Will Trump's New Housing Plan Change Everything?

According to Trump, everyone should be able to buy a house. Yeah. Well, as you guys may or may not know, every single president has affordable housing in their radar, right, Like a lot of times people just don't see it. It's not that apparent. There are a lot of things over the years, you know, starting back though, the big one was FDR and I know if most of you probably weren't alive, but from thirty three to forty five he established the FHA, which a lot of people know about today, right, and that was to ensure long term low interest mortgages. And obviously that that program was a huge hit. And the list goes on and on. Then let's talk about Trump right now, because first. Let's talk about Bush. The last time that we had a president really focused on everybody should buy a house was back in you know what what was that O two? Probably? Well, yeah, it was. So there was the Clinton and Bush era. You know, they they pushed the home ownership right, and and that kind of popped under Obama. That's essentially what happens. So Obama kind of got the brunt of I would call the two thousand and seven two thousand and eight, you know, great financial crisis. But it was started really two administrations before that, you know, and and I just if you take a look at these presidents, you know, even Kennedy. Kennedy started HUT and a lot of you know, housing of urban development, and we do a lot of hot deals. So we do what's called the two twenty one D four program with apartments, and they have a lot of HUT program for affordable housing. He also established fair Housing, and this is important because you remember what was going on in the sixties. So that was the fair housing, which is awesome, right, But then you keep going, you know, whether it's Ford, Reagan, Bush, even Clinton, you know, expanded the Fannie May Freddie Mack programs. So and then in Trump's administration in twenty sixteen, remember he did the opportunity zones. So it's going to be really interesting to see because he's a real estate guy. He's going to be out of office in what three years probably so well if he wants, right, But the interesting thing is is he could come up with something really powerful and what we have right now in this country is an affordable housing problem. Well, but I don't know if this is a partisan issue either. I mean, I know Trump kind of does what he wants to do, but this could gain a lot of support some of these ideas he has for Democrats and Republicans on both sides of the aisle, because there's a lot of pressure on these candidates about being able to afford home. Right, there are people that vote want to be able to afford a home, and as we all know, for homes are unaffordable, and this whole thing of home values are just going to crash down isn't happening because as we talk about how people are sitting in you know, three to four percent mortgages, right. And so they're not stressed. So the people that want the values of the homes to go down are the people that don't own homes. People that own homes, they don't want their house value to go down, and they also can afford their payment, so they're not under financial stress to have to sell. So you have this you know, market that's totally frozen because even boomers don't want to sell because they have to then pay capital gains in some situations and in other situations they have to move into something that's smaller that's going to be almost as expensive, right, So then they're not selling and then you have families like my brothers that need to expand into a bigger house, but they have a very little mortgage and to expand into a bigger house would be a huge jump in monthly costs. So you have that happening all over the place. And then you have people that don't have a house yet that really want to buy one, that are waiting for prices to come down. And it's just looking like that isn't going to happen. I mean, we're already seeing some softening of the rates. You know, these interest rates have been high for a while now, and there really hasn't been much price movement in most markets. Right, and we we keep talking about this exact issue, right, there is not going to be a single family housing crash right now. There is a bit of a crash going on on the commercial sector, but the public doesn't even really know about it. Yeah, it's quartally separate. And it's separate because those loans are not fixed, right, they went up when the rates went up. Nobody's like sitting in you know, three percent fixed rate debt on the middle I feel. They don't care, like a renter doesn't care, right, Yeah, Like if they live an apartment building and the ownership is going to hell, and there's you know, all of a sudden goes back to the bank and then goes back to somebody else. The only thing that might change is maybe the management company. Right well, and also like deferred maintenance, so they might get annoyed because things aren't getting fixed, so they'll not notice that they could. They could. But the lenders, you know, they've got these safeguards in place for a lot of that stuff. You know, So a lot of times a lender will take back a property and then put new capital into it, right and I you know, to preserve the asset, and you have to do it to get it marketable anyway. So you know, so there's this like silent crash going on and call it the apartment and some commercial office and some retail not everywhere, of course, but but on the single family side, the people people can't even hardly notice, right like it might show up however, in your in your life statement, your pension fun statement or something like that, if you guys even know that you're invested in some