WEBVTT - Fed Leaves Rates Unchanged 0:00:02.920 --> 0:00:10.719 Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business 0:00:10.720 --> 0:00:13.960 Wait Inside from the reporters and editors who bring you 0:00:14.000 --> 0:00:18.360 America's most trusted business magazine, plus global business, finance and 0:00:18.400 --> 0:00:22.880 tech news. The Bloomberg Business Week Podcast with Carol Messer 0:00:23.040 --> 0:00:25.800 and Tim Stenebeck from Bloomberg Radio. 0:00:27.320 --> 0:00:30.360 And a very good afternoon everybody Live on Radio, YouTube 0:00:30.440 --> 0:00:33.640 and Bloomberg originals. Well, the third FOMC decision, it is 0:00:33.680 --> 0:00:35.680 on the books, fed your J. Powells. We just heard 0:00:35.760 --> 0:00:38.680 from Charlie saying it's unlikely that the next policy rate 0:00:38.760 --> 0:00:41.600 move will be a hike, and that is something to 0:00:41.840 --> 0:00:43.159 perhaps tend your hot on. 0:00:43.240 --> 0:00:46.200 Tim, Yeah, I think investors certainly did. R Jay Powell 0:00:46.280 --> 0:00:48.599 said that we've seen stocks come back around, though, as 0:00:48.680 --> 0:00:51.160 Charlie mentioned, Hire by about two tenths of one percent. 0:00:51.240 --> 0:00:54.800 Right now, we were down at least and P ANDAZ decwenhundred. 0:00:54.840 --> 0:00:57.360 We were down going into it for sure. The Fed 0:00:57.480 --> 0:01:00.480 signaling fresh concerns about inflation, though reaffirming it needs more 0:01:00.520 --> 0:01:03.400 evidence that price gains are cooling before cutting interest rates 0:01:03.400 --> 0:01:06.360 from a two decade high. Were you surprised by anything? 0:01:07.080 --> 0:01:09.800 You and I were laughing, We're like so dot dot dot, 0:01:10.160 --> 0:01:12.600 the FED and Jaypowell their data dependent. 0:01:12.319 --> 0:01:16.000 Yeah, Hi, Hi for longer, Hi for longer exactly. I 0:01:16.000 --> 0:01:17.760 made the joke higher for longer. He said, no, Hi 0:01:17.880 --> 0:01:19.080 for longer, No exactly. 0:01:19.400 --> 0:01:21.119 So it's interesting. And in terms of the Ray curve, 0:01:21.160 --> 0:01:23.400 we've talked about this. You heard Charlie walking through the numbers. 0:01:23.560 --> 0:01:25.399 I think what's most as significant is at the shorter 0:01:25.480 --> 0:01:26.959 end of the Yeale curve that to your note, which 0:01:26.959 --> 0:01:30.920 was above five percent right before the FOMC decision. We're 0:01:30.959 --> 0:01:34.840 now seeing at four ninety four. So we definitely a 0:01:34.880 --> 0:01:38.319 little bit lower here. So it's interesting. I think we 0:01:38.360 --> 0:01:41.240 got a lot of what we've heard, but Ja Pale 0:01:41.760 --> 0:01:45.360 continuing to talk about needing more evidence sticking to that 0:01:45.400 --> 0:01:49.560 two percent inflation target objective, if you will, but a 0:01:49.680 --> 0:01:52.200 lack of further progress there, so he wants to see 0:01:52.240 --> 0:01:54.680 more before they're ready to do something different. 0:01:54.800 --> 0:01:56.880 I also thought or cut rates. For the first time 0:01:56.920 --> 0:02:00.280 I heard him talk politics or not talk politics. I 0:02:00.320 --> 0:02:02.760 guess and say, look, I've been through and accounted for 0:02:03.120 --> 0:02:07.320 different presidential elections. We are not a group of people 0:02:07.320 --> 0:02:09.840 who takes politics into account. That's not our job, right, 0:02:09.960 --> 0:02:12.440 That's the factor that they will. I can look at 0:02:12.440 --> 0:02:14.800 the minutes, right. I thought that was an interesting moment. 0:02:14.960 --> 0:02:17.400 Yeah, exactly. He did say further progress though in bringing 0:02:17.400 --> 0:02:21.120 down inflation out assured inflation again, showing a lack of 0:02:21.520 --> 0:02:25.560 further progress, and the path though forward is not certain. 0:02:25.760 --> 0:02:28.400 So yeah again data dependent. 0:02:28.480 --> 0:02:28.760 All right. 