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It Should Be A National Emergency
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Before we bang out today’s super important Juice with some startling numbers on housing, a quick look at the most searched stocks in Trackstar, our proprietary sentiment indicator. Tesla (TSLA) search interest jumps ahead of Apple (AAPL) interest thanks to weak delivery numbers at the EV maker. Our sister newsletter, The Spill, has an interesting, maybe even controversial take on TSLA. We include a link to it at the end of today’s email in our Freshly Squeezed section. Also, on Monday we’ll talk AI investing in The Juice. No doubt the two names bookending today’s Trackstar top five — Nvidia (NVDA) and Advanced Micro Devices (AMD) — will come up. So, if you haven’t already forward this email to a friend or family member and politely tell them to sign up for The Juice and The Spill. Now the national emergency. Or, at least, what should be a national emergency. As the campaign trail is shaping up to be even more of a circus than it was four years ago, politicians do what politicians do. They flex on hot button issues that don’t have much impact on the day-to-day lives of Americans. Where’s the discussion on housing? Because — and this is not an overstatement — the lack of affordability could spell doom for the nation. If people can’t afford to buy homes, they have to rent. In and of itself, renting isn’t a bad thing. In fact, for many people it can be a good thing. Right now, it’s certainly less expensive than buying a house. However, what happens when you’re 60 or 70 and on the hook for a $2,000 or $3,000 (or more) monthly obligation? What happens to your budget? Your spending power. Your retirement? These questions are barely being asked — they’re definitely not high on most political agendas in Washington — even though they have serious implications across generations, from babies being born today to people living out their golden years. Let’s consider some numbers on home ownership and all that it entails. First, the latest data on prices. Looking at “Fannie and Freddie” loans, Bill McBride reports that the Freddie Mac House Price Index (FMHPI) is up 5.9%, year over year, as of February. Meanwhile, the Case Shiller Index, which measures “real” home prices (that is, factoring in purchasing power of the dollar), is up 6.0% annually, as of January. Don’t believe anybody who tells you prices are coming down. Maybe so in some markets, but not enough matter locally and certainly not at all nationwide. We’re at a point in time when housing is literally a hair away from being as unaffordable as ever. Second, let’s consider home ownership rates. Nationally, the home ownership rate is 65.2%. So that’s the percent of owner-occupied housing in America. It’s down from the pandemic peak of 67.9% in Q2, 2020 and way, way down from the all-time high of 69.2% in Q2, 2004. This might not seem like a lot, but it is. Things look even worse when you look inside the numbers. We won’t do it by geography because that gets super complicated due to large cities of higher densities naturally having more renters. Places such as Manhattan, Brooklyn, San Francisco and Boston. Looking at age groups is less complicated. Surely, younger people tend to be renters. However, if you read between the lines — or numbers — it’s clear that unless something changes fast, homeownership rates could soon plummet across the board. According to PropertyShark, these are the home ownership rates by age:
For some historical perspective, the US Census tells us that between 1940 and 1990, the home ownership rate was in the low 40s among people under 35. In 2000, it dipped to 39%. This might not sound alarming, but we think it is. Only time will tell. In this case, California could be a harbinger for the nation.
The Bottom Line: This is what we (don’t) like to call the writing on the wall. We’re not saying the rest of the nation will become as expensive as California. Because, at the current rate, California will only continue to get pricer. But so will the rest of the nation. A nation where incomes don’t rise anywhere near as much as housing prices simply isn’t sustainable. A place where you need to make significantly past $100,000 a year just to own a median-priced home ain’t going to fly forever. Something has to be done. We pride ourselves on having ideas here at The Juice. But we’re sort of at a loss right now. We won’t be for long. Don’t worry. But, in the meantime, what’s your solution to this national emergency? Use the feedback link at the bottom of the page to send us your thoughts. We always appreciate them. |
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