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Murder Of Stamford Resident Explored In New Season Of Popular Netflix Docuseries · Murder Files Unsealed

• 0:00
  Speaker 1: Today, the median age of a first time home buyer
• 0:03
  in the United States has hit forty years.
• 0:05
  Speaker 2: Old, which is just I mean it used to be
• 0:08
  twenty nine exactly.
• 0:09
  Speaker 1: We're talking about in an entire decade of early adulthood
• 0:12
  wealth building that has essentially just been erased from the
• 0:15
  standard American timeline.
• 0:16
  Speaker 2: Yeah, completely wiped out.
• 0:18
  Speaker 1: It's wild. We are looking at a landscape where the
• 0:21
  fundamental right of passage, you know, buying your first house
• 0:25
  has totally transformed. It's gone from an expected milestone into
• 0:29
  something that looks increasingly like a luxury right.
• 0:32
  Speaker 2: A luxury reserved entirely for your peak earning years.
• 0:36
  Speaker 1: Welcome to the deep dive. Today is March thirty first,
• 0:39
  twenty twenty six. And if you are sitting on a
• 0:42
  down payment or just aggressively watching Zillo and wondering if
• 0:46
  the whole system is broken, We've got a lot to cover.
• 0:48
  Speaker 2: We really do.
• 0:48
  Speaker 1: We are going to look at a mountain of fresh
• 0:50
  twenty twenty six data to find out if the American
• 0:53
  starter home is dead, and more importantly, what you should
• 0:56
  actually do with your money in this crazy environment.
• 0:59
  Speaker 2: Yeah, we have a massive stack of analysis to get
• 1:01
  through today. We're looking at Completely Fresh March twenty twenty
• 1:05
  six metrics, deep economic overviews from JP Morgan and realtor
• 1:09
  dot Com.
• 1:10
  Speaker 1: Some really heavy hitters, oh absolutely.
• 1:12
  Speaker 2: Plus pricing models from Zelo, and some highly granular local
• 1:16
  data from Greater Nashville Realtors. Because you know, you can't
• 1:21
  just talk about the macroeconomy in a vacuum.
• 1:23
  Speaker 1: Right You have to see how these massive forces actually
• 1:26
  collide on a physical.
• 1:27
  Speaker 2: Streak, exactly how it impacts real neighborhoods.
• 1:30
  Speaker 1: And here is our promise to you for this deep dive.
• 1:34
  You already know the basics. We aren't going to sit
• 1:36
  here and give you some patronizing lecture on what a
• 1:38
  down payment is or.
• 1:39
  Speaker 2: Tell you to stop buying avocado took right exactly.
• 1:41
  Speaker 1: We know you understand that the market is messy right now.
• 1:44
  We are dealing with inflation that just absolutely refuses to die.
• 1:47
  It's stubborn, so stubborn, plus a completely paradoxical Libra market,
• 1:52
  and geopolitical tensions that are literally rewiring global supply chains
• 1:57
  as we speak.
• 1:58
  Speaker 2: Yeah, it's a lot of noise.
• 2:00
  Speaker 1: Mission today is to dig into the actual macroeconomic plumbing
• 2:04
  of the twenty twenty six housing market. We want to
• 2:07
  understand the mechanisms behind the madness so.
• 2:10
  Speaker 2: That you can build a personalized, mathematically sound framework for
• 2:13
  your own life.
• 2:14
  Speaker 1: Because the old rules, the ones that dictated how the
• 2:17
  generations before us bought real estate, they just simply do
• 2:20
  not apply anymore.
• 2:21
  Speaker 2: Not even a little bit. The architecture of the market
• 2:24
  today is completely different. We are sitting at a very strange,
• 2:28
  very pivotal inflection point.
• 2:30
  Speaker 1: Okay, let's unpack this before we get into whether you
• 2:32
  should actually pull the trigger on a mortgage. We have
• 2:34
  to look at the macro picture.
• 2:36
  Speaker 2: We have to establish the baseline right.
• 2:38
  Speaker 1: And the general consensus from the data is that the
• 2:41
  housing market is finally exhaling.
• 2:43
  Speaker 2: Exhaling is a great word for it.
• 2:44
  Speaker 1: Yeah, the chaotic g force of the post pandemic years,
• 2:47
  that whole era of waiving inspections and you know, bidding
• 2:51
  twenty percent over asking, that's largely over big goodness. Seriously,
• 2:55
  we are seeing a real transition. Existing home sales actually
• 2:58
  saw a slight unexpect bump in February, up one point
• 3:02
  seven percent to an annualized rate of four point zero
• 3:04
  nine million units.
• 3:06
  Speaker 2: But if you zoom out on that, sales are still
• 3:09
  hovering near three year lows.
• 3:10
  Speaker 1: Thirty year lows. We are talking about transaction volumes that
• 3:14
  are practically frozen compared to historical norms.
• 3:17
  Speaker 2: Frozen is the operative word there, and this is where
• 3:19
  we have to separate the concept of demand from the
• 3:21
  concept of transactions.
• 3:22
  Speaker 1: Okay, break that down for me.
• 3:24
  Speaker 2: Well, the transactions are frozen because the cost of capital
• 3:26
  is incredibly high right now. It's not because people suddenly
• 3:30
  stopped wanting to own homes, right.
• 3:32
  Speaker 1: The desires there, The math just isn't, which brings us
• 3:35
  to prices. Zilla reports the typical US home value right
• 3:39
  now is around three hundred and sixty thousand, five hundred
• 3:41
  and ninety one dollars.
• 3:42
  Speaker 2: Which represents a microscopic point two percent increase over the
• 3:46
  past year.
• 3:47
  Speaker 1: Basically nothing right.
• 3:49
  Speaker 2: Essentially, prices have flatlined.
• 3:50
  Speaker 1: Now Here is where I really want to push back
• 3:52
  on the standard economic narrative for a second.
• 3:54
  Speaker 2: Okay, let's hear it.
• 3:56
  Speaker 1: In any normal market, if your sales volume drops to
• 3:59
  a thirty year low, your prices should absolutely.
• 4:02
  Speaker 2: Creter, right, That's a textbook theory.
• 4:04
  Speaker 1: Yeah, if nobody's buying the product, the product goes on clearance.
