WEBVTT - The Fed Hiked Rates Rapidly and Housing Is as Broken as Ever 0:00:10.400 --> 0:00:14.200 Hello, and welcome to another episode of the Odd Lots Podcast. 0:00:14.240 --> 0:00:18.040 I'm Joe Wysenthal and I'm Tracy Alloway Tracy Housing. I 0:00:18.040 --> 0:00:20.200 feel like we'll never get away. I mean, it's so 0:00:20.600 --> 0:00:23.439 we'll never get away from this topic. Ever, it doesn't matter, 0:00:23.600 --> 0:00:26.200 boom buzz, We're going to be talking about this forever. 0:00:26.320 --> 0:00:29.000 Well, I mean, everyone lives somewhere right Like you're either 0:00:29.040 --> 0:00:32.440 in an apartment, probably hoping one day to own a house, 0:00:32.520 --> 0:00:34.280 or you're already in a house and you're very, very 0:00:34.280 --> 0:00:36.680 conscious of whatever is happening to the price of your 0:00:36.840 --> 0:00:39.600 most important financial asset. So I feel like this is 0:00:39.600 --> 0:00:42.400 on everyone's minds. Obviously there's been a lot of talk 0:00:42.440 --> 0:00:45.240 about it because rates have gone up, yeah, so much. 0:00:45.440 --> 0:00:48.520 And at the same time, I think we wrote about 0:00:48.560 --> 0:00:51.839 this late last year. It's been a really weird housing 0:00:51.880 --> 0:00:53.000 market in many ways. 0:00:53.080 --> 0:00:55.120 Well, and you know, we had that conversation of course 0:00:55.160 --> 0:00:57.920 with James Egan of Morgan Stanley and at the time 0:00:57.960 --> 0:00:59.800 he sort of made the bold prediction and he said, 0:00:59.840 --> 0:01:01.880 you know, even with the mortgage rate shock, it's like, 0:01:01.920 --> 0:01:03.600 I don't think prices are going to come down. And 0:01:03.640 --> 0:01:06.520 I think that's been pretty validated. The one thing that 0:01:06.680 --> 0:01:11.160 did come down in a meaningful way was housing starts 0:01:11.160 --> 0:01:13.760 in home builder activity, and you see all the lines 0:01:14.000 --> 0:01:17.319 sharply moving lower at the end, you know, throughout basically 0:01:17.360 --> 0:01:20.520 the second half of twenty twenty two, and yet here 0:01:20.560 --> 0:01:23.920 we are in you know, spring twenty twenty three, home 0:01:23.920 --> 0:01:26.720 builders docks are basically back near the tops, and housing 0:01:26.800 --> 0:01:28.840 starts picked up again, and it's not like rates have 0:01:28.880 --> 0:01:32.360 really come down. So even even the one category that 0:01:32.440 --> 0:01:35.080 was like affected by rates was not affected by rates. 0:01:35.240 --> 0:01:38.120 Well, it's sort of like a great microcosm of the 0:01:38.160 --> 0:01:41.600 soft versus hard data debate, which is the hard data 0:01:41.640 --> 0:01:45.040 is still coming in relatively active and strong, but the 0:01:45.040 --> 0:01:47.680 soft data is quite weak at the moment. And you 0:01:47.720 --> 0:01:50.200 see that in the home builders as well. So there's activity, 0:01:50.440 --> 0:01:53.240 but if you look at, for instance, the confidence survey 0:01:53.320 --> 0:01:56.120 of home builders, that's gone down quite a bit, although 0:01:56.120 --> 0:01:58.240 it is starting to pick up again, No it is. 0:01:58.320 --> 0:02:00.640 And you know, like I was reading through D. R. 0:02:00.680 --> 0:02:04.800 Horton's recent earnings report and they're like expressing some optimism. 0:02:04.880 --> 0:02:07.160 They said, some of the supply chain issues are behind us, 0:02:07.480 --> 0:02:11.799 but still like there's sort of like deep structural like underhousing, 0:02:11.840 --> 0:02:14.080 and I have like two questions sort of related to 0:02:14.120 --> 0:02:16.040 this that I'm thinking about. It is like still like 0:02:16.080 --> 0:02:18.920 the problems of like the post grade financial crisis period, 0:02:19.320 --> 0:02:21.360 And we talked there's like a big Odd Lots theme 0:02:21.480 --> 0:02:23.919 like how much did that scar the homebuilders? 0:02:24.000 --> 0:02:24.240 Right? 0:02:24.560 --> 0:02:27.000 And then this sort of like mini. 0:02:27.080 --> 0:02:29.440 Home builder recession that we got the second in the 0:02:29.440 --> 0:02:32.560 second half of twenty twenty two, is that like that 0:02:32.639 --> 0:02:34.920 all over again where the homebuilders were like, well, you 0:02:35.000 --> 0:02:36.120 just pulled the rugout from. 0:02:36.000 --> 0:02:36.760 Us once again. 0:02:37.440 --> 0:02:39.720 And if the whole point of rate hikes it's like 0:02:39.800 --> 0:02:43.000 easy supply, and Jerome Powell specifically talked about that as 0:02:43.040 --> 0:02:45.760 like one of the goals, like have we accomplished anything 0:02:46.240 --> 0:02:47.400 from these rate hikes so far? 0:02:47.600 --> 0:02:48.880 Definitely a lot to talk about. 0:02:48.960 --> 0:02:51.880 All Right, Well, I'm very excited about today's guest, the 0:02:51.880 --> 0:02:54.600 perfect guest. We've had her on before. We talked to 0:02:54.600 --> 0:02:57.640 her about the homebuilders during the absolute peak of the mania, 0:02:57.680 --> 0:03:01.160 and here we are again with Allie Wolf, chief economist 0:03:01.240 --> 0:03:04.360 at Zonda. So Ellie, thank you so much for coming 0:03:04.400 --> 0:03:05.400 back on Odd Lots. 0:03:05.800 --> 0:03:07.560 Hi, Joe, Hi, Tracy, thanks for having. 0:03:07.440 --> 0:03:10.280 Me, absolutely, thank you so much for coming back. 0:03:10.360 --> 0:03:13.839 So how is this that we had this huge rate 0:03:13.880 --> 0:03:17.040 shock like the one of the fascist hiking cycles ever, 0:03:17.720 --> 0:03:20.480 and we couldn't even like slow down like the. 0:03:20.440 --> 0:03:21.480 New construction market. 0:03:21.520 --> 0:03:24.560 It's like picking back up again, home building stocked, shooting 0:03:24.639 --> 0:03:27.000 up like we had a lot like a three month 0:03:27.040 --> 0:03:28.240 housing recession out of it. 0:03:29.160 --> 0:03:31.080 Yeah, So I think the important thing is to go 0:03:31.200 --> 0:03:33.080 back to the beginning of last year. So we had 0:03:33.200 --> 0:03:37.000 rates in the threes, and almost overnight it felt like 0:03:37.080 --> 0:03:39.160 rates went to the sixes yea, and there was just 0:03:39.200 --> 0:03:42.400 this huge fear that, Okay, no one's gonna want to 0:03:42.440 --> 0:03:46.240 buy anymore, when in fact we actually saw sales continue 0:03:46.320 --> 0:03:49.400 to be strong once rates got to six and there 0:03:49.440 --> 0:03:51.240 was this big question mark, this is kind of spring 0:03:51.240 --> 0:03:52.400 selling season last year. 0:03:53.080 --> 0:03:54.120 How is this happening. 0:03:54.160 --> 0:03:58.080 This kind of defies logic, This defies what's happened to 0:03:58.120 --> 0:04:00.560 the monthly payment change. And it was because there are 0:04:00.560 --> 0:04:02.200 a lot of people that were saying, oh gosh, if 0:04:02.200 --> 0:04:04.160 they've already gone up, are they going to continue to 0:04:04.160 --> 0:04:04.720 go more? 0:04:05.080 --> 0:04:07.240 I don't want to miss my opportunity to buy a home. 0:04:08.000 --> 0:04:11.520 That spurred some activity until about the middle of last year, 0:04:12.040 --> 0:04:14.720 and then you saw exactly what you thought would happen, 0:04:14.840 --> 0:04:18.599 which is consumers were like, whoa, never mind, housing's expensive, 0:04:18.880 --> 0:04:21.279 there may be a recession, I may lose my job, 0:04:21.720 --> 0:04:24.640 I don't want to buy a home. So demand froze 0:04:24.720 --> 0:04:28.880 up until we start to see the supply or the 0:04:29.000 --> 0:04:30.440 sellers adjust. 0:04:30.760 --> 0:04:32.520 And I think that's a really big. 0:04:32.320 --> 0:04:35.160 Part of what happened last year and how that's evolved 0:04:35.200 --> 0:04:35.640 this year. 0:04:36.200 --> 0:04:37.920 Well, talk to us about the sellers then, because I 0:04:37.960 --> 0:04:41.359 remember this was a big component of Jim Egan's argument 0:04:41.400 --> 0:04:44.400 at Morgan Stanley as well, this idea that with rates 0:04:44.480 --> 0:04:47.640 this high, you just don't why would you sell your house. 0:04:47.680 --> 0:04:50.240 It's going to be harder to get a mortgage at 0:04:50.279 --> 0:04:53.040 a low rate, and there's the possibility that you're selling 0:04:53.080 --> 0:04:55.240 your house maybe for less than what you bought it at. 0:04:55.360 --> 0:04:57.440 So what are sellers doing in this environment? 0:04:58.160 --> 0:05:00.680 Well, so last year we did see a little bit 0:05:00.680 --> 0:05:02.200 of an uptick towards the end of the year of 0:05:02.279 --> 0:05:04.280 resale supply, but I think it was a lot of 0:05:04.320 --> 0:05:07.359 the sellers thinking, oh, shoot, if I don't sell now, 0:05:07.520 --> 0:05:10.119 I don't want to sell for less. So that drove 0:05:10.160 --> 0:05:12.240 a little bit of an increase on the resale supply. 