1 00:00:10,680 --> 00:00:14,640 Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast. 2 00:00:14,680 --> 00:00:19,280 Speaker 1: I'm Joe Wisenthal and I'm Tracy Alloway. So, Tracy, it's 3 00:00:19,320 --> 00:00:21,880 Speaker 1: a new year. Well already I've been into the year. 4 00:00:21,920 --> 00:00:24,160 Speaker 1: But it's a new year, and yet many of the 5 00:00:24,600 --> 00:00:27,880 Speaker 1: big stories from last year remained the same, if not, 6 00:00:28,280 --> 00:00:30,480 Speaker 1: if not even more so, if if I feel like 7 00:00:30,520 --> 00:00:31,960 Speaker 1: many of them things you don't know about last year've 8 00:00:31,960 --> 00:00:35,080 Speaker 1: allly gotten more intent. Yeah, I think you're right. I mean, 9 00:00:35,680 --> 00:00:37,960 Speaker 1: we spent a lot of last year talking about supply 10 00:00:38,080 --> 00:00:42,360 Speaker 1: chain issues, the possibility of shortages, the idea of the 11 00:00:42,400 --> 00:00:45,600 Speaker 1: bullwhip effect, where you sort of get a small disruption 12 00:00:45,760 --> 00:00:50,200 Speaker 1: in one supply chain that then ends up cascading through 13 00:00:50,520 --> 00:00:54,280 Speaker 1: the entire chain and also causing very very big swings 14 00:00:54,320 --> 00:00:58,680 Speaker 1: in supply and demand. And that feels like it's definitely 15 00:00:58,800 --> 00:01:02,880 Speaker 1: getting more attention. And of course the secondary effects from 16 00:01:02,920 --> 00:01:06,639 Speaker 1: all of that is this question of inflation and price 17 00:01:06,720 --> 00:01:10,360 Speaker 1: increases and how is that feeding through to the broader economy. 18 00:01:10,440 --> 00:01:12,840 Speaker 1: So well, we you know, we talked about it last year, 19 00:01:13,240 --> 00:01:17,560 Speaker 1: but we're talking about it even more in right, And 20 00:01:17,600 --> 00:01:22,559 Speaker 1: of course, one way that people experience inflation or fuel inflation, 21 00:01:23,560 --> 00:01:27,840 Speaker 1: whether it's captured and official statistics accurately or regardless of 22 00:01:27,840 --> 00:01:31,560 Speaker 1: how it's captured and statistics is everything related to housing 23 00:01:31,720 --> 00:01:35,480 Speaker 1: and shelter, And by all accounts, it appears that everything 24 00:01:35,520 --> 00:01:38,200 Speaker 1: that you just mentioned is getting more extreme with housing 25 00:01:38,319 --> 00:01:40,880 Speaker 1: US A one survey that said like a hundred percent 26 00:01:41,400 --> 00:01:45,000 Speaker 1: of home builders are experiencing supply disruptions, which is up 27 00:01:45,040 --> 00:01:49,800 Speaker 1: from in December. Apparently it takes three weeks at a 28 00:01:49,840 --> 00:01:52,200 Speaker 1: minimum to get a garage door. I think we might 29 00:01:52,240 --> 00:01:54,680 Speaker 1: have an episode coming up on garage doors. By the way, 30 00:01:55,080 --> 00:01:56,960 Speaker 1: how is it just seems to be completely nuts this 31 00:01:57,040 --> 00:02:00,920 Speaker 1: year already and we're just a couple of weeks in. Yeah. So, 32 00:02:01,000 --> 00:02:03,760 Speaker 1: I remember we did do an episode last year with 33 00:02:03,800 --> 00:02:06,520 Speaker 1: Ali Wolf, and when we did that, I sort of 34 00:02:07,200 --> 00:02:10,760 Speaker 1: declared my complete lack of knowledge when it comes to 35 00:02:10,880 --> 00:02:13,760 Speaker 1: US housing because I'm based in Hong Kong and I've 36 00:02:13,840 --> 00:02:17,200 Speaker 1: never bought a house in the States. But now I 37 00:02:17,280 --> 00:02:20,440 Speaker 1: have to declare, I guess like the opposite personal interest. 38 00:02:20,639 --> 00:02:24,240 Speaker 1: I'm trying to close on a house right now in 39 00:02:24,280 --> 00:02:28,160 Speaker 1: the US, and let me tell you, going through the 40 00:02:28,200 --> 00:02:31,359 Speaker 1: market for the past three months has been absolutely insane, 41 00:02:31,960 --> 00:02:35,480 Speaker 1: and we've had like three instances where we've made an 42 00:02:35,480 --> 00:02:39,720 Speaker 1: offer and gotten gazumped by other buyers, and not by 43 00:02:39,840 --> 00:02:44,960 Speaker 1: like a small margin, but by an absolute massive margin 44 00:02:45,040 --> 00:02:47,720 Speaker 1: compared to the listing price. It's just been really difficult 45 00:02:47,760 --> 00:02:50,200 Speaker 1: to get anything at the moment. I just looked up 46 00:02:50,240 --> 00:02:54,119 Speaker 1: the word, which is is British English, which is why 47 00:02:54,200 --> 00:02:58,000 Speaker 1: I'm not that familiar with that. Sorry. According to dictionary 48 00:02:58,040 --> 00:03:01,080 Speaker 1: dot com, raised the contract the price of a property 49 00:03:01,120 --> 00:03:03,960 Speaker 1: after having formally accepted a lower offer. So you have 50 00:03:04,080 --> 00:03:07,720 Speaker 1: indeed been gazumped. And in fact, it's perfect because we 51 00:03:07,720 --> 00:03:10,600 Speaker 1: are going to speak with someone who has been tracking 52 00:03:10,919 --> 00:03:15,000 Speaker 1: the gazumping phenomenon that is widespread of the US housing market, 53 00:03:15,080 --> 00:03:18,880 Speaker 1: or more specifically, bidding wars have it breaking out across 54 00:03:18,919 --> 00:03:21,440 Speaker 1: the market. So, Tracy, I think this episode is going 55 00:03:21,520 --> 00:03:23,520 Speaker 1: to be very good for you. Maybe you'll give it, 56 00:03:23,560 --> 00:03:25,560 Speaker 1: get like a little like a home buying strategy out 57 00:03:25,560 --> 00:03:28,640 Speaker 1: of it. Yeah, I need answers why none of these 58 00:03:28,680 --> 00:03:31,760 Speaker 1: offers are attractive to people, even though it seems like 59 00:03:31,800 --> 00:03:34,720 Speaker 1: a lot of money to me obviously, Um, yes, I 60 00:03:34,760 --> 00:03:37,400 Speaker 1: want to know what? All right, I can't wait, let's 61 00:03:37,400 --> 00:03:40,440 Speaker 1: do it. We are going to be speaking with Mike Simonson. 62 00:03:40,880 --> 00:03:43,560 Speaker 1: He has the CEO of Altos Research, which puts out 63 00:03:43,600 --> 00:03:46,640 Speaker 1: and gathers tons of data on the housing market. He's 64 00:03:46,640 --> 00:03:49,480 Speaker 1: been putting out lots of videos and exactly this phenomenon, 65 00:03:49,800 --> 00:03:53,280 Speaker 1: the boom and bidding wars, rising prices, declining inventory of 66 00:03:53,320 --> 00:03:56,200 Speaker 1: homes available in the United States. What's going on? Mike, 67 00:03:56,320 --> 00:03:59,440 Speaker 1: thank you so much for coming on odd lots, Joe 68 00:03:59,520 --> 00:04:02,720 Speaker 1: and Tracy, It's nice to be here. So Tracy's experience 69 00:04:02,760 --> 00:04:05,680 Speaker 1: of getting Zoe left and left and right on, like 70 00:04:05,720 --> 00:04:10,520 Speaker 1: everyone's experiencing that these days. Huh, everyone across all price points, 71 00:04:10,520 --> 00:04:14,040 Speaker 1: basically the whole all geographies, across the country's it's a 72 00:04:14,160 --> 00:04:17,320 Speaker 1: it's been a pretty consistent phenomenon. So remind us what 73 00:04:17,440 --> 00:04:20,640 Speaker 1: exactly is going on, Like, what is driving this? Because 74 00:04:20,680 --> 00:04:24,640 Speaker 1: obviously you have some of the pandemic trends where people 75 00:04:24,720 --> 00:04:26,640 Speaker 1: want to move out of cities and they want more 76 00:04:26,680 --> 00:04:29,640 Speaker 1: space and things like that. But you would have thought 77 00:04:29,880 --> 00:04:33,839 Speaker 1: that almost two years on in the pandemic that some 78 00:04:34,000 --> 00:04:37,279 Speaker 1: of that trend would be fading away, and yet it 79 00:04:37,360 --> 00:04:41,839 Speaker 1: seems like demand for housing is still incredibly strong. Yes, 80 00:04:42,040 --> 00:04:46,320 Speaker 1: So the biggest theme of the last few years he 81 00:04:46,400 --> 00:04:50,480 Speaker 1: has been record low inventory, tight inventory. A few homes 82 00:04:50,520 --> 00:04:54,400 Speaker 1: for sale. That's partly a pandemic phenomenon. But but the 83 00:04:55,080 --> 00:04:59,280 Speaker 1: interesting thing about that is that we have been losing 84 00:04:59,480 --> 00:05:04,520 Speaker 1: available inventory of resale homes for a decade. So as 85 00:05:04,520 --> 00:05:08,680 Speaker 1: we came out of the housing bubble crisis, rates started 86 00:05:08,680 --> 00:05:12,760 Speaker 1: falling and we have had each year, basically each year 87 00:05:12,800 --> 00:05:15,919 Speaker 1: for the last decade, we have gone from a million 88 00:05:15,920 --> 00:05:19,840 Speaker 1: two homes available a million homes in January too. Right 89 00:05:19,880 --> 00:05:23,360 Speaker 1: now we have two hundred eight four thousand single family 90 00:05:23,400 --> 00:05:26,520 Speaker 1: homes on the market. And it's been a it's been 91 00:05:26,560 --> 00:05:30,080 Speaker 1: a decade long phenomenon for a few reasons, and then 92 00:05:30,120 --> 00:05:32,320 Speaker 1: we threw the pandemic on top of it. The top 93 00:05:32,360 --> 00:05:35,760 Speaker 1: team was was record loss supply. We have high demand 94 00:05:35,839 --> 00:05:39,240 Speaker 1: driven to so we have booming economy, we have cheap money, 95 00:05:39,320 --> 00:05:42,599 Speaker 1: we have a lot of these other factors driving it. 96 00:05:42,640 --> 00:05:46,440 Speaker 1: And then we have demographics where we have the millennials 97 00:05:46,480 --> 00:05:50,480 Speaker 1: are now in their mid to late thirties their peak 98 00:05:50,520 --> 00:05:53,560 Speaker 1: home buying years and so and they're the biggest chunk 99 00:05:53,560 --> 00:05:56,359 Speaker 1: of people ever. So now we have tight supply on 100 00:05:56,480 --> 00:06:00,960 Speaker 1: top of surging demographic demand, and that is a recipe 101 00:06:01,160 --> 00:06:05,040 Speaker 1: for you know, your bidding war problem. So this is 