WEBVTT - The "Big Shift" That's Finally Causing Rents to Fall 0:00:10.119 --> 0:00:14.040 Hello, and welcome to another episode of the Odd LODs podcast. 0:00:14.080 --> 0:00:17.560 I'm Joe Wisenthal and I'm Tracy Halloway. Tracy, you know 0:00:17.600 --> 0:00:22.840 what I'm not looking forward to? Uh, it could be 0:00:22.880 --> 0:00:25.319 any number of things, but what Well, I got a 0:00:25.360 --> 0:00:30.000 pretty I got a decent price on a rental in 0:00:30.120 --> 0:00:33.360 my where I live in Manhattan, moved during the pandemic. 0:00:33.400 --> 0:00:35.880 I did, like, I got a pretty good pandemic deal, 0:00:36.560 --> 0:00:39.280 and I am not looking forward and I think, like, 0:00:39.479 --> 0:00:41.920 you know, yeah, pretty good rent. I'm not. I'm worried 0:00:41.920 --> 0:00:44.600 that at some point, like the cut, my landlord will 0:00:44.840 --> 0:00:47.520 perceive that like there's a gap between what we're paying 0:00:47.720 --> 0:00:49.640 and what the market prices are, and that my rent 0:00:49.640 --> 0:00:51.839 bill is going to shoot up. Well, i got a 0:00:52.320 --> 0:00:56.640 not very good deal on a rental post pandemic last year, 0:00:56.720 --> 0:00:59.440 and I've already gotten my one year, um like rench 0:00:59.520 --> 0:01:03.720 renewal notice and it was an automatic five percent pay increase, 0:01:03.840 --> 0:01:06.640 which kind of sucks. Yeah that's not great. But wait, 0:01:06.680 --> 0:01:08.840 you did you did negotiate with them a little bit? 0:01:09.160 --> 0:01:12.480 I did. I said, I said, is there any way 0:01:12.480 --> 0:01:16.360 we could compromise on the rent, to which their response was, uh, 0:01:16.560 --> 0:01:20.399 they k not seventy five dollars off of their used 0:01:20.640 --> 0:01:23.640 off their proposed hikes. I'm saving myself seventy five dollars 0:01:23.640 --> 0:01:26.440 a month, which relative to the counterfeits I am. I 0:01:26.480 --> 0:01:30.679 am grateful for the gesture. However, relative to um the 0:01:30.760 --> 0:01:35.920 substantial New York rent, um, it's not it's not that much. 0:01:36.319 --> 0:01:38.720 I tried, so we know that, Like, all right, So 0:01:38.760 --> 0:01:41.360 obviously rent is really important for all kinds of reasons. 0:01:41.400 --> 0:01:44.319 It's another one of these highly salient prices that people pay. 0:01:44.360 --> 0:01:48.000 It's a huge component of the inflation measures. What we 0:01:48.160 --> 0:01:51.080 know about the measures of rent seemed to be two things. 0:01:51.240 --> 0:01:55.400 One is various private sector measures seemed to have been 0:01:55.440 --> 0:01:58.520 turning down for a while. That's clear, And it also 0:01:58.640 --> 0:02:01.680 seems like um uh, it's only a matter of time 0:02:01.760 --> 0:02:04.840 before that feeds into the official measures that the Fed 0:02:04.920 --> 0:02:06.960 likes to look at. We had a good episode last 0:02:07.040 --> 0:02:09.639 year with Sharif talking about why there's that gap and 0:02:09.720 --> 0:02:12.880 how to think about reconciled these two measures. But like, 0:02:13.080 --> 0:02:15.040 how far is it going to come down? Will there'll 0:02:15.040 --> 0:02:17.200 be a year in which our rent doesn't go up 0:02:17.240 --> 0:02:19.280 at all? Well, other people and other parts of the 0:02:19.320 --> 0:02:21.480 country seat rent. This is like a huge topic We've 0:02:21.520 --> 0:02:24.000 never actually done like a pure rent episode as far 0:02:24.040 --> 0:02:26.040 as I know, No, we haven't. And there are all 0:02:26.080 --> 0:02:28.560 these interesting little things you can start to pick out 0:02:28.560 --> 0:02:31.160 of the topic. So, for instance, you know, in New York, 0:02:31.280 --> 0:02:33.360 maybe rents are starting to come down now, but not 0:02:33.520 --> 0:02:36.160 nearly as quickly as in other parts of the country. 0:02:36.440 --> 0:02:39.639 New York is a big part of rent c P 0:02:39.880 --> 0:02:42.840 I right, and so if New York prices stay sticky, 0:02:43.120 --> 0:02:46.400 it could have an overall effect on on national rent prices. 