This Chart Should Terrify Every Millennial Homebuyer

We're in an urgent affordability crisis that could leave an entire generation behind for home buyers. That'll really worsen the economic divide that we see in this country. Let's dig into how we got here, what that means for you if you're a seller or an investor, and how you can work your way out of this situation. You're going to be seeing new information you may not have heard or seen before.

So, hang on. We've got 43 slides to go through. This is an article that came out from Fannie Mae. This is according to Fannie Mae calculations, it would take one thing or a combination of them for affordability just to go back to 2016 to 2019 levels.

The median price of a single family home would have to drop 38%. Okay, so 257,000. My personal model actually is in that range. I did an analysis for my investment banking model of 31 to 42% drop from home prices today to get it to become affordable.

Or median household income would have to rise more than 60% to 134,500. Or the mortgage rate would actually have to go all the way down to 2.35% from roughly 6.5. We're actually around 6% today cuz this came out a little while ago. But this is absolutely insane.

These numbers are unheard of. We're talking about Fannie Mae acknowledging that there could be a massive crash. And this is an urgent crisis if we want homes to be affordable again so the next generation can actually buy them and not be left behind. Now, how did this happen and what does this mean for you if you're a home buyer or home seller?

Well, in March 2022, the Federal Reserve started hiking interest rates up. But prior to that, interest rates from the federal funds rate were actually dropping all the way for 40 years, which pushed asset prices higher, causing it to be more expensive for the next generation to purchase. Yes, they had lower payments, but the prices were higher. And the problem is after you drop rates all the way to zero and then start moving them up again.

And prices are at record highs, you have this period of time where real estate is completely unaffordable. So, a lot of people were saying for last 30, 40 years, "I'm so successful. I make really good decisions. I'm really good at real estate.

You just need to work harder." But the reality is now there those same people are freaking out, realizing that the majority up to 80% of home price appreciation is due simply because of interest rates coming down. So, if you didn't buy before 2021, you're in trouble because you're in this huge affordability crisis where the majority of your money is going out the door to pay for your mortgage or for rent. So, let's look at this detail. This comes from Reventure.

It says the income needed to buy a house, just look at that. From 2021, just spiked from 58,000 to 112,000 dollars today. I mean, and you look at the wages. Yes, wages did come up, but the the gap between wages and prices is so significant.

One of the largest gaps ever in history. Even bigger than the Great Financial Crisis. What are home buyers supposed to do? They just aren't making enough money and worse, they're loaded up with debt where the majority of their income or good portion of it is actually going to shelter costs and repairs for that shelter.

So, we actually have data that shows the homeowners are paying today up to 40% of their income to just pay for their shelter. Well, if you think about it, if you're paying 30% tax, maybe you have a state income tax as well. The majority of your money is out the door between taxes and your shelter costs. What are you supposed to live on?

How are you supposed to save and get to the next level? And this is the graph that shows it. So, you can see mortgage payment as a percentage of income over here. The blue line shows this information.

And you can see that after 2021, it spiked. You used to be 25% of your income. Now it's 40% of your income. It even reached a peak of near 50% of your income when we had the 7.5% interest rates.

But this is causing a housing crisis, okay? If you don't have the next wave of buyers coming through, who are you selling to if you're a seller? And if you're a buyer, your funds are really valuable to sellers if you can actually afford to buy because you're one of the few remaining ones that can actually purchase from them and need to purchase from them. Now, this type of crisis is causing a lot of data to come out.

And one of the most interesting ones is the married, people who are married and also own a home by 30 years old has collapsed from 50% all the way down to 12%. From 50% 1950 to 12% in 2025. You can just see the affordability crisis continue to get worse every single year as time moves on. And it gets a lot worse right there at the end once we had the period of low interest rates move to high interest rates within a short period of time.

This is pricing people out from getting married and starting household formation and able to purchase a home. It's just not possible for them, even with dual income families. And when you look at it from a ratio perspective, affordability is already worse than the Great Financial Crisis when you're looking at it from a home price to medium household income ratio. You can see here's the last bubble that we had and here's the new bubble where we're at.

