1 00:00:02,720 --> 00:00:16,400 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:18,560 --> 00:00:22,639 Speaker 2: Hello and welcome to another episode of The Odd Lots Podcast. 3 00:00:22,720 --> 00:00:25,279 Speaker 3: I'm Joe Wisenthal and I'm Tracy Alloway. 4 00:00:25,480 --> 00:00:30,280 Speaker 2: You know, obviously, obviously we're a little distracted these days 5 00:00:30,720 --> 00:00:33,640 Speaker 2: because there is so much news all the time. It 6 00:00:33,680 --> 00:00:35,960 Speaker 2: doesn't feel like we have much time for sort of 7 00:00:36,440 --> 00:00:39,760 Speaker 2: classic episodes where we talk about some big idea. But 8 00:00:39,880 --> 00:00:41,760 Speaker 2: one thing that we had heard a lot over the 9 00:00:41,840 --> 00:00:45,720 Speaker 2: years really is that for the public, you know, when 10 00:00:45,720 --> 00:00:48,160 Speaker 2: they think about inflation or they think about the cost 11 00:00:48,200 --> 00:00:51,519 Speaker 2: of living, housing costs are really central to their view. 12 00:00:51,800 --> 00:00:55,040 Speaker 3: Right, And you see this not just in house prices 13 00:00:55,120 --> 00:00:59,120 Speaker 3: but also in rents. Right, everything has gone up since 14 00:00:59,280 --> 00:01:02,880 Speaker 3: the pandemic, and people people don't like it. People don't 15 00:01:02,920 --> 00:01:06,520 Speaker 3: like it when the cost of housing shelter goes up. 16 00:01:06,760 --> 00:01:08,959 Speaker 2: People don't like when the cause of gasoline goes up. 17 00:01:08,959 --> 00:01:11,560 Speaker 2: People don't like the cost of eggs for certain But 18 00:01:11,600 --> 00:01:14,000 Speaker 2: I feel like when it comes to the cost of living, 19 00:01:14,400 --> 00:01:19,000 Speaker 2: everybody must have shelter. Basically, it's also. 20 00:01:18,880 --> 00:01:20,840 Speaker 3: A big chunk, it's a huge chunk of. 21 00:01:20,959 --> 00:01:25,520 Speaker 2: The consumption basket, the consumption of shelter. And we've had 22 00:01:25,959 --> 00:01:28,640 Speaker 2: prices going up for like I don't know, fifteen years 23 00:01:28,760 --> 00:01:31,720 Speaker 2: or something like that. Even the raid hikes didn't do 24 00:01:31,880 --> 00:01:35,600 Speaker 2: much to slow house prices. They slowed other housing activity. 25 00:01:36,120 --> 00:01:37,840 Speaker 2: But it is a real problem and it gets to 26 00:01:37,880 --> 00:01:41,000 Speaker 2: the center of like what people call the American dream. 27 00:01:41,040 --> 00:01:43,040 Speaker 2: And we've talked to people over the years with different ideas, 28 00:01:43,080 --> 00:01:46,560 Speaker 2: you know, yimbi types. They talk about zoning, or people 29 00:01:46,640 --> 00:01:48,800 Speaker 2: say there should be some sort of more public investment, 30 00:01:48,960 --> 00:01:52,400 Speaker 2: et cetera. I don't think like we've fully cracked it, 31 00:01:52,440 --> 00:01:55,720 Speaker 2: and certainly policy makers have yet to solve the problem. 32 00:01:55,600 --> 00:01:59,160 Speaker 3: Right, although it is interesting. It's like one of the few, 33 00:01:59,320 --> 00:02:03,160 Speaker 3: by part of in areas where both sides of the 34 00:02:03,200 --> 00:02:07,040 Speaker 3: aisle will say that housing supply is an issue and 35 00:02:07,160 --> 00:02:10,280 Speaker 3: they want to do something to rectify it. 36 00:02:10,840 --> 00:02:13,200 Speaker 2: So go back to the Great Financial Crisis. Do you 37 00:02:13,240 --> 00:02:16,360 Speaker 2: remember in like twenty ten or something, or maybe middle 38 00:02:16,360 --> 00:02:18,600 Speaker 2: of two thousand and nine, there were actually some people 39 00:02:18,800 --> 00:02:23,960 Speaker 2: that proposed raising like destroying empty houses just to get 40 00:02:24,000 --> 00:02:25,799 Speaker 2: the supply demand imbalanced. 41 00:02:26,040 --> 00:02:27,600 Speaker 3: Just I don't remember that. 42 00:02:27,800 --> 00:02:28,560 Speaker 4: Yeah, this was. 43 00:02:28,520 --> 00:02:30,799 Speaker 2: Absolutely a thing. So we were like, well, why don't 44 00:02:30,800 --> 00:02:33,480 Speaker 2: we just like pave over a bunch of existing houses 45 00:02:33,520 --> 00:02:35,280 Speaker 2: and then we won't have this glut and then the 46 00:02:35,280 --> 00:02:38,120 Speaker 2: prices will keep falling that we can This was a 47 00:02:38,440 --> 00:02:41,280 Speaker 2: I'm going to google this while we're talking, but hopefully 48 00:02:41,520 --> 00:02:44,040 Speaker 2: no one never took that seriously. We'll be absurd because 49 00:02:44,080 --> 00:02:46,720 Speaker 2: now we're in an era of housing scarcity. But that 50 00:02:46,840 --> 00:02:47,680 Speaker 2: was a crazy time. 51 00:02:47,760 --> 00:02:50,960 Speaker 3: M hm. There is a lot of craziness in these 52 00:02:51,000 --> 00:02:54,560 Speaker 3: sort of two thousand and eight to twenty twelve era. 53 00:02:55,000 --> 00:02:57,040 Speaker 2: And one of the things that we know about crises, 54 00:02:57,120 --> 00:02:59,959 Speaker 2: you know, look, there's all this subprime lending, all that stuff. 55 00:03:00,200 --> 00:03:03,040 Speaker 2: So afterwards there was this big impulse to say, like, 56 00:03:03,320 --> 00:03:06,919 Speaker 2: we're never going to allow things to get that crazy again. 57 00:03:07,000 --> 00:03:09,440 Speaker 2: We're never going to allow people to buy a home 58 00:03:09,520 --> 00:03:14,320 Speaker 2: with no down payment, no documentation, and terrible credit scores again. Anyway, 59 00:03:14,320 --> 00:03:17,080 Speaker 2: we're going to be talking to someone whose argument is 60 00:03:17,120 --> 00:03:18,800 Speaker 2: that we may have overshot. 61 00:03:19,080 --> 00:03:21,600 Speaker 3: Great, I'm excited, all right, I'm really psyched. 62 00:03:21,639 --> 00:03:24,320 Speaker 2: We do have the perfect guest, someone who's writing I've 63 00:03:24,360 --> 00:03:26,920 Speaker 2: followed for a long time, and the gist of his 64 00:03:27,120 --> 00:03:31,160 Speaker 2: argument is that we overshot that various post greadte financial 65 00:03:31,200 --> 00:03:37,119 Speaker 2: crisis policy changes in pursuit of bubble avoidance are the 66 00:03:37,160 --> 00:03:40,240 Speaker 2: cause of our housing shortage. Today, we're going to be 67 00:03:40,280 --> 00:03:43,520 Speaker 2: speaking with Kevin Erdman. He is an affiliated scholar at 68 00:03:43,520 --> 00:03:46,400 Speaker 2: the Mercadis Institute and he's the author of the book 69 00:03:46,440 --> 00:03:49,840 Speaker 2: Building from the ground Up. He's a great newsletter. Uh, Kevin, 70 00:03:49,880 --> 00:03:51,760 Speaker 2: thank you so much for coming on O lots. 71 00:03:52,000 --> 00:03:53,080 Speaker 4: Yeah, thanks for having me. 72 00:03:53,480 --> 00:03:57,440 Speaker 2: That's true, right where't there's some headlines about bulldozing over houses. 73 00:03:57,920 --> 00:03:59,560 Speaker 2: I mean, it was like a weird time because like 74 00:03:59,840 --> 00:04:02,600 Speaker 2: there were three things. There was like the home price appreciation. 75 00:04:03,240 --> 00:04:05,800 Speaker 2: There was the amount of housing that was being built, 76 00:04:05,840 --> 00:04:08,160 Speaker 2: and then there was the sort of liberal lending standards 77 00:04:08,280 --> 00:04:10,280 Speaker 2: mortgages to people couldn't afford them. And then there was 78 00:04:10,280 --> 00:04:12,840 Speaker 2: all the also the financial engineering around it. Like there 79 00:04:12,880 --> 00:04:14,480 Speaker 2: was st a lot going on in those days. 80 00:04:14,760 --> 00:04:17,560 Speaker 4: Yeah. Yeah, and there were people that proposed that green span, 81 00:04:17,680 --> 00:04:20,320 Speaker 4: even I think in Hank Paulson's book he mentions that 82 00:04:20,400 --> 00:04:24,719 Speaker 4: green span sort of half jokingly mentioned it. But the 83 00:04:24,800 --> 00:04:28,520 Speaker 4: idea that you would even think of it is crazy. 