As a businessman with no prior political experience, President Donald Trump has long viewed this dynamic as a positive attribute. In his view, the U.S. has a severe economic problem. Thus, it takes a person who knows how to start businesses to get us on the right foot. Unfortunately, a brewing housing crisis suggests this is all talk and no substance.
First, President Trump, as much as he loves to boast about it, is no self-made man. He was born into incredible privilege and turned that wealth into a worldwide brand. Certainly, Trump should receive credit for that. But it’s not exactly a remarkable accomplishment if you’re merely multiplying wealth as opposed to creating it from scratch.
Unfortunately, with the housing crisis, that’s exactly what Trump needs to do. Wage growth is stagnant and not only that, can’t keep pace with rising costs of living. Furthermore, developers are not building enough new homes for the rapidly growing population, which drives up prices. As we all know from economics 101, less supply generally correlates with rising demand.
Evidence of a Brewing Housing Crisis
Contrary to popular wisdom, a housing crisis does exist, at least to astute alternative news sources. For instance, CCN contributor Harsh Chauhan made these alarming points about the current housing crisis:
The Commerce Department had reported last month that the median price of a new home was down 8.8 percent in September to $299,400 as compared to the prior-year period. The month-over-month decline was also severe at 7.9 percent.
Sales of both new homes and existing homes were also down in September, indicating that a U.S. housing market crash has already arrived. So, the third-quarter report from NAR [National Association of Realtors] does not reflect the true health of the U.S. housing market as things have already started going south. And the ironic thing to note is that NAR gave slight hints of a slowdown in its report.
Furthermore, Chauhan noted that:
What’s more, first-time homebuyers needed an annual income of $48,912 to qualify for a mortgage as compared to $50,976 in the second quarter. This is another proof that lower interest rates boosted the U.S. housing market.
But is there an answer to this housing crisis? Probably not.
Lower Interest Rates Won’t Save Real Estate
Of course, the Trump administration and real estate professionals will argue that continued lower interest rates will boost housing. But such measures are only temporary fixes.
First, lower interest rates hurt savers. Considering that baby boomers are retiring en masse daily, an indefinitely dovish monetary policy won’t fly politically.
Second, cheaper borrowing costs would invariably lift asset prices, including real estate. Thus, an effort to make housing more affordable would end up with the opposite effect.
Put another way, no easy solutions exist. This suggests that the free market will bring some normalcy to housing. But before it does so, we could see a severe correction.