• 4:08
  But we aren't seeing fire sale prices out there. We
• 4:11
  are just seeing flatline prices. Why is the fundamental law
• 4:15
  of supply and demand seemingly suspended?
• 4:18
  Speaker 2: What's fascinating here is that the law of supply and
• 4:20
  demand isn't suspended at all. It's just it's operating against
• 4:25
  a deeply broken backdrop.
• 4:27
  Speaker 1: A broken backsdrop, what do you mean by that?
• 4:29
  Speaker 2: We are dealing with a massive phenomenon known as a
• 4:32
  structural shortage. You really have to look back at the
• 4:34
  two thousand and eight financial crisis to understand twenty twenty six.
• 4:38
  Speaker 1: Oh wow, we have to go back that far.
• 4:40
  Speaker 2: We do. When the housing bubble burst almost two decades ago,
• 4:44
  homebuilders went bankrupt on mass, the entire apparatus of residential
• 4:48
  construction in the United States effectively shut.
• 4:50
  Speaker 1: Down, like completely stopped.
• 4:51
  Speaker 2: Yeah, for years, we had a literal lost decade of homebuilding.
• 4:54
  Speaker 1: So while the population just kept growing and you know,
• 4:57
  the largest demographic cohort in history, the millennials, we're aging
• 5:02
  into their prime home buying years, we just.
• 5:04
  Speaker 2: Stopped producing the core product. Exactly.
• 5:07
  Speaker 1: What that is wild to think about?
• 5:09
  Speaker 2: It is the conservative estimates and the JP Morgan and
• 5:12
  Realtor dot com data suggest we are structurally short, somewhere
• 5:17
  between one point two million and upwards of four million
• 5:20
  physical dwelling units in this country, up.
• 5:22
  Speaker 1: To four million homes short.
• 5:25
  Speaker 2: Yeah, So to answer your question about why prices aren't
• 5:28
  crashing despite historically low sales volume, it's because that underlying
• 5:33
  scarcity acts as an ironclad floor.
• 5:35
  Speaker 1: So you just cannot have a fire sale if the
• 5:37
  store shells are completely empty.
• 5:39
  Speaker 2: Exactly. The demand, even though it's severely weakened by high
• 5:42
  interest rates right now, is still easily enough to absorb
• 5:46
  the tiny trickle of supply that actually makes it to
• 5:48
  the market.
• 5:48
  Speaker 1: Which introduces this massive paradox for anyone who is actually
• 5:52
  out there driving through neighborhoods.
• 5:54
  Speaker 2: Right now, the inventory illusion.
• 5:56
  Speaker 1: Yes, because if we are short up to four million homes,
• 5:59
  why are we suddenly seeing four sale signs languishing on
• 6:02
  front lawns for weeks.
• 6:04
  Speaker 2: It's a great question.
• 6:05
  Speaker 1: If the shells are empty, why does it look like
• 6:07
  inventory is actually stacking up in my neighborhood.
• 6:09
  Speaker 2: This is a critical distinction to make. We have to
• 6:12
  separate the flow of new listings from the total pool
• 6:15
  of available homes.
• 6:16
  Speaker 1: Let's look at the actual numbers on that flow. Then,
• 6:19
  according to the realtor dot Com data, active listings hit
• 6:22
  nine hundred and fourteen thy eight hundred and sixty in
• 6:25
  late February.
• 6:26
  Speaker 2: Which is the twenty eighth consecutive month of growth.
• 6:28
  Speaker 1: Right, it's up seven point nine percent year over year.
• 6:31
  New listings alone are up two point four percent. So
• 6:34
  looking at that, leverage is slowly clawing its way back
• 6:37
  to the buyer.
• 6:37
  Speaker 2: It's definitely shifting a bit.
• 6:39
  Speaker 1: Homes are sitting on the market for a median of
• 6:41
  seventy days, which is up four days from last year,
• 6:44
  and fifteen point five percent of listings have actively cut
• 6:47
  their prices. On paper, it looks like a flood.
• 6:50
  Speaker 2: Yeah, but it looks like a flood only because we
• 6:52
  just survived a three year drought.
• 6:53
  Speaker 1: That is a great way to put it.
• 6:55
  Speaker 2: If you look at the historical baseline I'm talking about
• 6:57
  the pre pandemic years of twenty seventeen to twenty nine.
• 6:59
  Team total inventory is still sixteen point eight percent below
• 7:04
  what we would consider a normal, healthy market.
• 7:07
  Speaker 1: Still way underwater compared to normal times. But I want
• 7:10
  to dig into why we are seeing this specific type
• 7:13
  of inventory growth though.
• 7:14
  Speaker 2: Because the data reveals a really counterintuitive insight here.
• 7:18
  Speaker 1: It really does. The fastest listing growth across the board
• 7:22
  is happening in lower priced homes. We're talking about properties
• 7:25
  under the five hundred thousand.
• 7:27
  Speaker 2: Dollars mark, which is usually great news.
• 7:29
  Speaker 1: Normally you'd think great starter homes are back. But I've
• 7:32
  been looking at the underlying mechanisms here and it's not
• 7:35
  families deciding to upgrade.
• 7:37
  Speaker 2: No, it's not.
• 7:38
  Speaker 1: It's investors offloading their property.
• 7:40
  Speaker 2: That's a phenomenal point, and it perfectly illustrates how macroeconomic
• 7:44
  plumbing actually works behind the scenes.
• 7:46
  Speaker 1: Walk us through that plumbing.
• 7:47
  Speaker 2: During the low rate frenzy of twenty twenty and twenty
• 7:50
  twenty one, institutional investors and mom and pop landlords bought
• 7:54
  up massive swaths of entry level housing. They did it
• 7:59
  because the math worked beautifully.
• 8:00
  Speaker 1: Money was practically free.
• 8:02
  Speaker 2: Exactly, so their capitalization rates, you know, their return on
• 8:05
  investment were incredibly attractive.
• 8:07
  Speaker 1: But the math has violently changed since then.
• 8:10
  Speaker 2: Radically changed. The cost of maintaining those rental properties has skyrocketed.
• 8:14
  Property taxes are reassessing at the new inflated values.
• 8:17
  Speaker 1: Oh yeah, the tax bills are brutal right now.
• 8:20
  Speaker 2: And crucially, homeowner's insurance has become exorbitantly expensive. This is
• 8:25
  largely due to how climate risk is being aggressively repriced
• 8:29
  in the reinsurance markets.
