WEBVTT - Economic Cheat Codes for Everyday Life w/ Daryl Fairweather #971 0:00:00.080 --> 0:00:02.960 Welcome to How to Money. I'm Joel, I'm Matt, and 0:00:02.960 --> 0:00:06.280 today we're talking economic cheat codes for everyday life with 0:00:06.400 --> 0:00:07.200 Darryl Fairweather. 0:00:26.600 --> 0:00:29.800 Yeah, we are joined today by Darryl Fairweather, who is 0:00:29.840 --> 0:00:33.239 the chief economist over at Redfinn. Everybody knows about Redfinn. 0:00:33.680 --> 0:00:36.640 Before that, she was the senior economist at Amazon. And 0:00:36.720 --> 0:00:40.320 before that she was a researcher at the Federal Reserve 0:00:40.360 --> 0:00:44.080 Bank of Boston, and she worked with Freakonomics author Steven 0:00:44.159 --> 0:00:47.519 Levitt stepping back in time there. But now she has 0:00:47.600 --> 0:00:49.479 a new book that just came out, that actually came 0:00:49.520 --> 0:00:52.960 out last week, Hate the Game Economic Cheat Codes for Life, 0:00:53.040 --> 0:00:55.560 Love and Work, and Man. This book is all about 0:00:55.600 --> 0:00:59.280 helping folks to use game theory and behavioral science to 0:00:59.320 --> 0:01:01.760 lay out all the options as we approach these inevitable 0:01:01.760 --> 0:01:04.560 forks in the road in the road of life, like 0:01:04.840 --> 0:01:07.440 getting married and having kids or not doing those things, 0:01:08.040 --> 0:01:10.160 going for a promotion or looking for a new job, 0:01:10.280 --> 0:01:12.399 whether or not you should move. You know, these are 0:01:12.440 --> 0:01:15.160 like run of the mill, low stakes decisions we have 0:01:15.200 --> 0:01:17.880 to make a Lafe Joel. Basically, Daryl is wanting to 0:01:17.880 --> 0:01:20.680 help folks to win at whatever game in life. That 0:01:20.680 --> 0:01:22.760 they're playing, and we're excited to talk about all of 0:01:22.800 --> 0:01:25.320 that and more today. Darryl, thank you for joining How 0:01:25.360 --> 0:01:25.760 to Money. 0:01:25.880 --> 0:01:26.880 Thank you so much for having me. 0:01:27.400 --> 0:01:30.080 Oh we're stoked for this conversation, Darryl. First question, though, 0:01:30.120 --> 0:01:31.959 we ask everybody who comes on, what do you like 0:01:31.959 --> 0:01:33.960 to suplore John? For Matt and I, it's craft beer. 0:01:34.000 --> 0:01:35.320 I mean, we got a couple of other things in our 0:01:35.360 --> 0:01:37.200 arsenal that we like to spend money on too, but 0:01:37.240 --> 0:01:39.680 craft beer has been one of those mainstays. What is 0:01:39.720 --> 0:01:43.080 it that you spend money on? Maybe egregiously, but you're 0:01:43.120 --> 0:01:45.120 still hey, doing the smart thing, saving the investing for 0:01:45.160 --> 0:01:45.840 your future too. 0:01:46.240 --> 0:01:49.920 I definitely have a lot of subscriptions, Like streaming subscriptions 0:01:49.960 --> 0:01:51.440 is one of those where I'm like, do I really 0:01:51.520 --> 0:01:54.240 need to be subscribed to all these different services? And 0:01:54.280 --> 0:01:57.280 then I even have a Whoop subscription, which is like 0:01:57.360 --> 0:02:01.160 tracking my sleep and tracking my workout. And I'm a 0:02:01.240 --> 0:02:05.000 data junkie, so part of you know, spending money every 0:02:05.000 --> 0:02:08.120 month to collect data on myself is definitely feeding into that. 0:02:08.360 --> 0:02:11.400 But yeah, I question why I spend so much money. 0:02:11.400 --> 0:02:13.080 I could be doing it by hand. I could just 0:02:13.120 --> 0:02:15.040 be like paying attention more. I don't know if I 0:02:15.080 --> 0:02:18.120 need really the Whoop, but yeah, I keep it. 0:02:18.360 --> 0:02:20.320 I didn't know that you had to. Yeah, is that right? 