Our houses are too big to be affordable (04-11-2025--Hour3)

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[00:00:28] So I came across a website the other day called White Coat Investor. And they're doctors, but they also talk about investments and stuff, finances. And the founder of White Coat Investor is a doctor by the name of Jim Dahl. D-A-H-L-E. Dahl-E? Dahl-E? Anyway, Dr. Dahl, or Dahl,

[00:00:58] says in this piece titled, The Real Reason for the Housing Unaffordability Crisis. The Real Reason. And what he's going to tell us is probably something that people who want to blame all sorts of other things probably don't want to hear. So that's your trigger warning right there, okay? So first off, housing is unaffordable.

[00:01:29] Right? For a lot of people, housing is unaffordable. I think most people would agree that too much housing is unaffordable. Okay? This is the new chief complaint in our society. He says it used to be that health care was unaffordable. Now, that problem was not fixed. It's just that the housing issue became a bigger deal over the past few years.

[00:01:51] The price of housing soared due to low supply and a few years of very low interest rates. And that has now been combined with high interest rates without any accompanying decrease in prices. That, at least, is what most people think and what most pundits say.

[00:02:14] That's what everybody tends to believe, right? Low supply, low interest rates. People started buying more properties and stuff and then the interest rates went through the roof. Low supply continued. And now nobody can afford the homes. Low capital in Florida.

[00:02:59] stuff. So you had this constraint on supply. And then of course, COVID and the supply shortages. And I myself saw that in my own, I was, so when we were up in Asheville, I launched the podcast and we then go and we start the process of buying a house and we couldn't find any affordable

[00:03:23] existing homes, we found a home that was being built in a neighborhood. And so it was new construction, but we had to wait. So we signed the papers and picked out the fixtures and the countertops or whatever, cheapest level only. And then we were like, okay, now we got to wait for about eight or nine months while they build the house. And I would go out and talk with the site

[00:03:50] supervisor and talk with the sales rep and all of that, about where we were on the project status. And he told me at one point that we were the last one through the gate. Our house was the last one through the gate before all of the disruptions occurred. Because we started doing this during

[00:04:13] COVID or right after the lockdowns got eased up a bit. And so this is when all of the supply chain disruption started and there was a house being built right next to mine. And at one point they had to board up all of the holes that they had cut for the windows. They had to board them all up. They were waiting on windows and they couldn't get windows. And that house sat boarded up for a

[00:04:41] couple months because of the supply chain. So that caused more delays. That's an example of it. In the house I'm in currently, my neighbor, she closed on her house, or sorry, she signed the papers for her house before Christy and I signed the papers on our house. But because her house was bigger, it got slowed down or something, or took a little bit longer to do the work in there. And then by the

[00:05:08] time they went to install the bathroom vent fan, and they couldn't get any. And so it caused a delay because the inspections wouldn't pass without that fart fan up there. So, which by the way, spoiler alert, it doesn't actually clear the air. That's just, it's for the moisture. Anyway, so the point here is that those disruptions did have impact on supply, keeping up with demand.

[00:05:35] The demand issues caused by the ability to borrow money at ridiculously low subinflation rates are also very real too, right? The really low interest rates, people were getting mortgages for 3%, 2%, whatever. That had an impact too, absolutely. However, there's more. There's more to the story,

[00:05:55] as Paul Harvey would have said, size. The size of the homes. I don't, I know people aren't going to want to hear this. So right now, fewer than 11% of households can afford the average home. And that

[00:06:15] is a real problem. Fewer than 11% of households can afford the average home. Okay. Sometimes people, you know, have this, this nostalgia, this longing for the 50s. Dad went to work every day at a job that didn't even require a college degree and that would provide enough income to afford to buy a house just

[00:06:42] like everybody else's. Mom stayed home, right? Kept house, raised the kids and participated in the community. And some people today still see that as an ideal situation. There are two reasons, that that is mostly an impossibility now. Number one, and he quotes Elizabeth Warren,

[00:07:05] old Focahontas herself, which she outlined in her book, The Two Income Trap. The Two Income Trap. She wrote a book many years ago about this. I was unaware of this. However you feel about Warren's venture into politics afterwards, this doctor says she got this point right. When mothers went out into the workplace en masse, it provided additional income into the household. And with that income,