• 8:31
  Speaker 1: So an investor looks at their spreadsheet in twenty twenty
• 8:33
  six realizes their rental yield has been completely wiped out
• 8:37
  by insurance and taxes.
• 8:38
  Speaker 2: And they just decide to dump the property. That is
• 8:42
  exactly why you are seeing a surge in entry level inventory.
• 8:45
  It's not a healthy rotation of families moving up the ladder.
• 8:49
  Speaker 1: It's just capital reallocating itself, pure and simple, and where
• 8:52
  that capital is reallocating is completely fractured geographically. I mean,
• 8:56
  you cannot talk about the twenty and twenty six US
• 8:59
  housing market as a single entity anymore.
• 9:01
  Speaker 2: No, it's hyper regional.
• 9:02
  Speaker 1: The regional splits in this data are absolutely staggering. Let's
• 9:06
  look at the South and the West for a second. Okay,
• 9:08
  if you are in those markets, you are seeing list
• 9:10
  prices actually soften. They're down one point seven percent to
• 9:13
  two point two percent in some metros. The inventory recovery
• 9:17
  out there is hyper aggressive.
• 9:18
  Speaker 2: It's booming in terms of listings.
• 9:20
  Speaker 1: Sixty six of the top two hundred metropolitan areas have
• 9:24
  actually exceeded their twenty nineteen pre pandemic inventory levels.
• 9:28
  Speaker 2: They have completely recovered, and in some cases out West
• 9:31
  they have overshot the runway entirely and are sitting on
• 9:34
  a surplus.
• 9:35
  Speaker 1: But then you look at the Northeast and the Midwest.
• 9:38
  If you are a buyer in Boston or Chicago right now,
• 9:41
  you are listening to this eight percent national inventory growth
• 9:45
  metric and you're just laughing.
• 9:46
  Speaker 2: Yeah, you think are making it up.
• 9:47
  Speaker 1: Those markets are completely frozen. Inventory there is sitting a
• 9:51
  massive thirty nine percent to fifty seven percent below pre
• 9:55
  pandemic levels.
• 9:56
  Speaker 2: It's a tail of two countries.
• 9:57
  Speaker 1: Really, I need to challenge you on this. Why did
• 10:00
  the Sun Belt somehow solve its supply problem while the
• 10:03
  Northeast is still trapped in twenty twenty one.
• 10:06
  Speaker 2: It all comes down to geographical elasticity and local zoning laws.
• 10:10
  In the South and the West, places like Texas, Arizona, Florida,
• 10:14
  you have vast expanses of developable.
• 10:16
  Speaker 1: Land, just empty space waiting to be built on.
• 10:18
  Speaker 2: Right and they have highly permissible zoning laws. So when
• 10:21
  demand spiked in twenty twenty one, builders just rushed in.
• 10:24
  They acquire cheap dirt on the outskirts of these cities
• 10:27
  and started pouring concrete.
• 10:28
  Speaker 1: And now fast forward to twenty twenty six.
• 10:31
  Speaker 2: Those massive master planted communities are finally completed. They are
• 10:36
  hitting the market exactly when buyer demand is cooled off
• 10:40
  due to high rates. It's a classic oversupply dynamic.
• 10:43
  Speaker 1: Whereas in the Northeast, you know, you can't just pave
• 10:46
  over a new suburb outside of Boston.
• 10:48
  Speaker 2: Exactly the land is completely developed, it's geographically constrained by water,
• 10:53
  and the zoning is notoriously protectionist. You can't just build
• 10:56
  a thousand new homes.
• 10:57
  Speaker 1: So if you are a buyer, your geographical region and
• 11:00
  basically dictates your entire strategic posture.
• 11:03
  Speaker 2: Right now, absolutely, if you are shopping in Austin or
• 11:06
  Phoenix today, you have immense leverage.
• 11:09
  Speaker 1: You can demand the seller replace the HVAC system. You
• 11:12
  can ask for them to cover closing costs.
• 11:14
  Speaker 2: Yes, you have the power. But if you are in Massachusetts,
• 11:18
  where supply is structurally constrained, you are still playing defense.
• 11:21
  Speaker 1: You might not have to waive your inspection contingency anymore, thankfully, right.
• 11:25
  Speaker 2: But you certainly don't have the power to dictate terms
• 11:27
  to the seller.
• 11:28
  Speaker 1: So if existing homes in half the country are locked
• 11:31
  up like this, the natural pivot is to look at
• 11:34
  new construction. Let's talk about the builders. Let's do it
• 11:37
  because the data on builders is sending some seriously mixed signals.
• 11:41
  We are looking at the NAHB Index, which tracks home
• 11:44
  builders sentiment.
• 11:45
  Speaker 2: The mood of the industry.
• 11:46
  Speaker 1: Essentially, it edged up slightly to thirty eight in March,
• 11:49
  but context is everything here. A score of fifty is
• 11:54
  the neutral baseline. Builders have been trapped below fifty for
• 11:57
  twenty three consecutive months.
• 12:00
  Speaker 2: That is almost two full years of deeply entrenched pessimism.
• 12:04
  Speaker 1: From the exact people whose job it is to dig
• 12:06
  us out of this structural shortage.
• 12:08
  Speaker 2: It's bleak and their headwinds are brutal.
• 12:11
  Speaker 1: Right now, what are they dealing with?
• 12:12
  Speaker 2: Specifically persistent labor shortages for one, supply chain costs that
• 12:16
  never fully normalized after the pandemic, and what they call
• 12:19
  in the industry picky buyers.
• 12:21
  Speaker 1: Picky buyers, which is just industry spin for buyers who
• 12:24
  refuse to pay a massive premium for a house that
• 12:26
  looks like it was thrown together over a weekend.
• 12:28
  Speaker 2: Pretty much. Yeah, buyers expect quality at these prices.
• 12:31
  Speaker 1: But here is the fascinating part. Despite this deep pessimism,
• 12:36
  builders are actually moving product and they are doing it
• 12:39
  by deploying massive financial incentives.
• 12:41
  Speaker 2: Huge incentive.
• 12:42
  Speaker 1: According to the data, sixty four percent of builders are
• 12:45
  offering significant sales prokes right now and thirty seven percent
• 12:49
  are slashing their base prices by roughly six percent.