0:02:20.320 --> 0:02:21.240 You have to set up for a year. I was 0:02:21.240 --> 0:02:22.720 talking to a buddy and he was just like, well, 0:02:22.960 --> 0:02:24.839 I did the Whoop thing, so I'm going to see 0:02:24.840 --> 0:02:26.640 it to the end of the to the subscription. What 0:02:26.720 --> 0:02:28.239 is like the timeframe there? Because Joel and I both 0:02:28.240 --> 0:02:31.400 have garments and it's totally free, but I'm guessing that 0:02:31.440 --> 0:02:33.839 there's additional data that you're getting with Whoop. Yeah. 0:02:33.840 --> 0:02:35.880 With Woop, I think it's like I think it's like 0:02:35.919 --> 0:02:37.360 thirty dollars a month, and then they give you a 0:02:37.360 --> 0:02:39.600 discount if you sign up for an entire year, and 0:02:39.560 --> 0:02:40.960 then I think they give you a discount when you're 0:02:41.000 --> 0:02:44.680 first signing up and buying the device. I had friends 0:02:44.720 --> 0:02:46.919 who had them, and I got in with like their 0:02:46.960 --> 0:02:49.320 little competitions, and yeah, I got roped in and now 0:02:49.360 --> 0:02:52.079 I'm locked in. I've had it for years now. 0:02:52.160 --> 0:02:54.480 It's amazing how there's like a social media aspect of 0:02:54.520 --> 0:02:56.640 fitness these days. Like I feel that with the garment, 0:02:56.720 --> 0:02:59.200 like my friends have garments were I'll see like the 0:02:59.240 --> 0:03:02.120 stuff that they're up to, and I just never thought, 0:03:02.639 --> 0:03:04.400 I don't know, I guess I didn't suspect those going 0:03:04.480 --> 0:03:06.280 to be the case. It is interesting, and then you're 0:03:06.360 --> 0:03:09.880 kind of tied into this network effect of the whoop now, 0:03:09.960 --> 0:03:12.640 which I don't know. Giving that up is feels like 0:03:12.639 --> 0:03:15.519 more than just get relieving yourself of a monthly payment. 0:03:15.639 --> 0:03:17.320 Yeah, it's really easy for me to justify it too, 0:03:17.320 --> 0:03:19.840 because it's for my health, Like I'm spending money on 0:03:19.880 --> 0:03:22.120 my health. That's a good thing. But yeah, I don't 0:03:22.120 --> 0:03:24.280 know when I think it's in terms of all the 0:03:24.280 --> 0:03:27.360 subscriptions I have, that's the one that costs more than 0:03:27.400 --> 0:03:30.280 the others and feels kind of the most frivolous. 0:03:31.000 --> 0:03:31.800 All right, I. 0:03:31.800 --> 0:03:35.440 Would have expected like the Netflix subscription or Apple Plus. 0:03:35.520 --> 0:03:37.400 Now that severance is, Yeah. 0:03:37.200 --> 0:03:39.680 I'm not cutting those those are mandatory. 0:03:39.960 --> 0:03:44.120 Yeah, i'volous. Must have something else. Actually, on a personal 0:03:44.200 --> 0:03:47.360 note that you're into, you're an avid board gamer. Yeah, 0:03:47.400 --> 0:03:49.080 like it comes up a few times in your book, 0:03:49.160 --> 0:03:50.960 So I guess another small thing here, do you have 0:03:51.000 --> 0:03:53.880 any favorite board games? And maybe make the link between 0:03:54.240 --> 0:03:59.200 the decision making process matrix, the gaming process and economics 0:03:59.280 --> 0:04:00.360 kind of bridge that for us. 0:04:00.480 --> 0:04:02.880 Yes, I got into board games back in college and 0:04:02.920 --> 0:04:06.120 graduate school, playing with a lot of economists all the time, 0:04:06.280 --> 0:04:08.480 and we're very competitive with our board games because I 0:04:08.480 --> 0:04:11.200 think that we think about the costs and benefits the 0:04:11.240 --> 0:04:14.120 same way we think about a lot of things in life. 0:04:14.320 --> 0:04:16.240 The games that I like the most, there's one called 0:04:16.360 --> 0:04:19.680 Castles of Burgundy. If there are any Euro game fans 0:04:19.680 --> 0:04:23.400 out there, you're kind of building your little, your little 0:04:23.440 --> 0:04:27.520 fiefdom with tiles and you're playing against another person. I 0:04:27.560 --> 0:04:29.159 like that game because I'm good at it. Any game 0:04:29.160 --> 0:04:29.920 that I'm good at. 0:04:30.080 --> 0:04:33.200 That's try to like any game I win frequently come 0:04:33.240 --> 0:04:35.440 in for that. I played Castles of Burgundy once, but 0:04:35.480 --> 0:04:37.080 it's been a minute, and I