WEBVTT - Traversing a Broken Housing Market w/ Lance Lambert #761 0:00:00.080 --> 0:00:03.360 Welcome to How to Money. I'm Joel and I am Matt, 0:00:03.400 --> 0:00:06.480 and today we're talking traversing a broken housing market with 0:00:06.600 --> 0:00:07.360 Lance Lambert. 0:00:26.640 --> 0:00:28.960 Yeah. So, anyone who has spent any time in their 0:00:29.200 --> 0:00:31.880 Zillow and their Redfinn apps over the past few years 0:00:32.320 --> 0:00:36.040 knows that something is broken when it comes to home affordability. 0:00:36.400 --> 0:00:38.040 Or maybe they don't know it, maybe they don't have 0:00:38.159 --> 0:00:40.200 the data or the facts, but they feel it right 0:00:40.240 --> 0:00:42.720 as they're looking at homes. They might be overwhelmed to 0:00:42.720 --> 0:00:45.360 given the current state of the housing market. They might 0:00:45.400 --> 0:00:48.159 be saying, how can home prices continue to skyrocket like 0:00:48.240 --> 0:00:50.120 they have? And even if prices taper off some how 0:00:50.120 --> 0:00:51.760 am I supposed to save up a down payment in 0:00:51.840 --> 0:00:55.000 order to actually make a competitive offer. There are a 0:00:55.080 --> 0:00:57.480 lot of just big unknowns when it comes to the 0:00:57.520 --> 0:01:00.600 largest financial decision that many of us will make. But 0:01:00.720 --> 0:01:04.600 luckily we're joined by Lance Lambert. Lance is the nation's 0:01:04.640 --> 0:01:08.360 foremost data journalist and beat reporter in the residential real 0:01:08.440 --> 0:01:11.160 estate space. He's been the real estate editor over at 0:01:11.160 --> 0:01:14.880 Fortune Magazine, and he's recently launched Rezi Club to help 0:01:14.880 --> 0:01:18.400 folks to stay informed on the US housing market. Lance, 0:01:18.480 --> 0:01:20.520 thank you so much. For joining us today on the podcast. 0:01:20.880 --> 0:01:23.200 Yeah, thank you so much for having me on. And 0:01:23.760 --> 0:01:25.479 you hit the nail on the head right there, which 0:01:25.560 --> 0:01:30.680 is that housing affordability has deteriorated at the fastest pace 0:01:30.920 --> 0:01:34.480 ever over the past two years, only three years. And 0:01:34.520 --> 0:01:38.680 so what happened there is we had an overheating on 0:01:38.800 --> 0:01:44.120 prices during the pandemic. And what was going on is 0:01:44.160 --> 0:01:48.280 that there was an elevation in the demand for housing space, 0:01:49.040 --> 0:01:53.360 and so people, because they were working from home, could 0:01:53.400 --> 0:01:56.200 work in other you know, go live in other markets, 0:01:56.200 --> 0:01:59.800 go buy a home in let's say, you know, Lexington, 0:01:59.800 --> 0:02:02.600 can if they were working in New York City, and 0:02:02.680 --> 0:02:05.800 so they were able to depart their job market for 0:02:05.840 --> 0:02:09.160 a more affordable place. So that's work from home arbitrage. 0:02:09.600 --> 0:02:12.000 And then the second part is the people who stayed 0:02:12.000 --> 0:02:15.720 in those markets, even the places that had net out migration, 0:02:16.160 --> 0:02:20.160 think San Francisco, Los Angeles, New York City. The people 0:02:20.160 --> 0:02:23.240 who remained wanted more space because they wanted to work, 0:02:23.320 --> 0:02:25.960 they were working from home, they needed more room in 0:02:26.000 --> 0:02:29.720 their apartments. And so there was this elevation in demand 0:02:29.840 --> 0:02:34.200 for housing space and the work from home arbitrage that occurred. 0:02:34.639 --> 0:02:36.720 And at the same time, you had rates go to 0:02:36.760 --> 0:02:40.240 the lowest ever this century, really over the past one 0:02:40.320 --> 0:02:43.600 hundred plus years, and you had a lot of easy 0:02:43.639 --> 0:02:45.959 money rolling through the economy. 0:02:45.639 --> 0:02:47.839 And so appreciates any money. 0:02:47.639 --> 0:02:51.520 Yes, appreciation for housing. For home prices on a national 0:02:51.560 --> 0:02:56.560 basis went up about forty five percent from March twenty 0:02:56.760 --> 0:03:01.840 twenty to June twenty twenty twowenty twenty one alone, we 0:03:01.840 --> 0:03:04.639 were up like twenty one percent, which is the biggest 0:03:05.440 --> 0:03:08.520 year ever, one year jump ever in home prices. 