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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: Hello and welcome to another episode of the Odd Lots podcast.

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Speaker 2: I'm Tracy Alloway.

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Speaker 3: And I'm Jill. Why isn't thal Joe.

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Speaker 2: There's been this very long running now it feels, conversation

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Speaker 2: about the health of the American consumer. Yes, you've seen

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Speaker 2: all that commentary, right, So you see these headlines that

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Speaker 2: are like consumer debt at a record high, and you

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Speaker 2: see some of the sentiment surveys which have for the

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Speaker 2: past two years been coming in pretty bad. They started

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Speaker 2: to look kind of bad when all the tariffs were announced. Again,

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Speaker 2: they've improved a bit since then. And yet consumers seem to,

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Speaker 2: you know, pretty much keep doing what they've been doing

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Speaker 2: for a long time, which is spending, buying houses, things

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Speaker 2: like that.

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Speaker 3: Well, they're spending, for sure, But this is the thing.

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Speaker 4: There's all this dismal sentiment data everywhere you look, and

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Speaker 4: yet by and large, you know, you read like CEOs,

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Speaker 4: you look at the retail data, et cetera.

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Speaker 3: It's not like that terrible.

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Speaker 4: Companies seem to be doing fine, but there are pockets

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Speaker 4: of the economy clearly that are softening.

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Speaker 3: There is rising.

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Speaker 4: Inventory of homes. This is like one of the huge

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Speaker 4: stories in the economy. So there are clear areas where

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Speaker 4: high rates and stuff are having in effect. But to

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Speaker 4: your point, like it has not been some sort of

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Speaker 4: linear story of people are depressed in the economies.

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Speaker 2: Farm But you're right, we have seen some signs of softening,

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Speaker 2: So you know, we have to ask is it going

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Speaker 2: to be different this time? Is it the start of

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Speaker 2: some sort of real deterioration in the health of the

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Speaker 2: US consumer. I have also seen some very interesting stats recently,

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Speaker 2: specifically about consumer lending and mortgages and things like that.

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Speaker 2: I've seen, for instance, that existing home sales are down

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Speaker 2: one point nine percent year to date and have recorded

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Speaker 2: the lowest volumes by count at this point in the

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Speaker 2: year since two thousand and nine. And when you hear those,

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Speaker 2: you know, since two thousand and nine dates, you start

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Speaker 2: to get a little worried.

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Speaker 3: Right, this is definitely the case.

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Speaker 4: I saw something I think it was from Redfin they

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Speaker 4: said there was a record gap between sellers and buyers

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Speaker 4: in the housing market right now. Look, this is one

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Speaker 4: area where the high rates environment, Like, there's clearly something

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Speaker 4: going on. We haven't gotten like big you know, when

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Speaker 4: rates shot up in like twenty late twenty twenty one

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Speaker 4: or whatever that was. Do you know, by the way,

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Speaker 4: twenty this occurred to me last night. Twenty one is

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Speaker 4: kind of a long time ago, Like I know, I

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Speaker 4: was thinking about this last night because it's sort of

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Speaker 4: a cliche to point out that the pandemic twenty twenty

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Speaker 4: was long time ago. But some of those really pivotal

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Speaker 4: years where we got the surge of the raid hikes,

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Speaker 4: we got the surgeon inflation, even that's starting to fade

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Speaker 4: into history a little bit. I don't know, maybe just

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Speaker 4: last night I was think about getting.

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Speaker 2: Old and Joe, time is a flat circle. That's all

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Speaker 2: I'm going.

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Speaker 4: But there's something like, you know, house prices didn't fall

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Speaker 4: off cliff when rates were high dramatically, which was a

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Speaker 4: surprise to some Like some people thought, Okay, they're hugging

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Speaker 4: rates dramatically. The housing market is going to be affected.

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Speaker 4: The housing market is the US economy. Therefore the US

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Speaker 4: economy will fall off the cliff. That did not happen.

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Speaker 4: But there has been this slow down and lately we've

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Speaker 4: been seeing like, okay, like rates are still high, even

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Speaker 4: with talk of raid cuts, et cetera. They're still high

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Speaker 4: and there's clearly this sort of accumulation of household inventory,

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Speaker 4: these imbalances that are emerging. I don't know, maybe we

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Speaker 4: will get price to clients.

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Speaker 3: What's going to happen.

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Speaker 2: Well, I'm glad you brought that up, because we actually

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Speaker 2: do have the perfect guest. We're going to be speaking

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Speaker 2: with someone who was very, very correct in calling that

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Speaker 2: we wouldn't see a massive house price.

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Speaker 3: I thought it was wrong.

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Speaker 4: I didn't say it at the time, but he came

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Speaker 4: on the podcast like, we're not going to say and

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Speaker 4: I was like, there's no way.

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Speaker 3: I'm glad I didn't say. This is why I never get.

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Speaker 4: Anything wrong, because I don't state prediction because you don't

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Speaker 4: have opinions. But as a matter of professional accountability, when

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Speaker 4: we were interviewing him, in my head, I was skeptical.

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Speaker 2: All right, well that's a big maya coupla from Joe. Okay,

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Speaker 2: without further ado, then we are going to be speaking

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Speaker 2: with Morgan Stanley housing strategist Jim Egan. He's been on

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Speaker 2: the show quite a few times before. And here's where

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Speaker 2: I produce my disclaimer, which is that stat that I

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Speaker 2: just quoted about existing home sales actually came from one

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Speaker 2: of his recent notes. So, Jim, welcome back to the show.

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Speaker 5: Thank you so much for having me back. It's an

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Speaker 5: honor to be here.

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Speaker 2: I'm going to start, Actually, I'm going to go back

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Speaker 2: in time for a second. Let's just start. Why has

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Speaker 2: the American consumer been so resilient? And it's kind of

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Speaker 2: funny because you see people even talking about it still.

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Speaker 2: So we just had corporate earnings and there was this

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Speaker 2: funny comment from the AMEX CEO where he basically said,

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Speaker 2: our card members say they don't have any confidence in

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Speaker 2: the economy, but they keep spending, which is pretty funny

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Speaker 2: to me. But why this strength?

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Speaker 5: Yeah, So I think there are a number of different

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Speaker 5: things driving the underlying strength in the consumer. We do

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Speaker 5: a lot of work across our debt analysts and Morgan

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Speaker 5: Stanley Research with our economists to kind of try to

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Speaker 5: tie these positive macro numbers to some of the things

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Speaker 5: we're seeing on a more micro level. Look the unemployment rate.

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Speaker 5: We're at four point two percent, very low unemployment rate.

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Speaker 5: It's been low for a few years now. And on

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Speaker 5: top of that, you've had an incredible amount of wealth growth.

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Speaker 5: There's been volatility in markets recently, but whether it's home

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Speaker 5: prices at record highs and the record amount of equity

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Speaker 5: that homeowners and sixty five percent of Americans are homeowners.

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Speaker 5: The equity that they have in their home, or the

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Speaker 5: wealth they've been able to gain from appreciating financial assets.

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Speaker 5: That's contributed to consumer's ability to spend.

