Housing Crisis: The U.S. housing market faces a crisis due to insufficient home building, leading to high prices and difficulties for young Americans seeking affordable housing. Without change, the situation will worsen. Mixed-use development and economic adaptation are crucial to improve resilience and affordability.
Creating resilient and economically stable places requires a balance of mixed-use developments, allowing for communities that can endure various economic cycles. However, the American housing market faces significant challenges, including a lack of new homes that keep up with population growth, leading to skyrocketing prices. With many young people like Aidan struggling to find permanent affordable housing, it's apparent that a dearth of home building and high interest rates are major factors contributing to the current crisis. Without addressing these issues, the dream of homeownership becomes increasingly difficult for many Americans. It’s vital for the housing market to adapt and expand to meet the population's needs.
Housing Crisis: High interest rates are limiting housing starts, prioritizing luxury homes over affordable ones, worsening the housing crisis. Politicians are proposing solutions, with Harris aiming to build three million new homes in four years to address the issue.
Housing starts in the U.S. are surprisingly low, even as builders secure permits. Higher interest rates have led many builders to prioritize luxury homes over affordable options, leaving a gap in the market. This issue is compounded by existing homeowners reluctant to sell due to high mortgage rates, effectively freezing the market. Both Vice President Harris and former President Trump have addressed this crisis in their campaigns, with Harris proposing to build three million new homes in four years to tackle the housing shortage. This ambitious goal highlights the significant need for more affordable housing, especially in the current climate where the lack of new construction and rising costs are worsening the situation.
Housing Solutions: The U.S. faces a major housing shortage, and effective solutions depend on changing complex local zoning laws, which the federal government is trying to incentivize with financial support.
There is a significant housing shortage in the U.S., estimated to be between 4.5 and 7.2 million homes. Addressing this requires both new constructions and changes to local zoning laws, which currently govern where and what can be built. The federal government can incentivize local governments to alter these laws through financial grants, encouraging areas to allow for more housing development. However, finding effective ways to implement these changes is complex, as zoning regulations vary widely across different regions. Despite efforts, including programs like the Biden administration's Pathways for Removing Obstacles to Housing, progress at the federal level in changing local zoning practices remains limited and challenging due to the myriad of different laws in place.
Housing Solutions: To tackle the housing crisis, the federal government can enhance tax credits for affordable housing, support the rehab of old homes, and incentivize converting commercial buildings into housing. Effective measures could help address the growing housing shortage, though political challenges exist.
In addressing the housing crisis, the federal government could implement various strategies. One effective measure is to enhance tax credits for developers to build affordable housing through programs like the low-income housing tax credit. Additionally, support for rehabilitating old homes with tax incentives could help revitalize neglected properties. Another approach is converting vacant commercial buildings into residential units. These incentives are crucial as many old homes and commercial properties are deteriorating due to lack of occupancy, making them more costly to repair. Although there are proposals like the Neighborhood Homes Tax Credit to support these initiatives, political challenges remain, particularly around perceived bailouts for commercial real estate developers. Overall, these strategies aim to boost the housing supply and make homes more accessible and affordable for families across the country.
Housing Market Challenges: Revamping the housing market requires focusing on supply, incentivizing sales, and navigating zoning laws, but significant changes will take time and experimentation to achieve.
Commercial real estate conversion is a complex process, particularly for struggling office buildings in areas like Manhattan. To stimulate more housing, the government could incentivize the sale of existing properties and make changes to how real estate sales are taxed. However, efforts must focus on increasing housing supply while navigating the challenges posed by local zoning laws. Despite new policies aiming for 3 million additional housing units, progress will be slow as zoning regulations and community resistance, known as nimbyism, hinder development. While easing financial conditions might help some, fixing the broken housing market is a long-term endeavor that requires experimentation and collaboration between federal and state governments to discover effective solutions. Overall, transforming the housing landscape will take substantial time and repeated efforts before substantial change is realized.
Investment Insights: Turkish stocks are facing challenges amid inflation and changing investor strategies. While the yield curve normalized, it may no longer be a reliable economic indicator post-pandemic. Caution is advised for investors in these areas.
Turkish equities are currently experiencing a tough phase after a significant period of growth, mainly due to high inflation and changing investor behavior. Local households prefer high-yield bank accounts over stocks, while foreign investors are withdrawing their investments. Although there seem to be positive future aspects for Turkey’s economy, the current stock market conditions suggest that now is not the right time to buy. Additionally, the recent normalization of the yield curve, while creating buzz, may not be a reliable economic indicator anymore due to the lasting effects of the pandemic and related policies. Therefore, caution is advised for investors in both Turkish stocks and the yield curve as reliance on historical market indicators is diminishing in today’s context.
How to fix the housing market
Recent Episodes from Unhedged
Federal Reserve puts on enormous party hat
In a massive surprise on Wednesday, one of Rob Armstrong’s predictions turned out to be right. The Fed did indeed cut interest rates by half a percentage point. A cut this big is deeply unusual, and normally happens in a crisis. But there are a lot of reasons to think we’re not in a crisis at all. Today on the show, Katie Martin and Rob Armstrong talk about what the Fed just did, and where the central bank is headed. Also, we go long European merger drama and short well-being at big banks.
For a free 30-day trial to the Unhedged newsletter go to: https://www.ft.com/unhedgedoffer
You can email Robert Armstrong at robert.armstrong@ft.com and Katie Martin at katie.martin@ft.com.
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What is Apollo, anyway?
Apollo Global Management is publicly traded and one of the largest alternative asset managers in the world. But what does it really do? Today on the show, Rob Armstrong asks reporters Sujeet Indap and Eric Platt to describe the parts that make up Apollo. Also they go long Boeing and long News Corp.