• 12:53
  Speaker 2: And that six percent doesn't even account for the invisible
• 12:56
  discounts they are offering on the back end.
• 12:59
  Speaker 1: This is exactly what I want to get into, this
• 13:01
  idea of the invisible discount because if I am a
• 13:03
  listener feeling totally squeezed out of the resale market, it
• 13:07
  looks like new builds are a literal cheat cone right now.
• 13:10
  Speaker 2: It certainly looks that way.
• 13:11
  Speaker 1: But are builders actually taking a loss here or is
• 13:14
  this just financial engineering?
• 13:16
  Speaker 2: Well, it is entirely financial engineering, but it's engineering that
• 13:19
  actually benefits the buyer.
• 13:20
  Speaker 1: Okay, explain how that works.
• 13:22
  Speaker 2: To understand this, you have to look at the profit
• 13:24
  margins of large scale corporate homebuilders. They operate on very
• 13:28
  thick margins because they acquire land years sometimes decades in advance,
• 13:34
  at very low basis.
• 13:35
  Speaker 1: Costs, so the dirt is cheap for them.
• 13:37
  Speaker 2: Extremely cheap Furthermore, many of these massive builders have their
• 13:41
  own in house mortgage lending arms.
• 13:43
  Speaker 1: Oh wow, this is the critical piece, isn't it.
• 13:46
  Speaker 2: Yes, exactly, So instead of slashing the sticker price of
• 13:50
  the house by fifty thousand dollars, which by the way,
• 13:53
  would destroy the comparable sales data for the rest of
• 13:56
  their subdivision.
• 13:57
  Speaker 1: Right, which ruins their future sales.
• 14:00
  Speaker 2: Exactly, So instead of doing that, they use that fifty
• 14:03
  thousand dollars to buy down your mortgage rate on the
• 14:05
  secondary market.
• 14:06
  Speaker 1: So they offer you like a two to one buydown, yeah.
• 14:09
  Speaker 2: Or they permanently lock you in at a four point
• 14:12
  nine percent rate while the open market is sitting at
• 14:14
  six point five percent.
• 14:15
  Speaker 1: They are essentially subsidizing the macroeconomic reality to make their
• 14:20
  specific product affordable.
• 14:21
  Speaker 2: For you, exactly. And a traditional homeowner who's just trying
• 14:25
  to sell their fifteen year old house, they cannot compete
• 14:28
  with that.
• 14:28
  Speaker 1: A regular seller can't just offer you a sub five
• 14:31
  percent mortgage out of their own checking account, No.
• 14:33
  Speaker 2: It's impossible, And this creates a deeply bifurcated market. You
• 14:37
  have the resale market, which is totally frozen in a
• 14:39
  standoff between stubborn sellers and cash strapped buyers. And then
• 14:43
  you have the new build market over here, which is
• 14:45
  functioning surprisingly smoothly because builders have the margin to manipulate
• 14:49
  the cost.
• 14:50
  Speaker 1: Of capital, which drags us right to the absolute center
• 14:53
  of this entire conversation, the absolute gravity well of the
• 14:56
  twenty twenty six housing market.
• 14:58
  Speaker 2: Mortgage rates percent elephant in the room.
• 15:01
  Speaker 1: As of late March, thirty year fixed rates are hovering
• 15:04
  around six point three eight percent according to Freddiemac, or
• 15:08
  six point five six percent if you look at daily
• 15:10
  data from bank rate and.
• 15:12
  Speaker 2: Zillow, which is painful now.
• 15:13
  Speaker 1: Yes, that is down from the brutal seven percent peaks
• 15:17
  we saw in twenty twenty five, but we're still looking
• 15:21
  at rates that are mathematically double the sub three percent
• 15:24
  anomaly of the pandemic era.
• 15:26
  Speaker 2: We really need to frame that sub three percent era correctly.
• 15:29
  Though it was a complete historical aberration driven by emergency
• 15:32
  monetary policy.
• 15:33
  Speaker 1: It wasn't normal, not at all.
• 15:35
  Speaker 2: But psychologically it totally reset the American consumer's expectation of
• 15:38
  what borrowing money should cost.
• 15:40
  Speaker 1: And what's maddening right now is the volatility rates aren't
• 15:43
  just high, they are violently unpredictable.
• 15:46
  Speaker 2: From week to week, up and down constantly.
• 15:48
  Speaker 1: Our sources specifically point out that geopolitical jitters, specifically US's
• 15:52
  Raeli tensions, are driving volatility in the oil markets, which
• 15:56
  then bleeds directly into the martgage market.
• 15:58
  Speaker 2: It's all connected.
• 15:59
  Speaker 1: I think a lot of people glaze over when they
• 16:01
  hear geopolitics and bond yields. So let's really break down
• 16:05
  that mechanism. How does an event in the Middle East
• 16:08
  actually change the mortgage rate quoted by a local credit
• 16:12
  union in Ohio.
• 16:13
  Speaker 2: It's a great question. It's all connected through the bond market. Specifically,
• 16:18
  the ten year US Treasury note. Mortgage rates are generally
• 16:22
  benchmarked against the ten year treasury.
• 16:24
  Speaker 1: Okay, so they move together roughly.
• 16:26
  Speaker 2: Yes. When global instability rises, whether it's a conflict in
• 16:30
  the Middle East or some massive disruption in global shipping,
• 16:33
  large institutional investors get very nervous.
• 16:36
  Speaker 1: So what do they do with their money?
• 16:37
  Speaker 2: They pull their money out of risky assets like stocks
• 16:40
  and park it in the ultimate safe haven, which is
• 16:42
  US treasuries.
• 16:43
  Speaker 1: A flight to safety.
• 16:44
  Speaker 2: Precisely, when a massive amounts of capital flow into treasuries,
• 16:47
  the price of the bond goes up, and because of
• 16:50
  how bonds work. That forces the yield the interest rate
• 16:52
  it pays to go.
• 16:53
  Speaker 1: Down, and because mortgage rates track that.
• 16:55
  Speaker 2: Yield, your local mortgage rate drops. Conversely, if US and
• 17:00
  inflation data comes in hot, investors sell bonds, the yield
• 17:03
  spikes and mortgage rates shoot straight up. You are inextricably
• 17:07
  tethered to the global macroeconomic mood every single time you
• 17:11
  try to lock in a rate.