just don't play as 0:04:37.120 --> 0:04:39.440 many board games as I used to. But every year 0:04:39.600 --> 0:04:42.200 when we take our annual How the Money family vacation, 0:04:42.680 --> 0:04:44.560 we lond up a few board games we end. Lately, 0:04:44.600 --> 0:04:46.240 we've been playing a lot of Acchoir. Have you ever 0:04:46.279 --> 0:04:46.800 played that one? 0:04:46.920 --> 0:04:47.120 Yeah? 0:04:47.120 --> 0:04:48.719 I have that board game. It's actually in my stack 0:04:48.800 --> 0:04:49.279 right behind me. 0:04:49.400 --> 0:04:51.240 It's a really good one. Nice. I love that she's 0:04:51.240 --> 0:04:51.760 got a stack. 0:04:51.920 --> 0:04:56.120 Yeah, Like most economists have nerdy textbooks, and she's got 0:04:56.120 --> 0:04:59.000 those two. But yeah, the predominant feature in the bookshelf 0:04:59.120 --> 0:04:59.720 stack of games. 0:04:59.760 --> 0:04:59.960 It does. 0:05:00.000 --> 0:05:01.680 I like, I got to go to bed earlier than 0:05:01.680 --> 0:05:03.920 ever before, and so late night board game sessions it's 0:05:04.000 --> 0:05:05.880 very harder to come by, but I missed those days. 0:05:05.880 --> 0:05:08.000 They're so fun. Daryl. 0:05:08.080 --> 0:05:10.760 Let's talk about your book, and specifically a book that 0:05:10.800 --> 0:05:13.039 had an influence on you before you started writing this 0:05:13.080 --> 0:05:16.680 book was Freakonomics. It feels like, as someone who you 0:05:16.760 --> 0:05:18.679 kind of write about this. At the beginning of your book, 0:05:18.960 --> 0:05:22.880 you were an aspiring economist. Freakonomics pushed you further in 0:05:22.880 --> 0:05:26.000 that direction, and maybe your family wasn't so thrilled about 0:05:26.040 --> 0:05:26.320 that too. 0:05:26.360 --> 0:05:26.760 Is that right? 0:05:27.080 --> 0:05:31.200 Yes, Freakonomics came out twenty years ago, believe it or not, 0:05:31.480 --> 0:05:34.080 and that was the same time that I was getting 0:05:34.120 --> 0:05:37.240 ready to go to college. I had always been interested 0:05:37.360 --> 0:05:39.640 in math and science, and I thought that's what I 0:05:39.680 --> 0:05:42.440 was going to pursue. That's why I applied to MIT. 0:05:42.680 --> 0:05:45.280 I was headed to MIT, but then on the way 0:05:45.320 --> 0:05:47.680 to MIT, my dad hands me the book of Freakonomics 0:05:47.720 --> 0:05:49.960 and just says, like, hey, this guy, you know, he 0:05:50.080 --> 0:05:52.359 went to MIT, maybe you'd be interested in this. So 0:05:52.400 --> 0:05:54.960 I read the book on the plane ride there and 0:05:55.200 --> 0:05:56.760 immediately I was like, this is what I wanted to do. 0:05:57.240 --> 0:05:58.719 I was, I felt like I was. 0:05:59.000 --> 0:05:59.880 I was always. 0:05:59.560 --> 0:06:02.560 Interested in the way that people behave, but it was 0:06:02.600 --> 0:06:04.320 just really hard for me to wrap my head around 0:06:04.360 --> 0:06:06.919 it without the math part, which is what I was 0:06:06.920 --> 0:06:10.080 also interested in. But Economics really brings it together. It 0:06:10.120 --> 0:06:14.280 applies this mathematical framework, this analytical framework, to the way 0:06:14.279 --> 0:06:17.000 that people interact with one another, and all those interactions 0:06:17.000 --> 0:06:19.320 make up the economy. And that book was just the 0:06:19.320 --> 0:06:21.160 one that kind of broke it opened for me and 0:06:21.200 --> 0:06:23.719 made me realize what economics is. It's not just about 0:06:23.880 --> 0:06:27.960 the stock market or GDP, It's really about human behavior. 