1 00:00:10,480 --> 00:00:14,560 Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast. 2 00:00:14,600 --> 00:00:18,639 Speaker 1: I'm Joe Wisenthal and I'm Tracy Hallaway. So, Tracy, you 3 00:00:18,760 --> 00:00:20,880 Speaker 1: bought a house recently. That's kind of like winning the 4 00:00:20,920 --> 00:00:24,200 Speaker 1: lottery in this economy, I know. Well, okay, so first 5 00:00:24,200 --> 00:00:27,080 Speaker 1: of all, we put in three offers for different houses, 6 00:00:27,160 --> 00:00:29,560 Speaker 1: and we got kazumped on all of them. We got 7 00:00:29,640 --> 00:00:32,600 Speaker 1: out bid, and then finally we found a house that 8 00:00:32,640 --> 00:00:35,600 Speaker 1: we really liked and it happened to be a probate sale, 9 00:00:36,120 --> 00:00:38,480 Speaker 1: so the owner had actually died and it was going 10 00:00:38,520 --> 00:00:41,480 Speaker 1: through you know, this probate process, so no one else 11 00:00:41,520 --> 00:00:43,440 Speaker 1: wanted it because no one else wanted to deal with that. 12 00:00:43,800 --> 00:00:46,879 Speaker 1: So we actually got that house and it's been really amazing. 13 00:00:47,479 --> 00:00:49,640 Speaker 1: It's kind of like an odd lots of housing, right, 14 00:00:49,720 --> 00:00:52,080 Speaker 1: I mean like literally like here's like this like asset. 15 00:00:53,159 --> 00:00:54,959 Speaker 1: It's not the normal thing, and you have to put 16 00:00:54,960 --> 00:00:56,640 Speaker 1: it a little extra work to move it. And it 17 00:00:56,720 --> 00:00:58,600 Speaker 1: took advantage of that. That's right. We did our due 18 00:00:58,600 --> 00:01:01,440 Speaker 1: diligence and we were very patient at a time when 19 00:01:01,440 --> 00:01:04,480 Speaker 1: a lot of people kind of are worried about missing out. 20 00:01:05,000 --> 00:01:07,399 Speaker 1: Now it really has been an extreme I mean the 21 00:01:07,480 --> 00:01:10,520 Speaker 1: last two years have been extraordinary for all kinds of reasons, 22 00:01:10,560 --> 00:01:13,400 Speaker 1: particularly with housing. We've done We've done that a handful 23 00:01:13,480 --> 00:01:16,840 Speaker 1: of housing episodes before, but it feels like maybe we're 24 00:01:16,880 --> 00:01:19,720 Speaker 1: at some sort of turning point because rates have just 25 00:01:19,760 --> 00:01:22,520 Speaker 1: seen one of the biggest upward move Mortgage rates just 26 00:01:22,640 --> 00:01:26,040 Speaker 1: hit five Like, maybe maybe something's changing here. Is this 27 00:01:26,200 --> 00:01:30,360 Speaker 1: the peak housing market episode that we're doing right after 28 00:01:30,400 --> 00:01:33,319 Speaker 1: I bought a house and now right so we've jinxed 29 00:01:33,360 --> 00:01:36,280 Speaker 1: your home bridges that you're gonna be underwater excellent years. 30 00:01:36,319 --> 00:01:38,479 Speaker 1: But it does feel like something's changing here, that's right. 31 00:01:38,520 --> 00:01:42,360 Speaker 1: So we saw the thirty year mortgage rate hit almost 32 00:01:42,560 --> 00:01:46,320 Speaker 1: five percent quite recently, which is, you know, a very 33 00:01:46,400 --> 00:01:48,880 Speaker 1: big increase from what it has been over the past 34 00:01:48,920 --> 00:01:52,120 Speaker 1: couple of years. And there's this wider macro discussion going 35 00:01:52,120 --> 00:01:56,120 Speaker 1: on right now about financial conditions. As interest rates rise, 36 00:01:56,640 --> 00:01:58,480 Speaker 1: how much of an effect is that going to have 37 00:01:58,560 --> 00:02:01,440 Speaker 1: on financial conditions and the overall health of the U 38 00:02:01,520 --> 00:02:04,880 Speaker 1: S economy. Are homeowner is going to start feeling the 39 00:02:04,920 --> 00:02:08,400 Speaker 1: pinch of these higher rates or have most people at 40 00:02:08,400 --> 00:02:13,680 Speaker 1: this point actually refinance their mortgage at very very little Yeah, 41 00:02:13,720 --> 00:02:16,480 Speaker 1: you know, I was thinking about this, you know, um, 42 00:02:16,720 --> 00:02:19,520 Speaker 1: the other interesting thing about housing is it's such an 43 00:02:19,520 --> 00:02:21,880 Speaker 1: important part of the economy. Obviously, it's a huge source 44 00:02:21,919 --> 00:02:24,960 Speaker 1: of wealth housing assets, it's a huge source of consumption. 45 00:02:25,040 --> 00:02:26,959 Speaker 1: People need to pay rent or have a place to live. 46 00:02:27,440 --> 00:02:32,320 Speaker 1: And as we've sort of being reminded in the last 47 00:02:32,480 --> 00:02:35,519 Speaker 1: six months or year, it's a manufactured asset, has a 48 00:02:35,560 --> 00:02:39,000 Speaker 1: supply chain like everything else, and we don't I think, 49 00:02:39,040 --> 00:02:40,840 Speaker 1: for like twenty years or for a long time, we 50 00:02:40,880 --> 00:02:42,959 Speaker 1: did not think much about that aspect of housing. It 51 00:02:43,040 --> 00:02:44,680 Speaker 1: just you just take it for granted. You get the wood, 52 00:02:44,680 --> 00:02:46,720 Speaker 1: you get the workers, and so forth. The labor part 53 00:02:46,800 --> 00:02:49,080 Speaker 1: had been stressed for a little while pre COVID. But 54 00:02:49,160 --> 00:02:51,320 Speaker 1: I think that like we're all sort of being reminded 55 00:02:51,360 --> 00:02:54,160 Speaker 1: that homes have like tons of parts, like a car 56 00:02:54,240 --> 00:02:56,359 Speaker 1: has tons of parts, and if you're missing one thing 57 00:02:56,480 --> 00:02:58,720 Speaker 1: or of a part of wood or for example, gets 58 00:02:58,720 --> 00:03:02,480 Speaker 1: really expensive than that as building the new house difficult. Right, 59 00:03:02,600 --> 00:03:04,840 Speaker 1: So it feels like we have all these different push 60 00:03:04,919 --> 00:03:08,520 Speaker 1: pull factors. So on the one hand, housing finance, the 61 00:03:08,560 --> 00:03:11,760 Speaker 1: cost of a house is very very expensive at the moment, 62 00:03:11,880 --> 00:03:14,040 Speaker 1: and with rates going up, you would expect it to 63 00:03:14,080 --> 00:03:18,079 Speaker 1: get even costlier. But on the other hand, you're not 64 00:03:18,160 --> 00:03:22,760 Speaker 1: necessarily seeing the supply response because of all these supply 65 00:03:22,840 --> 00:03:25,799 Speaker 1: chain and logistics issues that we've been talking about. Right, Well, 66 00:03:25,840 --> 00:03:28,640 Speaker 1: I'm very excited we're gonna have a big housing conversation because, 67 00:03:28,680 --> 00:03:33,040 Speaker 1: as you mentioned, mortgage grades nearing five percent, mac grow things, 68 00:03:33,160 --> 00:03:36,720 Speaker 1: what's going on there, micro things, supply chain, commodity, all 69 00:03:36,800 --> 00:03:39,240 Speaker 1: kinds of questions. We had to bring on two guests, 70 00:03:39,840 --> 00:03:42,640 Speaker 1: uh this time to help us bring it down. We're 71 00:03:42,680 --> 00:03:45,280 Speaker 1: gonna be speaking with Dustin Jailbird. He is the senior 72 00:03:45,320 --> 00:03:49,480 Speaker 1: economist at Fast Markets in the wood products area. Great 73 00:03:49,600 --> 00:03:53,840 Speaker 1: on the sort of supply chain costs, lumber, all those things, 74 00:03:53,840 --> 00:03:56,160 Speaker 1: what's going on there. And we're also gonna be speaking 75 00:03:56,200 --> 00:04:00,640 Speaker 1: with Connerson, columnist for Bloomberg Opinion, founder of Huge Treat 76 00:04:00,680 --> 00:04:04,760 Speaker 1: Creek Investments, longtime friend of the podcast, but amazingly, I 77 00:04:04,760 --> 00:04:08,800 Speaker 1: think this is his first time actually coming on. So 78 00:04:08,920 --> 00:04:12,720 Speaker 1: I'm really excited about this conversation. Uh, Dustin and Connor, 79 00:04:12,760 --> 00:04:15,760 Speaker 1: thank you so much for coming on. Odd lots, Thanks Joe, 80 00:04:15,800 --> 00:04:18,880 Speaker 1: Thanks Tracy. It's it's a real pleasure to be here. Yeah. Likewise, 81 00:04:18,920 --> 00:04:21,719 Speaker 1: I'm excited to be having this conversation. So Connor, actually, 82 00:04:21,839 --> 00:04:25,880 Speaker 1: let's start with you, and you know, let's just start 83 00:04:25,920 --> 00:04:29,320 Speaker 1: really big picture, like, Okay, we've seen this huge rate shock. 84 00:04:29,720 --> 00:04:32,680 Speaker 1: Rates nominally are not that high, but the size of 85 00:04:32,720 --> 00:04:36,159 Speaker 1: the move is absolutely historic over the last few months. 86 00:04:36,400 --> 00:04:39,240 Speaker 1: What are the sort of immediate, sort of first order 87 00:04:39,279 --> 00:04:43,279 Speaker 1: implications for the housing market from this big move to 88 00:04:43,839 --> 00:04:48,120 Speaker 1: basically five percent thirty year mortgage as the most obvious 89 00:04:48,160 --> 00:04:50,600 Speaker 1: one is that affordability has certainly taken a huge hit. 90 00:04:50,680 --> 00:04:53,800 Speaker 1: I've seen things like the average mortgage cost for a 91 00:04:53,839 --> 00:04:55,720 Speaker 1: first trip if you're buying a house now versus a 92 00:04:55,800 --> 00:04:58,760 Speaker 1: year ago, is up around it's that's certainly going to 93 00:04:58,839 --> 00:05:01,840 Speaker 1: impact demand to some extent. Although at the same point, 94 00:05:01,920 --> 00:05:03,880 Speaker 1: rents are up seventeen percent year or a year, so 95 00:05:03,920 --> 00:05:06,400 Speaker 1: it's not like this is happening in a vacuum. But 96 00:05:06,440 --> 00:05:08,520 Speaker 1: I think just that affordability shock is the first thing 97 00:05:08,520 --> 00:05:11,000 Speaker 1: we're trying to figure out. Yeah, this is something that 98 00:05:11,040 --> 00:05:14,440 Speaker 1: came up recently, this idea of homeowners actually purchasing houses 99 00:05:14,560 --> 00:05:17,839 Speaker 1: as basically inflation insurance, right, as a way to get 100 00:05:17,880 --> 00:05:21,600 Speaker 1: away from increasing rents. Right. So in two thousands six, 101 00:05:21,600 --> 00:05:24,200 Speaker 1: when everyone's worried about is this another housing bubble, housing 102 00:05:24,200 --> 00:05:26,480 Speaker 1: crash thing going on that was really more about home 103 00:05:26,520 --> 00:05:29,960 Speaker 1: price appreciation speculation, people putting down very little hoping that 104 00:05:30,000 --> 00:05:31,960 Speaker 1: homes would go up a lot over the next two 105 00:05:32,000 --> 00:05:34,760 Speaker 1: to three years, whereas now arguably it's more of like 106 00:05:34,839 --> 00:05:36,520 Speaker 1: my rent is going up a ton, and I'm worried 107 00:05:36,560 --> 00:05:40,400 Speaker 1: about inflation. Maybe it's more of rent inflation speculation than 108 00:05:40,480 --> 00:05:44,719 Speaker 1: home price appreciation speculation. My impression is that overall in 109 00:05:44,760 --> 00:05:48,839 Speaker 1: the economy right now, there may be some uh softening 110 00:05:49,240 --> 00:05:53,360 Speaker 1: I don't know, logistics, maybe goods. Maybe what are you 111 00:05:53,440 --> 00:05:56,400 Speaker 1: seeing on your side, like, because a huge question that 112 00:05:56,440 --> 00:05:58,640 Speaker 1: we're you know, this issue is like, yeah, there's tons 113 00:05:58,640 --> 00:06:00,960 Speaker 1: of demand for housing. We just can't get the ability 114 00:06:01,000 --> 00:06:03,760 Speaker 1: of all these permits, but it takes forever. Is there 115 00:06:03,800 --> 00:06:06,880 Speaker 1: any easing going on in any aspect of the sort 116 00:06:06,960 --> 00:06:10,719 Speaker 1: of the construction of new homes yet? Yeah? I mean, 117 00:06:10,960 --> 00:06:14,720 Speaker 1: you know, right now, it doesn't seem like there's a 118 00:06:14,800 --> 00:06:17,080 Speaker 1: lot of good news, right I think you know that 119 00:06:17,200 --> 00:06:20,600 Speaker 1: the if there are some kind of silver linings here, 120 00:06:20,680 --> 00:06:24,159 Speaker 1: certainly in the wood product space that I cover, you 121 00:06:24,160 --> 00:06:27,279 Speaker 1: know specifically, you know, with fast markets, we're seeing lumber 122 00:06:27,320 --> 00:06:30,359 Speaker 1: prices come off kind of the peak levels that we 123 00:06:30,400 --> 00:06:32,479 Speaker 1: saw sort of about a month ago. You know, the 124 00:06:32,560 --> 00:06:35,599 Speaker 1: cash market that we report based on our you know, 125 00:06:35,600 --> 00:06:38,280 Speaker 1: our random length editorial team what they but they report 126 00:06:38,320 --> 00:06:42,440 Speaker 1: on the markets down probably almost three per thousand. Uh. 127 00:06:42,480 --> 00:06:44,359 Speaker 1: You know a lot of people follow the futures market 128 00:06:44,360 --> 00:06:46,960 Speaker 1: and it's fallen a lot more. Uh So, you know, 129 00:06:47,000 --> 00:06:50,440 Speaker 1: there has been some loosening on the framing side, but 130 00:06:50,600 --> 00:06:53,960 Speaker 1: everything we hear on the ground, trucking, you know, especially 131 00:06:54,040 --> 00:06:56,880 Speaker 1: flat beds are still incredibly tight. I know there's been 132 00:06:56,920 --> 00:06:59,800 Speaker 1: some talk recently on the van side of the trucking 133 00:06:59,800 --> 00:07:03,960 Speaker 1: bar get things loosening substantially, but flatbeds, you know, it's 134 00:07:04,000 --> 00:07:05,960 Speaker 1: it's a different animal. That's really how a lot of 135 00:07:06,160 --> 00:07:09,560 Speaker 1: building materials go to market, and that is still incredibly tight. 