They Want it All…Now!

Earlier this year I was asked to give a guest lecture for a class at the UH business school.  The lecture was to share my knowledge to help the class complete their semester capstone project.  For those that have no idea what a capstone project is – don’t feel alone, I didn’t know either until my son had to do one himself in his last year of school.  Your capstone project, like the capstone of a building’s foundation, is an academic assignment that symbolizes the culmination of skills one has learned as a student and utilizes them in the project.  Regardless of the subject matter, the project is supposed to demonstrate skills such as critical thinking, project management, independent research, and presentation skills.  The project didn’t work out very well.  It seems that many of the students lacked a lot of the basic skills needed to complete a project such as this.  The professor ended up shelving the project and used the time instead to do remedial teaching on researching and presenting a project.

 

Why I am bringing this up is to show a side of the next generation that will be controlling our economy and future.  To say this generation is poorly educated and simply being passed through the education system would only be explaining one part of the problem.  The other half of the problem is that despite this handicap, this young generation also feels entitled.

 

 

You are hearing it more and louder each day, and in every part of the country – Generation Y & Z want what their parents have achieved but aren’t willing to put in the hard work to achieving it themselves.  Just like the capstone project, they cruised through school and when the time came to show what they learned, they figured participation was good enough.

 

I understand things are tough, and the economy is no one’s friend right now.  But if someone wants to get ahead in life, in most instances you must start at the back of the line, not the front – and use everything you have, to get ahead.  I’ve had college grads tell me the exact job they wanted, what they expected to be paid, and where the job would be located.  If they didn’t get that, they’d just continue to live at home with parents.  I hate to sound old, and while times have changed, some things don’t change.  You take the job you can find – for now.  Get some experience, make yourself more desirable to hire, then move on.

 

So how does this connect to real estate and mortgages?

 

The same can be said about housing.  Especially here in Hawaii, housing inventory is tight, and prices are high.  Someone who is 30 shouldn’t expect to be able to buy a $1-million dollar home.  The solutions being presented are laughable “affordable” new homes starting around $700,000.  The amount of debt our kids must then take on is bad for their future.  There was a reason in the past why lending guidelines capped your mortgage payment to 33%-38% of your income.  Today, that figure is 50% for conventional loans.  FHA allows 55%.  While higher debt-to-income ratios allow more people to qualify, that additional burden isn’t a healthy path to financial success.

 

I received an email from a reader this week that shared how he moved to Hawaii out of college and was hell-bent on becoming a homeowner.  His determination is something anyone with kids or grandkids in their 20’s or 30’s should share with them.  In part, this is what he wrote:

 

I moved to Hawaii in 1991, just a little over a year out of grad school.  I was single and had been putting away as much as I could while paying for my college at the same time, knowing that one-day I wanted to have a home.  To make this happen, I lived on a very strict college budget in every way: beat-up old car (no auto loan), cheap rentals, simple food, no splurging, etc.  I learned how to fix and maintain things, because that is what old, falling-apart things required.

 

My income and down payment forced me to only look at places that needed repair, nothing fancy and new.  My first home ended up being a land-locked, vintage 1935 2-bed/1-bath fixer-upper with no driveway, just a narrow walkway.  A moped became my source of transportation.  The house had knob/tube wiring, galvanized plumbing, a cheap metal roof, and the yard had weeds and grass that was taller than me.  I ended up owning that home for five years, spending all my free time and money fixing the place up as best I could - all-the-while still living on a college-like budget.  I knew I wanted to eventually buy up, which I eventually did.

 

He not only traded up from that property, but repeated the process many times, and now has a substantial residence and financial success.  This story shows a stark contrast with today's generation of 1st-time home buyers.  Their distinction of "want" vs "need" is warped.  Unlike the reader above, today’s generation expects to be able to afford a wonderful home right out of the blocks – despite being saddled with the added debt of car loans, cell phone/plans, cable TV, and eating out.  For this younger generation, financing and carrying additional debt has become the norm.

 

Is it that difficult to live without, and to live within one's means - to start adult life humbly?  Gen Y & Z seem to live in a "I want to have it now" mentality - especially with homes.  It is sad to tell you of the number of young people that have applied with me to get a mortgage, only to see their dream crushed due to staggering personal debt.

 

What has made our country the envy of the world, is that nowhere else on the planet do the opportunities exist where one can start with nothing and end up financially well off.  It takes study, it takes hard work, it takes determination, and it takes a little bit of luck.  The path to success isn’t from a government handout.  Nor is it possible through socialist means either.  The path to financial success comes from the hard work you put into it yourself.

 

 

 

 

 

And now the week’s economic news…….

 

Oil Prices Climb

Rising tensions in the Middle East pushed oil prices higher this week, renewing concerns that inflation could remain stubborn.  The latest economic data had little impact on financial markets, and mortgage rates finished the week near their highest levels in roughly one year.

 

In June, sales of previously owned homes slipped slightly from May but still were up 3% from a year ago.  The median price of $440,600 was up 2% from last year to a record high.  Inventories remain stuck at low levels, standing at just a 4.6-month supply.  However, inventories were a bit higher than a year ago.

The latest home building data contained mixed news.  In June, overall housing starts jumped 19% from May, more than expected.  However, this was driven entirely by volatile multi-family units, while single-family starts declined for the third straight month.  Single-family building permits, a leading indicator of future construction, fell to the lowest level since August 2025.  A survey of home builder sentiment on housing market conditions from the NAHB unexpectedly dropped to 34 and has remained in negative territory below 50 for twenty-seven straight months.  To help generate demand, 63% of builders offered sales incentives in June, while 37% reduced home prices.  Builders continue to cite rising land, labor, and material costs as the biggest obstacles to increasing new home supply.

 

 

 

 

 

 

In the latest reading, the number of Americans seeking unemployment benefits for the first time unexpectedly dropped to just 187,000, the lowest level since the 1960s. Weekly jobless claims are important because they are one of the timeliest indicators of labor market trends. While other recent economic reports suggest that companies may be scaling back on hiring new employees, this report indicates that they remain reluctant to lay off workers.

 

Bottom Line: Inflation concerns remain elevated as energy prices rise, mortgage rates continue to hover near one-year highs, housing inventory remains constrained, and builders face ongoing affordability and cost challenges. At the same time, the labor market continues to show resilience, reinforcing expectations that interest rates could remain higher for longer.

 

 

 

 

 

 

Next Week

Looking ahead, attention will remain on the conflict in the Middle East and the proposed deal to ease tensions. The next Fed meeting will take place on Wednesday. No change in rates is expected, and investors will be closely analyzing the commentary for clues regarding future policy adjustments. For economic reports, Consumer Confidence will come out on Tuesday. Second quarter GDP, the broadest measure of economic activity, and the PCE price index, the inflation indicator favored by the Fed, will be released on Thursday.

 

 

Until next week….

 

*** Please note that Freddie Mac publishes their weekly rate report on Wednesday mornings from data received Monday and Tuesday. 

The graph above is intended to shown rate trends, and not “today’s current rate”. ***

 

 

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https://youtu.be/c7AKQ5wa2_U

 

 

 

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https://youtu.be/iH3igW5v2jE