0:03:08.639 --> 0:03:11.880 Yeah, Studio apartments basically became persona non grata who wants 0:03:11.919 --> 0:03:13.799 them because you need a space of orger Like I 0:03:13.840 --> 0:03:16.000 distinctly remember the beginning of the pandemic, my little sister 0:03:16.440 --> 0:03:19.040 and her husband working out, both of them trying to 0:03:19.080 --> 0:03:21.080 work from home in a studio apartment and it was 0:03:21.120 --> 0:03:23.960 not working very well. But listen, sorry, we have to 0:03:24.200 --> 0:03:26.080 ask you. One of the first questions we ask anybody 0:03:26.080 --> 0:03:27.840 who comes on the show is what's your craft beer equivalent? 0:03:27.919 --> 0:03:29.959 Because like, we want to get into all this housing data. 0:03:30.000 --> 0:03:31.680 And I love that you're like chopping at the bit 0:03:31.720 --> 0:03:32.280 to get started. 0:03:32.360 --> 0:03:34.840 Yeah, but you know, I'm always ready to just like 0:03:34.920 --> 0:03:38.360 take off the place. And so you want to know 0:03:38.600 --> 0:03:40.920 where I splurge on money, right exactly? 0:03:40.960 --> 0:03:41.240 Sure. 0:03:41.360 --> 0:03:44.440 Yeah, So I am a long I grew up in 0:03:44.520 --> 0:03:47.440 the Cincinnati area. I lived in New York before the 0:03:47.480 --> 0:03:51.200 pandemic hit. But when the pandemic hit, we had this 0:03:51.280 --> 0:03:54.960 guy named Joe Burrow that the Cincinnati Bengals drafted. Oh yeah, 0:03:55.000 --> 0:03:56.920 and I was already ready to move home, but that 0:03:57.040 --> 0:03:59.320 even made me wanted to get home more. And I 0:03:59.440 --> 0:04:01.360 kind of just had a feeling because I also watched 0:04:01.360 --> 0:04:03.880 college football that we were going to turn it around 0:04:03.920 --> 0:04:05.720 with Joe Burrow. It just kind of felt like it. 0:04:05.760 --> 0:04:08.960 And so my area that I splurge on is anything Bengals. 0:04:09.000 --> 0:04:11.640 I like to go to some road games, you know, 0:04:11.720 --> 0:04:13.920 I like to go to the home games. You know, 0:04:13.960 --> 0:04:17.160 I probably have bought like six or seven jerseys over 0:04:17.160 --> 0:04:21.159 the past, and I'm not you know, I'm a tightwad, 0:04:21.360 --> 0:04:25.080 so you know, and you know, like somebody have a 0:04:25.080 --> 0:04:27.760 big interception, I'll just go by their jersey. So I'm 0:04:27.800 --> 0:04:33.520 feeling splurging more on Cincinnati Bengals just because it feels 0:04:33.520 --> 0:04:35.720 like this is, you know, a rare moment for us 0:04:35.760 --> 0:04:39.240 where we might be all right. Although you know, by 0:04:39.279 --> 0:04:41.799 the time this publishes, we could have lost several games 0:04:41.800 --> 0:04:45.240 and lost. You know it hasn't been off to the 0:04:45.240 --> 0:04:45.800 best start. 0:04:46.080 --> 0:04:49.600 No, that is perfect. I love in particular your tight wad, 0:04:49.600 --> 0:04:51.279 but you are willing to splurge in this way. And 0:04:51.320 --> 0:04:53.480 by the way you said like six or seven jerseys. 0:04:53.480 --> 0:04:57.360 Those jerseys are not like that alone could have been 0:04:58.000 --> 0:04:59.760 on top of it. You at the away games. 0:05:00.160 --> 0:05:02.200 A few of them are official, and then a few 0:05:02.200 --> 0:05:04.000 were like the fifteen dollars from China. 0:05:04.200 --> 0:05:06.080 Nice. So you got to get you get the knockoffs 0:05:06.080 --> 0:05:08.520 where the color is not quite right. It's a I've 0:05:08.520 --> 0:05:10.840 done that before. Matt might have made fun of me. 0:05:10.880 --> 0:05:13.120 I got one from our local soccer team in Atlanta, 0:05:13.200 --> 0:05:16.080 and like the red was definitely a lot more abrasive. 0:05:16.160 --> 0:05:18.040 It was a little pink had a pick here than 0:05:18.120 --> 0:05:22.320 the red. Atlanta United was rocking. But Lance, I feel 0:05:22.320 --> 0:05:24.080 like you caught us up to speed when it came 0:05:24.240 --> 0:05:26.799 to the reaction of housing prices. 