102 00:06:05,160 --> 00:06:07,359 Speaker 1: very interesting and if we could back up to the 103 00:06:07,520 --> 00:06:11,480 Speaker 1: pre pandemic level, what is what were the trends that 104 00:06:11,760 --> 00:06:16,159 Speaker 1: drove the decline, the persistent decline in inventory, Like where 105 00:06:16,160 --> 00:06:18,200 Speaker 1: did it all? Where did they all go? Basically, I 106 00:06:18,240 --> 00:06:21,400 Speaker 1: guess where it all go. As interest rates have been 107 00:06:22,240 --> 00:06:26,440 Speaker 1: essentially four percent or lower for a decade, money has 108 00:06:26,480 --> 00:06:29,440 Speaker 1: been super cheap. It's been a really good time to 109 00:06:30,200 --> 00:06:35,040 Speaker 1: own real estate. It's been a good time to own 110 00:06:35,240 --> 00:06:39,760 Speaker 1: investment property rentals. Uh So, two big phenomenons happening. One 111 00:06:39,800 --> 00:06:44,200 Speaker 1: of them is it's like a doubling up. The homeowner 112 00:06:44,200 --> 00:06:46,040 Speaker 1: goes to buy the next time, move up and move down. 113 00:06:46,440 --> 00:06:49,279 Speaker 1: And because mortgages are so cheap, it's a really good 114 00:06:49,279 --> 00:06:54,440 Speaker 1: time to keep the first one. And so each year 115 00:06:54,680 --> 00:06:56,120 Speaker 1: I go to buy the next one, and I keep 116 00:06:56,160 --> 00:06:59,680 Speaker 1: my first one. And so that's one big phenomenon. And 117 00:06:59,760 --> 00:07:02,640 Speaker 1: all of a sudden, I'm a real estate investor. And 118 00:07:02,960 --> 00:07:05,320 Speaker 1: at the same time money has been institutional money has 119 00:07:05,360 --> 00:07:08,719 Speaker 1: been cheap, and so we have there's a lot of 120 00:07:08,760 --> 00:07:13,800 Speaker 1: news about the big private equity funds buying up homes, 121 00:07:13,840 --> 00:07:17,440 Speaker 1: but it's it's actually the individuals who are driving most 122 00:07:17,440 --> 00:07:21,960 Speaker 1: of it. So in the last decade, We've taken eight 123 00:07:22,000 --> 00:07:27,000 Speaker 1: million homes out of the resale cycle and moved them 124 00:07:27,040 --> 00:07:30,480 Speaker 1: into the investment rental part of the pool. And that's 125 00:07:30,760 --> 00:07:33,760 Speaker 1: you know, eight nine ten percent of all of our 126 00:07:33,800 --> 00:07:36,520 Speaker 1: homes ten percent, but you know, nine percent of all 127 00:07:36,560 --> 00:07:39,440 Speaker 1: of our of all the single family homes. So this 128 00:07:39,520 --> 00:07:42,040 Speaker 1: is something that I wanted to ask, But um, how 129 00:07:42,040 --> 00:07:47,360 Speaker 1: do you actually differentiate between different types of demand? So 130 00:07:47,440 --> 00:07:49,720 Speaker 1: obviously you have people who buy a house because they 131 00:07:49,720 --> 00:07:53,160 Speaker 1: want to live in it. Then you have individuals who 132 00:07:53,320 --> 00:07:56,200 Speaker 1: you know, maybe buy a second property or do something 133 00:07:56,200 --> 00:07:59,400 Speaker 1: with their first property and turn it into an Airbnb 134 00:07:59,520 --> 00:08:01,680 Speaker 1: or something like that and rent it out. And then 135 00:08:01,720 --> 00:08:05,880 Speaker 1: you have the big institutional buyers like private equity. How 136 00:08:05,920 --> 00:08:09,480 Speaker 1: do you how can you actually track who's buying what 137 00:08:09,640 --> 00:08:13,880 Speaker 1: and why? The way they tracked that when you read 138 00:08:13,920 --> 00:08:20,080 Speaker 1: the numbers of like of purchases are investment properties. The 139 00:08:20,120 --> 00:08:23,680 Speaker 1: way that that that is estimated is by looking at 140 00:08:23,720 --> 00:08:29,040 Speaker 1: the title. When the title on the property, the address 141 00:08:29,120 --> 00:08:33,880 Speaker 1: that that title gets sent to is a different address them. Uh, 142 00:08:34,200 --> 00:08:39,880 Speaker 1: that's that's that there's an investor owning that property. So 143 00:08:40,640 --> 00:08:44,280 Speaker 1: but it can be institutional or individual. What's the split 144 00:08:44,360 --> 00:08:46,920 Speaker 1: like right now? Like do you know the numbers offhand, 145 00:08:47,120 --> 00:08:52,800 Speaker 1: it's something like in the low twenties that are investor properties. 146 00:08:53,120 --> 00:08:54,760 Speaker 1: So I want to talk a little bit more about 147 00:08:54,760 --> 00:08:59,400 Speaker 1: this phenomenon of the individual homeowner, not the institutions and 148 00:08:59,720 --> 00:09:02,679 Speaker 1: core that's obviously plays a role, but the individual homeowner 149 00:09:03,080 --> 00:09:07,280 Speaker 1: essentially all getting into the game of de facto real 150 00:09:07,400 --> 00:09:11,920 Speaker 1: estate speculation. Maybe they become a small time landlord by 151 00:09:11,960 --> 00:09:15,160 Speaker 1: having their old home that they then rent out or 152 00:09:15,200 --> 00:09:18,160 Speaker 1: something like that. But talk about the emergence of this 153 00:09:18,200 --> 00:09:22,400 Speaker 1: phenomenon of Okay, maybe I moved down to Austin because 154 00:09:22,400 --> 00:09:24,440 Speaker 1: it's warm, et cetera, up, but I keep my house 155 00:09:24,480 --> 00:09:27,600 Speaker 1: here and rent it out or vice versa, and how 156 00:09:27,760 --> 00:09:30,960 Speaker 1: this trend emerged and how big that's gotten and how 157 00:09:31,080 --> 00:09:35,120 Speaker 1: unusual that is compared to I don't know, the old 158 00:09:35,160 --> 00:09:38,960 Speaker 1: days whenever that was. So it's always been, you know, 159 00:09:39,000 --> 00:09:41,440 Speaker 1: in many markets, has been a pretty good deal to 160 00:09:41,760 --> 00:09:44,080 Speaker 1: own some rental real estate. You know, some of the 161 00:09:44,520 --> 00:09:47,240 Speaker 1: you look at the blue collar folks in San Jose. 162 00:09:47,360 --> 00:09:50,360 Speaker 1: I live in San Francisco, in Silicon Valley, Santose. If 163 00:09:50,400 --> 00:09:53,120 Speaker 1: you're an electrician in nineteen eighty and you happen to 164 00:09:53,280 --> 00:09:58,240 Speaker 1: buy an investment property, you made millions of dollars over 165 00:09:58,920 --> 00:10:01,400 Speaker 1: the time, when you know, vastly more than when you're 166 00:10:01,600 --> 00:10:05,160 Speaker 1: you're making from your your salary, Like it was a 167 00:10:05,320 --> 00:10:09,120 Speaker 1: really good opportunity. And even that was even when interest 168 00:10:09,200 --> 00:10:11,880 Speaker 1: rates were super hot. So over the time you you 169 00:10:11,920 --> 00:10:16,680 Speaker 1: finance a lower and so in the last decade we've 170 00:10:16,679 --> 00:10:20,720 Speaker 1: had thirty year fixed rates four percent or lower. So 171 00:10:20,760 --> 00:10:24,880 Speaker 1: these are not like the two thousand five bubble investors 172 00:10:24,960 --> 00:10:29,160 Speaker 1: where I'm I'm buying a house with a mortgage rates 173 00:10:29,200 --> 00:10:31,360 Speaker 1: that's going to explode in two months, and you know, 174 00:10:31,480 --> 00:10:33,480 Speaker 1: in after month three, I'm not going to make my 175 00:10:33,520 --> 00:10:36,600 Speaker 1: payment anymore. These are people who have thirty year rates 176 00:10:37,600 --> 00:10:42,280 Speaker 1: locked at two point seven percent that in a six 177 00:10:42,360 --> 00:10:46,040 Speaker 1: percent inflation environment, like it's a really good deal to 178 00:10:46,160 --> 00:10:50,040 Speaker 1: be owning these houses. As a result, people have therefore 179 00:10:50,080 --> 00:10:52,920 Speaker 1: they do it right right. This is something that I've 180 00:10:52,960 --> 00:10:56,280 Speaker 1: been wondering about because it just feels like there's so 181 00:10:56,400 --> 00:11:00,600 Speaker 1: much money available for housing at the moment that even 182 00:11:00,640 --> 00:11:03,400 Speaker 1: if you put in you know, I've heard stories about 183 00:11:03,640 --> 00:11:07,200 Speaker 1: people putting in all cash offers, and even with the 184 00:11:07,360 --> 00:11:12,160 Speaker 1: cash in hand, they will get outbid by someone else 185 00:11:12,320 --> 00:11:16,560 Speaker 1: who has taken on like a very very large mortgage, 186 00:11:16,840 --> 00:11:19,120 Speaker 1: but because interest rates are so low, it doesn't really 187 00:11:19,160 --> 00:11:22,440 Speaker 1: matter that much to them. So yes, exactly, there is 188 00:11:22,640 --> 00:11:24,720 Speaker 1: a lot of money available to housing, but you know, 189 00:11:24,760 --> 00:11:27,000 Speaker 1: it's really it's a lot of money available in the economy. 