This week’s issue presented by Ridge Lending Group
What happened…
Washington doubled down on Canadian lumber tariffs. Countervailing duties jumped from 6.74% → 14.63%, plus a 20.56% anti-dumping tax, bringing the total hit to 35.2% — the steepest in decades. Lumber futures are up 19% YoY even as home demand cools. Treasury Secretary Scott Bessent now says the White House may declare a “national housing emergency” this fall.
Takeaways…
3.8M homes short → the 3rd-largest housing gap since 2012.
1.63M “missing” households → Gen Z/Millennials stuck at home (33% of 18–34-year-olds live with parents, an 80-year high).
Emergency powers could:
Slash permit times from years to weeks.
Free up $4.7B in block grants.
Fast-track 400k units stuck in limbo.
But Fed cuts (91.5% chance of September move) will stoke demand far faster than supply arrives.
Buffett knows: Berkshire just bet $991M on Lennar + D.R. Horton, the biggest housing wager in its history.
Explain Like I’m 12…
Imagine Washington is your landlord. They broke the water heater on purpose, then knock on your door to sell you bottled water at a markup — while your rich neighbor already bought the whole plumbing company.
What this releases…
Fast-track approvals → big builders with land banks cash in first.
Institutional land play → Blackstone/Brookfield banking land near transit; values could triple if zoning walls fall.
Investor move → buying before Fed cuts = entering while “cheap.”
Why it matters…
This isn’t just housing policy — it’s a wealth transfer machine.
Builders + Wall Street win.
Existing homeowners win.
First-time buyers lose hardest.
The ripple: today’s “impossible” prices may be the floor, not the ceiling, for the next 5–7 years.
Backroom breakdown…
Elites break it, then play hero fixing it. Emergency powers sound populist, but they tilt the board to builders who already own the land and the lobbyists. Buffett isn’t buying houses — he’s buying the rules of the game.
Real estate angle…
If you own: hold — policy tailwinds prop values.
If you invest: use creative finance now; waiting means bidding wars later.
If you rent: brace — 1.6M “missing” households eventually flood the rental pool.
Move or miss?
Don’t wait for prices to “correct.” Berkshire, Blackstone, and Brookfield already front-ran you. Best move: secure funding (RidgeLendingGroup.com) or get tactical support (CashFlowSavvy.com) before policy and Fed cuts push comps higher.
Lurking in the Shadows:
👟 Fed Poised to Pivot as Clouds Gather
Powell signaled a possible rate cut at the Sept 16–17 meeting, citing labor risks even as core inflation sits near 4%. Policy rate: 4.25–4.5%, steady since December.
💡 Why you should care: Mortgage rates (~6.6%) could ease—but if inflation flares, cap rates and financing could whipsaw.
👟 Tariffs Chill the Economy – Recession Whispers
Business investment plunged 3.1% in Q2. Ford says tariffs flipped an $800M profit into a loss. Senate leaders warn trade policy is “spiking costs for small businesses and families.”
💡 Why you should care: A policy-driven slowdown dents commercial demand and consumer budgets—spilling into housing.
👟 Housing Market Frozen as Low-Rate Owners Stay Put
Nearly 78% of owners hold sub-5% mortgages (22% under 3%). New buyers face ~6.7%. July listings lingered 43 days vs 16 in 2021; inventory rose to 1.55M homes.
💡 Why you should care: Supply is loosening, but volume is dying—flippers, lenders, and realtors feel it first.
On The Radar…
👤 “Big Short” Burry Bets on a Market Bust
Michael Burry’s fund loaded $1.6B in put options (~93% of his portfolio) against the S&P 500 and Nasdaq. If equities crack, credit tightens—real estate feels the liquidity squeeze.
🏢 Office Apocalypse: Record Vacancies Gut CRE
U.S. office vacancy hit 20.7%; San Francisco at 27.7%, NYC near 23%. $290B in loans mature by 2027. Office defaults are bleeding banks and city budgets—prime ground for distressed conversions.
🏠 Insurance Crisis: Climate Risks Upend Housing
California FAIR Plan policies nearly doubled to 610k; coverage ballooned to $650B (+289% since 2021). In Florida, Citizens shed 600k policies. Homes in risk zones are becoming uninsurable—shrinking resale pools and spiking costs.
🧑🏭 Labor Market Mirage – Up to 950k Jobs May Vanish
Upcoming BLS revisions could cut 550k–950k jobs from March 2024 counts. That’s 50k–80k fewer jobs per month than reported. A weaker labor market = softer demand but more rate-cut fuel.
🇺🇸 Government Shutdown Jitters
Deadline: Sept 30. A $37B budget gap could trigger the first shutdown since 2023. Past shutdowns cost ~$3B/week. FHA/VA closings may stall, Treasury yields may spike—raising borrowing costs overnight.
⁉ Soft Landing or Calm Before the Storm?
GDP +3.3% in Q2, unemployment 3.5%. Yet the yield curve sits at –60 bps—a classic recession omen. Whether 2025 is Goldilocks or bust decides tenant demand and cap rates.
🖇 The Connection
Tariffs drove costs up. The Fed toys with cuts that could reignite inflation. Jobs data may be weaker than believed. Add insurance crises, record vacancies, and a possible shutdown—and you see the through-line: policy keeps setting the stage, but investors capture the spoils first.
#️Number of the Week
78% — share of homeowners with mortgages under 5%.
🎯 The Hit List!
✅ If you own: hold tight—scarcity inflates asset values.
✅ If you rent: expect pressure when 1.6M “missing households” finally move out.
✅ If you invest: use creative finance (seller carry, sub-to, wraps) before Fed cuts heat demand.
✅ Watch: Midwest backlog (41 years to balance); distressed office loans (~$290B).
✅ Hedge: insurance risk—factor coverage availability before you buy.
🚪 Closer
Zillow Oddity: $1.2M for a kitchen where dreams go to die.