0:05:27.000 --> 0:05:30.920 Like I got to the first half, which is house prices. Sure, yeah, Really, 0:05:30.960 --> 0:05:35.320 the thing that a deteriorated affordability wasn't just the house 0:05:35.360 --> 0:05:38.400 price jump. Really, if you break down the math, the 0:05:38.440 --> 0:05:42.120 biggest part is just the historic move up in interest 0:05:42.200 --> 0:05:46.000 rates right, going from two three percent mortgage rates to 0:05:46.160 --> 0:05:50.080 four to five to six percent to seven percent, and 0:05:50.120 --> 0:05:53.080 then you know, this fall to hit that eight handle. 0:05:53.600 --> 0:05:56.159 And when you do the math with the house price 0:05:56.279 --> 0:05:58.919 move and then also the move up in rates and 0:05:58.960 --> 0:06:01.880 the fact that income, the third variable, just hasn't kept 0:06:01.960 --> 0:06:04.800 up over the past three years, what you'll see is 0:06:04.800 --> 0:06:09.080 that we were in the fastest deterioration ever for housing affordability. 0:06:09.440 --> 0:06:11.600 This is the fastest move up in a three year 0:06:11.720 --> 0:06:16.960 period ever. And we also have reached the most expensive 0:06:18.240 --> 0:06:21.839 period for housing this century since two thousand. But really, 0:06:21.920 --> 0:06:25.679 if you go back, this is the most expensive housing 0:06:25.760 --> 0:06:29.080 has been for new home buyers since nineteen eighty four 0:06:29.240 --> 0:06:33.480 and really only beat by eighty one eighty two, when 0:06:33.520 --> 0:06:36.960 mortgage rates were kind of pushing sixteen seventeen eighteen percent 0:06:37.600 --> 0:06:39.920 at the you know, at the peak of Paul Volker's 0:06:40.720 --> 0:06:45.839 interest rate hikes. And so the affordability has really deteriorated quickly, 0:06:46.279 --> 0:06:49.520 not just for housing, but also autos, which saw the 0:06:49.560 --> 0:06:53.400 same overheating for prices and the same rate shock as 0:06:53.440 --> 0:06:58.840 housing did. And the results there are interesting. You know, 0:06:59.160 --> 0:07:02.560 it's not just one you know, it's not all that 0:07:02.680 --> 0:07:04.800 you know, housing is in a bad spot, or housing 0:07:04.839 --> 0:07:07.159 it's in a good spot when you kind of break 0:07:07.400 --> 0:07:10.760 it down. There's a lot going on based on this 0:07:10.840 --> 0:07:16.800 deterioration and affordability for starters. The existing home sales now 0:07:16.960 --> 0:07:19.520 are lower than they were at the bottom of the 0:07:19.760 --> 0:07:25.560 eight ten, nine, ten, twenty eleven crash. And what's happened 0:07:25.720 --> 0:07:29.720 is that affordability has deteriorated so quickly that people with 0:07:29.840 --> 0:07:34.480 two three four percent mortgage rates and their lower monthly 0:07:34.520 --> 0:07:37.520 payments are like, well, why would I sell my home 0:07:37.600 --> 0:07:38.880 and go buy something new? 0:07:39.360 --> 0:07:41.640 Even if you had triplets, You're staying in the two 0:07:41.720 --> 0:07:43.680 two because you don't want to give up the three 0:07:43.720 --> 0:07:44.200 percent rate. 0:07:44.920 --> 0:07:48.040 Yeah, yeah, And so you know, my my wife's pregnant. 0:07:48.040 --> 0:07:50.000 You know, not all our family knows, but hopefully by 0:07:50.040 --> 0:07:54.520 the time publishes we will have told everybody. But we 0:07:54.640 --> 0:07:56.600 have a three bedroom house and this would be our 0:07:56.600 --> 0:07:59.280 third kid, and it just doesn't make sense for us 0:07:59.320 --> 0:08:01.520 to go buy some they knew right now, we'd rather 0:08:01.600 --> 0:08:04.720 just bunk at it because the math doesn't make sense. 