• 17:12
  Speaker 1: But there is an added layer of dysfunction right now,
• 17:14
  isn't there. The spread between the ten year Treasury and
• 17:17
  the thirty year mortgage rate is historically wide.
• 17:20
  Speaker 2: Oh, it's massive right now.
• 17:22
  Speaker 1: Usually a mortgage is about one point five percent to
• 17:24
  two percent higher than the ten year Treasury right now,
• 17:28
  that gap is huge. Why are lenders charging such a
• 17:31
  huge premium above the benchmark, that.
• 17:34
  Speaker 2: Is the pre payment risk premium.
• 17:36
  Speaker 1: What does that mean for the buyer?
• 17:37
  Speaker 2: Well, lenders aren't dumb. They know that if they originate
• 17:40
  a mortgage for you at six point five percent today
• 17:42
  and rates drop to five percent next year, you are
• 17:45
  immediately going to refinance.
• 17:46
  Speaker 1: Obviously, anyone would, which means the investor who bought that
• 17:49
  mortgage just lost their high yielding asset.
• 17:52
  Speaker 2: Exactly. The mortgage gets paid off early, and the investor
• 17:55
  loses out on decades of expected interest. Because the market
• 17:59
  expects rates to eventually drift lower, investors are demanding a
• 18:02
  massive upfront premium to take on that pre payment risk today.
• 18:06
  Speaker 1: So that widespread is basically a direct tax on the buyer,
• 18:11
  driven entirely by the uncertainty of the macroeconomic environment.
• 18:15
  Speaker 2: A tax exactly what it is.
• 18:17
  Speaker 1: Let's ground this an actual household cash flow, so we
• 18:19
  can really feel the pain here. Let's assume you are
• 18:22
  buying a five hundred thousand dollars home.
• 18:24
  Speaker 2: Today, Okay, pretty standard in a lot of markets.
• 18:27
  Speaker 1: You put twenty percent down, so you are taking out
• 18:29
  a four hundred thousand dollars loan at six point five percent.
• 18:33
  Your principal and interest payment a loan is roughly twenty
• 18:36
  five hundred dollars every single month, and that's before anything
• 18:38
  else exactly. That is just the baseline debt service. It
• 18:41
  does not include property taxes, it does not include insurance,
• 18:44
  it doesn't include maintaining the roof. That is easily one
• 18:48
  thousand dollars more per month than it would have been
• 18:50
  for the exact same house just four years.
• 18:52
  Speaker 2: Ago, which brings us to the single most paralyzing dynamic
• 18:55
  in the current market, the rate lock in effect.
• 18:58
  Speaker 1: Here's where it gets really interest. If we look at
• 19:01
  the data, roughly eighty percent of current homeowners have a
• 19:04
  mortgage rate locked in below six percent.
• 19:07
  Speaker 2: And millions of them are locked in below four percent.
• 19:10
  Speaker 1: I look at this as a nationwide system of golden handcuffs.
• 19:14
  You have a massive cohort of people who actually want
• 19:17
  to move.
• 19:17
  Speaker 2: Yeah, life still happens.
• 19:19
  Speaker 1: Maybe their family is growing, maybe they got a huge
• 19:22
  promotion in another state. Maybe they're retiring and want to downsize.
• 19:25
  But they look at their current three percent mortgage. They
• 19:28
  calculate that twenty five hundred dollars monthly payment at six
• 19:31
  point five percent for a house that might actually be
• 19:34
  a downgrade, and they.
• 19:35
  Speaker 2: Just refuse to unlock the handcuffs. They stay put.
• 19:38
  Speaker 1: If we connect this to the bigger picture, the lock
• 19:40
  in effect is the primary engine perpetuating the structural shortage
• 19:43
  we talked about earlier.
• 19:44
  Speaker 2: Because the housing market relies on a continuous chain of transactions.
• 19:47
  Speaker 1: Right exactly, the first time buyer buys the condo, the
• 19:51
  condo owner buys the starter home, the starter homeowner buys
• 19:53
  the four bedroom suburban house. But because the move up
• 19:57
  buyers are trapped by their golden handcuffs, the higher chain
• 20:00
  is broken. Nobody sells, so nobody can buy.
• 20:04
  Speaker 2: But the data highlights just how coiled this spring really is.
• 20:08
  According to the analysis, a mere one percentage point drop
• 20:11
  in mortgage rates could theoretically unlock five point five million
• 20:16
  qualified buyers who are currently sidelined just one percent.
• 20:20
  Speaker 1: That's staggering because.
• 20:22
  Speaker 2: A one percent rate drop profoundly changes the debt to
• 20:25
  income ratio, which is the singular metric banks used to
• 20:28
  approve loans.
• 20:29
  Speaker 1: It changes the math overnight, exactly.
• 20:31
  Speaker 2: Home prices are notoriously sticky downward sellers will sit on
• 20:35
  the market for six months before they agree to cut
• 20:37
  their price by ten percent, but a rate drop happens instantly.
• 20:41
  It immediately recalibrates the monthly affordability math from millions of
• 20:45
  people simultaneously, which leads.
• 20:47
  Speaker 1: Us directly into a deeply frustrating affordability paradox. We're looking
• 20:51
  at stubbornly high prices paired with historically elevated borrowing costs,
• 20:55
  and yet here comes the paradox. The headline data from
• 20:58
  the National Association of Realtor claims that affordability is actually improving.
• 21:02
  Speaker 2: Which sounds completely made up to anyone shopping.
• 21:04
  Speaker 1: Right now, it really does. The Housing Affordability Index the
• 21:08
  HAI has risen for eight consecutive months, sitting between one
• 21:12
  hundred and nine and one hundred and seventeen. Anything over
• 21:14
  one hundred technically implies that a median income family can
• 21:17
  qualify for a median priced home.
• 21:19
  Speaker 2: It is a statistical paradox where the spreadsheet completely diverges
• 21:23
  from the human experience. On paper, affordability is rising.
• 21:26
  Speaker 1: Let's explain the math behind why the spreadsheet thinks things
• 21:29
  are getting better though. It basically comes down to wage
• 21:32
  growth outpacing price growth.
• 21:34
  Speaker 2: Right. Wages are currently humming along at three percent to
• 21:37
  four percent growth annually.