190 00:11:27,840 --> 00:11:30,520 Speaker 1: The the and one way you know that it's not 191 00:11:31,000 --> 00:11:36,120 Speaker 1: over over supplied to housing relative to the rest of 192 00:11:36,120 --> 00:11:39,520 Speaker 1: the economy is that the quality of the mortgages and 193 00:11:39,960 --> 00:11:42,200 Speaker 1: the quality of the borrowers, the credit scores of the 194 00:11:42,200 --> 00:11:47,439 Speaker 1: borrowers is increasing. It's actually at record high levels. So 195 00:11:47,679 --> 00:11:52,760 Speaker 1: relative to to the bubble time, those credit scores were 196 00:11:52,800 --> 00:11:56,520 Speaker 1: declining and the loan to value was increasing, so the 197 00:11:56,559 --> 00:11:59,440 Speaker 1: loans were obviously a lot worse at that point, and 198 00:11:59,480 --> 00:12:01,960 Speaker 1: the loans are now are really good. It's not just 199 00:12:02,040 --> 00:12:04,320 Speaker 1: over lending to borrow or is the way it was 200 00:12:04,720 --> 00:12:25,319 Speaker 1: fifteen years ago. So this is really fascinating to me 201 00:12:25,400 --> 00:12:29,319 Speaker 1: that like credit scores and the quality of the mortgage 202 00:12:29,360 --> 00:12:32,400 Speaker 1: like we're never We're definitely like not talking ninja loans 203 00:12:32,480 --> 00:12:34,800 Speaker 1: or any of the stuff. In the mid two thousands, 204 00:12:35,120 --> 00:12:39,839 Speaker 1: credit scores, high quality paperwork, lending standards all very high. 205 00:12:40,320 --> 00:12:42,240 Speaker 1: One thing I'm curious about, and I don't know if 206 00:12:42,240 --> 00:12:45,240 Speaker 1: this requires a more macro assessment. But obviously you have 207 00:12:45,400 --> 00:12:47,440 Speaker 1: to like have a certain amount of wealth to be 208 00:12:47,480 --> 00:12:50,280 Speaker 1: able to carry multiple homes. Like it's still not the 209 00:12:50,400 --> 00:12:52,600 Speaker 1: norm level you know, to have to be able to 210 00:12:52,640 --> 00:12:55,520 Speaker 1: keep your old house is a rental property. The emergence 211 00:12:55,720 --> 00:12:58,719 Speaker 1: of people with very strong balance sheets, how much you 212 00:12:58,679 --> 00:13:01,960 Speaker 1: have a lot of this is some level. I don't 213 00:13:02,040 --> 00:13:05,360 Speaker 1: maybe inequality isn't is part of the word, but the 214 00:13:05,400 --> 00:13:09,000 Speaker 1: existence of a certain class of people who just have 215 00:13:09,240 --> 00:13:13,280 Speaker 1: a lot of cash and capital really having this sort 216 00:13:13,320 --> 00:13:16,800 Speaker 1: of like a very big structural advantage in the housing 217 00:13:16,840 --> 00:13:20,160 Speaker 1: market right now. You might say that that certain class 218 00:13:20,160 --> 00:13:24,000 Speaker 1: of people are the boomers, so and there's more of 219 00:13:24,000 --> 00:13:26,560 Speaker 1: them that's staying put in their homes longer. They're owning 220 00:13:26,559 --> 00:13:30,360 Speaker 1: their homes longer. All the laws are really designed to 221 00:13:30,440 --> 00:13:34,480 Speaker 1: allow people to stay, keep people in their homes, you know, 222 00:13:34,520 --> 00:13:37,079 Speaker 1: the tax laws and the mortgage interest laws, all of 223 00:13:37,080 --> 00:13:40,960 Speaker 1: those things are are designed for the existing homeowner. In California, 224 00:13:41,000 --> 00:13:44,080 Speaker 1: we have Prop thirteen, which which basically means your your 225 00:13:44,120 --> 00:13:47,560 Speaker 1: property taxes never go up. So if I bought a 226 00:13:47,679 --> 00:13:51,160 Speaker 1: house for a hundred thousand dollars or two or fifty 227 00:13:51,440 --> 00:13:56,280 Speaker 1: dollars in and the housing recession in California, and now 228 00:13:56,360 --> 00:14:00,520 Speaker 1: it's worth two and a half million. I'm still basically 229 00:14:00,559 --> 00:14:04,640 Speaker 1: paying taxes on two a little more than net, but 230 00:14:04,640 --> 00:14:08,040 Speaker 1: but paying essentially no taxes in California. And so I 231 00:14:08,040 --> 00:14:12,520 Speaker 1: am never selling at home. I've got a tiny mortgage 232 00:14:12,600 --> 00:14:16,280 Speaker 1: at no taxes. And so those things are all designed 233 00:14:16,280 --> 00:14:18,880 Speaker 1: to keep people in their homes. And and it is 234 00:14:18,920 --> 00:14:21,880 Speaker 1: to the detriment of the first time HomeBuyer at the 235 00:14:21,880 --> 00:14:25,600 Speaker 1: people who can't get in the mortgage payments. As mortgage 236 00:14:25,640 --> 00:14:29,080 Speaker 1: rates are low, the payment is super low, So that helps. 237 00:14:29,280 --> 00:14:33,720 Speaker 1: And it actually, as home prices increase, as long as 238 00:14:34,000 --> 00:14:36,440 Speaker 1: the rates stay low or ratchet a little bit lower 239 00:14:36,760 --> 00:14:40,600 Speaker 1: than than there's the mortgage rate has more impact on 240 00:14:40,640 --> 00:14:44,040 Speaker 1: my monthly payment than does the total purchase price. And actually, 241 00:14:44,040 --> 00:14:47,760 Speaker 1: Tracy this this is a partly why a function partly 242 00:14:47,760 --> 00:14:51,800 Speaker 1: a function of why it's easier to overbid in a 243 00:14:52,120 --> 00:14:56,800 Speaker 1: in a low rate environment. Because if if my the 244 00:14:56,840 --> 00:15:01,200 Speaker 1: home prices are accelerating by ten percent this year and 245 00:15:01,280 --> 00:15:04,120 Speaker 1: I overbid a little bit, what I'm doing is I'm 246 00:15:04,200 --> 00:15:08,560 Speaker 1: eating away six months of equity and putting that of 247 00:15:08,600 --> 00:15:11,400 Speaker 1: equity growth, you know, at home price growth that I'm 248 00:15:11,440 --> 00:15:15,720 Speaker 1: putting into a payment that's super barely noticeable difference, and 249 00:15:15,800 --> 00:15:19,320 Speaker 1: so that's why people that's why, that why the overbidding 250 00:15:19,320 --> 00:15:22,280 Speaker 1: tends to accelerate in this kind of environment. So I 251 00:15:22,320 --> 00:15:25,840 Speaker 1: guess that begs the question what actually happens to house 252 00:15:25,880 --> 00:15:29,360 Speaker 1: prices and demand when interest rates start to go up, 253 00:15:29,400 --> 00:15:32,600 Speaker 1: Because on the one hand, we can argue that low 254 00:15:32,640 --> 00:15:35,600 Speaker 1: interest rates are causing some of the higher prices and 255 00:15:35,680 --> 00:15:39,920 Speaker 1: people overbidding and some of the tight inventory. But on 256 00:15:39,960 --> 00:15:44,240 Speaker 1: the other hand, I guess it's not like the pre 257 00:15:44,480 --> 00:15:48,640 Speaker 1: two thousand eight situation where everyone had adjustable rate mortgages 258 00:15:48,880 --> 00:15:51,520 Speaker 1: and when interest rates started to go up, you know, 259 00:15:51,600 --> 00:15:55,920 Speaker 1: suddenly they can't afford their home loans anymore. Yeah, it 260 00:15:56,120 --> 00:15:59,040 Speaker 1: is very different from that time. And you know, we 261 00:15:59,160 --> 00:16:05,280 Speaker 1: looked during the pandemic, especially that March April we started 262 00:16:05,280 --> 00:16:08,560 Speaker 1: publicized why I started publishing this weekly videos. We've been 263 00:16:08,560 --> 00:16:10,640 Speaker 1: doing our data for fifteen years, but but we started 264 00:16:10,640 --> 00:16:13,240 Speaker 1: publishing these weekly videos because we wanted to say, help 265 00:16:13,320 --> 00:16:16,720 Speaker 1: observe what's happening to all these people as we locked 266 00:16:16,720 --> 00:16:19,120 Speaker 1: down on the pandemic and people lost their jobs and 267 00:16:19,160 --> 00:16:22,080 Speaker 1: we started the mortgage Forbearance program. What we're trying to 268 00:16:22,080 --> 00:16:25,600 Speaker 1: find out is is there a big wave of homes 269 00:16:25,800 --> 00:16:27,680 Speaker 1: that are going to have to be sold or go 270 00:16:27,760 --> 00:16:30,160 Speaker 1: into some kind of foreclosure. And it turned out that 271 00:16:30,200 --> 00:16:34,760 Speaker 1: wave never came, and it never came because it's a 272 00:16:34,840 --> 00:16:38,240 Speaker 1: really good time to own. The laws allowed me to 273 00:16:38,520 --> 00:16:41,320 Speaker 1: stay in my home if I didn't pay my mortgage 274 00:16:41,360 --> 00:16:45,000 Speaker 1: for a year and then I could start again. All 275 00:16:45,040 --> 00:16:49,600 Speaker 1: of my home actually gained the value. I ended that 276 00:16:49,680 --> 00:16:53,880 Speaker 1: year with more equity than when I started, so I 277 00:16:54,000 --> 00:16:57,680 Speaker 1: like I was in a better place after that year. 278 00:16:58,120 --> 00:17:01,440 Speaker 1: So there was no there's there's no wave of you 279 00:17:01,600 --> 00:17:04,439 Speaker 1: foreclosures or anything coming to market. So so that was 280 00:17:04,800 --> 00:17:08,280 Speaker 1: we were we were watching, you know, is it gonna 281 00:17:08,400 --> 00:17:10,440 Speaker 1: Is it gonna happen? But ultimately it never happened because 282 00:17:10,480 --> 00:17:13,439 Speaker 1: it was a really good time to keep owning and 283 00:17:13,800 --> 00:17:16,160 Speaker 1: the money was super cheap, and the laws were there 284 00:17:16,200 --> 00:17:19,240 Speaker 1: so that I could renegotiate and put at tech my 285 00:17:19,240 --> 00:17:20,840 Speaker 1: my missed payments side at the end of my loan 286 00:17:21,119 --> 00:17:24,920 Speaker 1: and essentially stayed in my home, So that one off 287 00:17:24,960 --> 00:17:27,920 Speaker 1: the table. No new inventory. But what we can see 288 00:17:28,080 --> 00:17:31,480 Speaker 1: is that the low rates effect demand, but they also 289 00:17:31,520 --> 00:17:34,280 Speaker 1: affect supply, and they effect supply in that phenomen phenomenon 290 00:17:34,359 --> 00:17:36,560 Speaker 1: I was talking about in that when I go to 291 00:17:37,160 --> 00:17:39,680 Speaker 1: buy my next one, it's really cheap to buy to 292 00:17:39,800 --> 00:17:42,240 Speaker 1: hold my first one, to hold two mortgages at at 293 00:17:42,359 --> 00:17:47,440 Speaker 1: three rather than rather than one at six. So in 294 00:17:47,640 --> 00:17:52,600 Speaker 1: any rising rate environment, will see fewer of those double 295 00:17:52,720 --> 00:17:57,159 Speaker 1: up transactions, some inventory will come onto the market. The 296 00:17:57,280 --> 00:18:01,280 Speaker 1: last time we saw rising rates was twenty eighteen. The 297 00:18:01,840 --> 00:18:04,280 Speaker 1: three quarters of eighteen started in the first quarter, peaked 298 00:18:04,320 --> 00:18:07,680 Speaker 1: at about the first week in December eighteen, so rates 299 00:18:07,760 --> 00:18:11,040 Speaker 1: rose pretty much all year long, and we could measure 300 00:18:11,840 --> 00:18:15,000 Speaker 1: the cooling of demand and increasing a supply in a 301 00:18:15,119 --> 00:18:17,720 Speaker 1: few of our metrics. So we track inventory. We tracked 302 00:18:17,720 --> 00:18:19,639 Speaker 1: every home for sale in the country every week, and 303 00:18:20,240 --> 00:18:23,679 Speaker 1: each year we we have a year over year fewer 304 00:18:23,800 --> 