0:05:12.440 --> 0:05:16.280 But the real story came from the homebuilders. So homebuilders, 0:05:16.320 --> 0:05:18.920 as we talked about last time we met, we're dealing 0:05:18.960 --> 0:05:20.839 with the issue of not being able to get homes 0:05:20.880 --> 0:05:23.640 built quickly. They didn't know how much it would cost 0:05:23.680 --> 0:05:26.400 them to get those homes built, so then they started 0:05:26.400 --> 0:05:29.640 to build Speck homes. Speck Holmes was going back to 0:05:29.720 --> 0:05:32.920 scars of last cycle. A lot of builders weren't going 0:05:33.040 --> 0:05:36.680 speck heavy, meaning building a home without a buyer attached, 0:05:37.160 --> 0:05:40.200 because last cycle, when you build a home without a buyer, 0:05:40.839 --> 0:05:43.839 those became the most risky because the music stopped and 0:05:43.839 --> 0:05:46.080 then you had a whole bunch of standing inventory, and 0:05:46.120 --> 0:05:48.440 what were you going to do with those homes? This 0:05:48.640 --> 0:05:51.880 time around, builders started to do specs because they said, 0:05:52.360 --> 0:05:55.920 I can control for how expensive it is to get 0:05:55.920 --> 0:05:58.719 this home built, and I don't have a customer who's 0:05:58.760 --> 0:06:00.920 mad that it took fourteen months to get this home 0:06:00.960 --> 0:06:04.400 built instead of eight. So they built these homes, and 0:06:04.480 --> 0:06:06.600 all of these homes hit the market at the end 0:06:06.640 --> 0:06:09.320 of last year at just about the same time the 0:06:09.360 --> 0:06:12.320 demand fell off a cliff, and that's where you started 0:06:12.360 --> 0:06:14.800 to see and hear about fire sales that happened from 0:06:14.800 --> 0:06:17.920 the builder side. So they were really the sellers, Tracy, 0:06:17.960 --> 0:06:21.200 to your question, they were the sellers that were influencing 0:06:21.200 --> 0:06:23.320 the market the most at the end of last year. 0:06:23.480 --> 0:06:27.200 So the sort of like marginal supplier of houses. 0:06:27.279 --> 0:06:29.320 I guess that's exactly it. 0:06:29.400 --> 0:06:31.960 So they had standing inventory and they said, we don't 0:06:31.960 --> 0:06:34.720 want this, and if consumers don't want it at this price, 0:06:35.200 --> 0:06:36.600 what are they willing to buy this home for? 0:06:37.360 --> 0:06:40.200 Okay, but what now? Because now we're back here in 0:06:40.320 --> 0:06:43.520 spring of twenty twenty three, and I assume that it 0:06:43.600 --> 0:06:46.279 feels like that fire sale is over and we see 0:06:46.440 --> 0:06:49.640 housing starts picking up again. So that was like a 0:06:49.640 --> 0:06:52.320 one time shop where we had this like brief supply 0:06:52.480 --> 0:06:55.080 of I don't know, introduction of new supply onto the market, 0:06:55.279 --> 0:06:56.920 and now we're just back into tightness again. 0:06:57.360 --> 0:06:59.880 Yep. So what happened is inventory build up. 0:07:00.040 --> 0:07:04.440 Builders offered those discounts, builders offered incentives, consumers showed. 0:07:04.200 --> 0:07:06.000 Up, the inventory rolled over. 0:07:06.360 --> 0:07:07.840 So if you look at the chart, you have this 0:07:07.960 --> 0:07:10.840 rapid increase and now you have inventory coming down at 0:07:10.840 --> 0:07:12.680 the same time that you have sales going back up 0:07:13.240 --> 0:07:16.320 because those homes are being sold through. You then also 0:07:16.440 --> 0:07:19.280 have builders that are raising prices again. So instead of 0:07:19.320 --> 0:07:22.800 lowering prices like last year, you have builders raising prices 0:07:23.240 --> 0:07:26.000 and because demand is stronger, that is contributing to more 0:07:26.040 --> 0:07:28.560 builders feeling more confident to start more homes. 0:07:29.040 --> 0:07:31.119 But I get so here and I sort of brought 0:07:31.160 --> 0:07:32.920 this up at the intro, which to me is the 0:07:32.920 --> 0:07:35.520 big question. It's like, we did get this big raid shock, 0:07:36.040 --> 0:07:39.360 Like are we going to see scars of the last 0:07:39.360 --> 0:07:43.840 six months or the FEDS ongoing inclination whatever it is 0:07:44.000 --> 0:07:48.320 like tamp down this economy. Will it contribute to some Okay, yes, 0:07:48.520 --> 0:07:51.200 builders may be more confident than they were six months ago, 0:07:51.800 --> 0:07:53.560 but is there scars of it? Is there going to 0:07:53.560 --> 0:07:56.960 be a residual caution that once again sort of impairs 0:07:57.000 --> 0:07:59.840 the upward trajectory of new home supply. 0:08:00.520 --> 0:08:01.040 In a way. 0:08:01.400 --> 0:08:04.000 So I was on a call with a builder yesterday 0:08:04.080 --> 0:08:07.120 and as we were talking, they were saying a lot 0:08:07.120 --> 0:08:09.720 of this feels too good to be true. This feels 0:08:09.720 --> 0:08:12.440 like we shouldn't be having as much success as we are. 0:08:13.240 --> 0:08:16.000 But we're still going to go through with our land 0:08:16.000 --> 0:08:19.600 acquisition because as it stands right now, we think that 0:08:19.680 --> 0:08:22.280 there is a demand for more homes and we want 0:08:22.320 --> 0:08:24.160 to be backfilling that Now. 0:08:24.200 --> 0:08:26.080 You have to have enough confidence to do that. 0:08:26.360 --> 0:08:28.720 You have to have an equity partner that's willing to 0:08:28.760 --> 0:08:31.600 support that, and you also have to feel good. 0:08:32.120 --> 0:08:33.360 There was so much talk. 0:08:33.120 --> 0:08:34.559 On that call about, Yeah, we think we're going to 0:08:34.600 --> 0:08:36.920 go through with land acquisition, but we also think of 0:08:36.960 --> 0:08:39.600 recessions probably around the corner, and how are we trying 0:08:39.600 --> 0:08:42.680 to plan for a recession where maybe demands down and 0:08:42.720 --> 0:08:46.520 then we're actually increasing starts at again the wrong time 0:08:46.600 --> 0:08:48.319 of the market. What are you. 0:08:48.320 --> 0:08:51.640 Seeing in terms of product segmentation, because I think this 0:08:51.679 --> 0:08:54.800 is one way that a lot of different companies deal 0:08:54.880 --> 0:08:58.840 with the future economic uncertainty. Is the sort of tailor 0:08:58.960 --> 0:09:03.240 they're offering to maybe a level of person who is 0:09:03.760 --> 0:09:07.679 more price inelastic or less price sensitive. Is that what 0:09:07.720 --> 0:09:09.960 we're seeing in the housing market as well. 0:09:10.080 --> 0:09:12.959 Yeah, and we should talk about the different buyers because 0:09:12.960 --> 0:09:17.200 I think that's where the story gets interesting. But probably 0:09:17.240 --> 0:09:20.120 the most important trend is if you think about work 0:09:20.160 --> 0:09:22.240 from home. There was this discussion a couple of years 0:09:22.280 --> 0:09:25.280 ago that you just build a bigger home because people 0:09:25.320 --> 0:09:27.600 are going to move further out and they want more space, 0:09:27.679 --> 0:09:29.959 and so home size is going to go up. And 0:09:30.000 --> 0:09:32.440 in fact, if you look at what's happening with home size, 0:09:32.720 --> 0:09:35.000 it's not just about a certain buyer that's going to 0:09:35.000 --> 0:09:37.920 continue to purchase, because in a lot of cases, those 0:09:37.920 --> 0:09:39.640 were the buyers that were the most active over the 0:09:39.679 --> 0:09:42.600 past few years. The biggest pool of buyers that have 0:09:42.640 --> 0:09:46.120 been untapped are those that haven't been able to purchase 0:09:46.160 --> 0:09:49.000 because of what's happened with home prices and because of 0:09:49.040 --> 0:09:50.080 how competitive. 0:09:49.640 --> 0:09:50.360 The market was. 0:09:50.840 --> 0:09:53.680 So we're actually seeing that builders are reversing home size, 0:09:53.760 --> 0:09:56.080 so they're trying to make the home smaller to be 0:09:56.120 --> 0:10:00.439 able to account for the quantifiable demand pool that wants 0:10:00.440 --> 0:10:02.840 to purchase a home but just can't figure out how 0:10:02.840 --> 0:10:03.640 to make the math work. 0:10:03.840 --> 0:10:05.880 This is really interesting to me, and I do feel 0:10:05.920 --> 0:10:09.040 like in most of the housing discussions, and probably including 0:10:09.080 --> 0:10:11.000 the ones that we've had, this is a dynamic that 0:10:11.040 --> 0:10:13.880 strikes me is under discussed, which is that in twenty 0:10:13.920 --> 0:10:17.160 twenty or twenty twenty one, a bunch of people maybe 0:10:17.200 --> 0:10:18.640 like sort of woke up to the fact that on 0:10:18.679 --> 0:10:20.600 maybe the future of work is going to be hybrid 0:10:20.679 --> 0:10:22.640 or I'm going to work from home, and so where 0:10:22.679 --> 0:10:25.880 I move, I wanted to have space, but regardless of 0:10:25.920 --> 0:10:28.560 the macro situation, I would sort of assume that sort 0:10:28.600 --> 0:10:31.920 of like a one time readjustment. So It is the 0:10:31.960 --> 0:10:36.439 implication to some extent that the people who really feel 0:10:36.480 --> 0:10:39.200 they need work from home space like that is done. 0:10:39.240 --> 0:10:41.160 Like they got their house, whether it's a rental or 0:10:41.200 --> 0:10:44.880 they bought it, and at that point, like that kink 0:10:44.960 --> 0:10:45.360 is out. 0:10:45.240 --> 0:10:45.760 Of the market. 0:10:46.600 --> 0:10:49.080 If you look at sales, it backs that argument. 