So, it's really bad. It's not really getting better. It's actually getting worse and there's an urgent crisis right now that needs to be solved. So, this is what articles that are coming out.

I think they're really interesting and I think they're true. I talked to people on the ground and they say the same thing. Housing costs are so high that some Americans are delaying milestones like getting married, having kids, and even adopting a pet. It's too expensive.

When you think about having a kid, I mean, for us it was $20,000 to have a kid. It's $20,000 a year to to put them in daycare and things like that. It is really expensive and it adds up. And if your wages aren't there, I don't know how most Americans are making it work.

Or one parent is staying home, the other's working, but they have to make enough to support the entire family. This is a really interesting stat that is going around on social media right now. During the Great Depression, 48% of young adults ages 18 to 29 lived with their parents. Today, it's 52%.

Life was more affordable than the Great Depression than it is now. And I did a little chat GPT and apparently this is fairly true. It's actually more affordable on a relative basis during the Great Depression than it is now. There's more people living at home because they can't afford to go out and buy a house.

And then they're living at home, they don't get married. They're putting off the major life events like buying a house and household formation. This is going to slow the entire real estate market down for years to come, especially as we see the silver tsunami happen with the boomers. And sadly, about 15.4 million boomers will pass away in the next 15 years according to Harvard study.

But so, we're going to see older generations start to pass away and younger generations aren't having kids. And this is obviously going to impact the housing market long-term. This is a scary chart, which is exactly what I was talking about. You can see that the folks, this is the demographics of the United States.

On the left side are male and the on the right side are female. But you can see that there's less and less people being born nearly every single year that that we have. And now we have this huge cohort up here of the older generations that'll be passing away. So, it's going to start narrowing down and we're going to have a population crisis.

Now, the builders don't understand this because they just keep building even though we have an oversupply right now. I don't know where they think that this is going to happen, especially with the policy from from Congress and the president of, you know, preventing people coming into the company country, which I think personally is a great thing. Like obviously we need to have a border in a in a right way to have people come in. But if Americans are priced out from having families and starting household formation and purchasing a house, it's going to impact the real estate market big time if we don't have some sort of immigration come in.

So, you know, either you fix the affordability or you need to have some immigration or you just let the market decline like Fannie Mae said, 38% to get things to be affordable to the prior normalized level, which nothing's really normal. The housing market's been manipulated by the Federal Reserve and the government for for basically ever. Household formation collapses. So, this is what we're talking about.

You can see from 2010 to 2024 on the total number of households and then household formation. And we had a really tough period in 2020. Obviously, there wasn't much household formation. We had a little pop back.

And then in '23 and '24, right? How can you have household formation if you can't afford to have a household? You can also see the people per household is starting to fall. So, this is something that is really needs to be watched.

It is terrifying. I'm worried about the next generation and their ability to buy houses and start families because of this affordability crisis. And frankly, it keeps getting worse. US grocery prices keep on rising.

This is a card according to the BLS. You can see that we're up 29% in groceries just from 2020, which is a wild statistic. And oh, the real problem is that it compounds every single year. So, you might say, well, you know, 2.9% inflation isn't that bad.

But when you play it out, it starts to go, you know, vertical. And if wages don't keep up on that curve, then, you know, you can have people fall behind really quickly who are in the middle or bottom class. And that's why there's a total disconnect from Main Street and Wall Street. Additionally, when you look at wages, you can see that the wages haven't kept up with the average rents over a period of time and there's a widening period between these two.

We need rent prices to come down, too, not just home prices. We need a big decline so that way we get closer and narrow this gap between two. And this will make it a lot easier for people to move out of their parents' house, start their own life, start having a family, and get back to a sustainable future. Another issue that we're seeing is that the productivity gains that companies were experiencing that was not translating to a rise in hourly compensation.

So, consumer basically workers back in 1970s, they get paid, you know, a little bit more today than they did back in 1970s on a relative basis, but their productivity has skyrocketed. So, most of the gains are actually going to the company and not to the workers, and this is part of the issue that we that we see and it's with AI, it's likely to get a lot worse because AI is going to be taking a lot of jobs and people will be looking for opportunities. This is another great chart. This comes from Bank of America Institute.