136 00:07:09,680 --> 00:07:12,280 Speaker 1: Part of it is seasonally, you know, demand is strong 137 00:07:12,400 --> 00:07:15,200 Speaker 1: right now. We're entering the prime building season and so 138 00:07:15,280 --> 00:07:18,160 Speaker 1: that is you know, still a challenge in the marketplace. 139 00:07:18,640 --> 00:07:21,440 Speaker 1: Another maybe kind of green you know, kind of green 140 00:07:21,480 --> 00:07:25,000 Speaker 1: shoot here, some some positive. The rail side is starting 141 00:07:25,000 --> 00:07:27,680 Speaker 1: to loosen a little bit. Uh. There's a lot of 142 00:07:27,680 --> 00:07:30,280 Speaker 1: framing lumber, as you've talked about with you know, previous guests, 143 00:07:30,320 --> 00:07:32,200 Speaker 1: you know Stintson Dean on this, a lot of framing 144 00:07:32,240 --> 00:07:34,080 Speaker 1: lumber comes from Canada and a lot of that is 145 00:07:34,120 --> 00:07:38,680 Speaker 1: delivered via rail. We've had huge rail challenges for several months. 146 00:07:38,720 --> 00:07:41,960 Speaker 1: Now we're starting to see some improvement there and that's 147 00:07:42,000 --> 00:07:45,200 Speaker 1: helping deliver some of that that framing material to market. 148 00:07:45,240 --> 00:07:48,160 Speaker 1: But it's still and you know, it's still very very tight, 149 00:07:48,240 --> 00:07:51,120 Speaker 1: even as prices come off these these really hot levels. 150 00:07:51,160 --> 00:07:54,160 Speaker 1: So can you just remind me what is the relationship 151 00:07:54,200 --> 00:07:58,600 Speaker 1: between lumber prices and new housing inventory? So when lumber 152 00:07:58,680 --> 00:08:01,880 Speaker 1: prices are going down, is that bullush on new houses 153 00:08:01,920 --> 00:08:04,360 Speaker 1: because everyone's like, oh, it's cheaper to build them, let's 154 00:08:04,360 --> 00:08:08,600 Speaker 1: get started, or does it suggest that construction is already 155 00:08:08,600 --> 00:08:11,280 Speaker 1: coming down and so you know there's less demand and 156 00:08:11,480 --> 00:08:15,000 Speaker 1: more supply. Well so, I mean, and this is probably 157 00:08:15,040 --> 00:08:18,280 Speaker 1: something that that somewhat debate here. I would argue that, 158 00:08:18,920 --> 00:08:23,080 Speaker 1: you know, the situation with lumber right now is more 159 00:08:23,120 --> 00:08:25,200 Speaker 1: a function of the transport what we're seeing in the 160 00:08:25,240 --> 00:08:29,080 Speaker 1: transportation markets this sort of loosening, right and what you're 161 00:08:29,080 --> 00:08:31,760 Speaker 1: seeing on the housing side sort of the inventory effect. 162 00:08:31,800 --> 00:08:34,360 Speaker 1: You know, there's still a lot of construction, actual physical 163 00:08:34,400 --> 00:08:37,000 Speaker 1: construction going out in the marketplace, so you think about 164 00:08:37,280 --> 00:08:40,720 Speaker 1: the actual would put in place or other building materials 165 00:08:40,760 --> 00:08:43,600 Speaker 1: put in place. Right, there's still a you know, a 166 00:08:43,720 --> 00:08:47,520 Speaker 1: borderline historic amount of homes currently under construction. Right, there's 167 00:08:47,520 --> 00:08:51,720 Speaker 1: this sort of huge sort of unfinished inventory that's in progress. Right, 168 00:08:51,760 --> 00:08:55,800 Speaker 1: So there's still good demand, especially on the new construction 169 00:08:55,880 --> 00:08:59,240 Speaker 1: side in some parts of the remodeling space. So at 170 00:08:59,280 --> 00:09:02,040 Speaker 1: least in the shore term, you know, the demand picture 171 00:09:02,080 --> 00:09:04,520 Speaker 1: for us the next three six months looks, you know, 172 00:09:04,600 --> 00:09:07,199 Speaker 1: hasn't really changed all that much. So again, a lot 173 00:09:07,240 --> 00:09:09,200 Speaker 1: of what we see on the pricing side right now 174 00:09:09,360 --> 00:09:13,160 Speaker 1: is more logistics and transportation issue as opposed to the 175 00:09:13,240 --> 00:09:16,319 Speaker 1: building cycle. You know, that sort of actual starts slowing 176 00:09:16,320 --> 00:09:18,920 Speaker 1: down or something like that. Right, that kind of makes sense, yeah, 177 00:09:19,360 --> 00:09:21,120 Speaker 1: you know, and you know, it's something that I've been 178 00:09:21,160 --> 00:09:23,840 Speaker 1: thinking about a lot. Obviously we've done quite a number 179 00:09:23,880 --> 00:09:27,240 Speaker 1: of logistics episodes, but it's something more broader that I've 180 00:09:27,280 --> 00:09:28,840 Speaker 1: been thinking about a lot, which is that, you know, 181 00:09:28,880 --> 00:09:30,840 Speaker 1: in a downturn or in a crash like we saw 182 00:09:30,880 --> 00:09:34,200 Speaker 1: in March April, you can sort of like build up 183 00:09:34,200 --> 00:09:38,960 Speaker 1: these big stockpiles of goods, right, Lumber sits there, other 184 00:09:39,040 --> 00:09:41,400 Speaker 1: goods sit there, but you can't really build up an 185 00:09:41,440 --> 00:09:45,160 Speaker 1: inventory of logistics capacity like that's just gone forever and 186 00:09:45,240 --> 00:09:47,559 Speaker 1: send then when the economy picks back up again and 187 00:09:47,640 --> 00:09:49,760 Speaker 1: starts growing really hot, it's not like there's a bunch 188 00:09:49,800 --> 00:09:52,280 Speaker 1: you can draw down. It just immediately gets a you 189 00:09:52,400 --> 00:09:55,640 Speaker 1: see how it immediately gets squeezed. Yeah, for sure, you know. 190 00:09:55,679 --> 00:09:57,840 Speaker 1: And and actually you know it's it's a good point, Joe, 191 00:09:57,840 --> 00:10:00,400 Speaker 1: because one thing we see right now, it's kind of 192 00:10:00,400 --> 00:10:02,760 Speaker 1: skewing more to what I see on a daily basis, 193 00:10:02,760 --> 00:10:06,160 Speaker 1: this being lumber and wood products. But what's interesting right 194 00:10:06,160 --> 00:10:08,480 Speaker 1: now is when you look back, say twelve to eighteen 195 00:10:08,480 --> 00:10:10,920 Speaker 1: months ago, you know, we had this big sort of 196 00:10:11,080 --> 00:10:16,120 Speaker 1: positive demand shock of home construction and this renovation boom, 197 00:10:16,160 --> 00:10:19,040 Speaker 1: so positive demand shock. Some of it was sort of 198 00:10:19,120 --> 00:10:22,520 Speaker 1: underlying demographics and demand, but certainly COVID has contributed to 199 00:10:22,520 --> 00:10:25,400 Speaker 1: the to that. And the supply side was constrained for 200 00:10:25,440 --> 00:10:27,400 Speaker 1: a lot of reasons. Some of it was actual plant 201 00:10:27,440 --> 00:10:29,880 Speaker 1: capacity issues, but a lot of it too was the 202 00:10:29,960 --> 00:10:33,080 Speaker 1: workers were furloughed, you know, sort of sent home, and 203 00:10:33,120 --> 00:10:35,600 Speaker 1: it's taken a lot of time for for sawmills, would 204 00:10:35,600 --> 00:10:39,120 Speaker 1: products mills, and other sort of building material producers to 205 00:10:39,160 --> 00:10:41,120 Speaker 1: get those workers back and be able to sort of 206 00:10:41,160 --> 00:10:45,839 Speaker 1: add shifts at overtime things like that. Now that's headcounts 207 00:10:45,880 --> 00:10:48,200 Speaker 1: have more or less normalized that a lot in a 208 00:10:48,200 --> 00:10:51,000 Speaker 1: lot of parts of the supply chain. What we're seeing 209 00:10:51,000 --> 00:10:54,680 Speaker 1: now is, yeah, it's that that throughput via trucking via 210 00:10:54,800 --> 00:10:57,800 Speaker 1: rail that are causing bottlenecks. And one thing we've seen 211 00:10:57,800 --> 00:11:01,960 Speaker 1: in lumber specifically, mills are actually having to curtail production 212 00:11:02,080 --> 00:11:05,160 Speaker 1: right now. Not because they're they're not profitable, you know, 213 00:11:05,200 --> 00:11:08,079 Speaker 1: prices are still close to record levels and their margins 214 00:11:08,080 --> 00:11:11,280 Speaker 1: are swelling, but the issue is they're overproducing what they 215 00:11:11,320 --> 00:11:14,560 Speaker 1: can actually ship, you know, specifically in British Columbia. You 216 00:11:14,559 --> 00:11:16,720 Speaker 1: know there's again there's a lot of sort of sawmill 217 00:11:16,760 --> 00:11:18,840 Speaker 1: output and a lot of lumber that comes to the 218 00:11:18,880 --> 00:11:21,480 Speaker 1: domestic market here in the US, some of that is 219 00:11:21,520 --> 00:11:24,640 Speaker 1: sort of captive because of these rail bottleneck issues, which 220 00:11:24,679 --> 00:11:27,200 Speaker 1: again from a builder perspective for your wholesale it's just 221 00:11:27,240 --> 00:11:30,600 Speaker 1: incredibly frustrating, you know that the hits just keep on coming, 222 00:11:30,720 --> 00:11:33,560 Speaker 1: even as we're seeing, at least at the plant level, 223 00:11:33,600 --> 00:11:36,679 Speaker 1: some improvements in supply chain. Connor, could you come in 224 00:11:36,720 --> 00:11:40,600 Speaker 1: on that demographics point that Dustin just mentioned, and you know, 225 00:11:40,640 --> 00:11:42,960 Speaker 1: we hear a lot about this idea that millennials are 226 00:11:42,960 --> 00:11:46,560 Speaker 1: finally getting into the housing market. People wanted to buy 227 00:11:46,600 --> 00:11:50,000 Speaker 1: houses and move away from cities during the pandemic. What 228 00:11:50,120 --> 00:11:52,839 Speaker 1: exactly is going on here and are there any historical 229 00:11:52,960 --> 00:11:56,880 Speaker 1: analogies that we can look at for this particular era. 230 00:11:58,200 --> 00:12:00,360 Speaker 1: So sure, this is the main difference between the current 231 00:12:00,400 --> 00:12:03,440 Speaker 1: cycle and the mid two thousand's because the average age 232 00:12:03,440 --> 00:12:05,040 Speaker 1: of the first on HomeBuyer tends to be in the 233 00:12:05,040 --> 00:12:07,840 Speaker 1: early thirties. And so what's was strange about the housing 234 00:12:07,880 --> 00:12:11,720 Speaker 1: bubbles that the people born in the early nineteen seventies 235 00:12:11,840 --> 00:12:14,880 Speaker 1: that was actually like the smallest generation of people in 236 00:12:14,880 --> 00:12:17,360 Speaker 1: in the long time in US history. Only about three 237 00:12:17,400 --> 00:12:20,120 Speaker 1: point one million Americans are born every year during that time, 238 00:12:20,480 --> 00:12:22,120 Speaker 1: and so as they were in their earlier thirties, that 239 00:12:22,200 --> 00:12:23,960 Speaker 1: was the sort of peak at the housing bubble. So 240 00:12:24,320 --> 00:12:26,199 Speaker 1: the demand that we had at that point was really 241 00:12:26,280 --> 00:12:30,120 Speaker 1: unnatural driffern by speculation rather than demographics, whereas now it's 242 00:12:30,120 --> 00:12:32,600 Speaker 1: the opposite. There were four million people