0:08:04.840 --> 0:08:07.920 And so you've taken out what I call churn in 0:08:07.960 --> 0:08:11.080 the market, somebody selling to go buy something new, And 0:08:11.120 --> 0:08:16.160 so the existing resale market is just very constrained right 0:08:16.200 --> 0:08:20.160 now because there's not much coming up for sale. So 0:08:20.240 --> 0:08:23.040 that's the first part. The second part is if you 0:08:23.240 --> 0:08:27.680 look at the home construction side, the new side of 0:08:27.720 --> 0:08:30.160 the market, not the existing the new side where the 0:08:30.160 --> 0:08:34.240 home builders play, what they have done is unlike the 0:08:34.280 --> 0:08:37.000 existing side of the market, which has been very sticky 0:08:37.040 --> 0:08:42.119 on prices, the homebuilders have given up some on prices, 0:08:42.480 --> 0:08:45.720 and in particular on a net effective basis for mortgage 0:08:45.800 --> 0:08:48.640 rate buydowns, in particular in markets where there's a lot 0:08:48.720 --> 0:08:53.360 of new construction. Think Austin, Think Boise, think Phoenix, think 0:08:53.400 --> 0:08:55.400 a lot of these places in the South that build 0:08:55.440 --> 0:08:58.200 a lot of homes, and including Dallas. The builders have 0:08:58.280 --> 0:09:00.880 given up some on prices, but they've also done these 0:09:00.920 --> 0:09:04.360 mortgage rate buydowns, and they'll buy people down into the 0:09:04.400 --> 0:09:07.520 five handle and sometimes even into the four handle high 0:09:07.600 --> 0:09:12.240 fours to get people interested or getting them to pull 0:09:12.280 --> 0:09:14.400 the trigger. And so a lot of the people who 0:09:14.440 --> 0:09:17.839 would have normally looked at the existing resale market are 0:09:17.880 --> 0:09:22.160 now looking at the builders and looking there because affordability 0:09:22.240 --> 0:09:25.360 is so deteriorated, and they're the one player in town 0:09:25.960 --> 0:09:31.040 that has made some affordability adjustments, and so new home 0:09:31.160 --> 0:09:35.880 sales have actually rebounded after last year's big or in 0:09:35.920 --> 0:09:38.880 twenty twenty two is big cratering. There was a big 0:09:38.920 --> 0:09:43.280 plummet down in new home sales and a huge spike 0:09:43.320 --> 0:09:47.559 in cancelation rates among builders. But by early twenty twenty three, 0:09:48.080 --> 0:09:50.400 the builders had kind of figured out the right mix 0:09:50.440 --> 0:09:54.200 of incentives, buydowns, and price cuts to bring the buyers 0:09:54.240 --> 0:09:57.840 into the existing market. So new home construction on the 0:09:57.880 --> 0:10:01.600 single family side has been fairly resiling, and we haven't 0:10:01.640 --> 0:10:07.760 seen many layoffs in new and residential construction employment. One 0:10:07.840 --> 0:10:11.720 reason being that, you know, single family sales have rebounded 0:10:11.720 --> 0:10:14.640 in new construction. And then also the fact that there 0:10:14.679 --> 0:10:18.880 is this huge pipeline a multifamily still under construction and 0:10:18.960 --> 0:10:23.520 it was kind of planned back when rates were lower, 0:10:23.640 --> 0:10:26.720 so that's still in the pipeline. And why that matters 0:10:26.840 --> 0:10:31.000 is from an economic perspective, housing is one of the 0:10:31.040 --> 0:10:36.880 areas where the fed's rate policy has normally transmitted into 0:10:36.920 --> 0:10:40.079 the rest of the economy. And so how it's normally 0:10:40.160 --> 0:10:46.800 worked is the FED jack's up rates, affordability deteriorates, new 0:10:46.840 --> 0:10:51.280 home sales fall way down, builders pull back on construction. 0:10:52.760 --> 0:10:54.959 You know, there's some there's a lot of layoffs and 0:10:55.080 --> 0:10:58.920 residential construction employment. Those people spend less than the rest 0:10:58.960 --> 0:11:01.720 of the economy, and that kind of trickles through. We're 0:11:01.720 --> 0:11:05.679 not seeing that right now. We've seen the deterioration and affordability, 0:11:06.000 --> 0:11:10.800 but builders have made the cycle rolled over on affordability 0:11:10.840 --> 0:11:13.480 because they made some affordability adjustments and they were able 0:11:13.520 --> 0:11:18.000 to keep volume transactions and employment moving. 