0:10:49.600 --> 0:10:52.520 So basically, if you think back to again last cycle, 0:10:53.000 --> 0:10:55.920 there was the drive to you qualify, so builders were 0:10:55.960 --> 0:10:58.679 going further and further away from the central business district 0:10:58.760 --> 0:11:04.480 because of affordability. That proved to be a poor investment 0:11:04.520 --> 0:11:07.000 when the market slowed because those were some of the 0:11:07.000 --> 0:11:09.360 buyers that had to move that far out that got 0:11:09.640 --> 0:11:12.720 hit the hardest during the Great Financial Crisis, and builders 0:11:12.720 --> 0:11:14.680 had the land that was out there and the homes 0:11:14.679 --> 0:11:17.120 that were out there at a price that people couldn't support, 0:11:17.440 --> 0:11:21.079 and those became kind of the ground zero for the 0:11:21.120 --> 0:11:24.360 price correction. So going back to scars, builders then didn't 0:11:24.400 --> 0:11:27.920 want to go to those areas really from the Great 0:11:27.960 --> 0:11:31.720 Financial Crisis up until twenty twenty, and then what happened 0:11:31.800 --> 0:11:34.120 is twenty twenty hits and all of a sudden, people say, 0:11:34.160 --> 0:11:36.560 you know what, I don't care about living an hour 0:11:36.679 --> 0:11:40.199 from the central business district because that means an hour away, 0:11:40.320 --> 0:11:42.960 I'm going to get a twenty percent discount in price 0:11:43.400 --> 0:11:46.640 and a thirty percent bump in square footage. So that 0:11:46.720 --> 0:11:49.640 basically said to builders, go go back to where you 0:11:49.640 --> 0:11:53.840 wouldn't touch before because that's where the demand is. Problem is, 0:11:54.200 --> 0:11:56.600 it takes a long time for that lot to become 0:11:56.640 --> 0:11:59.640 available for a builder to go vertical on, and over 0:11:59.679 --> 0:12:02.760 that period of time, more people are returning to the office, 0:12:02.960 --> 0:12:06.720 more people are doing a hybrid schedule, and that demand 0:12:06.800 --> 0:12:09.600 that thought was to be this huge pool of buyers 0:12:09.679 --> 0:12:12.240 has dwindled down. And so now when you think about 0:12:12.240 --> 0:12:14.040 the risk again, it goes back to the proofrey. It 0:12:14.040 --> 0:12:16.160 goes back to the same location that was the highest 0:12:16.200 --> 0:12:17.120 risk last time too. 0:12:18.080 --> 0:12:20.120 Can you talk to us about how that's playing out, 0:12:20.200 --> 0:12:22.800 you know, if you widen the geographic net a little 0:12:22.800 --> 0:12:25.040 bit more. What we have seen over the past couple 0:12:25.080 --> 0:12:27.520 of years is this idea of people moving, you know, 0:12:27.600 --> 0:12:31.560 away from maybe the biggest cities in the US, moving 0:12:31.600 --> 0:12:34.559 out to the sun Belt states, places like I mean, 0:12:34.600 --> 0:12:37.719 Austin was a big one. Is that like, is that 0:12:37.840 --> 0:12:39.840 just played out at the moment or what are you 0:12:39.880 --> 0:12:41.000 seeing in those markets? 0:12:41.600 --> 0:12:44.560 So when we look at the rate of migration. 0:12:44.760 --> 0:12:47.520 Luckily, Census just put out their data recently where you 0:12:47.520 --> 0:12:49.880 can look through the middle of last year you can 0:12:49.920 --> 0:12:54.880 see the higher rate of migration was happening the prior year. 0:12:55.240 --> 0:12:57.679 We're still seeing that there's some migration, but it's trending 0:12:57.760 --> 0:12:59.800 down in terms of new people that are moving. You 0:12:59.840 --> 0:13:02.559 don't have to Joe's point that one time kind of. 0:13:02.559 --> 0:13:03.360 Rush of people. 0:13:03.720 --> 0:13:06.640 There's still some people that are trickling out, that are moving, 0:13:06.679 --> 0:13:08.960 that still have work from home and maybe they feel 0:13:09.000 --> 0:13:11.520 more comfortable with where the market is. But I think 0:13:11.559 --> 0:13:15.240 you also have to take those markets separately because there's 0:13:15.280 --> 0:13:18.240 been this big discussion of Okay, everyone's leaving big cities, 0:13:18.679 --> 0:13:20.880 and so what this is doing is killing the Los 0:13:20.880 --> 0:13:23.520 Angeles housing market, or the San Francisco housing market, or 0:13:23.559 --> 0:13:27.040 the New York housing market, when in reality those markets 0:13:27.080 --> 0:13:29.359 became so expensive because. 0:13:29.080 --> 0:13:30.360 There wasn't enough building. 0:13:30.640 --> 0:13:33.960 And even if you subtract out however many people have left, 0:13:34.040 --> 0:13:35.520 they're still under supplied. 0:13:36.000 --> 0:13:37.360 So it's a tricky environment. 0:13:37.400 --> 0:13:40.400 Where then you go to the Southeast, which has been 0:13:40.440 --> 0:13:44.360 that kind of top market for migration. Southeast doesn't have 0:13:44.400 --> 0:13:46.920 all of the infrastructure in place, so we're hearing traffics 0:13:46.920 --> 0:13:50.680 getting more frustrating. Home prices in those areas relative themselves 0:13:50.720 --> 0:13:53.640 are going up, but they're also pipeline markets. There are 0:13:53.640 --> 0:13:57.040 markets that over time builders will likely be able to 0:13:57.120 --> 0:13:59.839 match demand with supply, but it's going to take time 0:13:59.840 --> 0:14:00.880 to get there. 0:14:17.120 --> 0:14:20.160 Now, there are a few markets and in the aggregate 0:14:20.200 --> 0:14:23.200 we sort of know that basically prices really have held 0:14:23.240 --> 0:14:25.600 up nationally or much better than maybe some people would 0:14:25.600 --> 0:14:28.960 have expected, et cetera. There are some markets that have 0:14:29.120 --> 0:14:33.080 seen price decreases. Is there like a common thread or 0:14:33.240 --> 0:14:35.680 sort of is it the ultra boom towns of the 0:14:35.760 --> 0:14:38.520 zoom tallengs of twenty twenty one? Is there a common 0:14:38.520 --> 0:14:41.240 thread of where it's like, actually, we kind of see 0:14:41.280 --> 0:14:42.360 a slowdown that's real. 0:14:43.640 --> 0:14:45.680 I would say there's a couple there's a couple of 0:14:45.720 --> 0:14:47.560 ways to cut that. Joe and Tracy. I think this 0:14:47.600 --> 0:14:50.000 is the most interesting part of the housing market from 0:14:50.040 --> 0:14:53.240 my opinion, is there was a discussion that home prices 0:14:53.240 --> 0:14:56.360 can't go down if the unemployment is at record lows 0:14:56.600 --> 0:15:00.720 and if resale inventory is at record lows. In reality, 0:15:01.240 --> 0:15:05.080 there are markets that it's not an oversupply issue or 0:15:05.080 --> 0:15:09.200 a credit issue like last cycle, but it's a fundamentals 0:15:09.280 --> 0:15:13.320 do not align issue where we found in some markets 0:15:13.520 --> 0:15:17.440 that home prices are so out of whack with incomes 0:15:18.040 --> 0:15:20.920 that sure, there's a certain pooll of buyers that have 0:15:21.040 --> 0:15:22.640 been able to buy homes, and maybe. 0:15:22.480 --> 0:15:23.760 We'll continue to buy homes. 0:15:24.120 --> 0:15:27.160 But if you're trying to cater to the Austin market, 0:15:27.200 --> 0:15:30.720 for example, not everyone is a transplant from San Francisco 0:15:30.920 --> 0:15:33.720 that can tap equity from California that has a high 0:15:33.800 --> 0:15:37.120 wage that can really going back to the price in elasticity, 0:15:37.160 --> 0:15:39.160 they don't care what the home is priced. 0:15:39.360 --> 0:15:41.280 That's only a certain subset of the market. 0:15:41.920 --> 0:15:48.200 So areas like Austin, Salt Lake City, Denver, Phoenix, these 0:15:48.200 --> 0:15:50.320 were areas that, oh, these are going to do fine 0:15:50.400 --> 0:15:53.720 because everyone wants to move there, But because everyone wanted to. 0:15:53.640 --> 0:15:56.000 Move there, they start to hit that price sealing. 0:15:56.720 --> 0:15:59.240 So part of it is the boom cities, and then 0:15:59.360 --> 0:16:02.720 part of it is some of the coastal Western cities 0:16:03.000 --> 0:16:07.600 that just inherently are more expensive, more interest rates sensitive. 0:16:07.680 --> 0:16:10.720 Despite having higher wealth individuals, they have a higher base price, 0:16:11.360 --> 0:16:14.680 and they did see that the prices were already. 0:16:14.440 --> 0:16:16.360 High going into the pandemic, and now they've. 0:16:16.120 --> 0:16:19.160 Only gone higher wait, so this is really interesting because 0:16:19.240 --> 0:16:22.360 unemployment was supposed to be the sort of wildcard in 0:16:22.400 --> 0:16:25.880 the housing market. As long as unemployment stays low, you 0:16:26.000 --> 0:16:29.680 won't get this wave of force selling that has contributed 0:16:29.720 --> 0:16:32.680 to previous crashes, I mean, notably the two thousand and 0:16:32.720 --> 0:16:36.400 eight financial crisis and housing bust. But you're saying we 0:16:36.560 --> 0:16:41.800 have seen some price decreases even in markets where unemployment 0:16:41.840 --> 0:16:42.960 is still relatively low. 0:16:43.200 --> 0:16:44.440 Yep, that's exactly it. 0:16:44.480 --> 0:16:47.960 Because I think what people say is, well, someone has 0:16:48.040 --> 0:16:49.280 to rent or own. 0:16:50.120 --> 0:16:52.000 Yeah, but they have a third option. 0:16:52.560 --> 0:16:54.720 They can move in with friends, they can move in 0:16:54.760 --> 0:16:56.520 with family, they can move in with roommates. 0:16:56.960 --> 0:16:59.000 And we didn't see that during the pandemic. 0:16:59.120 --> 0:17:02.160 During the pandemic was leaving family and leaving friends and 0:17:02.240 --> 0:17:05.679 leaving roommates. When inflation gets too high, when home prices 0:17:05.680 --> 0:17:08.000 get too high, people have a third option. And that 0:17:08.080 --> 0:17:10.520 third option is I don't want to play in this market. 0:17:10.840 --> 0:17:12.400 I don't want to pay more for rent. I don't 0:17:12.400 --> 0:17:14.359 want to have to pay at today's home prices. And 0:17:14.400 --> 0:17:16.960 I think that that also contributed. You had enough people 0:17:17.000 --> 0:17:21.680 step back that even though supplies low, fourth quarter really 0:17:21.800 --> 0:17:24.000 was the key component. Supply was low but demand got 0:17:24.000 --> 0:17:26.720 even lower for a while. That's again going back to 0:17:26.760 --> 0:17:29.560 Joe's point, that's changed this year because now the market's 0:17:29.600 --> 0:17:32.280 come back to life. But that's what we saw last year. 0:17:32.440 --> 0:17:35.200 Yeah, I forgot about that, like sort of third element. 