born per year 243 00:12:32,960 --> 00:12:35,719 Speaker 1: around they're the ones were in the early thirties now, 244 00:12:36,200 --> 00:12:38,240 Speaker 1: and so that's why the demand picture is so much 245 00:12:38,240 --> 00:12:40,599 Speaker 1: different now than it was then. This really fazing. I 246 00:12:40,600 --> 00:12:43,400 Speaker 1: don't think I'd ever realized that aspect. I mean, I knew, 247 00:12:43,480 --> 00:12:45,760 Speaker 1: you know that in the mid two thousands there was 248 00:12:45,800 --> 00:12:48,720 Speaker 1: a lot of unhealthy respect that of activity, but I 249 00:12:48,760 --> 00:12:53,000 Speaker 1: had never thought previously about how just there wasn't really 250 00:12:53,240 --> 00:12:55,480 Speaker 1: a very large base of I guess you would say 251 00:12:55,559 --> 00:12:59,000 Speaker 1: natural buyers um during that period. But I guess that's 252 00:12:59,000 --> 00:13:01,480 Speaker 1: really interesting. But I guess what about the bigger questions, 253 00:13:01,480 --> 00:13:04,199 Speaker 1: So like for people who aren't in the housing market, 254 00:13:04,320 --> 00:13:06,559 Speaker 1: or for people who didn't lend the lottery like Tracy 255 00:13:06,600 --> 00:13:09,160 Speaker 1: did and actually get get a house. The other question 256 00:13:09,200 --> 00:13:11,760 Speaker 1: was said mortgages, like well, will housing ever go down? 257 00:13:11,760 --> 00:13:14,480 Speaker 1: Will it ever get cheaper? Or it will it at 258 00:13:14,559 --> 00:13:17,160 Speaker 1: least slow down in prices such that it's not a 259 00:13:17,160 --> 00:13:19,839 Speaker 1: big risk to wait a couple of years. Is that 260 00:13:19,960 --> 00:13:23,400 Speaker 1: a possibility, Like, could we see there's the nominal price 261 00:13:23,400 --> 00:13:25,400 Speaker 1: of a house come down? And what are the factors 262 00:13:25,440 --> 00:13:27,000 Speaker 1: that are sort of driving this? Maybe both of you 263 00:13:27,000 --> 00:13:29,600 Speaker 1: can sort of come in on this question. Yeah, might 264 00:13:29,760 --> 00:13:31,559 Speaker 1: doing this. There's sort of two ways in which that 265 00:13:31,600 --> 00:13:33,880 Speaker 1: could happen over the next five to ten years. One 266 00:13:33,920 --> 00:13:36,040 Speaker 1: is that you have millions and millions of people losing 267 00:13:36,080 --> 00:13:38,080 Speaker 1: their jobs, because utimately, if you don't have a job, 268 00:13:38,120 --> 00:13:40,880 Speaker 1: you can't pay mortgage. Maybe you're a FoST seller. And 269 00:13:40,960 --> 00:13:42,280 Speaker 1: then the other is that we do you know, at 270 00:13:42,280 --> 00:13:44,880 Speaker 1: some point baby boomers will transition out of their current homes, 271 00:13:44,880 --> 00:13:48,880 Speaker 1: whether it's voluntarily or involuntarily, that's probably more of a late, 272 00:13:49,000 --> 00:13:51,720 Speaker 1: later part of the decade story. But once that happens, 273 00:13:51,760 --> 00:13:54,439 Speaker 1: particularly in places with that don't have great demographics maybe 274 00:13:54,840 --> 00:13:57,280 Speaker 1: we're parts of the Northeast and Midwest places like that, 275 00:13:57,679 --> 00:13:59,319 Speaker 1: then you just don't have people to step into buy 276 00:13:59,320 --> 00:14:01,839 Speaker 1: those homes and they it out in price. Yeah, I mean, 277 00:14:01,880 --> 00:14:04,480 Speaker 1: I generally agree with Connor. I mean I think you know, 278 00:14:04,480 --> 00:14:07,679 Speaker 1: when you look at the dynamics in terms of demographics 279 00:14:07,679 --> 00:14:10,440 Speaker 1: over the next five to ten years, you know, it's 280 00:14:10,480 --> 00:14:12,840 Speaker 1: it's a very positive story. And again barring some sort 281 00:14:12,840 --> 00:14:16,280 Speaker 1: of unexpected recession where yes, sort of employment goes down 282 00:14:16,360 --> 00:14:19,200 Speaker 1: and you know, some aggregate demand the economy goes down, 283 00:14:19,520 --> 00:14:21,520 Speaker 1: you know, for for're kind of having a steady sort 284 00:14:21,520 --> 00:14:25,680 Speaker 1: of business cycle expansion. It seems hard to imagine a 285 00:14:25,720 --> 00:14:28,720 Speaker 1: situation where you're gonna have broad based, sort of downward 286 00:14:28,800 --> 00:14:31,920 Speaker 1: moves in home prices. And you know, another you know, 287 00:14:31,960 --> 00:14:33,960 Speaker 1: and again we look at this from the building side 288 00:14:34,000 --> 00:14:36,640 Speaker 1: of the equation here. You know, one thing that we 289 00:14:36,680 --> 00:14:38,920 Speaker 1: think is going to be really challenging is just for 290 00:14:39,160 --> 00:14:42,960 Speaker 1: construction activity to be able to ramp up sufficiently to 291 00:14:43,120 --> 00:14:45,440 Speaker 1: build the number of homes that we need to meet, 292 00:14:45,840 --> 00:14:48,440 Speaker 1: not only existing demand, you know, your to your demand 293 00:14:48,440 --> 00:14:50,760 Speaker 1: in the marketplace. If you're a believer in this idea 294 00:14:50,760 --> 00:14:53,680 Speaker 1: of pent up demand, sort of suppressed headship rates where 295 00:14:54,040 --> 00:14:56,480 Speaker 1: people are not forming households and some of the key 296 00:14:56,480 --> 00:14:59,960 Speaker 1: demographics we've talked about here at more kind of tradition 297 00:15:00,200 --> 00:15:03,520 Speaker 1: rates we've seen over you know, over history, it's gonna 298 00:15:03,520 --> 00:15:06,360 Speaker 1: be really problematic for the industry to ramp up. Labor 299 00:15:06,440 --> 00:15:08,480 Speaker 1: is going to continue to be an issue. You know, 300 00:15:08,520 --> 00:15:11,480 Speaker 1: we've heard a lot about the zoning and you know issues, 301 00:15:11,600 --> 00:15:15,040 Speaker 1: particularly the multi family side. Think about that. In a hot, 302 00:15:15,080 --> 00:15:17,880 Speaker 1: tight labor market, how are we going to ramp up 303 00:15:17,920 --> 00:15:21,200 Speaker 1: you know, say half a million residential construction workers if 304 00:15:21,240 --> 00:15:23,400 Speaker 1: we want to ramp up to say, you know, one 305 00:15:23,400 --> 00:15:27,480 Speaker 1: point eight million starts or completions consistently, and we're seeing 306 00:15:27,520 --> 00:15:29,920 Speaker 1: that right now to you know, it's completion rates. You know, 307 00:15:29,960 --> 00:15:32,760 Speaker 1: we're starting homes at a one point you know, one 308 00:15:32,800 --> 00:15:36,600 Speaker 1: point six one point seven million, you know pace. The 309 00:15:36,640 --> 00:15:40,640 Speaker 1: completions are you know, pretty flat, around one point three million, 310 00:15:41,240 --> 00:15:44,200 Speaker 1: you know completions, and that is some of that is 311 00:15:44,200 --> 00:15:47,480 Speaker 1: is supply chain oriented in terms of actual building materials, 312 00:15:47,520 --> 00:15:49,480 Speaker 1: but some of that is also labor, some of that 313 00:15:49,640 --> 00:15:53,280 Speaker 1: is land availability. All those factors are gonna also on 314 00:15:53,320 --> 00:15:56,640 Speaker 1: the supply side make construction constraint and kind of underpin 315 00:15:57,040 --> 00:16:00,400 Speaker 1: home price appreciation. This is really striking. And I'm just 316 00:16:00,440 --> 00:16:02,760 Speaker 1: looking at this chart on my terminal right now because 317 00:16:02,760 --> 00:16:05,200 Speaker 1: I just want to drive home for listeners what you said, 318 00:16:05,240 --> 00:16:09,240 Speaker 1: which is that we have had housing start pick up. 319 00:16:09,400 --> 00:16:11,280 Speaker 1: You know, a home builder is gonna get a plot 320 00:16:11,320 --> 00:16:13,920 Speaker 1: of land and start putting down a frame and all that, 321 00:16:14,320 --> 00:16:17,400 Speaker 1: but completions like actually turning the housing start into a 322 00:16:17,400 --> 00:16:19,720 Speaker 1: home that someone can then move into, has clearly not 323 00:16:19,840 --> 00:16:22,560 Speaker 1: kept up. So currently, like just look at the February numbers, 324 00:16:22,760 --> 00:16:24,680 Speaker 1: the official it's like close to one point eight one 325 00:16:24,680 --> 00:16:28,040 Speaker 1: point eight million homes and the actually completions one point 326 00:16:28,080 --> 00:16:30,760 Speaker 1: three and so yeah, I mean there's this huge gap 327 00:16:30,880 --> 00:16:33,560 Speaker 1: that's emerged between Okay, you want to start a house, 328 00:16:33,560 --> 00:16:36,200 Speaker 1: but actually get a house completed. Yeah, something that Dustin 329 00:16:36,200 --> 00:16:38,080 Speaker 1: and I have talked about over the past few weeks 330 00:16:38,080 --> 00:16:41,040 Speaker 1: in response to this rate shock, is that home builders 331 00:16:41,040 --> 00:16:42,920 Speaker 1: have had this, you know, to the point of that data, 332 00:16:43,280 --> 00:16:45,600 Speaker 1: they've been starting a lot more homes than they've been completing, 333 00:16:45,720 --> 00:16:48,400 Speaker 1: and so they're inventories of homes that are construction. That 334 00:16:48,440 --> 00:16:51,720 Speaker 1: backlog has been growing, and we wonder if that's going 335 00:16:51,760 --> 00:16:54,080 Speaker 1: to be something that management teams think about over the 336 00:16:54,120 --> 00:16:56,120 Speaker 1: next couple of months where they say, we have a 337 00:16:56,120 --> 00:16:59,280 Speaker 1: lot of homes that are construction that are at risk, 338 00:16:59,320 --> 00:17:01,280 Speaker 1: if you know, maybe they're supposed to be delivered in 339 00:17:01,280 --> 00:17:03,800 Speaker 1: the first half of next year, and if market conditions 340 00:17:03,840 --> 00:17:06,399 Speaker 1: really change, that could be the kind of thing where 341 00:17:06,560 --> 00:17:08,520 Speaker 1: they might have to take losses or write downs. And 342 00:17:08,520 --> 00:17:12,040 Speaker 1: I believe the homebuilding stocks are down year to day, 343 00:17:12,080 --> 00:17:13,920 Speaker 1: so I think investors are worried about that as well, 344 00:17:14,320 --> 00:17:16,040 Speaker 1: and that would just be really bad news. If they 345 00:17:16,080 --> 00:17:18,760 Speaker 1: start to your homes and just focused on finishing their backlog, 346 00:17:19,000 --> 00:17:21,879 Speaker 1: then you create more supply is shoes next year. I 347 00:17:21,960 --> 00:17:24,399 Speaker 1: was about to ask about the home builder stock, So 348 00:17:24,480 --> 00:17:26,359 Speaker 1: if you look at something like k b H, I 349 00:17:26,359 --> 00:17:28,679 Speaker 1: think it's trading below its book value at the moment. 350 00:17:28,760 --> 00:17:31,880 Speaker 1: What what is that telling us about the future direction 351 00:17:32,040 --> 00:17:35,879 Speaker 1: of housing construction and profitability. I guess right, So the 352 00:17:36,080 --> 00:17:38,280 Speaker 1: book value for a lot of these homebuilding stocks is 353 00:17:38,320 --> 00:17:41,640 Speaker 1: really based on inventories, which is homes under construction and 354 00:17:42,119 --> 00:17:45,240 Speaker 1: land that they own. And so to me, if homebuilding 355 00:17:45,240 --> 00:17:47,800 Speaker 1: stocks are trading below book value, that's saying not only 356 00:17:47,840 --> 00:17:50,040 Speaker 1: our investors thinking they're gonna miss earnings of the next 357 00:17:50,119 --> 00:17:53,040 Speaker 1: few quarters, they're saying they're gonna take actual write downs 358 00:17:53,320 --> 00:17:55,560 Speaker 1: on the land and the homes under construction that they have, 359 00:17:55,680 --> 00:17:59,520 Speaker 1: which is to me a pretty severe forecast. But if 360 00:17:59,520 --> 00:18:01,720 Speaker 1: that were to happen, that just shows that the economy 361 00:18:01,760 --> 00:18:03,760 Speaker 1: I think is much much worse than appreciated. Or it 362 00:18:03,760 --> 00:18:06,919 Speaker 1: could just be an overaction. M but like this is 363 00:18:06,960 --> 00:18:10,800 Speaker 1: pretty wild. Like we're in a market in which demand 364 00:18:10,840 --> 00:18:13,600 Speaker 1: for housing even seems to still be red hot, right 365 00:18:13,760 --> 00:18:18,000 Speaker 1: five percent uh five percent mortgage rades despite that, I mean, 366 00:18:18,480 --> 00:18:21,600 Speaker 1: it still sounds like there's huge lines and bidding wars, 367 00:18:21,600 --> 00:18:24,119 Speaker 1: like it doesn't seem like that's gone away yet. And 368 00:18:24,240 --> 00:18:27,640 Speaker 1: yet you have these home builders, which you know, are 369 00:18:27,720 --> 00:18:31,320 Speaker 1: well off their recent highs, and investors saying like some 370 00:18:31,400 --> 00:18:33,639 Speaker 1: of these plots like are they might take a loss 371 00:18:33,720 --> 00:18:36,120 Speaker 1: they might just completely write them down like it does. 372 00:18:36,160 --> 00:18:39,320 Speaker 1: It's like it feels like a pretty extraordinary disconnect. There's 373 00:18:39,880 --> 00:18:42,399 Speaker 1: I think the sort of cell side view of what's 374 00:18:42,440 --> 00:18:45,080 Speaker 1: going on with comboiling stocks is that the valuations are cheap, 375 00:18:45,119 --> 00:18:46,960 Speaker 1: but when mortgage rates are rising, you don't own them, 376 00:18:47,440 --> 00:18:49,200 Speaker 1: and it's sort of you just kind of wait until 377 00:18:49,280 --> 00:18:51,720 Speaker 1: rates turn and see where things are and then reassess. 