0:06:28.640 --> 0:06:31.880 Yeah. I like how you mentioned how economists are essentially 0:06:31.880 --> 0:06:35.720 like profits and they explain human behavior and basically how 0:06:35.720 --> 0:06:37.320 the world works, which I've never really thought about it 0:06:37.320 --> 0:06:39.080 that way, where you're just kind of it almost allows 0:06:39.120 --> 0:06:41.560 you to like peer into the future and make pretty accurate, 0:06:42.040 --> 0:06:45.640 I guess predictions as to what might happen on that note. Well, 0:06:45.680 --> 0:06:46.920 I'm not going to ask you to make a prediction, 0:06:46.960 --> 0:06:49.640 I guess, but maybe just the current state of the 0:06:49.640 --> 0:06:52.600 housing market. You're the chief economists over there at redfin 0:06:53.320 --> 0:06:55.760 and this is a massive question. But what's going on 0:06:56.160 --> 0:06:58.159 when it comes to housing just the current state of 0:06:58.200 --> 0:07:00.880 things prices? Can you touch on that for a minute. 0:07:00.920 --> 0:07:05.640 The housing market has been distorted since at least the pandemic. 0:07:05.640 --> 0:07:07.919 I mean, you can argue it goes even farther back 0:07:07.960 --> 0:07:11.800 to the foreclosure crisis in the Great Recession, but I'll 0:07:11.800 --> 0:07:14.840 start with the pandemic. During the pandemic, interest rates fell 0:07:14.920 --> 0:07:17.480 to record lows, which made borrowing to buy a home 0:07:18.080 --> 0:07:21.000 historically cheap, and anybody who could buy a home was 0:07:21.040 --> 0:07:23.600 buying a home. People were buying multiple homes, people were 0:07:23.600 --> 0:07:26.640 buying vacation homes, people were moving because of remote work, 0:07:26.960 --> 0:07:29.119 and we had all us activity in the housing market. 0:07:29.200 --> 0:07:32.520 But then by twenty twenty three, inflation was the problem, 0:07:32.560 --> 0:07:35.600 not unemployment, and so the Federal Reserve had to raise 0:07:35.640 --> 0:07:39.240 interest rates that sent mortgage rates high. They increased by 0:07:39.280 --> 0:07:44.760 like the highest percentage historically, and home buying became unaffordable. 0:07:45.080 --> 0:07:48.480 Like it was a very sharp turn. And now homeowners 0:07:48.480 --> 0:07:50.480 don't want to sell because they were able to refinance 0:07:50.520 --> 0:07:52.760 into record loan mortgage rates during the pandemic, so their 0:07:52.800 --> 0:07:56.000 payments are still quite cheap, so they don't want to 0:07:56.000 --> 0:07:57.800 give that up because if they got gave it up 0:07:57.840 --> 0:07:59.440 and bought again, they would have to buy at these 0:07:59.440 --> 0:08:02.320 really high ends. So nobody wants to sell. People don't 0:08:02.360 --> 0:08:04.040 want to buy because interest rates are high, and it's 0:08:04.040 --> 0:08:08.280 just more affordable to rent right now in most metro areas. 0:08:08.720 --> 0:08:10.600 So we're just stuck in this place where there's very 0:08:10.640 --> 0:08:14.000 few transactions happening. Home values are remaining high, though, because 0:08:14.000 --> 0:08:16.520 it's both supply and demand that have pulled back. It's 0:08:16.560 --> 0:08:18.880 not like during the Great Recession, where there was no 0:08:18.960 --> 0:08:20.840 demand but there was still lots of supply and that 0:08:20.920 --> 0:08:24.280 caused values to fall. Values are still propped up by 0:08:24.280 --> 0:08:26.880 the fact that homeowners don't want to give up their homes. 0:08:27.040 --> 0:08:29.360 So we're just kind of stuck right now, and it's 0:08:29.360 --> 0:08:32.920 going to take interest rates falling or you know, new 0:08:32.960 --> 0:08:36.360 construction really taking off in order for this to break free. 0:08:36.480 --> 0:08:38.000 So you say that we're kind of stuck, and I 0:08:38.000 --> 0:08:40.360 think you're right. It does feel like just everything ground 0:08:40.360 --> 0:08:42.600 to a halt in the housing market. But when it 0:08:42.640 --> 0:08:45.960 comes to the and I think crisis is an overused term, 0:08:46.000 --> 0:08:48.800 but maybe the affordability crisis in housing, Are there any 0:08:48.840 --> 0:08:50.760 signs of relief? I'm going to look at a city 0:08:50.800 --> 0:08:54.160 like Austin and you see pretty significant declines at least 0:08:54.320 --> 0:08:56.920 in the amount of rent that can be asked year 0:08:57.000 --> 