0:17:35.240 --> 0:17:36.720 We talked about the work from a home one time 0:17:36.720 --> 0:17:39.920 shock and then the household formation boom that we saw 0:17:40.560 --> 0:17:43.760 as someone dealing with New York City housing right now, 0:17:43.800 --> 0:17:45.119 and I don't really want to talk about it. I 0:17:45.160 --> 0:17:48.280 would love a roommate. I want I want a roommate to. 0:17:48.240 --> 0:17:53.520 Move I'll move in with you. Honestly, this might solve 0:17:53.560 --> 0:17:54.600 both our problems. 0:17:54.760 --> 0:17:56.960 We get set up a studio at home, can we 0:17:57.000 --> 0:18:00.480 do that? Can we like split a house out? Going 0:18:00.520 --> 0:18:03.120 back to like these themes that I think were very 0:18:03.160 --> 0:18:05.760 prevalent the last time we talked, you know, I think 0:18:05.960 --> 0:18:07.439 a year and a half ago we might have been 0:18:07.480 --> 0:18:11.000 talking about like windows and garage doors and certainly lumber 0:18:11.040 --> 0:18:14.800 prices and all that labor. Top line we can get 0:18:14.840 --> 0:18:16.800 there's some specific details I want to get into, but 0:18:16.840 --> 0:18:19.359 like top line, it does seem like are those healed, 0:18:19.440 --> 0:18:22.760 Like the is the housing supply chain more or less 0:18:22.960 --> 0:18:24.280 healed at this point. 0:18:24.720 --> 0:18:28.200 Let's give numbers so supply chain issues. When we talked to. 0:18:28.160 --> 0:18:32.240 Builders for over a year, almost one hundred percent of 0:18:32.240 --> 0:18:35.160 them said supply chain was a massive issue for them. 0:18:35.760 --> 0:18:40.160 Our data as of April was that thirty five percent 0:18:40.200 --> 0:18:42.440 of builders are saying it's a massive issue. 0:18:42.640 --> 0:18:44.800 So I don't want to say it's healed. 0:18:45.200 --> 0:18:49.080 I want to say it is so significantly better that 0:18:49.119 --> 0:18:52.200 the issues that we're dealing with today feel like child's 0:18:52.200 --> 0:18:54.000 pay compared to what we have before. 0:18:54.480 --> 0:18:57.280 So just to follow up on this though, like I mentioned, 0:18:57.280 --> 0:18:58.960 I was like this morning, I was like reading the 0:18:59.000 --> 0:19:01.000 d R Horton earning call and they're like, yeah, we 0:19:01.040 --> 0:19:03.520 were you know, we're not really seeing many supply chain issues. 0:19:03.800 --> 0:19:05.920 But could this be the kind of thing where it's 0:19:05.920 --> 0:19:09.119 like all these individual builders say, yeah, there, our issues 0:19:09.160 --> 0:19:11.479 have gotten a lot better. But if there is this 0:19:11.520 --> 0:19:15.360 sort of sudden like you know, reacceleration, suddenly they all 0:19:15.400 --> 0:19:18.920 start thinking that they have an availability of supply. Meanwhile, 0:19:18.960 --> 0:19:22.040 that window company like shut down for a while because 0:19:22.520 --> 0:19:24.280 because of the slow down at the end of twenty 0:19:24.400 --> 0:19:27.040 twenty two, Like, is there the risk that these issues 0:19:27.080 --> 0:19:29.240 actually come back in a meaningful way? If this too 0:19:29.280 --> 0:19:30.880 good to be true? Market is sustained. 0:19:31.480 --> 0:19:33.439 Absolutely, Yeah, no doubt. 0:19:33.600 --> 0:19:36.119 I think that's something that that Luckily, though it's not 0:19:36.280 --> 0:19:38.920 just you that I have that's identified that as a 0:19:38.960 --> 0:19:39.600 potential risk. 0:19:39.640 --> 0:19:41.520 Builders have identified that as a potential risk. 0:19:41.720 --> 0:19:43.919 They're saying, if we all decide to start, we know 0:19:44.000 --> 0:19:46.879 that our suppliers forecast so that this year was going 0:19:46.960 --> 0:19:50.280 to be down for overall starts. It probably does still 0:19:50.359 --> 0:19:52.879 end up down from overall starts, but if it's way faster. 0:19:53.320 --> 0:19:55.560 That's what's been the weirdest thing about the market is 0:19:55.600 --> 0:19:58.800 it's whiplash. It's the market's going so fast, and then 0:19:58.840 --> 0:20:01.920 the market slowed so and then the market's coming back again, 0:20:02.280 --> 0:20:05.040 and then you're trying to plan production through all of 0:20:05.080 --> 0:20:08.640 these swings, and that's hard for builders to get right. 0:20:08.680 --> 0:20:10.880 That's hard for land developers to get right. That's hard 0:20:10.880 --> 0:20:11.959 for suppliers to get right. 0:20:12.240 --> 0:20:14.320 It Tracy listening to that, like it just seems like 0:20:14.440 --> 0:20:15.480 exactly classics. 0:20:15.640 --> 0:20:17.160 Well and also the. 0:20:17.119 --> 0:20:19.680 Opposite of what like the FED was hoping to achieve here, 0:20:19.720 --> 0:20:21.560 but they're like, let's just like bring some calm to 0:20:21.600 --> 0:20:22.119 this market. 0:20:22.200 --> 0:20:25.400 Well, I definitely want to ask about long term affordability 0:20:25.960 --> 0:20:29.080 trends and also credit availability because that's something that people 0:20:29.080 --> 0:20:30.880 are talking about in the wake of the banking crisis. 0:20:30.920 --> 0:20:33.280 But just before we do, in terms of how home 0:20:33.280 --> 0:20:36.720 builders are feeling about the outlook, can you maybe walk 0:20:36.800 --> 0:20:40.640 us through what exactly is happening with the survey because 0:20:41.040 --> 0:20:43.480 I think we have seen an improvement over the past 0:20:43.520 --> 0:20:46.560 three months, but if you look at the index, I 0:20:46.560 --> 0:20:50.159 think it's still at something like forty four for March 0:20:50.280 --> 0:20:53.160 something like that, so still below fifty, which would indicate 0:20:53.240 --> 0:20:57.160 like it's still a somewhat negative outlook. So what exactly 0:20:57.200 --> 0:20:58.800 is happening in that survey measure? 0:20:59.600 --> 0:21:03.240 Yep. So let's think about the demand side. 0:21:03.320 --> 0:21:07.880 So builders had the supply, they lowered prices, consumers returned. 0:21:08.560 --> 0:21:11.080 Now when we look at what's happening, we have sixty 0:21:11.080 --> 0:21:14.359 percent of builders that are raising prices again. And so 0:21:14.440 --> 0:21:16.560 this goes back to Joe kind of If you think 0:21:16.560 --> 0:21:19.960 about the policymakers, this is probably the opposite that they want. 0:21:19.840 --> 0:21:22.320 To see, is that prices are going back up. 0:21:22.240 --> 0:21:26.080 And that this is going to continue to stretch overall affordability. 0:21:26.760 --> 0:21:31.119 Builders are seeing this idea that Okay, now we've lowered prices, 0:21:31.240 --> 0:21:32.639 or now we've offered incentive. 0:21:32.960 --> 0:21:34.560 Now consumers have returned. 0:21:35.119 --> 0:21:39.080 We still feel uncomfortable about the market because again going 0:21:39.119 --> 0:21:40.720 back to is there going to be an increase in 0:21:40.760 --> 0:21:44.879 the unemployment rate? Are we operating on a demand pool 0:21:45.040 --> 0:21:48.200 that is pen up from last year? And so because 0:21:48.240 --> 0:21:50.000 so many people didn't buy in the fourth quarter they 0:21:50.080 --> 0:21:53.440 return this year. Is this artificially high or is this 0:21:53.480 --> 0:21:56.679 something sustainable? I think there's a lot of questions around that. 0:21:56.880 --> 0:21:59.560 So I don't think the confidence is fully back yet 0:21:59.560 --> 0:22:02.399 because it's part of the sales have been bought and 0:22:02.600 --> 0:22:08.280 part of the sale trajectory feels uncertain. What we know 0:22:08.520 --> 0:22:11.080 is at the end of last year, seventy five percent 0:22:11.080 --> 0:22:14.159 of builders thought they were going to slow starts this 0:22:14.240 --> 0:22:17.440 year compared to last year. Our data for April shows 0:22:17.480 --> 0:22:20.560 only forty five percent are planning to slow starts this 0:22:20.680 --> 0:22:21.760 year versus last year. 0:22:22.320 --> 0:22:24.360 And think about it, I think this is an important thing. 0:22:24.840 --> 0:22:28.800 The reason builder slowed starts is because they were aligning 0:22:28.920 --> 0:22:32.440 starts with sales. If sales are down, starts are down. 0:22:33.040 --> 0:22:36.520 But that realignment works both directions. If sales are up, 0:22:37.119 --> 0:22:38.680 as long as the land's there, as long as the 0:22:38.720 --> 0:22:41.960 labor's there, the materials there start should be up as well. 0:22:42.080 --> 0:22:44.639 So that's what we're seeing is this new realignment of 0:22:44.760 --> 0:22:47.520 starts coming back up to the fact that sales are 0:22:47.560 --> 0:22:48.520 stronger than expected. 