378 00:18:53,119 --> 00:18:57,160 Speaker 1: It also just emphasizes to you know, it's interesting that 379 00:18:57,760 --> 00:19:00,119 Speaker 1: I think the home builders have had a lot of 380 00:19:00,200 --> 00:19:02,800 Speaker 1: confidence that demand was going to be there right even 381 00:19:02,840 --> 00:19:07,040 Speaker 1: as cycle times for particularly the single family side of 382 00:19:07,040 --> 00:19:10,439 Speaker 1: the market, cycle times have gone from say, you know, 383 00:19:10,680 --> 00:19:13,720 Speaker 1: six to seven months on average pre pandemic, and now 384 00:19:13,720 --> 00:19:16,960 Speaker 1: we're somewhere probably around eight nine, maybe even approaching ten 385 00:19:17,000 --> 00:19:19,919 Speaker 1: months in some cases. You know, I think while you 386 00:19:19,960 --> 00:19:23,560 Speaker 1: saw this growing delta between completions and starts go up, 387 00:19:24,080 --> 00:19:26,840 Speaker 1: I think the home builders had some confidence that demand 388 00:19:26,960 --> 00:19:29,960 Speaker 1: was going to be there months out, particularly given how 389 00:19:30,240 --> 00:19:33,840 Speaker 1: low rates have been. But now as this affordability question 390 00:19:33,880 --> 00:19:37,640 Speaker 1: has come into play, I think there's just generally less 391 00:19:37,640 --> 00:19:40,960 Speaker 1: confidence what the home buying market will look like in 392 00:19:41,800 --> 00:19:44,119 Speaker 1: three even though we have all these underlying sort of 393 00:19:44,119 --> 00:19:47,080 Speaker 1: demographic tail winds, right. But you know, one thing that 394 00:19:47,119 --> 00:19:50,960 Speaker 1: we all often remind clients is that just because there's 395 00:19:51,000 --> 00:19:54,720 Speaker 1: pent up demand out there, it doesn't necessarily dictate that 396 00:19:54,760 --> 00:19:57,800 Speaker 1: it has to be realized in the marketplace, and affordability 397 00:19:58,320 --> 00:20:00,680 Speaker 1: does still matter. So I think you know, you're seeing 398 00:20:00,720 --> 00:20:03,200 Speaker 1: it in some of the home builder sentiment data recently 399 00:20:03,320 --> 00:20:06,920 Speaker 1: that you know, maybe they're getting a little bit skittish, 400 00:20:07,000 --> 00:20:09,120 Speaker 1: and you know, I think completions are going to continue 401 00:20:09,160 --> 00:20:12,240 Speaker 1: to move higher here, those start numbers could start to 402 00:20:12,320 --> 00:20:14,840 Speaker 1: kind of flatline a little bit as they try to 403 00:20:14,880 --> 00:20:32,480 Speaker 1: sort of focus on those backs. Can we talk a 404 00:20:32,480 --> 00:20:35,639 Speaker 1: little bit more about what happens to affordability when rates 405 00:20:36,040 --> 00:20:39,280 Speaker 1: go up? So, I mean, clearly you would expect higher 406 00:20:39,320 --> 00:20:43,680 Speaker 1: interest rates to knock demand a little bit um, But 407 00:20:43,920 --> 00:20:46,639 Speaker 1: what's your expectation for exactly what happens here and how 408 00:20:46,680 --> 00:20:50,760 Speaker 1: much of it depends on how high FED actually raises rates. 409 00:20:50,760 --> 00:20:53,360 Speaker 1: Something that that interests me is that redfin, they do 410 00:20:53,560 --> 00:20:56,200 Speaker 1: housing analytics and help home buyers and comb sellers, put 411 00:20:56,200 --> 00:20:58,920 Speaker 1: out a piece last week, I believe, talking about softening 412 00:20:58,960 --> 00:21:01,600 Speaker 1: that they see or some ends the potential softening, and 413 00:21:01,640 --> 00:21:04,640 Speaker 1: it was really focused on high cost markets like San Francisco, 414 00:21:04,760 --> 00:21:08,240 Speaker 1: Los Angeles, New York, just because that affordability is is 415 00:21:08,280 --> 00:21:10,199 Speaker 1: really really challenged. It was challenged to begin with, and 416 00:21:10,240 --> 00:21:12,520 Speaker 1: it's even more so now, and they hadn't seen that 417 00:21:12,560 --> 00:21:14,960 Speaker 1: to the same extent in the destination markets that people 418 00:21:14,960 --> 00:21:17,600 Speaker 1: have been moving to during COVID with remote work and migration. 419 00:21:18,119 --> 00:21:21,040 Speaker 1: And so something I wonder is that, arguably about like 420 00:21:21,080 --> 00:21:24,000 Speaker 1: the Austin, Texas housing market has been driven more by 421 00:21:24,240 --> 00:21:27,280 Speaker 1: the bio profile people moving there the local market conditions, 422 00:21:27,800 --> 00:21:30,200 Speaker 1: and so could we start to see something where the 423 00:21:30,280 --> 00:21:32,600 Speaker 1: high cost markets start to stagnate a little bit, But 424 00:21:32,640 --> 00:21:34,440 Speaker 1: as long as people are still moving to those destination 425 00:21:34,480 --> 00:21:37,560 Speaker 1: markets and bringing their bigger budgets with them, that doesn't 426 00:21:37,560 --> 00:21:40,879 Speaker 1: impact their affordability issues. Well, so this raises another question. 427 00:21:40,920 --> 00:21:46,439 Speaker 1: And of course, when COVID initially hit and suddenly everyone 428 00:21:46,520 --> 00:21:49,840 Speaker 1: wanted to move or it seemed to catalyze some big 429 00:21:49,880 --> 00:21:53,119 Speaker 1: shifts and we saw, okay, a bunch of people said, 430 00:21:53,200 --> 00:21:54,719 Speaker 1: you know, left the Bay Area, We're going to move 431 00:21:54,800 --> 00:21:58,080 Speaker 1: to Austin or somewhere else in Texas, and or maybe 432 00:21:58,119 --> 00:21:59,840 Speaker 1: they went down to Florida or something like that, or 433 00:21:59,880 --> 00:22:02,159 Speaker 1: some sort of Maybe people just want, you know what, 434 00:22:02,200 --> 00:22:04,080 Speaker 1: I can't live in a city. I want to live 435 00:22:04,119 --> 00:22:07,399 Speaker 1: in a suburb. But it doesn't feel like like the 436 00:22:07,440 --> 00:22:10,720 Speaker 1: other places cooled down. Like are we seeing other other 437 00:22:10,800 --> 00:22:13,320 Speaker 1: areas where prices are falling because everyone is moving out 438 00:22:13,320 --> 00:22:17,160 Speaker 1: of them. It seems like some places got really hot, obviously, 439 00:22:17,240 --> 00:22:19,720 Speaker 1: places in Texas, et cetera. But it doesn't seem like 440 00:22:19,720 --> 00:22:22,160 Speaker 1: the other places like actually cool, they really got that cheap, 441 00:22:22,280 --> 00:22:24,080 Speaker 1: or at least in New York here, you know, nothing 442 00:22:24,119 --> 00:22:26,399 Speaker 1: seems to be particularly cheap. I think that gets to 443 00:22:26,480 --> 00:22:28,919 Speaker 1: Dustin's point about the headship rate going up where And 444 00:22:28,960 --> 00:22:31,479 Speaker 1: this could be a strong economy, strong job market thing 445 00:22:31,480 --> 00:22:33,639 Speaker 1: as well. That in the twenty Times we spent all 446 00:22:33,640 --> 00:22:35,680 Speaker 1: this time talking about people still living in their parents 447 00:22:35,760 --> 00:22:38,520 Speaker 1: basements when the job market and wage growth was weak, 448 00:22:38,680 --> 00:22:40,639 Speaker 1: and now that those things are strong, you have that 449 00:22:40,680 --> 00:22:44,160 Speaker 1: pent up demand for new household formation and things like that. Yeah, 450 00:22:44,440 --> 00:22:46,600 Speaker 1: and I was just gonna say too, I think that 451 00:22:46,680 --> 00:22:49,160 Speaker 1: last point Connor on household formations. You know, you look 452 00:22:49,160 --> 00:22:52,840 Speaker 1: at the official census data, you know, and you have 453 00:22:52,920 --> 00:22:54,760 Speaker 1: to take it with a grain assault to some degree 454 00:22:54,800 --> 00:22:57,399 Speaker 1: because the data can be quite choppy. But you know, 455 00:22:57,520 --> 00:23:00,760 Speaker 1: at least looking at data, you know that when you 456 00:23:00,760 --> 00:23:02,679 Speaker 1: look at sort of the number of households, it was 457 00:23:02,720 --> 00:23:06,800 Speaker 1: sort of flat year over year. But again to Connor's point, 458 00:23:06,800 --> 00:23:08,760 Speaker 1: you have to think that there's a lot of people 459 00:23:09,320 --> 00:23:12,520 Speaker 1: returning to the shelter market, both on the ownership side 460 00:23:12,520 --> 00:23:14,800 Speaker 1: but also the rental side of the market to right, 461 00:23:15,280 --> 00:23:18,040 Speaker 1: and so you know, they kind of move hand in hand. 462 00:23:18,440 --> 00:23:20,800 Speaker 1: You know, you're not seeing any relief on the ownership 463 00:23:20,840 --> 00:23:23,760 Speaker 1: side of the market, but it's the same story in 464 00:23:23,800 --> 00:23:26,320 Speaker 1: some cases, if not worse, on the rental side of 465 00:23:26,320 --> 00:23:29,160 Speaker 1: the market. So you know, kind of the real estate 466 00:23:29,200 --> 00:23:32,120 Speaker 1: market across the board is having this massive adjustment. As 467 00:23:32,440 --> 00:23:34,440 Speaker 1: you know, a lot of especially young people who maybe 468 00:23:34,480 --> 00:23:36,880 Speaker 1: live with parents during the pandemic, are stepping back into 469 00:23:36,960 --> 00:23:40,080 Speaker 1: the rental market. You know, job growth and income growth 470 00:23:40,160 --> 00:23:43,040 Speaker 1: is driving people to separate away from roommates, right, so 471 00:23:43,440 --> 00:23:45,240 Speaker 1: you know, now you don't need to share an apartment. 472 00:23:45,320 --> 00:23:47,920 Speaker 1: Maybe you're going out and getting your own place. I mean, 473 00:23:48,000 --> 00:23:52,320 Speaker 1: all this is impacting the shelter market across the board here, 474 00:23:52,359 --> 00:23:55,800 Speaker 1: so everything is really tight, and even in the high 475 00:23:55,840 --> 00:24:00,440 Speaker 1: cost cities where people are migrating out of so that 476 00:24:00,600 --> 00:24:02,800 Speaker 1: actually is a good sort of step back, and I 477 00:24:02,840 --> 00:24:05,360 Speaker 1: want to go back to this question of pent up demand, 478 00:24:05,640 --> 00:24:08,600 Speaker 1: And this was obviously something that we talked about a 479 00:24:08,640 --> 00:24:11,080 Speaker 1: lot even prior to COVID, which is just like, Okay, 480 00:24:11,080 --> 00:24:15,840 Speaker 1: there's this huge wave of potential millennial home buyers post 481 00:24:15,960 --> 00:24:19,040 Speaker 1: Great Financial Crisis. We know that housing starts were very slow, 482 00:24:19,119 --> 00:24:22,720 Speaker 1: So there's like this story of like the under housed 483 00:24:22,760 --> 00:24:24,720 Speaker 1: economy was the thing that we were talking about prior 484 00:24:24,760 --> 00:24:27,160 Speaker 1: to COVID hitting, and then it really seemed to accelerate. 