For a free 30-day trial to the Unhedged newsletter go to: https://www.ft.com/unhedgedoffer
You can email Robert Armstrong at robert.armstrong@ft.com and Katie Martin at katie.martin@ft.com.
Read a transcript of this episode on FT.com
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How Ireland got too much money
Forty years ago Ireland had a high number of emigrants and very few multinational corporations. Then it became a tax haven. Today, the country is the headquarters for the European arms of companies such as Apple, Google and Intel. The country also has an €8bn surplus, and is about to get €13bn more following a court ruling with the iPhone maker. Today on the show, Katie Martin and Irish economist David McWilliams try to figure out what Ireland should do with all this extra cash. Also they go short Trump Media and long the Netflix series, The Perfect Couple.
For a free 30-day trial to the Unhedged newsletter go to: https://www.ft.com/unhedgedoffer
You can email Robert Armstrong at robert.armstrong@ft.com and Katie Martin at katie.martin@ft.com.
Read a transcript of this episode on FT.com
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The Fed: will it be 25 or 50?
Will the US central bank lower interest rates by 25 or 50 basis points? Fed chair Jay Powell has hinted rates are coming down, but not by how much. Today on the show, Katie Martin and Rob Armstrong take sides and argue the case for the expected 25 basis point cut, and a larger 50 basis point cut. Also we short Apple’s new phone, and go long the amazing technology of the veterinarian.
For a free 30-day trial to the Unhedged newsletter go to: https://www.ft.com/unhedgedoffer
You can email Robert Armstrong at robert.armstrong@ft.com and Katie Martin at katie.martin@ft.com.
Read a transcript of this episode on FT.com
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How to fix the housing market
By many measures, the US housing market is broken. High demand is causing high prices, and yet, year after year, new supply fails to arrive. What’s behind the mismatch? And is there any way to solve it? Today on the show, Robert Armstrong and Aiden Reiter discuss proposals from the two US presidential candidates, and other ideas. Also, we go short Turkey and short the yield curve.
For a free 30-day trial to the Unhedged newsletter go to: https://www.ft.com/unhedgedoffer
You can email Robert Armstrong at robert.armstrong@ft.com and Katie Martin at katie.martin@ft.com.
Read a transcript of this episode on FT.com
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Boring but sexy (stocks)
The run-up in the markets over the past year or so has been largely driven by tech companies with outsized returns. But that seems to be changing. Names such as Walmart, Berkshire Hathaway and UnitedHealthCare have been performing strongly while the once-hot tech sector seems to lag. Today on the show, Katie Martin and Rob Armstrong ask if this is a sign of an era shift in the market. Also we ask if Jerome Powell was lucky or good.
For a free 30-day trial to the Unhedged newsletter go to: https://www.ft.com/unhedgedoffer
You can email Robert Armstrong at robert.armstrong@ft.com and Katie Martin at katie.martin@ft.com.
Read a transcript of this episode on FT.com
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The ethics of investing for dictators
Toby Nangle is a regular contributor to the FT. Before he was a journalist, he was an asset manager for more than 25 years, and many of his clients were sovereign wealth funds. And some of the sovereigns of those wealth funds were doing things that made Nangle uncomfortable. So he quit. Today on the show, we discuss a massive problem faced by the investment industry: the ethical behaviour of its clients.
For a free 30-day trial to the Unhedged newsletter go to: https://www.ft.com/unhedgedoffer
You can email Robert Armstrong at robert.armstrong@ft.com and Katie Martin at katie.martin@ft.com.
Register now for the FT Weekend Festival, and claim £24 off your pass using promo code FTPodcast at: ft.com/festival
Read a transcript of this episode on FT.com
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The gold rally
The price of gold reached a record high this week, passing $2,500 an ounce. Market watchers often ascribe a rise like this to inflation, fears about political instability or the endless insanity of the wild-eyed goldbug. But which is it? Today on the show, Katie Martin and Rob Armstrong unpack gold’s rise. Also we go long and short Nvidia.
For a free 30-day trial to the Unhedged newsletter go to: https://www.ft.com/unhedgedoffer
You can email Robert Armstrong at robert.armstrong@ft.com and Katie Martin at katie.martin@ft.com.
Register now for the FT Weekend Festival, and claim £24 off your pass using promo code FTPodcast at: ft.com/festival
Read a transcript of this episode on FT.com
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What will Jay Powell say at Jackson Hole?
Why do central bankers gather in the middle of nowhere every summer? And what will this week's meeting in the middle of nowhere mean for markets? Katie Martin and FT economics commentator Chris Giles explain everything you need to know about Jackson Hole. Also, we go long exclusive conferences and short exams.
For a free 30-day trial to the Unhedged newsletter go to: https://www.ft.com/unhedgedoffer
You can email Robert Armstrong at robert.armstrong@ft.com and Katie Martin at katie.martin@ft.com.
Register now for the FT Weekend Festival, and claim £24 off your pass using promo code FTPodcast at: ft.com/festival
Read a transcript of this episode on FT.com
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Markets resume previously scheduled exuberance
Two weeks ago, investors seemed headed for the exits. Now they’re back in and cash is flooding the markets again. Today on the show, Katie Martin and Rob Armstrong unpack the madness. Also, we go long gold and short social media.
For a free 30-day trial to the Unhedged newsletter go to: https://www.ft.com/unhedgedoffer
You can email Robert Armstrong at robert.armstrong@ft.com and Katie Martin at katie.martin@ft.com.
Register now for the FT Weekend Festival, and claim £24 off your pass using promo code FTPodcast at: ft.com/festival
Read a transcript of this episode on FT.com
Hosted on Acast. See acast.com/privacy for more information.