0:22:48.640 --> 0:22:50.880 Well, you mentioned land there, which is a good sag 0:22:51.000 --> 0:22:52.960 to dive deeper into this, and we did. I think 0:22:53.000 --> 0:22:56.000 back in March an episode with Chase Emerson and the 0:22:56.080 --> 0:22:59.280 Arizona market, and he basically made this argument exactly, which 0:22:59.359 --> 0:23:02.080 is like, all these homebuilders walked away or wanted to 0:23:02.080 --> 0:23:05.520 walk away from deals or pause land acquisition, and they're 0:23:05.520 --> 0:23:07.760 going to regret it because they're going to fight. As 0:23:07.760 --> 0:23:10.359 soon as how home building picks up again, they're going 0:23:10.400 --> 0:23:11.600 to be short and they're going to have to come 0:23:11.640 --> 0:23:14.119 back and pay more. So what are you seeing like 0:23:14.200 --> 0:23:16.359 on the land acquisition front right now? 0:23:17.080 --> 0:23:21.600 So I think a really important difference between this cycle 0:23:21.640 --> 0:23:24.159 and past cycles too. As I remember when I joined 0:23:24.160 --> 0:23:27.520 the industry, there was just this common statement of land 0:23:27.560 --> 0:23:30.360 acquisition is a great role to be in, but when 0:23:30.400 --> 0:23:33.399 the market slows, you're the first person cut. And that's 0:23:33.440 --> 0:23:35.720 the complete opposite of what we're seeing now. We're actually 0:23:35.760 --> 0:23:38.399 finding that those land acquisition roles are still actually in 0:23:38.640 --> 0:23:41.919 very high demand because builders are thinking about not just 0:23:42.000 --> 0:23:44.680 the near term, but as I'm sure you and Chase 0:23:44.920 --> 0:23:45.480 and I listened. 0:23:45.480 --> 0:23:47.560 It was a great, great podcast you guys talked about 0:23:47.600 --> 0:23:48.040 it takes. 0:23:47.920 --> 0:23:52.439 A long time to take land through horizontal development to 0:23:52.480 --> 0:23:54.439 get it ready for the builders to have access to. 0:23:54.960 --> 0:23:57.120 You need to be thinking way more long term than 0:23:57.200 --> 0:23:58.879 just what next month is going to look like or 0:23:58.880 --> 0:24:00.479 what the next six months is going to look like. 0:24:01.160 --> 0:24:05.119 So we know right now from our builder survey at Zenda, 0:24:05.760 --> 0:24:08.080 ninety percent of builders feel that they have enough land 0:24:08.119 --> 0:24:11.440 for this year, seventy percent feel that they have enough 0:24:11.480 --> 0:24:15.080 land for next year, twenty five percent think they have 0:24:15.200 --> 0:24:17.879 enough land for the following year. So what we're seeing 0:24:17.960 --> 0:24:21.840 is this mad grab of what's available, what can I buy? 0:24:22.160 --> 0:24:24.680 To Chase's point, there were a lot of builders that 0:24:24.760 --> 0:24:28.280 dropped a deal last year or changed their terms, But 0:24:28.359 --> 0:24:30.960 let's focus on the drop drop a deal last year, 0:24:31.680 --> 0:24:34.439 went back to the land sellar this year and said, sorry, 0:24:34.840 --> 0:24:36.480 you know, the market's a lot stronger than I thought 0:24:36.480 --> 0:24:39.280 it was. I want that deal back, And the seller says, great, 0:24:39.760 --> 0:24:40.480 but you got to pay. 0:24:40.320 --> 0:24:40.959 More money for it. 0:24:41.320 --> 0:24:43.960 So that's already happening. That's not even something that might happen. 0:24:44.040 --> 0:24:47.199 That's what's happening right now. But it's also causing a 0:24:47.240 --> 0:24:50.439 gap between who is able to pay that top dollar. 0:24:50.720 --> 0:24:52.280 That's not going to be every builder. 0:24:52.440 --> 0:24:55.280 That's going to be certain builders that have good access 0:24:55.320 --> 0:24:57.679 to capital and has a good long term vision and 0:24:57.720 --> 0:25:00.320 believes that they should be investing to that point. 0:25:00.720 --> 0:25:03.040 So, just on this note, how much of the activity 0:25:03.080 --> 0:25:07.200 that we're seeing, whether it's land acquisition or starts, how 0:25:07.280 --> 0:25:10.800 much of that comes down to the experience of the 0:25:10.840 --> 0:25:14.280 past few years where we did see you know, timeframes 0:25:14.520 --> 0:25:18.440 for getting approvals and actually building things, getting the components 0:25:18.480 --> 0:25:21.520 that you need for a house extend. And I'm also 0:25:21.560 --> 0:25:23.800 thinking about something we saw in the labor market, which 0:25:23.840 --> 0:25:27.720 is this idea of labor hoarding, you know, companies acquiring 0:25:27.760 --> 0:25:31.199 more employees just in case it becomes more difficult in 0:25:31.200 --> 0:25:34.080 the future there's some sort of disruption. Is that basically 0:25:34.080 --> 0:25:36.440 what we're seeing with the home builders now. 0:25:36.920 --> 0:25:39.160 To the labor hoarding, you have some of the builders 0:25:39.320 --> 0:25:42.800 say that specifically is we don't want to going back 0:25:42.800 --> 0:25:44.560 to the whiplash. We don't want to be laying people 0:25:44.600 --> 0:25:46.640 off and then having to chase them back. We want 0:25:46.640 --> 0:25:49.960 to just try to provide steady employment if we can, 0:25:50.359 --> 0:25:52.200 because we want to have We know that there is 0:25:52.280 --> 0:25:56.480 a systemic undersupply in terms of the labor pool, especially 0:25:56.520 --> 0:25:58.520 of people of a certain skill set. 0:25:58.920 --> 0:25:59.960 So yes, that's happened. 0:26:00.200 --> 0:26:02.159 And then in terms of when you look at the 0:26:02.240 --> 0:26:06.200 land side, I think there is such a fundamental belief 0:26:06.680 --> 0:26:10.080 that we need so many more homes built and you 0:26:10.160 --> 0:26:14.440 can't replace land, especially in good locations, So you need 0:26:14.480 --> 0:26:17.960 to be absorbing whatever is available to get yourself in 0:26:18.040 --> 0:26:19.400 a good position in the future. 0:26:19.960 --> 0:26:24.119 So how much could that activity be sort of obscuring 0:26:24.680 --> 0:26:27.240 real demand at the moment? I guess this is the 0:26:27.240 --> 0:26:27.800 big question. 0:26:28.800 --> 0:26:32.439 So in terms of builder demand for land is your question? 0:26:32.840 --> 0:26:35.919 Yeah, or both demand for land and also just construction 0:26:36.080 --> 0:26:38.919 in order to get it out of the way in 0:26:39.000 --> 0:26:42.280 advance of any potential disruptions coming down the pipeline. 0:26:42.560 --> 0:26:45.920 Yeah, I think there's a lot of there's a lot 0:26:46.040 --> 0:26:50.240 of indicators in the housing market, from builders buying land, 0:26:50.280 --> 0:26:54.760 from consumers buying homes. That's looking artificial given the dynamics. 0:26:55.160 --> 0:26:57.679 So in the land side, because at least over the 0:26:57.680 --> 0:27:00.320 past couple of years, there hasn't been enough demand or 0:27:00.359 --> 0:27:03.040 hasn't been enough land, there's been such a rush with 0:27:03.160 --> 0:27:03.720 that demand. 0:27:03.880 --> 0:27:06.240 I think that evolves because what we're. 0:27:06.040 --> 0:27:08.879 Seeing, and I mentioned this to Joe before this call, 0:27:09.320 --> 0:27:12.720 we're finding in some markets because it takes two to 0:27:12.760 --> 0:27:18.520 four years for land to go through the horizontal development side, 0:27:18.800 --> 0:27:22.040 we're now finally seeing that there is some more land 0:27:22.160 --> 0:27:24.880 available after three years. 0:27:24.720 --> 0:27:26.720 Of it being so incredibly tight. 0:27:27.040 --> 0:27:29.600 Now we don't think we've solved the land and lot issue, 0:27:29.880 --> 0:27:32.960 but as starts activities down, even if it's going back up, 0:27:33.760 --> 0:27:37.080 it's down year over year, and that's contributing to an 0:27:37.240 --> 0:27:39.880 increase in overall land and a lot availability right now. 0:27:40.600 --> 0:27:44.720 Speaking of home builder activity, I'm always fascinated by any 0:27:44.840 --> 0:27:48.960 industry in which you have a significant number of public 0:27:49.200 --> 0:27:53.200 players versus up privately owned players and the different signals 0:27:53.200 --> 0:27:56.000 that they get from investors, and maybe public investors are 0:27:56.040 --> 0:27:58.360 rewarding one thing and the private investors could maybe think 0:27:58.359 --> 0:28:01.959 on different timeframes. Seeing with in respect to that. On 0:28:02.000 --> 0:28:05.320 any category, whether it's new construction, whether it's land acquisition, 0:28:05.680 --> 0:28:08.520 are we seeing any different types of behaviors public versus 0:28:08.520 --> 0:28:10.080 private players? 0:28:10.119 --> 0:28:10.920 Crazy difference? 0:28:11.320 --> 0:28:13.399 Yeah, So what we're seeing right now is if you 0:28:13.440 --> 0:28:18.600 look at of total transactions public versus private share publics 0:28:18.640 --> 0:28:21.639 are now almost at fifty percent of overall market share, 0:28:22.160 --> 0:28:24.240 where they were at about thirty. 0:28:23.920 --> 0:28:25.600 Five percent going into the pandemic. 0:28:25.600 --> 0:28:29.200 They were at twenty five percent during the Great Financial Crisis. 0:28:29.720 --> 0:28:33.480 So public private share absolutely skewing towards the publics in 0:28:33.560 --> 0:28:36.920 a lot of cases because they had better economies of scale, 0:28:36.960 --> 0:28:40.160 they had better margins. When the market slowed, they ripped 0:28:40.160 --> 0:28:43.719 the band aid off, they lowered prices way quicker, and 0:28:43.760 --> 0:28:47.920 they helped to stimulate some of that sales activity. They 0:28:48.040 --> 0:28:52.720 also generally have better access to labor. Generally will get 0:28:52.760 --> 0:28:55.880 the phone call first from the landslide, so they have 0:28:56.160 --> 0:28:58.960 a longer lead time, and they have better access to land. 0:28:59.360 --> 0:29:03.480 It's really just allowing the public builders to get bigger, 0:29:04.080 --> 0:29:06.400 and the private builders are having a lot harder of 0:29:06.400 --> 0:29:09.200 a time being competitive in today's market. 