Ignoring The Biggest Crisis Facing The Nation

We cover housing a lot here at The Juice. And we do it for several reasons. 

Primarily because, for many people, it’s their largest expense. And, if you can eliminate or drastically reduce that expense at any point in life, particularly headed towards or in retirement, you increase your financial options and flexibility. 

Also because, we see a future where the current housing crisis becomes a nation killer. We’re not engaging in hyperbole here. In fact, we think the political discourse (if you can call it that) — and, subsequently, the media — is ignoring the true magnitude of what we’re dealing with. 

Whatever happened to a media that didn’t take their cue on what to cover from the politicians? To a media that sees a problem and, with some journalistic pride and integrity, makes it the story because it — not tall tales about immigrants eating pets — deserves to be the story. Because it matters to the health and sustainability of the nation. 

Politicians certainly ignore the true extent of the housing crisis (or pay lip service and offer weak proposals that will do very little to decrease the price of housing and increase incomes) because a majority of Americans either have no mortgage payment or they’re paying one with a sub-5% interest rate. Many of these people tend to be older people who vote. 

This approach ignores the impact of out-of-control housing prices on younger people as well as millions of “older” people who are far from all set on housing. It’s a huge problem that no transfer of generational wealth, down payment assistance or tax credit is going to solve.

As we told you the other day, don’t expect the impact of Federal Reserve policy, particularly their half-point rate cut on Wednesday, to make housing affordable:

As we speak, the median price of a home in the United States is $433,229.

Now, depending on where you live, there’s a good chance you can’t tough a damn thing for less than half a million. But let’s humor one another and use the $433,229 figure.

The monthly payment on the median-priced home comes in at between $2,883 and $2,438 as you decrease the interest rate on a typical 30-year loan from 7% to 5%. 

At 7%, you need to earn $115,320 annually. 

At 6%, you need to earn $106,200 annually. 

At 5%, you need to earn $97,524 annually. 

So, for all intents and purposes, you need a six-figure income, not to mention a down payment of nearly $87,000, to be able to afford the typical home in the United States of America.

When we say “you need to earn” we refer to how much you have to make to not spend more than 30% of your income on housing. 

But here’s the problem that really underscores the media’s irresponsibility on the issue, not to mention politicians. 

According to the National Association of Realtors (NAR):

Almost 90% of metro markets (199 out of 223, or 89%) recorded home price gains in the second quarter of 2024… Thirteen percent of the 223 tracked metro areas experienced double-digit price gains over the same period, down from 30% in the first quarter of 2024.

If you follow national news and such on housing, you might think prices are falling. We’re led to believe the crisis is all about activity, when the crisis is, always has been and always will be about skyrocketing prices and relatively stagnant incomes. A drum we have been beating for more than two years now. 

But one thing doesn’t change. Sort of like the stock market, while they might ebb and flow nationally or in some areas, housing prices go up in a straight line. And they go up big time. 

From that NAR report, we see that the largest year-over-year increases are happening in the following places: Racine, Wis. (19.8%); Glens Falls, N.Y. (19.8%); El Paso, Texas (19.2%); Morristown, Tenn. (16.7%); Manchester-Nashua, N.H. (16.2%); Anaheim-Santa Ana-Irvine, Calif. (15.0%); New York-Jersey City-White Plains, N.Y.-N.J. (14.8%); Springfield, Ill. (14.8%); Dutchess County-Putnam County, N.Y. (14.2%); and Trenton, N.J. (14.1%).

Some perennially expensive markets, but quite a few relative bastions of affordability. 

Also from the NAR report:

A family needed a qualifying income of at least $100,000 to afford a 10% down payment mortgage in 48% of markets, up from 40.7% in the previous quarter. Yet, a family needed a qualifying income of less than $50,000 to afford a home in 2.7% of markets, down from 4.5% in the prior quarter.

If this doesn’t scare you for the future of the nation, we’re not sure what will. Being a nation of renters is one thing. Being a country of haves and have nots is another. It really spells quite clear writing on the wall, which is the continuing death of the American dream. 

The Bottom Line: If we’re right, as mortgage interest rates fall, more of the “haves” will step off the sidelines. Some people to sell and buy again. Others to buy for the first time. We’re talking the folks most financially well-off among us. 

This effect will help cause prices to achieve ever higher highs. At that point, you’ll need way more than $100,000 a year to even sniff the median-priced house in the country, irrespective of what interest rates do. 

Is this really a good direction for America to be going in? The Juice thinks not.

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