• 21:39
  Speaker 1: Meanwhile, home prices have essentially stalled out at zero percent
• 21:42
  to two percent growth, So your paycheck is objectively growing
• 21:45
  faster than the cost of the house.
• 21:48
  Speaker 2: Furthermore, when you factor in inflation running at roughly two
• 21:51
  point four percent to three percent, the real inflation adjusted
• 21:54
  price of a home is actually declining slightly.
• 21:56
  Speaker 1: Oh that's interesting. So Zilo calculates that a median income
• 21:59
  house sold can now theoretically afford a three hundred and
• 22:03
  thirty one thousand dollars home, which is the highest capacity
• 22:06
  since twenty twenty two.
• 22:07
  Speaker 2: That is the macroeconomic silver lining here. The absolute worst
• 22:11
  of the affordability squeeze is mathematically behind us.
• 22:14
  Speaker 1: But I have to challenge this narrative. If the math
• 22:17
  says affordability is improving for eight straight months, why does
• 22:20
  the reality on the ground feel so completely unattainable for
• 22:24
  regular people?
• 22:25
  Speaker 2: Because it is unattainable for a lot of them.
• 22:28
  Speaker 1: Look at the other side of this data. In thirty
• 22:30
  nine states, over sixty five percent of households still cannot
• 22:34
  afford the median new home.
• 22:36
  Speaker 2: It's brutal.
• 22:37
  Speaker 1: If you are a low income family, you would need
• 22:39
  impossible sixty seven percent of your total gross earnings just
• 22:42
  to cover the housing costs. And we circle back to
• 22:45
  the stat We open the show with the median age
• 22:48
  of a first time home buyer is now forty. Yeah,
• 22:50
  first timers only make up twenty one percent of purchases,
• 22:53
  down from a historical norm of forty four percent. If
• 22:56
  things are getting better, why are young people completely eradicated
• 23:00
  from the market.
• 23:00
  Speaker 2: Because the housing affordability index operates in a vacuum, and
• 23:04
  households do not.
• 23:05
  Speaker 1: Say more about that.
• 23:06
  Speaker 2: The HAI only looks at the relationship between your gross income,
• 23:10
  the price of the house, and the mortgage rate. It
• 23:13
  completely ignores the crushing reality of cyclical inflation on the
• 23:17
  rest of your life.
• 23:18
  Speaker 1: The unseen squeeze precisely.
• 23:21
  Speaker 2: Yes, wages are up four percent, but the cost of
• 23:24
  groceries is permanently higher. Energy costs are volatile. Auto loans
• 23:28
  are carrying eight percent interest rates right now. Childcare costs
• 23:32
  have absolutely exploited.
• 23:33
  Speaker 1: So while a bank underwriter might look at your gross
• 23:36
  income and say, congratulations, your debt to income ratio is
• 23:39
  thirty five percent. You qualify for this six point five
• 23:42
  percent mortgage, your.
• 23:43
  Speaker 2: Actual net monthly cash flow is severely depleted.
• 23:46
  Speaker 1: The spreadsheet says you can afford the mortgage, but it
• 23:48
  leaves you with zero margin for error in your real
• 23:51
  life exactly.
• 23:52
  Speaker 2: And the cost directly associated with home ownership, the ones
• 23:55
  outside the principle and interest are what is truly breaking
• 23:58
  people right now.
• 23:58
  Speaker 1: We briefly touched on insurance earlier, but that's huge.
• 24:01
  Speaker 2: It's massive, and property taxes are reassessing at twenty twenty
• 24:04
  four and twenty twenty five values, home maintenance materials and
• 24:08
  contractor labor are phenomenally expensive.
• 24:10
  Speaker 1: So the barrier to entry isn't just securing the down
• 24:13
  payment anymore.
• 24:14
  Speaker 2: No, it's proving you have the monthly liquidity to survive
• 24:17
  the carrying costs of the asset. That is why it
• 24:20
  takes until age forty to build up enough capital velocity
• 24:23
  to finally clear the hurdle.
• 24:25
  Speaker 1: To make all of this macroeconomic theory tangible. Our sources
• 24:28
  provided a deep dive into a specific micro market. We
• 24:31
  want to zoom in on Nashville, Tennessee to see how
• 24:34
  these massive national forces, structural shortages, lock in effects, insurance
• 24:39
  spikes actually translate into a physical local market.
• 24:42
  Speaker 2: Nashville is the perfect laboratory for twenty twenty six. Why
• 24:45
  is that it is not a distressed, rustbuilt city, but
• 24:49
  it's also not a hyperinflated tech monoculture like San Jose.
• 24:53
  It is a highly dynamic, transitional economy.
• 24:55
  Speaker 1: The Greater Nashville realtors explicitly describe their market right now
• 24:59
  as shifting toward balance, no boom, no bust. The median
• 25:03
  price is sitting around four hundred twenty five thousand dollars,
• 25:05
  and they are forecasting a very modest two percent to
• 25:08
  four percent growth over the next year.
• 25:10
  Speaker 2: But they also note that overbuilt pockets and the excerbs
• 25:12
  might actually stall or decline.
• 25:14
  Speaker 1: Which perfectly mirrors our earlier discussion about the inventory illusion
• 25:18
  and regionality. Even within a single city, you have localized leverage.
• 25:23
  Speaker 2: Yes, blocked by block sometimes.
• 25:25
  Speaker 1: The economic engine of Nashville is incredibly robust. You have
• 25:29
  massive healthcare infrastructure, the legacy music and entertainment industry, and
• 25:33
  a rapidly expanding tech sector. They specifically noted the new
• 25:37
  Oracle campus.
• 25:38
  Speaker 2: So you have high paying, stable jobs bringing high income
• 25:42
  earners into a four hundred and twenty five thousand dollars
• 25:45
  median market.
• 25:45
  Speaker 1: But the ground level dynamics are fascinating. The data shows
• 25:49
  that if you list a home that is unique, highly updated,
• 25:52
  and priced correctly, it still sells and dates.
• 25:55
  Speaker 2: Oh absolutely, the good stuff always moves.
• 25:57
  Speaker 1: But if you put up a generic, tired property, or
• 25:59
  if you succumb to sell our hubris and price it
• 26:01
  like it's twenty twenty two, it will sit indefinitely.