0:29:26.000 --> 0:29:28.240 You know, I mentioned unemployment as a sort of wild 0:29:28.360 --> 0:29:30.960 card for the market, and there's another one that people 0:29:31.240 --> 0:29:34.080 talk a lot about, and that's what the baby boomers 0:29:34.200 --> 0:29:37.640 actually do with their own houses as they age and 0:29:38.040 --> 0:29:41.480 start to die. Are we seeing any evidence of that 0:29:41.520 --> 0:29:46.160 sort of generational transfer of home ownership actually happen, Because 0:29:46.160 --> 0:29:48.320 I feel like this is something that people have talked 0:29:48.320 --> 0:29:51.640 about as a possibility for many, many years, and it 0:29:51.800 --> 0:29:55.240 has yet to really materialize. We are seeing some people 0:29:55.280 --> 0:29:57.520 maybe downsize, but we're also seeing a lot of baby 0:29:57.560 --> 0:30:01.240 boomers take advantage of the low rates of twenty twenty 0:30:01.240 --> 0:30:03.760 and twenty twenty one to maybe buy a second home 0:30:03.840 --> 0:30:05.320 for income and things like that. 0:30:06.040 --> 0:30:08.600 Tracy, this question is spot on. 0:30:09.160 --> 0:30:12.000 This is really the kind of the boomers hold the 0:30:12.040 --> 0:30:13.160 cards for what happens. 0:30:13.280 --> 0:30:14.920 I think in terms of the resale supply. 0:30:15.600 --> 0:30:18.800 So what we understand is, and I can't remember it's 0:30:18.800 --> 0:30:21.520 eighty three or eighty six percent, but AARP did a 0:30:21.560 --> 0:30:24.600 survey of boomers and said what do you want to do, 0:30:25.200 --> 0:30:27.200 and either eighty three or eighty six percent of them 0:30:27.200 --> 0:30:27.960 said I want. 0:30:27.760 --> 0:30:30.480 To stay in place. So their intention is I don't 0:30:30.480 --> 0:30:31.040 want to move. 0:30:31.480 --> 0:30:34.120 If they downsize, depending on what great they got and 0:30:34.160 --> 0:30:36.720 depending on if they still have a mortgage, they may 0:30:36.840 --> 0:30:40.000 not have any kind of affordability shock. They're not exhibiting 0:30:40.040 --> 0:30:42.720 the same kind of sticker shock that a normal buyer would. 0:30:43.400 --> 0:30:46.000 In fact, we know from the Census data forty three 0:30:46.000 --> 0:30:48.800 percent of people own their home free and clear, and 0:30:48.840 --> 0:30:51.840 that skewed towards those fifty five plus, So you have 0:30:51.880 --> 0:30:54.360 a lot of boomers that own their home free and clear. 0:30:55.000 --> 0:30:58.640 They are happy because maybe they're families close by. They're 0:30:58.680 --> 0:31:01.280 happy because their doctors are close, they know where their 0:31:01.280 --> 0:31:03.440 pharmacy is, they know where their grocery store is there. 0:31:03.560 --> 0:31:07.280 They're perfectly content where they are. With that being said, 0:31:08.080 --> 0:31:11.480 the National Association of Realtors put out their survey for 0:31:11.920 --> 0:31:15.760 twenty twenty two. They found that boomers are now the 0:31:15.880 --> 0:31:19.760 number one buyer and boomers are the number one seller. 0:31:20.280 --> 0:31:22.360 This group is actually more active than I think we 0:31:22.480 --> 0:31:25.000 believe them to be, because there are a lot that 0:31:25.040 --> 0:31:28.520 are staying put. When you think about why boomers are moving, 0:31:28.960 --> 0:31:32.280 United Band Lines says the third biggest reason people move 0:31:32.440 --> 0:31:35.480 is retirement. Boomers right now, all of them will be 0:31:35.480 --> 0:31:38.000 of retirement age by twenty thirty. So if they're not 0:31:38.160 --> 0:31:41.200 already moving now or changing their lifestyle now, that's likely 0:31:41.240 --> 0:31:43.640 going to happen over the next handful of years. 0:31:44.160 --> 0:31:44.680 And then when you. 0:31:44.720 --> 0:31:47.520 Look at this too, we get Zonda created a baby 0:31:47.600 --> 0:31:51.400 chaser index. It's not just retirement, but it's if your 0:31:51.520 --> 0:31:55.080 children were living. Let's just use California example. You and 0:31:55.120 --> 0:31:58.000 your children live in California, they move to the southeast 0:31:58.000 --> 0:32:02.240 because it's more affordable. They now have grand babies. Oftentimes, 0:32:02.240 --> 0:32:04.360 we find twenty five percent of boomers say they move 0:32:04.560 --> 0:32:07.320 to be close to their grand babies. So there's also 0:32:07.480 --> 0:32:09.960 if millennials move and migrate, that plays into boomers. 0:32:10.440 --> 0:32:15.480 So rather than boomers being this net marginal supply that's 0:32:15.520 --> 0:32:18.360 sort of like eases the market, Boomers are made to 0:32:18.440 --> 0:32:22.840 facto be competing with millennials because those retirement destinations, those 0:32:22.840 --> 0:32:25.040 baby chaser moves, which is a great term. I hadn't 0:32:25.040 --> 0:32:27.920 heard it before, they're essentially going to be going into 0:32:27.920 --> 0:32:32.240 the hot markets, perhaps not really solving any housing supply problems, 0:32:32.280 --> 0:32:33.240 perhaps worsening them. 0:32:33.480 --> 0:32:36.280 Yeah, we've seen that actually for years too, Joe. 0:32:36.400 --> 0:32:39.120 Is that they're looking to downsize, so they're looking for 0:32:39.160 --> 0:32:41.840 a smaller square footage. Entry level buyers are looking for 0:32:41.880 --> 0:32:44.240 smaller square footage because they're trying to adjust for price. 0:32:44.600 --> 0:32:46.640 But then you have an all cash boomer or. 0:32:46.560 --> 0:32:49.320 A millennial with three percent down, and there's one group 0:32:49.320 --> 0:32:50.400 that wins out over the other. 0:32:51.480 --> 0:32:54.120 So one of the things I wanted to ask you 0:32:54.320 --> 0:32:56.280 about as well is, you know, if you think about 0:32:56.280 --> 0:32:59.600 what moves the housing market, you have supply and demand, 0:32:59.760 --> 0:33:01.680 and we've been talking about that, but you also have 0:33:01.920 --> 0:33:06.440 credit availability, and affordability metrics, and those tend to be 0:33:06.560 --> 0:33:10.520 the two things that do actually move quite quickly. You know, 0:33:10.560 --> 0:33:13.680 you can get long running structural changes in supply and demand, 0:33:13.760 --> 0:33:17.960 but credit and affordability do kind of turn on a dime. 0:33:18.360 --> 0:33:22.000 So what are we seeing in terms of those two metrics, 0:33:22.000 --> 0:33:25.120 and especially in the wake of the you know, banking 0:33:25.280 --> 0:33:28.640 drama of March where we did see some banks start 0:33:28.640 --> 0:33:31.440 to report that they were tightening lending standards. 0:33:31.960 --> 0:33:35.200 Yep, so let's do Let's address the credit standards first, 0:33:35.240 --> 0:33:38.360 because affordability is a is a very wide discussion at 0:33:38.360 --> 0:33:44.040 this point. But when we look at credits availability, builders 0:33:44.080 --> 0:33:47.760 are feeling more optimistic that they want to start more homes. 0:33:48.000 --> 0:33:49.200 I shared this down more. 0:33:49.040 --> 0:33:51.160 Builders think that starts will be flat or up this 0:33:51.280 --> 0:33:55.239 year than down. A third of the builders we're talking to, though, 0:33:55.280 --> 0:34:00.200 we're saying, but buyers may be demanding more inventory, we 0:34:00.280 --> 0:34:02.680 may be wanting to build more homes. We may have 0:34:02.840 --> 0:34:05.640 now the supplies, the land, the labor to build it. 0:34:06.240 --> 0:34:09.960 We may not now have the credit component. So it's 0:34:10.000 --> 0:34:12.000 not going to apply. This goes back to Joe's question 0:34:12.000 --> 0:34:14.680 of public versus private. It doesn't apply to all builders equally. 0:34:15.200 --> 0:34:17.600 But we were just at an event in Seattle and 0:34:17.760 --> 0:34:21.319 we had some capital partners say in some cases, some 0:34:21.400 --> 0:34:24.520 capital partners are winning out because other banks or other 0:34:24.600 --> 0:34:27.359 lenders are seizing up, and so they're trying to gain 0:34:27.360 --> 0:34:30.040 market share during that time. But you're hearing it in 0:34:30.040 --> 0:34:33.719 real time that there's a pullback in overall construction financing. 0:34:34.200 --> 0:34:36.080 And I wouldn't say I know enough about this to 0:34:36.120 --> 0:34:39.600 go into detail, but we're also hearing from a consumer 0:34:39.680 --> 0:34:42.319 borrower point of view that there's a little bit of 0:34:42.320 --> 0:34:45.640 tightening on jumbo loan access, and jumbo loans are obviously 0:34:45.640 --> 0:34:48.800 those for the higher price point and usually higher buyers, 0:34:49.200 --> 0:34:51.000 and seeing that come down a little bit, and that's 0:34:51.000 --> 0:34:53.560 been a key driver of housing activity recently as well. 0:34:53.719 --> 0:34:56.319 It does also speak to this question of like, well, 0:34:56.360 --> 0:34:58.880 how effective is interest rate policy at solving any of 0:34:58.920 --> 0:35:01.640 these problems if one effect of it is just going 0:35:01.680 --> 0:35:05.120 to be at least some category of homebuilders, even if 0:35:05.160 --> 0:35:07.200 they have everything else in plays, feel that they do 0:35:07.280 --> 0:35:11.040 not have the financing in plays to continue to expand operations. 