0:02:28.800 --> 0:02:32.480 First up, let's talk markets as we should on this 0:02:32.560 --> 0:02:34.760 FED Wednesday. We've got a great guest to do it. 0:02:35.440 --> 0:02:37.840 We've got back with us Doug Cioka, CEO and partner 0:02:37.840 --> 0:02:40.040 at Kavar Capital Partners. They've got roughly one and a 0:02:40.120 --> 0:02:42.919 quarter billion in assets under management. He's with us once 0:02:42.960 --> 0:02:47.400 again from Leewood, Kansas. Doug, good to have you here. 0:02:47.720 --> 0:02:51.880 It feels like, you know, net net after a decision 0:02:52.360 --> 0:02:57.000 and not quite an hour press conference with Jay Powell, 0:02:57.320 --> 0:03:00.120 it does still feel like there's data dependent all so, 0:03:00.280 --> 0:03:02.760 there were some nuances there, some maybe some tweaks here 0:03:02.800 --> 0:03:05.359 in terms of his message. But how did you see it? 0:03:06.440 --> 0:03:06.880 I think so. 0:03:07.040 --> 0:03:09.600 I think you and and Tim were correct, Carol, like 0:03:09.680 --> 0:03:12.919 it was more data dependence. Market's kind of done around 0:03:12.960 --> 0:03:14.520 trip of where it was before the menion where it 0:03:14.560 --> 0:03:17.320 stands right now, particularly it relates to stocks bomb market 0:03:17.360 --> 0:03:20.240 is a little bit better bid. He was certainly prepared. 0:03:20.440 --> 0:03:23.520 I think Tim's right for the questions related to politics. 0:03:24.200 --> 0:03:27.320 I think the timing inso much as the release over 0:03:27.360 --> 0:03:29.960 the weekend of last week that his secret committee Donald 0:03:30.000 --> 0:03:33.120 Trump that is about having more of a presidential influence 0:03:33.160 --> 0:03:34.880 on the FED were he to be elected. I think 0:03:35.040 --> 0:03:37.200 that the FED was smart to be out in front 0:03:37.240 --> 0:03:42.280 of reinforcing the a political nature of their organization and 0:03:42.320 --> 0:03:45.840 the decision making, the process, and certainly the part about stagflation. 0:03:46.040 --> 0:03:47.720 I thought that was maybe the best answer to his 0:03:47.720 --> 0:03:49.840 whole press conference. He doesn't see stag and he doesn't 0:03:49.840 --> 0:03:50.320 see flation. 0:03:50.520 --> 0:03:51.680 We want to do a rap song. 0:03:53.200 --> 0:03:55.080 I wanted to carol after that, and I was like, 0:03:55.640 --> 0:03:58.200 that was like a little a little different version of Powell, 0:03:58.200 --> 0:04:01.320 this time spicy. He seems a little spicy today. I 0:04:01.320 --> 0:04:03.120 don't know, he felt a little felt a little different, 0:04:03.120 --> 0:04:04.520 felt like he went off script a little bit. 0:04:05.360 --> 0:04:05.880 I agree. 0:04:06.000 --> 0:04:08.720 I think he felt the consequence of the meeting merited such. 0:04:08.840 --> 0:04:12.440 I do believe like he certainly and sort of the 0:04:12.440 --> 0:04:15.160 people that are served with every many years would reinforce 0:04:15.280 --> 0:04:17.680 the fact that he doesn't feel the outside influence on 0:04:17.800 --> 0:04:20.120 his decision making, pointing at the record of your point, Tim, 0:04:20.160 --> 0:04:22.920 I think reinforces that, but I also think it's his 0:04:23.080 --> 0:04:25.760 personality that needs to shine through, and I think being 0:04:26.279 --> 0:04:29.640 in touch with the bifurcated economy is really critical. When 0:04:29.680 --> 0:04:32.239 he came into office, all this in the investment business 0:04:32.279 --> 0:04:35.160 were so excited because he wasn't an academic right here. 0:04:35.240 --> 0:04:38.200 He was someone who had invested, started and sold businesses. 0:04:38.560 --> 0:04:41.640 So that touch point with mainstream America and Wall Street 0:04:41.880 --> 0:04:44.240 were kind of a rare combination. And if he can 0:04:44.279 --> 0:04:47.680 come through and find the personality in that profile, I 0:04:47.720 --> 0:04:49.599 think it even magnifies you more as influence. 