00:18:26,440 Speaker 1: homes available on the market as more of them turned 305 00:18:26,480 --> 00:18:33,720 Speaker 1: into investment properties. We have in eighteen. January twenty nineteen, 306 00:18:33,760 --> 00:18:37,520 Speaker 1: for example, was one year in the last ten years 307 00:18:38,160 --> 00:18:42,600 Speaker 1: that the January started. January twenty nineteen started with about 308 00:18:43,040 --> 00:18:44,080 Speaker 1: I don't know off the top of my head, but 309 00:18:44,080 --> 00:18:46,680 Speaker 1: it's like about eight percent ten percent more than the 310 00:18:46,800 --> 00:18:51,840 Speaker 1: year before, So increased inventory by a fractional amount ten percent, 311 00:18:52,320 --> 00:18:54,840 Speaker 1: not hundreds of percent. It's not not hundreds of thousands 312 00:18:54,880 --> 00:18:57,000 Speaker 1: of homes, but tens of thousands of homes, and so 313 00:18:57,400 --> 00:18:59,280 Speaker 1: and that was the one year it did. So rates 314 00:18:59,359 --> 00:19:02,240 Speaker 1: rose all atween and we could see it in that 315 00:19:02,400 --> 00:19:04,320 Speaker 1: inventory rate. We could also see it, and we teck 316 00:19:04,359 --> 00:19:07,159 Speaker 1: a bunch of metrics like the percentage of homes on 317 00:19:07,240 --> 00:19:10,119 Speaker 1: the market that have taken price reductions, which is a 318 00:19:10,320 --> 00:19:14,680 Speaker 1: really interesting indicator of of demand. So the about a 319 00:19:14,760 --> 00:19:17,880 Speaker 1: third of homes when they get listed rule of thumb. 320 00:19:17,960 --> 00:19:20,040 Speaker 1: Third of homes when they get listed are going to 321 00:19:20,119 --> 00:19:23,159 Speaker 1: take a price cut before they sell. Sometimes that's strategic, 322 00:19:23,400 --> 00:19:26,119 Speaker 1: sometimes it's accidental, but about a third. And when the 323 00:19:26,280 --> 00:19:30,640 Speaker 1: market is hot, then a third of them are trying 324 00:19:30,720 --> 00:19:34,520 Speaker 1: to overprice, but onlycent need to. Some of them get 325 00:19:34,600 --> 00:19:37,920 Speaker 1: the bid and they and they only take a price cut, 326 00:19:38,520 --> 00:19:42,119 Speaker 1: or it gets hotter, maybe it's and last May, in 327 00:19:42,200 --> 00:19:45,320 Speaker 1: the peak of the frenzy last year nationally we were 328 00:19:45,359 --> 00:19:49,160 Speaker 1: at like fifteen percent thirty percent think they're over priced, 329 00:19:49,160 --> 00:19:51,360 Speaker 1: and only fifteen percent have to take a price cut 330 00:19:52,119 --> 00:19:54,680 Speaker 1: because they were getting their offers. That and so you 331 00:19:54,760 --> 00:20:00,680 Speaker 1: can trek that price decreases. And so in nineteen we 332 00:20:00,760 --> 00:20:04,240 Speaker 1: could watch the price decreases go from the low thirties 333 00:20:04,640 --> 00:20:09,160 Speaker 1: hot market to thirty six percent during the bubble burst, 334 00:20:09,240 --> 00:20:13,320 Speaker 1: we could watch that go forty of the stock had 335 00:20:13,359 --> 00:20:15,320 Speaker 1: to take a price cut. So that's a function that 336 00:20:15,400 --> 00:20:16,880 Speaker 1: you can see, so you can measure it in things 337 00:20:16,960 --> 00:20:19,359 Speaker 1: like price production. So that means that there are fewer 338 00:20:19,440 --> 00:20:22,720 Speaker 1: buyers out there. And so you know Tracy and your 339 00:20:22,760 --> 00:20:25,400 Speaker 1: buying situation, you know, it's all of a sudden, there 340 00:20:25,440 --> 00:20:28,760 Speaker 1: are some of these folks who are listing and saying, well, 341 00:20:28,840 --> 00:20:31,359 Speaker 1: let's see if we get a better All of a sudden, 342 00:20:31,400 --> 00:20:33,679 Speaker 1: they say, we didn't get a bitter and now their 343 00:20:33,760 --> 00:20:36,119 Speaker 1: house sits on the market for a little while. Now 344 00:20:36,280 --> 00:20:38,320 Speaker 1: you have the opportunity you have who don't have the 345 00:20:38,359 --> 00:20:44,080 Speaker 1: bidding wars because there's as rates rise, then there's more 346 00:20:44,400 --> 00:20:47,920 Speaker 1: purchase opportunity, more inventory opportunities for you. There's there's a 347 00:20:48,080 --> 00:20:52,400 Speaker 1: less competition of the people who are using the mortgage 348 00:20:52,440 --> 00:20:55,560 Speaker 1: to overbid are less likely to do that because now 349 00:20:55,640 --> 00:20:58,560 Speaker 1: the payment is more impacted. So all of those those 350 00:20:58,640 --> 00:21:01,520 Speaker 1: factors coming to play. And the way I look at it, 351 00:21:01,920 --> 00:21:05,960 Speaker 1: you know, if you look at we had you know, 352 00:21:06,119 --> 00:21:09,720 Speaker 1: increase of of inventory in that year, So you could 353 00:21:09,720 --> 00:21:14,160 Speaker 1: imagine that we would need several years of rising rates 354 00:21:14,280 --> 00:21:19,280 Speaker 1: from three thirty year fixed to four to five. You know, 355 00:21:19,400 --> 00:21:21,560 Speaker 1: we haven't been over five in a long time, so 356 00:21:22,119 --> 00:21:24,520 Speaker 1: how that impacts things. But you can imagine its several 357 00:21:24,680 --> 00:21:28,040 Speaker 1: years before we have this enough of a cycle to 358 00:21:28,880 --> 00:21:32,720 Speaker 1: put many of these rental properties back into the purchase 359 00:21:32,960 --> 00:21:36,440 Speaker 1: market and I sell my next one, I sell mine, 360 00:21:36,480 --> 00:21:39,560 Speaker 1: and I don't keep it because two mortgages at six 361 00:21:39,640 --> 00:21:42,760 Speaker 1: percent is very different than two mortgages at three. So 362 00:21:43,040 --> 00:21:46,560 Speaker 1: so several years to build back to the old normal. 363 00:21:47,359 --> 00:21:51,440 Speaker 1: So it's really about that that cost of carry literally 364 00:21:52,160 --> 00:21:55,520 Speaker 1: as that goes up in theory or in practice, as 365 00:21:55,560 --> 00:21:59,520 Speaker 1: we saw in that's what at least creates the new 366 00:21:59,560 --> 00:22:03,119 Speaker 1: supply from at least existing home sales. What is the 367 00:22:03,280 --> 00:22:07,080 Speaker 1: state of price increases and bidding wars that we've already 368 00:22:07,119 --> 00:22:09,840 Speaker 1: seen at the start of the year, and how does 369 00:22:09,920 --> 00:22:13,680 Speaker 1: that compare to us a slightly more normal year like 370 00:22:14,760 --> 00:22:20,119 Speaker 1: like pre pre pre crisis. The biggest, the biggest phenomenon 371 00:22:20,280 --> 00:22:25,320 Speaker 1: of things like bidding wars during the pandemic period is 372 00:22:25,720 --> 00:22:30,359 Speaker 1: a sort of lost the seasonality to the housing market 373 00:22:31,080 --> 00:22:35,919 Speaker 1: ian normal season the inventory comes on, starts to come 374 00:22:35,960 --> 00:22:39,680 Speaker 1: on for the spring in February, really accelerates March, April, 375 00:22:40,800 --> 00:22:46,440 Speaker 1: peak May June, and then June's inventory starts declining for 376 00:22:46,520 --> 00:22:49,040 Speaker 1: the fall. If your house is on the market in 377 00:22:49,200 --> 00:22:52,239 Speaker 1: August and and you haven't gotten an offer yet, now 378 00:22:52,320 --> 00:22:55,159 Speaker 1: you start taking a price cut because schools starting and 379 00:22:56,040 --> 00:22:58,440 Speaker 1: and so we have all of these seasonal factors. And 380 00:22:58,520 --> 00:23:02,280 Speaker 1: then the holidays and you have fewer listings, you have 381 00:23:02,800 --> 00:23:05,440 Speaker 1: fewer people like you know, you have some people like 382 00:23:05,520 --> 00:23:09,560 Speaker 1: Tracy who are needing to buy, but but cools way 383 00:23:09,680 --> 00:23:13,359 Speaker 1: way down in the holiday seasons. Over the pandemics of 384 00:23:13,720 --> 00:23:18,920 Speaker 1: the the holidays of January one, we all of a 385 00:23:18,920 --> 00:23:21,800 Speaker 1: sudden we have all the zoom town phenomena. We have 386 00:23:21,880 --> 00:23:24,600 Speaker 1: all the remote work, we have kids out of school, 387 00:23:24,680 --> 00:23:28,520 Speaker 1: so we have all kinds of options to move uh 388 00:23:28,720 --> 00:23:32,879 Speaker 1: in in the winter, and so we we lost a 389 00:23:32,920 --> 00:23:34,920 Speaker 1: lot of seasonality. If you look at, in fact, a 390 00:23:35,000 --> 00:23:38,320 Speaker 1: lot of the seasonally adjusted home price numbers that you 391 00:23:38,440 --> 00:23:42,520 Speaker 1: might see, you'll see that they swing really big in 392 00:23:42,720 --> 00:23:46,240 Speaker 1: the November December January time last year and and also 393 00:23:46,320 --> 00:23:49,760 Speaker 1: this year because things demand has been unseasonably high, like 394 00:23:49,840 --> 00:23:52,360 Speaker 1: it didn't cool down nearly as much. We can see 395 00:23:52,400 --> 00:23:54,720 Speaker 1: that in in a number we track, which is the 396 00:23:54,760 --> 00:23:56,680 Speaker 1: percentage of homes on the market that I've had price 397 00:23:56,840 --> 00:24:01,200 Speaker 1: increases lately. And so price ins is a function of 398 00:24:01,320 --> 00:24:05,200 Speaker 1: things like investor fix and flips. Like I buy a home, 399 00:24:05,280 --> 00:24:07,439 Speaker 1: I put a little bit of money in. Ninety days later, 400 00:24:07,480 --> 00:24:09,520 Speaker 1: it's back on the market at a higher price. And 401 00:24:10,119 --> 00:24:12,760 Speaker 1: that phenomenon happens more in a lot of the Southern 402 00:24:12,880 --> 00:24:16,879 Speaker 1: investment investment market, the sun Belt investment markets, but nationally 403 00:24:17,320 --> 00:24:21,000 Speaker 1: you might see in quote normal times, maybe two and 404 00:24:21,000 --> 00:24:23,560 Speaker 1: a half percent of the market is in some state 405 00:24:23,720 --> 00:24:27,440 Speaker 1: like that of price increased two couple