People recognize how unaffordable it has become to buy a home or even to rent a home, and they want their leaders to take action. So I think that this is the future that people have gotten on board with — the idea that we need to increase the supply of housing if we really want to make housing more affordable. And this is the direction that the country is headed, and I don't think that just one person is going to be able to stop it.
Welcome to Prof G Markets. I'm Ed Elson. It is June 25th. Let's check in on yesterday's market vitals. The S&P 500 and NASDAQ declined as chip stocks extended their losses. However, Micron stock popped more than 9% in after hours as it quadrupled its revenue in the latest quarter. We will see how those results impact the rest of the chip sector today. Oil dipped below $70 for the first time since before the war. The yield on 10-year treasuries fell. The dollar climbed as Bitcoin crashed below $60,000 to its lowest level since October of 2024. And finally, Alibaba shares sank 3% after Anthropic accused the company of, quote, 'illicitly accessing its AI models.' Okay, what else is happening?
America finally has a plan to make housing affordable. But President Trump is holding it hostage. In a rare bipartisan feat, Congress passed the most significant piece of housing legislation in 36 years on Tuesday. The 21st Century Road to Housing Act aims to lower housing costs and increase supply. It cuts red tape on new construction and makes loans easier to secure. It also sets limits on the role of institutional investors in the housing market, a policy which Trump himself has championed. But yesterday, Trump abruptly cancelled plans to sign this bill. He said he wouldn't sign it until Congress passes a separate voter ID bill called the Save America Act.
Homebuilders rallied anyway, with KB Home up 17%, Dreamfinders Homes up 13%, and Century Communities up 10%. Joining us to discuss this bill, we're speaking with Daryl Fairweather, chief economist at Redfin. Daryl, thank you so much for joining us on the show. I'm just going to tell you how I feel about this right off the bat and hear your response. Um, I'm pretty disappointed by this because I saw that bill, which I was very optimistic about. It seemed like we were finally making a bipartisan effort to get the cost of housing down, which has exploded. I mean, we can go through many different metrics, but the fact that, you know, I often look at the age of first-time home buyers, which is now 40, and back in 1991 it was 28. We could go through the list, and then the president shuts it down at a moment where I thought we all agreed. Um, could you just walk us through this bill and then also your reactions to it either happening or perhaps not happening?
Yes, I was excited that this bill passed through Congress because there is a lot of great stuff in it. There are provisions that tie government money to local municipalities increasing their supply of housing and making it easier to build, which I think is so important. There are provisions about manufactured and modular housing, making it easier for people to finance those types of homes, which could unlock a lot of additional housing supply. You can put an ADU in your backyard that's manufactured or that's modular, and that's a great way to increase the housing supply. There are also provisions in there about providing money for homes that are at risk of natural disasters. And then you have some stuff in there about investors buying homes. You know, I think overall this bill ended up in a really great place that housing advocates can get behind. And it is disappointing that it's not going to become the law today, but I remain optimistic that this will get over the finish line.
Why do you feel optimistic that this will ultimately happen? Because it's so supported on both sides. I mean, just looking at how it passed — 358 to 32 in the House, 85 to 5 in the Senate. Like, this is as bipartisan as they come. Is that why you feel optimistic about it?
Yes, it's bipartisan. Both Republican and Democrat lawmakers support it, and also people support it. People recognize how unaffordable it has become to buy a home or even to rent a home, and they want their leaders to take action. So I think that this is the future that people have gotten on board with — the idea that we need to increase the supply of housing if we really want to make housing more affordable. And this is the direction that the country is headed, and I don't think that just one person is going to be able to stop it.
Yeah. One of the provisions that's been a little bit controversial — it seems that everyone agrees that we need to do whatever we can to increase the supply. I think, I mean, I'd be interested to hear if maybe there's some pushback that you're seeing from the NIMBY community perhaps, but I feel like we're making headway there. But there is some controversy over this bill to limit the ability of institutional investors to buy up single-family homes. That is part of this bill. Um, what is your view on that provision? This has been kind of a popular topic in the world of housing — like, should we be letting BlackRock go out there and buy thousands of homes, and is that having a bad effect on the price of housing? What is your view on that debate?
I think that this final bill came to a very logical place with respect to that issue. I do not think that private equity or institutional investors are the reason why housing has gotten so unaffordable. I think they are more a symptom than a cause. And although the bill claims to ban them from the market, what it really does is it caps the number of homes that they are allowed to own and puts in some regulations on how they can, you know, rent those homes out. They need to allow renters to have an opportunity to buy the homes, and they also need to keep records of rental payments so that those renters have, you know, a history for when they go to buy a home that can be used for their credit history. So I think where we ended up in the end is actually a pretty logical place. And I know that Elizabeth Warren is going to say that they banned institutional investors. I don't think that's what actually happened. It was moderated. I think that's a good thing.
Yeah. Where are we in terms of housing prices at this point? I mean, I think we all know they're high, but how high, and how have they changed over the past year or so?
