The U.S. Housing Shortage Explained & How To Fix It

If you're under 35, you don't own a house, you're not married, you don't have kids, this episode is for you, you're going to want to share this with everybody else. There is a reason why you don't. In 2018, we had a housing shortage of roughly 2.5 million. I'm going to make an argument to you why most people in America under the age of 35 don't own a house. The data is going to tell you. You know, this is the biggest housing shortage we've ever had in the history of America. In 2018, it was 2.5 million. Today, six years later, we're looking at 6 to 7 million. Now, how do we get here? Some basic data for you to be thinking about. In 1970, we were building 418,000 units every year for entry-level homes. That has dropped to today roughly 55,000. By the way, 410,000 new properties we're building. Today, 55,000. So, I sat there and said, why would it decrease? Has population decreased? Of course not. We had 200 million in 1970. We got 340 today. Then I sat there and I said, well, how long did it take to save for a house back in the days? 2.4 years of saving money to buy a house. You know how much it takes today? Seven years. You know what the average house was in 1970? Roughly $23,000. You know what it is today? $420,000. That's 18.3 times how much more it's worth to buy a house today than it was in 1970. So, I said, your income must have increased that many times, right? The average median household income in 1970 was $9,800. Today, it's $80,000. Increased only by eight times the average age in 1970 was 28. Today's average age is 38 years old. This is a real epidemic that we have to figure out a way to address because these kids are coming out of college. They want to buy a house. They want to live with their family. They want to have a wife. They want to have a husband. They want to have kids. But the market is working against them. We're going to talk about that today. Okay, so if you give value to this video, give it a thumbs up, subscribe to the channel, check this out. Look at this chart with me here. This shows the percent of new homes being built under 1,400 square feet. Go to 1976. Roughly 37%. It peaked at 40%. That means four out of every 10 homes we built was under 1,400 square feet. You know what that is today? 10%. Out of every 10 homes we built, only one is under 1,400 square feet. So, isn't the dream like you come out, you get out of school, you get a job. Mom, three years, you save money. Maybe mom and dad give you $20,000, $50,000 for a damn payment of the house. You buy a nice 1,200 square foot condo, nice little place, whatever it may be. Then you work out of it. You live. You raise maybe $80,000 in equity in it. You take that money plus a down payment. Then you get another house. Then you take that, then you get another house, and then it grows, right? You're not doing that today because we're no longer building 1,400 square foot houses. So now when people say, why do we have so many kids living with their parents today? Do you know what the statistic is of adults under the age of 30 living with their parents today versus what it was back in the day? Let's check this out. In 1970, it was only 31%. Today, it's over 52% of adults 18 to 29 living with their parents. Why do you think that is? Because it's expensive to go move on your own. Maybe we need to do something about that, but these builders, their incentive is only to build the big stuff. They don't want to build this small stuff. Who wants to deal with this kind of stuff? Now, the challenge when you look at this isn't that simple. Labor shortage, 81% of construction firms reported difficulty finding skilled laborers. And a part of this is zoning restrictions with nimbyism. If you've never heard of nimbyism, that is not in my backyard. Limits to construction in high demand areas. Aside from that, you're looking at rising material costs, lumber, raw materials have spiked, especially during the pandemic. And by the way, you're looking at all this stuff. Then you look at millennials, the biggest generation beating out boomers. They're anywhere between 28 to 43 years old. Guess what they want to do? They want to buy a house, but they can't because we're no longer building these small starter homes. We're concerned about building these big homes that are more profitable. Not these guys for these guys to get stuck. This is an issue. Another reason why this is taking place because these black rock state street vanguards are getting into and they're starting to buy these properties. Listen, you're going to need to get a property. We'll overpay for it. What do you mean by that? Let me show you this chart. Here's a national number on investor market share. Look at this. Just 24 years ago in 2000, only about 6% of properties being bought were bought by investors. You know what that number is today? That number is today at roughly 17%, 3X of 24 years ago, which means what? Typically, regular average family would go out there and buy a property. That's not the case today. Investors are sitting there and say, look, guys, you guys are going to need it. You're going to have to rent it from me. There's nothing you can do about it. You need it anyways. You're not going to buy a property. Come to me. And guess what investors are saying? We'll even pay more. Even though we're buying the cash, we'll pay more with the average guy's going to need 90 days of financing. We'll pay more. What do you mean you'll pay more? Here's the data for you. The typical home sold by an investor in June fetched 58% more than the purchase price, slightly down to 62.1% a year earlier, but still above pre-pandemic level. So a seller, if you were selling, wouldn't you be like, look, whoever wants to pay me the most, you're not doing anything wrong. It's like, I'll sell it to the investor. I don't know if it's good for everybody, but I'll sell it because you're paying 58% more than the other guy. They're OK with that. They're not buying it for one year. They're not buying it for two years. They're buying it for 40 years. They're going to have a