of those things. But the single family market is not going down anytime soon. Now. There are markets like Florida let's just pick on Florida a little bit. You know, there are markets where there's a lot of listings hitting right now and we are seeing spricing changes, and you know, but historically we're not even close to what the amount of listings are in the US. And you know, I want to remind everybody they're in the Great Financial Crisis, there was something like ten million homes for sale, right, ten million? What are we at lesson two right now? Well, I mean I'm even working with clients in the Phoenix market and it's like, we just bid a full price offer with an escalation clause a couple of weeks ago. We didn't get it because there was multiple offers above asking. And then they were interested in another house the other day and we didn't go see it that day and it's sold. Right, So that's not a two thousand and eight situation, right. No, that's a seller's market that happens to be Phoenix at the moment. It does. But it's just but if you read online, the Phoenix market is crashing. There's twenty percent discounts. You know. What I am seeing is that, you know, things that are overpriced are having to come down. You know, ten percent twenty percent because they overpriced it, but it's not because prices are just down that much. And let's like draw a line to why we think this is important. We think it's important because if the only way affordable housing is going to neutralize for everyone is for single family home prices to actually go down dramatically, which we do not believe will happen, and or interest rates to go down dramatically, which could happen, but that's not going to happen for some time, you know, easily a year plus out. So what we have right now is we have a situation where people can't afford to buy a home, a new home, the entry level home, and Trump has this window of a year, maybe a year and a half to do something to try to get it going, because let's anything that's passed is going to take time, and then of course in order for it to go out into the marketplace is going to take time, and then to actually see the results is going to take time. So so what we have right now is we have this window of time where the where the homeowner, where the traditional homeowner like my two boys or in their twenties, who absolutely positively you know, they have to have one hundred grand in the bank to be able to buy something, right, Plus. They have to have really, really a good income and all that stuff, just like anyone else. They're sitting in rentals. Yeah, and I think that, you know, Trump has this window, and he has a bunch of ideas, and the question will be what ideas are adopted which ones are not. But I can almost guarantee you some of these are going to be adopted, because, like I said, it's not a part of an issue. People want affordable housing on both sides of the aisle. So let's go over your list, because I love this list of things that Trump wants to do. Now, granted, some of these may or may not happen, but it's on everyone's mind. Yeah. So the first one, obviously is for the Fed to lower rates. And we've been seeing this, you know, with everything that Trump has been doing, he is trying very hard to get power to lower rates. He's trying very hard to get Lisa Cook off the board so that he can put somebody else in there that's more prone to his ideas of wanting to lower rates. So, and the Fed has even changed their position when they mean this month as to possibly starting to lower rate. So we're already seeing that and we think that that's going to escalate. But there's a big wild card here. No matter what being reported for inflation, it's the unemployment issue, right Like, that is something that could really throw a wrench into into Trump's scenario here because we all know people that are getting replaced by AI. You know, I'm talking about you know, low income, low entry level, mostly white collar positions, you know, so you know, think of hr, think of you know, paralegals, think of you know, marketing, you know, graphics and ranting and all that stuff. Those jobs are being replaced right now as we speak, and we're at the very beginning of this. So I think this could be something that could really throw a wrench into that the FED decision of really getting those rates down. Yeah. Absolutely, And in lower rates they help They don't just help people wanting to buy a home, you know, they help small businesses to start, They help people with credit card debt, car loans, all the things. Right, So this is something that we think as we move into the end of twenty twenty five early twenty twenty six, we will see rates start to go down. Now people do talk about okay, just because rates go down the bond market, maybe the long term rate won't go down, right, so it won't help housing. But so far we haven't really seen that too much. Right, Like rates have went down on the talks of Trump going to be lower I'm sorry, the Fed going to be lowering rates, right, we've already seen that quarter point drop in the housing market from the thirty year. And the reality is the other side of it, and you'll touch on this is if rates do go down, then what happens is you actually have another bubble potentially. Again, it takes a while. It's not a media Yeah, it takes a while. But the reality is is lower rates definitely spur the economy, which is good for the economy, but it also creates bubbles in lots of areas, from auto loans to electronics to obviously housing helocks, cash out refis, new homes. All that stuff is good, even on the commercial side, even though most of that is driven by I would call it the tenure, which is sitting