EVERYONE Will Be Able To Afford a Home if They Do This

Apparently there's a brand new development scheme happening in the United States to build up to 1 million Trump homes. And I want to thank David for sending this story over to me because I actually had not heard of this until he sent this to me. But here's what's going on and how it might affect the housing market. There's a billionaire out of Dubai who proposed a 400 billion dollar plan to solve the U.S. housing shortage. And anybody who's familiar with my channel knows that there really is no housing shortage. We have plenty of homes out there, just a lot of them are not currently for sale, but they certainly will be over the next 15 or 20 years as all the baby boomers pass away. But anyways, this proposal includes investing 400 billion dollars in building homes in the United States and they claim that this could create up to 20 million jobs. Now that would be a big increase and boom in the economy, guys. Compared to all of the horrible jobs data we've been getting recently, worst firing January since 2008, going back to then, worst amount of jobs being created going back to 2009 as well. It is just completely in the tank right now. So if we created 20 million jobs because we're building all these homes, it'd be a huge boom for the U.S. economy. All the analysts continue to say that we're about 5 million homes short in the United States. In other words, we would need to build 5 million homes in order to make housing affordable again. Now, I completely disagree with that. I have for a long time. And I think if they actually did that, it would completely crash the U.S. housing market, guys. If we saw that many homes get built and actually come up for sale and they were all affordable homes, real estate values would collapse across the country. But they continue to push the narrative that because we haven't been building enough homes, that's why home prices are so high and we have fewer first-time home buyers than ever and people unable to move and get better jobs because of home prices and this and that. But the reality is housing was relatively affordable before the pandemic, guys. It just was, you know. Compared to the amount of money people earned and what home prices were, it was much easier to afford a house before 2020 than it was afterwards. And that's simply just because of inflation. So they can make up all these BS excuses of why it's this and why it's that, but it really just comes down to inflation. Inflation is the reason that many people can't afford homes today. Now, apparently the idea behind building these 1 million Trump homes is to do it under the rent to own model. Basically, private investors would buy and rent the homes to tenants and they would count a portion of the rent payments toward a future down payment and allow renters to buy homes after about three years of renting the house. I think that actually could be a good idea for a change because not only will it introduce some stability into the housing market and the rental market for that matter, but also, you know, rent to own deals are pretty tough to come by in the resale market, guys. You don't find them that often and if every person who rented one of these homes actually had an opportunity to buy that house after living in it for three years and put some of that rent money towards the down payment, that's a major advantage that a lot of people just don't have these days. So this is one of those very few housing initiatives that I'm in favor in just because it would make it so much easier for people to have a place to live. As long as the rent is affordable, of course, and a sizable amount of that rent does count towards the actual purchase of the home. But the part I'm really skeptical about is all the private investors because private investors want to make a profit just like anybody else trying to make an investment in the world, guys. No one does this for free and I really question how they're going to make this profitable and I wonder how many corners they're going to have to cut with these brand new homes if this actually happens to make it profitable. And I think that could end up being the crux of the whole thing that makes it fall apart. And today I'm walking down Hawthorne Avenue here in Miami Beach. But the other reason I like this is because if you introduce 1 million brand new homes on the market, that's not including all the brand new homes that are under development right now, that's not including the resale market and all the homes that are going to continue coming to market on the resale market, that's going to have a major downward pull on home prices. But if it actually creates 20 million jobs, then that could be the counterbalance, right? Because 20 million jobs is a tremendous amount of jobs and that can really influence how much people can afford to pay for homes, right? If we have an economic boom and a lot of people are getting jobs, that can make a big difference. That can easily create a situation where people can start affording to pay more for homes and we could see a resurgence in home prices at that point. But this is all speculation. This is just kind of thinking 5 to 10 steps ahead of what things could look like if this actually happens. But one thing I would be concerned about with this, just how stable people's finances who would be renting these homes and potentially buying them are. Because the thing is, buying a house and owning a house requires a lot of income stability and a lot of savings and a lot of financial wherewithal to be able to hang on to the house, guys. It's