The Housing Market Is Completely Stuck — Here’s Why with Daryl Fairweather | The 1600

0:00Hello once again from Newsweek headquarters at the top of the World Trade Center in New York City. This is the 1600 and I, of course, Carlo Versano.

0:08Daryl Fairweather:This country was stone cold dead. So we're sitting here on the eve of our 250th birthday, which is probably as good a time as any to think about the American dream and what it means. American dream obviously means a lot of different things to a lot of different people. But in its most literal sense, it means a home that you own, or at least it used to mean a home that you own and one that maybe comes with a white picket fence. Now that home comes with a 6.5 % mortgage rate, a seller who won't budge because they locked in at 3%, and a generation of young people who have really kind of just stopped believing they'll ever own a house or anything.

0:47So why not just burn it all down, which is something that we're seeing in a lot of these primaries, although that's a topic for another day. But, you know, staying on our housing market, it's broken. I think we can probably all agree, not really in a dramatic 2008 kind of way with all the foreclosures and the housing bubble that burst back then. It's broken in more of a slow grinding. Nobody really knows what to do. Nobody's coming to rescue kind of way. And we've got evidence of that. We've got evidence of that just the other day when President Trump all of a sudden flipped his position on a piece of legislation, probably the most significant piece of housing legislation that Congress has enacted 20 years or so, passed by Congress, bipartisan support.

1:27The White House even worked on it itself. And he's now saying he's not going to support it for various political reasons. So all of that said, my guest today is Daryl Fairweather. Daryl is chief economist at Redfin, and she's author of the book Hate the Game, Economic Cheap Codes for Life, Love and Work. Daryl, thank you so much for taking the time. Thank you for having me. So I've been following you a long time. You're a great source for all things housing and economy sort of writ large. And I want to ask you about the book specifically, these cheat codes for love. I'm especially interested in maybe we can save some time for that at the end.

2:03But I want to start with the recent news that I just mentioned. So we're recording this on Thursday afternoon, the 21st Century Road to Housing Act. That's this big housing bill which passed Congress, both houses, bipartisan support. Like I said, President Trump was behind this thing. This bill permits streamlining of home building. It addresses zoning reform. It's not particularly sexy, but most importantly, it does not add a dollar in new spending, which I think is something that probably is the reason why it got bipartisan support. Now, this bill is being held hostage by Donald Trump in his negotiations over the Save America Act, which is a voter fraud election ID bill, voter ID bill that has no chance of passing the Senate, at least in its current form.

2:46Can you just explain to us in sort of brief terms what this bill, the Road to Housing Act, does that addresses the housing problem? Yeah, there's so much good stuff in this bill. It really focuses on all of the roadblocks that make it difficult to build housing in this country, whether that be red tape from onerous regulations or zoning, which is mostly controlled by local governments. But they are tying now federal money to these local governments actually planning to build more housing. There's also some provisions about manufactured and modular homes, which could be a great solution for building housing more affordably.

3:27There's some stuff in there about disaster relief for people affected by disasters impacting their homes. So it's like kind of a kitchen sink, but it's everything that housing experts have been asking the federal government to do. The federal government doesn't have, you know, the most authority when it comes to housing. Most of that authority lies in local governments, but they can do some things. And that's what's in this bill. And the other thing, I mean, I guess it's, you know, maybe it's a little bit more of a, you know, I don't know how to put it, but less specific to the actual things that are in the bill.

4:00But one of the reasons why I was excited about this passing is just because of how little bipartisanship or any action at all we see from Congress. And the fact that they got together and got in this thing passed easily, you know, it wasn't close. The fact that they got both houses to pass a piece of legislation that does address what is the voters number one issue, which is affordability. That's no small thing, right? No, that is a big feat. And I think that housing is one of these issues that cuts across party lines. The way people feel about housing, it's not left or right. It usually falls into the category of NIMBY, which is not in my backyard, meaning you're just against building new housing in general, especially when it's in your local area.

