Invasion of the Millennials - Increasing the Housing Shortage
In this interview, Jason Hartman and host Bridger dissect the current U.S. housing shortage. Hartman argues that the narrative of millennials and Gen Z avoiding homeownership is fading; both cohorts are now entering the market, creating a surge in demand that collides with historically low inventory. He highlights that new‑construction homes now represent roughly a third of the market—a dramatic rise from the pre‑Great‑Recession norm of 10‑20%. Using a kitchen‑sink metaphor, he explains how a trickling supply (the faucet) and a partially clogged demand (the drain) keep the market imbalanced. He notes rising mortgage rates, longer days‑on‑market, and reduced transaction volume, attributing the latter primarily to inventory scarcity rather than pure demand destruction. Hartman predicts a Federal Reserve pivot will eventually lower rates, but warns that a sudden rate drop in a low‑inventory environment could reignite demand and push prices up again. The conversation then shifts to banking stress: SVB’s failure due to mark‑to‑market losses on low‑rate bonds, the broader risk of an inverted yield curve, and the potential for a banking crisis if rates stay high. Hartman dismisses the BRICS challenge to the dollar, calling the bloc economically fragile and asserting the U.S. dollar’s long‑term dominance. Finally, he warns that central‑bank digital currencies (CBDCs) are inevitable and could enable unprecedented financial surveillance and control. Throughout, Hartman mixes personal experience as a real‑estate investor with macro‑economic analysis, offering a cautionary yet pragmatic view of the housing market’s near‑term trajectory.
Chapters
You have to look at inventory on a per household basis with what's, what's.
Your thoughts on this, you know, inventory shortage? Based on millennials or even Gen Z not purchasing homes as much or later in life. This would be, maybe some people say, well, yeah, if this was all boomers, yeah, they'd be buying at 30 years old. But a lot of millennials and Gen Z's are saying, I'm okay to rent, I'm okay to not own a home. What's your thoughts on that trend that's been happening the last decade?
I think that that has been true, but it is not so true anymore. Millennials really are finally growing up and moving into the housing market in a big, big way. So, you know, again, there's that six year lag, right, where millennials are six years behind schedule vis a vis b baby boomers. I mean, listen, millennials are not kids anymore. The oldest millennial is what, 43 years old now?
Yeah.
Okay. These are not kids. Okay. You know, now we have to talk about Gen Z. Okay, we have to talk. Not the millennials anymore. Right. You know, that was true.
Now buying homes just later, they're just doing it later.
Absolutely. They are definitely moving into the housing market. Okay, so just look at this again. Okay, here's another way to look at it. Here's the inventory and we have urgently low inventory. The inventory needs to be above this level. If you look at 2019, okay, any of these years, 2018, 2017. Right. Those were not bad markets. They were very strong markets. I mean, listen, one of my main companies sells real estate. So we're on the front lines. I mean, we help investors buy properties nationwide and build their portfolios. Like we have one client that's got about 200 doors through us now. Okay, so this is what we do. We're not talking theory. I live this every day I see it. You know, our investment counselors are talking to clients. I'm talking to clients, they are buying properties and they're struggling to find good properties to buy. It's still a low inventory market. Yes, admittedly it's not as low as it was during the crazy Covid era, but it's still historically low.
Okay, that's helps paint a better picture too of why median home prices, you had that slide earlier, have not fallen with the rate of the interest rates have gone up. Now, maybe it's a lagging indicator. Maybe, you know, interest rates take time to trickle through down through an economy, but at least for me, God knows.
We'Ve had a year of high interest rates now.
Yeah.
So yeah, we've had it, you know.
And I'm like, well, I mean house prices should start coming down. They should be coming down. They're coming because just affordability has gone just on its head. But if you look at this chart you go, oh well maybe it's because inventory is just still so drastically low.