one thing to be able to rent it and have the down payment and buy the house, like we've talked about many times before, but it's a whole nother ball game once you own the over time. But this is all speculation at this point. It's all just talk. We don't really know if this is going to happen or not. It's going to require a tremendous amount of coordination across government and private industries, and we all know how well that usually works out. And there's really still no concrete plan on who's going to pay for what and how it's all going to look in the end. A lot of critics are saying that the developers are going to be the ones to really benefit from this more than people who are going to be renting the homes. And a lot of people are already questioning whether affordability or profit would be the primary goal. That's one of my biggest skepticisms about it as well. Because there are private investors involved here, this is not just the government giving away free money. These investors are going to want a return on their investment. And if the houses have to be affordable enough where the average renter can buy them, that means that they're going to have to cut some serious corners, whether it be the size of the home, the building materials, or whatever. Something's going to have to give to make those houses very cheap. In fact, one of the main concerns raised here in this story is about the higher long-term costs for buyers. Something I constantly talk about on this channel, guys. It's one thing to buy the house. It's a whole nother thing to be able to have the money to stay in the house over a 10 or 15-year period as the costs of that home continue to rise, especially if your income doesn't keep up with that rise. And the other thing I'm skeptical about with this is if a lot of this money comes from overseas, from a Dubai billionaire, for example, it makes you really wonder the direction this country is going in. As if things aren't already bad enough, China owns a sizable amount of U.S. real estate these days, and now if you have a billionaire in Dubai who controls over a million homes in the United States, well, that's not really a great thing. It's like, yeah, it's great that somebody's willing to come to the table and make the investment, but like I said, they're going to want to return on that investment. And I just hope that the people who end up renting these homes and ultimately buying them, if this happens, don't become victims in order to make somebody else a fortune. Just the announcement of this news actually boosted home builder stocks, and a lot of the home builders are willing to expand production if these affordability programs actually come to fruition. So essentially, these home builders are begging for this opportunity to actually happen so they can get their fair share of the pie and get that government handout to build houses, guys. But we've already seen the problems that a lot of people are having with these new construction homes. I mean, some of them are downright unlivable, guys, and if that's already happening now without a major government backstop, it makes you question how much worse it can really get. And then the whole reason that they're trying to do all of this comes back to this idea that we have a housing shortage, right? And the estimates of the amount of homes that were short vary depending on the company. You know, Moody's says we're 2 million homes short. Zillow says it's 4.7 million homes short. McKinsey Institute says it's a whopping 8 million homes that were short right now. Some crazy politicians even say that we're 20 million homes short in the United States. I mean, these numbers are just insane. But what I've been saying all along is that there's been no shortage all along. And the way that we know this is because the inventory continues to pile up on the market and it's going unsold. So if there was a shortage, then all of that inventory would be readily absorbed and there would just be nothing on the market. And every time something hit the market, people would just snap it up and buy it before you could blink. And the other thing is, what is the definition of a shortage? That's the other thing that people can't really agree on what a shortage is, you know? A shortage heavily depends on what should a house really cost, you know? How large should the homes be? How many people should live in any given house? How many vacant homes should exist in a healthy housing market? How many households would form if housing were cheaper? There's lots of unknowns and kind of subjective definitions of what a shortage really is. A lot of economists also say because there's so many people that are living together, you have about 8.1 million households that are doubled up right now, which is people living with roommates or non-family members in order to save the money for the housing costs. You have 18% of adult children between 25 and 34 living with parents compared to just 8% in the 1970s. And a lot of economists believe that if housing costs were lower, then a lot of these people would be independent and go out and start living on their own. And then we got to talk about vacancy rates. The actual data shows us that there are about 15 million vacant homes in the United States right now, which represents about 10% of the total housing stock. And these empty homes include properties that are for rent, for sale, seasonal use, or being held off market and are not occupied. So that's a lot of vacant homes, guys. The fact that there's 15 million homes just sitting there empty across the country right