84 00:04:28,520 --> 00:04:30,880 Speaker 4: In fact, I actually wrote a post on my substock 85 00:04:30,960 --> 00:04:36,440 Speaker 4: recently that Tyler Collen interviewed Joe Stiglitz very recently, and 86 00:04:36,520 --> 00:04:39,720 Speaker 4: Joe Stiglitz was still sort of basing his ideas of 87 00:04:39,880 --> 00:04:43,279 Speaker 4: you know what happened in the recession on this idea 88 00:04:43,279 --> 00:04:45,480 Speaker 4: of overbuilding, and he talked about like there were all 89 00:04:45,520 --> 00:04:49,239 Speaker 4: these low quality houses built in Las Vegas that basically 90 00:04:49,240 --> 00:04:52,080 Speaker 4: were built where nobody would want them. Yeah, and made 91 00:04:52,120 --> 00:04:54,080 Speaker 4: some quip that like the best thing about them was 92 00:04:54,120 --> 00:04:56,960 Speaker 4: they were so poorly built that they wouldn't last long 93 00:04:57,080 --> 00:04:59,520 Speaker 4: or something. And the crazy thing about that is that 94 00:04:59,560 --> 00:05:01,840 Speaker 4: they're actual. If you look back at the data, there 95 00:05:01,920 --> 00:05:04,039 Speaker 4: wasn't actually a building boom in Vegas. There was a 96 00:05:04,080 --> 00:05:07,480 Speaker 4: price bubble, but the rate of home building never actually 97 00:05:07,520 --> 00:05:09,279 Speaker 4: increased in Vegas during that time. 98 00:05:10,360 --> 00:05:12,440 Speaker 3: Why don't you go ahead and give us the sort 99 00:05:12,480 --> 00:05:15,720 Speaker 3: of two minute elevator pitch of your argument just so 100 00:05:15,760 --> 00:05:17,000 Speaker 3: we fully understand it. 101 00:05:17,320 --> 00:05:21,520 Speaker 4: Yeah. I think basically we have had a regional supply 102 00:05:21,680 --> 00:05:25,080 Speaker 4: problem going back into the eighties and nineties, where the 103 00:05:25,120 --> 00:05:27,960 Speaker 4: coastal metros like New York City in Boston and LA 104 00:05:27,960 --> 00:05:32,800 Speaker 4: and San Francisco have clamped down on housing construction and 105 00:05:32,839 --> 00:05:36,640 Speaker 4: so they basically can't grow as cities anymore in total. 106 00:05:37,240 --> 00:05:40,240 Speaker 4: And so when the economy is doing well, when incomes 107 00:05:40,240 --> 00:05:43,880 Speaker 4: are growing, population is growing, people just having babies and 108 00:05:43,960 --> 00:05:46,880 Speaker 4: people growing up and wanting to form households. When that 109 00:05:47,040 --> 00:05:50,080 Speaker 4: sort of all gets moving, those cities actually have to 110 00:05:50,120 --> 00:05:53,679 Speaker 4: depopulate at this point because you know, if per capita, 111 00:05:53,720 --> 00:05:56,920 Speaker 4: we're sort of demanding one or two percent more housing 112 00:05:56,960 --> 00:06:00,160 Speaker 4: per person and they're only willing to build a half 113 00:06:00,200 --> 00:06:03,680 Speaker 4: a percent of housing per year, that means a person 114 00:06:03,720 --> 00:06:05,960 Speaker 4: and a half has to leave the city. So we 115 00:06:06,000 --> 00:06:10,360 Speaker 4: actually have this weird countercyclical migration pattern into and out 116 00:06:10,360 --> 00:06:12,520 Speaker 4: of those cities now. So like, for instance, the last 117 00:06:12,760 --> 00:06:17,000 Speaker 4: several years, even pre dating covid LA has been for instance, 118 00:06:17,000 --> 00:06:20,040 Speaker 4: has been losing population every year. It's down probably three 119 00:06:20,120 --> 00:06:23,320 Speaker 4: or four percent now from its peak population in twenty seventeen. 120 00:06:24,120 --> 00:06:27,800 Speaker 4: So basically that happened during the housing bubble. This counterintuitive 121 00:06:27,839 --> 00:06:31,039 Speaker 4: thing was happening because when we're in good times or 122 00:06:31,040 --> 00:06:34,080 Speaker 4: when people are demanding more housing, people actually have to 123 00:06:34,080 --> 00:06:37,480 Speaker 4: move out of those cities. And the process for doing 124 00:06:37,520 --> 00:06:40,120 Speaker 4: that is the rents go high enough until somebody's cries 125 00:06:40,240 --> 00:06:43,320 Speaker 4: uncle and decides to leave town. And so the cities 126 00:06:43,320 --> 00:06:47,039 Speaker 4: we think of as bubble cities Florida, Nevada, and Arizona 127 00:06:47,320 --> 00:06:51,000 Speaker 4: in inland California were really just the landing places for 128 00:06:51,080 --> 00:06:55,400 Speaker 4: those housing refugees. So those cities truly had a bubble, 129 00:06:55,400 --> 00:06:57,559 Speaker 4: but it was a bubble in fundamentals, so it's actually 130 00:06:57,560 --> 00:07:00,280 Speaker 4: a bunch of families moving there, and ironically those families 131 00:07:00,320 --> 00:07:03,840 Speaker 4: were moving there to lower their housing costs. But all 132 00:07:03,880 --> 00:07:08,280 Speaker 4: that got interpreted just as a bubble period and it 133 00:07:08,320 --> 00:07:13,120 Speaker 4: was blamed on excess lending and speculation and all those 134 00:07:13,160 --> 00:07:16,320 Speaker 4: things that it was really at its core, it was 135 00:07:16,320 --> 00:07:19,520 Speaker 4: a lack of housing that drove all these migration patterns 136 00:07:19,560 --> 00:07:22,760 Speaker 4: that then overwhelmed the cities where prices sort of temporarily 137 00:07:22,960 --> 00:07:25,720 Speaker 4: rose and fell. And so basically what we did is 138 00:07:25,760 --> 00:07:28,240 Speaker 4: we solved all the wrong problems. We blamed it on lending, 139 00:07:28,240 --> 00:07:30,720 Speaker 4: and we cut off lending, and that basically closed down 140 00:07:31,080 --> 00:07:33,880 Speaker 4: home building across the country. And so now the housing 141 00:07:33,920 --> 00:07:36,040 Speaker 4: shortage that was just a a half a dozen coastal 142 00:07:36,080 --> 00:07:37,800 Speaker 4: cities now is countrywide. 143 00:07:37,880 --> 00:07:40,960 Speaker 2: This is very interesting. So I remember the Inland Empire, 144 00:07:41,040 --> 00:07:44,120 Speaker 2: they called them the Sand States, like Arizona and Nevada, 145 00:07:44,280 --> 00:07:47,080 Speaker 2: And the way it was certainly portrayed was that it 146 00:07:47,160 --> 00:07:49,840 Speaker 2: was a speculative bubble, that there was all this like 147 00:07:49,960 --> 00:07:53,040 Speaker 2: household speculation, and you know, there probably was some of 148 00:07:53,040 --> 00:07:55,320 Speaker 2: that and people buying more house than they need because 149 00:07:55,320 --> 00:07:57,239 Speaker 2: they thought they could flip it and flip this house. 150 00:07:57,480 --> 00:07:59,440 Speaker 2: It was a popular TV show. But you're saying the 151 00:07:59,440 --> 00:08:03,440 Speaker 2: fundamental were very sound, that basically it was like spillover population, 152 00:08:04,160 --> 00:08:07,040 Speaker 2: the fundamentals of demand for shelter. What did we do 153 00:08:07,440 --> 00:08:10,360 Speaker 2: after the Great Financial Crisis that, as you see it 154 00:08:10,720 --> 00:08:12,160 Speaker 2: massively slashed lending. 155 00:08:12,400 --> 00:08:15,080 Speaker 4: You know, it's tough to pin it down to one thing. 156 00:08:15,440 --> 00:08:17,960 Speaker 4: You know, there are a series of sort of official 157 00:08:18,000 --> 00:08:22,760 Speaker 4: and unofficial, sort of just pressures that were put on lenders. 158 00:08:22,800 --> 00:08:24,720 Speaker 4: So you know, there was the subprime boom and bus 159 00:08:24,760 --> 00:08:28,559 Speaker 4: that really heated up in sort of late two thousand 160 00:08:28,600 --> 00:08:30,520 Speaker 4: and three, early two thousand and four and then was 161 00:08:30,560 --> 00:08:34,600 Speaker 4: really dead by mid two thousand and seven. And you 162 00:08:34,640 --> 00:08:36,400 Speaker 4: can see sort of the effects of that. And again, 163 00:08:36,559 --> 00:08:38,560 Speaker 4: you know, I assert that the effects of that on 164 00:08:38,640 --> 00:08:41,920 Speaker 4: home prices and everything have been greatly overstated because it's 165 00:08:41,920 --> 00:08:45,040 Speaker 4: basically been inflated to explain everything that actually is explained 166 00:08:45,040 --> 00:08:48,080 Speaker 4: by the supply shortage. But it caused a few percentage 167 00:08:48,120 --> 00:08:51,559 Speaker 4: point increase in home prices on average, and that reversed 168 00:08:51,559 --> 00:08:54,360 Speaker 4: then when that market died, And then then there's this 169 00:08:54,520 --> 00:08:57,160 Speaker 4: second event that happens that sort of just got lost 170 00:08:57,200 --> 00:09:00,720 Speaker 4: in the chaos a because it was popular, be because 171 00:09:00,760 --> 00:09:04,760 Speaker 4: this idea that lending had been so outrageous that there 172 00:09:04,840 --> 00:09:07,560 Speaker 4: was sort of no amounts of pulling back that seemed 173 00:09:07,559 --> 00:09:10,280 Speaker 4: like it was satisfying enough. And so over the course 174 00:09:10,320 --> 00:09:12,720 Speaker 4: of two thousand and eight, there were just formal and 175 00:09:12,760 --> 00:09:17,800 Speaker 4: informal pressures on the federal agencies, the FHJA, Fannie Maine, 176 00:09:17,840 --> 00:09:21,040 Speaker 4: Freddie Mack to you know, be careful and tighten up lending. 177 00:09:21,120 --> 00:09:23,480 Speaker 4: And you can see it in the numbers. They report 178 00:09:23,520 --> 00:09:25,600 Speaker 4: in their books that over the course of two thousand 179 00:09:25,640 --> 00:09:28,600 Speaker 4: and eight, any year up to that, even back into 180 00:09:28,600 --> 00:09:32,920 Speaker 4: the late nineties, the typical Fanny and Freddie borrower had 181 00:09:32,960 --> 00:09:36,000 Speaker 4: a credit score of say seven to ten and which 182 00:09:36,040 --> 00:09:38,839 Speaker 4: is about average. And then by the end of two 183 00:09:38,840 --> 00:09:41,000 Speaker 4: thousand and eight, mid two thousand and nine, it's more 184 00:09:41,080 --> 00:09:44,439 Speaker 4: like seven sixty, which is you know, sort of top 185 00:09:44,559 --> 00:09:47,960 Speaker 4: quarter credit score. And so basically, over the course of 186 00:09:48,000 --> 00:09:50,680 Speaker 4: a year, year and a half, the average score on 187 00:09:50,760 --> 00:09:53,440 Speaker 4: an approved mortgage goes up by forty or fifty points 188 00:09:53,440 --> 00:09:57,640 Speaker 4: and stays there. It's really still there today. So basically, 189 00:09:58,000 --> 00:09:59,840 Speaker 4: you know, I would say probably ten or twenty million 190 00:09:59,840 --> 00:10:02,240 Speaker 4: five family's three two thousand and eight to post two 191 00:10:02,280 --> 00:10:04,480 Speaker 4: thousand and eight have lost access to mortgage funding. 