little monopoly in that community, but you're going to have to go through them. Most people don't have a choice. Now you may be asking, Pat, which one are these guys buying anyways? These black rocks, are they buying? They're probably buying the bigger, nicer stuff, like $600,000, $700,000. There's no way they're going after the small, low price stuff, right? That's exactly what they're going after. Take a look at this. Same chart since 2024. Orange, low price. Green, mid price. Blue, high price. They're interested in the low price. It used to be only 10% 24 years ago. It is 24%. One out of every four out there, they're interested in the low price. As they know, the millennials, the next generation, are not going to be able to afford it. They're going to rent through them. It's an easy annuity that they're investing into. So do we have a solution? Is this just going to be fear porn the entire time, or are we actually going to give you a solution? Here's a solution. Check this out. Do you know, only out of US, this is the map, only 2% of US land, 2% is urban land. However, in that 2%, 82% of US lives in this 2%. 82 lives in 2%. What about the other 98%? The other 98% is just waiting for you to go build up. What's my point here? In 1990, we used to live in a city called Plano, Texas, before I came to Florida. Plano, every weekend, we used to go to a city called Frisco. I met the mayor at an Inc. conference that I was at in Arizona or Tennessee. I don't know where I was, guy named Mayor Maso. We go play poker. And then afterwards, he says, I want you to come and look at my city, Frisco, see what we've done to this great city of Frisco. So I go to Frisco. He takes us, introduces us to Nolan Ryan, Don Nelson, all these guys, the old governor of Texas. What was his name? Governor Perry. We meet the governor. We're having all these conversations. I said, did you know Frisco in 1990 only had 6,000 people living here? And they started giving us a tour. Really? Where's it at now? Do you know where Frisco's at right now? Frisco went from 6,000 people in 1990, where the average home price you wanted to buy in Frisco was $58,000. Today's Frisco's population is 234,000, and the average home price in Frisco today is $700,000. What's the point? Guess what? Go build in a new area. Go to a new city. In California, guys couldn't afford to buy a house in L.A. Guess what they did? They went to Northridge. Then you couldn't afford to buy a house in Northridge. They moved to Valencia, Canyon Country. You moved to Palmville. You moved to Lancaster. There is plenty of areas to go move to and build. Somebody may say, but Patrick, that's ridiculous. Why would you, why can't we just make the houses cheaper in the area that we live? Because it's called capitalism. You don't control the market. If somebody wants to pay for it, what are you going to do about it? You can cry all you want. You can come in and put regulations saying, you can't let these prices be higher than $220,000. You don't dictate that. The market does. We can go to a new city, a new area, and say, guys, let's go build this area. You bring investors in. You start building the rest of the city. Let me give you some more testimonies outside of Frisco. You have Gilbert, Arizona, near Phoenix. It went from 109,000 people living there in 2000 to 250 today. Katy, Texas, went from 46,000 in 2000 to roughly 100,000 today. Johns Creek, Georgia, near Atlanta. It wasn't even a city in 2006. It became incorporated in 2006. You know how many people are living there today? 80,000. I've been there many times. Aurora, Colorado, near Denver, used to be at 276, now 386. I can give you a ton of these stories. Henderson, Nevada, Fishers, Indiana, Mayfield Grove, Minnesota, Pringle, Tennessee, Cary, North Carolina. You're going to hear so many of these stories taking place. The market is wide open. But if somebody sits there and says, well, I'd like to live in this area. I'd like to live in that area. The market is wide open. However, if there's one thing I can say as a policy that the president could be able to do, and I'm sure they're thinking about this, you can come out with incentives to help these smaller builders that are focused on building houses under 1,400 square feet and say, here's the incentives. Go to XYZ. You know who else can do that? States can do that. Governors can do that. What if a governor of a different state came out and said, here's what we're doing? Guess what? Rather than being, you know, you guys are charging too much for the house. People are paying for it. What are you going to do? You'd sell the house for a million if somebody wants to pay for it. Well, it wasn't worth a million six years ago. Who gives a shit? The market dictates the rate. But the governor could say, you know what we're going to do? All these areas that are not built, any builder that wants to come and build this area, we're going to give you incentives. Have you seen the video of what Dubai looked like 30, 40 years ago? And the sheik, he's walking around and saying, one day this place is going to be this. And what happened to Dubai today? Went from a desert to today. God knows how many businesses are based out of Dubai. Starts with a vision. Somebody can watch this and say, you know what I'm going to do? I'm going to go start this place. And it's going to become a town with only 5,000 people. And I'm going to bring some builders in this area. Start selling it. The crisis is there. The ears you have. Millennials are listening. Fear sharpens listening. Present your opportunity. Go to your governors. Go to states that are open to this idea and then do something about it. You could become a hero and solve a massive problem Americans are facing today. If you got value out of this video, give it a thumbs up, subscribe to the channel, and share it with other people in your age. If you're under 35, say, what do you think about this? If you enjoyed this video, there's another video to watch. The Most Powerful Man in Wall Street. If you've never seen it, click here to watch it. Take care everybody. Bye bye, bye bye.