percent. Uh, it 406 00:24:27,640 --> 00:24:29,320 Speaker 1: picks up a little bit after the beginning of the year, 407 00:24:29,440 --> 00:24:32,520 Speaker 1: so it's maybe two and a half percent because the 408 00:24:32,600 --> 00:24:35,520 Speaker 1: market's cool in the fall. If it didn't sell, I 409 00:24:35,600 --> 00:24:37,119 Speaker 1: might pull it off the market. I might do a 410 00:24:37,200 --> 00:24:38,639 Speaker 1: few things to it and put it back on the 411 00:24:38,720 --> 00:24:41,719 Speaker 1: market in January at a slightly higher price because now 412 00:24:41,760 --> 00:24:45,080 Speaker 1: I'm leaning into the spring market. So there's some pricing 413 00:24:45,119 --> 00:24:49,280 Speaker 1: strategy happening there and what's happening now. So normal might 414 00:24:49,320 --> 00:24:55,040 Speaker 1: be two and a half percent after that rising rate year, 415 00:24:55,400 --> 00:24:57,359 Speaker 1: it was closer to two percent. It was lower that 416 00:24:57,520 --> 00:25:00,800 Speaker 1: year because they were we could see less demand, you 417 00:25:00,880 --> 00:25:05,520 Speaker 1: had less investment at investor activity happening. Uh, and now 418 00:25:05,640 --> 00:25:08,920 Speaker 1: we're at six percent. So we're spiking right now. We 419 00:25:09,080 --> 00:25:12,159 Speaker 1: spiked big last year to peek in the in the 420 00:25:12,280 --> 00:25:15,680 Speaker 1: second quarter. Uh. Last year was about six point three 421 00:25:16,160 --> 00:25:20,520 Speaker 1: in this week, So we're last year was slightly more frenzied. 422 00:25:20,920 --> 00:25:23,560 Speaker 1: But it's spiking very quickly right now. And what that 423 00:25:23,760 --> 00:25:26,359 Speaker 1: what that's a phenomenon is this fall it seemed like 424 00:25:26,560 --> 00:25:28,520 Speaker 1: things were backing off a little bit with the peak 425 00:25:28,600 --> 00:25:33,240 Speaker 1: of our frenzy last year was was May. We finally 426 00:25:33,359 --> 00:25:37,120 Speaker 1: started increasing inventory for the year April. After April thirtieth 427 00:25:37,200 --> 00:25:40,800 Speaker 1: last year. Normally inventory starts climbing in the end of 428 00:25:40,920 --> 00:25:43,760 Speaker 1: January early February, but it didn't kept declining week over 429 00:25:43,800 --> 00:25:47,600 Speaker 1: week till April um and and that's because we were 430 00:25:47,760 --> 00:25:50,760 Speaker 1: people were just yeah, we're at our record low rates. 431 00:25:50,840 --> 00:25:53,440 Speaker 1: We were all of the things we're colliding at the 432 00:25:53,480 --> 00:25:55,879 Speaker 1: same time. But it cooled off a little bit in 433 00:25:55,920 --> 00:25:58,400 Speaker 1: the second half a year last year. It's accelerating again 434 00:25:58,520 --> 00:26:19,359 Speaker 1: right now. So setting aside the houses have been locked 435 00:26:19,440 --> 00:26:22,960 Speaker 1: up by baby boomers um who seemed to ruin everything. 436 00:26:23,960 --> 00:26:27,520 Speaker 1: If we focus on new house sorry if we focus 437 00:26:27,600 --> 00:26:31,080 Speaker 1: on new house housing supply for a second, Like when 438 00:26:31,280 --> 00:26:35,919 Speaker 1: prices go up and interest rates are extremely low, someone 439 00:26:36,040 --> 00:26:39,200 Speaker 1: should be coming in and trying to respond to that 440 00:26:39,400 --> 00:26:44,119 Speaker 1: increased in demand by actually building new houses. And of 441 00:26:44,240 --> 00:26:46,760 Speaker 1: course Joe already mentioned this in the intro, and we've 442 00:26:46,800 --> 00:26:49,800 Speaker 1: been covering it for a year now. There are these 443 00:26:49,880 --> 00:26:54,800 Speaker 1: supply issues that are obviously impacting their ability to build 444 00:26:54,840 --> 00:26:57,720 Speaker 1: new homes. But you would have thought there would be 445 00:26:58,240 --> 00:27:01,360 Speaker 1: some new supply coming onto the market, or at least 446 00:27:01,400 --> 00:27:05,320 Speaker 1: some new supply planned in the future. What are we 447 00:27:05,440 --> 00:27:09,639 Speaker 1: seeing on that front, so the answers, We are seeing it. 448 00:27:09,760 --> 00:27:13,399 Speaker 1: There are a lot of new homes in construction. And 449 00:27:14,160 --> 00:27:19,320 Speaker 1: the last decade, the decade post bubble burst, we underbuilt 450 00:27:19,560 --> 00:27:22,520 Speaker 1: for a bunch of you. So the twenty year average 451 00:27:22,800 --> 00:27:25,639 Speaker 1: about a million and a half homes new home construction 452 00:27:25,920 --> 00:27:29,639 Speaker 1: per year pre bubble, post bubble is half a million, uh, 453 00:27:29,720 --> 00:27:32,000 Speaker 1: and so we built a lot fewer, right, little, the 454 00:27:32,200 --> 00:27:34,600 Speaker 1: homeowners had to ditch, the home builders had to ditch 455 00:27:34,640 --> 00:27:39,280 Speaker 1: their land. They there's all kinds of restructuring that happened, 456 00:27:39,359 --> 00:27:42,560 Speaker 1: and and so it took them a decade to recover, 457 00:27:43,040 --> 00:27:46,360 Speaker 1: and now they are back to building uh, at least 458 00:27:46,400 --> 00:27:50,119 Speaker 1: starting plenty of homes are you know, they're responding to 459 00:27:50,200 --> 00:27:53,560 Speaker 1: the demand. So you get a lag time between because 460 00:27:53,640 --> 00:27:57,600 Speaker 1: of permitting and constraction and land you said, you know, 461 00:27:57,680 --> 00:28:00,480 Speaker 1: construction time, you get you get a you get a 462 00:28:00,560 --> 00:28:03,680 Speaker 1: lag time between the demand and the new construction in housing. 463 00:28:04,240 --> 00:28:05,800 Speaker 1: But we've got it now. We've had demand for a 464 00:28:05,880 --> 00:28:07,960 Speaker 1: long time and so the builders know exactly like there's 465 00:28:07,960 --> 00:28:12,040 Speaker 1: a lot of home demand there. There's there's demographic the millennials, like, 466 00:28:12,080 --> 00:28:15,760 Speaker 1: there is a lot of it's obvious demand, and so 467 00:28:15,920 --> 00:28:19,720 Speaker 1: the building is happening. So the shortage right now is 468 00:28:19,800 --> 00:28:24,880 Speaker 1: a function of historical construction. So if you had bought, 469 00:28:25,160 --> 00:28:27,880 Speaker 1: if if we had new construction seven eight years ago, 470 00:28:28,400 --> 00:28:31,000 Speaker 1: now you're in move up time that is in resale 471 00:28:31,240 --> 00:28:35,480 Speaker 1: inventory now. But because it was constricted that at that time, 472 00:28:35,640 --> 00:28:38,760 Speaker 1: there's few of those in resale inventory right now. And 473 00:28:38,880 --> 00:28:41,960 Speaker 1: so now we have this weird phenomenon, supply chain phenomenon 474 00:28:42,080 --> 00:28:44,600 Speaker 1: where we have all these homes in construction but they're 475 00:28:44,600 --> 00:28:47,080 Speaker 1: not finished yet. Ultimately they're going to come to market 476 00:28:47,400 --> 00:28:51,560 Speaker 1: and that's going to relieve some of our inventory challenges. 477 00:28:52,280 --> 00:28:55,320 Speaker 1: I want to talk a little bit more about the 478 00:28:55,440 --> 00:29:00,560 Speaker 1: bidding more phenomenon, specifically that the tracy has personally experience 479 00:29:00,880 --> 00:29:04,720 Speaker 1: a what is is there a actual definition of a 480 00:29:04,800 --> 00:29:08,520 Speaker 1: bidding war and be in a bidding war, what is 481 00:29:08,640 --> 00:29:11,880 Speaker 1: the mix? Is it people just raising their bid because 482 00:29:12,000 --> 00:29:14,480 Speaker 1: look at you know, three percent mortgage raid, it really 483 00:29:14,560 --> 00:29:18,240 Speaker 1: doesn't add that much. Or is it people with tons 484 00:29:18,320 --> 00:29:21,880 Speaker 1: of cash coming into with all cash offers and if 485 00:29:21,920 --> 00:29:23,760 Speaker 1: they have ten million dollars in the bank because they've 486 00:29:23,760 --> 00:29:26,320 Speaker 1: done really well, whether they've been a million dollars for 487 00:29:26,360 --> 00:29:27,840 Speaker 1: the house or a million two and try and get 488 00:29:27,880 --> 00:29:30,080 Speaker 1: it right away, it's just not that big of a 489 00:29:30,200 --> 00:29:32,440 Speaker 1: cost for them. Like what are these bidding war dynamics? 490 00:29:33,720 --> 00:29:39,160 Speaker 1: So the bidding wars are primarily a function of of 491 00:29:39,320 --> 00:29:42,360 Speaker 1: the low supply problems. So we have we have uh, 492 00:29:42,720 --> 00:29:48,560 Speaker 1: you know, generational big bulge of homebuyers millennials and generation 493 00:29:48,680 --> 00:29:53,240 Speaker 1: and so there are more people competing for available homes. 