0:04:49.760 --> 0:04:53.160 So what are your expectations, Doug in terms of what 0:04:53.200 --> 0:04:54.960 the Fed may or may not do or shouldn't do? 0:04:54.960 --> 0:04:57.400 You maybe this year a little bit of both, you know. 0:04:57.480 --> 0:04:59.560 I think the FED did a really good job today, Carol. 0:04:59.800 --> 0:05:04.320 The Edming Jpollo course is displaying a better understanding the 0:05:04.400 --> 0:05:07.279 complexion of the economy, right, And in so many ways, 0:05:07.360 --> 0:05:09.920 our economy is bifurcated. If you have the goods economy 0:05:10.000 --> 0:05:13.000 and the services economy. There are wealth and income lines 0:05:13.000 --> 0:05:17.760 of demarcation, there are large employers small employers, and the 0:05:17.880 --> 0:05:20.600 FED is handicapped right in my opinion because of the 0:05:20.680 --> 0:05:23.520 limited number of tools in our policy toolbox. So if 0:05:23.600 --> 0:05:28.200 they caught rates, that's not going to impact large companies 0:05:28.279 --> 0:05:30.400 that have turned out their debt. It's not going to 0:05:30.440 --> 0:05:34.080 impact healthcare companies, insurance companies, or educational entities. But it 0:05:34.160 --> 0:05:38.960 will meaningleslly help small businesses, particularly small banks, small real 0:05:39.120 --> 0:05:43.160 estate subcomponents, and these are starving for an increase in 0:05:43.360 --> 0:05:47.160 volume that's going to be courtesy of elevated liquidity because 0:05:47.200 --> 0:05:50.240 they've been impeded by tighter financial conditions, could see higher 0:05:50.279 --> 0:05:54.720 interest rates. So the FED understands, and I thought articulately well, 0:05:54.800 --> 0:05:59.599 today there are segments of the goods economy consumer goods 0:05:59.600 --> 0:06:03.360 economy broadly negatively impacted by higher interest rates. Credit card debt, 0:06:03.440 --> 0:06:05.599 subprime model debt was mentioned in one of the questions. 0:06:06.160 --> 0:06:08.400 The bulk of the person of power in this country, however, 0:06:09.279 --> 0:06:12.080 is not in that subsect of the economy. They're not 0:06:12.240 --> 0:06:15.160 going to have their spending patterns impacted by fifty two 0:06:15.240 --> 0:06:18.840 hundred paces points lower than where interest rates sit right now. 0:06:19.120 --> 0:06:21.600 So I think the Fed is do a good job 0:06:21.680 --> 0:06:24.000 of not letting the perfect be the enemy of the good, 0:06:24.040 --> 0:06:27.520 because the perfect is not coming and waiting too long 0:06:27.600 --> 0:06:30.240 could be problematic, So I think that they are still 0:06:30.320 --> 0:06:33.479 predisposed to cutting is smart and understand the two speed 0:06:33.560 --> 0:06:34.920 economy is really really healthy. 0:06:35.120 --> 0:06:37.240 You remind me, Doug of a question I think it 0:06:37.279 --> 0:06:41.000 was Nancy Marshall Genzler Marketplace asked about the effect of 0:06:41.440 --> 0:06:44.120 higher rates on the regular consumer, those who say that 0:06:45.240 --> 0:06:47.200 mortgages are out of reach for them right now because 0:06:47.279 --> 0:06:49.680 rates are higher, and Powell was so quick to say, 0:06:50.040 --> 0:06:52.400 he was so quick to say that what hurts these 0:06:52.440 --> 0:06:55.800 folks more is inflation, and that is what we are 0:06:55.839 --> 0:06:58.120 trying to do. We're trying to get inflation under control. 0:06:58.160 --> 0:07:01.120 Because if you're living paycheck to paycheck and inflation and 0:07:01.160 --> 0:07:04.520 you're experiencing inflation, that's an immediate price increase for your 0:07:04.560 --> 0:07:06.600 basic goods that you just can't afford it. 0:07:07.400 --> 0:07:09.560 That's right, No, I don't disagree with that, dam It's 0:07:09.560 --> 0:07:11.320 almost like there's a meeting point in the middle, because 0:07:11.320 --> 0:07:16.120 access to capital becomes more challenging in the presence of 0:07:16.200 --> 0:07:21.240 higher rates put in position to suppress inflation. So there's 0:07:21.280 --> 0:07:23.200 a middle ground, right, And I think he made a 0:07:23.240 --> 0:07:25.200 really good point to another really good answer that kind 0:07:25.200 --> 0:07:28.720 of dovetails into both these sub points. 