around about four point two. It's been that way for a while and the projection for that, believe it or not, is not that much to go down. So that's an interesting thing too as that plays out. Yeah, So something else that Trump is promoting right now is a new credit score system. I like this, by the way, Are the old ones sucks? Yeah, the old one does suck. And there's a lot of issues with the old credit score system. You know, certain states have tried to just do away with credit scores altogether, which terrible idea because then you know, we've seen you know, certain cities in Washington do that in California, and the issue with that is that then a renter's got to qualify on how much money is in their savings account, and you know, the landlord wants all these additional protections that a lot of runners just don't have because they can't pull a credit score. However, a credit score, you know, if you have. A bad medical debt that you're trying to pay off but can't, you know, there's all these things that can plument your score that you know are a little bit out of your control. Right just because a renter, you know, a potential renter has bad credit because they had a huge medical you know issue and they're trying to pay off their medical debt but it's too much, doesn't mean they're going to be a bad tenant. Well, let's let's talk about why the current system sucks really because there's a there's a few reasons that that I don't want to skim over. One is if you're retired. So we have a bunch of senior projects. And some of these senior projects, of course, most people are are working toward retirement. So if you don't have a W two coming in, like, the system doesn't know what to do with you. Like you know what I mean. So you could be financially retired, have a fair amount of money and all these different accounts, and you cannot believe how many hoops you have to jump through. Another one is just the you know, self employed, right, They don't like that either, Like Daneil had a ton of problems with this. If you guys can believe this, I have a problem with this. So so we I don't take a paycheck out of my company as an example, you know, I I live off of my passive income and our property stuff that we do of that. You know, I talk a lot about this, but because of that, the bank has a tough time wrapping their head around the fact that I don't have that little paycheck coming in each and every month, right, So you you had that for for your refive. I mean your mortgage person asked you to go and you'll get a job. Right in the middle of it. My first pando who's like, I can't run or I can't loan to you, but if you go get a job for six months, this will be no problem. And by the way, at the time, she had almost the entire amount of the for the price of the condo in cash. Yeah, I had one hundred and forty grand on one hundred and sixty thousand dollars kind. Of and the guy told her to go get a job. So so okay, So these are obviously some of you guys may or may not know that this happens. So everything's based on this weird credits card with a credit score with you know, kind of these old rules. And then Daniel touched on it, if you guys have let's say somebody has the medical problem and I know she discussed this, but that you know, one medical bill. I mean, you might have great credit for twenty years and then you had this thing that's not covered by health insurance and you're working with the hospital. Let's say to try to work through these bills, your your credit score drops out a lot, and all of a sudden what happens is and you now have to pay a higher interest rate, like the whole systems against you for this one thing. And we see the a lot as people try to rent. There's some very very very good people out there that have these one time events that you know, are crushing them and so all of sudden effects, it puts them at such a disadvantage in every way. So the credit score proposal that Trump's got, I think is needed. And Leil, there's one other thing too. In order to establish credit under the current system, you basically have to go take on debt, right. You have to either go get a car loan. You have to go get a credit card. And you know a lot of people they say, well, just use it for groceries and pay it every month. Well it's a little bit of a trap because a lot of people, you know, when you get that credit card, they want to use it. Right, So you're trying to get an eighteen year old a credit card just so they can build credit. Do you guys remember that? I am like my mom and dad said, hey, you got to get a credit card. To build. How ridiculous is that, Like you need to go out and get in debt to be able to show that you can pay off debt. Now I do understand the other side of the argument, but you're right, like this whole system is set up to get you in debt. Right, and so so what Trump wants to do with it's called the vantage score four point zero, And this is kind of what he wants to do. But he wants to help people qualify for these mortgages because this does happen. Like I had a client a couple months ago. He has no credit. He wants to buy a house. Isn't a bad credit, he just doesn't have any credit cards bisically responsible, But he didn't have enough credit to qualify for alone. But he has, but he has made some cats. But I had to have him go open a credit card at life thirty years old to try to start building credit so that he can then you know, be able to have buy a home. So this this new credit score system, it's going to look at tenants like are you paying your rent on time? Are you paying your utilities on time? It's going to calculate in these normal bills that normal people have without taking on debt, right. And that's what