‘The Accidental Economist’ with Jack Kern: Major Bank Discovers Young Homebuyers–News at 11

I had a great laugh today. On one of the newswires there was a headline article about how a major national bank discovered that millennials might represent the biggest home-buying cluster to come along in years. Imagine that, a bank that makes home loans talking about how it will be great to sell these mostly unemployed or underemployed young people a home. With large numbers of foreclosures still on the market in lots of places, much tougher underwriting standards in place and even fewer real estate agents hustling buyers, it strikes me as a public relations goof of epic proportions.

According to the article, the bank said there were more than 51 million potential first-time homebuyers born between 1979 and 1991 and that about 6 million of these are reaching the prime home-buying age faster than baby boomers did. (I’d love to see the math behind that one). So fundamentally what we have here is a news article (news being a relative term; just watch Fox and you’ll see what I mean by that) about a non-event by a bank that is in the very business of selling loans. So if logic permits, it means that Gen Y’ers who have taken a pounding in the job market and don’t conceivably have any savings to be able pay the down payment, bank fees and closing costs are more likely to buy. With what? Magic beans?

This kind of activity on the part of the bank strikes me as irresponsible. The bank, to promote the agenda of why now is a great time to get stuck with a house, even rented out movie theaters and played a video to 25,000+ agents (popcorn optional), extolling the virtues of this limited argument. I’m sure the audience, mostly aging real estate agents (they call them blue hairs in Cadillacs, I understand) ate it up. You see, an average of 40 percent of them barely made even $25,000 in the past year selling real estate. I’m guessing the balance made less than $40,000 by a wide margin, with less than 3 percent traditionally being the big money makers. The balance probably split the difference. One understated benefit of this past recession is at least fewer people were trying to get me to sell my house, putting their cards on the windshield of my car and accosting me at parties.  It’s been a good couple of years on that score.

There is currently an inventory of foreclosed and abandoned homes running up to about 10 years of supply, and while it’s concentrated in the same four major areas one might expect, there isn’t a single metropolitan area that has escaped at least some issue with this. And so now is the best time to buy a cheap home if you’re a speculator, investor with deep pockets and an undying belief that prices are going back up, or someone under the influence of a real estate agent related to you.

We really could use an honest housing policy in this country, and this kind of bank sponsored activity reminds me of the good old days, when at least you knew what the Resolution Trust Company was going to do. And yet, here we are again.

Jack Kern is usually in a good mood. This week, his daughter gave birth to his first granddaughter, and so he’s heading out of town to see her and make sure she isn’t already thinking of buying a home. A bottle warmer is probably a much better present. You can reach Jack at Kern Investment Research, LLC, based outside of Washington, D.C., at [email protected] or by calling 301.601.1900. If you’re a real estate agent, leave a message. He’ll call you back.