0:08:59.959 over year. But then there are and that's due to 0:09:00.320 --> 0:09:03.400 it seems like a cutting back of red tape. What 0:09:03.480 --> 0:09:07.080 do you see moving forward when it comes to rent 0:09:07.160 --> 0:09:10.320 and housing prices, and is that in a very city 0:09:10.320 --> 0:09:10.800 of the city. 0:09:11.040 --> 0:09:13.440 Austin is a great example of a place that where 0:09:13.480 --> 0:09:18.280 demand increase during the pandemic, and because building is allowed there, 0:09:18.400 --> 0:09:19.880 it's just easier to build there than is in other 0:09:19.920 --> 0:09:22.720 parts of the country. We saw an increase in new construction, 0:09:23.080 --> 0:09:26.320 and that increase in supply made it possible for rents 0:09:26.400 --> 0:09:29.360 to come back down after they had gone up in 0:09:29.400 --> 0:09:32.080 other parts of the country, like in California, when demand 0:09:32.120 --> 0:09:34.320 goes up, it just leads to higher prices because supply 0:09:34.520 --> 0:09:37.920 can't react, and that's largely due to regulations like single 0:09:38.000 --> 0:09:42.559 family zoning and the permitting processes that are there. So 0:09:43.120 --> 0:09:44.760 I think the lesson from that is that you have 0:09:44.800 --> 0:09:47.360 to make it easy to build because you know the 0:09:47.360 --> 0:09:49.120 next time there's going to be an increase in demand, 0:09:49.200 --> 0:09:51.400 either when rates fall or the economy is just doing 0:09:51.440 --> 0:09:54.920 really well, it will inevitably lead to higher prices unless 0:09:54.920 --> 0:09:58.240 we see an increase in supply reacting to it. So 0:09:58.360 --> 0:10:00.240 I think a lot of states of like made progress there, 0:10:00.240 --> 0:10:02.360 but there's still a lot of progress to be made. 0:10:02.640 --> 0:10:04.120 Yeah. Well, so, I mean, as you touched on supply, 0:10:04.200 --> 0:10:07.480 I think about the wildfires out in California and even 0:10:07.800 --> 0:10:11.320 Hurricane Helene damaged something like eighty I think around eighty 0:10:11.360 --> 0:10:14.280 thousand homes kind of along its path of destruction. How 0:10:14.320 --> 0:10:18.520 does something like that impact the supply of homes? Obviously 0:10:18.800 --> 0:10:20.520 you got homes that are completely destroyed and so they're 0:10:20.520 --> 0:10:23.160 not available, But even damaged homes, I feel like, at 0:10:23.240 --> 0:10:25.160 least temporarily, it kind of takes them off the market. 0:10:25.200 --> 0:10:28.440 Is that something that feels more localized or does that 0:10:28.480 --> 0:10:31.400 have larger impacts on the supply of housing across the 0:10:31.440 --> 0:10:32.120 country as well? 0:10:32.600 --> 0:10:35.920 It does have large impacts. We're already in a vulnerable 0:10:35.960 --> 0:10:40.839 position because of how unaffordable housing is. So climate change 0:10:40.840 --> 0:10:45.720 is inevitably going to make housing even less affordable because 0:10:45.920 --> 0:10:49.360 the cost of maintenance is going to increase with changing 0:10:49.360 --> 0:10:53.160 weather patterns. Like homes that were built for certain climates 0:10:53.440 --> 0:10:56.479 and then the climate changes, they need to be retrofitted 0:10:56.880 --> 0:11:00.560 and then it also makes insurance more expensive, and it 0:11:00.640 --> 0:11:03.240 literally like pulls homes out of the supply of housing 0:11:03.240 --> 0:11:06.199 if they're destroyed and then not be built. So all 0:11:06.200 --> 0:11:09.120 of that just makes housing more expensive, and we're seeing 0:11:09.160 --> 0:11:11.600 that in California how insurance premiums are going up. Insurance 0:11:11.600 --> 0:11:14.280 premiums are also going up in Florida and in Texas. 