0:02:46.680 --> 0:02:49.600 And also I'm I'm interested in talking also about some 0:02:49.680 --> 0:02:52.040 of the big picture developments that we have seen in 0:02:52.080 --> 0:02:54.520 the space. You know, people talk a lot about private 0:02:54.560 --> 0:02:57.720 equity moving into multy family housing, whether or not that's 0:02:57.760 --> 0:03:01.560 pushing up prices, uh, the impact to new technology as 0:03:01.600 --> 0:03:05.480 well on how landlords actually come up with the prices 0:03:05.520 --> 0:03:08.440 that they charge people for their buildings. Lots to talk about. Well, 0:03:08.440 --> 0:03:10.919 you know, and we did talk about this recently with Connerson, 0:03:11.000 --> 0:03:13.200 who I thought made a really fascinating point, which is 0:03:13.240 --> 0:03:18.000 that like the rent apartment rent specifically multi family housing, 0:03:18.400 --> 0:03:20.840 it just has gone from strength to strength over the 0:03:20.919 --> 0:03:22.840 last like fifteen years. You know, It's like after the 0:03:22.880 --> 0:03:25.440 Great Financial Crisis, no one's gonna want to own a 0:03:25.440 --> 0:03:29.000 home anymore. Let's rent um millennials don't want to live 0:03:29.000 --> 0:03:30.840 in the suburbs. Let's move to the city and rent 0:03:30.919 --> 0:03:35.320 millennials are delaying having kids, let's you know, no reason 0:03:35.360 --> 0:03:39.280 to you know more rent. Like at every turn, multi 0:03:39.280 --> 0:03:42.280 family dwellings have won, and there's this boom. And if 0:03:42.320 --> 0:03:45.240 you do a chart showing construction and multi family versu 0:03:45.280 --> 0:03:49.120 construction and single family, single families totally slump, never got 0:03:49.160 --> 0:03:52.480 even backed anywhere near like pre crisis levels, whereas multi 0:03:52.480 --> 0:03:55.440 family just keeps booming. Is that a permanent figure could 0:03:55.520 --> 0:03:58.080 like there be like this sort of like Minsky moment 0:03:58.560 --> 0:04:01.840 for multi family in floor rental options where it's like 0:04:01.920 --> 0:04:04.160 the lux suddenly runt right, and so much of the 0:04:04.200 --> 0:04:07.320 market right now housing in general, so single family plus 0:04:07.400 --> 0:04:10.280 multi family, so much of the outlook is predicated on 0:04:10.280 --> 0:04:13.120 what you think is going to happen to supply and capacity. 0:04:13.240 --> 0:04:15.680 So that is really a key question. Are the multi 0:04:15.680 --> 0:04:19.240 family homes going to keep getting built? Well, let's talk 0:04:19.240 --> 0:04:21.640 about it with someone who can answer all of these 0:04:21.720 --> 0:04:24.240 questions for us. We're going to be speaking with Chris Salviati. 0:04:24.320 --> 0:04:28.440 He is the senior Housing economist at Apartment List. He's 0:04:28.440 --> 0:04:30.680 going to answer our questions. Chris, thank you so much 0:04:30.720 --> 0:04:32.800 for coming on odd Lots. Hi thanks so much for 0:04:32.839 --> 0:04:35.920 having me on. So Chris, can I ask my landlord 0:04:35.960 --> 0:04:38.320 for a rent cut when in the next couple of months? Like, 0:04:38.440 --> 0:04:42.400 is it is that reasonable? Well, I guess it depends 0:04:42.400 --> 0:04:44.279 when you sign your least show. It sounds like you 0:04:44.440 --> 0:04:47.560 got kind of one of those pandemic deals that you know, 0:04:47.600 --> 0:04:49.880 particularly in New York City, that was one of the 0:04:49.920 --> 0:04:53.440 markets where friends actually really sharply in that first year 0:04:53.480 --> 0:04:57.080 of the pandemic. So we are really seeing the market 0:04:57.200 --> 0:04:59.640 having turned a corner a little bit over these past 0:04:59.680 --> 0:05:03.599 few Prices have been coming down for four straight months 0:05:03.640 --> 0:05:06.520 now in our our national rent index. But you know, 0:05:06.800 --> 0:05:11.240 if you're still paying that late level, then you might 0:05:11.279 --> 0:05:16.840 not necessarily eligible for a discount that. So when we 0:05:16.920 --> 0:05:19.680 say rents are going down, and I saw on your 0:05:19.680 --> 0:05:22.880 Twitter feed, I think you have the national median rent 0:05:23.120 --> 0:05:27.880 down now three from its August peak, what does that 0:05:27.920 --> 0:05:31.800 actually mean? Like, how are we actually putting together a 0:05:31.960 --> 0:05:35.200 national or you know, even a city rent price. And 0:05:35.480 --> 0:05:37.960 I guess my question really is when when prices start 0:05:38.000 --> 0:05:41.239 to move like that, how much of it is reflected 0:05:41.360 --> 0:05:44.839 in the actual figures that people are paying for their apartments. 