There's just. Yeah, that's the, that's the problem. I heard an interesting CNBC interview the other day and these leaps in logic that people make are really scary. Okay. The expert on CNBC was saying that the housing is due for a correction. And he says here's his theory, the Fed is going to pivot. And I agree with him. The Fed is going to pivot. Nobody knows exactly when, not even Jerome Powell. But the Fed will pivot and they'll start reducing rates. I think ultimately Bridger, if I had to guess, although interest rates are impossible to predict. Okay. I would think that rates are gonna settle somewhere in the. For mortgage rates. Okay. And that means non owner occupied mortgage rates will be in the sixes. And that's about where we're going to have is the sort of the new normal. Okay. Ultimately. But the Fed hasn't pivoted yet and they're probably a ways away from pivoting. But here's this theory. When the Fed pivots, people will finally sell their houses because the delta between the rate they have and the rate they can get on a new house won't be so much, so they'll have an incentive to sell. That's that theory is true. The problem is what he didn't tell you and what he didn't tell you is when the Fed pivots and we see mortgage rates decline that much, we're going to see housing affordability go way up.
Yeah.
And it's going to light the market on fire again. If you lower interest rates in a no inventory market, you're going to get massive demand for such limited supply. Yep. So you know, these theories from these experts just don't make sense. They don't really look at the whole picture. So what we are in right now is we are in a new home market, a new construction market because real estate developers, home builders do not have the lock in effect when they build houses. They need to sell them. They don't have 30 year debt of super cheap rates. Right. So if we look at new single family homes as a share of the overall market we see here is where they were in the 80s, 90s, you know, 2000s and then here was the bottom coming out of the Great Recession, where just everybody stopped building. Okay. Then we climbed back out of it. And now we see new homes, new construction, holding about a third of the overall market, which is insane.
Usually the average before was what, 10 to 20% in that 10 to 13%.
Yeah.
Dropped to 5% and then now up to about 35%.
Yeah, yeah. So. So the only market is the new home market because the resale sellers won't sell. They just aren't putting their houses on the market in any real way. Here's a good way to look at it. Everybody listening, Close your eyes for a minute. And I want you to picture in your mind your kitchen sink. Picture your kitchen sink. Okay. And now I want you to assume that your sink has the drain, the stoppers in the drain, and it's about 35% full of water. And the faucet is on, but it's a trickle, and you didn't put the stopper in quite right. So some water is draining out. Here's what's happening that describes the housing market. The faucet represents the new properties coming up for sale. And it's just trickling. There's a little bit coming on the market, but not very much. The faucet would be on full blast if people didn't have these cheap mortgages. They won't give up. Okay, but the faucet is trickling. The sink is about one third full. Let's assume that a normal market, not a bad market, just a normal market is a full sink. Now, if it were a really bad market, a buyer's market, the sink would be overflowing with inventory. Right. And the drainage is a little bit clogged because before the drain was totally open and everything that would come on, the market was getting purchased left and right. Now we see that the drain has like a 20% clog because there is less demand. The higher interest rates have definitely hurt demand. And there's less activity, less sales activity because of this. So that's where we are in the market. The sink metaphor helps people really understand what's going on, I think.
Interesting. Yeah. So you're not, you know, people have been looking at days on market or these properties aren't selling, at least for the current prices. And a lot of. There's total transactions have, at least I've heard from my real estate friends, have dropped significantly.
Oh, they have over the last year.
But you're saying it's still not as great as. As what people are panicking about.
Well, let's examine that. Let's unpack that a bit. Okay. Total transactions. First of all, the reason total transactions are down is, you know, most people just think it's demand destruction caused by higher interest rates and lower affordability. And that's somewhat true. But mostly the reason sales activity is down is because there's a lack of inventory. If there was more inventory, you could have more sales. I mean, look, if you own a shoe store and you sell shoes and you only have 30% of your normal selection and 70% or 65% of the shoe racks are empty and have no shoes on them, you're not going to sell as many shoes. Yeah, you need more inventory to sell more.
But then you're also seeing days on market, though. So those shoes are sitting on the shelves for longer and longer, not very long. At a historical level, I haven't seen the recent averages.
I mean, look, days on market has increased. No one would deny that. But it's. Compared to what? I mean, compared to two years ago. Of course it's increased. I mean, the cost of money has tripled. Mortgage payments are higher than they were, dramatically higher. So there's no question that housing affordability has taken a hit. Now, listen, all of the people with the predictions of doom will be right someday. There's no question there will be a correction. Okay, I want everybody to hear me say that nothing lasts forever. I'm just saying this is where we are today and we are not at that point yet. Someday we will be there.
