The Biggest Problem Facing The United States - InvestingChannel

The Biggest Problem Facing The United States

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The Biggest Problem Facing The United States

As ticker searchers across the platforms of our 100+ financial media partners help push Trump Media & Technology Group (DJT) stock into the top five among financial advisors and the top ten among all investors, The Juice has our mind on matters more important than what amounts to just another meme stock. 

(For a review of what a bad idea DJT is for investors, see the link from our sister newsletter, The Spill, in today’s Freshly Squeezed section of links). 

We just can’t get over the lack of coverage — or, at least, alarm — over the housing crisis. Most of the stories we see merely detail what’s happening, often referring to a new normal on interest rates and real estate prices. As politicians spend their days in court or arguing among one another about stuff that doesn’t impact most of the nation, becoming a homeowner continues to get more expensive, if not prohibitive for much, if not most of the renter population. 

As we have covered extensivelyabsolutely—a majority of homeowners are sitting relatively pretty with nice amounts of equity, locked-in mortgage interest rates of (sometimes way) less than 5% or no mortgage payment at all. 


But this doesn’t take into consideration the millions in rough housing situations and people priced out of the market. While there’s nothing wrong with being a lifelong renter, it can become an issue if you carry an outsized rent payment into old age. 

Housing is a huge expense. 

And, as you approach and pass midlife, you want that expense to be as close to zero as possible. More than anything — even how much money you make — what you pay for housing can make or break your retirement prospects

We’re convinced that lawmakers are doing relatively little to address the housing affordability crisis because they’re counting on the wealth transfer from baby boomers and older to their Gen X, millennial and Gen Z kids and grandkids. This is as dumb as it is dangerous and as ineffective as it is uncertain. More than anything, it’s not policy and only helps perpetuate a level of inequality that’s near as bad, if not as bad as it has ever been in this country. 

As an illustration, consider the Southern California housing market, where, according to the Los Angeles Times:

… home prices hit a record in March amid sky-high mortgage interest rates, a combination that’s creating the most unaffordable housing market in a generation.

The average for the six-county region reached $869,082 in March, according to Zillow. That’s up 9% from a year earlier and 1% higher than the previous all-time high in June 2022.

So, if you aim for a below average home in the region at, say, $800,000, your monthly payment, including taxes and insurance, will come to roughly $5,510 at the current 7.43% interest rate, assuming you come up with a 20% down payment of a formidable $160,000. To comfortably afford this payment, you’ll need to earn $18,366 a month, or more than $220,000 annually. 

That’s just insane. And we’re using a price at the low end of the Southern California market that’s quickly becoming par for the course in the not-so-desirable parts of long-expensive areas of the country and is becoming so in the better neighborhoods of most cities and suburbs nationwide. 

Heck, even knocking the purchase price down to $500,000 and $100,000 down gives your right to take on a $3,585 monthly mortgage obligation for 30 years. To spend no more than 30% of your income on this payment, you must earn $11,950 a month, or $143,400 a year. 

This is simply not sustainable

To pour salt in the wound, how about this from the LA Times piece:

“It’s bananas,” Tommy Kotero, a 43-year-old refinery worker, said last weekend after touring a dated, $899,000 house in north Torrance with visible cracks in the ceiling and walls. “The asking prices for what we are getting is crazy.”

And this:

“People who have cash are not paying too much attention to interest rates,” said Alin Glogovicean, a real estate agent with Redfin who specializes in northeast L.A.

He estimates that in about one-third of his deals a buyer is paying all cash. Another third put down at least 50%, with a mortgage on the rest.

At least two-thirds of the buyers with down payments of at least 30% aren’t investors but people who want to live in the home, he said. They are professionals such as architects and Hollywood types who have saved, liquidated stock portfolios, built up equity or received help from family.

Some are willing to dip into retirement savings — a strategy many financial experts advise against.

All hell is officially breaking loose. 

If you can afford it, you’re paying cash with your wealth, often thanks to home equity or stock market success. 

If you need to stretch, you’re pulling out all of the stops. Borrowing money and, circling back (we hate that corporate buzzword!) to one of our ongoing themes, risking your retirement by raiding retirement savings. 

Expect this trend to worsen. Not just in California, but across the nation. 

According to, “the number of newly listed homes (is) up by 30.1% from a year ago.” Sounds like good news on the surface. But The Juice also goes deeper. 

We have to think that:

  • Many of the sellers are going to buy another home and do it with copious amounts of cash, squeezing more people out of the market because they just can’t compete. 
  • Many of the people buying these newly-listed homes consider it now or never. Rates aren’t coming down so it’s time to s**t or get off the pot. 
  • This process will only serve to keep prices steady or help them continue to increase. 
  • Once rates actually do come down, even a little, more buyers enter the market, creating an even more competitive market, sending home prices into territory we’ve never seen before. 

Yes, all hell IS officially breaking loose. 

The Bottom Line: Job one for the next President, not to mention the current one, is to deal with housing. Sadly, we don’t think the guy in the courtroom is all that well-equipped to do so. And we haven’t been all that impressed with the current regime’s relatively feeble approaches. 

Ultimately, we need a radical transformation in how we organize our economy to address the housing crisis. We think this starts with raising taxes on the highest earners. Canada just hiked its capital gains tax to help with its affordability crisis. The United States needs to consider similar measures. 

Before you freak out on us, realize that we’re not overblowing the magnitude of the housing crisis. We can no longer kick the can, because life in America is becoming way too expensive for far too many people, particularly on the budget item that matters most.

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