[00:07:33] the family then decided to improve their standard of living. They decided to move into a bigger house in a safer neighborhood with a better school district, right? That's rational. That's logical. More sacrifice, more work gets you some economic advantages. But what happens when everybody does

[00:07:55] that? We've just shifted the goalposts and now everybody wants a bigger house in the safest neighborhoods in the best school districts. So they go out and buy them. But after a while, the natural economic effects are seen. Labor isn't worth as much as it used to be because the supply of it is twice as large as it used to be. By the way, this is one of the reasons why a lot of countries in the

[00:08:23] Middle East cannot compete basically economically. Despite all of that oil, they segregate half of their society out of the workforce, all the women. They don't educate them, right? They don't let them work. And so they're depriving their own society of the benefits that those individuals can provide to the

[00:08:47] society with inventions, with labor, with whatever, right? You're just, you're walling off half of your population from participating in the productive side versus the consumption side. So labor isn't worth as much as it used to be because we have twice as much of it. Now it takes two earners to get the, to get what you used to get with just one income earner. Heaven forbid you lose your spouse to disability,

[00:09:15] death or divorce. And now the family's on the verge of poverty, despite the fact that one parent still has a reasonably well-paying steady job. Maybe the job pays 50K, 60K, right? What are you going to afford with that when you're competing with people that have two incomes of the same amount? But the main reason, he says, the main reason is square footage of the homes. Things have changed. I know

[00:09:45] this personally. The first house that I bought here in Charlotte, on the east side of Charlotte, a neighborhood that was not so great. My house was 920 or so square foot. That's it. It was a small house, three bedroom, one bath, little brick ranch, tiny house, old, not a great neighborhood,

[00:10:10] not a good school assignment. People today are not buying the same houses in 2023 that they were buying in 1955. Our houses are bigger and we need more room to put all of our stuff. People have way more stuff than they did 50 years ago, right? So this idea that we're trying to compare the current situation to based on like the 50s or 60s or something, it doesn't compare any longer.

[00:10:39] Houses now are bigger. In 1950, the average home sold for $82,000 in today's dollars, okay? 82K, that's the equivalent. And it had 938 square feet. So that's about the size of my house. And it's the size of the houses all around that house I bought. They were all the same kind of cookie cutter ranch

[00:11:03] floor plan. They all had the same floor plan and they were all the same size, basically. Now some had been improved over the years. And that was on the east side of Charlotte in one of the first sort of suburbs that pushed outwards in the 50s. That's 30 feet long and 30 feet wide, okay? That's the size of living space that you're talking about. And by the way, I bought that home in 2005 for about 80K.

[00:11:32] That's what I spent on that house, 80K. Again, it needed a lot of work. I spent years doing work in renovating that house. So I know people don't want to hear it. All right. So spring is here, a time of renewal and celebrations. You got graduations, weddings, anniversaries, and the special days for mom and dad. Your family's making memories that are going to last a lifetime. But let me ask you, are all of those treasured moments from days gone by, are they hidden away on

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[00:12:31] Video today and let them preserve your legacy with the love and care that it deserves. Creative Video, preserving family memories since 1997. Located in Mint Hill, just off 485. Mail orders are accepted too. Get all the details at createavideo.com. The overall average square footage in America for a home

[00:12:54] is 2,014 square feet. That's the average, or sorry, the median home size in America, 2,014 square feet. And in the 50s, it was 938. So the homes that we are in now, you know, the median home is more than twice

[00:13:17] as large as the homes from 70 years ago, 60 years ago. So that's one thing, your size inflation. Nobody ever talks about that aspect of the housing crunch. There is also a massive difference in the quality of the homes. The quality. Homes are better built with nicer amenities. Now, I know people are

[00:13:43] like, oh, that's not true. They built them fantastic. No, they built to the best standards. You may have owned a home that was built to really good standards back then. But homes now have better things in them. They've, you know, my first, again, the first home I bought didn't have insulation in it. No insulation in the walls. Okay. Because I guess back then it was like, that was a luxury to have and it wasn't really necessary. You didn't want the house really insulated or something.

[00:14:12] Um, the wiring, right? And there is the regulatory costs as well. All of that gets built in. Heard the story yesterday, Fort Mill. They're like, they're looking to slap on additional quote, impact fees where they're like, we're going to charge these developers, you know, what is it now? It was something like $28,000 per new home for the impact it has on government services, basically.

