Demographics investing may lead to $upergrowth.

Your daily newspaper, local news and national media have all said it. Economic pundits, financial gurus and governmental officials have expressed concern. Are the glory days of investing in real estate coming to an end? Have we been caught up in another short-term boom without realizing it was nothing more than a bubble ready to pop?

Many believe that the anemic residential housing market and sub-prime crisis is just the start of a sustained lull in real estate investing. But others feel there is no better time to consider investing in real estate than right now.

So, who's correct?

There is no doubt that the second and third quarters of 2007 will be remembered as the worst in over five years for much of the real estate sector. The Dow Jones REIT index dropped almost 26% between February and August. The Housing Sector Index (HGX), an index composed of 20 companies whose primary lines of business are directly associated with the U.S. housing construction market, dropped 34% over the same time period.

But do these statistics forecast what is to come, or will 2007 be remembered as nothing more than a blip on the real estate radar screen?

Many studies have concluded the latter. In fact, the future of real estate is so bright that we might look back on 2007 as the start of one of the greatest real estate booms in history.

The Brookings Institute, the prominent Washington, D.C.-based public policy think tank, recently published a research report stating that in the year 2030 almost 50% of the buildings in which Americans live, work and shop will have been constructed since the year 2000. This mega-expansion will give the current generation a vital opportunity to reshape future trends.

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The study goes on to say "recent trends indicate that demand is increasing for more compact, walkable and high-quality living, entertainment and work environments."

This means that the concrete-block apartment complexes built in the '60s and '70s, for example, will quickly become a thing of the past, ultimately replaced by high-end developments promoting green spaces and attractive, upscale housing close to suburban and metropolitan areas.

So what does this mean for the Main Street investor? Firstly, real estate investment opportunities such as REIT's, LLC's, Securitized Notes and Tenant-In-Common interests aren't going away. In fact, based on these current market conditions, these investments will only grow more attractive to investors in the years to come as opportunities to participate in this construction and expansion will abound.

Secondly, real estate investments must become part of every investor's diversified portfolio. Time and time again, a diversification approach to investing has proven to outperform all other strategies.

The real question an investor should be asking themselves is not "should I invest in real estate?", but "where should I invest in real estate?" It boils down to the old real estate adage, "location, location, location."

Where are the places in the country that are set for expansion over the next quarter of a century? Where will population growth occur?

According to a 2006 US Census Bureau report, over 88% of the nation's population growth over the next 25 years will occur in two regions: the South and West.

As empty nesters consider downsizing, active seniors will escape the burdens of home ownership by moving to multi-family housing such as condos and townhomes in Florida, Arizona and the Carolinas.

Furthermore, as echo boomers (ages 13 to 25) leave the nest or graduate from college the housing market in the South and West will benefit. Cities like Charlotte, N.C., a hotbed for the financial and pharmaceutical sectors are now competing with New York, Chicago and Los Angeles as a viable, and oftentimes a more attractive alternative, for college grads entering the work force. This means more apartments, more condos and more single-family homes.

Finally, baby-boomers entering their 60s and 70s will strain America's health care resources. Medical office buildings, hospitals and assisted living facilities will need to be built to fulfill this demand.

What can the average investor do to take advantage of these demographic shifts?

Well, lucky for us many of the top real estate investment firms are already acting on these trends. Investment vehicles such as REITs focusing specifically on apartments and healthcare facilities are already flooding the market.

Sponsors of Tenant-In-Common investments (more commonly known as TICs) have already re-focused their acquisition strategies to acquire buildings in these growing areas of the country, thus giving property owners wishing to sell their investment and commercial property the opportunity to diversify their sale proceeds into a very attractive portfolio of TIC properties.

All arrows point in the direction of positive growth in the real estate market in the years to come.

Of course, the real trick for the average investor will be to determine how to invest in the path of progress most effectively. My suggestion: Consider demographics when making investment decisions.

Demographic investing is one of the most effective ways to evaluate your investment choices. The June 25, 2007 edition of Fortune stated that "Patiently investing in long-term demographic trends will set up your portfolio for supergrowth."

"Supergrowth" may be a tough term to define, but what should be obvious is that basing investment decisions on the goods and services that the country's largest population groups are most likely to consume over time in the regions experiencing the greatest growth just makes sense.

When it comes to demographic investing, investors needs to ask themselves three basic questions: Who? What? Where? Who are the dominant population groups? What are the essential needs of each group? Where are these groups living, working, and moving?

Find the answers to these questions and you'll be well ahead of the game.

BY JOSH SLAYBAUGH, PRESIDENT, TRADE UP 1031