192 00:10:05,760 --> 00:10:08,600 Speaker 3: But just on this point, I mean, I can go 193 00:10:08,800 --> 00:10:11,439 Speaker 3: get a loan at Fannie May with a six to 194 00:10:11,520 --> 00:10:14,240 Speaker 3: twenty credit score or something like that. I think it's 195 00:10:14,240 --> 00:10:18,360 Speaker 3: a little higher over at Freddie Mac. And there's minimum 196 00:10:18,520 --> 00:10:23,360 Speaker 3: down payments. I think it's three percent. But overall those 197 00:10:23,440 --> 00:10:27,560 Speaker 3: haven't moved that much from the early two thousands. Like 198 00:10:27,640 --> 00:10:29,960 Speaker 3: back in two thousand and six, at the height of 199 00:10:30,000 --> 00:10:33,840 Speaker 3: the housing bubble, the minimum down payment was still three percent, 200 00:10:34,080 --> 00:10:38,680 Speaker 3: and I think the FICO scores were generally lower. Is 201 00:10:38,720 --> 00:10:44,520 Speaker 3: there perhaps just a lack of viable home buyers out there? 202 00:10:44,640 --> 00:10:48,520 Speaker 3: I mean, credit card debt is at a record, wages 203 00:10:48,679 --> 00:10:53,520 Speaker 3: have been kind of sluggish. Maybe those people people who 204 00:10:53,600 --> 00:10:58,000 Speaker 3: are asset light, as Chimoth would say, maybe they just 205 00:10:58,080 --> 00:10:59,880 Speaker 3: they're not thinking about buying houses. 206 00:11:00,520 --> 00:11:04,440 Speaker 4: No, it's definitely so. I mean those products exist, but 207 00:11:04,559 --> 00:11:08,760 Speaker 4: the quantity of loans being originated to borrowers with those 208 00:11:08,760 --> 00:11:12,080 Speaker 4: credit scores is really negligible. So like if you look 209 00:11:12,080 --> 00:11:15,480 Speaker 4: at Fannie May, for any year two thousand and seven 210 00:11:15,559 --> 00:11:19,000 Speaker 4: or before, about two thirds of their book of business 211 00:11:19,200 --> 00:11:23,080 Speaker 4: was to borrowers with seven forty scores or less, and 212 00:11:23,120 --> 00:11:27,600 Speaker 4: then immediately then by two thousand and nine it's only 213 00:11:27,679 --> 00:11:30,640 Speaker 4: one third, and then it's stayed basically one third of 214 00:11:30,679 --> 00:11:32,959 Speaker 4: their new business to the point where now their book 215 00:11:32,960 --> 00:11:36,040 Speaker 4: of business is basically flip flopped. So the thing is 216 00:11:36,080 --> 00:11:39,000 Speaker 4: that you know they have products, but there's the ability 217 00:11:39,040 --> 00:11:42,520 Speaker 4: to repay standards that have been put in place and tightened, 218 00:11:42,600 --> 00:11:44,960 Speaker 4: and there's just you know, there's just a black box 219 00:11:45,000 --> 00:11:48,960 Speaker 4: of underwriting boxes that have to be ticked off that 220 00:11:49,200 --> 00:11:51,720 Speaker 4: in theory, there's a product that goes to people with 221 00:11:51,800 --> 00:11:55,040 Speaker 4: six twenty credit scores, but in practice, very few of 222 00:11:55,080 --> 00:11:57,400 Speaker 4: those families can run the gauntlet to actually get the 223 00:11:57,480 --> 00:12:12,000 Speaker 4: yes at the end of the approval process. 224 00:12:14,360 --> 00:12:17,679 Speaker 3: Well, speaking of black boxes, I was trying to find 225 00:12:17,920 --> 00:12:22,199 Speaker 3: like the average approval rate for Fannie and Freddy for mortgages, 226 00:12:22,240 --> 00:12:25,920 Speaker 3: and ideally you could break down approval rates by FICO 227 00:12:26,000 --> 00:12:29,800 Speaker 3: scores or something like that, and I couldn't find anything. 228 00:12:30,280 --> 00:12:33,560 Speaker 3: Do you have a sense of a are there official 229 00:12:33,640 --> 00:12:37,000 Speaker 3: numbers out there that I just couldn't find and be 230 00:12:37,720 --> 00:12:39,839 Speaker 3: do you have a sense of what the approval rates 231 00:12:39,920 --> 00:12:40,800 Speaker 3: might actually be? 232 00:12:41,320 --> 00:12:43,679 Speaker 4: Yeah, I don't have like an index that I tracked 233 00:12:43,840 --> 00:12:46,480 Speaker 4: you months to month, and in a way that gets 234 00:12:46,520 --> 00:12:50,040 Speaker 4: difficult that that number gets less informative over time. I 235 00:12:50,120 --> 00:12:54,280 Speaker 4: have seen claims that there's this very specific period over 236 00:12:54,320 --> 00:12:55,880 Speaker 4: the course of two thousand and eight and early two 237 00:12:55,880 --> 00:12:59,880 Speaker 4: thousand and nine where those standards change, and soon after that, 238 00:13:00,120 --> 00:13:02,240 Speaker 4: you know, two thousand and nine or ten. I know 239 00:13:02,320 --> 00:13:04,480 Speaker 4: one of the mortgage I cite it in one of 240 00:13:04,520 --> 00:13:09,040 Speaker 4: the books that one of the mortgage tracking institutions noted 241 00:13:09,040 --> 00:13:12,880 Speaker 4: that the average score on denied mortgages at that point 242 00:13:12,880 --> 00:13:14,720 Speaker 4: in two thousand and nine or ten had a higher 243 00:13:14,760 --> 00:13:18,440 Speaker 4: average score than approved mortgages had had before two thousand 244 00:13:18,440 --> 00:13:21,760 Speaker 4: and eight. And one of the oddities about the subprime 245 00:13:21,800 --> 00:13:24,880 Speaker 4: boom and bust is that the subprime boom really wasn't 246 00:13:25,240 --> 00:13:28,560 Speaker 4: associated with much of a change in the average It 247 00:13:28,600 --> 00:13:32,840 Speaker 4: was mostly about terms getting reckless, but the average borrower quality, 248 00:13:32,920 --> 00:13:36,240 Speaker 4: surprisingly enough, didn't really change that much in total during 249 00:13:36,240 --> 00:13:39,480 Speaker 4: those boom times. So you know, as you get farther 250 00:13:39,559 --> 00:13:42,040 Speaker 4: away from two thousand and eight, the denial rate becomes 251 00:13:42,120 --> 00:13:45,800 Speaker 4: less informative because at some point families know who can 252 00:13:45,880 --> 00:13:49,480 Speaker 4: qualify and who can't, And you know, somebody that has 253 00:13:49,520 --> 00:13:52,480 Speaker 4: a seven to ten credit score and something wrong with 254 00:13:52,520 --> 00:13:54,280 Speaker 4: their income that they know is going to be a 255 00:13:54,720 --> 00:13:56,600 Speaker 4: prevent one of the boxes from getting checked off. They're 256 00:13:56,640 --> 00:13:58,160 Speaker 4: not going to keep going back to the bank year 257 00:13:58,200 --> 00:14:00,559 Speaker 4: after year after year to show up on the denial rates. 258 00:14:01,360 --> 00:14:03,360 Speaker 4: But you can see sort of the effects of this 259 00:14:03,440 --> 00:14:05,240 Speaker 4: in a lot of ways, Like if you go back 260 00:14:05,280 --> 00:14:08,520 Speaker 4: to pre COVID when interest rates were really low, before 261 00:14:09,320 --> 00:14:12,719 Speaker 4: home prices took off, there were houses across the country 262 00:14:13,280 --> 00:14:17,360 Speaker 4: that would have previously been owner occupied where you go 263 00:14:17,400 --> 00:14:19,600 Speaker 4: to Zello and they would estimate the rent on that 264 00:14:19,680 --> 00:14:23,080 Speaker 4: house to be like fifteen hundred and a mortgage, you know, 265 00:14:23,080 --> 00:14:25,200 Speaker 4: for what it was selling for the mortgage might only 266 00:14:25,240 --> 00:14:27,240 Speaker 4: be five or six hundred a month, like it was. 267 00:14:27,400 --> 00:14:30,920 Speaker 4: The mismatch after these families were cut out of the 268 00:14:30,920 --> 00:14:34,720 Speaker 4: market is you know, pretty extreme during those post two 269 00:14:34,720 --> 00:14:35,600 Speaker 4: thousand and eight years. 270 00:14:36,000 --> 00:14:40,640 Speaker 2: Let's stipulate that there is a cohort out there that 271 00:14:40,960 --> 00:14:44,880 Speaker 2: you know has some sort of stable income, potentially able 272 00:14:44,960 --> 00:14:48,480 Speaker 2: to buy a home, wants to buy a home, and 273 00:14:48,840 --> 00:14:51,480 Speaker 2: can't get a mortgage for all of the reasons that 274 00:14:51,560 --> 00:14:54,880 Speaker 2: you laid out, How does that actually feed through to 275 00:14:55,400 --> 00:14:58,680 Speaker 2: lack of supply out there? Talk to us about the 276 00:14:58,800 --> 00:15:03,840 Speaker 2: link between the pressures that you described to constrain the 277 00:15:03,880 --> 00:15:07,760 Speaker 2: supply of credit and just the lack of abundance, the 278 00:15:07,840 --> 00:15:08,480 Speaker 2: lack of building. 