The Peter Zeihan Podcast Series - I Hope You Didn't Want to Buy a Home || Peter Zeihan

Episode Date: April 21, 2025

Trump's endless tariff policies will likely hit just about every corner of the American economy, but the US housing industry is poised to take a devastating blow.Join the Patreon here: https://www.patreon.com/PeterZeihanFull Newsletter: https://mailchi.mp/zeihan/i-hope-you-didnt-want-to-buy-a-home

Hey, Peter Zine here coming to you from Florida, doing kind of an open-ended series now on the effects of the tariffs on the U.S. economic structure. And today we're going to talk about housing. It is probably the sector that's going to get hit hardest with the exception of electronics imports, both from the point of view of supply and from the point of view of costs. So let me just run through it real quick. First of all, if you want to buy a house, you have to get a mortgage in us you're incredibly lucky. And mortgage rates are going up for a couple of reasons. Number one, if the Trump administration does what it says it wants to do, it's going to increase deficit spending by roughly one trillion U.S. a year, which will put pressure on the debt market hugely. And all those 10-year treasury bills that the Treasury Department is going to have to issue are going to add up and raise the cost of a mortgage because it's based on the 10-year treasury.

That's number one. Number two, we were moving in this direction anyway. Most of the free capital in a system comes from a population of people aged 55 to 65 to 65 who haven't yet. retired but are preparing to. Their incomes are very high, their expenses are low, and the difference between those two generally gets shoved away for the future because they know when they retire, they're going to have to basically cash out of their high-velocity investments, so stocks and bonds become T-bills and cash. Well, as of January of this year, two-thirds of the American baby boomers, the largest generation we have ever had, have retired. That liquidation has already happened.

I'd argue that most of the reason we've seen a quadrupling in capital costs across the overall economy these last five years hasn't been COVID. It hasn't been Biden or Trump or the Fed. It's just been the boomers doing what you do when you retire. Well, that hits mortgage rates as well. And then we have Trump's more specific policies, basically liquidating the migrant workforce. Trump says he wants to send about half of at home, roughly five million people. Well, the industry that migrant workers, are most likely to work in after agriculture is construction. In addition, we have

tariffs on steel and aluminum, which are two of the four biggest components that go into home building. The other two being copper and wood, which are also under sanctions. So all of the inputs that are necessary to build a house in the first place are seeing their prices go up even as finance goes up. And there's one more angle to keep in mind. If something happens to your car, if something happens to your house and if you draw upon your insurance policy for rebuilding you still need labor and steel and aluminum and copper and wood well you may not need wood for the car but the rest of it and so insurance premiums are probably going up 20 to 30% just this year specifically because of new policies out of the

federal government finally the boomers themselves unlike the generations that have come before who move into smaller units when they retire whether it's an apartment or assisted living or something like that, boomers are far more likely to stay in their home and age in place. And there's nothing wrong with that, but what it does mean is the single largest concentration of homes that owned by the boomers is not getting freed up as part of this demographic turnover. And so if you are a millennia and especially a member of Generation Z, the quantity of housing simply isn't there. The older generation is staying in place. the newer construction costs more, the home insurance that you have to get to get the mortgage

costs more, and the mortgage itself costs more. You add it all up and housing is just expensive and only going to get more so. We cannot build it fast enough and even if we could, the components that go into it are more expensive than they have ever been relative to the average income in American history. So if you happen to own your house, of course, this is all great news because we're entering a higher inflationary environment which will eat down the cost of your loan relative to your income. So if you are in a position where you have already established yourself, this is great. If you're trying to get going, this is awful. And that is one more problem that we're going to have with inequality down the road.