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Speaker 4: These tracks completely with me because I'm anxious about this

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Speaker 4: date of the economy. I read all the headlines like

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Speaker 4: everyone else. But you know, like I owned a home,

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Speaker 4: I bought a home, I have my retirement account. It

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Speaker 4: seems to be doing fine despite my anxiety. I don't

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Speaker 4: think I'm like changing my behavior anyway.

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Speaker 5: And I think another piece to that when we think

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Speaker 5: about just the consumer balance sheet, one of the statistics

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Speaker 5: that gets quoted all the time is the just debt

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Speaker 5: service ratios debt service to income. It's above where it

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Speaker 5: wasn't twenty twenty one, but it's still it's so of

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Speaker 5: the lowest levels we've seen in the past couple decades.

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Speaker 5: The capital c consumer, the holistic balance sheet of the

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Speaker 5: consumer that still looks healthy. We don't think that the

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Speaker 5: consumer holistically is over levered. There might be some pockets

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Speaker 5: of pressure, but we don't think they're in aggregate overlevered.

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Speaker 2: Yeah, so this is exactly what I wanted to ask

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Speaker 2: you because one of the things that I've been sort

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Speaker 2: of internalizing from recent years is this idea that the

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Speaker 2: aggregate hides a lot of stuff happening in the tails. Right,

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Speaker 2: And the question, I guess is always when the tails

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Speaker 2: start getting fat enough that they start affecting the whole.

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Speaker 2: And this is one reason why your recent research really

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Speaker 2: caught my interest and I actually wrote it up in

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Speaker 2: the All Thoughts newsletter. But you are starting to see

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Speaker 2: some pockets of strain. Describe what you're examining right now.

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Speaker 5: Yes, so thank you for writing that up.

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Speaker 2: Visibility was very much No, thank you for producing it, honestly.

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Speaker 5: And I think what we're seeing and this is something

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Speaker 5: as part of my role at Morgan Stanley, I work

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Speaker 5: on the teams that look at auto credit, within asset

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Speaker 5: back securities, credit cards, all of those other consumer products.

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Speaker 5: And one of the i'll call it apparent contradictions that

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Speaker 5: we were seeing was the macro consumer data that we

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Speaker 5: were just discussing, incredibly healthy consumer keeps spending and then

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Speaker 5: we're seeing delinquencies climb, delinquencies climbing with the unemployment rate

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Speaker 5: as low as it was. That was something that we

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Speaker 5: had been asked to explain a fair amount of times.

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Speaker 5: We're trying to find better data to explain, and so

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Speaker 5: the impetus behind that report was to kind of say, look,

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Speaker 5: subprime auto delinquencies have been climbing to a point where

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Speaker 5: they're higher now than they've been at any point. I

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Speaker 5: mean some metrics there above where they were in two

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Speaker 5: thousand and eight, two thousand and nine at their prior peaks.

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Speaker 5: Now there's some apples to apples issues there, but you'll

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Speaker 5: see those numbers. Prime auto delinquencies have started climbing. Unsecured

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Speaker 5: consumer delinquencies are up. They're not at local highs, but

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Speaker 5: they're up. And so from a pockets perspective, we are

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Speaker 5: seeing a little bit of those delinquencies climb.

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Speaker 2: I just want to explain the terms really quickly, but

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Speaker 2: what's the official definition of delinquency.

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Speaker 5: So delinquency as we're talking about it here is somebody

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Speaker 5: who is thirty days past due on their loan. So

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Speaker 5: we'll either talk about it in terms of thirty days

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Speaker 5: or sometimes sixty plus days. But you've missed at least

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Speaker 5: one or two payments on a debt instrument, whether that's

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Speaker 5: an auto loan, we'll look at it for mortgages, credit cards,

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Speaker 5: and so on and so forth.

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Speaker 4: So this is really important though, because in the aggregate

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Speaker 4: things are mostly fine, but we're seeing this rise across

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Speaker 4: different categories, which is not entirely intuitive. So what you're

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Speaker 4: saying is that there are these tails, there are these

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Speaker 4: sources of stress, but that they're not a function of

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Speaker 4: credit worthiness.

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Speaker 5: What are they a function of might not be a

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Speaker 5: function of aggregate credit worthiness, And that's when it comes

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Speaker 5: into looking at these statistics that we need to use

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Speaker 5: to think about just kind of broadly, how the economy,

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Speaker 5: how the consumer is going to move forward. But I

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Speaker 5: mentioned debt service ratios right when we think about what's

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Speaker 5: brought debts service ratio is down to kind of some

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Speaker 5: of the lowest levels we've seen in decades. The mortgage

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Speaker 5: market plays a big role. The largest piece of debt

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Speaker 5: on any household balance sheet that owns a home is

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Speaker 5: almost certainly going to be that mortgage. And the lock

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Speaker 5: in effect that we've heard in the housing market, that's

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Speaker 5: a function of the fact that a majority, an overwhelming majority,

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Speaker 5: of mortgage debt in this country thirty or fixed rate mortgages.

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Speaker 5: Most of those borrowers were able to take out that

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Speaker 5: mortgage at historically low rates. In twenty twenty, twenty twenty one,

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Speaker 5: the effective rate on the outstanding right now four percent,

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Speaker 5: prevailing mortgage rates six point eight six point nine percent

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Speaker 5: as we're in this studio today. So when you think

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Speaker 5: about two thirds of the country or homeowners, their effective

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Speaker 5: rates at four percent are dragging down that payment. Only

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Speaker 5: sixty percent of homeowners even have a mortgage, so forty

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Speaker 5: percent own their home free and clear any debt. They're

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Speaker 5: not contributing to the numerator. And the thirty five percent

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Speaker 5: of households that are renters rents don't count as debt

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Speaker 5: service in these equations. They're contributing to the denominator in

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Speaker 5: terms of the income piece of this calculation, but they're

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Speaker 5: not adding to the service piece, right and or the

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Speaker 5: debt service piece, And so that's all helping to drag

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Speaker 5: this down and potentially missing a few pockets of specific

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Speaker 5: borrowers that are under a lot more pressure than those

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Speaker 5: aggregate numbers would suggest.

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Speaker 4: Just to be clear, so is the story that the

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Speaker 4: stress is building basically among the unfortunate people who have

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Speaker 4: a mortgage, but don't have a Zerbier mortgage.

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Speaker 5: I think when we started to see delinquencies climb, and

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Speaker 5: this is two to three years ago, we started to

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Speaker 5: see it subprime borrowers, and those tend to be borrowers

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Speaker 5: who in this post GFC past fifteen years, lending standards

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Speaker 5: have been tighter, more likely to be renters. We're not

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Speaker 5: capturing rent, and so their payments are getting tougher. But

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Speaker 5: then to your point, now, over the past twelve to

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Speaker 5: eighteen months, now prime delinquencies are moving higher. These are

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Speaker 5: households that are much more likely to be homeowners. And

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Speaker 5: what we think we're seeing there is exactly the dynamic

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Speaker 5: you're talking about. Right, If you bought a home prior

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Speaker 5: to twenty twenty one, Let's say you bought in twenty

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Speaker 5: sixteen median priced home percent down prevailing mortgage rates at

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Speaker 5: the time, that was a thirty year fixed rate mortgage.