0:05:45.279 --> 0:05:48.840 The way that we calculate our price index, it's basically 0:05:48.880 --> 0:05:52.280 a repeat transaction index, and so we can see, you know, 0:05:52.400 --> 0:05:56.040 on our platform, we're able to track individual units over time, 0:05:56.120 --> 0:05:58.760 so we can see for all of the apartments that 0:05:58.800 --> 0:06:02.360 we're listed on apartment List for rent this month and 0:06:02.480 --> 0:06:05.160 that subsequently got rented, we can look back and see 0:06:05.400 --> 0:06:07.520 when was the last time that that exact unit was 0:06:07.560 --> 0:06:10.960 rented previously. Compare those two prices and see how much 0:06:11.040 --> 0:06:14.240 that price changed for that individual unit, which really you know, 0:06:14.320 --> 0:06:18.720 controls for sort of quality across the inventory, and then 0:06:18.760 --> 0:06:23.320 we basically aggregate those up for the individual geography, whether 0:06:23.320 --> 0:06:26.440 that be a city level or national level index. Uh. 0:06:26.440 --> 0:06:28.960 And our national index is basically just an aggregation of 0:06:29.000 --> 0:06:32.000 all the inventory that we see across the country. And 0:06:32.040 --> 0:06:34.320 so that you know, three percent discount that we talked 0:06:34.320 --> 0:06:38.400 about and starting from the August peak to present that 0:06:38.400 --> 0:06:41.520 that should be reflective of what folks are seeing if 0:06:41.520 --> 0:06:43.400 you're going out on the market and signing a new lease. 0:06:44.200 --> 0:06:46.760 So as an economist, I mean, you know, I guess 0:06:46.760 --> 0:06:50.120 like there's like, uh, the index construction as you described it, 0:06:50.200 --> 0:06:52.800 I'm sure it's a you know, I'm sure that's a 0:06:52.839 --> 0:06:56.080 pretty tricky technical challenge. And you know that we had 0:06:56.120 --> 0:06:59.599 that conversation last year at Olmer Sharief. There's these coming 0:06:59.640 --> 0:07:02.520 up with the price index is never trivial, even if 0:07:02.560 --> 0:07:05.880 it's just like a sort of like repeat methodology. But 0:07:06.000 --> 0:07:12.080 I'm curious, like, as an UH, from a modeling perspective, like, okay, 0:07:12.120 --> 0:07:14.760 strength of the consumer, strength of the labor market has 0:07:14.800 --> 0:07:18.080 got to be like one important factor. People are losing jobs, 0:07:18.400 --> 0:07:21.280 people's wages are going down. There's like a got to 0:07:21.320 --> 0:07:24.520 be a limit to how much rent price increase can 0:07:24.560 --> 0:07:28.000 be sustained. What else goes into that supply Like, how 0:07:28.000 --> 0:07:30.480 do you think about sort of like modeling a forecast 0:07:30.520 --> 0:07:32.760 for the price of rent? Yeah, you know, I mean 0:07:32.800 --> 0:07:36.480 I think in the highest level framework, it is, as 0:07:36.480 --> 0:07:39.560 you said, kind of a demand and supply question. I 0:07:39.600 --> 0:07:43.160 think when we talk about housing, you know, obviously the 0:07:43.280 --> 0:07:47.800 supply response UH is a lot more prolonged than it 0:07:47.880 --> 0:07:49.640 is maybe in some other markets. You know, it takes 0:07:49.640 --> 0:07:53.720 a long time to permit and get construct new construction built, 0:07:53.760 --> 0:07:56.240 and so in the shorter term, you know, I think 0:07:56.280 --> 0:07:59.000 the kind of the big up and down swings that 0:07:59.040 --> 0:08:01.920 we see are really driven by demand. And when we're 0:08:01.920 --> 0:08:05.440 talking about demand here, it's really household formation. You know, 0:08:05.480 --> 0:08:08.000 how many new people are striking out on their own 0:08:08.080 --> 0:08:11.360 