0:35:11.880 --> 0:35:14.640 Yeah, and in a way, and I know it sounds 0:35:14.640 --> 0:35:17.440 counterintuitive because we want to get more homes built, but 0:35:17.640 --> 0:35:21.279 because land development takes so much time. Not having as 0:35:21.320 --> 0:35:23.880 much start activity does allow the market to catch up 0:35:23.880 --> 0:35:25.799 a little bit. We were at a point where the 0:35:25.800 --> 0:35:28.480 suppliers couldn't keep up, the land developers couldn't keep up. 0:35:28.480 --> 0:35:30.839 And if you can get those land developers to keep 0:35:30.880 --> 0:35:35.120 moving forward, having more land inventory over time will be 0:35:35.200 --> 0:35:36.440 good to let us come out of. 0:35:36.400 --> 0:35:37.759 This, but it is. 0:35:38.640 --> 0:35:42.719 It's tricky because now you're having financing sees up to 0:35:42.719 --> 0:35:47.000 get new homes built, but you're also having builders raise 0:35:47.040 --> 0:35:50.680 prices again. So the market is operating completely out of 0:35:50.719 --> 0:35:53.000 whack where you should be seeing demand come down and 0:35:53.040 --> 0:35:56.759 prices come down, but now you're seeing prices up but 0:35:56.880 --> 0:35:59.640 inventory potentially going down. Well. 0:35:59.680 --> 0:36:03.200 Online, No talk to us about the affordability aspect of it, 0:36:03.280 --> 0:36:07.000 because it feels like we're still further away than ever 0:36:07.239 --> 0:36:10.439 to building a sort of sustainable market where people are 0:36:10.520 --> 0:36:12.839 able to get a foothold. 0:36:13.640 --> 0:36:17.080 Yeah, this is going to be the hardest issue to 0:36:17.160 --> 0:36:20.279 solve because even if we're saying land availability is a 0:36:20.280 --> 0:36:23.480 little bit better, land prices are still expensive. We're saying 0:36:23.760 --> 0:36:28.480 labor availability is better, it's still expensive. We're saying supply 0:36:28.600 --> 0:36:30.920 chain is better, Okay, good, So now you can get 0:36:30.960 --> 0:36:33.080 the windows, but the windows are still twenty percent more 0:36:33.080 --> 0:36:36.200 expensive than they were going into the pandemic. You're looking 0:36:36.200 --> 0:36:39.239 at government regulation. That's actually the number one issue that 0:36:39.280 --> 0:36:41.800 builders are saying right now that's impacting their ability to 0:36:41.840 --> 0:36:42.919 get more homes. 0:36:42.600 --> 0:36:44.960 Built and to be able to do it quickly. 0:36:45.320 --> 0:36:47.520 Time is money when it comes to home building, and 0:36:47.600 --> 0:36:50.720 again going back to Seattle, it should take three months 0:36:51.000 --> 0:36:53.600 to get a permit issued from the local government in Seattle, 0:36:53.640 --> 0:36:56.800 it's taking eight months. In Florida, it's taking five months. 0:36:57.200 --> 0:36:59.960 So that's stretching out that too. So this is great 0:37:00.040 --> 0:37:02.880 right that all of these problems are not getting worse, 0:37:03.360 --> 0:37:04.719 but if you look at where they are in terms 0:37:04.760 --> 0:37:07.560 of costs, they're still high, which is making it hard 0:37:07.640 --> 0:37:10.120 for builders to be able to. 0:37:10.040 --> 0:37:11.960 Bring a home to the market at a reasonable price point. 0:37:12.120 --> 0:37:13.799 I'm glad you brought that up because I meant to 0:37:13.880 --> 0:37:16.440 ask about that. I remember one of the bottlenecks, and 0:37:16.520 --> 0:37:18.800 there were a few stories where it's like these government 0:37:18.960 --> 0:37:23.000 offices in these places are just completely overwhelmed by like 0:37:23.040 --> 0:37:25.680 the literal paperwork aspect of it. There's always so many 0:37:25.680 --> 0:37:28.520 public sector employees, and we know that homebuilders have had 0:37:28.520 --> 0:37:31.520 a hard time like hiring, but also public sector is 0:37:31.719 --> 0:37:34.400 you know, continues to be in short supply of labor. 0:37:34.680 --> 0:37:37.279 But that's still a constraint. Even after all this time 0:37:37.360 --> 0:37:40.120 that the sort of permitting authorities, the paperwork authorities are 0:37:40.120 --> 0:37:41.640 still they're still overworked. 0:37:43.040 --> 0:37:46.320 Yeah, it's slow processing time, and it applies to permits, 0:37:46.360 --> 0:37:49.839 it applies to inspections, but it also applies to the 0:37:50.000 --> 0:37:52.400 land and lot development. I do want to say one 0:37:52.480 --> 0:37:55.000 thing though, because as we think about the constraints, so yes, 0:37:55.239 --> 0:37:59.240 a huge component is the regulatory component that's slowing. 0:37:58.920 --> 0:38:01.680 Down the ability to get more homes built quickly. 0:38:02.080 --> 0:38:04.759 But another thing, when you talk about supply chain, Yes, 0:38:04.920 --> 0:38:08.319 the cycle times are generally within reason of. 0:38:08.280 --> 0:38:11.640 Where they were going into the pandemic. But transformers are 0:38:11.719 --> 0:38:13.160 still a massive issue. 0:38:13.320 --> 0:38:17.400 Transformers are holding up the horizontal development to get land ready, 0:38:17.640 --> 0:38:19.760 and then builders are saying that they've started a home 0:38:19.960 --> 0:38:21.920 and then they can't get electricity to the home, and 0:38:21.960 --> 0:38:23.640 then they have to pause on that too. So I 0:38:23.640 --> 0:38:27.080 wouldn't say everything solved. Kind of the flavor of the 0:38:27.120 --> 0:38:29.399 week right now is transformers in the role it's playing 0:38:29.440 --> 0:38:29.920 in the market. 0:38:30.480 --> 0:38:32.640 Yeah, this was why I asked that question about stretch 0:38:32.760 --> 0:38:35.800 time frames. And whether or not that's sort of obscuring 0:38:35.840 --> 0:38:39.000 a lot of the real demand. But Ali, maybe one 0:38:39.000 --> 0:38:41.439 more question from me, but what are you looking at 0:38:41.480 --> 0:38:44.360 in terms of the catalyst for the rest of the 0:38:44.440 --> 0:38:48.240 year and something that could change the way the market 0:38:48.360 --> 0:38:51.160 has so far been functioning, which is, you know, in 0:38:51.200 --> 0:38:53.960 terms of at least house prices and activity, we have 0:38:54.120 --> 0:38:56.360 seen it be relatively resilient. 0:38:58.360 --> 0:39:00.200 Yeah, I think we're tracking. 0:39:00.560 --> 0:39:05.080 What we know is consumer confidence can change instantly, So 0:39:05.440 --> 0:39:09.320 we're tracking what happens with consumer confidence, and it's something 0:39:09.360 --> 0:39:12.719 where it literally can be weekend to weekend or day 0:39:12.719 --> 0:39:13.080 by day. 0:39:13.080 --> 0:39:15.560 A builder will say, oh, this article. 0:39:15.239 --> 0:39:17.239 Came out, the consumers read it and they said, you 0:39:17.280 --> 0:39:19.040 know what, I feel weird about the market. So I 0:39:19.040 --> 0:39:22.640 think there's still headline risk. I think there's still economic risk. 0:39:23.000 --> 0:39:26.080 I think there's still mortgage rate risk. As to how 0:39:26.120 --> 0:39:29.040 the market goes, we didn't talk about investors who are 0:39:29.040 --> 0:39:31.200 not as active today, but if there's any kind of 0:39:31.239 --> 0:39:35.080 financial distress to investors or flippers that may want them 0:39:35.120 --> 0:39:38.120 to offload any of their homes, I don't think it'll 0:39:38.120 --> 0:39:41.800 happen that quick. But we're still watching investors as it 0:39:41.840 --> 0:39:45.080 plays into the market and also, I think tracking that 0:39:45.120 --> 0:39:48.600 pent up demand. How much of this is sustainable demand 0:39:48.960 --> 0:39:51.600 and how much of this is people that didn't buy 0:39:51.600 --> 0:39:53.480 in the third and fourth quarter of last year that 0:39:53.520 --> 0:39:56.320 are accepting the new reality they've returned to the market. 0:39:56.520 --> 0:39:58.920 But it's not that deep of a pool. 0:39:59.120 --> 0:40:00.920 It's only a select pie people that are willing to 0:40:00.920 --> 0:40:03.839 give up their interest rate or are able to buy 0:40:03.920 --> 0:40:04.800 in today's market. 0:40:05.360 --> 0:40:07.719 All right, I have one more question, and it's kind 0:40:07.760 --> 0:40:09.879 of a wild card, and I've never asked a question 0:40:10.000 --> 0:40:12.600 like this before, but I asked this question to chat 0:40:12.640 --> 0:40:15.319 GPT and I was really unimpressed with the answer because 0:40:15.320 --> 0:40:17.359 I said, all right, what's the next Austin, Like, what's 0:40:17.360 --> 0:40:18.000 the next hot Citi? 0:40:18.080 --> 0:40:19.760 And it was like Bozeman, Montana. 0:40:19.800 --> 0:40:21.360 I'm like, yeah, I know, I've read like one hundred 0:40:21.440 --> 0:40:24.600 articles about Bozeman, Montana. What is a market that is 0:40:24.719 --> 0:40:28.200 genuinely under the radar in your view but actually interesting 0:40:28.360 --> 0:40:30.000 in terms of where things are bubbling up? 0:40:30.640 --> 0:40:34.200 So what I will say is under the radar is 0:40:34.280 --> 0:40:36.759 tricky because anything that was under the radar became on 0:40:36.840 --> 0:40:39.239 the radar if it was attractive over the past couple 0:40:39.239 --> 0:40:43.200 of years. So I don't want to say Charleston or 0:40:43.480 --> 0:40:47.279 Greenville or any of the small markets in the southeast, 0:40:47.320 --> 0:40:49.320 because those are not hidden gems anymore. 0:40:49.400 --> 0:40:51.840 Right, right, we know about markets. 0:40:51.360 --> 0:40:53.720 That I think potentially could grow. 0:40:54.400 --> 0:40:59.000 I always want to look at interstate highway connectivity, in airports. 0:40:59.480 --> 0:41:02.440 You want to look at a share of the population 0:41:02.800 --> 0:41:07.759 that's relatively young that maybe still doesn't have the whole 0:41:07.760 --> 0:41:10.640 ownership rate is allowing them to it's low enough that 0:41:10.640 --> 0:41:11.760 it's allowing for mobility. 0:41:12.360 --> 0:41:14.680 You want to see some kind of job stability. 