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Speaker 5: Most homeowners who bought at that time refinanced at record

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Speaker 5: lows in twenty twenty twenty twenty one. And if we

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Speaker 5: just assume that their incomes have been growing along the

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Speaker 5: levels that median household incomes have been growing for the

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Speaker 5: past nine to ten years, their monthly payment is a

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Speaker 5: share of their income is eight to nine percent. Today.

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Speaker 5: Anybody who bought before twenty twenty one, that median household,

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Speaker 5: we think that payment is probably below twelve percent. If

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Speaker 5: you bought the past three years, as rates moved materially higher,

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Speaker 5: your monthly payment as a percentage of your income median

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Speaker 5: household probably twenty four to twenty six percent.

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Speaker 3: This is like the most important state in the world.

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Speaker 2: Yeah, this is like you have the haves and half

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Speaker 2: knots of renters versus homeowners, but you also have the

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Speaker 2: have and have nots in homeowners themselves.

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Speaker 5: Yes, and so we think that the Joint Center for

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Speaker 5: Housing Studies at Harvard right, they have some great statistics

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Speaker 5: on affordability, and they will qualify thirty percent of your

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Speaker 5: income as the threshold for are you cost burdened on shelter,

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Speaker 5: So twenty four to twenty six percent. We're not saying

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Speaker 5: that those homeowners are cost burdened, but they're spending two

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Speaker 5: to three times more of their monthly paycheck on that

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Speaker 5: mortgage than somebody who was fortunate enough to buy prior

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Speaker 5: to twenty twenty one, which you'd think has to be

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Speaker 5: crowding out something and maybe that's it hasn't been spending

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Speaker 5: that that's clearly been the case from the data that

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Speaker 5: we talked about earlier, but maybe it's these marginal payments

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Speaker 5: on other debt service products.

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Speaker 2: So one of the results of having a lot of

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Speaker 2: people locked into mortgage rates that maybe they got before

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Speaker 2: everything went up by quite a lot is the lock

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Speaker 2: in effect and the idea that people don't want to

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Speaker 2: move houses because they'd have to get a new mortgage

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Speaker 2: and then they would end up potentially cost burdened. And

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Speaker 2: I'm curious if we're still seeing an impact from that

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Speaker 2: particular or as much of an impact from that particular dynamic,

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Speaker 2: or are we at the point now where people are

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Speaker 2: thinking like, well, maybe mortgage rates aren't going down anytime soon,

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Speaker 2: and so I'm just going to bite the bullet and

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Speaker 2: do something new.

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Speaker 5: So, if I were to take a ten thousand foot

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Speaker 5: view and answer your question, the locket effect is clearly

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Speaker 5: still playing a role. Right If we look at overall

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Speaker 5: inventory levels as a share of the outstanding housing market,

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Speaker 5: the chart still looks like there's a TYPEO given how

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Speaker 5: low inventories are. But I can't sit here like I

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Speaker 5: have been able to in the past and say we're

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Speaker 5: at historically low inventories, right, we are starting to see

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Speaker 5: to the point that you're making. We are starting to

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Speaker 5: see four sale inventory volumes move higher. Year over year,

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Speaker 5: inventory volumes are up almost it's almost eighteen consecutive months,

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Speaker 5: now almost a year and a half. They're up almost

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Speaker 5: twenty percent from those lows. And while that's still below

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Speaker 5: where we were we are in the fourth quarter of

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Speaker 5: twenty nineteen, below where we were when rates picked up

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Speaker 5: massively and inventories kind of retrenched, that's still a pretty

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Speaker 5: healthy increase where we're starting to see a little bit

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Speaker 5: more supply come on the market here, despite the fact

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Speaker 5: that the lock in effect remains two hundred and fifty selling.

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Speaker 4: Is it just eventually, like, what is the source of

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Speaker 4: the inventory? Is it the people who have needed to

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Speaker 4: sell for a while are finally capitulating and you're not what,

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Speaker 4: I finally.

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Speaker 3: Got to sell this house.

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Speaker 4: Is it that there are some marginal buyers who have

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Speaker 4: dropped out because they've been waiting. I don't know what

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Speaker 4: is the source of this inventory? And this is the

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Speaker 4: longest inventory growth since the GFC.

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Speaker 5: It's the highest percentage change when I look at year

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Speaker 5: over year growth. But we just saw with the most

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Speaker 5: recent data that came in, it's now the biggest it's

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Speaker 5: been on a year over your basis since the GFC.

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Speaker 5: It's also the second largest it's spin in the history

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Speaker 5: of the data, which goes back to the early second

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Speaker 5: nineteen eighties.

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Speaker 3: What streak a year over year growth?

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Speaker 1: Oh?

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Speaker 5: Okay, Like just in terms of how much we're up now,

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Speaker 5: the question as to who is selling i'd argue probably

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Speaker 5: one of the more important questions in the housing market

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Speaker 5: right now. Yeah, so it's a question we're trying to answer,

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Speaker 5: but it's one that's a little bit more difficult to answer.

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Speaker 5: We can identify at this point where the inventory is

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Speaker 5: picking up more. Right You look in states like Florida

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Speaker 5: has some of the steepest increases. Texas has had some

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Speaker 5: pretty steep increases, and we get a lot of questions,

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Speaker 5: For instance, in Florida, cost of insurance increasing, Are the

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Speaker 5: ancillary costs of home ownership? Is that forcing inventory? We

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Speaker 5: don't know if that's the case. We can't empirically prove

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Speaker 5: that right now, but I think you combine that with

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Speaker 5: twenty twenty one was a long time.

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Speaker 4: Ago Yeah, this was my realization last night that actually

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Speaker 4: twenty twenty one was not yesterday.

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Speaker 5: Yes, and these people have been lack of effect has

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Speaker 5: had people stuck in their homes in a lot of

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Speaker 5: instances for probably longer than they wanted to be. Growing

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Speaker 5: families both in terms of number of children as well

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Speaker 5: as larger children, like just growing needs for more space,

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Speaker 5: if those for lack of a better word, if those

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Speaker 5: dreams have been delayed, like maybe the realization that rates

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Speaker 5: might not come down all that much, maybe it's time

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Speaker 5: to do that. And home prices are up fifty percent

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Speaker 5: since March of twenty twenty, Like over the past five years,

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Speaker 5: you have a fifty percent growth in home prices. It's

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Speaker 5: perhaps those homeowners with that equity might be just a

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Speaker 5: little like marginally more willing to list.

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Speaker 3: And the economics to make a little bit more. Yeah,

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Speaker 3: this is yeah.

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Speaker 2: Wait, can you talk a little bit more Since we're

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Speaker 2: all about digging into the aggregate and finding the different

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Speaker 2: tales here, can you talk a little bit more about

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Speaker 2: the different pockets and geographical differences between what you're seeing

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Speaker 2: in supply and home prices.