0:11:18.120 --> 0:11:20.200 So that's okay, So quick question, then I think I 0:11:20.240 --> 0:11:23.240 saw so according to data from the Census Bureau, like 0:11:23.360 --> 0:11:26.040 recent permits and starts, they seemed to be down from 0:11:26.080 --> 0:11:27.920 a couple years ago. So it does seem like construction 0:11:28.040 --> 0:11:31.000 has maintained, but as far as new construction, as far 0:11:31.040 --> 0:11:34.000 as new permits, those seemed to be declining compared to 0:11:34.200 --> 0:11:35.560 what we saw a couple of years ago. 0:11:35.960 --> 0:11:39.720 Yeah, there's been some there, but on the single family side, 0:11:40.480 --> 0:11:44.120 the completions have held steady. One of the things that 0:11:44.240 --> 0:11:48.960 was happening during the pandemic is that starts and also 0:11:49.240 --> 0:11:54.959 sales were outstripping the capacity to build, and the time 0:11:55.000 --> 0:11:58.560 to completion for these new homes got really high. And 0:11:58.640 --> 0:12:01.680 so what you've seen is you've seen the sales come 0:12:01.720 --> 0:12:05.199 down from the frothy pandemic tops and the permits come 0:12:05.240 --> 0:12:08.200 down from the frothy pandemic tops. But you have seen 0:12:08.280 --> 0:12:13.560 completions hold steady. And what had to happen there is 0:12:13.600 --> 0:12:17.679 that the time to completion is starting to normalize. Builders 0:12:17.679 --> 0:12:21.080 who are able to build the homes faster, And so 0:12:21.960 --> 0:12:26.400 you know, the hit there hasn't been that big when 0:12:26.480 --> 0:12:29.480 adjusting for how high it got during the pandemic. If 0:12:29.520 --> 0:12:33.200 you compare it to twenty nineteen levels on the starts 0:12:33.200 --> 0:12:35.480 and the permits, you start to get a bit of 0:12:35.480 --> 0:12:36.520 a different story. 0:12:36.640 --> 0:12:39.199 Is part of that that they're building smaller houses? I've 0:12:39.240 --> 0:12:41.600 read more about it seems like new home builds are 0:12:41.840 --> 0:12:43.280 for the first time in a long time, for the 0:12:43.280 --> 0:12:47.000 first time in like fifty sixty years, becoming like smaller 0:12:47.040 --> 0:12:49.800 homes are being built. And that seems to be given 0:12:49.880 --> 0:12:51.959 kind of how things have gotten locked up and affordability 0:12:51.960 --> 0:12:54.160 has become a problem. Maybe that's at least one part 0:12:54.200 --> 0:12:54.760 of a solution. 0:12:55.440 --> 0:12:58.720 Yeah, So what we've seen since really about twenty eighteen 0:12:59.200 --> 0:13:03.280 is that gradually builders have been building smaller homes. We've 0:13:03.360 --> 0:13:05.960 kind of seen a rolling over on the square footage 0:13:06.240 --> 0:13:08.840 for the average home and it's been moving down, not 0:13:09.120 --> 0:13:12.720 just you know, on a national aggregate, but really almost 0:13:12.760 --> 0:13:17.679 every market is getting smaller and that is probably going 0:13:17.760 --> 0:13:21.720 to continue to accelerate now that affordability has just deteriorated 0:13:21.760 --> 0:13:25.120 to the levels it has gotten to. But this has 0:13:25.160 --> 0:13:27.679 been a steady move down, and we're not talking like 0:13:27.920 --> 0:13:32.640 drastic moves. We're talking like two three percent contraction per 0:13:32.760 --> 0:13:35.319 year in square footage. So it adds up, you know, 0:13:35.400 --> 0:13:37.760 if you look at it from now versus twenty eighteen. 0:13:38.160 --> 0:13:40.960 But it's a very gradual move down. 0:13:41.080 --> 0:13:42.920 We're kind of talking about that. I guess overall the 0:13:42.960 --> 0:13:48.040 supply of housing and how that's impacted housing affordability. How 0:13:48.080 --> 0:13:51.080 have investors been impacting what's happening in the in the 0:13:51.120 --> 0:13:53.000 housing market. Do you think the different Wall Street firms 0:13:53.040 --> 0:13:55.720 out there investing in single family homes have they had 0:13:55.760 --> 0:13:58.520 a big effect on the lack of inventory for uner occupants. 