0:41:15.200 --> 0:41:18.320 I am not biased, but I do think Columbus, Ohio 0:41:18.600 --> 0:41:21.560 is still a market that has the potential to grow. 0:41:22.080 --> 0:41:25.440 I think Richmond, Virginia is a market that has a 0:41:25.480 --> 0:41:28.520 lot of the It's close enough to DC, close enough 0:41:28.560 --> 0:41:30.799 to employment center, it has its own employment base, it 0:41:30.840 --> 0:41:33.840 has the interstate highway system. I think that that market 0:41:33.960 --> 0:41:38.640 has some potential. Thinking further out, Portland is not under 0:41:38.640 --> 0:41:40.480 the radar and that you don't know it, but it's 0:41:40.480 --> 0:41:42.440 a market that didn't really boom like some of the 0:41:42.440 --> 0:41:43.879 other areas because there was. 0:41:43.880 --> 0:41:45.560 Some which one which. 0:41:45.600 --> 0:41:48.239 Stigma about living in Portland, Oregon, oh Orgon. 0:41:48.320 --> 0:41:51.800 Yeah, yeah, and so I think that market can still 0:41:51.920 --> 0:41:54.520 see a lot more growth relative to what it has seen. 0:41:55.200 --> 0:41:56.120 But again, I mean. 0:41:56.000 --> 0:41:59.959 Even the Fayettevilles of the world have become on the map, 0:42:00.320 --> 0:42:01.359 so it's really hard to. 0:42:01.320 --> 0:42:06.400 Point and I were there and year ago. Crazy, it 0:42:06.400 --> 0:42:09.400 feels nice, but yeah, definitely not. That answer was so 0:42:09.480 --> 0:42:12.840 much better than the GPT answer. Allie, Well, thank you 0:42:12.880 --> 0:42:15.680 so much for coming back. That was such a helpful conversation. 0:42:15.880 --> 0:42:18.000 I really appreciate you coming back on Odd Loves. 0:42:18.200 --> 0:42:19.120 Thank you for having me. 0:42:19.160 --> 0:42:20.520 Thank so much, Ali, that was great. 0:42:20.640 --> 0:42:35.960 That was really good. I love talking to Ellie so much, 0:42:36.040 --> 0:42:39.440 just so much, like I just find her to be 0:42:39.480 --> 0:42:42.239 really good about big picture like themes, but also knows 0:42:42.280 --> 0:42:45.560 so much manular, granular specific data that I just feel 0:42:45.600 --> 0:42:47.080 like I learned a lot from her. 0:42:47.160 --> 0:42:48.799 No, there were a bunch of things that jumped out 0:42:48.800 --> 0:42:50.759 at me from that episode. One of them was this 0:42:50.840 --> 0:42:53.840 idea of the third option, which we're so used to 0:42:53.960 --> 0:42:57.880 talking about housing in terms of like you have two options, 0:42:57.920 --> 0:43:01.640 two binary options, you either buy house or you rent yea, 0:43:01.880 --> 0:43:04.920 And over the past year or two, because of high inflation, 0:43:05.160 --> 0:43:07.640 there was this argument that like, oh, it's actually a 0:43:07.680 --> 0:43:10.440 way of protecting yourself from higher prices, from higher rent 0:43:10.560 --> 0:43:13.480 if you go out and buy a house, get a mortgage. 0:43:13.680 --> 0:43:16.319 But there is that third option, which is you just 0:43:16.400 --> 0:43:19.000 opt out of the market entirely and say, you know what, 0:43:19.120 --> 0:43:22.600 rent prices are crazy, house prices are crazy. I'm going 0:43:22.680 --> 0:43:25.480 to move in with some roommates or move back with 0:43:25.560 --> 0:43:26.080 my family. 0:43:26.440 --> 0:43:27.640 So should we split a house? 0:43:27.760 --> 0:43:28.440 Should we split? 0:43:28.440 --> 0:43:28.760 Ah? 0:43:28.880 --> 0:43:31.480 Honestly, this would save me a lot of money. 0:43:31.640 --> 0:43:31.879 Same. 0:43:32.200 --> 0:43:35.080 There's another thing that she brought up that is one 0:43:35.080 --> 0:43:37.600 of these things that I've wanted to do an episode 0:43:37.680 --> 0:43:40.600 on for a long time, electrical components. If you go 0:43:40.640 --> 0:43:44.319 to the ISM Manufacturing Survey, there is a section in 0:43:44.360 --> 0:43:47.600 there on commodities and short supply, and there are not 0:43:47.719 --> 0:43:49.920 many left because actually most of the most of the 0:43:49.920 --> 0:43:53.640 supply chain crises have or problems have like eased. But 0:43:53.800 --> 0:43:56.000 the number of consecutive months the commodity that's been in 0:43:56.000 --> 0:43:59.399 short supply, electrical components thirty straight months have been listed 0:43:59.440 --> 0:44:03.920 in short supply. The next most common is electronic components 0:44:04.200 --> 0:44:07.000 twenty eight straight months. So this remains like this huge 0:44:07.040 --> 0:44:09.480 bottleneck to everything. And then when you think like layering 0:44:09.560 --> 0:44:12.799 on the Inflation Reduction Act in right and energy investments, etc. 0:44:13.440 --> 0:44:15.560 This is still just like and I don't think many 0:44:15.560 --> 0:44:17.239 people are talking about it, so I'm really glad that 0:44:17.480 --> 0:44:18.319 Ali brought that up. 0:44:18.400 --> 0:44:21.120 Well, since we're on the subject of bottlenecks, this is 0:44:21.160 --> 0:44:23.120 something else that kind of jumped out at me from 0:44:23.160 --> 0:44:26.600 that conversation. It's the idea of, like, maybe what we 0:44:26.719 --> 0:44:30.719 are seeing is a classic bullwhip effect amongst the home 0:44:30.719 --> 0:44:34.000 builders themselves. Yeah, because they know that time frames to 0:44:34.120 --> 0:44:38.160 complete construction have become much longer. They know that it 0:44:38.280 --> 0:44:40.920 takes a lot longer to get permits and things like that, 0:44:41.000 --> 0:44:43.960 So why not start now and even if the market 0:44:44.000 --> 0:44:46.600 softens a little bit down the road, you'll be better prepared. 0:44:46.680 --> 0:44:49.040 And I just think it was a question of Powell 0:44:49.040 --> 0:44:50.720 at the end of last year, and it was basically 0:44:50.760 --> 0:44:52.200 one of these questions like what do you say to 0:44:52.239 --> 0:44:55.040 the person who wants to buy a house and your 0:44:55.120 --> 0:44:57.360 Jackie up raids and what do you say to that 0:44:57.440 --> 0:45:00.359 first time home buyer? And his answer was something like, yeah, 0:45:00.400 --> 0:45:02.680 it's not great that rates are going up. We acknowledge 0:45:02.680 --> 0:45:06.040 the pain, but this is a necessary step to bring 0:45:06.080 --> 0:45:08.200 basically some level of sanity. 0:45:07.800 --> 0:45:08.640 Back to this market. 0:45:09.000 --> 0:45:11.160 And I see no evidence that that's happened. 0:45:11.160 --> 0:45:12.000 If anything, it just. 0:45:11.920 --> 0:45:16.640 Seems even more greater more bull whipping, more uncertain more 0:45:16.719 --> 0:45:19.959 reasons for homebuilders to not be able to plan these 0:45:20.040 --> 0:45:23.000 different timeframes, as you mentioned, with the sort of like 0:45:23.239 --> 0:45:25.600 you know, the sort of just the longer cycle, the 0:45:25.719 --> 0:45:29.279 multi year cycle for land acquisition. I do not get 0:45:29.280 --> 0:45:32.399 this sentence that the rate hikes, whether good or bad, said, 0:45:32.600 --> 0:45:35.360 have done much to restore something that people would resemble 0:45:35.600 --> 0:45:36.560 a healthy housing market. 0:45:36.640 --> 0:45:39.480 Well, also, if you're talking about inflation and you know, 0:45:39.680 --> 0:45:43.360 consumer power, it seems like there is still a large 0:45:43.760 --> 0:45:47.439 bulk of those that own homes who just like are 0:45:47.480 --> 0:45:50.160 not necessarily feeling any constraints at the moment. They would 0:45:50.160 --> 0:45:54.520 have gotten mortgages at relatively low rates, their home prices 0:45:54.600 --> 0:45:57.640 are still relatively high, and it feels like they have 0:45:57.680 --> 0:45:59.000 a lot of bargaining power still. 0:45:59.360 --> 0:46:00.960 And all the boer are going to move to the 0:46:00.960 --> 0:46:03.799 boomtown that too, the boomberg boomtowns. I was like, Oh, 0:46:03.800 --> 0:46:05.720 they're all going to move to Phoenix and the places 0:46:05.719 --> 0:46:06.480 where their kids are. 0:46:06.560 --> 0:46:09.480 So it always comes back to boomers. We can we 0:46:09.480 --> 0:46:12.319 can end every episode of Odd Lots by blaming baby 0:46:12.360 --> 0:46:14.480 boomers for something. But shall we leave it there? 0:46:14.560 --> 0:46:15.640 Let's leave it there, all right? 0:46:15.760 --> 0:46:18.440 This has been another episode of the Odd Lots podcast. 0:46:18.480 --> 0:46:21.120 I'm Tracy Alloway. You can follow me on Twitter at 0:46:21.160 --> 0:46:21.840 Tracy Alloway. 0:46:21.960 --> 0:46:23.120 And I'm Joe Wisenthal. 0:46:23.200 --> 0:46:26.160 You can follow me on Twitter at the Stalwart, follow 0:46:26.200 --> 0:46:30.280 our producers Carmen Rodriguez at Carmen Arman and Dashel Bennett 0:46:30.320 --> 0:46:33.520 at Dashbot. And check out all of the Bloomberg podcasts 0:46:33.560 --> 0:46:37.279 on Twitter under the handle at podcasts. And for more 0:46:37.280 --> 0:46:40.720 Oddlogs content, go to Bloomberg dot Bloomberg dot com slash 0:46:40.760 --> 0:46:43.440 odd Lots. We post transcripts, we have a blog, we 0:46:43.520 --> 0:46:46.880 have a newsletter that comes out Friday. And for even more, 0:46:47.239 --> 0:46:50.960 check out our discord where listeners and viewers are chatting 0:46:51.000 --> 0:46:53.160 twenty four seven about all of these topics. We have 0:46:53.160 --> 0:46:55.120 a great real estate channel in there, one of the 0:46:55.120 --> 0:46:57.880 most active ones. All kinds of interesting stories getting posted 0:46:57.880 --> 0:47:00.319 from around the country. What's really happening in the real 0:47:00.440 --> 0:47:01.080 estate market. 0:47:01.400 --> 0:47:03.920 Go there and check it out. Thanks for listening.