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Speaker 5: Yes, So we've been trying to figure out what are

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Speaker 5: the most because we talk about home prices nationally, the

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Speaker 5: housing market is so hyper local that those national numbers

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Speaker 5: are helpful, but they don't describe the dynamics that are

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Speaker 5: going on at the ground level at any individual place

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Speaker 5: in the country. Right. And so when we look at

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Speaker 5: the growth and inventory, looking at it year over years,

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Speaker 5: looking at it since the fourth quarter of twenty nineteen

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Speaker 5: before the pandemic started, you're seeing the sharpest increases in

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Speaker 5: the South, right, Like you've seen it in Florida, You've

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Speaker 5: seen it in Texas, a couple of states that show

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Speaker 5: up a little bit more on the year over year numbers,

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Speaker 5: or Colorado, North Carolina. When we look at the implications

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Speaker 5: from home price perspective, what we've seen to be more

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Speaker 5: at least statistically significant for now are places where either

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Speaker 5: those inventory levels are higher highest compared to the fourth

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Speaker 5: quarter of twenty nineteen, which you have New Orleans eleven

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Speaker 5: of the top fourteen msas from that perspective, or in

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Speaker 5: Florida or Texas, and that's where you're seeing softer year

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Speaker 5: over year home price growth, or in some instances where

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Speaker 5: you are actually seeing prices come down on a year

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Speaker 5: over year basis. The other side of that coin is

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Speaker 5: the Northeast. It's New York, it's New England, it's the

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Speaker 5: northern Midwest. Those are places where inventories are still falling.

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Speaker 5: Inventories are far shy of where they were in the

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Speaker 5: fourth quarter of twenty nineteen. And to put all of

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Speaker 5: these percentages into context, rationally, inventories are down. I believe

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Speaker 5: it's twenty eight percent from the fourth quarter of twenty nineteen.

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Speaker 5: So to talk about places where inventories are actually up

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Speaker 5: relative to fourty twenty nineteen, that is an outlier relative

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Speaker 5: to national numbers.

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Speaker 4: This conversation wasn't on the record, but I'm going to

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Speaker 4: quot him anyway. I was trying to my friend Connor

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Speaker 4: saying he writes for Bloomberg Opinion. Hopefully it doesn't mind

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Speaker 4: me quoting him. We're talking about this phenomenon of the

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Speaker 4: fact that inventories are very tight in the Northeast, and

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Speaker 4: one of the things that he said was that, And again,

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Speaker 4: I don't think he told this to me for publication,

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Speaker 4: but maybe he's written about it.

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Speaker 3: So I'm just going to take a risk.

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Speaker 4: That it's okay to quote him from a chat that

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Speaker 4: I had with him. But I want to give him credit,

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Speaker 4: but that there's this natural, long standing migratory pattern in

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Speaker 4: the US of people moving essentially to the sun belt

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Speaker 4: from the northern and that the way he characterized it

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Speaker 4: to me is like imagine a university town in which

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Speaker 4: suddenly for a few years no one moves out of

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Speaker 4: the town after graduation. How inventories would rapidly diminish, And

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Speaker 4: that because of the lock in, the mortgage lock in,

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Speaker 4: you're not getting the same sort of migration out of

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Speaker 4: the cold areas to the southern areas, and so people

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Speaker 4: are stuck in the cold areas basically, and that is

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Speaker 4: does that resonate as a reason for why vacancy rates

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Speaker 4: would be very low or inventory rates in the northeast

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Speaker 4: would be very low right now?

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Speaker 5: So from the data that we've looked at, is common

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Speaker 5: around the migratory patterns. They didn't start in COVID when

401
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Speaker 5: people moved to the southeast. They were happening before that.

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Speaker 5: That makes sense to me. I don't have the specific

403
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Speaker 5: numbers to completely agree with that as a research channelist

404
00:19:35,280 --> 00:19:37,560
Speaker 5: on air, but what I can say as well, which

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Speaker 5: could be contributing to that, we've talked demographics in the past. Yeah,

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Speaker 5: and one of the underlying trends in the housing market

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Speaker 5: has been the fact that we're now at a place

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Speaker 5: where over one out of every three homes, over thirty

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Speaker 5: three percent of the housing market is owned by people

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Speaker 5: over the age of sixty five. And when you look

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Speaker 5: at where yes, there's Florida, and there's Arizona, and there's

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Speaker 5: South Carolina. But when you look at where they're more

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Speaker 5: concentrated as a percentage of the housing stock in particular,

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Speaker 5: it's in the Northeast. It's New York, it's in New England.

415
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Speaker 5: And we've rerun this analysis posts the pandemic, their tendency

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Speaker 5: to agent place has continued to get more and more prevalent.

417
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Speaker 5: So I think you combine some of these trends and

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Speaker 5: this is what you're left with.

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Speaker 2: Yeah, the Northeast is nice. I'm just going to put

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Speaker 2: that out there. Nothing wrong with the Northeast. Okay, So

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Speaker 2: we're talking about an increase in delinquencies, a slight pickup

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Speaker 2: even in prime borrowers, but we're not saying foreclosures yet,

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Speaker 2: and I think that's an important differentiator. But what would

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Speaker 2: you expect to be a sort of catalyst I guess

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Speaker 2: for things getting worse. And since we keep bringing up

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Speaker 2: the Great Financial Crisis in this conversation, I mean back

427
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Speaker 2: then people were two indebted, too overlevered, and when house

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Speaker 2: prices started to fall, they couldn't keep up and everything

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Speaker 2: basically collapse. But to your point earlier, we don't really

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Speaker 2: have that level of indebtedness anymore. So what's the catalyst, right?

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Speaker 5: So, I think there are a few things going on.

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Speaker 5: Another piece to the different levels of leverage today versus

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Speaker 5: back then was the fact of the types of leverage

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Speaker 5: we were giving borrowers. According to data from I believe

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Speaker 5: it's the FAHFA, ninety two and a half percent of

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Speaker 5: mortgage balances in the country right now are fixed rate.

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Speaker 5: Most of those are thirty or fixed rate back two

438
00:21:21,280 --> 00:21:24,520
Speaker 5: thousand and five, two thousand and six, almost an ARM

439
00:21:24,640 --> 00:21:28,080
Speaker 5: era and adjustable rate mortgages and not just adjustable rates

440
00:21:28,240 --> 00:21:31,520
Speaker 5: short reset arms with teaser rates option arm mortgages that

441
00:21:31,520 --> 00:21:34,120
Speaker 5: could negatively amortize, so the balance of your mortgage could

442
00:21:34,160 --> 00:21:37,240
Speaker 5: get bigger over the first couple of years of that product.

443
00:21:37,440 --> 00:21:40,040
Speaker 5: Those were payments that as we hit kind of an

444
00:21:40,080 --> 00:21:43,640
Speaker 5: economic hiccup, unemployment rate picks up, money becomes a little

445
00:21:43,680 --> 00:21:46,679
Speaker 5: bit more tight, and then your mortgage payment ratchets higher.

446
00:21:46,960 --> 00:21:49,080
Speaker 5: That makes it even more difficult for you to make

447
00:21:49,119 --> 00:21:51,600
Speaker 5: that monthly payment. We don't have that this time. Not

448
00:21:51,640 --> 00:21:54,040
Speaker 5: only that the home ownership rate back then was over

449
00:21:54,160 --> 00:21:57,480
Speaker 5: sixty nine percent. Today, I believe it's sixty five point

450
00:21:57,480 --> 00:21:59,879
Speaker 5: one as we walk in here. Four percentage points does

451
00:22:00,119 --> 00:22:03,919
Speaker 5: not sound huge given how big the United States is.

