Trump Can't Ignore Our Housing Crisis
Mr. Kirk is highlighting a genuine concern. The median price for an existing single-family home in 2024 was a record $412,500. The growth in home prices has significantly outpaced household income growth, increasing the price-to-income ratio to approximately 5.0 in 2024, compared with around 4.1 in 2019 before the pandemic and an average of 3.2 in the 1990s.
Rising interest rates have made a bad situation worse. Average monthly mortgage payments on median-priced houses have surged from $1,445 in 2021 to $2,570 in 2024, and rising home-insurance premiums pushed up the total monthly costs of homeownership to $3,270.
The bottom line: The annual income required to qualify for a mortgage on the median house has risen by more than 60% since 2021, pricing more than half of potential first-time home buyers out of the market. No wonder the median age of first-time home buyers reached a record-high 38 years last year, or that the homeownership rate for households whose heads are 44 and younger has declined. Many couples with young children are stuck in apartments they have outgrown, and they aren't happy about it.
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00:00 Seems like the market got ahead of themselves about what we could have seen with this meeting. What does it tell us about where policy supports that have come through? I think the market is still building expectations that there will be another meaningful round of policy coming through. Whoever you speak to on the street. I think there's a very clear view that the government this time around is very much determined. And then what is really facilitating this view is also since April we have seen a slowdown in sales momentum. So building up six months of very good sales since April, with the trade tension kicking in, sales has moderated along with the home price data which has weakened what's caused that. I think in part because we have had six months of very strong data, the market felt that maybe a bulk of the pent up demand has already been taken up by the market. And then, of course, we had Trade Towers kicking in back in April. So I think it's a combination of factor, but more importantly, it's just about the market feeling quite unsettled that home prices in some cities are still correcting. What can we expect in terms of the next sort of data? I mean, the Politburo meeting seems to be the next sort of pit stop, I guess. Do you think we're likely to hear anything then? I'm never a subscriber of identifying dates because we have learned over the years that policies can really come any time. But how the market is thinking about it is is July could be a window at end of month. But the other window of opportunity is in November. Window for what? Like what? What's what's a realistic expectation to have? I think that in species view, we really don't expect anything very meaningful. Anything that has been announced has been announcements to announce the 24. We have had rate cuts, we have had down payment cuts, the relaxation of home purchase relaxations, all of them is there. So I think at the moment what's very important is for the government to really execute. Nothing. One key aspect is inventory acquisition. If the government can push through, accelerate and maybe do it in a more aggressive manner, that can actually move the needle. Okay. What are you expecting out of this earnings season? We've already had some profilers from the likes of Lanco and the like. How do you separate between who's going to do well, who's not? We don't project interim earnings because it seems there's no way to do so. But I think what we can point to is the base effect. I think in first half, 2024, we have had companies like Sealand where pet companies like CND that had generally quite a low base. So what that means is that first half of this year should be quite favorable for them. On the contrary, quarterly had a high base same period last year. So what that means is that the market generally would be more cautious in terms of thinking about what they can deliver during a period in terms of which city tiers are doing better than others and out of a tier one over the rest, Or is it what price points are doing well within? See if it's tier one, it's doing well within that. What price points are doing well? What segments do you think stand out to you? It's going to be a luxury luxury held up very well and actually surprise us through the down cycle. We have been in and out of China the last two months. We went to Beijing, Shanghai. What we actually learned is that if you're in a luxury market that caters to upgraded housing demand, you will sell through. And some use this as you can naturally raise prices as well. Okay. What are your, I guess, assumptions for housing demand moving forward? I think Goldman had a line just a few weeks ago that, you know, they're going to stay around 75% of the peak. Yeah. How are we going to be looking at this, the sector here in maybe couple of months or years time? How do you compare that to 2017? I'm actually quite constructive. I'm quite optimistic because I feel that the pain is already behind us. 2024 should be a floor this year. We're projecting for volume to be flat to maybe down 5% or so. But of course, it really depends on the momentum the next couple of months and if there is going to be more meaningful policies coming through. What I think the market should really focus on at the moment is, of course there's going to be a lot of pain is very convenient to still be quite negative on China property. But I think that what the market has not really focused on and that's really going to make a difference is the decoupling. What we've seen in the Twin Cities, tier two cities, new home versus secondary home. But even within the top tier cities, there are properties that won't probably ever so that there are properties that are still highly sought after and that actually has a positive pricing momentum, right? Yeah, because we you know, us in the media, we we operate based on data that's given and released. And some time, you know, one of the most frequent data points that we get is, you know, the 70 cities. Right. And I wonder how useful that is looking at this market wholesale when to your point, you will miss a good story if you simply focused in on that. So what then do we pay attention to? Like what do you pay attention to? I look at this data. This data is important because I think the market look at this data very, very closely. So they would determine then the market movement. But what I also pay attention to is increasingly top down fundamentals. What are the big themes in the market? The big theme is we're in a lower for longer rate environment. But a bigger theme from a realistic perspective is we have a supply squeeze. Why I say that is because when you look at two data point, you know, new starts versus home sales, new starts down 70% from the peak home sales down, give or take, just around 50%. So what that means is that in a market whereby no one is really buying a lot of landbank, you just really don't have a lot of quality new builds. But more importantly, I think going bottom, bottom up deeper, that's very, very helpful for us in terms of formulating what we think would help the market navigate through a recovery where we can actually think about which developers can capitalize on emerging opportunities. Right. And just very quickly, our clients and investors receptive to that good news because largely, you know, the China property story was negative wholesale to many people. And I wonder how receptive people are now to some of the bright spots there. They're very receptive. They are just not position that way. That Verbale was very, very, very positive. But I think what happened the last couple of years still making them a little bit nervous. Yeah, there's do that bitter taste. But I think if we look at the performance of some of the key stocks that we like for some of them, right, even though they don't really understand that story, they are just do going in just because they don't really want to miss the boat.