485 00:24:27,200 --> 00:24:29,800 Speaker 1: But what are the numbers, Like, what are we actually 486 00:24:29,800 --> 00:24:32,880 Speaker 1: talking about in terms of how much pent up, how 487 00:24:32,880 --> 00:24:35,560 Speaker 1: big that pent up demand is, and what we need 488 00:24:35,600 --> 00:24:38,320 Speaker 1: to see on the sustained basis to do something about 489 00:24:38,440 --> 00:24:41,320 Speaker 1: getting back in equilibrium, Like okay, at one point eight 490 00:24:41,640 --> 00:24:43,880 Speaker 1: million annualized, how does it starts enough? Does it need 491 00:24:43,920 --> 00:24:46,600 Speaker 1: to go to to like what it what seems like 492 00:24:46,640 --> 00:24:49,920 Speaker 1: a reasonable like numbers here to bring into balance? What's 493 00:24:49,960 --> 00:24:52,720 Speaker 1: the shortfall? So I think there are two ways of 494 00:24:52,720 --> 00:24:55,480 Speaker 1: looking at this. First is looking at the vacancy rate 495 00:24:55,560 --> 00:24:58,399 Speaker 1: of of homes that are like sort of owned homes 496 00:24:58,400 --> 00:25:01,240 Speaker 1: and rental homes and looking at what a normalized level 497 00:25:01,359 --> 00:25:03,600 Speaker 1: was over time, and that maybe tells you something about 498 00:25:03,600 --> 00:25:06,080 Speaker 1: what the current shortfall is, and that numbers around two 499 00:25:06,160 --> 00:25:10,040 Speaker 1: million housing units. And then sort of for pent up demand, 500 00:25:10,040 --> 00:25:12,320 Speaker 1: that gets a little tougher because again you're making assumptions 501 00:25:12,320 --> 00:25:15,840 Speaker 1: about what home ownership rates might be in an ideal environment, 502 00:25:16,000 --> 00:25:18,960 Speaker 1: should they So the homeownership rate look like it did, 503 00:25:20,560 --> 00:25:24,000 Speaker 1: but you're seeing that both say millennial households, but also 504 00:25:24,200 --> 00:25:27,080 Speaker 1: households in their forties and fifties, that home ownership rate 505 00:25:27,119 --> 00:25:29,879 Speaker 1: is much lower than it was pre two eight. And 506 00:25:29,960 --> 00:25:32,800 Speaker 1: so if that were to normalize, that's several million more. 507 00:25:33,240 --> 00:25:35,520 Speaker 1: And to Dustin's point, it's it's unclear whether we can 508 00:25:35,560 --> 00:25:37,440 Speaker 1: meet that demand on the construction side over the next 509 00:25:37,440 --> 00:25:41,560 Speaker 1: several years. Yeah. And and just to extend on Connor's point, 510 00:25:41,720 --> 00:25:43,840 Speaker 1: it's something that we had fast markets. When we do 511 00:25:43,840 --> 00:25:46,280 Speaker 1: our kind of long term housing forecasts, it's really a 512 00:25:46,320 --> 00:25:49,879 Speaker 1: demographic story, right, And this is always a big point 513 00:25:49,880 --> 00:25:52,920 Speaker 1: of debate is what is this pent up demand idea? Right? 514 00:25:52,960 --> 00:25:55,280 Speaker 1: And you know when you look at other people who 515 00:25:55,320 --> 00:25:59,000 Speaker 1: forecast the market, you know the ranges anywhere from there's 516 00:25:59,080 --> 00:26:02,040 Speaker 1: there's zero pent demand. We're already over building too. We're 517 00:26:02,359 --> 00:26:05,240 Speaker 1: six million units short, right, So I mean there's a 518 00:26:05,240 --> 00:26:08,639 Speaker 1: massive range out there, you know, just kind of attach 519 00:26:08,680 --> 00:26:11,360 Speaker 1: some more numbers to it. First of all, you need 520 00:26:11,400 --> 00:26:15,560 Speaker 1: to think about what existing demand is for shelter, right, 521 00:26:15,720 --> 00:26:18,840 Speaker 1: and that that number is when you think about what 522 00:26:19,000 --> 00:26:23,359 Speaker 1: household formations could be trending at to just meet you know, again, 523 00:26:23,440 --> 00:26:26,399 Speaker 1: existing demand, you're probably talking about anywhere between one point 524 00:26:26,440 --> 00:26:30,800 Speaker 1: one and one point two million units. Then you tack 525 00:26:30,960 --> 00:26:35,439 Speaker 1: on every year there's shelter loss that is either destroyed 526 00:26:35,480 --> 00:26:40,159 Speaker 1: because of natural disasters wildfires, infills, so you know, homes 527 00:26:40,160 --> 00:26:42,600 Speaker 1: that are torn down and then built on a new 528 00:26:42,640 --> 00:26:45,679 Speaker 1: home built on that lot. You know that averages you know, 529 00:26:45,800 --> 00:26:49,040 Speaker 1: two hundred to three hundred thousand units a year. And 530 00:26:49,080 --> 00:26:51,639 Speaker 1: then you tack on second and third home ownership. You 531 00:26:51,680 --> 00:26:54,879 Speaker 1: know that that puts us between somewhere around one point 532 00:26:54,880 --> 00:26:58,520 Speaker 1: four and one point five million units of demand annually, 533 00:26:58,600 --> 00:27:02,359 Speaker 1: just existing demand. So and then you have to build 534 00:27:02,400 --> 00:27:05,080 Speaker 1: on top of that, right to deal with the pent 535 00:27:05,160 --> 00:27:07,560 Speaker 1: up demand that Connor talked about. Let's say you think 536 00:27:07,560 --> 00:27:10,000 Speaker 1: there's three million units of pent up demand because of 537 00:27:10,040 --> 00:27:14,160 Speaker 1: the vacancy rate issues plus these four gone households. So 538 00:27:14,400 --> 00:27:16,240 Speaker 1: if you build out a one, if you complete at 539 00:27:16,240 --> 00:27:19,200 Speaker 1: a one, point eight million unit rate, that's going to 540 00:27:19,280 --> 00:27:22,040 Speaker 1: take you ten years. You know, that extra three under 541 00:27:22,080 --> 00:27:24,120 Speaker 1: thousand units you're getting a year a year, that's gonna 542 00:27:24,119 --> 00:27:27,000 Speaker 1: take you ten years to fill that pent up demand gap. 543 00:27:27,240 --> 00:27:30,280 Speaker 1: So that's just that's a that's a huge number that 544 00:27:30,359 --> 00:27:34,440 Speaker 1: you're dealing with their right. So justin you mentioned this 545 00:27:34,920 --> 00:27:41,080 Speaker 1: very wide range of expectations, is that historically is that unusual. 546 00:27:41,520 --> 00:27:43,640 Speaker 1: Have we been in a situation like this before where 547 00:27:43,640 --> 00:27:47,439 Speaker 1: people can't really agree on that number, or is this 548 00:27:47,520 --> 00:27:50,119 Speaker 1: the result of just being in a very very weird 549 00:27:50,640 --> 00:27:53,040 Speaker 1: post COVID time where there are a lot of different 550 00:27:53,080 --> 00:27:55,560 Speaker 1: things going on and we're just not sure of how 551 00:27:55,560 --> 00:27:57,960 Speaker 1: they're all going to play out. You know. I think 552 00:27:57,960 --> 00:28:01,360 Speaker 1: it goes back to Connor's point, is that this idea 553 00:28:01,520 --> 00:28:04,400 Speaker 1: of pent up demand is it's a little bit nebulous, 554 00:28:04,400 --> 00:28:06,719 Speaker 1: and some of it is a function of what you 555 00:28:06,760 --> 00:28:11,720 Speaker 1: think quote unquote normal headship and household formation rates should be, 556 00:28:11,760 --> 00:28:13,959 Speaker 1: you know, looking at the key demographics as they kind 557 00:28:14,000 --> 00:28:16,639 Speaker 1: of come of age in home buying years, and that 558 00:28:16,800 --> 00:28:20,080 Speaker 1: is a difficult thing because it's it's somewhat arbitrary in 559 00:28:20,160 --> 00:28:23,639 Speaker 1: terms of what that should be. Right, determining that in 560 00:28:23,640 --> 00:28:25,840 Speaker 1: to some extent. It's also a function of where you 561 00:28:25,880 --> 00:28:31,960 Speaker 1: start calculating, like what year you start calculating pent up demand, right, 562 00:28:32,000 --> 00:28:36,320 Speaker 1: so if you start in two thousand verses, that starting 563 00:28:36,359 --> 00:28:39,200 Speaker 1: point matters in terms of what that cumulative build up 564 00:28:39,680 --> 00:28:41,920 Speaker 1: of pent up demand is. So so you can arrive 565 00:28:42,000 --> 00:28:45,280 Speaker 1: to very different answers there. That's kind of where we 566 00:28:45,360 --> 00:28:47,120 Speaker 1: see it when we kind of do this type of 567 00:28:47,160 --> 00:28:50,840 Speaker 1: analysis internally ourselves, so we keep kind of arrange you know, 568 00:28:50,840 --> 00:28:53,239 Speaker 1: I don't think anybody knows what that exact number is. 569 00:28:54,040 --> 00:28:56,160 Speaker 1: So I've got a theory related to this pent up 570 00:28:56,240 --> 00:28:59,040 Speaker 1: demand thing that's sort of in defensive data Boomers in 571 00:28:59,080 --> 00:29:02,600 Speaker 1: the housing market. When people, when people our age think 572 00:29:02,640 --> 00:29:05,440 Speaker 1: about baby boomers the sort of stereotype as they all 573 00:29:05,480 --> 00:29:08,600 Speaker 1: got to buy a house in Los Angeles and made 574 00:29:08,640 --> 00:29:11,440 Speaker 1: a gazillion dollars over the next thirty years. But it's 575 00:29:11,480 --> 00:29:13,959 Speaker 1: sort of like, when did the baby boomer pent up 576 00:29:14,080 --> 00:29:16,640 Speaker 1: demand in the housing market get met? And we know 577 00:29:16,680 --> 00:29:18,960 Speaker 1: that mortgage rates in the nineteen eighties were still in 578 00:29:18,960 --> 00:29:21,400 Speaker 1: the double digits, and you can imagine how we would 579 00:29:21,440 --> 00:29:23,560 Speaker 1: feel today if mortgage rates were ten percent, how many 580 00:29:23,560 --> 00:29:25,760 Speaker 1: people would be locked out of pot ownership and as 581 00:29:25,880 --> 00:29:28,440 Speaker 1: rates kept declining, that allowed more and more people to 582 00:29:28,480 --> 00:29:30,880 Speaker 1: get into homes. And I would argue in a sense 583 00:29:30,920 --> 00:29:33,920 Speaker 1: that some of the early least mid two thousands housing 584 00:29:33,920 --> 00:29:37,520 Speaker 1: construction boom was lagged pent up demand from thirty years 585 00:29:37,560 --> 00:29:39,560 Speaker 1: of people who finally could buy a home based on 586 00:29:39,920 --> 00:29:42,800 Speaker 1: four to mortgage rates. So this could go on for 587 00:29:42,880 --> 00:29:45,760 Speaker 1: quite a long time. That's interesting. Yeah, And this also 588 00:29:45,840 --> 00:29:48,360 Speaker 1: of course gets to the challenge of like what is 589 00:29:48,480 --> 00:29:51,440 Speaker 1: a cheape house, right and when where when is housing affordable? 590 00:29:51,480 --> 00:29:53,640 Speaker 1: Because okay, we could look back at the early eighties 591 00:29:53,640 --> 00:29:57,760 Speaker 1: house we're su cheap, mortgages were of course uh much higher. 592 00:29:58,080 --> 00:30:00,600 Speaker 1: Or we can look back at out of the Great 593 00:30:00,640 --> 00:30:05,280 Speaker 1: Financial Crisis when houses were cheap and mortgages were cheap, 594 00:30:05,640 --> 00:30:08,360 Speaker 1: and yet unemployment was close to ten pc, so there 595 00:30:08,360 --> 00:30:10,520 Speaker 1: were not a lot of people at the time who 596 00:30:10,520 --> 00:30:13,600 Speaker 1: could had the income or there you know, there were 597 00:30:13,640 --> 00:30:16,080 Speaker 1: there was a significant curtailment of people at the time 598 00:30:16,120 --> 00:30:19,240 Speaker 1: who even had the income to to get a mortgage. 