452
00:22:03,920 --> 00:22:06,960
Speaker 5: From a household perspective, that means that we have four

453
00:22:07,000 --> 00:22:10,880
Speaker 5: to five million fewer homeowners than we would have if

454
00:22:10,880 --> 00:22:13,000
Speaker 5: the home ownership rate was over sixty nine percent. So

455
00:22:13,040 --> 00:22:16,240
Speaker 5: your marginal homeowner is a lot cleaner from that perspective

456
00:22:16,640 --> 00:22:19,800
Speaker 5: that they're not necessarily going to see, certainly not going

457
00:22:19,800 --> 00:22:21,880
Speaker 5: to see that changing mortgage payment that's going to drive

458
00:22:22,320 --> 00:22:26,800
Speaker 5: things there. And because of our experience seventeen years ago,

459
00:22:26,840 --> 00:22:32,679
Speaker 5: now mortgage servicers have a much more varied toolkit at

460
00:22:32,720 --> 00:22:38,720
Speaker 5: their disposal to prevent them. We'll call them foreclosure mitigation options, modifications.

461
00:22:38,000 --> 00:22:39,160
Speaker 2: In the life loan workouts.

462
00:22:39,200 --> 00:22:42,200
Speaker 5: Basically, so it's difficult for us to foresee a place

463
00:22:42,240 --> 00:22:46,640
Speaker 5: where mortgage foreclosures pick up too significantly in the forecast horizon.

464
00:22:47,000 --> 00:22:50,000
Speaker 3: Could we see national home price declines.

465
00:22:49,760 --> 00:22:54,199
Speaker 5: We could, We're talking about inventory increasing. Demand has not

466
00:22:54,480 --> 00:22:59,840
Speaker 5: increased alongside inventory. Affordability is still very, very challenged. And

467
00:23:01,080 --> 00:23:03,439
Speaker 5: I mean we mentioned one point nine percent decrease here

468
00:23:03,440 --> 00:23:06,159
Speaker 5: to date from an existing home sales perspective. As supply

469
00:23:06,240 --> 00:23:11,359
Speaker 5: increases and demand stays flat, sometimes it's just as simple

470
00:23:11,359 --> 00:23:13,560
Speaker 5: as looking at the supply and demand piece. We've started

471
00:23:13,560 --> 00:23:17,040
Speaker 5: to see home price appreciation decelerate four point one to

472
00:23:17,080 --> 00:23:20,080
Speaker 5: three point four percent just over the past two months,

473
00:23:21,040 --> 00:23:24,040
Speaker 5: twenty five percent. A quarter of the largest one hundred

474
00:23:24,119 --> 00:23:26,480
Speaker 5: msas in the country are already seeing home price declines.

475
00:23:27,640 --> 00:23:29,760
Speaker 5: I don't think it's out of the realm of possibilities

476
00:23:29,760 --> 00:23:33,040
Speaker 5: for this imbalance of supply and demand to take us

477
00:23:33,040 --> 00:23:35,960
Speaker 5: through zero percent. I think that what we're talking about

478
00:23:36,000 --> 00:23:39,120
Speaker 5: from how healthy mortgage credit is the locked in home

479
00:23:39,119 --> 00:23:41,840
Speaker 5: buyer doesn't need to sell at lower prices. I don't

480
00:23:41,840 --> 00:23:44,359
Speaker 5: see a true home price correction. That's not in our

481
00:23:44,359 --> 00:23:47,399
Speaker 5: base case. That's not in our bare case. But we

482
00:23:47,480 --> 00:23:49,600
Speaker 5: do have a bare case of negative three percent home

483
00:23:49,640 --> 00:23:52,000
Speaker 5: prices by the end of this year. Base cases plus

484
00:23:52,080 --> 00:23:55,720
Speaker 5: two decelerating from here. It's slowing growth, but it's still

485
00:23:55,760 --> 00:23:58,440
Speaker 5: positive on the national level. But I think there is

486
00:23:58,440 --> 00:24:13,280
Speaker 5: a realistic bare case where we go below here over something.

487
00:24:16,640 --> 00:24:19,320
Speaker 2: Can you talk maybe a little bit about the wealth effect,

488
00:24:19,400 --> 00:24:22,000
Speaker 2: because if we're talking about like how important it is

489
00:24:22,040 --> 00:24:24,399
Speaker 2: that people have locked in mortgages at low rates, or

490
00:24:24,440 --> 00:24:27,760
Speaker 2: maybe they have big portfolios of stocks and bonds, maybe

491
00:24:27,800 --> 00:24:30,600
Speaker 2: they're a baby boomer and kind of luck down in

492
00:24:30,680 --> 00:24:33,879
Speaker 2: their wealth building lives, that seems like a big factor.

493
00:24:34,040 --> 00:24:36,959
Speaker 2: And in the current environment, we've had some volatility, although

494
00:24:37,119 --> 00:24:40,960
Speaker 2: things are looking better as we record this on June twelfth,

495
00:24:41,600 --> 00:24:43,679
Speaker 2: So I'm just curious, like, how do you start to

496
00:24:43,720 --> 00:24:46,680
Speaker 2: look at how people feel about their actual financial assets

497
00:24:46,720 --> 00:24:49,880
Speaker 2: and financial position when it comes to making decisions about

498
00:24:50,040 --> 00:24:52,640
Speaker 2: home ownership or whether they should move and things like that.

499
00:24:52,840 --> 00:24:55,080
Speaker 5: Yeah, and it's that piece of it. The wealth effect

500
00:24:55,119 --> 00:24:57,200
Speaker 5: in particular is something that our economists have been talking

501
00:24:57,200 --> 00:25:01,040
Speaker 5: about a lot to talk through just how confident the

502
00:25:01,040 --> 00:25:03,719
Speaker 5: consumer has been in spending over the past quarters, over

503
00:25:03,760 --> 00:25:06,360
Speaker 5: the past couple of years, and so when they think

504
00:25:06,400 --> 00:25:09,520
Speaker 5: about the consumer's ability to keep spending going forward, whether

505
00:25:09,520 --> 00:25:13,120
Speaker 5: it's smaller purchases or larger home purchases durable goods, they

506
00:25:13,160 --> 00:25:15,919
Speaker 5: are looking more at the financial aspect piece of this.

507
00:25:15,960 --> 00:25:18,080
Speaker 5: When we look at the growth in wealth in this cycle,

508
00:25:18,119 --> 00:25:20,240
Speaker 5: it's been more on the financial assets side than it's

509
00:25:20,280 --> 00:25:23,120
Speaker 5: been on the real estate side of things, which has

510
00:25:23,119 --> 00:25:25,720
Speaker 5: the housing strategist, with home prices at record highs, took

511
00:25:25,800 --> 00:25:27,560
Speaker 5: me a couple seconds looking at those numbers to see

512
00:25:27,600 --> 00:25:30,000
Speaker 5: that that's what that is kind of what's going on underneath.

513
00:25:30,320 --> 00:25:33,320
Speaker 5: And so when they think about the borrowers' ability or

514
00:25:33,359 --> 00:25:36,200
Speaker 5: the borrowers willingness and by borrow I should say consumer's

515
00:25:36,200 --> 00:25:40,160
Speaker 5: willingness to keep making those expenditures. They are looking at equities,

516
00:25:40,160 --> 00:25:42,439
Speaker 5: they're looking at financial assets, and they're looking at the

517
00:25:42,480 --> 00:25:44,399
Speaker 5: volatility there, but they do think we need a pretty

518
00:25:44,880 --> 00:25:47,560
Speaker 5: healthy correction for it to really impact that in a

519
00:25:47,560 --> 00:25:48,280
Speaker 5: material way.

