WSJ What’s News - Luxury Real Estate Is Booming in D.C. as Wealthy Try to Get Close to Trump

Episode Date: January 24, 2025

P.M. Edition for Jan. 24. Wealthy political appointees, new members of Congress and business leaders with a need to be in Washington, D.C. are scooping up multimillion dollar properties, reporter E.B. Solomont tells us. Plus, as he visits the site of hurricane destruction in North Carolina, President Trump says he will sign an order to overhaul or eliminate FEMA. And U.S. home sales hit their lowest level since 1995. WSJ real estate bureau chief Craig Karmin explains what’s going on, and what it will take to turn the market around. Alex Ossola hosts. Sign up for the WSJ's free What's News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

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is blowing up as people jockey to be close to the new president. If you are a business titan in this country, you want to be close to decision makers. You want to be in the room. You want to be part of that conversation and that sometimes does require face time with the ultimate decision maker or their deputies. It's Friday, January 24th. I'm Alex Osela for the Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today.

U.S. home sales dropped last year to their lowest level in nearly 30 years. According to data out this morning from the National Association of Realtors, existing home sales fell 0.7% in 2024 from the year prior to $4.06 million. Here to tell us more about what's going on in the housing market is WSJ Real Estate Bureau Chief Craig Karman. Craig, sales are low while prices seem to be quite high still. The national median existing home price in December was $404,400, a 6% increase from the year before. What is going on here?

Yeah, it is a strange dynamic. We're seeing sales are knee-making, yet prices are hovering around all-time highs. And it's really an expression of the limited supply in the market. The market has been below its historical norm for inventory for most of those two years that we've seen that slump in sales. That's still a reflection of the fact that mortgage rates were so low in the previous two years that people were able to buy homes or refinance their existing mortgages to super low rates, in some cases half of what the rates are available today. Those people don't want to sell their home and then have to buy a new home and pay rates that could be double what they're paying now.

That said, the number of homes in the market has been slowly edging higher. Inventory at the end of the year was 1.15 million units, which was up about 16% from the previous year. How do mortgage rates fit into all this? I mean, last week they topped 7%. Yeah, this housing market is really primarily about mortgage rates right now. And you've seen whenever mortgage rates start to come down again, that tends to spark a

little bit of activity. For example, existing home sales in November had their biggest year over year gain in more than three years. And that reflected the fact that in the previous weeks, mortgage rates were trickling back towards 6%. What's it going to take to turn the housing market around? I think what could turn it around, eventually people sometimes they just have to move. You have a bigger family, your apartment is too small, you need to buy a single family

home, job got relocated to another city. If interest rates can level off even, I think people would then adjust to it. The problem is a lot of economists are thinking interest rates are going the other direction. You know, Trump policies tend to be stimulative and protectionist, which tend to lead to more inflation which is going to keep interest rates high and possibly rising. That was WSJ Real estate bureau chief Craig Karman. Craig, thank you so much. Thank you for having me.

News Corp, which owns the journal, also operates realtor.com under license from the National Association of Realtors. US economic activity increased at a slower pace at the start of this year. That's according to data from the S&P Global Flash US Composite PMI, which gauges activity in the manufacturing and services sectors. Though the factory sector showed signs of

recovery, the services sector dropped to its lowest pace of expansion in nine months. The optimism investors have shown during Trump's first week back in office tempered a bit as US stock indexes slipped today. The S&P 500 and the Dow were both down about 0.3 percent and the Nasdaq was down roughly half a percent. In other business news, Meta is planning to spend between $60 and $65 billion this year on artificial intelligence and a massive new data center. The company operates a suite of AI products, and CEO Mark Zuckerberg said it's also planning to build an AI engineer that will start writing

its own code. The announcement comes days after tech rivals, including OpenAI, unveiled a plan to pour $500 billion into AI infrastructure. Target is walking back some of its diversity initiatives. The company said it would end its workforce diversity targets, which include a pledge to increase the representation of Black employees across the company, as well as its supplier diversity programs.

Target said that some of its diversity initiatives had already been scheduled to conclude this year. Coming up, why business elites are spending millions to live near President Trump. That's after the break. Now that President Trump is back in the White House, many of the business elite are trying to be his neighbor. In recent months, they've been buying up multi-million dollar properties in and around Washington, D.C. According to Bright MLS, the local multiple listing service, there were 87 home sales above $5 million last year in the D.C. metro area, up from 53 in 2023.