599 00:30:19,320 --> 00:30:22,200 Speaker 1: It kind of feels like there are very rarely sweet spots, 600 00:30:22,560 --> 00:30:27,840 Speaker 1: maybe one with rapidly improving job growth and yet mortgage 601 00:30:27,920 --> 00:30:30,480 Speaker 1: rates really low. Was like that sort of like brief 602 00:30:30,520 --> 00:30:32,840 Speaker 1: like extreme sweet spot. But then again, I guess that 603 00:30:32,960 --> 00:30:35,440 Speaker 1: was like a year of huge housing bidding wars, So 604 00:30:35,560 --> 00:30:38,760 Speaker 1: it doesn't feel like there's ever like the perfect time. Yeah. 605 00:30:39,040 --> 00:30:41,400 Speaker 1: I mean, I've been out of college for twenty years 606 00:30:41,400 --> 00:30:43,640 Speaker 1: now and I've never once heard people say housing so 607 00:30:43,720 --> 00:30:46,840 Speaker 1: cheap it's it's time to buy. And so maybe maybe 608 00:30:46,840 --> 00:30:49,680 Speaker 1: the late were okay because the job market was strong, 609 00:30:50,240 --> 00:30:52,480 Speaker 1: real hum price boom hadn't happened yet, mortgage rates were 610 00:30:52,480 --> 00:30:55,120 Speaker 1: coming down. But it's if it's only a few years 611 00:30:55,120 --> 00:30:57,200 Speaker 1: out of a multi decade period, then maybe housing just 612 00:30:57,240 --> 00:31:01,600 Speaker 1: never gets cheap. Is there any prospect for something meaningfully 613 00:31:01,640 --> 00:31:04,520 Speaker 1: different on the supply side, and like, is it a 614 00:31:04,560 --> 00:31:08,520 Speaker 1: different kind of construction, is it something regulatory that could 615 00:31:08,520 --> 00:31:10,520 Speaker 1: open up a lot of space like people always you know, 616 00:31:10,520 --> 00:31:14,080 Speaker 1: it's like everyone on Twitter all the times like build, build, build, 617 00:31:14,160 --> 00:31:16,880 Speaker 1: And it doesn't feel like that's a very controversial stance. 618 00:31:17,240 --> 00:31:20,400 Speaker 1: Everyone likes the idea of more housing stock in general, 619 00:31:20,800 --> 00:31:23,280 Speaker 1: but they're all kinds of constraints. There's the physical ones, 620 00:31:23,840 --> 00:31:25,560 Speaker 1: just the sort of you know, labor and lumber, and 621 00:31:25,600 --> 00:31:29,040 Speaker 1: then there's regulatory ones, whether that means to make cities 622 00:31:29,040 --> 00:31:31,160 Speaker 1: where it's difficult to build, et cetera. Is there anything 623 00:31:31,200 --> 00:31:33,760 Speaker 1: that could happen that would actually meaningfully just change the 624 00:31:34,200 --> 00:31:38,440 Speaker 1: supply side of this applied demand equation? Yeah, you know, Joe, 625 00:31:38,720 --> 00:31:41,680 Speaker 1: It's it's interesting because I think, you know, the last decade, 626 00:31:41,720 --> 00:31:44,920 Speaker 1: we've been so worried about affordability on the demand side, right, 627 00:31:44,960 --> 00:31:48,320 Speaker 1: it seems like we haven't really prepared ourselves for what 628 00:31:48,320 --> 00:31:50,280 Speaker 1: we're gonna do when when we get there on the 629 00:31:50,400 --> 00:31:53,560 Speaker 1: and and now the supply side is constrained, right, you know, 630 00:31:53,560 --> 00:31:56,520 Speaker 1: And I'll kind of break it down between single family 631 00:31:56,520 --> 00:31:58,720 Speaker 1: and multi family because I think you know, they're they're 632 00:31:58,760 --> 00:32:02,280 Speaker 1: definitely crossover issues. But you know, to me, when I 633 00:32:02,320 --> 00:32:04,800 Speaker 1: look at this, you know, on the multi family side, 634 00:32:04,840 --> 00:32:08,520 Speaker 1: certainly the permitting and zoning issues seeing you know, like 635 00:32:08,520 --> 00:32:11,680 Speaker 1: like major challenges right that are kind of installing the 636 00:32:11,720 --> 00:32:15,840 Speaker 1: ability to gramp up apartment construction and smaller, more affordable 637 00:32:15,880 --> 00:32:19,080 Speaker 1: sort of units out in the marketplace. And so that 638 00:32:19,240 --> 00:32:21,880 Speaker 1: is going to continue to be a challenge, right for 639 00:32:22,120 --> 00:32:24,640 Speaker 1: political reasons. I think you know, maybe Connor you could 640 00:32:24,680 --> 00:32:26,880 Speaker 1: probably talk about better than I, but I think that's 641 00:32:27,280 --> 00:32:29,600 Speaker 1: that's going to remain challenging. I think the advantage with 642 00:32:29,720 --> 00:32:32,520 Speaker 1: multi family. Right, when you look at history in terms 643 00:32:32,560 --> 00:32:38,280 Speaker 1: of productivity of construction, multifamily actually has a lot better 644 00:32:38,360 --> 00:32:41,560 Speaker 1: sort of track record of increasing productivity growth. So I 645 00:32:41,600 --> 00:32:44,600 Speaker 1: think even in a labor constrained environment, you know, we 646 00:32:44,680 --> 00:32:48,480 Speaker 1: are seeing you know, sort of technology like wall panalization, 647 00:32:48,640 --> 00:32:53,080 Speaker 1: off site construction that are being implemented, a component manufacturing, 648 00:32:53,640 --> 00:32:56,720 Speaker 1: you know, more quickly adopted in the multi family space. 649 00:32:56,760 --> 00:32:59,680 Speaker 1: So I think even if we're in a labor constrained environment, 650 00:33:00,080 --> 00:33:03,080 Speaker 1: we probably have the ability to ramp up multi family 651 00:33:03,600 --> 00:33:06,880 Speaker 1: given those factors. Single families very labor intensive. You know, 652 00:33:06,920 --> 00:33:09,480 Speaker 1: you're you're building on site, your stick framing. In a 653 00:33:09,480 --> 00:33:11,720 Speaker 1: lot of cases, most of our homes are built with wood. 654 00:33:12,240 --> 00:33:14,600 Speaker 1: Historically it's been a cheap way to build, but it's 655 00:33:14,720 --> 00:33:17,560 Speaker 1: it's kind of been contingent on a wall supply labor 656 00:33:17,640 --> 00:33:21,160 Speaker 1: market in that context, you know, on the single family side, 657 00:33:21,280 --> 00:33:23,640 Speaker 1: I mean, certainly zoning and things like that can help, 658 00:33:23,720 --> 00:33:27,560 Speaker 1: But again I come back to really issues on the 659 00:33:27,640 --> 00:33:30,680 Speaker 1: labor side. Can we pull in more sort of migrant 660 00:33:30,680 --> 00:33:34,480 Speaker 1: workers in key building markets like in Texas and California. 661 00:33:34,560 --> 00:33:38,720 Speaker 1: You're talking about the residential construction employment is dependent on 662 00:33:38,840 --> 00:33:42,000 Speaker 1: you know, anywhere third of the labor market there in 663 00:33:42,240 --> 00:33:45,720 Speaker 1: residential construction is our foreign born workers. So in an 664 00:33:45,720 --> 00:33:49,680 Speaker 1: immigration constrained environment, you know, it's gonna be tough to 665 00:33:49,760 --> 00:33:52,240 Speaker 1: ramp up. If that loosens up, maybe we get some 666 00:33:52,240 --> 00:33:55,800 Speaker 1: some quick burst of production, but beyond you know, kind 667 00:33:55,840 --> 00:34:01,240 Speaker 1: of really pivoting to off site construction, manufactured home construction. Um, 668 00:34:01,560 --> 00:34:03,720 Speaker 1: it looks like a challenge we rode ahead for single 669 00:34:03,760 --> 00:34:05,840 Speaker 1: family in particular. So I look at it sort of 670 00:34:05,840 --> 00:34:07,840 Speaker 1: in two ways. I follow what the homebuilders do and 671 00:34:07,880 --> 00:34:11,040 Speaker 1: say really closely, and they've really, in my opinion, to 672 00:34:11,080 --> 00:34:13,560 Speaker 1: kind of optimize their businesses where they're really trying to 673 00:34:13,560 --> 00:34:15,480 Speaker 1: be cautious about how many homes they build. They don't 674 00:34:15,480 --> 00:34:17,839 Speaker 1: want to get caught with too much inventory. They're really 675 00:34:17,840 --> 00:34:22,440 Speaker 1: focused on high profit margins, returning cash to investors. And 676 00:34:22,520 --> 00:34:24,239 Speaker 1: that to me was isn't gonna be enough to meet 677 00:34:24,280 --> 00:34:26,520 Speaker 1: the housing demand we have. I have this line that 678 00:34:26,560 --> 00:34:29,080 Speaker 1: I like to use that the future as a policy choice, 679 00:34:29,320 --> 00:34:30,919 Speaker 1: and I think ultimately that really is what it comes 680 00:34:30,920 --> 00:34:33,160 Speaker 1: down to. And you can sort of look at in 681 00:34:33,160 --> 00:34:36,160 Speaker 1: the response to the the return of soldiers from World 682 00:34:36,200 --> 00:34:38,400 Speaker 1: War Two, and there was this sort of we're all 683 00:34:38,400 --> 00:34:40,440 Speaker 1: in this together. We have to build enough homes to 684 00:34:40,480 --> 00:34:42,960 Speaker 1: meet the demand for gis and people like that. And 685 00:34:43,000 --> 00:34:46,480 Speaker 1: we met the challenge with zoning changes and giveaways to 686 00:34:46,480 --> 00:34:49,600 Speaker 1: homebuilders and things like that. And I don't see that 687 00:34:49,640 --> 00:34:52,319 Speaker 1: same political will right now, and you know, ultimately that's 688 00:34:52,360 --> 00:34:54,080 Speaker 1: what we need. Otherwise I think this is just going 689 00:34:54,120 --> 00:34:56,839 Speaker 1: to be the reality for at least this decade. Can 690 00:34:56,880 --> 00:35:00,239 Speaker 1: I just ask going back to the baby boomer point 691 00:35:00,520 --> 00:35:04,040 Speaker 1: and your well intentioned defense of baby boomers, Connor, But 692 00:35:04,400 --> 00:35:06,600 Speaker 1: one of the things we hear, one of the things 693 00:35:06,640 --> 00:35:10,080 Speaker 1: we hear a lot is this idea of either large 694 00:35:10,120 --> 00:35:14,279 Speaker 1: financial institutions like private equity coming in and buying up 695 00:35:14,360 --> 00:35:18,120 Speaker 1: a bunch of single family homes or sometimes multifamily. And 696 00:35:18,239 --> 00:35:20,600 Speaker 1: this idea that you have a lot of baby boomers 697 00:35:20,640 --> 00:35:23,359 Speaker 1: who have built up wealth over the years, and there 698 00:35:23,360 --> 00:35:25,400 Speaker 1: are very low mortgage rates, and so what they do 699 00:35:25,520 --> 00:35:27,680 Speaker 1: is they go out and buy second homes and then 700 00:35:27,719 --> 00:35:31,200 Speaker 1: rent those out for additional income. How much does that 701 00:35:31,360 --> 00:35:35,880 Speaker 1: constrain supply and how much would you expect or how 702 00:35:35,960 --> 00:35:38,880 Speaker 1: much additional inventory would you expect to come on stream 703 00:35:39,000 --> 00:35:42,800 Speaker 1: when um baby boomers? How do I put this? I 704 00:35:42,920 --> 00:35:47,800 Speaker 1: guess when when they die so even though the numbers 705 00:35:47,840 --> 00:35:51,160 Speaker 1: from institutional investors buying homes are large, like tens of 706 00:35:51,200 --> 00:35:54,280 Speaker 1: billions of dollars, sounds like a lot when you're talking 707 00:35:54,280 --> 00:35:56,960 Speaker 1: about tens of trillions of dollars of real estate value 708 00:35:56,960 --> 00:35:59,160 Speaker 1: in the United States, that's not a very large percentage. 709 00:35:59,280 --> 00:36:01,120 Speaker 1: And so it it gets a lot of headlines. But 710 00:36:01,160 --> 00:36:03,799 Speaker 1: to your point, that's not really where the sort of 711 00:36:03,800 --> 00:36:06,359 Speaker 1: soaking up the inventory is coming from. And an earlier guest, 712 00:36:06,400 --> 00:36:09,960 Speaker 1: Mike Simonson, spoke to that when baby immersed die, I 713 00:36:10,040 --> 00:36:12,399 Speaker 1: think the question is I mean, maybe they just give 714 00:36:12,480 --> 00:36:14,640 Speaker 1: their homes in the real estate to their kids and 715 00:36:14,680 --> 00:36:16,560 Speaker 1: it stays in the family and it doesn't get released 716 00:36:16,560 --> 00:36:19,319 Speaker 1: onto the market. So I think that will help to 717 00:36:19,360 --> 00:36:22,879 Speaker 1: some extent, but sort of there's magnitude wise, I don't know. Yeah, 718 00:36:22,960 --> 00:36:25,680 Speaker 1: So there's a new startup that Andrews and Horowitz is 719 00:36:25,719 --> 00:36:30,040 Speaker 1: funding that allows people to basically do what commercial real 720 00:36:30,120 --> 00:36:32,400 Speaker 1: estate investors do, which is not they don't want to 721 00:36:32,440 --> 00:36:34,879 Speaker 1: be a landlord and they don't want to sell their home, 722 00:36:35,160 --> 00:36:37,879 Speaker 1: so they can like swap it in for this portfolio 723 00:36:38,280 --> 00:36:41,040 Speaker 1: of like sort of like a quasi read and so 724 00:36:41,120 --> 00:36:45,759 Speaker 1: they retain ownership, retain home housing equity, and so you know, 725 00:36:45,800 --> 00:36:47,840 Speaker 1: they're I feel like they're going to find a way 726 00:36:47,920 --> 00:36:51,000 Speaker 1: to prevent these houses. Capitalism will find a way to 727 00:36:51,000 --> 00:36:54,240 Speaker 1: prevent these houses from coming out to the capitalism A yeah, 728 00:36:54,480 --> 00:36:56,480 Speaker 1: you know. The the other thing going back to Connor's 729 00:36:56,520 --> 00:36:59,920 Speaker 1: point to you know, one one question about you know, 730 00:37:00,040 --> 00:37:02,520 Speaker 1: even if this sort of baby boom or supply is 731 00:37:02,560 --> 00:37:05,480 Speaker 1: released into the market, it's a question of also the geography, 732 00:37:05,560 --> 00:37:08,520 Speaker 1: Right where are these times located? So you know, if 733 00:37:08,560 --> 00:37:11,520 Speaker 1: you have lots of migration to the sun Belt, you know, 734 00:37:11,560 --> 00:37:14,080 Speaker 1: if if these are sort of whatever vacation homes or 735 00:37:14,120 --> 00:37:18,440 Speaker 1: second homes in I don't know, Midwest or northeastern United States, 736 00:37:18,440 --> 00:37:20,720 Speaker 1: you know, sort of cake cod like, are those places 737 00:37:20,719 --> 00:37:23,759 Speaker 1: that we really need the housing supply to be released from? Right? 