520
00:25:48,400 --> 00:25:51,560
Speaker 4: It's interesting, like when I think about wealth effect sometimes

521
00:25:51,560 --> 00:25:52,920
Speaker 4: I think of it psychologically.

522
00:25:53,000 --> 00:25:54,680
Speaker 3: It's like, oh, people like look at their.

523
00:25:54,600 --> 00:25:57,080
Speaker 4: Investment portfolio and it's green, so I feel good and

524
00:25:57,160 --> 00:25:58,879
Speaker 4: go out to dinner and take a vacation or whatever.

525
00:25:59,080 --> 00:26:03,359
Speaker 4: But listening to you, it's just crazy. Like if you

526
00:26:04,000 --> 00:26:07,400
Speaker 4: have a twenty nineteen or twenty twenty one vintage mortgage

527
00:26:07,960 --> 00:26:11,200
Speaker 4: and you've been investing in the market for some time,

528
00:26:11,440 --> 00:26:13,760
Speaker 4: regularly putting money in a four own K or maybe

529
00:26:13,800 --> 00:26:19,680
Speaker 4: some taxable account. You have a very strong inflation hedge

530
00:26:19,760 --> 00:26:23,240
Speaker 4: because you have this recurring payment that has not gone up,

531
00:26:23,280 --> 00:26:26,880
Speaker 4: assuming it's fixed, and you're just sitting on this boatload

532
00:26:27,160 --> 00:26:32,240
Speaker 4: of capital gains. That is just that's not psychological, that's real. Now,

533
00:26:32,280 --> 00:26:34,480
Speaker 4: whether the degree to which you can monetize it is

534
00:26:34,520 --> 00:26:37,600
Speaker 4: obviously questionable, because if everyone's trying to monetize it at

535
00:26:37,600 --> 00:26:40,200
Speaker 4: the same time, that could shrink. But just on your

536
00:26:40,240 --> 00:26:44,040
Speaker 4: paper like, that's great, that class of person who has

537
00:26:44,080 --> 00:26:48,200
Speaker 4: that situation is just an extraordinary large cushion and margin

538
00:26:48,480 --> 00:26:50,480
Speaker 4: and a sort of winning on every front right now.

539
00:26:50,800 --> 00:26:54,640
Speaker 5: Yes, the households that were homeowners before the pandemic hit

540
00:26:54,680 --> 00:26:57,719
Speaker 5: in March of twenty twenty or made what was probably

541
00:26:57,720 --> 00:27:00,800
Speaker 5: a pretty scary decision to buy twenty or twenty twenty one,

542
00:27:01,200 --> 00:27:03,400
Speaker 5: those are the households that, on the perspectives that we're

543
00:27:03,400 --> 00:27:05,919
Speaker 5: talking about, to the points that you're making, we're really

544
00:27:06,320 --> 00:27:07,720
Speaker 5: big winners here.

545
00:27:08,160 --> 00:27:08,840
Speaker 3: Huge winners.

546
00:27:08,880 --> 00:27:12,960
Speaker 4: Payments have stayed flat even at a time of galloping inflation.

547
00:27:13,600 --> 00:27:16,280
Speaker 4: They're sitting on all these capital gains. There are wages

548
00:27:16,320 --> 00:27:18,480
Speaker 4: that probably just assume they have a normal job, have

549
00:27:18,520 --> 00:27:21,000
Speaker 4: gone up marginally. So just the nominal payment of the

550
00:27:21,000 --> 00:27:23,520
Speaker 4: mortgage relative to how much they're pulling in is probably

551
00:27:23,800 --> 00:27:26,359
Speaker 4: fallen over the last four plus years or however many.

552
00:27:26,400 --> 00:27:27,440
Speaker 3: I mean, it's pretty nice.

553
00:27:27,480 --> 00:27:29,879
Speaker 2: Well, since we're talking about people who lucked out in

554
00:27:29,920 --> 00:27:31,680
Speaker 2: their wealth building, I want to go back to baby

555
00:27:31,680 --> 00:27:34,320
Speaker 2: boomers for a second. So what if the narratives that

556
00:27:34,359 --> 00:27:36,520
Speaker 2: we hear when we're talking about housing is this idea

557
00:27:36,600 --> 00:27:39,520
Speaker 2: that one day the older generation is going to pass

558
00:27:39,560 --> 00:27:43,000
Speaker 2: away and eventually a big segment of the housing market

559
00:27:43,040 --> 00:27:46,600
Speaker 2: is going to become unlocked and available for sale, maybe

560
00:27:46,720 --> 00:27:50,760
Speaker 2: at lower prices. Who knows. Is that still something that

561
00:27:50,760 --> 00:27:54,040
Speaker 2: you're sort of incorporating into your longer term forecasts or

562
00:27:54,119 --> 00:27:56,679
Speaker 2: have you seen anything change on that front. I guess

563
00:27:56,720 --> 00:27:58,560
Speaker 2: in the year or so since we last spoke to you.

564
00:27:59,160 --> 00:28:01,640
Speaker 5: So it is something we're still incorporating when we think

565
00:28:01,640 --> 00:28:04,240
Speaker 5: about housing. Not over the next two to five years,

566
00:28:04,480 --> 00:28:06,520
Speaker 5: but this is really a longer term, like this is

567
00:28:06,560 --> 00:28:10,320
Speaker 5: a ten year plus aspect to this. But we very

568
00:28:10,400 --> 00:28:14,000
Speaker 5: much subscribe to the narrative that we are underbuilt and

569
00:28:14,080 --> 00:28:17,879
Speaker 5: undersupplied from us housing holistically, and we get asked the question, well,

570
00:28:17,920 --> 00:28:20,439
Speaker 5: how do we fix the underbuilt aspect of this? Or

571
00:28:20,440 --> 00:28:23,280
Speaker 5: how do we fix the aggregate undersupplied aspect of this,

572
00:28:23,960 --> 00:28:26,879
Speaker 5: And it's we do come back to this. Right to

573
00:28:26,880 --> 00:28:28,800
Speaker 5: the point I made earlier, more than one out of

574
00:28:28,840 --> 00:28:30,720
Speaker 5: every three homes in this country is owned by somebody

575
00:28:30,760 --> 00:28:34,520
Speaker 5: over sixty five. From nineteen eighty through twenty twelve, that

576
00:28:34,720 --> 00:28:38,360
Speaker 5: was twenty five percent was effectively flat. It's increased pretty significantly.

577
00:28:38,800 --> 00:28:42,200
Speaker 5: It's very regionally concentrated where those homes are owned. And

578
00:28:42,320 --> 00:28:44,640
Speaker 5: eventually we do think that that's the supply that starts

579
00:28:44,680 --> 00:28:47,960
Speaker 5: to help fix this, but it's an eventually thing, and

580
00:28:48,120 --> 00:28:50,360
Speaker 5: not nearly in our two to five year forecast, horizing.