279 00:15:08,800 --> 00:15:12,160 Speaker 4: Yeah, so you can see a real effect. Credit scores 280 00:15:12,200 --> 00:15:16,400 Speaker 4: are highly correlated with incomes, okay, and they're correlated with age, 281 00:15:16,480 --> 00:15:19,920 Speaker 4: which correlates with savings. So you can sort of use 282 00:15:20,280 --> 00:15:22,880 Speaker 4: like neighborhood income or zip code income as a proxy 283 00:15:23,080 --> 00:15:26,440 Speaker 4: for you know, the average credit score in that zip code, 284 00:15:26,800 --> 00:15:30,840 Speaker 4: and you can just see how zip codes after two 285 00:15:30,840 --> 00:15:33,960 Speaker 4: thousand and eight, the majority of the country had actually 286 00:15:34,000 --> 00:15:36,720 Speaker 4: not really had a boom and bust, like you had 287 00:15:36,800 --> 00:15:40,800 Speaker 4: the coastal cities and the sand state cities where prices 288 00:15:40,840 --> 00:15:42,960 Speaker 4: had gone way up and then sort of, you know, 289 00:15:43,000 --> 00:15:46,640 Speaker 4: come back down. But you know, cities like Atlanta or Chicago, 290 00:15:46,960 --> 00:15:50,080 Speaker 4: or Indianapolis or Saint Louis, you know, they had all 291 00:15:50,200 --> 00:15:53,520 Speaker 4: sort of been just moving along with regular building rates 292 00:15:53,560 --> 00:15:55,960 Speaker 4: and prices that were sort of staying about where they 293 00:15:55,960 --> 00:15:59,000 Speaker 4: had been in terms of price to income ratios. And 294 00:15:59,040 --> 00:16:01,800 Speaker 4: then once this tight happens, you can see in all 295 00:16:01,840 --> 00:16:05,360 Speaker 4: those cities, whether they had abubble or not, the price 296 00:16:05,400 --> 00:16:08,640 Speaker 4: to income ratios and the poorer zip codes, you know, 297 00:16:08,720 --> 00:16:13,280 Speaker 4: go down by twenty thirty forty fifty percent, while the 298 00:16:13,360 --> 00:16:17,720 Speaker 4: high end neighborhoods sort of stayed flat. And so you know, 299 00:16:17,800 --> 00:16:21,160 Speaker 4: you get this drop in the market price of existing 300 00:16:21,200 --> 00:16:26,200 Speaker 4: homes that's very income correlated, and so it basically just 301 00:16:26,280 --> 00:16:29,800 Speaker 4: dropped the price of existing homes below the cost of 302 00:16:29,960 --> 00:16:33,240 Speaker 4: building new homes, but very regressively. So at the high 303 00:16:33,360 --> 00:16:36,120 Speaker 4: end they could still build new ones, they were still 304 00:16:36,160 --> 00:16:38,840 Speaker 4: selling for basically the same price they had been, but 305 00:16:38,960 --> 00:16:40,240 Speaker 4: at the low end, you know nothing. 306 00:16:40,560 --> 00:16:43,560 Speaker 2: So this gets into the economics of the home builder, 307 00:16:43,880 --> 00:16:46,240 Speaker 2: the home builder economics, which is that because you have 308 00:16:46,320 --> 00:16:51,920 Speaker 2: this bifurcation in basically price relative to income, is just 309 00:16:52,160 --> 00:16:56,200 Speaker 2: no longer made sense for them to build what we 310 00:16:56,320 --> 00:16:57,800 Speaker 2: call a starter home. 311 00:16:58,080 --> 00:17:00,840 Speaker 4: Yeah, and I would say that's totally results of the 312 00:17:00,880 --> 00:17:03,680 Speaker 4: crackdown in lending. The rents didn't really go down on 313 00:17:03,720 --> 00:17:06,600 Speaker 4: those units, it was just the prices. And the prices 314 00:17:06,640 --> 00:17:10,639 Speaker 4: went down because we basically made it illegal for those 315 00:17:10,800 --> 00:17:14,639 Speaker 4: traditional home owner occupiers to be buyers. So basically the 316 00:17:14,680 --> 00:17:16,800 Speaker 4: prices fell. One way you could look at it is 317 00:17:16,840 --> 00:17:20,800 Speaker 4: that landlords require a higher yield than owner occupiers do, 318 00:17:20,880 --> 00:17:23,199 Speaker 4: and so the price first there was sort of just 319 00:17:23,359 --> 00:17:27,960 Speaker 4: a chaotic drop and then by say twenty fifteen, they 320 00:17:28,000 --> 00:17:31,160 Speaker 4: sort of leveled out at basically the lower price point 321 00:17:31,200 --> 00:17:34,320 Speaker 4: that a landlord would be willing to invest in those houses. 322 00:17:35,000 --> 00:17:38,280 Speaker 3: You mentioned mortgage rates earlier, and I'm wondering how big 323 00:17:38,320 --> 00:17:42,080 Speaker 3: a factor those are in your analysis. So, say, if 324 00:17:42,080 --> 00:17:45,600 Speaker 3: mortgage rates dropped to three percent again, would there be 325 00:17:45,680 --> 00:17:50,679 Speaker 3: more supply because there's more demand, And also presumably the 326 00:17:50,720 --> 00:17:54,520 Speaker 3: cost of building of financing for the home builders would 327 00:17:54,560 --> 00:17:57,600 Speaker 3: also go down in that scenario, so maybe they would 328 00:17:57,600 --> 00:17:58,840 Speaker 3: build more as well. 329 00:17:58,960 --> 00:18:01,760 Speaker 4: Now I used to put weight on that, just analytically, 330 00:18:01,800 --> 00:18:03,879 Speaker 4: over the last decade that I've been studying this, I 331 00:18:04,119 --> 00:18:07,919 Speaker 4: just keep lowering my estimation of how important the actual 332 00:18:07,960 --> 00:18:10,960 Speaker 4: mortgage rate is. And you know, one example, which is 333 00:18:11,000 --> 00:18:12,840 Speaker 4: the example I give earlier, is that there were tons 334 00:18:12,880 --> 00:18:15,720 Speaker 4: of houses across the country where families could have cut 335 00:18:15,720 --> 00:18:19,080 Speaker 4: their housing costs by more than half in the late 336 00:18:19,119 --> 00:18:22,880 Speaker 4: twenty tens that they weren't able to just because there 337 00:18:22,960 --> 00:18:26,320 Speaker 4: isn't a government agency that's telling if they're qualified to 338 00:18:26,359 --> 00:18:29,359 Speaker 4: be a renter. There's only agencies telling them they're unqualified 339 00:18:29,400 --> 00:18:33,600 Speaker 4: to be buyers. So just that economic decision isn't available 340 00:18:33,600 --> 00:18:36,960 Speaker 4: to them, and for families they can get a mortgage. 341 00:18:37,040 --> 00:18:42,400 Speaker 4: The economics I think were unusually positive before twenty twenty one, 342 00:18:42,560 --> 00:18:45,439 Speaker 4: but at this point there's still positive on the margin. 343 00:18:45,520 --> 00:18:49,280 Speaker 4: So basically, anyone who can qualify for mortgages in general 344 00:18:49,400 --> 00:18:52,680 Speaker 4: is probably willing to be a buyer at today's prices 345 00:18:52,720 --> 00:18:55,200 Speaker 4: and rates, and I'm not sure that that changes much 346 00:18:55,240 --> 00:18:57,120 Speaker 4: more than marginally if raids go back down. 347 00:18:57,560 --> 00:19:01,959 Speaker 2: You said that the government agencies de facto telling people 348 00:19:02,000 --> 00:19:04,679 Speaker 2: that they are not allowed to be a borrower, and 349 00:19:05,000 --> 00:19:09,119 Speaker 2: that's not strictly true. There's not allowed to be a 350 00:19:09,200 --> 00:19:13,760 Speaker 2: borrower from a mortgage that's backed by Fanny and Freddy. 351 00:19:14,160 --> 00:19:18,720 Speaker 2: If there is a substantial population of theoretically starter home 352 00:19:18,960 --> 00:19:22,359 Speaker 2: would be starter home owners with low on the income ladder, 353 00:19:22,480 --> 00:19:26,199 Speaker 2: lower on the FCO score scale. Why couldn't there be 354 00:19:26,240 --> 00:19:29,480 Speaker 2: a private sector solution, because when you talk about the math, 355 00:19:29,760 --> 00:19:32,480 Speaker 2: you don't have to have a mortgage backed by Fanny 356 00:19:32,560 --> 00:19:35,920 Speaker 2: and Freddy. Why not a private sector solution to sound 357 00:19:36,040 --> 00:19:38,960 Speaker 2: like what in your case seems like a fairly big arbitrage, 358 00:19:39,600 --> 00:19:40,160 Speaker 2: It would. 359 00:19:39,960 --> 00:19:44,119 Speaker 4: Be the regulatory liabilities on the banks and the mortgage 360 00:19:44,200 --> 00:19:47,720 Speaker 4: riginators are even tighter than they are on Fanny and Freddy. 