• 26:04
  Speaker 2: It's a market that violently punishes sellar delusion and richly
• 26:07
  rewards buyer patients.
• 26:08
  Speaker 1: I look at the Nashville market like a damned River.
• 26:11
  The high mortgage rates are the dam. Demand is still
• 26:15
  flowing into the city because of the jobs, but it's
• 26:17
  backing up into the rental reservoir because the spillway of
• 26:20
  home ownership is blocked by that six point five percent rate.
• 26:23
  Speaker 2: That's a really good analogy.
• 26:25
  Speaker 1: The analysis points out that established highly desirable neighborhoods East Nashville,
• 26:30
  Green Hills, Franklin have deeply inelastic demand. People will pay
• 26:35
  whatever it takes to live there, so those areas remain
• 26:38
  highly competitive.
• 26:39
  Speaker 2: But if you look out to the emerging suburbs, demand
• 26:41
  becomes highly elastic. Buyers have a leverage out there to
• 26:45
  negotiate price as for concessions and demand repairs.
• 26:48
  Speaker 1: And this raises an important question that applies to anyone listening,
• 26:52
  regardless of whether you live in Nashville or not. How
• 26:54
  do you mathematically decide whether to stay in that rental
• 26:57
  reservoir or force your way over the dam?
• 27:00
  Speaker 2: Tough call. Nashville has incredibly strong rental demand and a
• 27:04
  massive pipeline of new luxury apartments that just finish construction.
• 27:08
  Speaker 1: And because of that new rental supply, rent growth has flatlined.
• 27:13
  This makes the math between owning and renting incredibly.
• 27:16
  Speaker 2: Tight, it's no longer no brainer to buy right.
• 27:18
  Speaker 1: But the local analysts point out that if your time
• 27:20
  horizon is five to seven years, this current boring, balanced
• 27:24
  market is actually a much healthier entry point than the
• 27:26
  frenzy of twenty twenty two.
• 27:28
  Speaker 2: Exactly, you might be paying a six point four percent rate,
• 27:31
  but you aren't waiving your right to inspect the foundation.
• 27:34
  You aren't offering fifty thousand dollars over appraisal. You are
• 27:37
  buying a house based on fundamentals, not fomo.
• 27:40
  Speaker 1: So we have dissected the macrodata, the regional nuances, the
• 27:44
  builder mechanics, and the local realities. Now we want to
• 27:47
  turn the lens directly onto you, the listener. We want
• 27:50
  to synthesize all this twenty twenty six data into a
• 27:53
  personalized decision framework should you buy a house right now?
• 27:57
  Speaker 2: To do that, we have to look at what the
• 27:58
  institutional models are for casting for the next twelve to
• 28:01
  eighteen months, Because you are buying an asset based on
• 28:04
  its future performance.
• 28:05
  Speaker 1: And the consensus from JP Morgan, Reeltrue, dot Com and
• 28:08
  redfin is incredibly unified. Here they are forecasting national price
• 28:12
  growth between zero percent and two.
• 28:14
  Speaker 2: Point two percent effectively flat.
• 28:16
  Speaker 1: They expect sales transaction volume to grow slightly by one
• 28:20
  point seven percent to four point four percent. They see
• 28:22
  inventory continuing to climb by eight percent to ten percent,
• 28:26
  mostly in the sun Belt, and they expect mortgage rates
• 28:29
  to average out around six point three percent.
• 28:31
  Speaker 2: If you wanted to summarize twenty ten six and two words,
• 28:34
  it would be unspectacular normalization. There is no impending crash,
• 28:40
  largely because of the structural shortage and tight lending standards,
• 28:43
  but there is absolutely no boom either.
• 28:45
  Speaker 1: So given that reality, let's break down the pros, the cons,
• 28:48
  and the alternative strategies for your money. Let's start with
• 28:50
  the pros of buying in twenty twenty six.
• 28:53
  Speaker 2: Okay, let's hear the good news.
• 28:54
  Speaker 1: Number one, we've established that in many markets, especially outside
• 28:58
  the Northeast, you finally have negotiating leverage. You can buy
• 29:01
  a house like a normal human being.
• 29:03
  Speaker 2: Again, which is huge for peace of mind.
• 29:05
  Speaker 1: Number two. Locking in a fixed monthly payment acts as
• 29:08
  a definitive hedge against future inflation and rent hikes. Your
• 29:12
  property taxes will go up, but your principle and interest
• 29:15
  will never change.
• 29:16
  Speaker 2: That's certainty is valuable.
• 29:17
  Speaker 1: Number Three you have access to those massive builder incentives
• 29:21
  and mortgage buy downs we discussed, and number four, you
• 29:25
  avoid the rent trap.
• 29:27
  Speaker 2: The rent trap is a vital concept. Historically, the data
• 29:30
  overwhelmingly shows that people who sit on the sidelines trying
• 29:33
  to perfectly time a market bottom end up losing far
• 29:37
  more money in misappreciation and equity paydown than they save
• 29:41
  by getting a slightly better purchase price.
• 29:43
  Speaker 1: Time in the market generally beats timing the market almost always.
• 29:47
  But let's look at the cons and the real risks,
• 29:49
  because they are substantial. Number one, sticky downward prices. Because
• 29:54
  sellers refuse to lower prices, we are hovering at an
• 29:57
  affordability ceiling. If a rare, deep macroeconomic recession hits, you
• 30:02
  could find yourself under water.
• 30:03
  Speaker 2: That's a real risk.
• 30:04
  Speaker 1: Number two transaction costs. It costs roughly six percent to
• 30:08
  ten percent of the homes value in fees, commissions, and
• 30:10
  taxes just to buy and sell it. If you have
• 30:13
  to move in three years, those transaction costs will completely
• 30:16
  wipe out any flatline equity you've built.
• 30:18
  Speaker 2: Which makes your timeline the most critical variable in this
• 30:21
  entire equation exactly.
• 30:23
  Speaker 1: Number three general economic uncertainty. The labor market is behaving strangely,
• 30:29
  and tying up your liquidity in an illiquid asset right
• 30:32
  before potential job instability is a massive risk.
• 30:35
  Speaker 2: Absolutely, cash is king in a recession.
• 30:37
  Speaker 1: And number four, which I think is the most important
• 30:40
  for our financially literate listeners, opportunity costs.