581
00:28:50,520 --> 00:28:52,000
Speaker 2: And then the other thing I wanted to ask you

582
00:28:52,080 --> 00:28:54,600
Speaker 2: is do you speak to home builders at all to

583
00:28:54,680 --> 00:28:57,360
Speaker 2: try to get like a read on maybe new supply

584
00:28:57,520 --> 00:29:00,400
Speaker 2: of housing coming onto the market. And I would be

585
00:29:00,440 --> 00:29:03,960
Speaker 2: really curious what I guess the atmosphere is like right now,

586
00:29:04,000 --> 00:29:07,080
Speaker 2: because on the one hand, you know, things seem okay,

587
00:29:07,520 --> 00:29:08,880
Speaker 2: but on the other hand, you have a lot of

588
00:29:08,920 --> 00:29:12,360
Speaker 2: uncertainty over the long term outlook, lots of policy questions

589
00:29:12,400 --> 00:29:15,000
Speaker 2: and things like that, and I guess I'm wondering, like

590
00:29:15,120 --> 00:29:16,480
Speaker 2: how they feel at the moment.

591
00:29:17,000 --> 00:29:19,000
Speaker 5: So I don't want to attribute what I'm about to

592
00:29:19,000 --> 00:29:22,040
Speaker 5: say specifically to homeowner commentary, but we do have to

593
00:29:22,640 --> 00:29:24,920
Speaker 5: look through all of this when we think about our

594
00:29:24,960 --> 00:29:27,280
Speaker 5: pillars of the housing market, the supply aspect of that,

595
00:29:27,320 --> 00:29:30,240
Speaker 5: which is both existing listings, which we've talked a lot about, but.

596
00:29:30,200 --> 00:29:32,200
Speaker 2: The builder commentary.

597
00:29:32,400 --> 00:29:35,240
Speaker 5: Right, I don't want to ascribe this to homebuilder commentary,

598
00:29:35,280 --> 00:29:36,560
Speaker 5: but what I do want to say when we look

599
00:29:36,600 --> 00:29:40,400
Speaker 5: at the new supply of homes, single unit housing starts,

600
00:29:40,400 --> 00:29:43,800
Speaker 5: building volumes. Look, we work closely with our economists, as

601
00:29:43,800 --> 00:29:47,400
Speaker 5: I've been talking about in our policy team. Tariffs, right,

602
00:29:48,080 --> 00:29:51,520
Speaker 5: effective tariff rate now elevated versus where it's been historically,

603
00:29:51,800 --> 00:29:53,280
Speaker 5: even if it isn't as high as we might have

604
00:29:53,360 --> 00:29:57,240
Speaker 5: feared earlier in April. The primary way that's going to

605
00:29:57,240 --> 00:30:00,520
Speaker 5: flow through the housing market is, in our view, home building.

606
00:30:00,960 --> 00:30:04,760
Speaker 5: The cost of goods to build homes going higher, immigration policies.

607
00:30:04,840 --> 00:30:06,760
Speaker 5: When we look at different sectors of the economy, the

608
00:30:06,800 --> 00:30:09,960
Speaker 5: sector with the largest percentage of foreign born workers construction,

609
00:30:10,360 --> 00:30:12,560
Speaker 5: so the cost and availability of labor also going to

610
00:30:12,600 --> 00:30:16,440
Speaker 5: be contained. Home Builder confidence has been coming down this year,

611
00:30:16,600 --> 00:30:18,760
Speaker 5: and when I look at all of the housing statistics

612
00:30:18,760 --> 00:30:21,640
Speaker 5: that we forecast, what has been weakest in twenty twenty

613
00:30:21,680 --> 00:30:24,760
Speaker 5: five is single unit housing starts. Over the first four

614
00:30:24,800 --> 00:30:26,960
Speaker 5: months of the year. We're down seven percent versus where

615
00:30:26,960 --> 00:30:29,040
Speaker 5: we were in the first four months of twenty twenty four.

616
00:30:29,400 --> 00:30:31,920
Speaker 5: And we think that we are significantly underbuilt. So if

617
00:30:31,920 --> 00:30:35,880
Speaker 5: we're going down and we're undersupplied, like we do, think

618
00:30:35,920 --> 00:30:38,600
Speaker 5: that that from a home price perspective, provides a little

619
00:30:38,600 --> 00:30:39,240
Speaker 5: bit of support.

620
00:30:39,360 --> 00:30:42,360
Speaker 4: So we have widespread view that there are not enough

621
00:30:42,520 --> 00:30:44,400
Speaker 4: homes either in the short term or in the long

622
00:30:44,480 --> 00:30:46,520
Speaker 4: term in America, and the trends are going in the

623
00:30:46,560 --> 00:30:47,080
Speaker 4: wrong direction.

624
00:30:47,920 --> 00:30:51,520
Speaker 2: Awesome, all right, Well, on that happy note, Jim, thank

625
00:30:51,520 --> 00:30:53,239
Speaker 2: you so much for coming back on Odd Lots. It

626
00:30:53,280 --> 00:30:54,160
Speaker 2: was great as always.

627
00:30:54,480 --> 00:30:55,680
Speaker 5: Thank you so much for having me.

628
00:30:55,800 --> 00:30:57,280
Speaker 3: Thanks Jim, transat.

629
00:31:09,720 --> 00:31:09,960
Speaker 1: Joe.

630
00:31:09,960 --> 00:31:13,120
Speaker 2: That was such an interesting conversation and I always enjoy

631
00:31:13,240 --> 00:31:15,200
Speaker 2: hearing from Jim. One thing I really like is that

632
00:31:15,240 --> 00:31:18,240
Speaker 2: he has all the numbers like in his head. He's

633
00:31:18,240 --> 00:31:21,040
Speaker 2: not looking anything up when we talk to him. He's

634
00:31:21,120 --> 00:31:24,360
Speaker 2: just you know, I guess he thinks about them all

635
00:31:24,480 --> 00:31:27,520
Speaker 2: day every day and so he remembers them. But I

636
00:31:27,560 --> 00:31:30,000
Speaker 2: gotta say, like the number that sticks out to me

637
00:31:30,400 --> 00:31:34,280
Speaker 2: is that variation between someone who bought their house in

638
00:31:34,360 --> 00:31:37,240
Speaker 2: like twenty sixteen versus someone who bought it in twenty

639
00:31:37,280 --> 00:31:40,760
Speaker 2: twenty four And I guess it's eight percent versus twenty

640
00:31:40,800 --> 00:31:43,880
Speaker 2: six percent of their housing costs something like that. That

641
00:31:44,000 --> 00:31:46,000
Speaker 2: is just insane, Tracy.

642
00:31:46,080 --> 00:31:49,680
Speaker 4: I'm on the website Know Yourmeme dot Com right now

643
00:31:50,400 --> 00:31:54,000
Speaker 4: because I am looking for the source of that meme

644
00:31:54,480 --> 00:31:56,560
Speaker 4: of the girl whispering in the ear of the other girl,

645
00:31:56,600 --> 00:31:57,760
Speaker 4: and I just keep imagining it.

646
00:31:57,760 --> 00:31:59,840
Speaker 2: It's like he has a mortgage, right said he bought

647
00:32:00,080 --> 00:32:02,720
Speaker 2: t has a Zurpiera mortgage.

648
00:32:02,920 --> 00:32:05,720
Speaker 4: But like I always knew that intuitively by the way,

649
00:32:05,760 --> 00:32:08,280
Speaker 4: it came from the movie Aquamarine.