494 00:29:53,560 --> 00:29:57,800 Speaker 1: We could actually measure inventory per capita and we could 495 00:29:57,840 --> 00:30:01,560 Speaker 1: actually see that or our home is available flipping around 496 00:30:02,080 --> 00:30:05,640 Speaker 1: people per home available and we can measure that in 497 00:30:06,120 --> 00:30:09,000 Speaker 1: as the bubble was bursting, you could see that that 498 00:30:09,280 --> 00:30:14,920 Speaker 1: was a function of how likely a housing market was 499 00:30:15,080 --> 00:30:18,080 Speaker 1: to create or down. So if you had we had 500 00:30:18,760 --> 00:30:22,560 Speaker 1: more homes available per capita, then it was a more 501 00:30:22,760 --> 00:30:25,600 Speaker 1: risky it's a higher beta market, it was more likely 502 00:30:25,720 --> 00:30:29,040 Speaker 1: to adjust down. And so everywhere in the country is 503 00:30:29,240 --> 00:30:33,400 Speaker 1: ultra low right now and an ultra low per per population, 504 00:30:34,040 --> 00:30:37,360 Speaker 1: and so so bidding war ends up being, well, there's 505 00:30:37,440 --> 00:30:39,840 Speaker 1: one house for sale and they're forty people that want 506 00:30:39,840 --> 00:30:41,960 Speaker 1: to buy it. What's interesting is you could look at 507 00:30:42,440 --> 00:30:46,440 Speaker 1: like a lot of the hot California markets. Because of 508 00:30:46,600 --> 00:30:49,719 Speaker 1: California's prop their team, we have chronically low inventory. It's 509 00:30:49,760 --> 00:30:53,000 Speaker 1: like rent control for the whole state, so so that 510 00:30:53,160 --> 00:30:54,800 Speaker 1: these houses don't come back on the market. So you 511 00:30:54,880 --> 00:30:57,080 Speaker 1: get a you get like a Silicon Valley market like 512 00:30:57,160 --> 00:31:01,040 Speaker 1: Palo Alto, and it's it's fifty thousand or seventy thousand 513 00:31:01,080 --> 00:31:04,200 Speaker 1: people and there's sixty homes for sale. You take a 514 00:31:04,280 --> 00:31:08,360 Speaker 1: similar demographic outside of Dallas and normally there's seven hundred 515 00:31:08,440 --> 00:31:12,400 Speaker 1: homes for sale in the same sized town. As a result, 516 00:31:12,480 --> 00:31:14,880 Speaker 1: really one of the results of property tax laws, because 517 00:31:14,880 --> 00:31:16,880 Speaker 1: your property taxes are high in Texas and they're you know, 518 00:31:16,920 --> 00:31:19,160 Speaker 1: they're low in California, and so you know, in a 519 00:31:19,360 --> 00:31:23,480 Speaker 1: in the normal times, you'd have the same population. In 520 00:31:23,680 --> 00:31:25,560 Speaker 1: Palo Alto, you only have to be available to four, 521 00:31:25,920 --> 00:31:28,480 Speaker 1: you know, forty people because there's only forty homes is available. 522 00:31:28,680 --> 00:31:31,280 Speaker 1: And in Dallas it has to be available to essentially 523 00:31:31,360 --> 00:31:34,400 Speaker 1: the media income because there's seven hundred available. That's the 524 00:31:34,600 --> 00:31:36,840 Speaker 1: that's the normal time. What's going on right now is 525 00:31:36,960 --> 00:31:39,080 Speaker 1: that that Dallas town is down to you a hundred 526 00:31:39,080 --> 00:31:42,320 Speaker 1: and forty uh instead of seven hundred and or whatever 527 00:31:42,440 --> 00:31:44,640 Speaker 1: that that that you know threshold is. And so all 528 00:31:44,640 --> 00:31:47,080 Speaker 1: of a sudden that now you don't have to be 529 00:31:47,160 --> 00:31:49,520 Speaker 1: available affordable to the median income. You just have to 530 00:31:49,560 --> 00:31:52,920 Speaker 1: be affordable to us a much smaller chuck of population. 531 00:31:53,800 --> 00:31:56,239 Speaker 1: So on that note, if I could just ask um 532 00:31:56,760 --> 00:32:01,480 Speaker 1: a question completely out of um personal interest, but you know, 533 00:32:02,000 --> 00:32:04,720 Speaker 1: what should you do if you find yourself in a 534 00:32:04,840 --> 00:32:07,960 Speaker 1: situation where you put in an offer for a house 535 00:32:08,240 --> 00:32:11,800 Speaker 1: and suddenly people are putting in much higher offers, Like 536 00:32:12,000 --> 00:32:14,000 Speaker 1: is there anything you can do? Or are you just 537 00:32:14,280 --> 00:32:17,239 Speaker 1: automatically doomed because you don't have as much money as 538 00:32:17,240 --> 00:32:20,600 Speaker 1: the next person. Well, I will preface this but saying 539 00:32:21,080 --> 00:32:22,760 Speaker 1: I am not a realtor, and it's one of the 540 00:32:22,840 --> 00:32:26,240 Speaker 1: reasons that you work with a really good realtor, you know, 541 00:32:26,640 --> 00:32:31,040 Speaker 1: they they know how to structure the deal, when to 542 00:32:31,160 --> 00:32:35,560 Speaker 1: make that offer. What are the the other opportunities for financing. 543 00:32:35,600 --> 00:32:41,120 Speaker 1: There's a lot of interesting alternative financing products that have 544 00:32:41,240 --> 00:32:43,400 Speaker 1: come to the market in the last decade. For for 545 00:32:43,520 --> 00:32:46,520 Speaker 1: home buying. This as a function of having a lot 546 00:32:46,600 --> 00:32:49,920 Speaker 1: of capital that there are ways to make cash offers 547 00:32:50,320 --> 00:32:52,840 Speaker 1: even when you don't have the cash, And so working 548 00:32:52,880 --> 00:32:55,840 Speaker 1: with a really good realtor is really how ultimately you 549 00:32:56,000 --> 00:33:00,880 Speaker 1: make that success. You know, the guidance I give in 550 00:33:01,680 --> 00:33:04,640 Speaker 1: what people ask me that you know, the challenges of 551 00:33:04,760 --> 00:33:07,480 Speaker 1: the bubble came when you bought a house either that 552 00:33:07,600 --> 00:33:11,720 Speaker 1: you couldn't afford or one that you didn't like but 553 00:33:11,880 --> 00:33:14,760 Speaker 1: you felt you had to buy. Then you've gotten stuck 554 00:33:14,800 --> 00:33:16,480 Speaker 1: into a house that you didn't want to be in 555 00:33:17,520 --> 00:33:20,320 Speaker 1: when the mark market was creating. And so the way 556 00:33:20,360 --> 00:33:21,960 Speaker 1: I look at it now is if you find a 557 00:33:22,040 --> 00:33:25,520 Speaker 1: house that you like and you can't afford, then you 558 00:33:25,640 --> 00:33:28,000 Speaker 1: buy the house. And if you're you're looking at the payment, 559 00:33:28,040 --> 00:33:30,520 Speaker 1: you go, well, you know it's more than they're asking, 560 00:33:30,760 --> 00:33:33,480 Speaker 1: but we can afford that payment, and this is the 561 00:33:33,560 --> 00:33:36,080 Speaker 1: house we want like, then then that is that's the 562 00:33:36,160 --> 00:33:39,080 Speaker 1: time to buy the house. If you can't afford it, 563 00:33:39,440 --> 00:33:41,440 Speaker 1: or if you don't like it, don't buy the house. 564 00:33:41,560 --> 00:33:43,440 Speaker 1: Don't buy it because you think you need to know. 565 00:33:43,880 --> 00:33:46,640 Speaker 1: So that's the way I framework guidance when people ask me. 566 00:33:47,800 --> 00:33:52,479 Speaker 1: So it really sounds like, I mean, you mentioned obviously, uh, 567 00:33:52,720 --> 00:33:56,120 Speaker 1: the rates issue, and lower rates make the cost of 568 00:33:56,200 --> 00:33:59,880 Speaker 1: carrying an old home more attractive. And then you've called 569 00:34:00,200 --> 00:34:02,800 Speaker 1: California specifically a couple of times because of how the 570 00:34:02,880 --> 00:34:06,440 Speaker 1: taxes don't go up, contrasting that with Texas. It seems 571 00:34:06,560 --> 00:34:09,560 Speaker 1: like and I don't know that there's like a policy 572 00:34:09,640 --> 00:34:13,640 Speaker 1: silver bullet, but the issue is it's when it's really 573 00:34:13,760 --> 00:34:16,239 Speaker 1: cheap to carry a house for for taxes and or 574 00:34:16,320 --> 00:34:19,960 Speaker 1: rates or whatever reason, that is a real detriment to supply. 575 00:34:21,280 --> 00:34:23,200 Speaker 1: It's it's a real detriment to supply. It's like, it's 576 00:34:23,800 --> 00:34:26,000 Speaker 1: the everything we do in this country makes it really 577 00:34:26,080 --> 00:34:30,160 Speaker 1: good deal to own your house, and therefore people own it. Uh, 578 00:34:30,239 --> 00:34:32,120 Speaker 1: And that is that to a detriment to the buyers 579 00:34:32,160 --> 00:34:35,040 Speaker 1: who don't own yet. So so one of the things 580 00:34:35,840 --> 00:34:41,840 Speaker 1: the conversations that I recall taking place again very pre pandemic, 581 00:34:41,960 --> 00:34:44,520 Speaker 1: when the market was probably a warm or hot but 582 00:34:44,640 --> 00:34:48,840 Speaker 1: not crazy like this. You know, you mentioned the boomers housing, 583 00:34:48,960 --> 00:34:50,840 Speaker 1: and there was all the simes like, oh, boomer homes 584 00:34:50,920 --> 00:34:54,239 Speaker 1: aren't what millennials want and maybe they're like too far 585 00:34:54,560 --> 00:34:58,880 Speaker 1: away from the city or you know, two big lawns, 586 00:34:59,000 --> 00:35:02,000 Speaker 1: or maybe they don't have like a YouTube studio involved 587 00:35:02,120 --> 00:35:05,319 Speaker 1: or whatever, like millennials are like into for homes, they 588 00:35:05,400 --> 00:35:08,080 Speaker 1: just don't look like the homes that millennials want. Whatever, 589 00:35:08,560 --> 00:35:10,440 Speaker 1: and that it was gonna be all the supply and 590 00:35:10,560 --> 00:35:13,880 Speaker 1: also that either boomers would downsize or moved to a 591 00:35:13,960 --> 00:35:17,800 Speaker 1: condo in Florida or eventually die as they get older. 592 00:35:17,920 --> 00:35:20,160 Speaker 1: Like what happened to that? Because I thought there was 593 00:35:20,160 --> 00:35:22,520 Speaker 1: all this stuff about like boomer inventory that was going 594 00:35:22,600 --> 00:35:25,279 Speaker 1: to have a really hard time hitting the market. Yeah, 595 00:35:25,480 --> 00:35:27,960 Speaker 1: so we've been looking, you know, you keep looking for 596 00:35:28,080 --> 00:35:30,800 Speaker 1: the boomer inventory. Uh, and it has and it hasn't. 597 00:35:30,920 --> 00:35:33,520 Speaker 1: It hasn't shown up, right, Uh. You know, the boomers 598 00:35:33,560 --> 00:35:37,080 Speaker 1: are finally getting to the age where maybe it really 599 00:35:37,200 --> 00:35:40,359 Speaker 1: has to show up soon. They're as they're getting their 600 00:35:40,400 --> 00:35:45,080 Speaker 1: seventies eighties like that, like, maybe we finally get to 601 00:35:45,239 --> 00:35:49,040 Speaker 1: see that come to market. And so you know, when 602 00:35:49,120 --> 00:35:51,560 Speaker 1: we we measure are the you know, the entire US 603 00:35:51,640 --> 00:35:54,919 Speaker 1: market every week, and there's some leading indicators in that data. 604 00:35:55,000 --> 00:35:56,520 Speaker 1: You can see where the supply is going to go. 605 00:35:56,640 --> 00:35:58,919 Speaker 1: You can see where you know, three, six, twelve months. 