How Policy Changes Are Influencing Housing Prices and Affordability

Understanding the current real estate landscape requires a look at how government policies are impacting housing affordability, grocery pricing, and rent control. Each of these factors significantly influences the market and affects both buyers and sellers. This discussion examines why a proposed $25,000 tax credit may not address the housing crisis, how price controls on groceries could lead to shortages, and the potential issues with rent control policies. Additionally, it explores the effects of recent government intervention in real estate, particularly how these changes might affect first-time homebuyers and who stands to benefit the most.

Why a $25,000 Tax Credit Won’t Solve the Housing Crisis

The first thing we want to examine is a potential $25,000 first-time homebuyer tax credit. At first glance, this might seem like a good idea, especially if you're not currently a homeowner. Many people, particularly millennials, are waiting on the sidelines to buy their first home due to the ongoing affordability crisis. We want to help first-time homebuyers get into their homes, as this is a key way to build generational wealth.

Homeowners typically have 40 times the net worth of renters, which highlights the importance of this issue. Unfortunately, this tax credit is not the solution. The real issue is supply and demand. We simply don't have enough supply in this country. Adding more demand without addressing the supply side will not solve the broader housing problem. What is likely to happen is that the $25,000 tax credit will increase home prices by $25,000. While builders and sellers might benefit during this time, first-time homebuyers won't see significant gains. The last time we tried something similar with an $8,000 tax credit, home prices fell back to their original levels once the credit expired.

Even if prices don't drop afterward, this tax credit is still inflationary. It leads to one of two outcomes: either people pay higher taxes to fund this bill, which resembles a socialistic tax, or it adds to inflation because we’re deficit spending without having the money in the first place. This returns us to the same affordability challenge we faced before. You might help people buy a house, but the cost of everything else, like gas and groceries, increases, making it harder to afford living expenses.

The real issue with housing prices is inflation, which the government created. When you compare the actual value of homes to the price of gold, which is considered true money, homes are slightly below average in value. The problem isn’t the value of homes; it’s the situation created by excessive government spending. You can’t solve this problem with the same approach that caused it. The problem was overspending, and if we continue deficit spending, it will only make the problem worse.

Hidden Dangers of Capping Grocery Price Increases

The next point to consider is the proposal to address grocery price gouging by limiting price increases. The root of the problem is the deficit spending that has occurred over the past several years, which has fueled inflation. It’s unjust to place the burden of this inflation on grocery stores, especially given their already thin profit margins. Policies like this have been shown to lead to shortages, which is not something we want in this country. We don’t want to face shortages of essentials like meat and bread, leading to bread lines, as seen in some other countries. Even Jason Furman, who served as a top economist for Barack Obama, has stated that this approach would harm consumers and is not a wise policy.

Why Economists Warn Against Rent Control Policies

Next, let's talk about rent control, which we've already covered in a previous video. Economists agree that rent control leads to shortages and higher prices. There's even a documentary coming out about rent control in New York, highlighting its negative impact. This policy often results in dilapidated buildings where necessary repairs are neglected, leading to shortages and higher prices for units outside rent-controlled areas. It's another policy that I hope won't be implemented across the U.S.

Government Intervention in Real Estate: Impact on Buyers and Sellers

The last topic to discuss is the government's involvement in real estate. Recently, there was a significant real estate settlement, which stemmed from a lawsuit outside of the government, though the DOJ was heavily involved. The challenge we face is a housing affordability crisis across the U.S., and politicians are reluctant to take responsibility. They prefer to blame the Federal Reserve for creating deficits, which have led to higher prices and interest rates, fueling the crisis.

So, who is struggling the most right now? It's those who don't own homes. The NAR settlement brought a few changes, one being that buyer compensation will no longer be listed in the MLS, changing the system as we knew it. The intention might be to lower commission rates, but this doesn't help the people who need it most—homebuyers, particularly first-time buyers. In fact, it could increase their out-of-pocket expenses if sellers don't assist with buyer agent compensation. This could even prevent them from purchasing a home if they lack the funds for closing costs.

So, who benefits? It might help sellers, but probably not, since most sellers are also buying homes. The real winners could be those with multiple properties to sell, and that’s often Wall Street. Institutions like Wall Street have been buying up large numbers of homes. This settlement could potentially benefit them by reducing the overall cost of selling homes, enabling them to flip and trade homes more quickly.

As someone who works with real estate agents, I've been in touch with agents from different countries recently. They consistently tell me that our system is the best and most efficient in the world. Our MLS system allows easy access to all listings, while in other countries, you might have to visit numerous websites and contact multiple brokers, which can take days or even weeks to gather all the available properties. Often, you only get a fraction of what’s available compared to the comprehensive data provided by the MLS.

We also had a buyer compensation model that benefited both buyers and sellers. Many countries still use this structure. We had the best system in the world, but now we’re taking a step back for homebuyers. Additionally, when you look at other countries, another advantage we have is financing. The U.S. offers the best and easiest financing terms in the world. We need to keep America the easiest place for homeownership because homeownership is crucial, and we need to get more first-time buyers into homes. One of the best ways to achieve this is by keeping the government out of real estate, allowing us to continue focusing on serving clients and providing the best value for our buyers and sellers.

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