It shows that the after-tax wages and salaries by household income from a prior year has actually been going up for the higher income earners. The middle income earners have seen a slight decline in the lower income earners are seeing less and less growth. Probably because they have a lot more competition and they also are using technology to get rid of a lot of those lower wage jobs. And so, this is making it worse with the technology changes and the middle class and lower class, frankly, are being left behind right now.

If they don't have assets, as you can see with the stock market hitting all-time highs and a lot of the assets hitting all-time highs, if they don't own those assets, they're falling behind the other people who do have the money to invest and it gets worse every single year. And this is a interesting stat that came out that says the spending today in the economy is being driven a lot by the top 10% wealthiest of households. Another interesting stat you should know is about 80% of qualified buyers have already purchased a home. The people who actually qualified with their wages to be able to purchase a median price home today.

So, sellers are scrambling over the remaining 20% of buyers who can purchase. And here's another chart that, you know, again is just re-illustrating how tough it is for the average consumer to be able to purchase. You can see that the consumer price index for all items in the US have just skyrocketed and continue to get out of control. I don't see this changing anytime soon now that we have the Fed is actually stepping in a little bit to provide a little bit of easing on the short end of the curve.

We see the Fed come in and manipulate the short end of the curve and we see Congress continue to spend and we have a massive budget deficit. And it just continues to get worse. I mean, the story and the data that comes out every single month is really terrifying. So, the consumer has so much debt, they're loaded up with debt.

They have credit card debt, they have student loan debt, they have car debt. We're seeing delinquencies rise across the board already. So, let's look at the credit card debt. It's ticking higher.

We're up to almost 12% near Great Financial Crisis levels and nobody really feels like we're in a crisis at this period of time, but if you're looking at the numbers on a number of sales of existing home sales, absolutely we're in we're in a crisis. And it's starting to show up. We're seeing like the car debt and the student loan debts obviously have an impact now that student loan debt has resumed in their payment, but you can see that the inflation for student loans like right people were sold this story that they could go to college and make more money if they went to college with a degree and we just don't see that being the case for a ton of the different degrees, but the US college tuition and fees have skyrocketed for over the last 40 years and this is partly because the government intervened and guaranteed a lot of these loans. You know, the colleges felt comfortable with the situation and the government is basically helping to finance these insane costs of of US tuition and that's a huge problem that's plaguing the next generation of buyers and preventing them from moving forward.

Now, here's an insane headline from the Wall Street Journal. It says their divorce to 2% mortgage is keeping them together, right? So, this would have been one of the couples that, you know, purchased before in '21, '20, '20 or before and it's insane like there's going to be social impacts of this affordability crisis where people are making personal decisions off of financials, which is kind of terrifying that people don't have the mobility that they once had. Uh this is a concerning chart as well.

This is why maybe we don't have as much fam- family formation here. This is how couples met in the US and you can see that people meeting online is like skyrocketing and just the organic ways of meeting people is starting to fall. So, maybe there's something around this. I'd love to hear your thoughts.

You know, people are are is this causing like household formation to slow because people are having like artificial relationships? We have like a low commitment society. This what it kind of seems like it's headed to and we're just seeing a crash of all the ways that people meet each other. So, technology is great in that we can connect with each other, but is it organic?

Is it actually building something where people want to stay together long-term? They want to buy a house together and they want to build a life together and start having kids. And one of the main things that's scary is that millennials and Gen Z, the younger generations, they want in on the housing market, right? There is demand for buyers.

They just can't afford it. So, they're gambling on, you know, financial instruments like mortgage rate drops that they're doing like the buy 321. Down and then their rate pops up, you know, 3 years later on what their payment is. They're using arms, right?