361 00:19:47,880 --> 00:19:50,760 Speaker 4: So it's again it's tough to quantify. There's a lot 362 00:19:50,760 --> 00:19:56,479 Speaker 4: of just sort of potential backward looking penalty potential. You know, 363 00:19:56,560 --> 00:19:58,720 Speaker 4: if we have another recession and a bank has a 364 00:19:58,720 --> 00:20:03,040 Speaker 4: bunch of defaults, the regulators could come in and say, oh, 365 00:20:03,160 --> 00:20:05,879 Speaker 4: you know, those were mortgages that shouldn't have been made. 366 00:20:05,920 --> 00:20:08,560 Speaker 4: In an addition to the cost of foreclosure, we're going 367 00:20:08,600 --> 00:20:10,679 Speaker 4: to give you a bunch of penalties. And you know, 368 00:20:10,720 --> 00:20:12,840 Speaker 4: there's just a lot of limits on how big of 369 00:20:12,840 --> 00:20:15,800 Speaker 4: a spread they can use, plus limits on what they 370 00:20:15,840 --> 00:20:19,280 Speaker 4: can count as income, plus you know, mandates on things 371 00:20:19,320 --> 00:20:21,520 Speaker 4: they have to do in underwriting. That just all add 372 00:20:21,600 --> 00:20:25,720 Speaker 4: up to low dollar mortgages being very hard to make. 373 00:20:25,760 --> 00:20:27,560 Speaker 4: And if you make them, then you've got these sort 374 00:20:27,600 --> 00:20:31,719 Speaker 4: of vague liabilities that you're carrying, so to the point 375 00:20:31,760 --> 00:20:35,719 Speaker 4: that just lenders haven't been willing to make them. And 376 00:20:35,800 --> 00:20:38,000 Speaker 4: so you know, for most of the past ten or 377 00:20:38,040 --> 00:20:41,840 Speaker 4: fifteen years, there's been this qualified mortgage patch where if 378 00:20:41,840 --> 00:20:45,199 Speaker 4: you could get Fanny and Freddy and the FAHA to 379 00:20:45,240 --> 00:20:48,679 Speaker 4: buy your mortgages and put into their system, then it 380 00:20:48,720 --> 00:20:52,800 Speaker 4: would give you a liability waiver on all those regulations. 381 00:20:52,800 --> 00:20:55,840 Speaker 4: And it was called the QM patch, and so basically, 382 00:20:55,840 --> 00:20:58,960 Speaker 4: if you could get the q impatch, you made the loan. 383 00:20:59,119 --> 00:21:01,880 Speaker 4: And very few bankers have been willing to make any 384 00:21:01,920 --> 00:21:05,159 Speaker 4: mortgages with any default risk at all that couldn't get 385 00:21:05,160 --> 00:21:08,040 Speaker 4: the q impact. So really, I would say pre two 386 00:21:08,040 --> 00:21:10,840 Speaker 4: thousand and eight, you could say that the agencies were 387 00:21:10,880 --> 00:21:13,680 Speaker 4: sort of a subsidy that they lowered the average mortgage 388 00:21:13,760 --> 00:21:15,959 Speaker 4: rate by probably a quarter of a percent or something. 389 00:21:16,359 --> 00:21:18,600 Speaker 4: Since two thousand and eight, really, they're just running a 390 00:21:18,640 --> 00:21:22,720 Speaker 4: monopoly on default risk, where the government imposes a bunch 391 00:21:22,760 --> 00:21:26,240 Speaker 4: of liabilities on private lenders for default risk, and so 392 00:21:26,880 --> 00:21:30,719 Speaker 4: the agencies actually can overcharge for taking that risk and 393 00:21:30,880 --> 00:21:33,160 Speaker 4: just keep their very tight standards right. 394 00:21:33,240 --> 00:21:38,280 Speaker 3: And the agencies, i mean, GSE guaranteed mortgages absolutely dominate 395 00:21:38,440 --> 00:21:39,600 Speaker 3: the market nowadays. 396 00:21:39,800 --> 00:21:42,960 Speaker 4: Yeah, and the government's pulling in billions in profits every year. 397 00:21:43,000 --> 00:21:45,880 Speaker 3: On well, on that note, this is kind of exactly 398 00:21:45,920 --> 00:21:47,720 Speaker 3: what I wanted to ask you. There is a lot 399 00:21:47,760 --> 00:21:50,720 Speaker 3: of buzz at the moment about the possibility of Fanny 400 00:21:50,760 --> 00:21:54,439 Speaker 3: and Freddie getting privatized, and we've seen, you know, some 401 00:21:54,520 --> 00:21:57,439 Speaker 3: of their stock move in response to that. Bill Ackman 402 00:21:57,840 --> 00:22:00,960 Speaker 3: seems to be very excited about that passable stability. What 403 00:22:01,000 --> 00:22:04,879 Speaker 3: would you expect to happen to credit standards if the 404 00:22:04,960 --> 00:22:08,800 Speaker 3: gsees were actually privatized, Because I can kind of argue 405 00:22:08,840 --> 00:22:12,000 Speaker 3: it both ways. I guess, like, on the one hand, 406 00:22:12,960 --> 00:22:17,480 Speaker 3: I imagine they would want to increase their capital cushion, 407 00:22:17,560 --> 00:22:20,280 Speaker 3: and in fact, they've been doing that. If investors are 408 00:22:20,280 --> 00:22:22,359 Speaker 3: going to invest, they have to feel that this is 409 00:22:22,680 --> 00:22:26,919 Speaker 3: a safe investment, so maybe they keep tightening. On the 410 00:22:27,080 --> 00:22:30,840 Speaker 3: other hand, they're in the business of making loans, maybe 411 00:22:30,880 --> 00:22:34,240 Speaker 3: the volume of loans, the absolute volume of loans, is 412 00:22:34,280 --> 00:22:37,879 Speaker 3: more important than the profit margin. But then again, I 413 00:22:37,920 --> 00:22:39,280 Speaker 3: don't know. I can see it both ways. 414 00:22:39,520 --> 00:22:42,919 Speaker 4: Yeah, you know, to be honest, I don't understand how 415 00:22:43,000 --> 00:22:46,520 Speaker 4: this is supposed to work. Like these institutions were created 416 00:22:47,440 --> 00:22:50,479 Speaker 4: by a public charter that sort of had you're going 417 00:22:50,520 --> 00:22:54,240 Speaker 4: to have this mission, and for taking this mission, you know, 418 00:22:54,320 --> 00:22:56,640 Speaker 4: will sort of give you this protection, right, I mean, 419 00:22:56,760 --> 00:22:59,360 Speaker 4: originally they were just public, and then when they were 420 00:22:59,359 --> 00:23:03,119 Speaker 4: made private the first time, you know, everybody assumed that 421 00:23:03,160 --> 00:23:05,199 Speaker 4: they would be backed by the federal government if they 422 00:23:05,200 --> 00:23:08,120 Speaker 4: needed to be, and of course they were. And if 423 00:23:08,119 --> 00:23:11,679 Speaker 4: they didn't have that charter, that agreement, nobody would go 424 00:23:11,800 --> 00:23:13,680 Speaker 4: do an IPO for a new bank and say, hey, 425 00:23:13,720 --> 00:23:15,960 Speaker 4: we've got this great business model. We're only going to 426 00:23:16,000 --> 00:23:20,679 Speaker 4: do securitized mortgages and we're going to be totally undiversified, 427 00:23:20,880 --> 00:23:23,680 Speaker 4: and now we're going to collect capital for this new bank. 428 00:23:24,119 --> 00:23:27,760 Speaker 4: If we get rid of the federal support behind it, 429 00:23:27,960 --> 00:23:30,840 Speaker 4: I don't see how it's viable as a private institution. 430 00:23:31,480 --> 00:23:33,680 Speaker 4: To me, the value that they have is that as 431 00:23:33,720 --> 00:23:38,000 Speaker 4: public institutions, they don't need capital, and that's where the 432 00:23:38,480 --> 00:23:40,760 Speaker 4: sort of what lies at the base of what makes 433 00:23:40,800 --> 00:23:44,359 Speaker 4: them function as institutions. So the only way I could 434 00:23:44,359 --> 00:23:46,960 Speaker 4: see them operating as they are is to still have 435 00:23:47,080 --> 00:23:50,960 Speaker 4: government backing. And if they're privatized but still with government backing, 436 00:23:50,960 --> 00:23:54,240 Speaker 4: that just seems like privatizing and name only. I actually 437 00:23:54,280 --> 00:23:57,600 Speaker 4: think they have value as a public utility, not because 438 00:23:57,600 --> 00:24:01,280 Speaker 4: of the subsidy, but because stain mex Cyclical risk is 439 00:24:01,359 --> 00:24:03,600 Speaker 4: like the one thing that basically you have to be 440 00:24:03,640 --> 00:24:07,160 Speaker 4: paid for in capital markets because you can't diversify away 441 00:24:07,160 --> 00:24:11,879 Speaker 4: from it. And these institutions basically are able to isolate 442 00:24:12,000 --> 00:24:15,600 Speaker 4: systemic risk, and there's no really better place for that 443 00:24:15,680 --> 00:24:18,320 Speaker 4: than in the federal government, and the federal government can 444 00:24:18,320 --> 00:24:20,240 Speaker 4: sort of take that risk with really out. One of 445 00:24:20,280 --> 00:24:23,280 Speaker 4: the little known trivia points about two thousand and eight 446 00:24:23,320 --> 00:24:26,760 Speaker 4: is those that Fanny and Freddy never actually needed cash 447 00:24:26,920 --> 00:24:29,159 Speaker 4: the big you know, two hundred billion dollar injection that 448 00:24:29,200 --> 00:24:32,320 Speaker 4: they supposedly got, but they never used any of that cash. 449 00:24:32,359 --> 00:24:34,119 Speaker 4: They actually just bought treasuries with it. 450 00:24:34,640 --> 00:24:38,359 Speaker 2: You can understand why investors would like access to all 451 00:24:38,400 --> 00:24:42,200 Speaker 2: those profits that Fanny and Freddie are getting. It does 452 00:24:42,240 --> 00:24:46,000 Speaker 2: seem hard to imagine how the government could credibly commit 453 00:24:46,119 --> 00:24:48,800 Speaker 2: to never backstopping again. It seems like it would always 454 00:24:48,840 --> 00:24:49,160 Speaker 2: want Well. 455 00:24:49,600 --> 00:24:51,879 Speaker 3: I don't think they would like I think what investors 456 00:24:51,920 --> 00:24:53,439 Speaker 3: want is both is both? 457 00:24:53,520 --> 00:24:54,080 Speaker 4: Yeah? No. 458 00:25:10,920 --> 00:25:13,919 Speaker 2: Obviously today in twenty twenty five, you know, there are 459 00:25:13,960 --> 00:25:16,720 Speaker 2: reasons why building a new home, a new starter home 460 00:25:17,080 --> 00:25:22,080 Speaker 2: would be more expensive. Labor costs more, especially if we 461 00:25:22,160 --> 00:25:26,120 Speaker 2: have lumber terraffs. Everything costs more, et cetera. So there's 462 00:25:26,119 --> 00:25:29,960 Speaker 2: going to be some increase. But tell us a what 463 00:25:30,000 --> 00:25:33,080 Speaker 2: could we do in your view to safely reverse some 464 00:25:33,160 --> 00:25:36,040 Speaker 2: of the excess tightening that we did post GFC and 465 00:25:36,119 --> 00:25:38,480 Speaker 2: how much can it move the dial in terms of 466 00:25:38,640 --> 00:25:43,800 Speaker 2: incentivizing homebuilders to get re enthused about the starter market. 