• 30:43
  Speaker 2: This is the massive differentiator between twenty twenty six and
• 30:46
  twenty twenty one. In twenty twenty one, cash in the
• 30:49
  bank was earning basically zero percent. You had to put
• 30:52
  into real estate of the stock market to get a return.
• 30:55
  But today, today you can park your down payment in
• 30:58
  a virtually risk free Treasury bill or a high yield
• 31:00
  savings account and earn four percent to five percent. The
• 31:04
  opportunity cost of burying one hundred thousand dollars in the
• 31:06
  dry wall of a house is significantly higher today because
• 31:10
  that money could be actively working for you elsewhere without
• 31:13
  the liability of a leaking roof.
• 31:15
  Speaker 1: Which brings us to the alternatives. Buying a single family
• 31:17
  home is not the only way to build wealth, despite
• 31:19
  what American culture constantly tells us.
• 31:21
  Speaker 2: Definitely not.
• 31:22
  Speaker 1: You can rent and aggressively invest. The difference between your
• 31:25
  rent and what a mortgage would have cost into the
• 31:27
  S and P five hundred. You could look into house hacking, Ohle.
• 31:30
  Speaker 2: House hacking is a great strategy right.
• 31:32
  Speaker 1: Now, utilizing an fah loan to buy a duplex or triplex,
• 31:36
  living in one unit and using the rental income from
• 31:39
  the others to offset these brutal six point five percent
• 31:42
  interest rates.
• 31:43
  Speaker 2: You can also look into Read's real estate investment trusts
• 31:46
  if you want portfolio exposure to real estate appreciation without
• 31:50
  having to personally underwrite a thirty year mortgage or deal
• 31:53
  with tenant phone calls at midnight.
• 31:55
  Speaker 1: So what does this all mean for you? How do
• 31:57
  you actually make the decision based on all the source material? Oh,
• 32:00
  We've distilled this down into a personalized, organic checklist.
• 32:03
  Speaker 2: It's not about timing the macroeconomic cycle. It's about underwriting
• 32:07
  your own life.
• 32:08
  Speaker 1: Question one, do you actually have twenty percent to twenty
• 32:12
  five percent of the purchase price saved in liquid cash?
• 32:15
  And I say twenty five percent because you need the
• 32:17
  down payment plus closing costs, plus an emergency fund for
• 32:21
  the inevitable maintenance catastrophe that will happen in month two.
• 32:24
  Speaker 2: If putting twenty percent down drains your entire network down
• 32:27
  to zero, You are not ready to buy a house
• 32:30
  regardless of what the market is doing.
• 32:32
  Speaker 1: Question two, is your debt to income ratio genuinely comfortable?
• 32:36
  Don't just look at the gross twenty eight percent to
• 32:39
  thirty six percent rule the bank uses. Look at your
• 32:41
  actual net cash flow. Can you afford the mortgage, the
• 32:44
  property taxes, the skyrocketing insurance premiums and still save for
• 32:49
  retirement and live your life.
• 32:51
  Speaker 2: The bank's job is to make sure you won't default.
• 32:54
  Your job is to make sure you don't become house poor.
• 32:57
  Those are two completely different thresholds of affordability.
• 33:00
  Speaker 1: And question three the absolute deal breaker. Are you highly
• 33:03
  confident you will stay in this specific location, in this
• 33:07
  specific house for at least five to seven years.
• 33:09
  Speaker 2: Because in a market with zero percent to two percent
• 33:12
  annual appreciation, it will take you a minimum of five
• 33:15
  years just to break even on the transaction costs of
• 33:17
  the purchase.
• 33:18
  Speaker 1: If you can honestly answer yes to those three questions,
• 33:21
  then the macroeconomic noise, the FED, the bond yields, the
• 33:24
  NAHB index, it all becomes secondary.
• 33:26
  Speaker 2: The market serves people, people don't serve the market. If
• 33:30
  you are financially fortified and you find a house that
• 33:33
  improves your quality of life. Twenty twenty six is a
• 33:36
  perfectly rational, balanced window of opportunity to execute that transaction.
• 33:41
  Speaker 1: To bring this massive deep dive to a close. Twenty
• 33:44
  twenty six is not a clearance sale. It is not
• 33:46
  a buyer's paradise. But the fever has definitely broken.
• 33:50
  Speaker 2: The market is slowly, unspectacularly normalizing.
• 33:54
  Speaker 1: We are seeing a stabilization of prices, a return of inventory,
• 33:58
  albeit fractured geographically, and the return of actual buyer leverage.
• 34:02
  It is a landscape that severely punishes speculation but deeply
• 34:06
  rewards the financially prepared long term planner.
• 34:09
  Speaker 2: And looking at the totality of this data, I want
• 34:11
  to leave you with one final structural thought to chew on.
• 34:13
  Speaker 1: So's hear it.
• 34:14
  Speaker 2: We started this deep dive by noting that the median
• 34:16
  age of a first time home buyer is now forty
• 34:18
  years old. If the barrier to entry is so structurally high,
• 34:22
  if it requires fifteen years of professional earning power just
• 34:25
  to overcome the down payment and the monthly carrying costs,
• 34:28
  we really have to ask ourselves something fundamental, which is
• 34:30
  the traditional concept of the American starter home completely dead.
• 34:35
  Have we quietly permanently shifted into an era where home
• 34:38
  ownership is no longer the foundational building block of early
• 34:41
  adulthood wealth, but rather a capstone achievement that you only
• 34:46
  unlock at the absolute peak of your financial trajectory.
• 34:50
  Speaker 1: That is a profound shift, it really is.
• 34:53
  Speaker 2: And if that is the new macroeconomic reality, how does
• 34:56
  that fundamentally change the way you should be allocating your capital,
• 35:00
  planning your career, and building your life today.
• 35:02
  Speaker 1: That is the exact kind of question that breaks the
• 35:05
  spreadsheet and forces you to think deeply about what wealth
• 35:08
  actually means to you. Take this framework, consult your own
• 35:11
  financial advisors, run the math on your own specific timeline,
• 35:15
  and keep challenging the assumptions. Just because the math isn't
• 35:18
  clean anymore doesn't mean you can't architect the right answer
• 35:20
  for your own life. Thanks for joining us on the
• 35:23
  steep dive.