hey all Peter Zion here coming to you from Colorado my life these days is explaining what's going on in the world to people no matter what your political persuasion happens to be economics in Europe Security in Latin America energy in the former Soviet Union war in the Middle East whatever it happens to be and the best way to follow what I do is to sign up for my patreon page at the analyst level not only does this give you access to everything that I do as it comes out in real time as opposed to on
a time delay but once per quarter you have the opportunity to submit questions to me Direct directly and Grill me live and we're doing the next one of these question times this Friday February 7 so sign up now links attached to this video and I will see you for the awkwardness real soon hey everyone coming to you from wagi Inlet in the northwest coast of the South Island I am on a big low tide Beach that has dramatic walls um needs a name I'm going to call it Peter Beach because he never know if it's
going to be here the next day anyway um folks in patreon have been asking me about the housing market of late so let me give you the quick rundown uh we have emerged from Co we've emerged from the sunprime crisis and so for several years we had record low numbers of new builds uh both because we were recovering from over Supply and because um covid we thought was going to last longer than it did so nobody built anything because they thought nobody was going to move and that drove prices through the roof and turns out
with Co people wanted to move someplace where they could have quality of life outside of a city so we saw actually record hous housing sales and a huge drop in available housing units we put those together prices go through the roof people get a little aggroed and if you're in your 20s it's really hard to get started because you can't afford anything that is now behind us uh we've seen um well new house builds hasn't actually changed really at all in the last several years but the amount of stock on the market has increased almost
by a um a factor of two at the same time that house sales have dropped by about 40% so we've kind of got two things going on here one political one economic let's deal with the political first because there's something for everyone to hate on this one uh the mortgage rate in the United States the 30-year mortgage rate is largely obsid subsidiary of the cost that it takes the government to borrow money specifically the 10year treasury note so the tighter the fiscal control that the federal government shows the more money there is available for other
things like housing uh conversely if the government spends money like it's going out of style uh spends money it doesn't have the opposite happens and borrowing costs for everybody rise what we've seen is we had Barack Obama who ran the most proliferate fiscal situation we have had in in peace time in modern American history Donald Trump refusing to be outdone doubled the fiscal deficit under his first term Joe Biden did it again and if Trump 2.0 decides he's going to follow through with his campaign promises uh we will once again have the biggest Federal deficits
in American history um world talking Argentinian Venezuelan Greek style budget deficits here just absolutely massive amounts of red ink that will drive up the costs of everything for everyone uh and so we have seen mortgage rates since the first day of the first Trump term already roughly double you should expect based on the fiscal situation in the federal government that to increase again if Trump does what he says is going to do uh second issue has nothing to do at all with politics it's all about demographics you see when you are aged 20 to 45
and you're raising your kids and you're building your home you're a net absorber a net customer of credit because you're borrowing to do all these things your income isn't very high and then later on as you get older and your kids move out you pay down your house from 45 to say 65 you become a net contributor to the credit Market because you're not borrowing anymore your income is high and actually you're saving for retirement and some of the money that you save eventually Works back into out into the system through Investments to be lent
to other people well the Baby Boomers have gone through both of those phases so when they were all young adults back in the 60s through the uh early 80s we saw credit rise credit cost rise because they were gobling it all up and when they were mature adults late 80s through roughly 2010 2020 uh you saw the opposite happen and all of a sudden they're providing credit to the system and so credit costs collapse you put all that together and it's shapes how we have seen the credit Market especially for housing well once again the
Baby Boomers are the primary culprit for the changes in the market two things number one two-thirds of them already retired so they're liquidating their savings and that capital is no longer available to the degree that it was so the entire Capital Market regardless of what the sector is housing including is getting a little starved second while two-thirds of them are retired the Leading Edge of Boomer the oldest Boomers the ones who were born in the late 1940s have already started to die which means that their houses are becoming available see the Boomers did something that
no one else in American history had done as they retired they didn't move out they didn't move in with their family they didn't uh consolidate they didn't go into nursing homes if they could help it they just stayed in place and in doing so they shrank the volume of housing that was available for the rest of us well that is finally finally finally starting to loosen up a little bit and that housing is now coming back into the market but it's coming back into the market at a time when credit is getting progressively more expensive
so we have seen as you would expect credit costs go up mortgage rates go up at the same time that available housing stock has gone up as well so it's more expensive to get a house because of the credit cost but there's also more houses available which are pushing down the costs of housing r large including purchase prices so a lot of cross curring and never never never never never never forget that uh what I'm saying here is true on average uh more than all other markets out there real estate is a local industry so
what is true in Las Vegas is not true in Nebraska in the rural zones is certainly not true in Boston so this is kind of a broad guide what's going on your own backyard is probably just as relevant because if there isn't housing in the zip code that you're interested in you're going to follow a different set of Market guides okay that's it until next time everyone