So, it was actually just last week that the median home price crossed over $400,000 for the first time according to our Redfin data. And I think that's one of the reasons people are so upset. It's really difficult to find those $300,000, $200,000 homes that are affordable on a middle-class salary now. And then on top of the home price, mortgage rates are high. They are nearly — they're more than double what they were during the pandemic. So if you were buying, say, a $400,000 home a couple of years ago during the pandemic, you would actually have to pay about $1,000 more per month just because of the difference in interest. And that's why people have gotten so frustrated, because mortgage rates went up so quickly in 2022. They've remained high partially due to the trade war and due to the conflict in Iran. And that continues to make housing just so inaccessible, especially to first-time home buyers who have to get a mortgage in order to be able to afford a home. Cash buyers can navigate around interest rates. Wealthy people can navigate around interest rates, but regular people can't.
Could you explain further the connection between what we've seen in the Middle East, in Iran, and how that ultimately funnels through to housing prices, or I guess housing becoming less affordable overall?
Yes. So, the reason why mortgage rates are so much higher now than they were during or before the pandemic is because of inflation. When inflation heats up, the Federal Reserve has to raise interest rates in order to suck money out of the economy to get demand to come down and inflation to come down. And this has a disproportionate impact on the housing market. The housing market is very interest-rate sensitive. So when inflation started going up because of the trade war and then because of the conflict in Iran, that directly made mortgage rates higher. Mortgage rates for a 30-year fixed rate were 5.99% the day before the conflict in Iran started, and now they're above 6.6%. So, you can definitely see the difference that the conflict in Iran is causing to the market. And that lowers demand for housing, but it also makes it less likely for homeowners to sell, because many homeowners have these record-low mortgage rates they got during the pandemic, back when everybody was refinancing or buying. And if they were to give that up and to buy again, they would have to pay much more for that new interest rate. So these high interest rates are really just suffocating the housing market. We're seeing near-record-low amounts of homes being sold because both buyers and sellers can't afford to make it happen when these mortgage rates are so high.
It's this terrible combination. You've got higher prices because there's lower supply, plus all of these other exogenous factors which are causing higher interest rates. So you're paying more to borrow and then also paying more to buy. Seems like, you know, this is exactly what you don't want. And it does seem that this is becoming more and more a political issue that is at the center of our politics. I mean, the idea of buying a home is central to everything we do in America. It's central to the American dream, and increasingly it's becoming impossible. Let's assume this goes through. Let's assume that the bill passes, Trump does sign it. Um, is there anything — I mean, are you optimistic that once this passes we might actually see housing prices come down, and is there anything that might get in the way of that outcome?
So, I don't think that home prices will go down in terms of the sticker price that you see, but what will happen is that home prices won't go up as much as they would in the absence of this bill allowing more supply to be built. And we're projecting that over the next decade, home prices will still go up, but they will go up slower than wages and slower than inflation. And effectively, buying a home will become more affordable over time. And we can make it more affordable over time, even more, if we add more supply. And that's what this bill really does. It's not just the federal bill. There's also a lot of action happening at the state level and the local level. And I think in general the YIMBYs, the people who have been advocating for more housing supply in general, are winning all across the country.
All right, Daryl Fairweather, chief economist at Redfin. Daryl, this was extremely informative. Thank you so much.
We'll be right back. And if you're enjoying the show, be sure to subscribe to the Prof G Markets YouTube channel at the link below.
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We're back with Prof G Markets. The world's largest social media company may soon be expanding into prediction markets. Mark Zuckerberg recently directed his team at Meta to create a prediction markets app similar to Kalshi and Polymarket called Arena. An initial version of the app involves making bets on real-world events using in-game points, although wagering with real money has not yet been ruled out. So, here to discuss this potential new direction for Meta, we're speaking with the reporter who actually broke this story. We're speaking with Mike Isaac, New York Times technology correspondent. Mike, great to see you. Thank you for joining us. Meta's working on a prediction markets platform. I guess something like Kalshi, something like Polymarket. What do we know about this?
Uh, so when I found out about it, uh, my jaw kind of hit the floor just because I — um, it's like it's kind of an intense thing to do, especially right now. You know, it's a moment where all of these markets are being heavily scrutinized, even if they are technically playing in a legal gray area according to every analyst. But, uh, Zuckerberg — as far as my sources have told me, Zuckerberg himself has ordered this up. It's one of these things where he's really an astute — I would call him an astute student of just like obsessing over what people do online and leaving, let's say, leaving value judgments out of it some of the time. But like, just saying, prediction markets — Kalshi and Polymarket are two of the largest, fastest-growing activities on the internet for a while. How can we bring some of that activity into Facebook? As far as I know, it's going to be a standalone app, but also have the social graph from Facebook and Instagram kind of integrated somehow, because their whole point is, you know, do it with your friends and family. That's where you make bets on things in the world. It is striking because, I mean, for a guy who's led a company that has been scrutinized for engaging in the kinds of digital addictions and digital habits that a lot of people would say are bad for you health-wise, bad for you mental health-wise — this is sort of the next controversial thing, is prediction markets, because it's controversial for the fact that it's quite similar to gambling in a lot of ways.