and forming new households. Uh. And obviously when we're talking 0:08:11.400 --> 0:08:15.520 about the rental market in particular, there's also the dynamics 0:08:15.680 --> 0:08:20.360 of how that household formation kind of interacts between the 0:08:20.360 --> 0:08:23.520 for sale and the rental side of the market. So, uh, 0:08:23.560 --> 0:08:26.960 you know, right now what we're seeing obviously sky high 0:08:26.960 --> 0:08:29.600 mortgage rates, things are really difficult on the for sale 0:08:29.680 --> 0:08:32.600 side as well, and so folks are staying in rental 0:08:32.679 --> 0:08:37.640 units for longer. That creates lightness, but the overall household 0:08:37.640 --> 0:08:41.439 formation numbers, you know, if we go back to that's 0:08:41.480 --> 0:08:44.440 when that was really uh, you know, taking off, and 0:08:44.480 --> 0:08:47.120 when we saw the really astronomical rent hikes over the 0:08:47.120 --> 0:08:50.120 past year and particularly the past few months, that's really 0:08:50.160 --> 0:09:09.679 started to slow down quite a bit. So one thing 0:09:09.679 --> 0:09:13.839 I've always wondered our our rent hikes and rent decreases 0:09:14.040 --> 0:09:17.000 sort of asymmetrical in the sense that rents tend to 0:09:17.040 --> 0:09:19.640 go up a lot faster than they come down. This 0:09:19.720 --> 0:09:22.320 is my you know, at the risk of risk of 0:09:22.880 --> 0:09:25.720 being very biased here, but my personal experience with rent 0:09:26.200 --> 0:09:28.680 is that it tends to go up and doesn't tend 0:09:28.720 --> 0:09:32.800 to come down as much. Is that actually the case? Yeah, 0:09:33.000 --> 0:09:35.400 you know what, when we looked at our rent index 0:09:35.520 --> 0:09:38.960 over time, it's definitely the case that it tends to 0:09:38.960 --> 0:09:42.440 to march upward rather than downward. We do see it 0:09:42.520 --> 0:09:45.000 is typical to see a little bit of a decline 0:09:45.160 --> 0:09:48.360 in the late fall and winter months. There's just a 0:09:48.360 --> 0:09:51.920 pretty clear seasonal pattern to rent friends and fewer folks 0:09:51.960 --> 0:09:55.079 move in the winter, so properties that do have vacancies 0:09:55.120 --> 0:09:58.240 to fill will often offer modest discounts at that time 0:09:58.280 --> 0:10:01.680 of year. But again, at is really just kind of 0:10:01.880 --> 0:10:06.360 a temporary seasonal trend. And uh you know at UM, 0:10:06.960 --> 0:10:10.480 once activity picks back up, rent growth tends to turn 0:10:10.600 --> 0:10:15.000 positive again, and that positive growth almost always outweighs those 0:10:15.040 --> 0:10:18.920 seasonal declines. You know, our our rent index goes back 0:10:18.960 --> 0:10:22.240 to seventeen so we don't have a huge history, but 0:10:22.320 --> 0:10:25.600 at least over those years, we've never seen a year 0:10:25.679 --> 0:10:29.560 in which uh nominal rent growth has been negative. Even 0:10:29.600 --> 0:10:32.960 if you go back to the aftermath of the Great 0:10:33.000 --> 0:10:36.080 Recession and you look at rent cp I over that period, 0:10:36.160 --> 0:10:39.120 you know, it was basically flat or we didn't really 0:10:39.160 --> 0:10:43.520 see much of a nominal decline there either. So just 0:10:43.559 --> 0:10:46.160 on this topic, I imagine that you must speak to 0:10:46.520 --> 0:10:51.559 landlords on on a fairly regular basis. What's the decision 0:10:51.679 --> 0:10:54.959 process for them, like when it comes to setting the rents, 0:10:55.040 --> 0:10:57.160 Like what are they looking at? What are the different 0:10:57.280 --> 0:11:00.679 factors that might go into them actually pulling the trigger 0:11:00.840 --> 0:11:04.600 on either a substantial rent hike or some sort of decline. 0:11:05.240 --> 0:11:07.360 You know, I should say, a lot of the inventory 0:11:07.480 --> 0:11:10.360 that we have an apartment list in particular, and that 0:11:10.400 --> 0:11:13.040 feeds into our r in in index. Uh, it does 0:11:13.160 --> 0:11:16.439 tend to skew towards a particular segment of the market, 0:11:16.480 --> 0:11:20.880 that being you know, the large professionally managed multifamily complexes. 