Housing Is Becoming A Political Circus

A CNBC survey came out last Sunday showing that housing costs are the number one political issue for young voters heading into midterms.  I want to say something about that before we get into this week's data.

I am not surprised. And you shouldn't be either.

We have been watching this play out all year. The war tax. The Confidence Tax. The housing bill that took thirty years to materialize. The institutional investors. The rate spike. The inventory crisis. The millennial generation quietly splitting in half along a single fault line - whether or not you own a home.

Housing has been a politicized nightmare all year. What I want to talk about today is what all of that noise actually means for my clients sitting at their kitchen table trying to figure out the next best step.

Politics are whack. Personal policy is where it’s at.

I’m noticing that some people have been waiting for the political system to solve this for them. Waiting for the Fed to cut rates. Waiting for the housing bill. Waiting for institutional investors to be banned. Waiting for inventory to flood the market. Waiting for Washington to make it feel safe enough to act.

And in the meantime, other people have gone ahead and made a personal decision.

They stopped waiting for the macroeconomics to cooperate and started working with what existed in front of them. They looked at their income, their savings, their job stability, and the next major milestone coming up in their life…and they decided that their personal economy was strong enough to move even when if the national or global economy felt uncertain.

Because with what other purchases in your life are you considering what’s happening overseas?  What other major decision are you stopping and checking Trump’s Truth Social Feed before making.  I’m going to go ahead and assume you typically check our own bank balances and consider your own personal life events and then make or don’t make the move.  It’s only housing that we complicate like this.

And the data confirmed that this week on multiple fronts.

Mortgage applications were up 7.8% for the week ending July 10 compared to last year. Buyer demand has stayed strong mostly because housing inventory still hasn't caught up with demand. New home sales data came out this morning (I’ll get to that) but the directional story was already clear. SOME buyers are moving. Not all but some. Because they focused on what they can actually control rather than the headlines.

The Wall Street Story

Here is the most surprising real estate development of the week and it is a direct result of the legislation we have been following since March.

Institutional investor home listings have gone from 4,166 in February to 9,447 homes for sale this month -more than double! The seven largest corporate landlords are all net sellers year to date with 3,180 more homes sold than bought since January 1st.

The corporations that spent years outbidding individual buyers with cash offers are now selling.

Not because they want to. Because the law requires them to stop buying. And when you can no longer grow a portfolio, the calcs on holding it change too.

I want to be honest about what this is and what it isn't. The law doesn't exclude institutions from the housing market - it creates guidelines, but there's still enough room to allow institutions to remain active. The wiggle room is real. Build-to-rent is still permitted. Significant renovations are exceptions. This is not a complete corporate exit from housing.

It’s a little more inventory though. For the buyers who have been competing against a faceless LLC with an algorithmic offer and no contingencies - 9,447 more homes on the market is not nothing.  Or when you consider that’s for the whole country – maybe it is still nothing?

 The Trolls are Wrong about Boomers

New Fed research published this week confirmed something that has been building for years and that I think explains a lot of the generational rage in my comments section lately.

The millennial generation has split. Older millennials over 35 are edging toward boomer-style wealth. Younger millennials under 35 are falling further and further behind.

Here are the numbers.

Older millennials - the highest-earning buyer segment in the market right now - are posting a median household income of $132,700 and increasingly functioning as repeat, equity-leveraging buyers. Only 22% of adults under 35 are actually homeowners.

Millennials' total net worth has nearly quadrupled since 2019 - from $3.94 trillion to $15.95 trillion. That sounds like good news. But the average is being pulled up by the older half of the generation that got into housing before 2022 and rode the appreciation wave.

The median under-35 millennial net worth is $39,000.

The median over-35 millennial net worth is $135,600.

Same generation. Three and a half times the wealth. One variable more than any other explains the difference: whether or not they own a home.

Maybe, just maybe the Boomers aren’t hogging all the monies. Boomers did not design a market that ran prices up 37% in two years while simultaneously raising rates from 3% to 7.79%. That was a pandemic, a supply chain shock, a war, and a Federal Reserve response that nobody fully predicted.

The fault line isn’t generational. It is actually temporal. Did you get in before 2022 or after? That question - more than your politics, your parents, or your generation - is what determined where you sit on the wealth divide today.  That’s crazy to think about from inside the industry.

A $124 trillion wealth transfer from boomers to younger generations begins around 2028. Which half of the Millennial generation will take advantage of that transfer?  We shall see.

New Home Sales and Builders

New home sales data dropped this morning at 10am EDT. Sales were down 5.6% year over year and what got my attention was that the median new home price fell even further to $393,300.  When May numbers came out, they showed new builds were costing less than resales which surprised me.  So for them to drop another $42k in June is something to pay attention to.  The report says builders on average are offering a 6% price cut and 63% of them nationwide are offering incentives.

Builders need to move inventory…

What This All Actually Means

The political conversation about housing is the loudest it has been in a generation. And it will get louder heading into midterms. But here is the thing about political conversations. They operate on a timeline that has nothing to do with your life. Bills take years. Rate cuts take quarters. Inventory takes decades.

Your personal economy operates on your timeline.

The buyers (and sellers) who are winning right now did not wait for Washington to solve it. They did not wait for the Fed to cut. They did not wait for corporate landlords to be fully purged from the market or for the housing bill to produce its first unit of new supply.  They looked at their income. Their savings. Their job. Their family. And they made a decision based on their own economic reality.

The political system will keep fighting about housing. That fight is important and worth having.

But it will not buy you a home. Only you can do that.