Yeah. I love it. This is awesome, Jason. Now, just for time's sake, I'm gonna switch gears for a little bit. I wanna talk about a few other things I wanna talk about. Well, this all in relation to banks right now. We've had an inverted yield curve over a year. The banking model does not work with an inverted yield curve.
And that's why I think the pivot is required.
Yeah, sorry, say it again.
That's why I think the Fed has to pivot, because they're gonna kill more banks. We're gonna have more banks breaking.
So. Yeah, and you have this with. I mean, mortgages is a massive product for banks. And they sell and package and resell, if we are seeing it, maybe whether it's a housing inventory shortage, all the metrics you just talked about, but I'm. At least from where I sit, it looks like this is stretching banks. Additionally, they bought bonds that are now very much undervalued from what the. The market price they purchased them. They're just not marking a market to Market. How does this, what you just told us all about single family real estate dovetailing with inverted yield curve with bonds decreasing value, do you foresee a banking crash or crisis coming soon?
Yeah, it's a great question. And first of all, I want to make the disclaimer. I'm not a banking expert. There are people who spend their entire careers studying banks and they still can't figure it out. Okay. But from my layperson's point of view, let's just talk about SVB or Silicon Valley Bank. Okay, the reason, the major reason, I mean, there are multiple reasons, okay? But the major thing that hurt Silicon Valley bank is they had these who to maturity bonds that they purchased when those rates were very low and those rates went up and the value of them went down. It's just what you described a moment ago and what we talked about earlier. So that dramatically hurt them. And then Zero Hedge published this chart and it had a list of all the big banks and it had the percentage of hold to maturity assets they owned. But what it didn't tell you was more important than what it did tell you. Okay? And what it didn't tell you is the rate on those hold to maturity assets, the rate that that bank was, you know, holding the mat, which wasn't necessarily as low as Silicon Valley banks. So those assets weren't underwater like theirs. And it didn't tell you the maturity dates, which usually are staggered and laddered. So they're all different. So you just have to like peel the layers of the onion back. But overall, I think your question is a great one. And I think it's speaks to the reality that the Fed will have no choice but to pivot because more things will break. And one of the big things that could break is the banking system. Okay? And also we've got to remember the government is a debtor, okay? And the government pays its debts at higher interest rates the longer this goes on because they have to make T bills competitive with the overall market, so they have an incentive to see lower rates ultimately. So there is so much going in favor of lower rates and a Fed pivot. And there's one thing going against it, and that is inflation. Okay? And I say what will always happen is the elite class will always sell out the poor and the middle class and let them suffer the inflation burden while they take advantage of what's called the Cantillon Effect, which is an economist from like 250 years ago who talked about how the people closest to the money benefit the most and the upper middle Class and the rich and the elite class, they all benefit from the money printer. So they'll let inflation run. That'll be, you know, they're going to try to stave it off a bit and they have done, you know a reasonable job of that but you know, it's not going to last.
Interesting. On the, on bank, the bank side of thing. Yeah. I've talked to a number of funds that we work with. There was a big REIT last week that threw, I mean there was a 18 property portfolio. They just threw the keys to the bank. They said we're good, we don't want em anywhere. They couldn't get values on them. I'm curious to see if commercial people, a lot of people been saying the commercial real estate space is going to blow up because work from home in conjunction with higher interest rates. A lot of these companies aren't paying anymore. I guess we will see. Again with all these things with banks. I've been trying to. Again like you said though, it is hard to study banks and find out what is going on because banks are just so. Because I've been trying to study and figure out how to like under write a bank and see if I could short it or not short where banks are at. But it's very interesting. And then they get bailed out and they have other lending facilities. There's always something you don't know that a bank is doing that you figure out like six months later that they are doing. For sake of time, let's transition. Now we're talking about interest rates, the BRICS nations, you know, huge threat to the US Dollar. A lot of people online saying the dollar's dead. You mentioned a second ago about rates and I something me and my dad have actually were putting in our, in our book we've talked about at length. But the concept that yes, we know the Fed is trying to help inflation and job growth, those are two mandates. But overall their biggest job is to protect the number one asset of the United States, which is the US dollar. That is their number one job. And so one theory is that we are raising rates, yes for inflation, these other things, but to also show the world how strong the dollar is. And the dollar, the dx, the dollar index has been incredible. We've had record high inflation and the dollar is ripping. It's been doing incredible. All right, again, compared to what?