0:11:20.920 --> 0:11:23.960 So thinking here of you know, big apartment buildings that 0:11:23.960 --> 0:11:28.360 that have fifty or more units, and so those professionally 0:11:28.360 --> 0:11:32.240 managed buildings tend to be pretty sophisticated and how they 0:11:32.240 --> 0:11:37.000 set prices. Uh, And actually there are price setting algorithms 0:11:37.040 --> 0:11:40.320 softwares that kind of tend to come bundled along with 0:11:40.440 --> 0:11:43.840 property management softwares, and so a lot of these properties 0:11:43.880 --> 0:11:46.720 are are actually you know, using these kind of algorithmic 0:11:46.760 --> 0:11:51.040 price setting techniques where you know, the software that they're 0:11:51.120 --> 0:11:55.439 using is also uh kind of integrated with various other 0:11:55.480 --> 0:11:57.520 properties throughout the market, and so they have a lot 0:11:57.559 --> 0:12:01.160 of really good real time data, you know, those demand 0:12:01.240 --> 0:12:03.400 changes as I see them in real time. And so 0:12:03.760 --> 0:12:05.800 I think, you know, when we're talking about this professionally 0:12:05.800 --> 0:12:09.120 managed segment, I think it can be pretty sophisticated. Obviously, 0:12:09.200 --> 0:12:10.920 at the other end of the spectrum, you've got you know, 0:12:10.960 --> 0:12:13.600 your your kind of mom and pop landlord's folks who 0:12:13.640 --> 0:12:16.920 maybe only own a couple of rental units, and I 0:12:17.360 --> 0:12:20.480 think that segment of the market maybe the considerations are 0:12:20.800 --> 0:12:24.080 a little bit different, probably a little bit slower to 0:12:24.160 --> 0:12:28.920 respond to those market changes, and also probably a greater 0:12:29.000 --> 0:12:33.240 emphasis on just wanting to avoid vacancies and have intenants 0:12:33.240 --> 0:12:34.800 that will be there for a long time. So it 0:12:34.880 --> 0:12:36.760 definitely varies based on, you know, the part of the 0:12:36.760 --> 0:12:39.520 market that you're talking about actually wanted to bring. I mean, 0:12:39.720 --> 0:12:41.920 it's sort of getting a little bit away from the macro, 0:12:42.160 --> 0:12:45.440 but that's fine, you know, Like it's always seems to 0:12:45.480 --> 0:12:48.280 me when I think about this question, which is that 0:12:48.840 --> 0:12:53.400 if you have a a tenant who is both um 0:12:53.800 --> 0:12:58.000 good at like regularly paying their bills, is not regularly late, 0:12:58.080 --> 0:12:59.640 has never had an issue where they need to be 0:13:00.040 --> 0:13:02.280 did or something. It seems like there must be like 0:13:02.320 --> 0:13:04.800 a pretty big risk in pricing them out because a 0:13:05.440 --> 0:13:09.000 like it doesn't take very long of a vacant apartment. 0:13:09.120 --> 0:13:11.160 It would seem to me it wouldn't take very long 0:13:11.400 --> 0:13:13.120 to lose a lot of the games you would get 0:13:13.120 --> 0:13:14.880 from the rent pricing crease. So if you have like 0:13:14.920 --> 0:13:17.720 a month vacancy, that's a lot of lost money. And 0:13:17.760 --> 0:13:19.720 then there's the wild card of like, okay, then you 0:13:19.800 --> 0:13:21.840 fill it. But what if the person who comes in 0:13:22.080 --> 0:13:24.040 is like not great about paying the rent, They're gonna 0:13:24.240 --> 0:13:27.600 damage the place. And so I'm curious like whether some 0:13:27.640 --> 0:13:30.440 of the software these pricing decisions like take it to 0:13:30.520 --> 0:13:34.640 account about like existing tenant quality and the potential like 0:13:34.800 --> 0:13:37.280 cost of losing them. Yeah, you know, that's a great 0:13:37.360 --> 0:13:41.320 question as far as kind of the the algorithmic portion 0:13:41.400 --> 0:13:44.439 of it. You know, those are sort of proprietary algorithms, 0:13:44.480 --> 0:13:45.960 and you know there's not something that you know, we 0:13:46.000 --> 0:13:48.600 had apartment lists, we don't have kind of version of that. 0:13:48.679 --> 0:13:52.080 So I don't actually have a good sense of whether 0:13:52.160 --> 0:13:54.080 or not you know, this dynamic that we're talking about 