Housing not in crisis but first-time buyers are being squeezed: Serhant Real Estate's Ryan Serhant

Key Concepts

• Housing Stalemate: The current situation in the US housing market, characterized by limited mobility rather than a full-blown crisis.
• Mobility Crisis: The difficulty people face in moving and accessing housing, stemming from a lack of supply and policies that favor existing homeowners.
• Scarcity Reward System: The current housing market structure that incentivizes holding onto properties, driving up prices and limiting availability.
• Capital Gains Exclusion (Section 121): A tax benefit allowing homeowners to exclude a significant amount of profit from the sale of their primary residence.
• Fannie & Freddie: Government-sponsored enterprises that play a key role in the mortgage market, but are limited in effectiveness without increased housing stock.
• American Dream (Redefined): Shifting from homeownership as the sole measure of success to broader economic prosperity and financial security.

The US Housing Market: A Mobility Crisis, Not a Crisis of Value

Ryan Serhant, Founder and CEO of Serhant Real Estate, frames the current state of the US housing market not as a “crisis,” but as a “housing stalemate.” He rejects the use of “trigger words” like ‘crisis’ favored by some economists, arguing that the core issue isn’t a collapse in value, but a severe restriction in mobility. He asserts that homeowners are generally financially stable, while first-time buyers are facing significant barriers to entry.

The Policy-Driven Nature of High Prices & Limited Mobility

Serhant contends that high housing prices are not accidental, but are a direct result of existing policies. He highlights the system’s tendency to reward scarcity and protect existing homeowners, creating a situation where it’s financially advantageous to hold property rather than sell it. This is evidenced by substantial equity gains experienced by homeowners across the country. He points to the long-term effect of measures like offering lower mortgage payments (e.g., through 50-year mortgages) as ultimately increasing the punishment for mobility.

The Role of Fannie & Freddie and the Capital Gains Exclusion

He questions the effectiveness of Fannie and Freddie in addressing the issue without a corresponding increase in housing stock, stating they are “completely useless if we don't have housing stock.” He further criticizes the lack of revision to the capital gains exclusion on primary residences (Section 121 of the US Tax Code, originating from the Taxpayer Relief Act of 1997), noting it was established when the median home price was under $150,000. He emphasizes the need for practical solutions – “people need roofs” – rather than rhetorical debate.

Shifting the Definition of the American Dream

Serhant challenges the traditional association of the American Dream solely with homeownership. He defines the American Dream as “economic prosperity” – the ability to live without constant financial worry. He argues that attaching the dream exclusively to homeownership is limiting and potentially unrealistic. He states, “I think the US housing market…is working exactly as it’s designed to,” implying the design itself is the problem. He contrasts this with a scenario where the dream is unattainable, stating, “I’d rather we have a housing crisis and still have a dream. If there’s no dream, if it’s not a possibility…”

Regional Variations & Buyer Priorities

Acknowledging regional differences, Serhant notes that while Manhattan presents a unique housing landscape, the core issues resonate across the country. He emphasizes the importance of buyers clarifying their priorities – location versus size – as a means of navigating the limited inventory. He points to a January sales drop of 8.4% from December, coinciding with a slight dip in mortgage rates to around 6%, the lowest in three years.

Homeowner Inertia & Market Dynamics

Serhant highlights a trend of homeowners staying put for longer periods, with the average homeowner now moving only once every nine years. He also notes that while the bottom of the market is experiencing some distress, there is still available housing. He suggests that the current system incentivizes staying in place, further exacerbating the mobility crisis.

Conclusion

Ryan Serhant presents a nuanced perspective on the US housing market, arguing that the current challenges stem from a systemic issue of limited mobility driven by policy choices that reward scarcity. He advocates for increased housing stock and a re-evaluation of existing tax benefits to address the problem, while also redefining the American Dream to encompass broader economic security rather than solely focusing on homeownership. His analysis emphasizes that the market is functioning as designed, and that fundamental changes are needed to unlock greater accessibility and opportunity.