we need, guys. We need we need a system that shows what people are doing right and also cash, like there's a you know, like this whole system is set up. It's so bizarre the fact that two people sitting here doing this podcast right now have a heck of a time just getting loans, like right, yeah, it's unbelievable because we don't fit in the little box of having a paycheck. So that's a big one out, you know, stay tuned on that. Well. Plus two, if a tenant is been paying rent, so they've been paying rent for five years, the landlord has said they've paid rent every single month on time, then you know there's a good indication that if they got a mortgage they would do the same thing with that. So the next thing that Trump wants to do, and this one is pretty controversial, but he wants to allow people to use crypto for qualifying for real estate. So essentially, there's all these people that made a bunch of money on crypto over the last few years. They don't want to take it out and put it in cash. They want to keep it in crypto. So this one, I don't know if this one would pass. But what he's trying to do is be able to use that crypto as collateral against a home, just like you would a normal asset. This is a This is a one though. I mean, we were just talking about this the other day, Like there's a whole bunch of people in crypto that have their money sitting in their little you know, heart yeah, or coal wallets, and you know, on these little thumb drives, and and nobody knows that they have it, they don't know how much they have it, and they're obviously trying to avoid tax, you know. So there's all this, all these nuances around this. But it does appear that Trump is a you know, a bitcoin crypto president, right, got to umbrace it. So this is one to watch. It's gonna be very very interesting. And this actually could help the housing market a lot. It could because there are a lot of people in crypto that would like to move that money to diversify those assets. Yeah, I mean, think to this, guys, there's lots of people that have crypto on the sidelines, on their little thumb drives that could buy a house all cash, a lot of people, and so you got this is something just to keep your eye on. So number four is being able to use your four oh one K for real estate investments and private deals. So I have this one's always pissed me off. So this is what we have in the US is we have a system set up for retirement and for one K. And you guys, you guys have heard all these before. And so you could put money away through your employer, and there's eployer matching and all that kind of stuff. Even the ones that don't have employer matching, they sit over here. It's your money, by the way, sitting in your retirement account. Okay, we're one of the only countries that actually says you can't use that for yourself. You actually like now you go to Australia, which is called I'm trying, I actually can't remember off the top of my head. In Canada, it's called the RSP, the Retirement Savings Plan. They let you use your money to do what you want with you know, you can, but you can't in the US. You can invest it, by the way, but you can't live in it. Right, there's these restrictions on the other side. And so this is a big one because there's you know, they're basically cutting people off. And you know why they do it because they want you to invest in their financial products, with their wealth managers and their system. But so so this is a big one because there's a fair amount of money sitting on the sidelines in the retirement plans. And I, for one, would love this because this would just open the floodgates for people for real estate and and and and you guys, this might be obvious to you or maybe not, but the reason that the financial services industry does not want you to use your four one K for housing, guess why they don't get a commission for it. That's why if you have to funnel it into mutual funds or stocks or with them, then they can make fees. But if you have the freedom to do whatever it is that you want with your money, then all of a sudden, it takes away cast out of their pocket. So I would love this. This is one that obviously I think everyone should support because just look around, guys, we are super unique. And I didn't realize this until I started flying around with Kiyosaki back and you know, back in the day, and we would go to these other countries and people would put away money in their retirement plans and they would go out and do investments, they buy homes for their kids and all this other stuff. But we can't in the US. So this is a big one. Yeah, think about how much that would open it up. Think about you yourself or people you know, how much money they have in there for a one K. For a lot of people, it's a lot of money. They could easily. Put down a down payment on a house and like Ken said, get an investment going have their kids live in it. You know, typically you can't buy something that you are going to live in with that money. But it would still really move the housing market because it would allow a lot of people, even people that are paycheck to paycheck, but they have been putting money in a four A one K for twenty years, to be able to you know, afford some kind of real estate. Right And there's a hack right now that something you might know about. It's called the self directed IRA. Just look into it. There is a way to move money from a wealth manager into a self directed IRA right now. And we're not I'm not advocating you do this. We're not we don't have any affiliation to this. I'm not going to promote any company around this. But the reality is is you can do that and then you can self direct into what you want. But even then