0:13:54.080 --> 0:13:56.000 as far as kind of kind of quality, I'm not 0:13:56.040 --> 0:13:59.400 sure exactly how that kind of factors into those algorithmic 0:13:59.440 --> 0:14:01.559 price setting, but as you said, you know, I think 0:14:01.559 --> 0:14:05.719 this is definitely uh unimportant variable. I think in particular, 0:14:05.800 --> 0:14:08.080 like I said, when we're referring to the kind of 0:14:08.080 --> 0:14:12.640 the mom and pop segments of the of the rental space, 0:14:12.760 --> 0:14:16.040 I think that's probably you know, factoring a lot more 0:14:16.080 --> 0:14:19.600 heavily into their decision making if you've got you know, 0:14:19.640 --> 0:14:23.600 if you're if you're a big property owner that has 0:14:23.800 --> 0:14:27.440 hundreds of units and you lose you know, one good 0:14:27.440 --> 0:14:30.360 tenant and have a vacancy that maybe sits for a 0:14:30.400 --> 0:14:33.320 few months, that's not going to really affect the bottom 0:14:33.360 --> 0:14:35.640 line as much as if you have you know, a 0:14:35.640 --> 0:14:38.320 single duplex and and one of your tenants leaves and 0:14:38.400 --> 0:14:41.080 you have a vacancy for months or have a bad 0:14:41.120 --> 0:14:43.880 experience with a tenant. And so I think that's also why, 0:14:44.120 --> 0:14:46.080 you know, maybe prices tend to be a little bit 0:14:46.080 --> 0:14:50.600 stickier for in those kind of smaller rental properties as well. 0:14:50.640 --> 0:14:52.720 You know, if those mom and pop landlords do get 0:14:52.760 --> 0:14:54.880 a good tenant in I think they want to keep 0:14:54.920 --> 0:14:57.200 that person there as long as possible, and so maybe 0:14:57.240 --> 0:15:00.720 they're a little bit more hesitant to um to really 0:15:00.880 --> 0:15:03.320 raise prices. Sing that again we Tracy, I just want 0:15:03.360 --> 0:15:09.239 to point out I really like my landlord. She's very attentive, 0:15:09.400 --> 0:15:12.440 with a very good relationship. So even though I started 0:15:12.440 --> 0:15:15.200 the episode saying I was anxious, if she is listening 0:15:15.680 --> 0:15:19.800 to this, I hope she hears that I really enjoy 0:15:19.880 --> 0:15:24.080 where we live and I really enjoy our the landlord, 0:15:24.120 --> 0:15:30.960 she should factor your consistency into her pricing algorithm. Yes, yes, exactly, excellent, Okay, Chris, 0:15:31.080 --> 0:15:33.720 just on this topic, I mean, I do find this fascinating. 0:15:33.720 --> 0:15:36.880 So let me ask about this in a slightly different way, 0:15:36.920 --> 0:15:40.560 which is, over the past few years, given the rise 0:15:40.640 --> 0:15:44.200 of some of these algorithmic pricing services, given also the 0:15:44.360 --> 0:15:46.960 rise of the number of big landlords who seem to 0:15:46.960 --> 0:15:49.920 be moving into the multifamily space or becoming a bigger 0:15:50.000 --> 0:15:54.680 part of that space, do you see an impact on prices? So, 0:15:54.720 --> 0:15:57.800 for instance, are they more volatile, more reactive than they 0:15:57.960 --> 0:16:00.080 used to be when we maybe had a run a 0:16:00.240 --> 0:16:03.720 landscape that was more about small, mom and pop landlords. 0:16:04.680 --> 0:16:06.920 That definitely could be the case that we're seeing a 0:16:06.960 --> 0:16:10.240 little bit more of volatility, kind of bigger swings in 0:16:10.520 --> 0:16:14.600 either direction in rent prices. I think one one kind 0:16:14.600 --> 0:16:16.760 of piece of evidence that's maybe kind of interesting and 0:16:16.800 --> 0:16:20.280 relevant here. Um, the Cleveland Fed actually put out a 0:16:20.320 --> 0:16:24.840 really interesting working paper recently where they dugged into you know, 0:16:24.960 --> 0:16:28.000 you mentioned kind of briefly that this difference between the 0:16:28.000 --> 0:16:30.760 trends that you would see in our rent indexperts what's 0:16:30.760 --> 0:16:35.080 happening in the official CPI measures, uh, and so this 0:16:35.160 --> 0:16:38.920 paper was really meant to kind of like disentangle those differences. 