650
00:32:07,600 --> 00:32:10,000
Speaker 3: Which I had literally never heard of, and the one

651
00:32:10,040 --> 00:32:11,080
Speaker 3: actress I didn't know that.

652
00:32:11,040 --> 00:32:14,720
Speaker 4: Yeah I didn't and an actress named Jojo no last

653
00:32:14,760 --> 00:32:17,480
Speaker 4: name is whispering to Emma Roberts. Anyway, I just thought

654
00:32:17,480 --> 00:32:19,440
Speaker 4: I would say that now since I'm on the page,

655
00:32:19,480 --> 00:32:21,680
Speaker 4: and maybe people would find that to be useful. But

656
00:32:21,760 --> 00:32:23,960
Speaker 4: I did not appreciate quite. I mean, yeah, of course,

657
00:32:24,000 --> 00:32:26,880
Speaker 4: I sort of intuitively understood that if you had locked

658
00:32:26,920 --> 00:32:29,000
Speaker 4: in a mortgage at some point in the twenty tens

659
00:32:29,280 --> 00:32:32,040
Speaker 4: or really nailed the timing and twenty twenty or twenty

660
00:32:32,120 --> 00:32:34,200
Speaker 4: twenty one. That was great, But I don't think I

661
00:32:34,200 --> 00:32:39,160
Speaker 4: had like quite appreciated just how massively that gap is.

662
00:32:39,600 --> 00:32:42,240
Speaker 4: What is the prospect of that going to change anytime soon?

663
00:32:42,320 --> 00:32:44,000
Speaker 4: Like there's going to be these two you know, this

664
00:32:44,120 --> 00:32:46,440
Speaker 4: sort of division in society where it's like, hey, you

665
00:32:46,560 --> 00:32:48,040
Speaker 4: have a lot of people living in homes and they

666
00:32:48,040 --> 00:32:50,880
Speaker 4: don't have a mortgage because they're old and they've aged

667
00:32:50,920 --> 00:32:53,240
Speaker 4: in place b than the lucky people who have this

668
00:32:53,360 --> 00:32:54,000
Speaker 4: mortgage edge.

669
00:32:54,000 --> 00:32:56,320
Speaker 2: And then everyone else, everyone who rents.

670
00:32:56,320 --> 00:32:58,800
Speaker 4: Or because they had to buy in twenty twenty four

671
00:32:58,880 --> 00:33:02,720
Speaker 4: or twenty twenty three because for whatever reason, and now

672
00:33:02,800 --> 00:33:05,240
Speaker 4: they're paying a massive amount of their income in their

673
00:33:05,240 --> 00:33:05,760
Speaker 4: mortgage paper.

674
00:33:05,840 --> 00:33:07,400
Speaker 2: But I do think this is also a really great

675
00:33:07,440 --> 00:33:10,440
Speaker 2: example of why it's important to look beyond the aggregates

676
00:33:10,520 --> 00:33:13,520
Speaker 2: and the sort of you know, single average number and

677
00:33:13,600 --> 00:33:14,920
Speaker 2: kind of dig into the tails.

678
00:33:15,080 --> 00:33:17,760
Speaker 4: Well, just on this point too, a lot of like

679
00:33:17,920 --> 00:33:20,560
Speaker 4: scare headlines or scare posts on Twitter. It's like, look

680
00:33:20,560 --> 00:33:24,600
Speaker 4: at the surge in delinquencies or whatever, or versus two

681
00:33:24,640 --> 00:33:27,240
Speaker 4: thousand and eight, two thousand and nine, and sort of touched

682
00:33:27,280 --> 00:33:29,040
Speaker 4: on this, you know, one of the things that I

683
00:33:29,080 --> 00:33:31,400
Speaker 4: do think is important to note, and Jim mentioned you

684
00:33:31,400 --> 00:33:34,160
Speaker 4: know you have to be careful with apples to apples comparisons.

685
00:33:34,200 --> 00:33:38,360
Speaker 4: Is that, like some of these effects can be magnified,

686
00:33:38,800 --> 00:33:42,000
Speaker 4: not because there's like a massive deterioration and credit worthiness,

687
00:33:42,160 --> 00:33:44,800
Speaker 4: but because there was so much extension of lending during

688
00:33:44,840 --> 00:33:46,480
Speaker 4: the boom time, et cetera. Like you sort of have

689
00:33:46,520 --> 00:33:49,280
Speaker 4: to be careful with some of these statistics because things

690
00:33:49,280 --> 00:33:50,000
Speaker 4: can change.

691
00:33:49,760 --> 00:33:51,960
Speaker 3: A lot for different reasons at different times.

692
00:33:52,480 --> 00:33:55,920
Speaker 2: Anyway, No, I mean, the home ownership market is structured

693
00:33:56,000 --> 00:33:58,040
Speaker 2: very different, really different to what it was in two

694
00:33:58,080 --> 00:34:00,680
Speaker 2: thousand and eight. Oh, we should have asked about the

695
00:34:00,720 --> 00:34:03,600
Speaker 2: gcs and Fanny and Freddie. Oh well, maybe next time

696
00:34:03,600 --> 00:34:05,120
Speaker 2: we do that next time. Shall we leave it there

697
00:34:05,160 --> 00:34:05,480
Speaker 2: for now?

698
00:34:05,560 --> 00:34:06,280
Speaker 3: Let's leave it there.

699
00:34:06,440 --> 00:34:09,319
Speaker 2: This has been another episode of the Oudlots podcast. I'm

700
00:34:09,360 --> 00:34:12,440
Speaker 2: Tracy Alloway. You can follow me at Tracy Alloway.

701
00:34:12,160 --> 00:34:14,800
Speaker 4: And I'm Jill Wisenthal. You can follow me at the Stalwart.

702
00:34:15,080 --> 00:34:18,120
Speaker 4: Follow our producers Krman, Rodriguez at Carman Ermann dash O,

703
00:34:18,160 --> 00:34:21,520
Speaker 4: Bennett at Dashbod, and Kelbrooks at Kilbrooks. From our odd

704
00:34:21,600 --> 00:34:23,480
Speaker 4: Laws content, go to Bloomberg dot com.

705
00:34:23,320 --> 00:34:25,839
Speaker 3: Slash od lotch. We have a daily newsletter and all.

706
00:34:25,760 --> 00:34:27,920
Speaker 4: Of our episodes, and you can chat about all of

707
00:34:27,960 --> 00:34:30,759
Speaker 4: these topics, including housing twenty four to seven in our

708
00:34:30,840 --> 00:34:33,680
Speaker 4: discord Discord dot gg slash.

709
00:34:33,320 --> 00:34:35,520
Speaker 2: Odline and if you enjoy Odd Lots, if you like

710
00:34:35,600 --> 00:34:38,279
Speaker 2: it when we talk about the lucky homeowners versus the

711
00:34:38,360 --> 00:34:41,359
Speaker 2: unlucky homeowners, then please leave us a positive review on

712
00:34:41,400 --> 00:34:44,359
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713
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714
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715
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716
00:34:54,239 --> 00:35:00,839
Speaker 2: Thanks for listening

717
00:35:11,880 --> 00:35:11,920
Speaker 1: It