4:41And the people who have been advocating for more housing who recognize that the fundamental problem in the housing market is a lack of supply. And that's what this bill addresses. It addresses the supply problems. It's not, you know, the quick fix, but it is what is necessary in order for us to get to a healthier housing market. So on the supply issue. And again, I know you're an economist. You're not a political commentator. So, you know, you don't need to apply on this. But, you know, it was very interesting to me. So Trump told Mike Johnson, Speaker of the House, this is according to Punchbowl News, quote, nobody gives a shit about housing.

5:17That was his that was his quote about why he sort of flipped flip flopped on this. And, you know, put aside that that's an insane thing to say for a real estate developer, a guy who made his fortune building homes for people. But at first I thought, you know, this is a crazy thing for Trump to say because a lot of people give lots of shits about housing, like to your point, across party lines. But then I realized he's not saying nobody gives a shit about it. He's saying my voters don't care. His voters, the people who still support him, are mostly conservative boomers who are, by and large, homeowners.

5:53Right. They don't need or particularly want, to your point about nimbyism. They don't want a whole boatload of new affordable housing in their backyard because they bought their houses for, you know,$48 in the 80s. And they're sitting on, you know, it 100xed in the, you know, 40 years since. And now they're sitting on this boatload of equity that they don't want to have diluted. Do you think that's a fair read? I think that's a fair read. But the people, that group of people, these baby boomers who own homes, they're also negatively impacted by the lack of affordable housing, especially as they get into their older years and they're going to need care workers to take care of them.

6:31They're going to need to be able to get to their doctor's appointments. And if they live in these suburban neighborhoods without public transit, they're going to have to figure out how to get there if they don't have a license. They're going to need help from other people who may not be homeowners, who may need to rent. And their rent is high, which means it's more expensive to hire those care workers. So it does impact them, even if they don't see that direct impact. They just see the apartment building going up, change in their neighborhoods, and they don't like the change. No, exactly. It's a great point.

7:00And I mean, I see this in my own life, right? My parents live in a house that we grew up in. My wife and I are trying to buy it from them. They kind of need to get out just because they're getting older and there's a you know, it's on a hill. There's a lot of steps. But, you know, again, they locked in a whatever, 2.5 percent interest rate and there's nowhere for them to go. So it's not I don't want to just, you know, blame the boomers. But they are, I think, a big piece of this. But in terms of just in terms of this bill, you sort of mentioned this already. But even if it were to become law and it could write, you never know with Trump.

7:30He flip flops. He's in on it. He's out on it. I think there's a fair chance that he might come back to this. There are no new funds for affordable housing. It can't address a lot of these economic headwinds, which I know you've written about, whether it's tariffs or the constraints in the labor market, material costs, everything just being expensive, and of course interest rates, which Trump himself said. Yeah, my understanding is that there are enough votes and bipartisan support to get this passed, even if there was a presidential veto. Maybe it won't come to that. But yeah, I'm still optimistic that this bill will pass.

8:07But even after it does pass, it's not like housing is going to automatically become affordable overnight. Right. Builders right now are in a construction recession. They're up against high interest rates, which makes it more expensive for them to borrow in order to build in the first place. And they're up against high mortgage rates, which significantly reduces the demand for their housing once it's actually built. They're also dealing with a lack of construction labor, which is exacerbated by the current immigration policy, high cost of land, high cost of materials, exacerbated by tariffs. And there is a natural cycle to the housing market, which means even if we do everything right, we have a tendency to underbuild because you build a lot during boom times.

8:43And then the builders completely back off when things are in a downturn. So there is reason for even more government intervention in the housing market if we truly wanted to make it affordable for everyone. So let's back up a minute. What is the state of the housing market right now? You mentioned we're in a construction recession. I believe Redfin's official sort of stance or headline framing for this year is that we're in something of a reset, right? So we're not in a crash. We're not in a boom. But does that just mean that we're kind of like stuck? We are stuck, but we are slowly becoming unstuck.