738 00:37:23,840 --> 00:37:26,040 Speaker 1: So I think that's what also makes it quite uncertain, 739 00:37:26,400 --> 00:37:30,840 Speaker 1: even if that supply side release occurs, is it geographically 740 00:37:30,840 --> 00:37:32,360 Speaker 1: going to be in the place that you know, the 741 00:37:32,440 --> 00:37:37,680 Speaker 1: locations that you need. So housing the original non fungible token, 742 00:37:37,840 --> 00:37:42,120 Speaker 1: right like how housing like southern Illinois, It is not 743 00:37:42,239 --> 00:37:46,360 Speaker 1: a house in uh central Texas between Austin and San Antonio. 744 00:37:46,440 --> 00:37:49,160 Speaker 1: And so just because it exists doesn't mean it's going 745 00:37:49,239 --> 00:37:53,160 Speaker 1: to solve an acute housing shortage that people immediately need. 746 00:37:53,840 --> 00:37:55,719 Speaker 1: I think something we haven't talked about yet too, is 747 00:37:55,760 --> 00:37:58,839 Speaker 1: that if hybrid remote work becomes a thing, yeah, tens 748 00:37:58,880 --> 00:38:01,120 Speaker 1: of millions of workers need an extra bedroom as a 749 00:38:01,160 --> 00:38:04,480 Speaker 1: home office. That's sort of tens of millions of bedrooms 750 00:38:04,560 --> 00:38:06,920 Speaker 1: from the national housing stock that are going to be 751 00:38:06,960 --> 00:38:09,279 Speaker 1: there because maybe now instead of needing a three or 752 00:38:09,320 --> 00:38:11,720 Speaker 1: four bedroom home, you need four or five bedrooms or 753 00:38:11,920 --> 00:38:13,480 Speaker 1: what have you. And so I do think that's sort 754 00:38:13,480 --> 00:38:15,600 Speaker 1: of a subtle factor that hasn't been discussed enough in 755 00:38:15,680 --> 00:38:18,920 Speaker 1: terms of why the shortages existing. Yeah, you think about 756 00:38:18,920 --> 00:38:22,960 Speaker 1: the amount of floor space that's pivoted from the commercial 757 00:38:23,000 --> 00:38:25,520 Speaker 1: space and the office space to the home right for 758 00:38:25,560 --> 00:38:28,520 Speaker 1: that exact reason. Kind of people needing an extra you know, 759 00:38:28,600 --> 00:38:31,759 Speaker 1: people needing an extra extra space for an home home 760 00:38:31,760 --> 00:38:35,439 Speaker 1: office maybe two. That's a lot of demand in terms 761 00:38:35,480 --> 00:38:38,480 Speaker 1: of floor space going to the residential side all of 762 00:38:38,560 --> 00:38:40,839 Speaker 1: a sudden. And I know that the numbers are kind 763 00:38:40,840 --> 00:38:44,400 Speaker 1: of squishy on the percentage of the population that's that 764 00:38:44,520 --> 00:38:47,520 Speaker 1: was pre COVID remote work and now where we are now. 765 00:38:47,560 --> 00:38:51,160 Speaker 1: But if that number doubles, let's say, just for just 766 00:38:51,200 --> 00:38:55,680 Speaker 1: a thought exercise. That's incredibly bullish for real estate demand 767 00:38:55,719 --> 00:38:59,880 Speaker 1: in general, not only new construction, but also renovation demand 768 00:39:00,480 --> 00:39:04,480 Speaker 1: where we're seeing you know, particularly for lumber and structural panels. 769 00:39:04,960 --> 00:39:08,120 Speaker 1: That's a huge category, a channel of demand that we're 770 00:39:08,120 --> 00:39:11,520 Speaker 1: seeing being driven by this work from home movement and 771 00:39:11,520 --> 00:39:14,439 Speaker 1: all by the way you have soaring home equity that's 772 00:39:14,440 --> 00:39:16,880 Speaker 1: helping fund that. That's really interesting. How much are you 773 00:39:16,920 --> 00:39:19,440 Speaker 1: seeing on that? So like we've we've been talking about 774 00:39:19,560 --> 00:39:23,719 Speaker 1: all the housing starts, etcetera. But how important for lumber 775 00:39:24,280 --> 00:39:28,680 Speaker 1: would products is the either renovation or someone wanting to 776 00:39:28,719 --> 00:39:30,440 Speaker 1: add a deck to their home, Like how big of 777 00:39:30,480 --> 00:39:33,160 Speaker 1: the how big of a contributor is that to overall demand. 778 00:39:33,560 --> 00:39:36,760 Speaker 1: I'll speak to lumber mainly, and it's probably different by building, 779 00:39:36,880 --> 00:39:39,760 Speaker 1: you know, the type of building material, but certainly for 780 00:39:39,760 --> 00:39:43,400 Speaker 1: for software, lumber demand, what we call repairing or modeling 781 00:39:43,560 --> 00:39:46,879 Speaker 1: is actually the largest single end use market in terms 782 00:39:46,880 --> 00:39:50,200 Speaker 1: of volume. It's larger than new residential construction. Yes, and 783 00:39:50,239 --> 00:39:54,600 Speaker 1: that always surprises people that would not have been like, yeah, 784 00:39:54,680 --> 00:39:57,359 Speaker 1: and it's it's lumber is a little bit different than 785 00:39:57,440 --> 00:40:01,160 Speaker 1: say even plywood or OSB you know, always be tends 786 00:40:01,239 --> 00:40:03,920 Speaker 1: to skew a little bit more towards the new construction space. 787 00:40:03,960 --> 00:40:06,120 Speaker 1: But you know, you mentioned it, Joe. You think about 788 00:40:06,120 --> 00:40:09,080 Speaker 1: all the renovation that happens, you know, new decks, putting 789 00:40:09,080 --> 00:40:11,360 Speaker 1: in fences, people putting in you know, those you know, 790 00:40:11,440 --> 00:40:13,640 Speaker 1: flower beds, things like that. There's a lot of sort 791 00:40:13,680 --> 00:40:17,040 Speaker 1: of home improvement that happens on the renovation side that 792 00:40:17,200 --> 00:40:20,239 Speaker 1: is substantial, and probably the best number to kind of 793 00:40:20,239 --> 00:40:22,840 Speaker 1: size up the market is from the Harvard Joint Center 794 00:40:22,840 --> 00:40:26,440 Speaker 1: and Housing Studies, and that market based on their estimates 795 00:40:26,440 --> 00:40:31,040 Speaker 1: including both improvements. So home renovation and maintenance is around 796 00:40:31,080 --> 00:40:35,239 Speaker 1: a four hundred and thirty billion dollar market. So that's substantial. 797 00:40:35,360 --> 00:40:38,720 Speaker 1: And to put some context to it, total construction spending, 798 00:40:39,080 --> 00:40:42,320 Speaker 1: it is probably about over eight hundred eight hundred billion 799 00:40:42,360 --> 00:40:46,200 Speaker 1: in total. Uh that excludes sort of the maintenance portion, 800 00:40:46,280 --> 00:40:48,440 Speaker 1: So if you've tacked on maintenance, it's probably more like 801 00:40:48,480 --> 00:40:52,120 Speaker 1: a trillion dollar market. So that's a pretty big chunk 802 00:40:52,320 --> 00:40:56,120 Speaker 1: of total residential construction that that it goes into that 803 00:40:56,200 --> 00:40:59,000 Speaker 1: renovation space. It's incredibly important, and I think it's going 804 00:40:59,040 --> 00:41:02,480 Speaker 1: to remain outsized because of how you know, we have 805 00:41:02,560 --> 00:41:05,520 Speaker 1: such a shortage of both new and existing home inventory, 806 00:41:05,640 --> 00:41:09,400 Speaker 1: people are sort of pivoting to renovations to to enhance 807 00:41:09,480 --> 00:41:28,120 Speaker 1: their shelter space. Can I just ask in terms of 808 00:41:28,160 --> 00:41:33,560 Speaker 1: supply shortages, I mean, we've had lumber, trust plates, kitchen sink, 809 00:41:34,480 --> 00:41:39,560 Speaker 1: garage doors. What's the sort of next thing on your 810 00:41:39,640 --> 00:41:42,279 Speaker 1: radar or what is your pricing data telling you will 811 00:41:42,320 --> 00:41:46,520 Speaker 1: be a future crunch point? Boy, it feels like we've 812 00:41:46,560 --> 00:41:49,760 Speaker 1: covered everything, right because, like every component of a house, 813 00:41:50,239 --> 00:41:53,040 Speaker 1: I'm not sure what the next thing is, tracy, because 814 00:41:53,080 --> 00:41:55,239 Speaker 1: I mean, I think when you think about it, right 815 00:41:55,320 --> 00:41:57,960 Speaker 1: that the way that the shortages have progressed, it's almost 816 00:41:58,480 --> 00:42:01,200 Speaker 1: been in tandem with what the building cycle looks like. 817 00:42:01,320 --> 00:42:05,680 Speaker 1: Right first it started with lumber and structural panels and 818 00:42:05,960 --> 00:42:09,359 Speaker 1: engineered wood products, and now it seems like more of 819 00:42:09,440 --> 00:42:13,520 Speaker 1: the shortages are stemming from what you know, how you 820 00:42:13,560 --> 00:42:16,400 Speaker 1: finish at home. Again, you mentioned the windows, that h 821 00:42:16,480 --> 00:42:19,640 Speaker 1: VAC systems, you know, so you know, you know, it 822 00:42:19,719 --> 00:42:21,720 Speaker 1: was kind of joking at the beginning of the question, 823 00:42:21,719 --> 00:42:24,479 Speaker 1: but it does feel like we've really touched a lot, 824 00:42:25,000 --> 00:42:28,239 Speaker 1: you know, all points of the building cycle. So you know, 825 00:42:28,280 --> 00:42:30,640 Speaker 1: it seems like again that those parts to finish a 826 00:42:30,719 --> 00:42:32,680 Speaker 1: home are really going to be continue to be the 827 00:42:32,680 --> 00:42:36,120 Speaker 1: critical determinant of of us being able to complete homes, 828 00:42:36,200 --> 00:42:39,640 Speaker 1: especially considering a lot of that material either the components 829 00:42:39,640 --> 00:42:43,400 Speaker 1: are the actual building materials themselves are sourced from offshore. 830 00:42:43,680 --> 00:42:45,520 Speaker 1: I think why you're seeing maybe a little bit of 831 00:42:45,560 --> 00:42:48,840 Speaker 1: relief on sort of the framing materials. A lot of 832 00:42:48,840 --> 00:42:52,239 Speaker 1: it is sourced domestically, you know, the vast majority of it, 833 00:42:52,280 --> 00:42:54,719 Speaker 1: and so it's it's a lot more function of the 834 00:42:54,800 --> 00:42:58,560 Speaker 1: domestic transportation constraints, which are still tight but probably improving 835 00:42:58,640 --> 00:43:01,920 Speaker 1: a bit on the margin. Well, you know, container ships 836 00:43:01,920 --> 00:43:04,560 Speaker 1: and port throughput. You know, it continues to be a 837 00:43:04,560 --> 00:43:08,239 Speaker 1: constant challenge with complex items like that. So you know, 838 00:43:08,280 --> 00:43:10,560 Speaker 1: I don't know what's the next thing, but it seems 839 00:43:10,560 --> 00:43:13,399 Speaker 1: like that area is still going to be problematic. What's 840 00:43:13,440 --> 00:43:15,840 Speaker 1: the next thing you're thinking about right now? Like what 841 00:43:15,880 --> 00:43:18,080 Speaker 1: should people be watching? And it can be anything but 842 00:43:18,200 --> 00:43:19,840 Speaker 1: sort of like what's the what's the next thing on 843 00:43:19,880 --> 00:43:22,919 Speaker 1: your mind? I think for me, since again we talked 844 00:43:22,920 --> 00:43:24,960 Speaker 1: about how home building stocks are down so much this 845 00:43:25,080 --> 00:43:28,160 Speaker 1: year and builders have been still trust saying they're trying 846 00:43:28,160 --> 00:43:31,200 Speaker 1: to meet construction backlogs and growing community counts by ten 847 00:43:31,239 --> 00:43:33,920 Speaker 1: percent this year, is that when they are part earnings 848 00:43:33,960 --> 00:43:36,239 Speaker 1: over the next couple of months, what will they be 849 00:43:36,239 --> 00:43:38,480 Speaker 1: pivoting at all in their business models and response to 850 00:43:38,560 --> 00:43:41,759 Speaker 1: changing market conditions? Because as an investor, I'm looking at 851 00:43:41,760 --> 00:43:43,879 Speaker 1: them trading in some in some cases three to four 852 00:43:43,920 --> 00:43:47,160 Speaker 1: times estimated this year's earnings, saying, Okay, what's going on? 853 00:43:47,280 --> 00:43:49,960 Speaker 1: Like the markets trade value like you're going out of business? 