0:11:15.040 --> 0:11:16.640 But there are certain parts of the country where the 0:11:16.640 --> 0:11:21.360 climate could potentially become more appealing and values will go 0:11:21.440 --> 0:11:23.880 up as people decide to move to those places. So 0:11:24.200 --> 0:11:26.200 it really is going to have an effect on the 0:11:26.360 --> 0:11:30.000 entire country. There is no neighborhood that isn't going to 0:11:30.040 --> 0:11:32.160 be impacted one way or the other by climate change, 0:11:32.200 --> 0:11:34.000 and their housing markets are going to be impacted too. 0:11:34.640 --> 0:11:37.079 It's like if Minnesota becomes a little more balmby here, 0:11:37.320 --> 0:11:39.800 it starts to look a little more appealing. Oh, the 0:11:39.800 --> 0:11:41.880 Great Lakes. I've never been up there, but it seems 0:11:41.960 --> 0:11:44.280 quite nice now we're not frozen over half the year. 0:11:44.440 --> 0:11:45.240 It might be interested. 0:11:45.600 --> 0:11:48.319 I'm curious too, Darrell. Something else that was proposed recently, 0:11:48.400 --> 0:11:52.240 a Trump administration proposal was to use federal lands to 0:11:52.320 --> 0:11:55.480 build more housing supply, And is that going to make 0:11:55.520 --> 0:11:57.960 a dent in the housing issues that we have in 0:11:57.960 --> 0:12:01.240 this country because obviously applying demand like we just don't 0:12:01.280 --> 0:12:04.720 have enough supply. We're millions of units short, it seems. 0:12:05.080 --> 0:12:08.120 But on the other side, is the supply coming where 0:12:08.160 --> 0:12:08.840 it's most needed. 0:12:09.360 --> 0:12:12.720 Federal land tends to be in parts of the country 0:12:12.920 --> 0:12:17.360 that don't have access to amenities like city amenities. They 0:12:17.400 --> 0:12:19.200 might not even have access to roads to begin with. 0:12:19.240 --> 0:12:21.920 So I think developing, yeah, that kind of land, it's 0:12:22.600 --> 0:12:24.160 not the high value land. If it was high value, 0:12:24.160 --> 0:12:26.079 it wouldn't be federal land. It would have already there 0:12:26.120 --> 0:12:28.280 would have already been a push to develop it. So 0:12:28.360 --> 0:12:31.560 I think that it's not really solving the real problem, 0:12:31.600 --> 0:12:34.040 which is how expensive housing is. In the most productive 0:12:34.080 --> 0:12:36.760 cities in the United States, like New York, Los Angeles, 0:12:36.800 --> 0:12:40.920 San Francisco, there is some federal land in those areas. 0:12:40.960 --> 0:12:44.040 It's like post offices and federal buildings, and I think 0:12:44.040 --> 0:12:47.960 that the idea of densifying those types of buildings and 0:12:48.600 --> 0:12:51.840 allowing there to be mixed use housing, mixed use development 0:12:51.880 --> 0:12:53.679 with like a federal building and then housing on top 0:12:53.720 --> 0:12:55.960 of it, I think is a really interesting idea that 0:12:56.000 --> 0:12:58.080 we should just allow. I think the default should be 0:12:58.120 --> 0:13:01.120 that we allow housing on more lots of land, especially 0:13:01.360 --> 0:13:03.160 if it's near places that people want to live. 0:13:03.400 --> 0:13:05.840 Yeah, just by default say yes, and then if there's problems, 0:13:05.840 --> 0:13:08.080 we'll figure it out. That seems much more appealing to 0:13:08.120 --> 0:13:12.000 me than living in an Oppenheimer like desert town that 0:13:12.040 --> 0:13:13.760 gets erected in Utah or something. 0:13:13.520 --> 0:13:14.520 Like that in New Mexico. 0:13:14.600 --> 0:13:17.240 But right, yeah, which is what I pictured, beautiful hours 0:13:17.679 --> 0:13:18.720 in the middle of nowhere. 0:13:19.240 --> 0:13:21.000 But I like the idea of the post office being 0:13:21.040 --> 0:13:22.920 on the bottom floor of like a high rise. Like 0:13:22.960 --> 0:13:26.280 think about that. That sounds like maybe what you're suggesting, Darryl. 0:13:26.360 --> 0:13:29.000 Right, yes, yes, talk to us about the rule of 0:13:29.000 --> 0:13:31.480 thumb for a housing budget. You talk about this in 0:13:31.559 --> 0:13:35.680 chapter five of your new book. But has your advice 0:13:35.800 --> 0:13:39.800 on that changed as we have seen cost rise faster 0:13:39.880 --> 0:13:41.319 than we've seen wages go up. 0:13:41.480 --> 0:13:43.680 The rule of thumb is that you shouldn't spend more 0:13:43.720 --> 0:13:47.720 than thirty percent of your pre tax income on housing. 