9:21Over the next 10 years or so, we expect that home prices will go up slower than the pace of inflation and the pace of wage growth. We also expect that mortgage rates will come down. They won't come down to pandemic levels, might not even come down to pre-pandemic levels, but they will probably come down from where they are right now, given that the war in Iran is not going to last forever and that the impacts of these tariffs aren't going to last forever when it comes to inflation. So in the coming years, housing will become more affordable. Another thing is what you brought up, baby boomers. Baby boomers are eventually going to give up their homes.

9:54They're going to pass on. They are a very large generation and Gen Z is a very small generation. But those homes are going to need a lot of maintenance. They're going to need repair. And a lot of them aren't necessarily located where younger people want to live. So in general, I think housing is going to be more affordable to buy, but there are more challenges on the horizon. Another one is climate change that will increase the cost of insurance. So it's a constant battle when it comes to housing to make sure that we're building enough and making it affordable. Well, I'm glad you brought up the issue of boomers sort of, you know, because I was going to ask you this and it's like kind of a macabre question, but it's true.

10:31I mean, the boomers are going to die. Everyone, we all are. Right. What is going to happen to all of those homes? Let me put it another way. Does some of this problem solve itself when that generation passes on? With this legislation, the problem is easier to solve by itself. So in Los Angeles, for example, there are so many single family homes in places where the land is incredibly valuable. The reason that those homes aren't turning over into multifamily zoning, into multifamily homes, is because they are zoned for single family. That has changed with legislation from California at the state level and will probably also change because of this road to housing bill.

11:14The baby boomers aren't going to give up those single family homes right away. But when they do pass on and their heirs get the homes, they're probably going to find it more profitable to sell to a developer that will take those single family homes and develop them into multifamily housing and create more housing supply because the land is so valuable, because there is so much money to be made and there is so much demand for housing in Los Angeles. Los Angeles has the most expensive housing market in the country. When you adjust for income, it's even more expensive in San Francisco. So I think there you will see a big transformation of housing.

11:46But then for the homes that are kind of like, let's say the homes in Florida that are more rural, that aren't really located near jobs, I think those could go down in value and be very difficult to sell and might not have buyers waiting for them. Interesting. I didn't actually realize that. Los Angeles housing is real estate is more expensive on a per capita earnings basis than San Francisco. Wow. Yeah. Only 1 % of homes for sale are affordable to a family making the local median income in Los Angeles. In San Francisco, I think it's more like 5%. Just an incredible policy failure with so many architects.

12:26Can you talk a little bit about this concept of the lock-in effect and why – we talked about this a little bit at the top, why people aren't selling. It's like, you know, if you get a 3 % mortgage and I mean, you still if you're going to sell your house, you still need to buy another house. Right. And if that rate is six and a half percent, it doesn't look very attractive. Yeah. So during the pandemic, the Fed dropped interest rates to zero. Mortgage rates fell to below 3%. And everybody who was paying attention went out and refinanced their mortgage. And people who were buying homes, which there was a lot of people buying homes at that time, got those super cheap mortgage rates.

13:01I got a mortgage rate around 3 % at that time. those people right right those people don't want to leave because you know if you were to sell your five hundred thousand dollar home and buy another home where you were taking on an equal amount of debt you would be paying a thousand dollars more per month for your mortgage just to move laterally now you probably have some equity in your home and we are seeing that happen where people who have a lot of equity in their home and are downsizing or taking out the cash and buying in cash to navigate around interest rates. But most people need to borrow and those high interest rates just make it so the math doesn't work.

13:35The sellers cannot afford to sell and the buyers cannot afford to buy. And that's why the housing market is completely stuck. That's a very succinct way of putting it. I appreciate that. And I see that in Brooklyn, where I live. We've been in and out of the housing market for a while and we cannot make the numbers work. I mean, it's like rates come down and we're like, OK, maybe this is our chance. And then we go to war with Iran and they're up another basis point. It's like, What am I doing here? So I'm a millennial. I believe you are, too. I think I have you by a couple years, but we're of the same milieu.