0:07:28.800 --> 0:07:30.880 Is that the FED has a. 0:07:30.920 --> 0:07:33.920 Dual mandates, and when the dual mandate, if one of 0:07:33.960 --> 0:07:36.440 the mandates is starting to be more in control of 0:07:36.480 --> 0:07:39.600 being inflation PC and out below three percent, we can 0:07:39.720 --> 0:07:45.280 focus more on job markets, fullness and stability, and that 0:07:45.480 --> 0:07:48.040 will help the consumer that it is in a subprime 0:07:48.120 --> 0:07:50.840 lending that has an affordable mortgages. So I think that's 0:07:51.040 --> 0:07:53.280 one way he was trying to convey that they're in 0:07:53.360 --> 0:07:56.280 touch with the fact that they do have one blunt instruments, 0:07:56.480 --> 0:07:58.680 but they have a dual mandates and the way they're 0:07:58.720 --> 0:08:01.000 going to lean on the propulsion of one sector, each 0:08:01.040 --> 0:08:02.640 of that mandate at any point in time is going 0:08:02.680 --> 0:08:04.280 to address the greatest number of people in need. 0:08:04.560 --> 0:08:07.400 Hey twenty seconds, what's your best investment idea in this 0:08:07.520 --> 0:08:08.320 market environment? 0:08:09.320 --> 0:08:11.160 Yeah, we're kind of the minder. You want to control 0:08:11.200 --> 0:08:13.560 the controllables because there's so much variability that exists in 0:08:13.600 --> 0:08:15.920 the market, and obviously volatility has been elevated. But within 0:08:16.000 --> 0:08:19.080 fixed income, you know, finding these positive real yields with 0:08:19.240 --> 0:08:22.280 load to moderate maturities, right, whether it be Treasury's mortgage 0:08:22.320 --> 0:08:24.560 debt governed A ANDC paper, we've seen these at levels 0:08:24.600 --> 0:08:26.520 today that we've not seen in fifteen to seventeen years. 0:08:26.920 --> 0:08:29.600 Then with inequities, keep within reasonable valuations. 0:08:29.640 --> 0:08:30.920 If the S and p's at twenty. 0:08:30.720 --> 0:08:33.199 One times the average stocks at eighteen times, look for 0:08:33.240 --> 0:08:35.880 those in fifteen sixteen times, high free cash flows, strong 0:08:35.960 --> 0:08:38.840 balance sheets, Plenty of those in health, grantergy, financial services, 0:08:38.920 --> 0:08:40.400 and even in some technoledge and sectors. 0:08:40.440 --> 0:08:42.280 All right, that's a nice little bucket. All right, Doug, 0:08:42.360 --> 0:08:45.160 thank you so much. Doug Cioka, chief executive officer, partner 0:08:45.200 --> 0:08:48.840 of ur Kavar Capital Partners, joining us from Leewood, Kansas. 0:08:49.679 --> 0:08:53.160 You're listening to the Bloomberg Business Week podcast. Catch us 0:08:53.240 --> 0:08:56.440 Live weekday afternoons from two to five pm Eastern Listen 0:08:56.520 --> 0:08:58.679 on Apple card Play, and then brought auto with a 0:08:58.720 --> 0:09:01.680 Bloomberg Business at want us Live on YouTube. 0:09:03.559 --> 0:09:06.600 As we said, Big day fed decision with some data 0:09:06.720 --> 0:09:09.839 on the economy, US factory activity contracted. 0:09:09.880 --> 0:09:10.199 We had that. 0:09:11.160 --> 0:09:13.800 We also had some jolts labor, you know, in terms 0:09:13.840 --> 0:09:16.240 of jobs openings, and we saw that there's more openings 0:09:16.280 --> 0:09:18.040 out there. So that kind of plays into what we 0:09:18.120 --> 0:09:21.319 got from Jay Powell in terms of maybe some softness, 0:09:21.360 --> 0:09:23.840 if you will, in the labor market. But one industry 0:09:23.880 --> 0:09:25.240 that we like to pay a lot of attention to 0:09:25.360 --> 0:09:28.880 tim Is, especially when it comes to rate environment policy. 0:09:29.160 --> 0:09:30.280 Is the home builders. 0:09:30.440 --> 0:09:32.920 Yes, stocks in the group up slightly year to date 0:09:33.000 --> 0:09:36.120 with more homebuilders. We welcome back Brad Dillman, chief economist 0:09:36.200 --> 0:09:39.559 at RPM Living. It's the real estate services and management 0:09:39.640 --> 0:09:42.880 company and owner of multi family residential properties and developments. 