606 00:35:59,160 --> 00:36:03,080 Speaker 1: But when you look at five years, that's there's some 607 00:36:03,280 --> 00:36:05,560 Speaker 1: real macro things that aren't you know, there aren't in 608 00:36:05,600 --> 00:36:09,279 Speaker 1: the data yet. So you know, like, are there are 609 00:36:09,400 --> 00:36:11,719 Speaker 1: big shocks of the economy. They're like those kinds of 610 00:36:11,760 --> 00:36:14,480 Speaker 1: things that you that that aren't yet visible in in 611 00:36:14,600 --> 00:36:17,360 Speaker 1: the data that we measure. So things like when the 612 00:36:17,400 --> 00:36:22,040 Speaker 1: boomers finally go, do we have a generational transfer for 613 00:36:22,960 --> 00:36:26,560 Speaker 1: of those properties? You know, we could see the zoom 614 00:36:26,600 --> 00:36:31,080 Speaker 1: town phenomenon that your Bloomberg colleague kind ofcend quote of 615 00:36:31,920 --> 00:36:36,360 Speaker 1: the label bloom zoom towns during during the pandemic. You know, 616 00:36:36,480 --> 00:36:40,360 Speaker 1: people moved to you know, the remote load with the 617 00:36:40,400 --> 00:36:43,279 Speaker 1: work remote locations. And in New York it was that 618 00:36:43,400 --> 00:36:48,239 Speaker 1: Hudson Valley exploded. In California, it was the mountains like 619 00:36:48,320 --> 00:36:51,799 Speaker 1: truck Ee or places like Bend, Oregon, and so these 620 00:36:51,840 --> 00:36:55,480 Speaker 1: zoom towns happened. The phenomenon though was it turns out 621 00:36:55,560 --> 00:36:58,640 Speaker 1: that most of those are a great majority of those 622 00:36:58,680 --> 00:37:01,840 Speaker 1: were second home is like people moved from San Francisco 623 00:37:01,880 --> 00:37:04,719 Speaker 1: to the mountains. They didn't sell the San Francisco home, right, 624 00:37:04,840 --> 00:37:07,560 Speaker 1: they just they just had another one. So those kinds 625 00:37:07,640 --> 00:37:10,960 Speaker 1: of that millennial purchase turned to be that way. There 626 00:37:11,080 --> 00:37:13,719 Speaker 1: was there were, you know, some of those some of 627 00:37:13,800 --> 00:37:16,160 Speaker 1: that migration, especially out of places like New York and 628 00:37:16,640 --> 00:37:19,799 Speaker 1: San Francisco. At the time, we were younger people who 629 00:37:19,840 --> 00:37:22,400 Speaker 1: didn't already own, they were renters, and so it was 630 00:37:22,640 --> 00:37:24,759 Speaker 1: it was a pressure on the rental market much more 631 00:37:24,960 --> 00:37:28,320 Speaker 1: than it was a pressure on on the resale inventory. 632 00:37:29,440 --> 00:37:32,880 Speaker 1: So let me ask, I guess the big question, but 633 00:37:33,600 --> 00:37:38,040 Speaker 1: bringing everything that we just discussed altogether, when would you 634 00:37:38,200 --> 00:37:43,480 Speaker 1: expect the housing market to actually start to normalize? And 635 00:37:43,719 --> 00:37:47,960 Speaker 1: what does a normal housing market actually look like now? 636 00:37:49,400 --> 00:37:53,400 Speaker 1: So if we if we look at the last decade, 637 00:37:53,920 --> 00:37:58,160 Speaker 1: we could say, quote normal being a million homes on 638 00:37:58,320 --> 00:38:01,920 Speaker 1: the market around the country at this time in January. 639 00:38:02,840 --> 00:38:06,120 Speaker 1: We're at two d eighty four thousand this week, so 640 00:38:07,120 --> 00:38:10,239 Speaker 1: that's single family homes. Getting back to that level of 641 00:38:10,280 --> 00:38:14,440 Speaker 1: normal is a long way. Multiple years, multiple years of 642 00:38:14,840 --> 00:38:18,520 Speaker 1: higher rates of systemic changes. Uh, you know, we have 643 00:38:19,000 --> 00:38:22,440 Speaker 1: one of the big phenomenons has been the institutional investors 644 00:38:22,880 --> 00:38:26,480 Speaker 1: buying building and buying homes for two intended force as 645 00:38:26,560 --> 00:38:32,080 Speaker 1: single family rental units. And so if there's structural change 646 00:38:33,040 --> 00:38:36,919 Speaker 1: such that that's no longer a good business and those 647 00:38:37,000 --> 00:38:40,440 Speaker 1: start to be sold, like there there that's been a 648 00:38:40,480 --> 00:38:43,920 Speaker 1: big phenomenon, and therefore there is some you can imagine 649 00:38:44,040 --> 00:38:46,960 Speaker 1: some risk in there if that falls out of fashion 650 00:38:47,280 --> 00:38:50,200 Speaker 1: or out of financing as a as a business, that 651 00:38:50,320 --> 00:38:54,200 Speaker 1: those then start to become actual resale inventory. There's a 652 00:38:54,280 --> 00:38:57,480 Speaker 1: number of those phenomenons that have to happen in order 653 00:38:57,560 --> 00:39:01,000 Speaker 1: for us to get back to an old normal. You know, 654 00:39:01,120 --> 00:39:05,520 Speaker 1: we we are at rates rates have climbed a little 655 00:39:05,520 --> 00:39:08,439 Speaker 1: bit in the last month there in the three point 656 00:39:08,760 --> 00:39:13,000 Speaker 1: something percent. Now do like I'm I am unable to 657 00:39:13,160 --> 00:39:19,680 Speaker 1: predict interest rates? Like where do they go? I M so? 658 00:39:20,239 --> 00:39:23,319 Speaker 1: So if they go up from here? The first thing 659 00:39:23,400 --> 00:39:27,320 Speaker 1: that happens actually is as a rise is there's a 660 00:39:27,480 --> 00:39:30,000 Speaker 1: there's an accelerating phenomenon where people are like I gotta 661 00:39:30,040 --> 00:39:33,360 Speaker 1: get in before while it's still good. That actually accelerates 662 00:39:33,400 --> 00:39:36,080 Speaker 1: demand first, and then it probably pulls demand for it. 663 00:39:36,200 --> 00:39:39,680 Speaker 1: And so before it takes you know, eight months or 664 00:39:39,680 --> 00:39:42,880 Speaker 1: a year before people start to really impact it, like aen. 665 00:39:42,920 --> 00:39:45,520 Speaker 1: It took all year, and so then it's a multiple 666 00:39:45,600 --> 00:39:48,839 Speaker 1: year process to get us back to some level of inventory, uh, 667 00:39:48,960 --> 00:39:52,520 Speaker 1: some level of lower demand because rates are money is 668 00:39:52,560 --> 00:39:57,239 Speaker 1: more expensive that combination of things. Because everyone in the 669 00:39:57,400 --> 00:40:03,719 Speaker 1: country has a thirty your rate locked it basically everybody. Uh, 670 00:40:03,840 --> 00:40:09,480 Speaker 1: in a six percent inflation environment, there's no there's almost 671 00:40:09,600 --> 00:40:14,680 Speaker 1: no impetus to sell those homes ever because and they 672 00:40:14,760 --> 00:40:19,120 Speaker 1: also have lots of equity, so there's no there's nobody 673 00:40:19,640 --> 00:40:22,800 Speaker 1: who is underwater in their home, essentially no one in 674 00:40:22,840 --> 00:40:26,200 Speaker 1: the house. In a few weeks, we will have record 675 00:40:26,400 --> 00:40:30,560 Speaker 1: few homes anywhere in the foreclosure property and then foreclosure pipeline. 676 00:40:30,640 --> 00:40:33,640 Speaker 1: So uh, there are always some of you know, deal 677 00:40:33,719 --> 00:40:36,680 Speaker 1: went bad or divorce or whatever the thing the thing 678 00:40:36,800 --> 00:40:40,279 Speaker 1: is that that triggered that, but will have record few 679 00:40:40,840 --> 00:40:44,040 Speaker 1: properties in that because the market is so good. Everybody 680 00:40:44,120 --> 00:40:48,040 Speaker 1: has strong credit, lots of equity, and cheap money. UM, 681 00:40:48,200 --> 00:40:53,200 Speaker 1: so all of those those Americans are in really good position, 682 00:40:53,440 --> 00:40:59,040 Speaker 1: and so there's no big catalyst for a lot of 683 00:40:59,120 --> 00:41:01,000 Speaker 1: homes to come to market. So it's a multi year 684 00:41:01,680 --> 00:41:05,000 Speaker 1: inching more homes on back into the market. And then 685 00:41:05,320 --> 00:41:07,680 Speaker 1: at some point it could be that that it is 686 00:41:07,760 --> 00:41:12,520 Speaker 1: the boomer transition that those finally start to unlock from 687 00:41:13,280 --> 00:41:16,480 Speaker 1: from the boomer population and transfer to the to the millennials, 688 00:41:16,960 --> 00:41:20,240 Speaker 1: you know, before we go, and that was that summation 689 00:41:20,440 --> 00:41:22,719 Speaker 1: was extremely helpful. The one the one thing in my 690 00:41:22,800 --> 00:41:25,080 Speaker 1: mind that I'm still very curious on and if you 691 00:41:25,160 --> 00:41:28,440 Speaker 1: have more stats about you know, there's obviously tons of 692 00:41:28,560 --> 00:41:32,600 Speaker 1: talk these days about the big institutional buyers um who 693 00:41:32,719 --> 00:41:35,160 Speaker 1: buy tons of homes and rent them out, and there's 694 00:41:35,160 --> 00:41:38,359 Speaker 1: all kinds of anxiety about them. But as you've pointed out, 695 00:41:38,400 --> 00:41:41,600 Speaker 1: there is there's other phenomenon which I have seen extremely 696 00:41:41,680 --> 00:41:44,040 Speaker 1: little discussion, but it continues to come up about the 697 00:41:44,120 --> 00:41:46,520 Speaker 1: person buying a home, the family buying a home and 698 00:41:46,600 --> 00:41:49,920 Speaker 1: not feeling the need to sell the first home. How 699 00:41:50,080 --> 00:41:54,520 Speaker 1: big is that essentially the rise of the small landlord 700 00:41:54,840 --> 00:41:57,719 Speaker 1: or the small real estate speculator, And how does that 701 00:41:57,920 --> 00:42:01,680 Speaker 1: compare in terms of what moves the needle relative to 702 00:42:01,800 --> 00:42:04,560 Speaker 1: the institutional investor which gets tons of coverage all the time. 703 00:42:05,160 --> 00:42:09,239 Speaker 1: The numbers I've seen on that are individual investors who 704 00:42:09,360 --> 00:42:15,279 Speaker 1: own one to four units. Yeah, is it about the market? Wow? Wait, 705 00:42:15,400 --> 00:42:19,880 Speaker 1: So when you say of what market of those of 706 00:42:19,960 --> 00:42:22,880 Speaker 1: those investment properties that are on our own by individuals. 