[00:14:38] $28,000. The builder doesn't pay that folks, the buyers do, right? So you're, you're creating an economic wall around your town. So nobody else moves in. And that is also one of the major problems here too, with the regulatory regimes is that nimbyism, not in my backyard, people arrive and this was really pronounced in the Asheville area when I was up there. And these people would go down

[00:15:07] to the city council for a rezoning petition or a development petition or something. And, and they're like, yeah, we want to build an apartment building. And you would have all the neighbors come down and say no to the apartment building. No, no, no. And they would always start this, the people who came down, I don't know why, but the people who came down to speak at these meetings, almost every single time they would start off with saying something like,

[00:15:30] I moved here eight years ago and I'm opposed to anybody else moving here. So there is this mentality of pulling up the ladder behind you after you got your slice, you know, you found your piece of heaven in the Blue Ridge mountains, but nobody else can move in. And then they put pressure on the elected officials to vote down more housing. And when you do that, you get less housing. And when you have

[00:15:56] less housing, the existing housing goes up also on the regulatory front. Builders are not building starter homes. They're, they're not, they're not building 900,000 square foot or nine or a thousand square foot homes. They're not building them because the profit margins are so low. If existent at all, they, they make money when they build bigger because they can sell the house for more.

[00:16:25] And so they're just not building the starter homes on the quality front. We have hardwood floors and tile where there used to be linoleum. We have higher quality carpet. We have higher quality paint. We have baseboards and light fixtures and granite countertops and stainless steel kitchen appliances, air conditioning, central heating, a dishwasher, a washer and dryer that you actually keep inside.

[00:16:54] And if you don't know what that's about, once again, first house that I bought, the washer and dryer were outside. You had to go outside. There was a little room off the back porch. So there was like a little like concrete step of about, you know, 10 feet long and then like six or seven steps down to the grass. And on that back patio, there was a little shed, a little closet. And in there was

[00:17:22] the circuit panel and the, um, the washer and dryer. And it was not finished. It was like exposed beams and everything else. And so you would walk outside to do your laundry. Now we have laundry rooms, right? We have bathrooms attached to the master bedroom. Whereas again, the old homes, there was

[00:17:45] one bathroom, one bathroom, one shower, one sink. Everybody shared it. That was it. Houses are bigger. They are nicer than they used to be. Um, and then, well, why don't we just buy a smaller house? Right. Here's the thing. Those smaller homes, a lot of that housing stock deals does still exist, but it's in neighborhoods where people don't want to go and live. See, I went to a neighborhood

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[00:19:35] U.S. consumers always want bigger, faster, more, bigger houses, bigger, nicer vehicles, vacation three times a year, more, more, more. I did not go to college. My wife only worked for three months after we got pregnant. 18 years later in my 2,000 square foot house and my newer vehicles are all paid off. I have zero debt. Many of my friends back then did go to college and both husband and wife have worked full-time since.

[00:20:01] And they are living paycheck to paycheck still now. Some have had to file bankruptcy. I tried to warn them. They didn't listen. I mean, this is all just living within your means. That's no matter what price point or income level you're at, it's about being debt-free, not spending more than you make. You know, right before COVID, I was helping my father and mother-in-law find a lot to build a house,

[00:20:26] less than 1,000 square foot house. It did not exist in my area. Minimum square foot in all subdivisions was 1,800 square feet. I ended up just building them a small house on our one and a half acre lot. Yeah, which, by the way, Dr. Jim Dowell at White Coat Investor, he does have a recommendation. He does offer a piece of advice on this, and I'll get to that.

[00:20:55] A couple of tweets here. Russ says, you haven't, oh, about the outdoor washer and dryer. You haven't truly lived until you've had to take your freshly cleaned laundry outside through the rain to get it back inside. Bonus points if something falls out of the basket and onto the wet grass or mud. Yeah, look, I have no doubt that just the idea of having a washer and dryer attached to the house, I mean, there was no garage on this house that I had bought.

[00:21:26] But that was a luxury at the time. This is from Melissa, who says, The first house I bought was an old Victorian, 1880s, still owned by the original family that built it. No electricity or heat upstairs. One central register in the downstairs central hall. I paid $63,000. I sold it four years later. It is now on Zillow for over a million dollars.

