Affordability Shortage Is Real, Housing Shortage Is Fake

Are we in a housing shortage or an affordability shortage?

With up to 40-80% of housing price appreciation being attributable to lower mortgage rates, the inverse of that (higher interest rates jumping from 3% to 7% — combined with record prices) is causing an affordability shortage.

Worse, builders are not developing products to address the affordability shortage because the margins are smaller.

That’s why you see so many luxury apartments for $2,000-3,200/month, even in Jacksonville, when what is really needed is affordable apartments for $1,200 to $1,700.

Apartments are nearly twice as expensive as they should be considering Jacksonville’s median household income of $68,000.

While housing prices are at near record highs, the stock market is at record highs, the job market is OK but starting to show signs of distress with delinquencies, and housing weakness is primarily only in a handful of sunbelt and other states (FL, TX, CO, AZ, etc.), FHFA President Pulte and the administration continue to push on Fed Chair Jerome Powell to reduce short term overnight rates all the way down to 1% to stimulate the economy further.

Is this the right move? Only time will tell. But history tells us this strategy is a path to hyperinflation (similar to what we saw during the pandemic time period). Slap a $5T debt ceiling hike on top of that with the BBB and we have turned the printing machines back on.

With the government wanting to grow its way out of our debt crisis (as Dalio says, this is the easy path, and unlikely to work long-term), we could see inflation pop up fairly quickly by the end of 2026.

Inflation hurts the bottom 90% of consumers, while those who own the assets in the top 10% of the socioeconomic strata, accumulate the majority of the gains. The poor get poorer and the rich get richer, when we already have 68% of households living paycheck to paycheck.

Explore what could happen next, what impacts the price appreciation of real estate long-term (you may be surprised), in this video.

To me, a healthy correction is needed, not more stimulus while we are at or near record highs. What do you think? Should we try to grow our way out of our spiraling US Debt Crisis or should we print our way out and pray our growth can compound faster than our debt?

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