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By Suzanne Blake
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President Donald Trump is doing the “worst thing” for the housing market, according to a leading economist.
In a new post on X, Peter Schiff, chief economist and global strategist at Europac.com, criticized the president for trying to prevent the housing market bubble from popping.
“Trump basically admitted there is a housing bubble in the U.S. He also admitted his main policy goal is to prevent it from popping,” Schiff wrote Wednesday. “But once you recognize a bubble, the worst thing you can do is try to sustain it. The sooner it bursts, the less damage it will ultimately cause.”
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Why It Matters
The housing market remains unaffordable for a large swath of Americans. With the median home sale price at roughly $428,000 across the United States, per Redfin data, many Americans are unable to realize their dreams of homeownership.
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What To Know
At this week's World Economic Forum in Davos, Switzerland, Trump advocated for lower interest rates, not necessarily lower housing prices. “I don’t want to do anything that’s going to hurt the value of people who own a house. I could crash the housing market but I’m not going to."
Schiff predicted an economic meltdown in 2006. Years before the Great Recession, he warned the economy would be ravaged by "too much consumption and borrowing and not enough production and savings. What's going to happen is that the American consumer is basically going to stop consuming and start rebuilding his savings, especially when he sees his home equity evaporate. And when you have the economy at 70 percent consumption, you can't address those imbalances without a recession."
He has also predicted much of what occurred in the U.S. economy since, telling Fox News in 2006: “You're going to start to see both the government and the lenders reimposing lending standards and tightening up on credit—and these sky-high real estate prices are going to come crashing back down to earth."
Americans largely learned in 2008 that pumping liquidity into an overpriced asset doesn't create affordability, said Michael Ryan, finance expert and founder of MichaelRyanMoney.com.
“When you pour gasoline on a fire because people are cold, don't be shocked when the whole house burns down,” Ryan told Newsweek.
“Once you acknowledge a bubble exists, the worst thing you can do is try to sustain it. Every month you prop up inflated prices, you're adding leverage to an eventual correction. Schiff's prediction of a 20-30 percent nationwide price drop isn't hyperbole. It's math. When prices disconnect from incomes this severely, gravity always wins.”
What People Are Saying
Ryan, also to Newsweek: “Schiff is right, but I think for the wrong reasons. Trump admitted we're in a housing bubble, then announced his solution is to inflate it further. Is that policy? No, that's a Hail Mary to goose approval ratings before midterms.”
What Happens Next
Ryan urged buyers to not mistake artificially suppressed rates for genuine affordability. “A lower monthly payment on an overpriced asset is still a losing bet. The bond buying program might shave 25-50 basis points off rates, but it won't offset a 30 percent correction,” he said.
“If you've been waiting for the ‘right time,’ this is your exit liquidity window. Policy-induced demand spikes are temporary. Fundamentals aren't improving," Ryan added in a warning to sellers.
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