0:09:43.280 --> 0:09:45.800 Brad here in our Bloomberg Interactive Brokers studio, welcome back. 0:09:45.840 --> 0:09:46.160 How are you. 0:09:46.320 --> 0:09:47.760 I'm doing excellent, Great to be here with you. 0:09:48.280 --> 0:09:50.319 It's good to have you with us. Okay, So you 0:09:50.520 --> 0:09:52.920 guys are based in Austin. You've got a client list 0:09:53.040 --> 0:09:56.440 that owns a portfolio of some three billion dollars. You acquire, 0:09:56.520 --> 0:09:59.880 you build. Remind our audience though, exactly what RPM does 0:10:00.080 --> 0:10:02.800 and what insight that gives you on the home building industry. 0:10:02.880 --> 0:10:03.040 Yeah. 0:10:03.080 --> 0:10:06.079 So we're a manager, investor and developer of apartments, the 0:10:06.200 --> 0:10:06.680 key part. 0:10:06.520 --> 0:10:07.400 Of the business. Management. 0:10:07.440 --> 0:10:09.360 We manage over two hundred and twenty five thousand units. 0:10:09.440 --> 0:10:11.680 That makes us the third largest in the country according 0:10:11.720 --> 0:10:12.559 to the National Multi. 0:10:12.400 --> 0:10:14.880 Family So multi family owners hire you to do management. 0:10:14.920 --> 0:10:17.880 That's right, Which is you know exploded during this the. 0:10:17.960 --> 0:10:20.000 BOLK is that like ninety percent of your business. Yes, 0:10:20.080 --> 0:10:21.480 I was trying to get nice here because you know 0:10:21.600 --> 0:10:23.439 your website talks a little bit about investing and stuff, 0:10:23.440 --> 0:10:24.720 but it's really about management. 0:10:24.800 --> 0:10:25.240 Yeah, and we do. 0:10:25.440 --> 0:10:27.600 We have about twenty thousand units that are invested into 0:10:27.679 --> 0:10:29.240 but that management part of me the third largest in 0:10:29.280 --> 0:10:31.320 the country. That's that's something a lot of data there too. 0:10:31.480 --> 0:10:33.320 How do you scale management though, because at the end 0:10:33.320 --> 0:10:36.920 of the day, management is about solving problems on a 0:10:37.160 --> 0:10:39.559 very small level that can add up to something big 0:10:39.720 --> 0:10:42.200 if they're not addressed. I mean, it's responding to tenants needs. 0:10:42.559 --> 0:10:44.920 Yeah. So you got scale for one, right, but how 0:10:44.960 --> 0:10:45.480 does that scale? 0:10:45.480 --> 0:10:48.760 How do you scale plumbers? How do you scale scale 0:10:48.800 --> 0:10:49.280 in a market? 0:10:49.440 --> 0:10:49.640 Yeah? 0:10:50.040 --> 0:10:51.559 So once you do scale in a market, right, and 0:10:51.600 --> 0:10:54.200 then you could start to share resources between properties. Obviously 0:10:54.320 --> 0:10:58.079 data becomes very important, learning management systems become very important. 0:10:58.240 --> 0:11:00.280 And so these are the kind of things that you know, 0:11:00.400 --> 0:11:02.840 set us apart basically, Right, we have this thoughtful approach 0:11:02.880 --> 0:11:06.120 for looking at how we're actually going to translate our 0:11:06.200 --> 0:11:08.680 individuals on the ground into improving better. So we track 0:11:08.760 --> 0:11:11.040 peak performances. We have a bunch of KPIs in these kinds. 0:11:11.120 --> 0:11:14.160 So maybe you'd have like a service provider on retainer 0:11:14.280 --> 0:11:17.319 for example, that would handle x number of properties for you, 0:11:17.400 --> 0:11:19.480 which would be cheaper than somebody one off calling a 0:11:19.520 --> 0:11:20.320 plumber to fix something. 0:11:20.400 --> 0:11:22.120 Oh, we have staff too, right, so we have our 0:11:22.120 --> 0:11:24.000 own facilities staff that can handle these kinds of things. 0:11:24.040 --> 0:11:24.960 Can be work orders a zeriou. 0:11:25.000 --> 0:11:27.240 How much is automated though at this point, like in 0:11:27.360 --> 0:11:28.559 terms of servicing. 