And so far this month, there have already been seven deals above $5 million. I'm joined now by reporter E.B. Solomon, who's going to tell us more about this. So E.B., who is driving this uptick in real estate? It's actually really interesting because it's kind of multifaceted. We're talking about luxury real estate in the D.C. area, so that's in D.C. itself and also in affluent areas like McLean. And as you might expect, there are some new administration officials or appointees, but

it's not just political operatives. It's also business leaders and locals. Why is this happening now? Unlike past administrations, unlike the Biden administration or the Obama administration, a lot of the people who President Trump has tapped for high level posts are business leaders. They're not Washington insiders. They're coming from all over the country New York, California, Florida, and now they need to be in DC They need a foothold near the government and near their places of work

Okay, and what about people who aren't working directly in government? What are they hoping to get out of proximity to the White House? There's this idea among business titans in this country that to really succeed at the highest levels, there's a value to being close to people in power, to socializing with them, entertaining them, being entertained by them. Obviously, Washington has tremendous lobbying that goes on, but it's not like it's a quid pro quo thing. It's more, I have a billion dollar business and I want to make sure that I'm having conversations

with people who are going to be setting policy in this country. And so if you can have a place in DC where you can entertain those people and where you can regularly interact with them, you know, that would be a good thing. E.B., I'm wondering if there are any examples in your reporting that stood out as far as people buying up these multimillion dollar properties. One of the biggest examples is Howard Lutnick, the president's pick for commerce secretary. He bought a home for $25 million, which set a record for DC. A new senator from Pennsylvania, Senator David McCormick bought a multimillion dollar home.

He bought a 10 and a half million dollar house in Georgetown and Treasury Secretary nominee Scott Bessent. about a $10.5 million house in Georgetown, and Treasury Secretary nominee Scott Besant. We're told he's in the market for a luxury property, as is John Phelan, Trump's pick for Navy secretary. That was WSJ reporter Eby Solomon. Well, President Trump is away from the Capitol today, as he tours damage from September's Hurricane Helene in North Carolina. From there, he announced plans for an order that would overhaul or eliminate the Federal

Emergency Management Agency, or FEMA. I'll also be signing an executive order to begin the process of fundamentally reforming and overhauling FEMA or maybe getting rid of FEMA. I think, frankly, FEMA is not good. Trump said that his administration was looking at ways to give governors more responsibility for responding to disasters and that he wanted to send more funding directly to states. Eliminating a federal agency like FEMA, which has more than 20,000 employees and an annual budget in the tens of billions of dollars, would likely require approval from Congress. After North

Carolina, the president will travel to Los Angeles to tour the Pacific Palisades neighborhood that has been devastated by the deadly wildfires and get briefed by local officials. And the Senate is planning to vote tonight on whether to confirm Pete Hegseth, Trump's unconventional pick to lead the Pentagon. The president said he isn't sure if Hegseth can squeak through what is expected to be an extremely close

confirmation vote tonight in the Republican controlled Senate. Two centrist Republican senators yesterday voted against moving forward with Hegseth's nomination and said that they would oppose his confirmation in tonight's vote. And finally, Gen Z workers are entering the office and they're bringing new ideas for how to dress. They're wearing clothes like crop tops and pajama pants that were once off limits at work and trends like office siren and corp core are proliferating online. Wall Street Journal fashion reporter, Lane Floresheim spoke to our Your Money Briefing podcast about why Gen Z is revamping office wear. One of the most interesting parts of reporting this story was learning that a lot of women,

especially young women, are shifting away from having a work section of their closet and an everything else section of their closet. I think that a lot of Gen Z and people in general want to invest in pieces they can wear anywhere and really get their money's worth. So if you're buying a blazer, you want it to be like your office blazer, your going out blazer, your running out to brunch blazer. And you can hear more from Lane in today's episode of our Your Money Briefing podcast. And that's What's News for this week.

Tomorrow, you can look out for our weekly markets wrap up, What's News in Markets. Then on Sunday, we'll be looking at President Trump's first week in office. That's in What's News Sunday. And we'll be back with our regular show on Monday morning. Today's show was produced by Pierre Bienneme and Anthony Bansi, with supervising producer Michael Kosmides. Michael Laval wrote our theme music. Aisha Al-Muslim is our development producer, Scott Salloway and Chris Zinsley are our deputy editors, and Philana Patterson is The Wall Street Journal's head of news audio. I'm Alex Osela.

Thanks for listening.