That's what I was just going to say.
Compared to, compared to rubles, compared to un, compared to bitcoins, compared to the S and P, compared to gold. The dollar has done very, very well. It's up 11% over the last two years. And so the one theory is that the Fed is going to continue rates high and it's, yeah, the US Might go into a recession or we might have some things problems, but it's going to really decimate and hurt all these other economies on a compounded rate from degrees away, like you said, from the money printer. I'm curious your thoughts though on right now these currency wars that are taking place with BRICs, the US dollar and banks.
Okay, well, first of all, this may be a contrarian view. I have a feeling it is a contrarian view to yours. But for anybody listening or watching who is in fear that the BRICs are going to be a threat to the US or to the dollar, you are. It's just not going to happen. Okay? Look, the brics are a bunch of dying countries, okay, that are meeting and they will nibble at the edges a little bit, sure, but are they a real threat? Not even close. I mean, it's, you know, the BRICs have to change their name because now they want to add Saudi Arabia and the uae, which by the way, those would be the best countries in the basket probably to add. Right. As much as they're messed up in their own way, but at least economically they have oil, okay? So they've got a real commodity that the world wants and you know, so does Russia, but it can't, you know, it can't sell it in an open market in any real way because of the sanctions. So I don't think that that is a threat. I think the almighty dollar is going to be here a lot longer than many people think. I think the US Is going to be the hegemon for a lot longer than people think. It's to criticize the US and say that all of these things are going to happen, but it's just incredibly unlikely. We have the most powerful military the human race has ever known, okay? And like you said, the thing we are going to defend is the dollar. That is our number one product, is our dollar. And still everybody wants to come here, okay? And everybody's trading in the dollar. In developing countries, people keep dollars under their mattress because they know that's their version of gold. It's going to be the reserve currency for a very long time.
I agree. I actually agree with you, which is contrary to most people, most people, the US Is dead. I actually totally agree with Jeff. But I'm going to steal me on the other position of people that are listening I'll steal me on the opposite with adding these six new countries. Global GDP from the BRICS nations is going to be about, I think, 31% of global GDP, which is about the same as the G7 countries. The massive difference is population. It is a. I think it's 40% of the world's population is in the BRICS nations. And these are emerging markets. These are emerging countries that are going to increase as they get access to Internet like Starlink and access to blockchain. All these new technologies, they will produce more GDP and grow as emerging markets. What would you say to someone that says that to you?
I would say that is not going to happen. First of all, what makes anybody think these BRICS nations will actually get along with each other? First of all, they all have separate interests. I mean, look at the European Union, okay? I was born in Europe and I study the EU a lot. Right, you've got, what, 27 member nations now or something. They can't figure that out. That thing's going to fall apart. I mean, the eu, I, I don't hold out a lot of hope for it. I mean, the United States has managed to stick together even through its own big civil war for what, 240 years. It's just a much more united thing than the bricks. I mean, think of the massive cultural differences of these BRICS nations. Okay, you've got. Now they want to add and geographical.
They're spread over all the world.
It's insane. Like there's nothing bringing them together except their jealousy and hatred of the U.S. okay? That's, that's all they got, okay? It's just not, it's just not a threat, okay? I just, I don't know. And I'll make the disclaimer. I am not a geopolitical expert, okay? But that's just what I think.
So central bank, digital currency, is it happening or not?
Jason, sadly, it is happening, and there's no way we're going to stop it. CBDCs are going to take over the world, and it's going to be very unfortunate because then they will be able to monitor and control our spending. A lot of people don't think of spending as a big form of freedom, but your ability to spend and trade the way you want is maybe one of the biggest forms of freedom. And if they can make money programmable, we are in for a lot of oppression, and this scares me greatly. This is very bad news for humanity because they can make your money not work at certain times of the day. They can make your money not work within more than a mile of your house if there's a lockdown or a quarantine, maybe if they don't like what you post on Facebook, they make it so you can't buy Internet access or cell phone with your. With your money, right? Your digital money that's tied to your phone. So this is a big concern. And CBDCs, they are definitely coming, and we need to do whatever we can to work outside of that.