707 00:42:23,200 --> 00:42:26,279 Speaker 1: Just to be clear, the investment market and single family 708 00:42:26,360 --> 00:42:31,800 Speaker 1: home is overwhelmingly dominated by individuals. That's correct. And you 709 00:42:31,880 --> 00:42:35,480 Speaker 1: can see in some markets the big institutions are you know, 710 00:42:35,520 --> 00:42:38,600 Speaker 1: trying to build market share, but but it is in 711 00:42:38,719 --> 00:42:42,560 Speaker 1: the in the across the US is overwhelmingly individual investors. 712 00:42:42,840 --> 00:42:45,680 Speaker 1: That's really interesting, Yeah, because it seems like the coverage 713 00:42:46,080 --> 00:42:48,719 Speaker 1: and you know, the coverage is totally scued. I mean, 714 00:42:48,760 --> 00:42:52,160 Speaker 1: there's tons of talk about the big asset managers buying homes, 715 00:42:52,719 --> 00:42:55,400 Speaker 1: but it sounds like in terms of like who's owning 716 00:42:55,520 --> 00:42:59,280 Speaker 1: a house for investment and therefore rental, it's actually probably 717 00:42:59,360 --> 00:43:01,839 Speaker 1: much smaller the one, uh, the impression one would get 718 00:43:01,840 --> 00:43:04,600 Speaker 1: from the media and the just the general discords. Right, 719 00:43:05,480 --> 00:43:09,239 Speaker 1: there are a few fewer easier villain targets than a 720 00:43:10,000 --> 00:43:14,160 Speaker 1: landlord private equity right A right, guess it makes a 721 00:43:14,360 --> 00:43:19,120 Speaker 1: very good bad guy. It's super interesting, Mike, that was phenomenal. 722 00:43:19,560 --> 00:43:23,600 Speaker 1: I genuinely learned a lot from that conversation. I recommend 723 00:43:23,640 --> 00:43:27,279 Speaker 1: everyone go check your videos and tweets always updated with 724 00:43:27,360 --> 00:43:30,120 Speaker 1: the data. Mike Simons and CEO of Altos Research, thank 725 00:43:30,160 --> 00:43:33,320 Speaker 1: you so much. For coming on outline, Tracy, is my pleasure. 726 00:43:33,360 --> 00:43:36,279 Speaker 1: I really enjoy listening to the program, so it's it's great. 727 00:43:36,880 --> 00:43:39,399 Speaker 1: Thank you, it's really fun. Thank you so much, Thanks 728 00:43:39,480 --> 00:43:55,880 Speaker 1: so much. Yeah, take care of Mike, Tracy. Do you 729 00:43:55,960 --> 00:43:59,480 Speaker 1: feel any better about having been repeatedly gazumped in your 730 00:43:59,600 --> 00:44:01,960 Speaker 1: quest to buy a home in the United States? Um? 731 00:44:02,320 --> 00:44:05,320 Speaker 1: I guess. I guess it's comforting to know that I 732 00:44:05,440 --> 00:44:09,320 Speaker 1: am not alone in this extremely frustrating experience. And I 733 00:44:09,440 --> 00:44:12,840 Speaker 1: guess um now that I am a homeowner, or hopefully 734 00:44:12,960 --> 00:44:15,680 Speaker 1: will be very soon, I guess I can take some 735 00:44:16,000 --> 00:44:20,319 Speaker 1: comfort from Mike's prediction that it will take a very 736 00:44:20,400 --> 00:44:23,600 Speaker 1: long time for housing to actually normalize. But on the 737 00:44:23,680 --> 00:44:27,600 Speaker 1: other hand, I can't shake off a suspicion. I guess 738 00:44:27,680 --> 00:44:30,680 Speaker 1: everyone probably feels it after a major purchase, but I 739 00:44:30,719 --> 00:44:32,800 Speaker 1: always feel like I'm probably buying at the top of 740 00:44:32,840 --> 00:44:36,080 Speaker 1: the market. Yeah, I think that's like a phenomenon. This 741 00:44:36,200 --> 00:44:39,640 Speaker 1: is kind of news, right, Oh, oh, like this is 742 00:44:39,680 --> 00:44:42,520 Speaker 1: a little bit hashtag personal news, right yeah. Yeah. Um, 743 00:44:42,920 --> 00:44:45,520 Speaker 1: I'm going back to New York, which means Joe and 744 00:44:45,600 --> 00:44:49,400 Speaker 1: I will finally be able to record these podcast episodes 745 00:44:49,560 --> 00:44:51,680 Speaker 1: in the same room, which will be a lot of fun. 746 00:44:51,880 --> 00:44:54,000 Speaker 1: I figured we I figured like the announcement would be 747 00:44:54,000 --> 00:44:55,839 Speaker 1: a little bit bigger. But I like how we sort 748 00:44:55,840 --> 00:44:58,279 Speaker 1: of backed into it a little bit by you talking 749 00:44:58,280 --> 00:45:01,759 Speaker 1: about the frustration of being, you know, it's a home buyer. Yeah, 750 00:45:02,160 --> 00:45:06,000 Speaker 1: for clarity, I'm not buying a US house for investment purposes. 751 00:45:06,280 --> 00:45:09,319 Speaker 1: You're okay, I'm not one of those people, but you might. 752 00:45:09,520 --> 00:45:11,800 Speaker 1: You know what, when you buy when when when mortgage 753 00:45:11,880 --> 00:45:14,080 Speaker 1: rates in ten years or twenty years right down to 754 00:45:14,160 --> 00:45:17,479 Speaker 1: point five percent and you're ready to move, and you're like, good, 755 00:45:17,960 --> 00:45:22,319 Speaker 1: pretty cheap to refinance the old home and keep carrying it. Uh, 756 00:45:22,440 --> 00:45:24,960 Speaker 1: it might become an investment property. But anyway, I will 757 00:45:25,040 --> 00:45:28,920 Speaker 1: join the ranks of like baby boomer mini landlords that 758 00:45:29,200 --> 00:45:31,520 Speaker 1: milk everything for money. But I did find that to 759 00:45:31,600 --> 00:45:36,240 Speaker 1: be extremely I did not realize a quite how skewed 760 00:45:36,320 --> 00:45:38,560 Speaker 1: that is, because there is a you know, tons of 761 00:45:38,640 --> 00:45:41,320 Speaker 1: attention to as a managers buying homes and how small 762 00:45:41,400 --> 00:45:46,320 Speaker 1: they still are and be the long term structural issues 763 00:45:47,000 --> 00:45:49,200 Speaker 1: that you know what, It makes sense when you're younger 764 00:45:49,280 --> 00:45:51,399 Speaker 1: and you think about buying a home, it's like, oh, 765 00:45:51,520 --> 00:45:53,239 Speaker 1: you're going to move to a new town. But it's 766 00:45:53,280 --> 00:45:55,320 Speaker 1: really complicated because you gotta sell the old home and 767 00:45:55,320 --> 00:45:57,480 Speaker 1: you gotta get the timing just right to free up 768 00:45:57,480 --> 00:45:59,000 Speaker 1: the money. And you heard all, you know, people just 769 00:45:59,200 --> 00:46:01,759 Speaker 1: all these stories of like I gotta like sell to 770 00:46:01,800 --> 00:46:04,720 Speaker 1: get my down payment. But in this in this market, 771 00:46:04,800 --> 00:46:06,960 Speaker 1: where there's a robust rental market, low cost of care, 772 00:46:07,000 --> 00:46:08,600 Speaker 1: you just buy the second home and don't even so 773 00:46:08,640 --> 00:46:10,200 Speaker 1: many people don't even have to worry about what they 774 00:46:10,239 --> 00:46:13,719 Speaker 1: do with their first home totally. Um. The other thing, well, 775 00:46:14,640 --> 00:46:17,000 Speaker 1: I guess the one question that we didn't actually ask Mike, 776 00:46:17,080 --> 00:46:19,640 Speaker 1: which would have been good, um, is at what point 777 00:46:19,840 --> 00:46:25,400 Speaker 1: do prices get so high that they start actually impacting demand? 778 00:46:26,000 --> 00:46:28,800 Speaker 1: Because that feels like it's the only thing on a 779 00:46:28,880 --> 00:46:32,520 Speaker 1: near term basis that might you know, take some of 780 00:46:32,640 --> 00:46:36,040 Speaker 1: the heat out of this market. But otherwise, Yeah, the 781 00:46:36,600 --> 00:46:40,120 Speaker 1: sort of long term structural trends that he outlined were 782 00:46:40,160 --> 00:46:43,879 Speaker 1: really interesting and definitely suggest tightness for years to come. 783 00:46:44,480 --> 00:46:47,480 Speaker 1: And also, you know, just his point about like in 784 00:46:47,719 --> 00:46:51,080 Speaker 1: rates this low, you know, you could you could lob 785 00:46:51,160 --> 00:46:53,680 Speaker 1: in a bid way higher than the market, and it 786 00:46:53,840 --> 00:46:56,759 Speaker 1: just does not move that much in terms of where 787 00:46:56,800 --> 00:46:58,840 Speaker 1: you if if you could make the down payment, it 788 00:46:58,920 --> 00:47:03,600 Speaker 1: doesn't Uh, changed that much the monthly payment potential. Right, well, 789 00:47:03,680 --> 00:47:07,200 Speaker 1: housing just looks like a really good investment in the 790 00:47:07,280 --> 00:47:10,960 Speaker 1: current climate with low interest rates, and now as inflation 791 00:47:11,239 --> 00:47:14,080 Speaker 1: ticks higher. I mean, Mike made that point that you know, 792 00:47:14,160 --> 00:47:16,560 Speaker 1: if inflation is at six percent or something and your 793 00:47:16,600 --> 00:47:19,800 Speaker 1: mortgage is basically at zero percent, that looks like a 794 00:47:19,880 --> 00:47:23,920 Speaker 1: pretty good trade. Yeah. Absolutely, Well, it's a fascinating episode. 795 00:47:23,920 --> 00:47:27,680 Speaker 1: I did learn a lot and Tracy, I wish you luck. Yeah, 796 00:47:27,880 --> 00:47:31,200 Speaker 1: thank you. I will probably need it. Okay, shall we 797 00:47:31,280 --> 00:47:34,239 Speaker 1: leave it there? Let's leave it there. This has been 798 00:47:34,320 --> 00:47:37,720 Speaker 1: another episode of the All Thoughts Podcast. I'm Tracy Alloway. 799 00:47:38,000 --> 00:47:40,960 Speaker 1: You can follow me on Twitter at Tracy Alloway. And 800 00:47:41,040 --> 00:47:43,960 Speaker 1: I'm Jill Wisenthal. You can follow me on Twitter at 801 00:47:44,000 --> 00:47:47,880 Speaker 1: the Stalwart. Follow our guest on Twitter, He's Mike Simonson 802 00:47:48,080 --> 00:47:51,920 Speaker 1: at Mike Simonson. Follow our producer Laura Carlson. She's at 803 00:47:52,040 --> 00:47:55,160 Speaker 1: Laura M. Carlson. Follow the Bloomberg head of podcast for 804 00:47:55,239 --> 00:47:58,759 Speaker 1: Incesca Levi at Francesca Today, and check out all of 805 00:47:58,840 --> 00:48:02,640 Speaker 1: our podcast at Bloomberg under the handle at podcasts. Thanks 806 00:48:02,680 --> 00:48:03,120 Speaker 1: for listening.