14:09You've done a lot of work, a lot of writing on millennial ownership, but also Gen Z, which flatlined back in 2024. You said that the culture, you wrote this, the culture is, quote, shifting with the economic times. Talk a little bit about what that means. And is that just sort of like a euphemism for what I said at the top, which is like a lot of younger people are just throwing up their hands and saying, this isn't going to happen for me. Right. So I'm going to, you know, I'm going to give up. Yeah, I think what Gen Z is up against is a lack of affordability, even though many of them are still like too young to really be thinking about homeownership.

14:44They see how things have been headed for their whole entire adulthood. Housing has been so unaffordable. They feel like it's so out of reach that they shouldn't even try and they should rent instead. They also get a lot of information online from TikTok about how, you know, it's not necessarily better to own than to rent, which is true. If you are disciplined about saving, you can actually get ahead by putting your money into the stock market instead of tying it up in your home. And I think that they are just trying to figure out how to have economic prosperity, given that the traditional path to economic prosperity seems to be cut off for them.

15:21Now, I will say that right now is probably as bad as it's going to get in terms of affordability to buy a home with the price and the mortgage. Insurance is a different story. So I think over time, the Gen Zers who thought they would never become homeowners probably will become homeowners, similar to how it was for us millennials. We graduated from college during the Great Recession, wasn't really thinking about homeownership, just trying to figure out how to get a job, a good job in the first place. And now millennials have the same homeownership rate as Gen Xers. So I think Gen Z will catch up, but I think their relationship to housing is going to change.

15:55They're not going to see it as necessary and maybe more optional. Maybe that will change the way that they think about homes. Maybe they will get more creative with what they do with their homes instead of only thinking about resale value. Maybe they'll see the value and ownership for the sake of just owning. Right. No, it's a really good point. And it's like, you know, there's so much written and spoken in the media about how Gen Z has it so tough. But it's your point. Like, I mean, so I was born in 84. I graduated in 06. So I was OK. My wife graduated in 09. So she graduated right into the teeth of the, you know, the Great Recession.

16:33So, yeah, I mean, these things are cyclical to a degree, I suppose. Right. That's that's kind of the bottom line. Daryl, you had this piece in in Forbes recently I really like called to the point you were just saying Gen Z is creating a new path to prosperity. There's a quote in it I want to I want to read. But can you just just give me the thesis of that piece, if you could. Like, what are the paths to prosperity? Yeah, there's been a lot of discussion about how Gen Z is becoming economic nihilists, that they're turning to day trading or gambling as kind of the get rich quick scheme because the traditional path to prosperity doesn't really exist anymore, especially for people who are graduating from college.

17:15It's so difficult to even get an entry level job. And then if you have to take a job that isn't what you trained for, you're probably not going to make enough money to be able to afford a rent. And if you can't afford rent, it's really difficult to think about affording a home one day. But at the same time, there's so much economic opportunity out there. Like you could become an entrepreneur, I think, much more easily now than you could have 10 years ago because of AI and because of the Internet and everything. So I think Gen Z will discover new forms in order to move in the economy. I think that will translate to housing, too.

17:46I think that they will probably have to abandon the idea of the single family home with the picket fence and start embracing the idea of multifamily housing, because that is the way that we're going to make housing more affordable to everyone. Right. This is the quote I liked from your piece that I pulled out here, quoting you now. When success is not achieved through hard work, but instead luck at birth or through betting, the signifiers of success lose their meaning because success has become detached from effort. But effort does still matter. It's just much less clear which endeavor to pour that effort into.

18:19Yeah, just talk about that for a minute because you're basically making the point that like, yeah, maybe you can make a quick buck in crypto or in the prediction markets or something. But it's that's different. I mean, it is luck. That's not, you know, nose to the grindstone shoe leather hard work that builds equity. Right. Right. Yeah, I think that especially online nowadays, you might see your peers achieve success earlier than you did. And then there's this question of, well, how do they do that? How are they affording this apartment in New York or this home in Los Angeles? Is it the bank of mom and dad?