0:11:28.200 --> 0:11:30.120 Well, you do have prop tech, right, so prop tech 0:11:30.160 --> 0:11:32.680 can help you, you know, with an understanding of whether 0:11:32.720 --> 0:11:35.000 or not there's an issue with certain items in a structure. 0:11:35.000 --> 0:11:36.720 But it depends on whether not the structure actually has 0:11:36.800 --> 0:11:38.360 that yet and whether or not that's going to be 0:11:38.480 --> 0:11:40.400 rolled out depends on the investor. A lot of times 0:11:40.800 --> 0:11:42.920 that's large because of the cost or what that's right, Yeah, 0:11:42.960 --> 0:11:44.439 part of the costs that's going to affect their returns 0:11:44.480 --> 0:11:45.640 are interesting. 0:11:45.840 --> 0:11:48.959 Okay, So the rate environment, how is that impacting? What 0:11:49.040 --> 0:11:51.120 can you tell us from your advantage point in terms 0:11:51.160 --> 0:11:53.440 of servicing properties, which is as you said and reminded 0:11:53.520 --> 0:11:55.599 us of the bulk of your business. How is the 0:11:55.880 --> 0:11:58.439 economic and the rate environment impacting that? 0:11:58.720 --> 0:12:00.760 Yeah, So obviously these rates that we've had over the 0:12:00.840 --> 0:12:04.000 last several years have been critical on the cost of debt, right, 0:12:04.080 --> 0:12:06.280 so many people are underwriting properties that they purchased back 0:12:06.280 --> 0:12:08.080 in say twenty twenty one. They're now paying a lot 0:12:08.120 --> 0:12:09.520 more in debt expense than they thought they were going 0:12:09.559 --> 0:12:11.000 through and they're not hitting the rents they thought they 0:12:11.040 --> 0:12:13.400 were going to. There's also more supply than they expected. 0:12:13.720 --> 0:12:15.800 This is an interesting new one, seriously. Yeah, So if 0:12:15.800 --> 0:12:17.480 you look at rent growth, it's some of these major 0:12:17.520 --> 0:12:19.200 markets in the Sun Belt it's down. 0:12:19.480 --> 0:12:21.440 Is that because there has been so much development? Because 0:12:21.440 --> 0:12:23.160 I'm live in an area just outside of New York 0:12:23.240 --> 0:12:26.199 City and rents are pretty high. Yeah, and I think 0:12:26.280 --> 0:12:27.599 some of that has to do although there's been a 0:12:27.600 --> 0:12:28.440 fair amount of development. 0:12:28.480 --> 0:12:30.280 But is it the rent is too Damn I've heard 0:12:30.320 --> 0:12:32.720 that before in this area. 0:12:33.040 --> 0:12:34.640 WHOA stop the presses? 0:12:35.800 --> 0:12:39.000 But isn't Are they just done so much building? Like 0:12:39.080 --> 0:12:42.160 I know some of these markets, like remind everybody we're 0:12:42.200 --> 0:12:50.040 talking about Charleston while we're talking about Austin, Dallas, Houston, Phoenix, Raleigh, Durham, Jacksonville, Tampa. 0:12:50.160 --> 0:12:51.679 These are the markets that you guys play. 0:12:51.520 --> 0:12:53.400 In, that's right. Yeah, And so these were also markets 0:12:53.440 --> 0:12:54.720 you know, they've they've been hit by two things. 0:12:54.760 --> 0:12:55.160 Really right. 0:12:55.200 --> 0:12:58.400 One was the eviction mortory. This was national and related practices. Okay, 0:12:58.480 --> 0:13:01.160 so that created a tighter occupants the environment than we 0:13:01.200 --> 0:13:03.400 otherwise would have had. That took rents higher than they 0:13:03.400 --> 0:13:05.959 otherwise would have been in the context of zero interest rates, 0:13:06.000 --> 0:13:08.120 remember back then. Yeah, that's a lot of supply that's 0:13:08.120 --> 0:13:09.880 all coming to market now. So over the last couple 0:13:09.920 --> 0:13:12.800 of years, we've seen this slowing rent growth environment that's 0:13:12.880 --> 0:13:16.679 now gone negative across huge slots of the Sunbelt, Austin down. 0:13:17.000 --> 0:13:18.800 Which is it's interesting because it's in contrast to what 0:13:18.880 --> 0:13:21.360 we hear, certainly from the FED and JPT right about 0:13:21.400 --> 0:13:24.680 the pressures because of the rental costs exactly. 