0:13:58.880 --> 0:14:03.920 So on a national basis, institutional home buyers those with 0:14:04.160 --> 0:14:07.839 you at least one thousand homes in their inventory. They 0:14:07.920 --> 0:14:11.840 own about zero point seven three percent of the national 0:14:11.880 --> 0:14:15.560 single family housing stock according to Parcel Labs data. So 0:14:15.600 --> 0:14:19.480 they're not a huge amount of the total housing. 0:14:19.160 --> 0:14:21.200 Stock except for where we live here in Atlanta. 0:14:21.280 --> 0:14:25.040 Right, That's what I'm getting to is that in Atlanta 0:14:25.160 --> 0:14:27.800 they own four point four percent of the single family 0:14:27.840 --> 0:14:31.760 housing stock, and if you look at it based on 0:14:31.800 --> 0:14:35.960 a zip code level, there are around eleven zip codes 0:14:36.160 --> 0:14:40.520 in the Atlanta area where they own about half of 0:14:40.600 --> 0:14:45.440 the single family rental stock. And so my view on 0:14:45.880 --> 0:14:50.280 institutional home buyers is that I believe on a nationally 0:14:50.320 --> 0:14:55.320 aggregated basis, they're probably not moving the needle a ton, 0:14:56.200 --> 0:15:00.000 but on a regional basis in a certain specific pockets, 0:15:00.040 --> 0:15:04.280 it's they are probably the marginal home buyer in some 0:15:04.360 --> 0:15:07.320 of these areas where they've kind of all piled into 0:15:07.880 --> 0:15:11.840 and I think with Alanta in particular, they're probably you know, 0:15:11.960 --> 0:15:15.760 running their numbers and they're like, oh, Atlanta has good 0:15:15.840 --> 0:15:21.440 population growth, Oh, Alana has good rental growth. Oh Alana 0:15:21.880 --> 0:15:23.840 has good home appreciation growth. 0:15:24.240 --> 0:15:24.480 Oh. 0:15:24.520 --> 0:15:28.600 And by the way, affordability in Atlanta relative to where 0:15:28.640 --> 0:15:31.240 some of these buyers are coming from is kind of 0:15:31.280 --> 0:15:34.400 in a good spot, and the rent yields just work 0:15:34.440 --> 0:15:36.960 out great. And so a lot of them have probably 0:15:37.080 --> 0:15:40.440 just piled into the market because they're all seeing the 0:15:40.480 --> 0:15:44.320 same aggregate data. That's the view of kind of parcel labs, 0:15:45.160 --> 0:15:47.560 and I think they're probably right, and so I think 0:15:47.600 --> 0:15:52.160 they have an outsized impact in some markets. And I 0:15:52.160 --> 0:15:57.720 think those markets are probably Charlotte, Alana, Tampa, Dallas, Phoenix, 0:15:58.600 --> 0:16:01.080 and I'm missing one more, might you like Houston, but 0:16:01.200 --> 0:16:04.120 really you would probably think Raley and Jacksonville are right 0:16:04.120 --> 0:16:08.720 there too. But those, you know, the states in you know, 0:16:08.800 --> 0:16:10.840 the sun Belt that are kind of like high growth 0:16:10.920 --> 0:16:16.440 states that have good long term outlooks and reasonable state 0:16:16.560 --> 0:16:21.680 laws for you know, for landlords is probably you know 0:16:21.840 --> 0:16:23.640 what they're after, and really at the end of the day, 0:16:23.680 --> 0:16:26.480 it's about those yields. Can they get the returns on 0:16:26.520 --> 0:16:29.080 the capitol they want? And those have been some of 0:16:29.120 --> 0:16:31.320 the markets over the past several years that they've been 0:16:31.320 --> 0:16:34.600 able to And if you zoom out, what occurred during 0:16:34.600 --> 0:16:38.320 the pandemic is we saw a huge rush of investors 0:16:38.840 --> 0:16:41.800 everybody from you know, the mom and pops, the people 0:16:41.840 --> 0:16:46.000 who want to do you know, amateur airbnb folks. And 0:16:46.040 --> 0:16:48.760 then you also saw it on the institutional side. And 0:16:48.840 --> 0:16:52.560 what occurred is there was a very easy access to 0:16:52.640 --> 0:16:56.760 capital during that you know, low rate, high stimulus period. 