The adjustable rate mortgages and refinancing, but this could be a huge financial ticking time bomb if the, you know, prices come down, which they are starting to come down pretty significantly and we'll show you that data later in the video, but this could be a huge crisis for the next generation that did get in and now they're going to be underwater on their real estate for a long period of time because of the things we're talking about, you know, the demographic shifts, the affordability crisis. And here's a great I think this is a great image to show. You know, most people feel like that dark image on the right where the economy is getting worse every single year, but financial asset prices continue to move up quite significantly because of the government manipulation. And so, if you're don't own the financial assets, then you're living on this side.

So, there's like the tale of two worlds. Like usually it's the older generation that own the majority of the assets that continue to move upward like stocks, but the majority of people who work on W-2 and they're terrified about their job, they live in this type of darker world and are not benefiting and they're starting to fall behind. Now, this just chart is really good. This comes from Reventure.

It's the homebuyer demand versus affordability by state. So, the states that have more affordability, they are selling more homes. This is like a duh, right? So, you can see that there's only one outlier.

All the other homes are actually have less number of sales from 2019 levels. So, existing homes in expensive states are down 30 to 35% from 2019 levels. So, this is pre-2020 government manipulation levels of number of sales and you can see that, you know, here's Florida right here. We're down about 25% from 2019 levels, right?

So, we are in a much worse situation than we were prior to the last 5 years massive amount of growth. And that's because again, this affordability by state is a massive issue. You can see that the certain states that have the largest issues, and this the source of this comes from Redfin and Zillow. I thought this was a really cool chart that was well put together.

Now, sellers are panicking because they're trying to figure out who's going to buy my house that's like at this insane manipulated price by the Federal Reserve and Congress. There's 35% more home sellers than buyers today and that is a crazy stat and we expect this to continue to move up. We are seeing this crazy phenomenon of sellers basically rage quitting. They list their house for a month or two, can't get the price they want and they pull their house off the market upset at the marketplace, upset at their agent that they can't get the price that they want.

And so, we that's part of the reason why we don't see this higher now is because there is demand for sellers to sell. They want to move, they want to change the house that they're in, they want to upsize, they want to downsize, but size, but they're locked in on their mortgage rate and if they can't get the price they want, they can't purchase their next home because rates are too high for them as well. And that's creating a lock-in effect. Now, when we look at new construction, we can see that this is near financial crisis levels for the completed, under construction, and not started.

And so, the problem is that the existing home inventory that sellers want to sell have to compete with new construction and their incentives. So, if you live near a new home construction area where most of the younger generations would rather buy new construction than have to buy your house and upgrade it, and they don't a lot of them don't seem to care about their yards and they don't mind being 10 ft away from their neighbor, I guess. Uh but this is just how the the trend is going, but they're offering insane incentives. So, if you're an existing home seller, you are you have like massive competition and we saw a massive number of homes being sold, new one single family houses sold in July and August, just this massive pop.

I think it was like a 22% pop because, number one, the the builders are at the end of their fiscal year. The majority of them end October 31st, some of them September 30th. So, they're trying to move inventory on their books for financial reporting purposes and they're doing that by offering mass incentives for the next wave of buyers for affordability, but be careful, it's a trap if you're a buyer because if you're lock in like a 4% rate that they give you for an incentive, you cannot sell that house. You have to hold that house for a very significant period of time or your new next buyer that comes in, they're not going to be able to pay the price that you paid because they're basically buying a payment and they have to use whatever the new rate is at the time.

So, unless rates go to 4%, which I don't see happening, then you're going to have a real issue in selling that house. So, it could be a buyer trap for you if you're buying these houses. Another phenomenon that we're seeing with these new one family houses is that, you know, build to rent. So, we see these builder these build to rent organizations purchase an entire neighborhood to rent them out from, you know, a builder.

And that's a that's one of the ways that they're off that they're offloading a lot of their inventory and that's another reason why we see this spike in that month. But builders are getting desperate, okay? So, they're paying for your buy-down, they're paying for upgrades, uh they're paying your HOA, and in Florida we have something called a CDD, which is a community development district bond, which is that's the way they fund, you know, the roads, the utilities, all that kind of stuff through the city, and you usually have to pay once per year, you know, $2 to $3,000. Well, they're talking about paying off and it's like a 20- to 30-year bond sometimes.