0:16:39.000 --> 0:16:42.880 And so what they did was essentially take the underlying 0:16:42.920 --> 0:16:47.120 micro data that feeds into the official CPI estimates and 0:16:47.240 --> 0:16:51.240 reconstructed an alternate index. That's you're using a methodology similar 0:16:51.280 --> 0:16:54.840 to how apartment List and other kind of private sector 0:16:54.960 --> 0:16:58.640 sources calculate our rent indexes, so essentially looking at you know, 0:16:58.760 --> 0:17:01.680 rather than all households, looking at only new tenants, and 0:17:01.800 --> 0:17:05.160 using kind of a repeat rent methodology similar to ours. 0:17:05.880 --> 0:17:10.440 And so what that found was basically that this kind 0:17:10.440 --> 0:17:14.520 of new index that they constructed, uh follows a very 0:17:14.520 --> 0:17:17.439 similar trend to what we see in our index, but 0:17:17.840 --> 0:17:20.560 the swings are a little bit less extreme, And I 0:17:20.600 --> 0:17:25.280 do think that probably this comes down to the difference 0:17:25.320 --> 0:17:27.879 in sample. As I said, you know, the apartmentless index 0:17:27.960 --> 0:17:32.960 is heavily skewed towards this large, professionally managed segment of 0:17:33.000 --> 0:17:36.280 the market, whereas the l S data is designed to 0:17:36.320 --> 0:17:38.960 be representative of the market as a whole. And so 0:17:39.359 --> 0:17:43.719 that kind of suggests to me that we are seeing, 0:17:43.760 --> 0:17:46.320 you know, a bit of kind of what you described, 0:17:46.440 --> 0:17:50.360 that these uh, that a large professionally managed buildings are 0:17:50.400 --> 0:17:53.360 going to be a little bit more reactive in their pricing, 0:17:53.520 --> 0:17:56.560 and that those uh, those swings, as I said, you know, 0:17:56.600 --> 0:17:59.119 when when rents are going up, they might go up 0:17:59.119 --> 0:18:01.320 a little bit quicker when they're going down with that 0:18:01.359 --> 0:18:04.359 seasonal trend, those those winter tips might be a little 0:18:04.359 --> 0:18:07.159 bit more pronounced as well. Um, you know it is 0:18:07.200 --> 0:18:09.040 it could also be the case that there is maybe 0:18:09.080 --> 0:18:13.439 just different demand dynamics happening at different segments of the market. 0:18:13.480 --> 0:18:15.480 So this might not all come down to just that 0:18:15.600 --> 0:18:19.040 kind of algorithmic pricing alone, but I do think it's 0:18:19.040 --> 0:18:22.200 certainly a factor there. Well, let's talk a little bit 0:18:22.240 --> 0:18:26.800 more about the picture right now and what's happening, because 0:18:27.040 --> 0:18:29.560 so we've had we had this huge rent boom. Everyone 0:18:29.600 --> 0:18:33.000 knows the price of rent surge, especially basically all the measures, 0:18:33.000 --> 0:18:36.480 private measures, public measures, etcetera. Everything went up a lot. 0:18:36.680 --> 0:18:38.520 But it seems like there are a number of factors 0:18:38.600 --> 0:18:40.280 now that and we've touched on some of them that 0:18:40.320 --> 0:18:44.159 are reversing. So the labor market is slowing, wage growth 0:18:44.280 --> 0:18:46.800 is slowing, new job creation is not what it was 0:18:47.000 --> 0:18:51.200 a year ago. Household formation, as you mentioned that ship 0:18:51.359 --> 0:18:54.959 that boomed, and now there's already some talk about like, okay, 0:18:54.960 --> 0:18:57.639 well maybe like people are getting roommates again, which as 0:18:57.680 --> 0:18:59.720 we talked about I think it was with them James 0:18:59.760 --> 0:19:02.800 E in the dats A factor and shrinking household formation. 0:19:02.840 --> 0:19:05.520 I didn't understand all these terms until just a few 0:19:05.560 --> 0:19:07.440 months ago when we talked about that. But so that's 0:19:07.440 --> 0:19:10.920 shrinking household formation and then you know, and talked about 0:19:10.920 --> 0:19:14.760 it in the intro the the part the multi family 0:19:14.800 --> 0:19:18.800 industry just like booming, and those those construction numbers haven't 0:19:18.800 --> 0:19:20.840 really don't seem to have slowed down at all yet. 0:19:21.160 --> 0:19:23.439 And so like, how much of like a sort of 0:19:23.480 --> 0:19:26.639 like confluence of factors could there be or how unusual 0:19:26.760 --> 0:19:29.440 the situation could be where there's a number of potential 0:19:29.520 --> 0:19:33.240 drivers of reduced demand, and at the same time the 0:19:33.320 --> 0:19:35.919 supply creation has been off the charts, Like, what do 0:19:35.960 --> 0:19:41.159 you see happening with this combo of drivers. Yeah, you know, 0:19:41.240 --> 0:19:44.840 as I said, we've been seeing already that our national 0:19:44.840 --> 0:19:48.080 rent index has been declining for the past four months. 