now is huge, which is going back to what I was saying. How is there a shortage? How can they tell us that we still need 5 million homes if we already have 15 million sitting there empty? Sure, you could say, well, no one's living in them or the price is too high for rent or for sale, so they're remaining perpetually vacant. But the same thing could end up happening if they build these 1 million homes. Even if they start off as affordable, maybe people will turn around and flip those homes for a profit. But I agree with the economists who have their head on straight and say that there's no housing shortage because their argument says that housing supply has kept pace with population growth. And they say the problem is location and affordability, not total supply. So shortages mainly exist in high demand cities and lower income housing segments, which I think is largely true. That's part of the reason why there's so many houses for sale that are going unsold. It doesn't really matter how many houses are for sale if no one's buying them because they can't afford them. But one thing that these people who are claiming there's a shortage do not understand is that eventually those houses will get sold, guys. People are not going to hold onto these houses forever who are being stubborn with the price. Eventually, they're going to have to come to what the market's willing to pay if they want to get that home sold. And then also we have the silver tsunami that we've talked about several times on the channel that refers to all of the baby boomers that are going to be selling their homes when they're no longer around. Sure, a lot of those homes will get passed down and inherited, but 70 percent of those homes will get resold because people don't want those houses for one reason or another. And another alternative view from economists that I agree with is that housing supply is not the issue. Income is the issue. People do not make enough money anymore to buy the homes that are available today. So if wages were to increase, that would solve the affordability crisis right then and there. And a lot of these economists say that the U.S. cannot build its way out of housing affordability problems. And I completely agree, guys, because the fundamental issues come down to homes not being affordable, not because we don't have enough of them, but because people don't make enough to buy them. And too many people who probably shouldn't be allowed to buy homes are able to and artificially push up the prices of these homes. When you have so many different programs that allow people to get into homes with zero percent down or even helping people out that make six figures a year buy these houses, no wonder we have affordability issues. You know how you fix the housing affordability problem? You require that everybody who buys a home needs to put 20 percent down. That's mandatory. And eliminate any down payment assistance, no government handouts for giving that 20 percent down. That would fix affordability overnight because basically, if you think the buyer pool is small now, watch it completely drop off a cliff because no one has that kind of money. And that's how you know most people don't really have the money to buy a house. And obviously that's not going to happen, but it would be a very quick social experiment to just prove to everybody that the demand would just be completely gone if you really had to have some skin in the game to be able to buy a home. And also one last thing I want to touch on here is something that the Trump administration recently said, is they want to increase affordability of homes for people who are entering the market while still preserving the value of the homes that people already own. Because the last thing they want to do is see people who have a house that's worth more money than ever, see the equity and the value of that home plummet because now all of a sudden housing is affordable again. Well guess what? You can't have it both ways. You can either keep these prices artificially high and just keep doing what you're doing, or you can actually solve the affordability crisis, but that's going to cause home prices to tank. And that includes people who own houses right now. Now it will be skewed because in very highly desirable areas, home prices will still remain a lot higher because even if you build 10 million new homes, a lot of people who live like in this neighborhood, for example, are not going to want to move to an area where they're building those 10 million homes. So you're still going to have high demand and high desirable areas that will bolster prices in those areas. But in general, when you have a lot of housing stock come to market, that will lower the price guys. That's why you're starting to see the prices fall in so many metros across America because the supply is coming back. So you know what? I think they should do it. I think they should do it simply because more housing means cheaper prices for everyone, at least on the surface. And as long as none of our taxpayer dollars go into this, then I'm okay with it. How well it's going to work out in terms of investors getting their returns without crushing the people who are renting and buying their homes remains to be seen. But hey, it's better than sitting around doing nothing, I guess. So let me know what you guys think about this proposal in the comments. And if you enjoyed this video, make sure you subscribe to the channel. And if you don't want to wait for my next video to come out, check out this one on the screen right over here. And I'll see you in the next one.