0:13:24.840 --> 0:13:26.280 And you're not the only one to notice that the 0:13:26.320 --> 0:13:28.319 Cleveland Fed put out of paper to this effect of 0:13:28.440 --> 0:13:30.440 talking about how we kind of need to be looking 0:13:30.440 --> 0:13:32.480 at new lease rent growth in some of these metrics 0:13:32.520 --> 0:13:34.000 when we think about the kind of data that's feeding 0:13:34.000 --> 0:13:36.319 into the inflation calculation. Because if you're telling me that 0:13:36.360 --> 0:13:38.400 shelter inflation is still strong at over five percent, and 0:13:38.559 --> 0:13:41.880 granted I'm only talking about conventional multifamily, that simply doesn't 0:13:41.920 --> 0:13:43.880 jive with rents being down eight percent. Your vere in 0:13:43.880 --> 0:13:46.360 Austin down four percent, You're overe in Atlanta just down 0:13:46.400 --> 0:13:47.880 four percent, your vereen in Orlando, and so on. 0:13:48.120 --> 0:13:49.679 Let's not look at it year over year. Let's look 0:13:49.720 --> 0:13:51.800 at it pre pandemic, because some of the places that 0:13:51.880 --> 0:13:54.920 you mentioned had incredible growth during the pandemic. And we 0:13:55.080 --> 0:13:57.240 especially with the rise of remote work, are we seeing 0:13:57.240 --> 0:14:00.000 a normalization back to rates of twenty twenty we still 0:14:00.000 --> 0:14:01.040 a higher or twenty. 0:14:00.960 --> 0:14:02.320 H we're certainly still higher. 0:14:02.559 --> 0:14:04.400 So that's what I mean. So if you sort of 0:14:04.520 --> 0:14:06.959 normalize this, is it as bad as you say? 0:14:07.679 --> 0:14:09.400 I think it's bad in the sense that if we're 0:14:09.400 --> 0:14:12.920 looking at inflation as measured in the CPI, Yeah, it 0:14:13.080 --> 0:14:14.960 simply doesn't jive with what we're seeing on the ground. 0:14:15.040 --> 0:14:16.480 It doesn't jive with what we're seeing in the private, 0:14:16.520 --> 0:14:17.000 secret data. 0:14:17.280 --> 0:14:18.920 We talked about this with one of our colleagues here 0:14:18.960 --> 0:14:21.520 who Yeah, I think it was Matt Bosler who wrote 0:14:21.560 --> 0:14:25.240 that story about how we're looking at this on a 0:14:25.320 --> 0:14:27.760 national level, but it's a regional story because in some 0:14:27.960 --> 0:14:29.760 areas that shelter component. 0:14:29.880 --> 0:14:33.080 Is not exactly It is really fascinating to see that. 0:14:33.160 --> 0:14:35.600 So okay, so what does it mean? All right? So 0:14:35.680 --> 0:14:40.600 then when you put that into account against the national statistics. 0:14:40.960 --> 0:14:42.880 I mean, how do you describe the housing market? 0:14:43.560 --> 0:14:45.120 Well, so now you want to get an own housing too. 0:14:45.160 --> 0:14:47.000 It's a little bit of a different dynamic. I think 0:14:47.040 --> 0:14:48.880 you know, the k Shuler data came out obviously just 0:14:49.040 --> 0:14:52.960 twenty city indexes at a new high. We've got very 0:14:53.000 --> 0:14:55.200 little volume there right an ar shows us there's not 0:14:55.240 --> 0:14:57.440 a lot of existing you know, home sales. Even the 0:14:57.520 --> 0:14:59.680 data for the k Shuler the sales pairs very low 0:14:59.720 --> 0:15:02.000 by this anders the last fifteen years. So it's sort 0:15:02.000 --> 0:15:04.480 of a moving up on little volume. We're seeing that 0:15:04.560 --> 0:15:06.800 channel to the homebuilders, right, Pulti Group, de or Horton, 0:15:07.040 --> 0:15:08.640 some of these groups coming out with some good earnings 0:15:08.680 --> 0:15:11.240 increasing guidance as well. So I think new housing is 0:15:11.240 --> 0:15:13.480 certainly benefiting right now. In single family all you do 0:15:13.600 --> 0:15:15.920 bread is rental. We only do rental, yes. 0:15:15.880 --> 0:15:17.680 Yeah, okay, So that's interesting because part of the other 0:15:17.760 --> 0:15:21.440 story was that people couldn't afford to buy homes because 0:15:21.440 --> 0:15:23.480 either first of all, there weren't supplies or the prices 0:15:23.480 --> 0:15:25.720 were too high in it was pushing them into rental. 