0:16:57.600 --> 0:17:02.520 There was the low rates, soaring rents and high home appreciation, 0:17:03.120 --> 0:17:05.280 and when you add all those factors in the yields 0:17:05.320 --> 0:17:08.000 were just amazing. And so, you know, a lot of 0:17:08.040 --> 0:17:12.760 the biggest buyers American homes for rent, invitation homes, Amherst Tricon, 0:17:13.040 --> 0:17:16.000 you know, they were out there buying. And now what 0:17:16.040 --> 0:17:19.120 we've seen is we've seen rates move very high, home 0:17:19.160 --> 0:17:23.600 prices have stayed high. Rents relative to home prices are 0:17:23.920 --> 0:17:27.760 very strained, and there's not a lot of inventory on 0:17:27.800 --> 0:17:30.280 the market, and so there's not a lot out there 0:17:30.320 --> 0:17:32.560 available for sale and not a lot of it that 0:17:32.720 --> 0:17:36.000 is out there pencils. And remember these people often spend 0:17:36.040 --> 0:17:39.679 a lot of money on renovations too, and realizations and 0:17:39.720 --> 0:17:43.919 repairs are very expensive. Given the inflationary run and the 0:17:44.000 --> 0:17:48.080 move up and capital cost on that side, we're seeing 0:17:48.160 --> 0:17:50.000 less institutional home buying right now. 0:17:50.160 --> 0:17:53.040 Yeah, you mentioned you mentioned rents, and that is something 0:17:53.119 --> 0:17:57.160 that Yeah, during the really heart of the pandemic, rents 0:17:57.160 --> 0:17:59.800 were skyrocketing, and we had certainly a lot of listeners 0:18:00.000 --> 0:18:01.840 reaching out like what do I do? How do I 0:18:01.840 --> 0:18:05.120 push back against these crazy rent increases? But now rents 0:18:05.200 --> 0:18:08.200 are softening and in fact like falling year over year, 0:18:08.480 --> 0:18:11.760 which is good for what we're talking about the affordability 0:18:12.160 --> 0:18:15.320 for folks who are looking to rent, but that doesn't 0:18:15.359 --> 0:18:18.400 necessarily help home buyers. But I'm curious like to hear 0:18:18.440 --> 0:18:22.119 your thoughts on we have this massive spread now between 0:18:22.119 --> 0:18:24.920 the average cost monthly cost of a mortgage versus the 0:18:24.920 --> 0:18:29.280 monthly cost of rent, especially in places like California. So 0:18:29.920 --> 0:18:33.240 is renting a superior option for so many people who 0:18:33.240 --> 0:18:35.879 are like I want to own a home. Is patients 0:18:36.040 --> 0:18:39.359 the best way to proceed given kind of how much 0:18:39.400 --> 0:18:41.360 cheaper rents are relative to the home. 0:18:41.560 --> 0:18:43.479 Yeah, So I want to be careful here. You know. 0:18:43.560 --> 0:18:44.920 One of the things I try to do in the 0:18:44.960 --> 0:18:47.280 space is be a little bit more of a journalist, 0:18:47.359 --> 0:18:50.000 a little less of an analyst, and try to not 0:18:50.160 --> 0:18:53.040 make too many big predictions. That way, I can, you know, 0:18:53.200 --> 0:18:56.600 kind of spread other people's views and be a good 0:18:56.640 --> 0:18:59.040 place for people to get exposed to a lot of 0:18:59.119 --> 0:19:02.800 different viewpoints. But I will say, in terms of the data, 0:19:03.119 --> 0:19:06.320 we have seen a softening of rents and rent growth. 0:19:06.320 --> 0:19:10.240 That is true. We've seen some falling rents on the 0:19:10.359 --> 0:19:17.800 multifamily side in very big boom towns think Austin, think Boise, Phoenix, 0:19:17.880 --> 0:19:20.760 some of those places with a lot of multifamily inventory 0:19:20.800 --> 0:19:24.399 coming into the market, but we have continued to see 0:19:25.520 --> 0:19:31.760 rising prices for single family rents and you know, invitation 0:19:31.880 --> 0:19:35.280 homes which they own almost ninety thousand single family rentals. 0:19:35.520 --> 0:19:38.440 If you look at their earnings report year over year 0:19:38.520 --> 0:19:42.240 single family rents and there's on average we're up six percent. 0:19:42.800 --> 0:19:46.000 And so I think it's important to remember that there 0:19:46.080 --> 0:19:49.720 is a bifurcation happening throughout all of housing right now, 0:19:50.160 --> 0:19:53.280 and on one of those fault lines is multi versus 0:19:53.280 --> 0:19:57.560 single family and single family it appears, and at least 0:19:57.760 --> 0:19:59.800 among a lot of the investors I also talk to, 0:20:00.280 --> 0:20:03.600 they think there is upward momentum on single family rents. 