Um, and I guess I'm just struck by the fact that he doesn't seem to care about that. Or maybe he does, and he decides that the money's worth it. I mean, do you know if that's been part of the calculus for the people over at Meta?
Yeah. No, it's a great point. And after the story broke, it was actually great because a lot of people started coming out of the woodwork and sending me more stuff. And, um, there's a few things. One, there are a lot of people inside of Meta right now who are not happy that they're actually working on this. I think there are people like — as you might imagine, prediction markets are very controversial. Like, a lot of folks call them pathways to gambling. A lot of folks call them outright gambling under a different name and are upset that they're not called gambling apps. Um, they're again — they're still in this process of where does regulation exist at all around them? You know, it's like stalled in Congress as far as some of these bills are going. So, like, it's controversial to begin with, and not a ton of people knew about it. It was a small team, um, working on it under the direction of Zuckerberg. That said, I saw another document that was talking about what they do is a lot of these risk assessments internally, like the essentially pros and cons lists. And one of the things — they had a category that specifically was about regulatory risk. And, um, because they're playing with low — with not real money, they said this was like low, low risk, and that's how they can sort of justify it. I still think that's probably a rosy view. Like, it's — you're in the middle of exactly what you're saying. You're in the middle of a bunch of high-profile court battles, class-action lawsuits, essentially calling your app addictive in a lot of ways. And then you bring about — like, it's just like inviting more pain and scrutiny. But I think Mark Zuckerberg has a high pain tolerance threshold, especially if he believes this is something that can benefit him and Meta in the long run.
Yeah. And I would add on to that the fact that we've got the sequel to The Social Network, which is going to be all about this. So, it's going to be even more public pressure, which I guess he's not that worried about. The fact that they're doing in-game points is striking. It seems to me that maybe that means that they don't want to delve into the regulatory cesspit too aggressively. But I do wonder — I mean, how are you going to make money doing that? Or is that really even the point? Do you think that ultimately the strategy would be test it, see if it works, and if people like it, then we'll start using real dollars?
Yeah, I think — no, it's a good point. And here's what I'd say. There's a version of this where, you know, the folks I talked to have not ruled out — as you noted, have not ruled out ever making a financial component, a real-money component to it. I think Zuckerberg — again, he cares about behavior and activity. And if there's a way to capture behavior, even if it's not directly financially motivated, there are indirect ways. He's all about indirectly monetizing a lot of stuff that's on their platform. And at the end of the day, we'll always go back to scale. We have three and a half billion users. The two things we need to think about is how to keep them coming back and then shoving different forms of monetization in there. So, I can imagine a world in which this highly — I'm not even going to say the word 'addictive' because that comes loaded, but like, let's say this highly engaging activity brings people back to Facebook more often. How many more — what does your ad inventory do there? It opens up. You get more time spent. And so even if they never make it a for-money thing, I think if it works, it could yield some sort of benefits to them.
Yeah, it is striking just how good of a copycat Mark Zuckerberg is. If it's, you know, starting Reels as a copy of TikTok and Instagram Stories which copied Snap, uh, now he's copying Kalshi and Polymarket. I mean, it's been a winning strategy before. So, I mean, I feel like we have every reason to believe it might be a winning strategy. Again, just going back to what you said about how the team at Meta feels about this — the idea that people, they don't want to be working on this, they're not excited about this. It's an interesting point because we're at a time in the markets where investors are starting to feel the same way about Mark Zuckerberg, specifically when it comes to spending on AI, which is he's spending all of this money on these data centers. He hasn't communicated a clear vision for where we're going to see a real return. I mean, that was already a concern, and he's doing probably the worst job of all the hyperscalers in communicating, 'Here's how we're going to make money off of this thing.' I'd be curious to know, is that a feeling that is growing among the staff at Meta? Do we know if there is a lack of trust or faith or concern that is growing aside from the prediction markets?
Yeah, you nailed it. I think — so this sort of controversial app that they're building also comes at — I was talking to someone there who's been around for a long time who was telling me this is probably one of the worst times they've had for the company. Like, people — morale is really gnarly. They made the case like, 'Look, we're still making money and we're building things' or whatever. But like, AI hype and the threat of competition around them has got a level of paranoia across the board that they're going to get unseated, I think, at the top ranks. And then at the bottom ranks, you're just sort of going through enormous layoffs and real structural change on how they've rejiggered a lot of the engineering teams in a way that is actually having them bleed. Uh, attrition is going up because other companies are coming in and taking those engineers. So, it is like a very tumultuous time inside of Meta right now. And I think — I've only seen a few like moments inside over the years where folks are outright sort of on the verge of mutiny. One of them was around the Trump election stuff and misinformation suddenly being a thing. Uh, and really now in the wake of the layoffs and all this sort of turbulence, like, it's pretty gnarly inside, and the top is trying to calm the troops, but it's been hard, I think.
All right, Mike Isaac, New York Times technology correspondent. Really fascinating stuff, Mike. We appreciate your time.