467 00:25:44,359 --> 00:25:47,400 Speaker 4: I'll say you know, obviously underlying all of this, if 468 00:25:47,640 --> 00:25:51,320 Speaker 4: at the local level, if cities allowed enough apartment construction, 469 00:25:52,040 --> 00:25:56,040 Speaker 4: then it wouldn't necessarily have mattered that much that lending 470 00:25:56,080 --> 00:26:00,719 Speaker 4: standards were tightened effectively. You know, home buyers prefer single 471 00:26:00,720 --> 00:26:06,240 Speaker 4: family homes and landlords prefer apartments, and there typically has 472 00:26:06,320 --> 00:26:11,159 Speaker 4: been very little overlap. And historically the single family rental 473 00:26:11,200 --> 00:26:14,920 Speaker 4: market was just old, depreciated units owned by little mom 474 00:26:14,960 --> 00:26:19,399 Speaker 4: and pop landlords. So if we didn't have all of 475 00:26:19,440 --> 00:26:23,919 Speaker 4: the zoning regulations at the local level that prevent apartments 476 00:26:23,960 --> 00:26:27,359 Speaker 4: from being built at a higher scale, we probably would 477 00:26:27,359 --> 00:26:29,439 Speaker 4: have just switched to a market where we were building 478 00:26:29,440 --> 00:26:32,040 Speaker 4: a million apartments a year instead of three or four 479 00:26:32,080 --> 00:26:35,320 Speaker 4: hundred thousand like we've been doing for the last fifteen years. 480 00:26:35,600 --> 00:26:38,000 Speaker 2: All Right, but it's hard, youmbie. Politics are hard. So 481 00:26:38,119 --> 00:26:40,920 Speaker 2: let's say we let's assume this, let's assume the spillover. 482 00:26:41,440 --> 00:26:43,480 Speaker 4: Yeah, so that you know, that's the long term project. 483 00:26:43,520 --> 00:26:45,160 Speaker 4: But I do want to mention it because I tend 484 00:26:45,160 --> 00:26:47,800 Speaker 4: to harp on the mortgage issue for exactly the reason 485 00:26:47,840 --> 00:26:51,560 Speaker 4: you're saying. It's like, it seems like the attainable solution, 486 00:26:52,200 --> 00:26:54,159 Speaker 4: but it does sort of work in concert with the 487 00:26:54,240 --> 00:26:57,360 Speaker 4: zoning problem. But yeah, I mean, in practical terms, it's 488 00:26:57,359 --> 00:27:00,520 Speaker 4: easy just go back to pick a stand hundred from 489 00:27:00,560 --> 00:27:02,720 Speaker 4: before two thousand and eight and go with that. If 490 00:27:02,880 --> 00:27:05,320 Speaker 4: everyone's too afraid to call it the two thousand and 491 00:27:05,359 --> 00:27:07,880 Speaker 4: five standard, use the nineteen ninety eight to any standard 492 00:27:07,880 --> 00:27:11,480 Speaker 4: that the agencies used or that was applied to private 493 00:27:11,560 --> 00:27:14,520 Speaker 4: lenders in the last forty years would be good enough 494 00:27:14,560 --> 00:27:18,000 Speaker 4: to change the marketplace. And yeah, I mean, I think 495 00:27:18,080 --> 00:27:20,840 Speaker 4: it would be astounding the effect. One thing that I've done, 496 00:27:20,920 --> 00:27:25,919 Speaker 4: I'd compared. So the Census Bureau publishes sales data on 497 00:27:26,000 --> 00:27:29,480 Speaker 4: new homes by price point, and if you compare two 498 00:27:29,560 --> 00:27:34,639 Speaker 4: thousand and six, which is before the crackdown to twenty seventeen. 499 00:27:34,840 --> 00:27:36,919 Speaker 4: And the reason I use those two years is because 500 00:27:37,240 --> 00:27:39,359 Speaker 4: the average home price in those two years was about 501 00:27:39,400 --> 00:27:42,199 Speaker 4: the same, you know, the prices had collapsed, and then 502 00:27:42,240 --> 00:27:44,919 Speaker 4: by twenty seventeen the average price was about up to 503 00:27:44,920 --> 00:27:47,200 Speaker 4: where it had been in two thousand and six. If 504 00:27:47,240 --> 00:27:50,639 Speaker 4: you look at new home sales by price point, basically 505 00:27:50,760 --> 00:27:54,400 Speaker 4: every category, every bin, like three hundred thousand and higher 506 00:27:55,160 --> 00:27:57,680 Speaker 4: new homes were being built that those prices at exactly 507 00:27:57,720 --> 00:27:59,960 Speaker 4: the same rate. They had been building in two thousand 508 00:28:00,080 --> 00:28:02,760 Speaker 4: and six, but four two thousand and eight it had 509 00:28:02,800 --> 00:28:05,840 Speaker 4: been like a half million units a year at those 510 00:28:05,880 --> 00:28:09,320 Speaker 4: price levels, and now it was basically negligible, and it's 511 00:28:09,320 --> 00:28:12,200 Speaker 4: still negligible. So basically, you know, you can add up 512 00:28:12,560 --> 00:28:15,960 Speaker 4: the builders stopped building homes, you know, those price points 513 00:28:15,960 --> 00:28:17,960 Speaker 4: at a you know, a half million a year for 514 00:28:18,119 --> 00:28:21,720 Speaker 4: now more than a decade. And basically how that plays 515 00:28:21,720 --> 00:28:25,679 Speaker 4: out in the marketplace is the mortgage crackdown had you know, 516 00:28:25,760 --> 00:28:28,479 Speaker 4: lowered the prices of existing homes in a way that 517 00:28:28,520 --> 00:28:32,879 Speaker 4: correlated with incomes and with home values, and so just 518 00:28:32,960 --> 00:28:36,280 Speaker 4: systematically in every city there's some price point where below 519 00:28:36,320 --> 00:28:39,160 Speaker 4: that price point, existing homes were so cheap that if 520 00:28:39,160 --> 00:28:40,880 Speaker 4: you could get one, you would just go by an 521 00:28:40,880 --> 00:28:43,880 Speaker 4: existing one. And it's just taken us like twenty years 522 00:28:43,880 --> 00:28:45,440 Speaker 4: to sort of get back to where I think in 523 00:28:45,520 --> 00:28:49,280 Speaker 4: most cities now where we're hitting a tipping point where 524 00:28:49,360 --> 00:28:52,480 Speaker 4: those houses can be built again. But again they can't 525 00:28:52,520 --> 00:28:55,480 Speaker 4: be built for the occupier because they can't get the mortgage. 526 00:28:55,560 --> 00:28:58,240 Speaker 4: So I think we're going to see build a rent 527 00:28:58,280 --> 00:29:01,480 Speaker 4: market in the single family segment really take It has 528 00:29:01,520 --> 00:29:03,280 Speaker 4: taken off, and I think it's going to continue to 529 00:29:03,280 --> 00:29:05,480 Speaker 4: take off. And actually that's the one thing that I'm 530 00:29:05,520 --> 00:29:08,400 Speaker 4: afraid of in terms of, you know, thinking offense versus defense. 531 00:29:08,440 --> 00:29:11,360 Speaker 4: There's a defensive thing that has to happen here with policymakers, 532 00:29:11,640 --> 00:29:14,640 Speaker 4: and that there's already a push to ban corporate ownership 533 00:29:14,680 --> 00:29:18,080 Speaker 4: of single family homes. And that's literally the last form 534 00:29:18,080 --> 00:29:20,680 Speaker 4: of housing on the margin that can grow above the 535 00:29:20,760 --> 00:29:22,920 Speaker 4: rate that we're building now. So if we ban that, 536 00:29:23,000 --> 00:29:25,959 Speaker 4: then we really are legislating homelessness and effect. 537 00:29:27,000 --> 00:29:30,200 Speaker 3: One of the things I remember from the post crash period, 538 00:29:30,280 --> 00:29:34,000 Speaker 3: I don't remember proposals to bulldoze empty houses, but one 539 00:29:34,000 --> 00:29:37,920 Speaker 3: thing I remember is adjustable rate mortgages. And there were 540 00:29:37,960 --> 00:29:41,080 Speaker 3: a lot of them, and we used to write headlines 541 00:29:41,240 --> 00:29:44,880 Speaker 3: like option armageddon as they blew up. That was a 542 00:29:44,920 --> 00:29:47,240 Speaker 3: fun time. No, it wasn't fun. It was fun for 543 00:29:47,280 --> 00:29:51,920 Speaker 3: headline writers, not for actual borrowers. But those adjustable rate 544 00:29:52,000 --> 00:29:57,240 Speaker 3: mortgages actually all but disappeared after the Financial crisis. I 545 00:29:57,320 --> 00:30:01,040 Speaker 3: think they dropped to like single digits a proportion of 546 00:30:01,280 --> 00:30:06,440 Speaker 3: total mortgage originations? Is that a factor here? The idea 547 00:30:06,520 --> 00:30:09,560 Speaker 3: that once upon a time, you could get an arm 548 00:30:09,920 --> 00:30:13,680 Speaker 3: you could get a really cheap teaser rate going in 549 00:30:13,760 --> 00:30:17,560 Speaker 3: and then eventually it went up as interest rates were raised. 