854 00:43:50,280 --> 00:43:52,400 Speaker 1: Proved to me that you're you're gonna not have an 855 00:43:52,440 --> 00:43:54,440 Speaker 1: issue a year from now. Yeah, And I mean, I 856 00:43:54,480 --> 00:43:57,160 Speaker 1: think on our side of fast markets, we're obviously thinking 857 00:43:57,200 --> 00:44:00,240 Speaker 1: a lot about what, you know, the picture, the building 858 00:44:00,680 --> 00:44:05,800 Speaker 1: picture looks like in right, it feels like the market 859 00:44:05,880 --> 00:44:08,200 Speaker 1: is kind of set here in terms of the construction 860 00:44:08,239 --> 00:44:10,840 Speaker 1: activity we're going to see, except what maybe the exception 861 00:44:10,920 --> 00:44:13,920 Speaker 1: sort of the d I Y side of the renovation market. 862 00:44:14,120 --> 00:44:16,440 Speaker 1: We're seeing some softening there. But I think when you 863 00:44:16,440 --> 00:44:20,000 Speaker 1: think about new construction and pro driven renovation, you know, 864 00:44:20,040 --> 00:44:22,319 Speaker 1: a lot of that activity is already booked out for 865 00:44:22,440 --> 00:44:25,200 Speaker 1: much of the year. We're wondering, now, okay, what does 866 00:44:26,000 --> 00:44:29,080 Speaker 1: three look like with rates going up close to five 867 00:44:29,120 --> 00:44:33,319 Speaker 1: percent now maybe going higher, building material costs continuing to 868 00:44:33,400 --> 00:44:37,000 Speaker 1: remain elevated, you know, is that going to cool housing 869 00:44:37,040 --> 00:44:39,239 Speaker 1: starts to some degree? Is that going to cool the 870 00:44:39,280 --> 00:44:42,960 Speaker 1: renovation market between you know, a combination of demand destruction 871 00:44:43,080 --> 00:44:46,360 Speaker 1: and also thinking about this pivot back to the service 872 00:44:46,360 --> 00:44:48,840 Speaker 1: side of the economy, right if people are less inclined 873 00:44:48,880 --> 00:44:51,640 Speaker 1: to renovate their homes because they're going on vacation again, 874 00:44:52,200 --> 00:44:55,040 Speaker 1: and on top of that, you know, just demand destruction 875 00:44:55,120 --> 00:44:57,920 Speaker 1: from elevated price levels, you know, will we see some 876 00:44:58,040 --> 00:45:01,880 Speaker 1: cooling in three both on the new construction and maybe 877 00:45:02,120 --> 00:45:06,480 Speaker 1: on that R and R piece too. So alright, well, guys, 878 00:45:06,680 --> 00:45:09,839 Speaker 1: Dustin and Connor, that was fantastic. We covered a lot 879 00:45:09,880 --> 00:45:12,319 Speaker 1: of ground. I learned a ton and great having you 880 00:45:12,400 --> 00:45:15,000 Speaker 1: both on odd lots for the first time. Thanks for 881 00:45:15,080 --> 00:45:18,160 Speaker 1: having me. Yeah, it's been a pleasure. Thanks to Jason Things. Yeah, 882 00:45:18,239 --> 00:45:28,560 Speaker 1: that was great. It's almost like you don't even know 883 00:45:28,560 --> 00:45:30,960 Speaker 1: where to begin to think about it. I had not 884 00:45:31,120 --> 00:45:35,799 Speaker 1: thought previously about just like how much adding decks and 885 00:45:35,840 --> 00:45:39,480 Speaker 1: fences and flower beds added to the lumber market. I 886 00:45:39,480 --> 00:45:41,120 Speaker 1: guess that's true. I mean, I thought the point about 887 00:45:41,160 --> 00:45:44,080 Speaker 1: how the supply shortages are sort of following the trajectory 888 00:45:44,120 --> 00:45:46,759 Speaker 1: of actually building a home was very interesting. I do 889 00:45:46,880 --> 00:45:50,239 Speaker 1: feel a little bit better about buying over the past 890 00:45:50,239 --> 00:45:52,560 Speaker 1: few months, right before interest rates go up. I'm sure 891 00:45:52,680 --> 00:45:55,759 Speaker 1: you're really worried that, like, well, what everyone does. I 892 00:45:55,760 --> 00:45:57,719 Speaker 1: think there's like a thing people buy a house, like, oh, 893 00:45:57,760 --> 00:45:59,880 Speaker 1: I definitely bought the top. Yeah. I mean I think 894 00:46:00,000 --> 00:46:03,680 Speaker 1: everyone inevitably feels like that, and I suspect, you know, 895 00:46:03,760 --> 00:46:06,840 Speaker 1: maybe that will turn out to be true. But I 896 00:46:06,840 --> 00:46:09,279 Speaker 1: feel a little bit better. I have to say, you're 897 00:46:09,360 --> 00:46:13,480 Speaker 1: feeling better. Is someone else's feeling worse like you? But no, 898 00:46:13,600 --> 00:46:17,000 Speaker 1: it's it does not feel like from this conversation. And 899 00:46:17,040 --> 00:46:19,200 Speaker 1: I guess this is probably one of my big takeaways 900 00:46:19,320 --> 00:46:23,439 Speaker 1: that even with five percent mortgage rates, that there's gonna 901 00:46:23,440 --> 00:46:27,480 Speaker 1: be like some major softening, Like there's too much structural demand, 902 00:46:27,840 --> 00:46:31,040 Speaker 1: there's too much pent up demand, the demographics are too good, 903 00:46:31,440 --> 00:46:35,920 Speaker 1: there's too the supply is too constrained for there to 904 00:46:35,920 --> 00:46:38,400 Speaker 1: be like some sort of shift quality. We didn't really 905 00:46:38,440 --> 00:46:40,800 Speaker 1: get into it, but like I know, like loan quality 906 00:46:40,920 --> 00:46:43,560 Speaker 1: I believe is very high these days. It's like nothing 907 00:46:43,640 --> 00:46:46,080 Speaker 1: like it was in the mid two thousands. So it 908 00:46:46,160 --> 00:46:48,319 Speaker 1: does not feel like there's gonna be like some like 909 00:46:48,360 --> 00:46:50,239 Speaker 1: wave of relief for a bunch of new homes that 910 00:46:50,280 --> 00:46:53,040 Speaker 1: get really cheap. All of this. Well, you mentioned loan quality, 911 00:46:53,160 --> 00:46:56,240 Speaker 1: and this is the other big thing that is emerging, 912 00:46:56,480 --> 00:46:58,560 Speaker 1: and we just discussed it. But this idea that people 913 00:46:58,560 --> 00:47:01,640 Speaker 1: who are buying houses now are not necessarily buying them 914 00:47:01,920 --> 00:47:04,799 Speaker 1: as speculative assets and thinking that the price is just 915 00:47:04,880 --> 00:47:07,319 Speaker 1: going to keep going up and up and up. Rather, 916 00:47:07,640 --> 00:47:09,640 Speaker 1: a lot of people seem to be buying these as 917 00:47:09,840 --> 00:47:15,600 Speaker 1: logical uh investments or a logical choice and inflation protection. 918 00:47:15,680 --> 00:47:18,759 Speaker 1: So rents are going up enormously, I might as well 919 00:47:18,840 --> 00:47:21,560 Speaker 1: own my own house in the current situation. Yeah, we 920 00:47:21,600 --> 00:47:24,880 Speaker 1: had the CEO I forget, I forget which homebowner. It 921 00:47:24,960 --> 00:47:28,080 Speaker 1: might have been Kaby Homes. Yeah, I knew you wrote 922 00:47:28,120 --> 00:47:31,280 Speaker 1: about and saying like, look, you know he said housing 923 00:47:31,280 --> 00:47:35,400 Speaker 1: a shelter and it's also shelter from rising rent. And 924 00:47:35,400 --> 00:47:37,719 Speaker 1: I thought that was just like really fascinating, Like people want. 925 00:47:38,080 --> 00:47:41,239 Speaker 1: People want a predictable monthly check and to not have 926 00:47:41,320 --> 00:47:43,759 Speaker 1: to UH that they pay out and to not have 927 00:47:43,800 --> 00:47:45,680 Speaker 1: to worry that their cost of rent is going to 928 00:47:45,800 --> 00:47:49,279 Speaker 1: jump twenty next year when the landlord upset, and so 929 00:47:49,400 --> 00:47:52,080 Speaker 1: in an environment in which there's a high degree of 930 00:47:52,320 --> 00:47:55,080 Speaker 1: anxiety about rents, going up every year. You could pay 931 00:47:55,120 --> 00:47:57,959 Speaker 1: extra and buy a house, but then you're you could 932 00:47:58,000 --> 00:48:01,319 Speaker 1: theoretically lock in a monthly cost. It's stable for thirty 933 00:48:01,400 --> 00:48:04,160 Speaker 1: years out right, And so even if mortgage rates are 934 00:48:04,200 --> 00:48:08,040 Speaker 1: going up, at least they're relatively and predictable. And Connor 935 00:48:08,080 --> 00:48:11,759 Speaker 1: made that point, like, yes, the all in affordability for 936 00:48:11,800 --> 00:48:14,279 Speaker 1: homes is like up thirty percent, but rents are sevent 937 00:48:15,280 --> 00:48:18,560 Speaker 1: and you have to have shelter. That makes it such 938 00:48:18,760 --> 00:48:20,520 Speaker 1: that the price of you know, it has gone up 939 00:48:20,520 --> 00:48:23,759 Speaker 1: to cost of bind but not it makes it sort 940 00:48:23,760 --> 00:48:26,319 Speaker 1: of relativistically not as much anyway. So many, so many 941 00:48:26,320 --> 00:48:29,520 Speaker 1: different angles. Yeah, but you're you're entirely right there. There 942 00:48:29,640 --> 00:48:32,040 Speaker 1: is just so much to digest in the housing market 943 00:48:32,080 --> 00:48:35,600 Speaker 1: at the moment. It does kind of feel like overwhelming. Well, 944 00:48:35,760 --> 00:48:38,000 Speaker 1: we'll come back in six months. We'll see how far 945 00:48:38,080 --> 00:48:41,040 Speaker 1: under the water you are or whether you're you're already 946 00:48:41,120 --> 00:48:46,720 Speaker 1: ready another another episode based on my personal misfortunes. Excellent, Yeah, 947 00:48:46,800 --> 00:48:49,160 Speaker 1: all right, shall we leave it there, Let's leave it there. 948 00:48:49,280 --> 00:48:52,000 Speaker 1: This has been another episode of the All Thoughts podcast. 949 00:48:52,080 --> 00:48:54,600 Speaker 1: I'm Tracy Alloway. You can follow me on Twitter at 950 00:48:54,640 --> 00:48:56,920 Speaker 1: Tracy Alloway, and I'm Joe Wi isn't though. You can 951 00:48:56,960 --> 00:48:59,600 Speaker 1: follow me on Twitter at the Stalwart. Both of our 952 00:48:59,600 --> 00:49:02,759 Speaker 1: guests are on Twitter and they're grade follows. Dustin Jailbert 953 00:49:02,800 --> 00:49:06,960 Speaker 1: He's at two By Forecaster and Connorson. He's at Connorson. 954 00:49:07,480 --> 00:49:11,600 Speaker 1: Follow our producer Carmen Rodriguez at Carmen Arman. Follow the 955 00:49:11,640 --> 00:49:15,200 Speaker 1: Bloomberg had a podcast, Francesca Levi at Francesco Today, and 956 00:49:15,320 --> 00:49:18,560 Speaker 1: check out all of our podcasts on Twitter at Bloomberg 957 00:49:18,600 --> 00:49:24,879 Speaker 1: going to the handle at podcasts. Thanks for listening. Hey, 958 00:49:24,880 --> 00:49:27,920 Speaker 1: there are All Thoughts listeners. We are very excited to 959 00:49:28,000 --> 00:49:31,040 Speaker 1: let you know that All Thoughts is nominated for a 960 00:49:31,080 --> 00:49:34,839 Speaker 1: Webby Award. You know, Tracy, I'm not normally like a 961 00:49:34,880 --> 00:49:38,759 Speaker 1: big awards person or get excited about that, but now 962 00:49:38,800 --> 00:49:41,840 Speaker 1: that I saw that we were nominated for the Webby 963 00:49:42,000 --> 00:49:45,120 Speaker 1: for Best Business Podcast, suddenly I'm feeling very competitive and 964 00:49:45,120 --> 00:49:47,920 Speaker 1: I want you really want it. Yeah, okay, Well, on 965 00:49:48,080 --> 00:49:51,080 Speaker 1: that note, listeners, if you enjoy add Thoughts, if you 966 00:49:51,160 --> 00:49:53,520 Speaker 1: like what we do, we would really appreciate it. If 967 00:49:53,560 --> 00:49:55,839 Speaker 1: you take two minutes of your time and head over 968 00:49:55,960 --> 00:49:59,720 Speaker 1: to vote dot Webby Awards dot com. You can find 969 00:49:59,760 --> 00:50:02,960 Speaker 1: all lots in the business podcast category