you have to you have to buy, you have to invest with people like me, and then it works. But which is ridiculous because you be able to do whatever you want with your money, right. You can't go buy like a single family home with it. I couldn't buy it. I couldn't buy my kids a home with it right now if I wanted. I couldn't buy my mom a home, even though I've done that. So those are things that you know you could now do. And so I'm a huge, huge fan of this and I hope it I hope it passes. Yeah, that one could really move the needle. Something else is getting rid of capital gains on a primary residence. This is a big one. So it's huge. Well, so a lot of people listening, you know, as you know, there are exemptions, right, there's two undred fifty thousand dollars per person if people are married, that's half a million bucks. But for a lot of these seniors, and this is one of their bigger issues for downsizing is that their house has went up more than five hundred thousand dollars right since the time they bought it. My mom's a great example, right, Well, your. Mom's a great example because she's single now, so she'd only get a two hundred and fifty thousand dollars exemption and her house has went up much, much, much more. Right, my mom, my dad passed away for those of you, you may or may not know, So my mom is now widow, but she's got like seven hundred thousand dollars in upside, right, So the issue is we sell that. She's got the two fifty exemption and then she's got this cap gain over that top of that, so call it four or five hundred thousand dollars attacks which the government would take a huge piece. And so so what we did is we rented it instead, which pays for what she's doing now and she's got this monthly income coming in so it's really working for her. But most people want that money, right, And so yeah, there's that's what's called a step up and basis. But who wants to wait my mom has that's ridiculous. That means that my mom has to pass away, which I hate even discussing, but it is. That's the way it's sat up, and then then that house can transfer to the next generation. And you know that also could go away at some point, but that's the way it is at the moment. But the reality is is my mom should be able to have access to that money when she wants it, and and that's that's that's what this is all about. And but also let's forget this run up we just had, let's call it from twenty twenty twenty twenty one. There's a lot of people sitting on a lot of equity here, and so this would be a game changer for a lot of people. I like this one. Well, it opens up the housing market, right because if somebody is sitting on a million dollars appreciation, or somebody is sitting on which is a live hundred thousand dollars appreciation, right, they actually want to downsize, They want to get rid of that house, but they can't because they don't want to pay the tax. So if you make them not have to pay the tax, and then that those how has come onto the market, that's good for those buyers that want to buy those homers, right, and they don't have to be an expensive home. I mean, Ken's mom buy her home for ten thousand dollars. It's now worth seven hundred thousand dollars. Oh, it's not like these are homes that are you have seven hundred thousand appreciation because the home is two million dollars. Like, No, these are homes that you know, they're not cheap, but they're homes that are you know, quote starter. H I'll just srow one other thing in here, like like Denil's in this category. She doesn't like debt. My mom doesn't like debt, all right. I talk a lot about debt, and you know, you guys know I'm a fan of it. Now, I'm not a fan of being heavy and leveraged against myself. But so so this actually penalizes the people that are paying out their loans. Right, So there's a lot of people in this country that don't have any debt at all, and you know what, they're the best risk on the planet they have, right. These are people that don't have a lot of monthly that yet they're getting pay all eyes under the system, and they should be able to have access to the equity that they have in their home if they need it. And so so I like this as well. So the number six is interesting. So it's buy a home with one percent down, so that this kind of opens those floodgates to people did not have a lot of money invested in their house. We saw this kind of in eight. The other thing about it now is that the payments would be so expensive for most houses. If you only put one percent down, you would have private mortgage insurance on top of that. You know, you'd have just expensive Okay. If you have more than eighty percent leverage, which in this case, one percent out means that you're at ninety nine percent leverage. They it's called PMI Private mortgage insurance. Is it's like an insurance policy on top of the your you know, your your regular. Mode because you're more likely to defult correct. So I love this from a marketing angle. Yeah, like one percent down, one percent down, Like you know, people don't look at the other side of it. However, if this could work, they could bump out the you know, the term. They could go from thirty year to full Yeah, I mean, but I'm saying that if they combine some of these things else. So there's only there's only two ways for this to work. The first way is the rates have to be low. So maybe if there's something that could be done for a first time home buyer one percent. I like this idea, But the issue is the issue is going to be default, right, and so you could you could, uh, you could extend the term. There's there's other ways around that. But the one percent. Uh, if this did pass, uh and you could buy home with one percent, I I and