0:13:48.120 --> 0:13:51.079 But the reality is that the majority of renters are 0:13:51.120 --> 0:13:54.160 spending more of that on their rent. So I think 0:13:54.240 --> 0:13:57.160 that that was the rule of thumb, you know, fifteen 0:13:57.200 --> 0:13:59.600 twenty years ago, and people were able to meet that, 0:13:59.679 --> 0:14:02.480 but now a lot of people just it just feels 0:14:02.480 --> 0:14:04.280 like so out of reach for them. So what I 0:14:04.320 --> 0:14:08.040 advise people to do is to go through their spending 0:14:08.080 --> 0:14:10.320 habits on a monthly basis, like pull it up your 0:14:10.360 --> 0:14:13.559 credit card transactions or your bank statements, or use software 0:14:13.600 --> 0:14:15.960 that's out there, and just look at how much you're 0:14:15.960 --> 0:14:17.960 spending on each category. And then when you're thinking about 0:14:17.960 --> 0:14:21.160 moving somewhere new, think about how all those categories could change, 0:14:21.200 --> 0:14:23.840 because it's not just the housing payment. If you're moving 0:14:23.840 --> 0:14:26.360 somewhere with public transit, you might not be spending money 0:14:26.400 --> 0:14:29.160 on your car or on gas anymore. Or if you're 0:14:29.160 --> 0:14:32.560 moving somewhere that's smaller, then maybe your energy bill is 0:14:32.600 --> 0:14:35.280 not going to be as big compared to somewhere that's larger. 0:14:35.360 --> 0:14:39.040 So I think every category deserves evaluation and taken in 0:14:39.160 --> 0:14:41.920 and taken in because that thirty percent rule is really, just, 0:14:42.000 --> 0:14:45.200 like I think, more something that academics use to understand 0:14:45.240 --> 0:14:47.800 how many people are struggling. But at a personal level, 0:14:47.800 --> 0:14:50.520 you just have to make do with what options are 0:14:50.560 --> 0:14:51.280 available to you. 0:14:51.600 --> 0:14:54.440 Yeah, I realized I'm asking this question of someone who 0:14:54.960 --> 0:14:58.000 is an economist at a real estate website. But I 0:14:58.000 --> 0:15:00.360 think in this country, at least, home ownership like this 0:15:00.440 --> 0:15:03.160 ride of passage for a lot of people, and the 0:15:03.160 --> 0:15:06.400 majority of individual wealth is often tied to equity in 0:15:06.520 --> 0:15:08.840 a home, which we don't think is a good thing, 0:15:08.920 --> 0:15:11.920 but it's a reality. Have we just overly deified home 0:15:11.960 --> 0:15:14.000 ownership in the US. Is that part of the problem. 0:15:14.040 --> 0:15:17.760 We've made home ownership seem like it's a prerequisite to 0:15:17.800 --> 0:15:18.720 live the American dream? 0:15:19.120 --> 0:15:20.840 Yes, And I think it like goes back to the 0:15:20.880 --> 0:15:23.880 founding of our country how people with property were the 0:15:23.920 --> 0:15:26.800 ones who are allowed to vote initially. It's it's just 0:15:26.840 --> 0:15:31.000 seen as like a step into having wealth or being 0:15:31.040 --> 0:15:32.680 in the middle class when you own property, and the 0:15:33.600 --> 0:15:35.880 first piece of property that people own is typically their 0:15:35.920 --> 0:15:39.920 own home. So yeah, I think that there's really, from 0:15:39.960 --> 0:15:45.000 an economic standpoint, no reason to glorify housing. It's actually, 0:15:45.800 --> 0:15:48.440 you know, unadvisable to put all of your money into 0:15:48.520 --> 0:15:51.640 one undiversified asset. You can see that with climate risk. 0:15:52.240 --> 0:15:54.560 So if we reimagine like how we want people to 0:15:54.600 --> 0:15:58.000 build wealth and look at all the different ways to 0:15:58.040 --> 0:16:00.320 invest besides home ownership, I think we'd be a better 0:16:00.320 --> 0:16:02.080 position as an economy. 