxury condos. And I mean everywhere. I spend my days reading real estate news from literally every corner of the planet—Miami, Mumbai, Lagos, Sydney, you name it—and it’s the same story. Glass towers. Marble lobbies. Infinity pools on the 47th floor. Starting at $2 million.

Meanwhile, teachers can’t find apartments.

This seems… not great?

But here’s what’s really interesting. When I’m not reading about $15 million penthouses, I’m reading economic data. And the data says something surprising: people feel broke. Not actually broke—the numbers say household wealth is up. But psychologically broke. Compared to four years ago, pre-COVID, people across Western economies feel significantly poorer.

So we have this bizarre situation where developers keep building things for rich people, while the actual population feels like they’re getting less rich. This is either a massive market failure, or I’m missing something obvious. Let’s find out which.

The Numbers Are Wild

Okay, so first: is the luxury oversupply real, or am I just noticing it more?

It’s real. Really real.

By late 2024, the U.S. multifamily vacancy rate hit 8%. Not great, but okay. Luxury units though? 11.4%. That’s nearly half higher. In Austin—which went absolutely bananas during COVID—luxury vacancy rates hit 15%. Landlords were literally offering two months free rent. When you’re giving away 17% of a year to get someone to move in, your pricing strategy might be off.

Here’s the part that made me do a double-take: Los Angeles has 97% of downtown rental construction in the “4 & 5 star” category. Ninety-seven percent! Average rent: $2,800/month. The city also has 93,000 vacant units—nearly half deliberately kept off the market—while 36,000 people are unhoused.

Read that again. We have empty apartments and homeless people in the same city, and we’re building… more expensive apartments.

The national picture is even weirder. The U.S. supposedly needs somewhere between 1.5 and 7 million housing units (economists can’t even agree on the shortage size, which is its own problem). So what are we building? In 2024: 490,000 luxury units under construction. Affordable units (average rent $1,332)? 6,700.

That’s not a typo. The ratio is 73:1.

A Columbia researcher named Alex Schwartz found something that really clarifies what’s happening. From 2000 to 2020, the U.S. actually built a surplus of 3.3 million units compared to population growth. We have enough homes! We just built the wrong ones.

It’s like if a town had a potato shortage, and in response, someone built 73 caviar factories and one potato farm.

The Psychology of Feeling Poor

Now for the weird part about consumer sentiment.

Objectively, by the numbers, people got richer recently. Median home equity jumped 45% from 2019 to 2022. If you owned a house, you made out great. But consumer sentiment—how people feel about the economy—has been in the toilet.

The University of Michigan measures this stuff, and their consumer sentiment index has been doing this strange thing where it decouples from actual financial reality. The Federal Reserve even published a study trying to figure out why people who are technically better off feel worse. Their conclusion? Inflation psychology. Even when your assets go up, if your grocery bill also goes up, your brain focuses on the grocery bill.

But here’s what I think is really happening: the wealth gains went to people who already had assets (houses, stocks), while the costs hit everyone. If you’re 28 and trying to rent an apartment, your home equity didn’t go up 45% because you don’t have home equity. You just saw rent prices explode.

This creates a tale of two economies. The asset-owner economy is doing fine. The trying-to-become-an-asset-owner economy is getting crushed.

The Investment Property Paradox

Here’s where it gets philosophical. A huge chunk of luxury real estate isn’t even for living in—it’s for investing in. Ultra-high-net-worth individuals park money in trophy properties. Foreigners use it for capital preservation. Boomers buy second and third homes as investments.

But here’s my question: when does an investment stop being an investment?

Normally, you invest in something to eventually sell it for more money. That’s the whole point. You buy low, sell high, cash out, enjoy your gains. But if everyone is buying luxury real estate as a store of value, who are they planning to sell to?

Each other? Forever?

At some point, someone has to actually want to live there and be able to afford it. Otherwise you’ve just created an elaborate game of hot potato with $5 million condos.

The Generational Time Bomb

And this is where the demographic math gets really interesting.

Who’s buying these luxury properties today? According to the data, it’s overwhelmingly people in their 60s and 70s—Baby Boomers born in the 1950s and 1960s. They’re at peak wealth, they’ve benefited from decades of asset appreciation, and they’re making luxury real estate purchases either as primary residences, investments, or second homes.

In a decade or so, these properties are going to get inherited by Gen X (born 1965-1980) and older Millennials (born 1981-1996).

Now, here’s my hypothesis: what if the next generation doesn’t want them?

Not because they’re against wealth or nice things. But because their values and priorities seem genuinely different. The data on younger buyers shows a shift toward experiences over possessions, flexibility over permanence, and urban access over suburban space. Millennials and Gen Z are the generations that invented “minimalism” as an aesthetic and “nomadic” as a lifestyle choice.

They’re also—and this part is crucial—the exact same people who can’t afford housing in today’s market. The 35-year-old who can’t buy a starter home right now is supposed to want a $3 million inheritance property in 15 years?

Maybe they will. People’s preferences change as they age. But maybe they won’t. Maybe they’ll sell these properties immediately to fund more liquid lifestyles. And if everyone inheriting luxury real estate decides to sell at once…

Well, that would be quite a market correction.

The Fundamental Mismatch

What we’re seeing isn’t just a market inefficiency. It’s a complete misalignment of supply and demand across time, price, and demographic segments.

Developers build luxury because the margins are better and financing is easier. But they’re building for a customer base that’s aging out of the market, to be inherited by a generation that’s been priced out of homeownership entirely and might not share the same housing values.

Meanwhile, the housing that people actually need—workforce housing, affordable rentals, starter homes—barely gets built because the economics don’t work under current zoning, financing, and construction cost structures.

The result? Empty penthouses and homeless teachers in the same skyline.

This isn’t sustainable. Market failures this large eventually correct themselves, usually in painful ways. Either prices have to come down dramatically, incomes have to go up dramatically, or we need to build radically different housing.

My guess? Some combination of all three, plus a generational reckoning when Boomers’ luxury real estate hits the inheritance market and discovers that younger generations either can’t afford it or simply don’t want it.

The only question is: how long can we keep building the wrong thing before we’re forced to build the right thing?

Because right now, we’re building caviar factories in a potato shortage. And that’s not a market. That’s a system error.