[00:21:57] The house that I bought for under $80,000, I think I bought it for $78,000. I fixed it up over the course of about three years or so. This was like $05,000 to $08,000. And then sold it. And I think I got, I'm trying to remember. I think it was like $103,000. I mean, because I improved it. So I think I got over a little over $100,000, if I remember correctly.

[00:22:28] That house is now, so it has changed hands a couple times. And somebody along the way took it from a three-bedroom to a two-bedroom, one bath. And it's now, the last time it sold, it was over a quarter million dollars. Still, at like 900-something square feet. Every house, like you cannot find small houses unless they're like the tiny house variety, you know?

[00:22:58] So the point here is that houses are bigger and they are nicer than they used to be. And that has created some of the shortage in the housing supply. You can find tiny houses, smaller houses, I should say. But they will be in, you know, disrepair. They're going to be in dumpy, crime-ridden neighborhoods with terrible schools. Right? And that means that you're not just economizing, but you're sacrificing the safety and education of your kids. And parents still want to do that.

[00:23:28] He says, The real cause of housing unaffordability is that in many cities in America, perhaps even most, it is impossible to buy a small house in a reasonable neighborhood because those houses simply don't exist. Homebuilders aren't making them. Realtors aren't selling them. And people aren't willing to live in them because they think they're entitled to nice stuff even if they can't afford it. There, I said it, but it's the truth. Think about it.

[00:23:59] A lot of people are raised in these larger, nicer homes. And so they then expect to go into a larger, nicer home. And I should be able to afford the same thing that I grew up in. Well, no. The only solution in most cities? Build more housing. Usually smaller housing, including higher density stuff like condos or duplexes and townhomes. The NIMBY crowd fights it. NIMBY, not in my backyard, NIMBY.

[00:24:30] Cities get behind their biggest taxpayers. Even if developers wanted to help with the issue, they are stymied at every turn by bureaucrats, regulations, and homeowners associations. If cities want affordable housing, they have to make it easier and more profitable to build or convert units. And then he says, because again, these are doctors talking about investment stuff.

[00:24:58] So a lot of doctors read this website. So he says to these people, this audience, he says, okay, but now what about your kids? If you want them to live anywhere near or like you do, presumably on less income than you make as a doctor, right? You're going to have to help out. You're going to have to help pay for their first home. And that means you have to help out. And that means you have a new financial goal.

[00:25:29] And maybe your old list included college savings, retirement, a down payment for your own house. But now it also has to include some money for your kids' houses. How much? He said, I'll leave that up to you. He said, though, I would suggest that this goal of putting money aside for your kids to help offset the cost of buying a decent house in a decent neighborhood. I would suggest that this goal may be just as important or even more important than saving for college.

[00:25:59] College costs what you're willing to pay. But that's not the case with housing. All right. If you're listening to this show, you know I try to keep up with all sorts of current events. And I know you do, too. And you've probably heard me say, get your news from multiple sources. Why? Well, because it's how you detect media bias, which is why I've been so impressed with Ground News. It's an app and it's a website and it combines news from around the world in one place so you can compare coverage and verify information.

[00:26:28] You can check it out at check.ground.news slash Pete. I put the link in the podcast description, too. I started using Ground News a few months ago and more recently chose to work with them as an affiliate because it lets me see clearly how stories get covered and by whom. The Blind Spot feature shows you which stories get ignored by the left and the right. See for yourself. Check.ground.news slash Pete.

[00:26:55] Subscribe through that link and you'll get 15% off any subscription. I use the Vantage plan to get unlimited access to every feature. Your subscription then not only helps my podcast, but it also supports Ground News as they make the media landscape more transparent. Hi, I'm Brett Wetterble. And we are pre-gaming with him as we have started doing pretty recently. I think this is like episode three or four. It is. Something like that. Yeah. We're still where it's a baby stepping right now. I like it.

[00:27:24] This is this is one of my favorite parts of my whole day. Not to be outdone by The Hangover, which is the first segment of your show after three o'clock. Yes. Okay. Where I join you. We double up. Right. That's I like it. So, well, you know, many hands lighten the load. That's a good point. All right. So I got I got I got a story for you to react to. You probably already seen this, but I'm curious because I read this and I was like, I got to ask Brett.

[00:27:49] From the Daily Caller, former vice president and failed 2024 presidential candidate Kamala Harris is thinking about creating an institute for policy and ideas for her next act.