0:16:02.320 --> 0:16:03.120 Totally agree. 0:16:03.720 --> 0:16:06.600 When you buy a home, though, like you're oftentimes doing 0:16:06.600 --> 0:16:09.880 it for personal reasons, not necessarily from like a wealth 0:16:09.880 --> 0:16:14.360 building standpoint that although that is a positive proxy results. Yeah, yeah, 0:16:14.400 --> 0:16:16.600 but I guess when you are looking at it as 0:16:16.600 --> 0:16:19.840 a primary residence, Like one of the problems when it 0:16:19.840 --> 0:16:21.560 comes to especially like when you're bidding on a house 0:16:21.600 --> 0:16:24.760 is getting emotionally attached and you say to watch out 0:16:24.800 --> 0:16:27.520 for that, which is it's easier than done. But do 0:16:27.560 --> 0:16:31.920 you have any tips for avoiding like envisioning ourselves in 0:16:32.000 --> 0:16:34.040 a home as you're going out there as your house shopping, 0:16:34.680 --> 0:16:37.720 because that can lead to perhaps, yeah, maybe you overpaying 0:16:37.720 --> 0:16:38.560 for that house. Yes. 0:16:39.000 --> 0:16:41.240 My My first piece of advice is to do a 0:16:41.280 --> 0:16:44.480 lot of your thinking before you even start your home search, 0:16:45.120 --> 0:16:49.000 setting your budget, talking to a mortgage lender to understand, 0:16:49.000 --> 0:16:51.320 like if you what you qualify in terms of your loan, 0:16:51.720 --> 0:16:54.640 going through whatever your must haves versus your nice to havebs, 0:16:54.640 --> 0:16:57.760 looking at homes that are available for salor that recently sold, 0:16:57.760 --> 0:17:00.880 an understanding if your budget makes sense given what is 0:17:00.880 --> 0:17:04.240 that you want, and then start your home search with 0:17:04.280 --> 0:17:05.880 an idea in mind of like this is how much 0:17:05.920 --> 0:17:07.560 I'm going to pay and these are the home features 0:17:07.600 --> 0:17:10.240 that are most important to me. When you find the 0:17:10.240 --> 0:17:12.600 home that fits all that criteria and you're starting to 0:17:12.640 --> 0:17:15.080 fall in love, I would definitely advise you to slow down, Like, 0:17:15.119 --> 0:17:20.680 don't start imagining Thanksgiving dinners or happy family memories there 0:17:20.680 --> 0:17:22.480 because it's not your home yet, and there are going 0:17:22.560 --> 0:17:24.760 to be other people, yeah, making offers on this home, 0:17:25.040 --> 0:17:27.040 and you could get in a situation where you end 0:17:27.119 --> 0:17:30.399 up overbidding because you are already become attached to it. 0:17:30.440 --> 0:17:32.640 And there's a lot of behavioral economics research about how 0:17:32.920 --> 0:17:35.959 once you own something, you tend to overvalue it. So 0:17:36.680 --> 0:17:38.800 just kind of stay attached. Yeah, it's not yours yet, 0:17:38.880 --> 0:17:40.080 that's my biggest advice. 0:17:40.320 --> 0:17:44.520 Okay, yeah, I think so, like a true economist, remove 0:17:44.560 --> 0:17:47.479 the emotion, remove those feelings, right, look at the numbers. 0:17:48.480 --> 0:17:49.920 One of the things you just mentioned in there too 0:17:50.200 --> 0:17:53.439 was talking to a mortgage broker. And this is one 0:17:53.440 --> 0:17:56.320 of those things that I feel like it's so underplayed, 0:17:56.960 --> 0:17:59.960 is to talk to a few different lenders and get 0:18:00.119 --> 0:18:02.119 quotes because of how much it can save you. Like, 0:18:02.160 --> 0:18:04.560 the stakes are so high, so much higher than almost 0:18:04.600 --> 0:18:07.080 anything else we buy, than really anything else we buy. 0:18:07.119 --> 0:18:09.399 So let's say you go to a credit union to 0:18:09.440 --> 0:18:11.879 get a loan for a car instead of getting it 0:18:11.920 --> 0:18:15.960 at the dealership. Sure, save a couple percentage points on 0:18:16.480 --> 0:18:18.600 the APR right at the rate of the loan, But 0:18:19.160 --> 0:18:22.240 when it comes to your mortgage loan, just because of 0:18:22.280 --> 0:18:24.479