0:19:48.080 --> 0:19:49.919 You know, as I said, that all in and of 0:19:49.960 --> 0:19:53.760 itself isn't necessarily a typical but the decline that we've 0:19:53.800 --> 0:19:58.200 been seeing recently has been notably sharper than than the 0:19:58.280 --> 0:20:01.399 usual seasonal trend. And so it seem like like some 0:20:01.480 --> 0:20:05.240 of these factors are finally kind of colliding and coming 0:20:05.280 --> 0:20:08.000 to fruition in a way that's really resulting in a 0:20:08.000 --> 0:20:10.320 big shift in the market. And I do think, you know, 0:20:10.800 --> 0:20:13.160 it's really kind of the things that you just laid 0:20:13.160 --> 0:20:15.720 out there. On the demand side, things really are cooling 0:20:15.720 --> 0:20:19.320 down quite a bit obviously, you know, after a year 0:20:19.560 --> 0:20:24.000 plus of extreme skyrocketing grunt growth as well as just 0:20:24.119 --> 0:20:27.680 broad based inflation eating way at non housing budgets, folks 0:20:27.720 --> 0:20:29.760 are finding that their budgets just aren't going as far, 0:20:29.840 --> 0:20:32.480 and so fewer folks are able to afford to strike 0:20:32.480 --> 0:20:35.199 out on their own. Also with you know, kind of 0:20:35.320 --> 0:20:37.600 as you said, kind of a cooling labor market where 0:20:37.640 --> 0:20:41.159 session fears even people that maybe could currently afford to 0:20:41.160 --> 0:20:44.439 strike out there on their own are possibly delaying those moves, 0:20:44.600 --> 0:20:49.040 And so demand has really cooled down significantly. And on 0:20:49.080 --> 0:20:52.120 the supply side, we are seeing really, as you said, 0:20:52.160 --> 0:20:56.200 a historic boom there. We've got right now more multifamily 0:20:56.280 --> 0:21:00.000 units under construction that than at any point since nineteen seven. 0:21:00.560 --> 0:21:02.960 A lot of that supply is expected to hit the market, 0:21:04.640 --> 0:21:07.159 and so I do think that, you know, we we 0:21:07.200 --> 0:21:12.040 aren't necessarily expecting to see a prolonged slide in rents, 0:21:12.080 --> 0:21:15.080 but I think these days of you know, extreme brain 0:21:15.160 --> 0:21:18.760 froth are definitely behind us. Why is that construction boom 0:21:19.000 --> 0:21:22.639 happening because for the past few years you would have expected, 0:21:23.240 --> 0:21:25.440 I mean, we talk a lot about on the show 0:21:25.480 --> 0:21:29.040 about supply chain issues how that impacted housing. You saw 0:21:29.040 --> 0:21:33.400 the big gap between single family housing starts and completions 0:21:33.520 --> 0:21:37.280 supposedly because of a lot of supply chain issues. At 0:21:37.280 --> 0:21:41.040 a minimum, you would have expected some big multi family 0:21:41.400 --> 0:21:45.240 builders or investors to have a more uncertain outlook for 0:21:45.280 --> 0:21:47.520 the past two or three years. But that doesn't seem 0:21:47.560 --> 0:21:51.000 to have translated into any sort of construction slowdown. So 0:21:51.040 --> 0:21:53.879 why is that? You know, I think despite kind of 0:21:53.880 --> 0:21:56.320 the factors that you mentioned, the the outlook for multi 0:21:56.359 --> 0:22:01.680 family has continued to remain pretty strong. And I think 0:22:01.760 --> 0:22:04.679 even as we talk about the market slowing down a 0:22:04.720 --> 0:22:08.119 little bit over these past few months, that's still a 0:22:08.240 --> 0:22:11.480 very minor decline when we think about it relative to 0:22:11.520 --> 0:22:13.880 what's happened over the past couple of years. So prices 0:22:14.400 --> 0:22:18.920