Dan Denning: The Hollow Class, Part I

“To preserve their independence, we must not let our rules load us with perpetual debt. We must make our election between economy and liberty, or profusion and servitude.”

– Thomas Jefferson

America’s middle class has declined with the loss of manufacturing jobs and a sound dollar.

November 11, 2025 — Nearly 75% of US households cannot afford a median priced home in America, according to the National Association of Home Builders (NAHB).

That’s with a median house price of around $460,000 and a 30-year fixed mortgage at between 6% and 6.5%. Almost a third of renters spend about 30% of their income on rent (Redfin reports that it’s closer to 40% for home owners with a mortgage on a median priced home).

Housing has never been more expense or unaffordable in America. You can thank the intervention of the Federal government (especially the Federal Reserve) for that.

Since I published my most recent weekly research note, we learned the Trump administration is advocating the introduction of 50-year mortgages in the US. Federal Housing Finance Agency Director Bill Pulte made the announcement on Saturday. Trump posted something on social media comparing himself to FDR, who introduced the 30-year mortgage.

A 50-year mortgage doesn’t make housing cheaper. But by stretching the repayment period over time, it DOES lower the monthly payment on your principal. That lowers the percentage of your total income you’re spending on repayment. And in a strange way, it makes sense.

With a fixed rate mortgage and inflation running in the high upper digits, the real value you of your total debt goes down over time (inflation pays off your loan, as long as your income rises faster in nominal terms). Of course you pay off a lot more interest over 50 years than 30 years. And it takes a lot longer to build up equity (assuming also that house prices don’t fall).

But the point is…the government now knows to keep the housing market functioning and prevent a mean reversion in house prices, more intervention is required. By the way, Pulte also said Fannie Mae and Freddie Mac are thinking of investing in tech firms. Why?

Asset prices of any sort—stocks and houses—must not be allowed to crash. Especially before next year’s mid-term elections. The economic and social consequences of a crash are too dire to imagine. What happens next and what should you do?

Quite a bit to think about. The hollowing out of the American middle class has been thorough.

Dan Denning
Bonner Private Research & Grey Swan Investment Fraternity

P.S. from Addison: A small personal note re: Mr. Denning. Dan and I met in the mid-90s while we were both studying philosophy in graduate school at St. John’s College in Santa Fe, New Mexico.

The anecdotes vary depending on whom you talk to and what hour of the evening it is… but, what I remember is having a proper dust up in one of our seminar classes while reading Nietzsche’s Thus Spoke Zarathustra.

We’ll have the second part of the Hollow Class tomorrow with a follow-up from Bonner Private Partners guest analyst Joe Winthrow. Stay tuned.

A 50-year mortgage may not sound so bad. After all, it will allow homeowners to pay a lower total amount each month, and could thaw out a frozen housing market.

But, much like the increasing length of car leases, it underscores a harsh reality – that we live in an economy where everything needs to be financed for longer and longer periods of time.

America’s middle class used to be about owning their own car and throwing a party to burn the mortgage paperwork when it was paid off. Many Americans still do. But an increasing number are sliding below middle class while their expenses to keep up with that lifestyle soar.

If you have any questions for us about the market, send them our way now to: feedback@greyswanfraternity.com.