0:15:26.160 --> 0:15:27.840 Is that a trend that you guys continue to see 0:15:27.840 --> 0:15:28.280 in the markets. 0:15:28.320 --> 0:15:30.040 You play. I think we're seeing that now because you've 0:15:30.040 --> 0:15:32.440 got these high mortgage rates, right, there's just no liquidity, really, 0:15:32.520 --> 0:15:34.160 I mean, I guess there is liquid there's just not 0:15:34.240 --> 0:15:35.920 a lot of overlap. There's not a lot of volume 0:15:36.000 --> 0:15:38.240 going on, you know, in the single family market today, 0:15:38.320 --> 0:15:40.080 in the owned housing market today. So yeah, I think 0:15:40.120 --> 0:15:41.720 what we are going to see here is a continent 0:15:41.800 --> 0:15:45.440 until long term rates come down, continued constriction in existing 0:15:45.520 --> 0:15:48.360 home sales activity, and then that channeling back towards rentals, 0:15:48.360 --> 0:15:50.000 which in any case are getting much more affordable at 0:15:50.080 --> 0:15:51.400 least if you look at these sun built markets. 0:15:51.600 --> 0:15:54.000 Big part of the story over the last few years 0:15:54.200 --> 0:15:58.000 actually post financial crisis has really been there just aren't 0:15:58.080 --> 0:16:00.680 enough homes for Americans out there right now in new 0:16:00.720 --> 0:16:04.920 household formations, just not we're not seeing it. When does 0:16:05.000 --> 0:16:06.720 that story end? When does that story change? 0:16:06.720 --> 0:16:07.320 In your opinion? 0:16:07.440 --> 0:16:09.360 So in my projection, I think we're that's going to 0:16:09.400 --> 0:16:11.800 inflect here in the next couple of years, will enter 0:16:11.880 --> 0:16:14.600 systemic oversupply for the first time in two thousand and one. 0:16:14.640 --> 0:16:16.280 Now I'm kind of alone in that outlook. Okay. 0:16:16.600 --> 0:16:19.600 My gauge which I use is using the population sixteen 0:16:19.600 --> 0:16:22.240 and over the non institutionalized. A lot of other commentators 0:16:22.240 --> 0:16:25.800 out there talking about household which is in part weighted 0:16:25.840 --> 0:16:28.440 by the household stock itself, the housing stock itself, right, 0:16:28.440 --> 0:16:30.600 So it's a little bit of a circular reference. It's 0:16:30.640 --> 0:16:32.560 got very different figures saying, you know, we're under built 0:16:32.560 --> 0:16:34.880 by five million units, and so that's ten million people 0:16:34.960 --> 0:16:37.560 you need to house. And yes we've had immigration of 0:16:37.840 --> 0:16:39.800 a large scale, but we've also been completing a lot 0:16:39.840 --> 0:16:41.600 of housing. Those numbers just don't work out for me. 0:16:41.680 --> 0:16:43.520 I get to a figure that we're underbuilt five hundred 0:16:43.560 --> 0:16:45.960 thousand units total, but a lot of that is on 0:16:46.000 --> 0:16:48.080 the single family side because of the distortions we had 0:16:48.120 --> 0:16:50.520 in the market for the last decade. Our underbuilding over 0:16:50.560 --> 0:16:52.680 the last decade has been in single family, no question. 0:16:53.000 --> 0:16:54.760 It's just fascinating. Like I said to you, you know, 0:16:54.840 --> 0:16:56.880 we had too many homes during the GFC, the Great 0:16:56.920 --> 0:16:59.600 Financial Crisis. You know, people were talking about blowing up homes. 0:16:59.600 --> 0:17:01.160 Just get to some of the supply and here we are. 0:17:01.240 --> 0:17:01.360 You know. 0:17:01.440 --> 0:17:03.560 Once again, I mean things are you know, cyclical right 0:17:04.400 --> 0:17:06.280 or I don't know if there's a cycle in terms 0:17:06.320 --> 0:17:08.760 of the build and then the underbuild. So it's kind 0:17:08.760 --> 0:17:11.399 of fascinating to see got it run. Thanks for coming in. 0:17:12.119 --> 0:17:14.800 Brad Dillman, He's chief economist at RPM Living joining us 0:17:14.840 --> 0:17:15.600 here in studio. 0:17:18.000 --> 0:17:21.840