they could figure out the rest without the default piece to as a as a safety net for people. I would be a huge fan of this, was you, I would yeah, yeah. If I feel like this is like that way where gets a. House, yeah, absolutely could be get me wrong. I one percent think that this is this could be something that could be bad. But I like the way this is started, you know, and uh, you know everyone should not own a home. But there's there's millions and millions and millions and millions of people that would be completely good on this program, right, but there there could be a lot of people that all that that aren't right, and it's going to boil down to can they pay that mortgage and some Deniel's right, it's going to be expensive. One percent also means ninety nine percent financed. That's what that means. Right, and so you're going to have to find people that are comfortable with the other side of that. Right. Well, then the last thing that Trump wants to do, and we've heard this floated on both. Sides of the aisle, and I think this one has the most viability, but it would be best in the short term, maybe worse than the long term. But that's kicking the thirty year mortgage to a forty. Year mortgage thirty five forty Even more so, you guys saw this right before your eyes. You saw this in the auto industry, right, people solved to their monthly payment. So I've watched this. It's just I just shake my head. But you know, car payments have always been kind of ranging in a certain you know, let's call it five hundred to one thousand dollars. And now, grant granted, I'm talking about new cars, but how have they done that. They've done that by going from thirty six months to forty eight months, to sixty months, to seventy two months to eighty four months. All they've really done is they've extended this out so they keep you in debt longer. So said it in another way, they've kind of they've kind of moved it down down the line, just like a thirty year mortgage right now. I know we're not talking about thirty years for a car here, but that's how they've kept the payment low. They've kept you in debt longer over long period of time. It's enabled you to you know that you create the least program and all these things that you know the car dealership done to try to keep you in debt and keep you as a customer. So by lowering the monthly here, it helps a lot. Like think about if you add ten years to anything, it's going to lower your payment. Well, and this is what it does, right, It lowers the payment on the short term and the long term it will probably make housing prices go up because this is what it does, right. Like, the reason college. Is so expensive is because everyone can get a student loan. If people couldn't get a student loan, college would be a lot cheaper. Same thing with our mortgage rates, right if we only had a fifteen year loan, people would be able to afford as much house so prices would have to come down. We now have a thirty. If they move it to a forty, that's just going to push prices even higher. But in that short term, which is why most presidents care about it's like the immediate result, more people could buy a house because you could then take five hundred dollars a month off your payment. That affects a lot for a lot of people. Then they can also all of a sudden for that extra hundred thousand dollars on their house and they could buy. Right right And it might surprise you guys that on the apartment multi family side, we already have forty year mortgages right through HUD. And as I mentioned before, Kennedy actually created the HUD program. This is the Housing of Urban Development. There's a program called the two to twenty one D four program, which is something that Ross and I have done over the years. We've built playing projects that we have one going right now where this is a construction to perm forty year amortization. So so what that does is allows new construction for us lowers our monthly mortgage payment. I know it's very different, but the point is there are these are already things that the government's doing and that that's important. So it's just happening at the commercial level. It's been and it's been in place for years, and so this could easily get pushed down to the you know, call it the private consumer. Yeah, and you already have in Europe. Right in the United Kingdom they have forty year mortgages, and other countries in Europe they have fifty to sixty year mortgage. Yeah. It doesn't mean that the rate is set on those, but they are. They're and you know, people will argue, Okay, if I'm going to do a forty fifty year mortgage, am I basically just a lifelong renter then, right, because I'm going to constantly have this payment. And the truth is, yes. But you're just paying. But you're paying down your home. Yeah, you're paying, Like that's the difference. Yeah, you're right as a renter, you're paying somebody else in this case, you're paying down your home. So it's just happening over a longer period of time. But also too, you have to think is when everyone can buy a home, what is that going to do to home prices? Right? Like, what did it do leading up to the two thousand and eight crash? Right? There was a huge run up on housing prices over that decade, right, because more people could buy a home. So if Trump or whoever is in power wants more people to be able to buy a home, which is a great campaigning tool that is going to bump up home prices because we don't have a lack of demand right now. We have a lack of people that can afford to buy the homes at the price and the race that they are, So if we start to move that barrier, then you're going to have a lot of more home sales. Thanks guys. Seeing as week