They're talking about, "Hey, I'll pay off your CDD all the way from the beginning in this new construction community." I mean, there's like another 20, 30, 40 dollars right there that they're adding to try to reduce the cost of the community, of the monthly payment in the annual payment to you as the home buyer so they can get you in there. So, they're trying to they're trying to get creative whatever the way they can do to get you to buy their home at the artificially inflated price, but not reduce the price cuz if they reduce the price of one of the homes, they got to reduce the price of all the homes because they won't appraise after that period of time because it's a game that they play with the bank. And here's from Lennar, this is like screaming desperation. They said rates dropped, right?

We had that 25% rate cut from the Federal Reserve, and this is the first rate cut we've had in 9 months. This is the best time to buy. Home prices may rise fast. This is the biggest BS I've ever seen.

It's crazy that they're putting this out there. They don't even know how the Federal Reserve works and that their interest rate cut only impacts the overnight borrowing rate for banks. It doesn't impact the long end of the curve as much, and we actually saw interest rates on the mortgage mortgage rates go up after this cut because people the bond market thinks there's going to be more inflation in the future. So, this is completely misleading to consumers in my opinion.

I think it's a really bad way to do business. It's but I get it. Like these these builders are trying to do whatever they can to offload their inventory to the biggest sucker that they can. That's the way that I view it.

Unless you have like a top agent, you can reach out to me. You need the best of the best to be able to negotiate like crazy and beat up these guys in multiple ways, not just the interest rate and the benefits, but also the price so that way you can protect yourself from any sort of downturn in the future. And it just kept keeps getting worse because the prices are so high. We're seeing the lowest number of home sales since 1995.

There's fewer home sales today than there were during the Great Financial Crisis despite having 40 to 50 million more people in our population. So, I know a lot of people are saying, "No, real estate's great." It's hyper local. You got to look at the micro to be able to understand the macro. I see a lot of people, "Oh, you know, nationwide prices are okay." Real estate doesn't work like that generally, you know, until correlation goes to one until there's a certain type of crisis.

Generally, what you see is the South that had all the over-construction, had tons of migration, and now is is basically inversing from that period of time, that area is going to be the one that is going to be hit the hardest. It had the most speculation and the most new construction. The North where they didn't build as much and they didn't have these type of issues mass speculation, they're not going to be hit as much, right? So, there tale of two markets.

You need to be really careful at looking at national data, but the number of sales has really drastically slowed. You can see here the existing home sales are just grinding along the bottom the last few years, and they've been bouncing around 4 million annual sales rate for the last 2 and 1/2 years. So, the affordability crisis is slowing this existing homes. The repairs, insurance costs, taxes are just becoming so expensive for people that it's actually cheaper to rent a home in a lot of cases now.

Even the even the flippers are upset and starting to complain and trying to figure out who is the next buyer of my house if relocations have fallen. Specifically for Florida, relocations have dropped 80% from the peak 2022, which is crazy. And so, this is an article that came out from News4JAX that says the profit margin on flipping a home is at a 17-year low due to high prices, right? So, they're not able to buy properties low enough.

They have the distressed sellers have a lot of debt on their books and multiple liens that they have to clear. It's just really hard if you're a flipper right now, and prices have stopped moving up and are actually going down about 0.7% per month here in Florida. So, if you buy it and you're done in 6 months, it's going to be worth 6% less. You have to price that into what your you know, what your profit's going to be.

So, you need to pay 6% less on the front end, and this is causing people to basically not be able to to sell their home. Banks understand this that prices are going to be coming down, so they're not doing as many appraisal waivers anymore. You know, back during the peak years it that spiked, obviously you couldn't really meet in person, have people go out to the house, but they created these basically appraisal waivers that says, "Oh, yeah, we're cool with the price. We don't need to go out and do an appraisal." Now, they understand prices are coming down.