550 00:30:18,440 --> 00:30:22,160 Speaker 3: Maybe that would suggest that the structure of the loan 551 00:30:22,440 --> 00:30:23,480 Speaker 3: is more of a factor. 552 00:30:24,000 --> 00:30:25,440 Speaker 4: Yeah, I don't, you know, I don't think so. Just 553 00:30:25,480 --> 00:30:28,360 Speaker 4: going back to that sort of pre COVID you know, market, 554 00:30:28,840 --> 00:30:34,320 Speaker 4: it just doesn't seem that the marginal affordability of mortgages 555 00:30:34,800 --> 00:30:37,200 Speaker 4: is the fact here. In fact, I would love to see, 556 00:30:37,200 --> 00:30:39,600 Speaker 4: you know, there's people making documentaries about all sorts of 557 00:30:39,600 --> 00:30:42,640 Speaker 4: different aspects of the housing market and housing shortage. I'd 558 00:30:42,720 --> 00:30:45,239 Speaker 4: love to see somebody do a documentary where they go 559 00:30:45,320 --> 00:30:47,760 Speaker 4: to one of these new build to rent neighborhoods and 560 00:30:47,920 --> 00:30:50,560 Speaker 4: find ten families and say would you have liked to 561 00:30:50,600 --> 00:30:53,760 Speaker 4: have bought instead of rented? And they'll find plenty of them, 562 00:30:54,160 --> 00:30:55,720 Speaker 4: and then go to the bank with them and see 563 00:30:55,720 --> 00:30:58,200 Speaker 4: what happens, because you know, I think what's happening is 564 00:30:58,880 --> 00:31:02,000 Speaker 4: it's just become your cratic and there's no discretion left 565 00:31:02,000 --> 00:31:05,760 Speaker 4: for the bankers. And I think for the typical potential 566 00:31:05,800 --> 00:31:08,960 Speaker 4: borrow where I think we would be shocked at the 567 00:31:09,000 --> 00:31:12,200 Speaker 4: reasoning sometimes that's being used to deny them. You know, 568 00:31:12,400 --> 00:31:15,040 Speaker 4: just you know, forms of income that you know, maybe 569 00:31:15,160 --> 00:31:18,240 Speaker 4: aren't you know, strict W two that just count for zero, 570 00:31:18,600 --> 00:31:20,920 Speaker 4: you know, you know, just a bunch of things like 571 00:31:20,960 --> 00:31:23,440 Speaker 4: that that really just make it a hard no. And 572 00:31:23,480 --> 00:31:27,320 Speaker 4: there's no marginal tinkering you can do with a mortgage 573 00:31:27,320 --> 00:31:27,960 Speaker 4: to get that to. 574 00:31:28,000 --> 00:31:33,200 Speaker 3: A yes, big picture question. It feels like in the US, 575 00:31:33,440 --> 00:31:36,680 Speaker 3: part of the problem is perhaps that America has never 576 00:31:36,800 --> 00:31:40,400 Speaker 3: decided what it wants housing to be. So does it 577 00:31:40,560 --> 00:31:45,160 Speaker 3: want housing to be a wealth generator, in which case 578 00:31:45,320 --> 00:31:48,800 Speaker 3: prices need to keep going up. Does it want housing 579 00:31:49,040 --> 00:31:52,840 Speaker 3: to be actually affordable so that people can live places? 580 00:31:53,400 --> 00:31:56,400 Speaker 3: And it is true that housing has been one of 581 00:31:56,480 --> 00:32:01,000 Speaker 3: the biggest wealth effects over time. And I'm thinking specifically, 582 00:32:01,080 --> 00:32:03,640 Speaker 3: you know, there are people in New York that bought 583 00:32:03,760 --> 00:32:08,920 Speaker 3: a dilapidated building in Soho and they're now multimillionaires just 584 00:32:09,040 --> 00:32:14,000 Speaker 3: because they bought at that particular time. How should America 585 00:32:14,040 --> 00:32:16,160 Speaker 3: actually think of housing? 586 00:32:16,680 --> 00:32:19,880 Speaker 4: You know, I think there's a temptation to benchmark to 587 00:32:20,880 --> 00:32:24,880 Speaker 4: the peculiarities that we're living in and sort of consider 588 00:32:25,000 --> 00:32:28,880 Speaker 4: them to be a state of nature. And you think 589 00:32:28,920 --> 00:32:31,360 Speaker 4: of that, you know, the famous you know, case Schiller 590 00:32:31,360 --> 00:32:34,120 Speaker 4: housing chart that shows that home prices were flat, you know, 591 00:32:34,240 --> 00:32:36,680 Speaker 4: adjusted for inflation. Home prices were flat for one hundred 592 00:32:36,760 --> 00:32:39,840 Speaker 4: years and then they shot up. You know, there's a deep, 593 00:32:39,880 --> 00:32:44,240 Speaker 4: deep history of home ownership in this country where the 594 00:32:44,480 --> 00:32:47,920 Speaker 4: house is not expected to appreciate value. And in fact, 595 00:32:47,960 --> 00:32:50,680 Speaker 4: even up till two thousand and eight, in two thirds 596 00:32:50,720 --> 00:32:55,400 Speaker 4: of the country, nobody had experienced any unusual increase in 597 00:32:55,440 --> 00:32:58,920 Speaker 4: the value of their houses. So I don't think that's 598 00:32:58,960 --> 00:33:03,400 Speaker 4: actually a necessary part of how we should think about 599 00:33:02,680 --> 00:33:07,040 Speaker 4: Housing can be a very good investment for an owner 600 00:33:07,080 --> 00:33:11,320 Speaker 4: occupier without ever really increasing in real market value. It 601 00:33:11,360 --> 00:33:13,600 Speaker 4: comes from the shelter that it's providing you. 602 00:33:14,040 --> 00:33:18,280 Speaker 3: But there is a peculiar American thing here, which is 603 00:33:18,400 --> 00:33:22,080 Speaker 3: the dream of home ownership, right like the American dream, 604 00:33:22,520 --> 00:33:26,040 Speaker 3: and that doesn't exist as much in other countries. So 605 00:33:26,160 --> 00:33:30,000 Speaker 3: if you look at Europe Germany, people tend to be 606 00:33:30,280 --> 00:33:34,320 Speaker 3: happy being renters for the most part. I'm sure costs 607 00:33:34,480 --> 00:33:37,880 Speaker 3: went up recently, but it's a totally different model. 608 00:33:38,320 --> 00:33:41,080 Speaker 4: Yeah, But I just don't think that it requires this 609 00:33:41,400 --> 00:33:46,680 Speaker 4: ongoing battle between price appreciation and affordability. I think housing 610 00:33:46,760 --> 00:33:50,520 Speaker 4: done right. Up until two thousand and two in Phoenix, 611 00:33:50,800 --> 00:33:55,400 Speaker 4: houses across Phoenix were selling for about three times their tenants' incomes, 612 00:33:56,040 --> 00:33:58,160 Speaker 4: and they had been for decades, and they're you know, 613 00:33:58,320 --> 00:34:00,840 Speaker 4: people were moving to Phoenix by the tens of thousands 614 00:34:00,880 --> 00:34:04,320 Speaker 4: to become homeowners all through that time. So I think 615 00:34:04,440 --> 00:34:08,360 Speaker 4: the benefits of home ownership come more from, you know, 616 00:34:08,480 --> 00:34:10,960 Speaker 4: just getting rid of the principal ancient issue you have 617 00:34:11,040 --> 00:34:13,680 Speaker 4: between the landlord and a tenant that you know has 618 00:34:13,800 --> 00:34:15,799 Speaker 4: value for you know, being your own landlord or your 619 00:34:15,800 --> 00:34:18,000 Speaker 4: own tenant is a value that a landlord or a 620 00:34:18,080 --> 00:34:21,239 Speaker 4: tenant on their own can't capture. And just you know, 621 00:34:21,280 --> 00:34:24,600 Speaker 4: the sense of ownership and the sense of neighborhood that 622 00:34:24,640 --> 00:34:27,080 Speaker 4: you can get from that. You know, all those things 623 00:34:27,120 --> 00:34:31,640 Speaker 4: are sources of value that make home ownership valuable even 624 00:34:31,680 --> 00:34:34,440 Speaker 4: if the home doesn't give you excess profits. 625 00:34:34,760 --> 00:34:38,040 Speaker 2: Right, even without the profits, you've at least covered your 626 00:34:38,040 --> 00:34:40,840 Speaker 2: housing short Every person in the world is born with 627 00:34:40,880 --> 00:34:43,839 Speaker 2: a short position on housing that they have to theoretically 628 00:34:43,880 --> 00:34:46,520 Speaker 2: cover at some point, and so once you own your house, 629 00:34:46,719 --> 00:34:48,279 Speaker 2: you never have to worry about that again. I have 630 00:34:48,360 --> 00:34:51,319 Speaker 2: to say I want to do more actually on the 631 00:34:51,360 --> 00:34:53,560 Speaker 2: existence of the build to rent market, because I knew 632 00:34:53,600 --> 00:34:56,239 Speaker 2: that was one of the areas of home building that 633 00:34:56,280 --> 00:34:59,680 Speaker 2: actually has grown rapidly, and it hadn't clicked to me 634 00:35:00,239 --> 00:35:03,880 Speaker 2: sort of before that. Perhaps a big part of it 635 00:35:03,920 --> 00:35:07,120 Speaker 2: is who has access to that credit and is able 636 00:35:07,120 --> 00:35:09,560 Speaker 2: to own the house. Is an institution which can obviously 637 00:35:09,560 --> 00:35:12,319 Speaker 2: borrow easily, or someone with low income and likely low 638 00:35:12,400 --> 00:35:15,360 Speaker 2: FICO and likely low ability to make a down payment 639 00:35:15,960 --> 00:35:19,040 Speaker 2: is a very interesting phenomenon. Kevin Erdman, thank you so 640 00:35:19,120 --> 00:35:21,880 Speaker 2: much for coming on Odd Lots. Really really appreciate you 641 00:35:22,000 --> 00:35:22,520 Speaker 2: joining us. 642 00:35:22,800 --> 00:35:24,280 Speaker 4: Yeah, it's been a pleasure. 