Donald Trump, Irresponsible Realtors, Expensive Housing And High Mortgage Rates |
The Juice isn’t going to spend time soapboxing. What good does it do anybody anyway? But, today, we’re taking a small break from our coverage of alternative investments, which is really all about how to invest in the year 2025. We’re covering the ins and outs of alts for the rest of the year, as we prepare to kick off the new year by showing you ways to blend traditional investment approaches and products with alternatives. We’re taking a small break to update you on what might be the biggest issue facing our nation. The cost of housing. For many people — no matter their investing style — housing is a make or break matter. If you manage to head into old age without a house payment, you certainly have managed to set yourself up for a more comfortable retirement. Except, for younger people these days, getting into the housing market isn’t easy. For some, it’s impossible.
And this is largely because—
The monthly payment on that median-priced property, after a significant 20% down payment of $87,000, comes to $2,895. To be able to afford that payment, you need to earn $9,650 a month, or $115,800, annually. That’s a pretty penny. And even crazier when you up the numbers in the nation’s larger size metros that tend to be considerably more expensive than the median. So, here we are. For roughly two years now, we have taken strong exception to what Realtors were doing over the last couple of years by telling prospective homebuyers to marry the house and date the rate. |
Continued… |
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In March of 2023, we wrote: Cute talk to say you can get the house you love today at a high rate and refinance later at a lower rate. But it’s not that simple. First, what if rates don’t come down anytime soon? Prior to spring 2022, we enjoyed nearly three years of sub-4% rates on a 30-year mortgage. In the previous decade, a rate of around 5% was more common. Hopefully, they’re not doing it anymore. Because rates haven’t come down. How horrifically irresponsible. When Trump became President-elect, rates popped, but they were already trending up in anticipation that he’d win. The economic line of thinking is that if he imposes meaningful tariffs on imports, the cost of goods in the US will increase. This could (re)create an inflationary environment on all goods, including housing. We’ll see. One thing’s for sure. Just as the stock market goes up regardless of who’s in office, so have housing prices. This isn’t stopping anytime soon. We’d be saying the same if the Democrats won — or even had a good day — the other week. Interest rates are another story. Just as it appears the Fed has things about where they want them, we’re still feeling the shock of high borrowing costs on the ground. And if the bean counters are correct and Trump follows through on his tough talk about tariffs, things could go from bad to better to worse in a relatively short period of time.
The Bottom Line: We hope that, as a nation, we start having serious conversations about housing. Because, renting isn’t a bargain these days. So, young people are in a pickle within the context of having an eye on old age. The longer you have a house payment, the more money you’re putting out each month. While you’re earning, this naturally means you’re saving less. If you never get rid of your housing payment — or keep one relatively late into life — you’ll likely have a much more difficult time in retirement. It scares us to look at the data, see the writing on the wall and not see any viable solutions to address and ultimately fix the problem. |
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