We're back in person, and they're going right back to like, "Yeah, we need to go out and do an appraisal on it." Especially for the ones that are putting less than 20% down on their property. So, the reality is that the boomers are selling. The majority of the people who are selling right now are boomers, and the buyers the next generation are waiting for prices to come down. I say boomers, but it's about 58 years old is the median age for a home buyer today, which is insane.

And a repeat buyer I think is like 56 years old, so that's why I say that, but there's people selling at all price points, but the majority of the wealth is held by the boomers and older, and they're just freaking out because again, there's more sellers than buyers right now, and there's more sellers coming on and less buyers coming down the pipeline. Meanwhile, you know, the consumer's getting beat up by having all the debt, and the value of the money that they're earning each each day is becoming less and less. So, Congress keeps spending all of our dollars. The Federal Reserve keeps printing and and ultimately our debt is going to explode as a country.

We're probably past the point of no return at this point as it continues to compound. I don't really see a path for us to get out of this, but the dollar continues to have one of the worst years that it's been having in decades. So, your purchasing power as a consumer is going to continue to fall. Prices have to come down, and they're starting to.

So, this is the good news. We're starting to see what we need to see, which is a correction in home prices. So, this is the median price of new single-family houses sold. This is from the Census Bureau.

We had that massive spike. Look at that from 320,000 all the way up to 440, and now we're back down to 400. That's just a 10% drop. There's some people like Lennar that are all the way down with incentive 22% from this period, but we need to see at least like a 30 to 40% drop for us to get back to basically normal, and it's going to take time for that to happen.

Real estate isn't a liquid asset class. It takes time for it to transition. It's not going to be like the stock market where you can see a drop of 30% within a month. It's going to take years for you to realize that just because it takes time to process transactions.

And so, here's what we see. Real home prices in the US are starting to fall. You can see there's the zero right there. We had this big fall right in the '08 Great Financial Crisis.

We're starting to see a drop now, and we need more of the drop as we are moving forward. And for Florida specifically, if you're a seller, reach out. You need an expert today. You can email me and I can get you in touch with the top person in your market who actually understands the reality of what's going on because you need to be careful when you hire an agent.

71% of agents didn't even sell a house last year, so don't hire your cousin or your friend that doesn't sell any real estate. You need an expert for today. But Florida homes for sale actively for sale are the highest on record, and you can see this chart just completely pivoted once the Fed started raising rates and we had the affordability crisis take off. And the next thing you need to be on the lookout for, and this starts with just in a few days, at September 30th, the loan workout programs for FHA loans.

This is the basically the next subprime crisis. They make it like extremely difficult for you to kick the can down the road if you're an FHA loan borrower that is delinquent. So, they put new guardrails on this loss mitigation, and it just starts in a few days. We're already seeing delinquencies up to 12% in August, and it's going to continue to move up.

And we're seeing a ton of people start to be underwater who purchased with FHA in new construction communities in the last few years cuz they only put a little bit down. They already had a lot of debt and a lower credit score. That's why they got FHA, and it's going to turn into a problem unless the government steps in with another program, which is definitely possible, but be on the lookout for this. But I would like to hear from you, you know, who do you see as the next wave of buyers because the next jet couple generations here, they're loaded up with debt.

They're not getting together. They're living with their parents, and they're not having kids. Who is the next wave of buyers to buy all these houses, especially from the boomers who have these generally larger houses that are outdated, and they need a lot of money put into them to to bring them up to snuff, or they're the buyers will just go to the new construction communities so they don't have to deal with any of that. So, is there a way or a path for us to get out of this insane government debt and deficits that we have created that has caused this massive affordability crisis?

And will AI save us, which I know Elon is working on and some others that say, you know, the next thing that will save us from all this debt and from all these problems is AI, or will it actually make it worse and we'll see a ton of job loss, and a lot of people just simply won't be able to buy because they won't have an income anymore. I'd love to hear from you. As always, thanks for watching. Drop a comment below, and if you want to follow my Substack, you can go there and subscribe, and you can learn about all my updates that I have coming out twice per week, and I can talk about things on my Substack I can't talk about here on YouTube.

Love you guys. Thanks for watching. If you need anything, send me a message. Talk to you soon.