[00:28:09] One of her top advisors is reaching out to universities to discuss the possibility of setting up a think tank for Harris. So, okay. I think we know what's going to happen here. They are hoping that the Elon, not not Elon Musk, right? The Elon. They're hoping that the Elon will connect with the Harris poll.

[00:28:34] So they'll they'll they're they're working to kind of take that, you know, take that forward being like, yes, we're from the Harris Institute. You're not going to really think about it. And they're going to pick up an automatic amount of of of cred because of the Harris poll that happens every every election. There was a movie like that. What was it called?

[00:28:57] The guy who was running or the incumbent died and then Chris Rock had the same name as him and ran for office. That's that's like a way, way back movie. Holy cow. And he had the same name. And then he won based on the written the name being the same. Same idea. I think I think that's what they're trying to do that because they'll probably call it the Harris Institute. The Harris the Harris Institute. Well, you can't say the Harris poll because that's probably trade.

[00:29:27] P.O.L.E. Wow. That's that's that's a little jarring. Find somebody. Here you go. Find somebody else named poll. Last name poll. The Harris Poll Institute. Yeah, that would probably work. We're from Harris Poll. How about the Harris Walls Institute? No, no. The Walls Harris Institute. That guy's. So I think this is actually a very positive development for her to have an institute for her to have an idea.

[00:29:57] And just the you're giving credit for just the idea. And the idea is to have an institute for ideas. So she's like that's forward looking. Like that's aspirational. That is like I'm going to come up with like with a bunch of ideas. I like this. Right. I like this because what are we going to do? We're going to figure we're going to bring people together. To get more understanding. Yes.

[00:30:24] Of the challenges of this time. Correct. I mean. Right. That you're going to get 40 million just off of that sentence. Easily. That's 40 million. Right. And you house this thing at a university. At a university. Scrape up that sweet, sweet cutter cash. Cutter cash. Oh my gosh. That's a good move. And we all know just like Roy Cooper and our former Senator John Edwards. Like this is. And Bev Perdue, our former governor. Sure.

[00:30:52] These college centers or institutes and such. And they're just. It's just a. You're on scholarship. You know. You're just there waiting for the next run for something else. Yeah. Look. It makes total sense. She could really develop some ideas for her next run. Ideas about bringing people together. Right. To solve the problems that everyone is facing. And have faced. And have faced.

[00:31:22] And will face. And will face. And may face or not. Or not. Right. Those for the face and the faceless. See this is the. Will be represented. This is the kind of. This is the kind of think tankery that I think we are really needing. And Harris. Did you say. She's the. Did I just hear you say. Did you say. Tankery or did you say tankeray? Both. Wow. Because you're going to need both of those things. I think. Yeah. I have another story for you too. Okay.

[00:31:52] So did you hear that the crime is down? Where? In Charlotte. Which part? Crime is down. Arrests. Are. Down. Crime is down. Mm-hmm. Arrests are. Up. Yes. What and how? How can that be? It is. I was as perplexed as you. Mm-hmm. Crime. According to the Charlotte Observer. Crime is down. And arrests are up. Mm-hmm. In the first three months of the year. So they're arresting more people.

[00:32:23] Who knew? But wait a minute. See this is. This is one of those sticky wickets. Because. Pete. Are they prosecuting? It's one thing to have the bracelet slapped on you. Yeah. Yeah. And then they let you go two hours later. And now you're doing car takeovers. Right. I mean. What up with this? Well. I mean. I like to think it's a positive development. Because you can't have the prosecutions. Unless you first have the arrests. So baby steps. Right. We start off with some arrests. Some arrests. You get some arrests. Right. Right.

[00:32:53] Then you get some prosecution. Maybe. I'd like to go one step further. Okay. Persecutions. Oh my goodness. Like I think it's time to bring back persecutions. Like there should be. The prosecution is so passe. Persecution is something that is forever. See this is Brett. I feel like you take it too far sometimes. How is that too far? It's persecution. The Persecution Institute. All right. That'll do it for this episode. Thank you so much for listening.

[00:33:22] I could not do the show without your support. And the support of the businesses that advertise on the podcast. So if you'd like. Please support them too. And tell them you heard it here. You can also become a patron at my Patreon page. Or go to thepetecalendorshow.com. Again. Thank you so much for listening. And don't break anything while I'm gone.