18:52Did they get lucky because they bought Bitcoin 10 years ago? Do they have like, you know, a spouse that makes a lot of money? It just starts to feel like the signifiers of success are detached from the effort that goes into that success. But when it comes to more paths opening up, I go back to technology. Technology is the way that prosperity increases. It's how economic model, it's how GDP increases. And I think technology is going to open up new paths, but it's really hard to take that path that hasn't been taken before. But that can end up being the way to really do something that's ever been done to kind of carve your own niche that could lead to a lot of prosperity.

19:34Yeah. And so much of it is social media, right? This like keeping up with the Joneses effect, just being multiplied because instead of just looking at your neighbors, your coworkers, and wondering, oh, how did he get that raise? Or how is she driving the Range Rover now? Now it's just like the entire world is just on your screen and everybody's, obviously, there's always somebody who is doing better, making more money. It's, yeah, I mean, that's, again, an issue for another day. But you have noted in your writing that a lot of young buyers may stay with their family or rent into their 30s. What does that do to house?

20:10This is more of like a sociological question, but it's something I've thought about a lot. That has a lot to do with household formation and the broader economy, but also just like family formation, right? I mean, I believe that this is actually the skeleton key to a lot of our current problems. Yeah, I think a lot of people feel like they aren't ready to get married and have kids until they have their student debt paid off, until they become homeowners, until they've gotten those other signifiers that show that they are adults. Now, not everyone does that. There are plenty of people who have kids and rent and plenty of people who buy homes that still have student debt.

20:43But I think that there is this mental block that happens. I was looking at the data for when do people reach these milestones of owning a home, getting married, having kids. And men are increasingly buying homes before they get married. But women are putting it off until they get married. And there might be some gender norms going on there. But it does seem like when owning a home becomes less achievable, people move back their timeline for getting married and having kids. Right. No, I mean, again, I've seen it in my own friends because you grow up with this. This is how it works, right? You get married, you buy a home together, then you start having children.

21:21If you're not going to get married, if you can't afford to buy a home, you're going to put off having children. Then you put off having children so long that maybe you're in your 40s and you wish you did anyway. But also, it's not just family formation. I think we're seeing right now this huge insurgency in the Democratic Party by a lot, Democratic socialists, a lot of young, not just young, but mostly young people who are supporting socialist candidates, some of whom have said very controversial things. But it's much it feels like an insurgency in the Democratic Party. And it makes sense. Right.

21:58If you don't own anything, then you're not invested in the system. If you're not invested in the system, then why not? Yeah. Just burn it all down. Right. No. Why not? You've got nothing to lose. yeah i think that that could be part of it i think another reason why people are are kind of rejecting uh capitalism right now is because of the way that it's so difficult to rely on other people like one thing like one thing we see in our surveys that when people move uh one of the top reasons is to move to be closer to family when child care is so unaffordable like you want to have that village to help you out with raising your kids but because housing is so unaffordable like you can't even own your own home, let alone help your aging parents out with living near you to help with childcare.

22:44And then you're told, well, you have to pay a mortgage just to afford childcare if you're going to go the private market route. So I think young people are just really getting frustrated with the choices that are available to them. And they want the government to make those options more available and just cheaper and for them to be able to rely on their communities instead of relying on the private market for everything when everything's so expensive. So going back to this sort of like supply side crunch that you mentioned and that you've written a lot about. So you've talked about, you know, construction labor is constrained by immigration enforcement.

23:20Tariffs are inflating material costs. I saw homebuilders estimate the tariffs alone added almost$11 ,000 to the cost of a new home, which is not nothing. Right. I mean, that's that's real money. Do you think that the administration is like aware? I mean, obviously they're aware of it, but it just seems like housing supply is just sort of collateral damage in the tariff agenda, in this sort of trade war that we started, right? You can't blame it all on tariffs, but some of it. Yeah, I think they're somewhat aware of it because they started making carve-outs for the tariffs that seemed to carve out lumber, which was obviously a big input into housing, but it didn't address everything.