0:20:04.440 --> 0:20:08.000 And you know, so the last time that the cost 0:20:08.119 --> 0:20:11.960 to buy versus rent got this strained, which right now 0:20:12.280 --> 0:20:16.320 a new monthly mortgage is substantially more expensive than renting 0:20:16.359 --> 0:20:18.760 the same home in most of the country right now. 0:20:19.240 --> 0:20:24.160 The last time that happened was six seven eight, and 0:20:24.680 --> 0:20:30.080 the gap there closed very quickly because house prices crashed 0:20:30.440 --> 0:20:34.960 and rents continued to rise. Now, maybe they're looking through 0:20:35.040 --> 0:20:37.560 rose collared glasses, but a lot of them think that 0:20:37.600 --> 0:20:40.760 there isn't going to be the downward momentum on house 0:20:40.840 --> 0:20:44.360 prices because this time we don't have the toxic mortgages, 0:20:44.720 --> 0:20:47.000 think the ninja loons, we don't have that this time 0:20:47.359 --> 0:20:50.800 like we did in the lead up to THEA crash 0:20:50.920 --> 0:20:53.080 and also in the lead up to the OA crash. 0:20:53.880 --> 0:20:58.720 Active listings inventory had been building for several years and 0:20:58.760 --> 0:21:02.160 there were substantially more on the market, and then when 0:21:02.160 --> 0:21:05.000 you had the foreclosure crisis that occurred in the job 0:21:05.040 --> 0:21:09.400 loss recession, it created this perfect storm to pull house 0:21:09.400 --> 0:21:14.160 prices down. Industry experts now think that's less likely for 0:21:14.320 --> 0:21:18.800 you know, a material correction in house prices, and they're 0:21:18.840 --> 0:21:21.840 talking on a national basis, but they think it's more 0:21:22.000 --> 0:21:26.359 likely that rents will do the work to help to 0:21:26.480 --> 0:21:30.119 narrow the gap. And again, maybe that's rose colored glasses, 0:21:30.480 --> 0:21:34.919 but at least that's the of you that shared a 0:21:34.960 --> 0:21:38.400 lot among the industry. And again i'm talking single family here. 0:21:38.800 --> 0:21:41.919 Multi is a very different story, and there's a tremendous 0:21:41.920 --> 0:21:45.360 amount of supply on the multi family side that's still 0:21:45.400 --> 0:21:48.280 making its way into the market over not just the 0:21:48.320 --> 0:21:52.199 next you know, the last six months, but really twelve 0:21:53.040 --> 0:21:54.040 eighteen months out. 0:21:54.119 --> 0:21:57.560 Still sure that being said, there are still some markets 0:21:57.560 --> 0:22:00.919 that have seen some declines and will actually ask you 0:22:00.960 --> 0:22:03.840 about that as well as some other wisdom hopefully that 0:22:03.880 --> 0:22:05.840 we can give to our listeners on how it is 0:22:05.880 --> 0:22:08.159 that they can go about purchasing a home, especially for 0:22:08.200 --> 0:22:10.080 those first time home buyers. And we'll get to all 0:22:10.080 --> 0:22:11.520 of that right after this. 0:22:19.840 --> 0:22:21.680 Are we're back from the break, we're still talking about 0:22:21.720 --> 0:22:26.320 traversing a broken housing market with expert Lance Lambert. And Lance, 0:22:26.600 --> 0:22:29.639 let's talk about kind of the You've mentioned the term bifurcation. 0:22:29.760 --> 0:22:32.720 And one of the interesting things all real estate is local, right, 0:22:32.760 --> 0:22:36.560 and that can be hyper local in for instance, in 0:22:37.000 --> 0:22:40.040 Atlanta where we live, like certain parts of Atlanta have 0:22:40.080 --> 0:22:43.400 seen outside growth, other parts have seen not nearly as much. 0:22:43.720 --> 0:22:45.919 Or that can be kind of town to town. Some 0:22:46.080 --> 0:22:49.600 towns were boomtowns during COVID. You mentioned Boise and Austin 0:22:49.680 --> 0:22:52.960 being a couple of those. There's a bifurcation there, right, 0:22:53.000 --> 0:22:55.840 some of those. I think you equated Austin to being 0:22:55.880 --> 0:22:59.080 like a meme stock the way kind of it shot 0:22:59.160 --> 0:23:02.000