643 00:35:36,280 --> 00:35:39,920 Speaker 2: Chrissy, I love that in twenty twenty five and like, 644 00:35:40,320 --> 00:35:43,400 Speaker 2: we're not done trying to figure out what happened in 645 00:35:43,440 --> 00:35:44,920 Speaker 2: the housing bubble, Well. 646 00:35:44,760 --> 00:35:48,680 Speaker 3: This is exactly it, right, Memories are long, and so 647 00:35:48,920 --> 00:35:51,799 Speaker 3: I'm not sure if you waive to magic wand and 648 00:35:51,920 --> 00:35:55,279 Speaker 3: loosen credit standards at the GSS that all of a 649 00:35:55,280 --> 00:35:58,040 Speaker 3: sudden home builders would be like, true, yes, we're going 650 00:35:58,120 --> 00:36:00,520 Speaker 3: to build a lot, because they all remember what happened 651 00:36:01,040 --> 00:36:03,759 Speaker 3: in the early two thousands. And then the other thing 652 00:36:03,800 --> 00:36:06,480 Speaker 3: I would say is one of the big themes of 653 00:36:06,520 --> 00:36:10,520 Speaker 3: the post two thousand and eight period has been bifurcation 654 00:36:11,400 --> 00:36:15,000 Speaker 3: entails in the economy, so the rich get richer, the 655 00:36:15,040 --> 00:36:19,040 Speaker 3: poor get poorer, and I think In that scenario, lower 656 00:36:19,080 --> 00:36:23,879 Speaker 3: income people just aren't thinking about buying houses and they're 657 00:36:23,880 --> 00:36:27,200 Speaker 3: not trying either, And so that's one reason why you've 658 00:36:27,239 --> 00:36:31,960 Speaker 3: seen the average FICO score for GSE approved loans actually 659 00:36:32,000 --> 00:36:32,399 Speaker 3: go up. 660 00:36:33,000 --> 00:36:37,239 Speaker 2: It would be interesting, to Kevin's point at the end, way, 661 00:36:37,320 --> 00:36:40,440 Speaker 2: we should actually do something more on the build to 662 00:36:40,480 --> 00:36:44,239 Speaker 2: rent market, because that, to me, what you just said 663 00:36:44,400 --> 00:36:47,839 Speaker 2: is sort of the key question here is does there 664 00:36:47,960 --> 00:36:52,600 Speaker 2: exist a significant block of Americans who are a little 665 00:36:52,600 --> 00:36:56,160 Speaker 2: bit lower on the FCO score spectrum, lower on the 666 00:36:56,160 --> 00:37:02,400 Speaker 2: income spectrum, but otherwise stayle enough and sort of confident 667 00:37:02,520 --> 00:37:04,160 Speaker 2: enough that they want this is where they want to 668 00:37:04,239 --> 00:37:06,719 Speaker 2: own and build a family. Yeah, And that's sort of 669 00:37:06,760 --> 00:37:09,960 Speaker 2: like the big question, because right, you can loosen it 670 00:37:10,000 --> 00:37:11,920 Speaker 2: all you want, but to the like, how many of 671 00:37:11,960 --> 00:37:14,799 Speaker 2: those people are there? Is that would the homebuilders then, 672 00:37:15,320 --> 00:37:17,520 Speaker 2: you know, like start building for them. Will it be 673 00:37:17,560 --> 00:37:21,080 Speaker 2: a meaningful part of the market given the bifurcation and 674 00:37:21,160 --> 00:37:24,120 Speaker 2: the sort of barbell nature of the economy where like, 675 00:37:24,520 --> 00:37:26,680 Speaker 2: because to my mind, it certainly seems plausible that the 676 00:37:26,680 --> 00:37:28,759 Speaker 2: home builder is like, yeah, that's great, we still want 677 00:37:28,800 --> 00:37:29,880 Speaker 2: to serve the really rich people. 678 00:37:30,200 --> 00:37:33,120 Speaker 3: Yeah, exactly, and the margins on those houses tend to 679 00:37:33,120 --> 00:37:35,560 Speaker 3: be fatter. And the other thing I would say is 680 00:37:35,719 --> 00:37:39,080 Speaker 3: the question isn't whether people want to buy homes. I 681 00:37:39,120 --> 00:37:42,879 Speaker 3: think in America almost everyone really wants to buy a home, 682 00:37:42,920 --> 00:37:46,400 Speaker 3: although there are some people who find renting more convenient. 683 00:37:46,719 --> 00:37:49,640 Speaker 3: The question is can they actually afford a home? 684 00:37:49,800 --> 00:37:50,200 Speaker 4: Yeah? 685 00:37:50,239 --> 00:37:53,680 Speaker 3: And will they apply? And I think that pool of 686 00:37:53,840 --> 00:37:55,560 Speaker 3: potential home buyers has gone down. 687 00:37:56,440 --> 00:37:59,840 Speaker 2: I do remember that in like pre twenty twenty, people 688 00:38:00,440 --> 00:38:04,239 Speaker 2: posting Zillow links and showing the gap between what you 689 00:38:04,280 --> 00:38:07,200 Speaker 2: can rent them out for and what they would cost 690 00:38:07,200 --> 00:38:11,520 Speaker 2: together on them, and man, I really regret not getting 691 00:38:11,520 --> 00:38:13,320 Speaker 2: a pool of capital together, and they're all like in 692 00:38:13,360 --> 00:38:16,560 Speaker 2: the Midwest, like you know, random houses in Indiana or something. 693 00:38:16,800 --> 00:38:19,600 Speaker 2: I really regret not getting a pool of capital together 694 00:38:19,640 --> 00:38:21,880 Speaker 2: and buying a bunch of those houses and renting them out. 695 00:38:21,960 --> 00:38:23,120 Speaker 3: As in Austin. 696 00:38:23,360 --> 00:38:23,600 Speaker 1: Yeah. 697 00:38:23,680 --> 00:38:26,239 Speaker 2: No, not, you know, just some like normal house and 698 00:38:26,560 --> 00:38:28,960 Speaker 2: you know, the suburbs of Indianapolis or whatever. 699 00:38:29,280 --> 00:38:32,800 Speaker 3: You're going to become one of the financial institutions and 700 00:38:33,040 --> 00:38:35,840 Speaker 3: snapping up all the single homes. It's too family homes. 701 00:38:35,920 --> 00:38:36,480 Speaker 4: It's too late. 702 00:38:36,560 --> 00:38:38,560 Speaker 2: But this is the this is the interesting thing he 703 00:38:38,600 --> 00:38:41,880 Speaker 2: pointed out, which is like that financial institution, you know, 704 00:38:41,920 --> 00:38:44,640 Speaker 2: people to his point, you know, the reason that they're 705 00:38:44,680 --> 00:38:46,480 Speaker 2: able to make a spread is this idea that they 706 00:38:46,480 --> 00:38:48,560 Speaker 2: could get access to credit to buy those homes and 707 00:38:48,600 --> 00:38:50,920 Speaker 2: then an individual can't. So it does seem like if 708 00:38:50,960 --> 00:38:55,880 Speaker 2: you want to tilt the dial between whether a financial 709 00:38:55,880 --> 00:38:58,560 Speaker 2: institution or a family can own a home, you at 710 00:38:58,640 --> 00:39:02,000 Speaker 2: least have to, like probably start by making the credit available. 711 00:39:02,600 --> 00:39:04,640 Speaker 3: Yeah. Absolutely, Uh, shall we leave it there? 712 00:39:04,719 --> 00:39:05,479 Speaker 4: Let's leave it there. 713 00:39:05,880 --> 00:39:08,839 Speaker 3: This has been another episode of the Oudlots podcast. I'm 714 00:39:08,840 --> 00:39:11,560 Speaker 3: Tracy Alloway. You can follow me at Tracy Alloway. 715 00:39:11,680 --> 00:39:14,360 Speaker 2: And I'm Joe Wisenthal. You can follow me at the Stalwart. 716 00:39:14,520 --> 00:39:18,480 Speaker 2: Follow Kevin Erdman, He's at ka Erdman and check out 717 00:39:18,520 --> 00:39:22,640 Speaker 2: his newsletter Erdman Housing Tracker. It's over on Substack. Follow 718 00:39:22,640 --> 00:39:25,880 Speaker 2: our producers Carmen Rodriguez at Carmen armand Dash'll Bennett at 719 00:39:25,920 --> 00:39:29,759 Speaker 2: Dashbot and Kelbrooks at Kelbrooks. For more Oddlows content, go 720 00:39:29,800 --> 00:39:31,879 Speaker 2: to bloomberg dot com slash odd Lots, where you can 721 00:39:31,880 --> 00:39:34,680 Speaker 2: find all of our episodes and a daily newsletter and 722 00:39:34,719 --> 00:39:36,719 Speaker 2: you can chat about all of these topics. Twenty four 723 00:39:36,719 --> 00:39:38,799 Speaker 2: to seven in our discord, we have a real Estate 724 00:39:38,840 --> 00:39:42,479 Speaker 2: channel on there. We even have an HGTV channel where 725 00:39:42,520 --> 00:39:45,399 Speaker 2: Tracy shows off her new tractor. Go check it out 726 00:39:45,400 --> 00:39:47,640 Speaker 2: Discord dot gg, slash out Lots. 727 00:39:47,560 --> 00:39:50,000 Speaker 3: And if you enjoy odlots. If you like it when 728 00:39:50,040 --> 00:39:53,400 Speaker 3: we talk about affordability in the housing market, then please 729 00:39:53,480 --> 00:39:57,080 Speaker 3: leave us a positive review on your favorite podcast platform. 730 00:39:57,520 --> 00:40:00,400 Speaker 3: And remember, if you are a Bloomberg subscriber, you can 731 00:40:00,440 --> 00:40:03,879 Speaker 3: listen to all of our episodes absolutely ad free. All 732 00:40:03,920 --> 00:40:05,960 Speaker 3: you need to do is find the Bloomberg channel on 733 00:40:06,120 --> 00:40:10,040 Speaker 3: Apple Podcasts and follow the instructions there. Thanks for listening.