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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside

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Speaker 1: my co host Matt Miller. Every business day we bring

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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along

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Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast

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Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and

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Speaker 1: at Bloomberg dot com slash podcast. The conversation of the

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Speaker 1: morning certainly for me. Dan Eyves, Mountaging director Equity Research

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Speaker 1: at web Securities, UM, Penn State alum and a bad

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Speaker 1: loss last week Matt, Penn State lost to Illinois. At

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Speaker 1: saw that and I thought of Dan when I saw

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Speaker 1: it nine overtimes? I mean, who plays nine overtimes? Anyway?

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Speaker 1: All right, Dan, thanks so much for joining us here.

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Speaker 1: We got Microsoft after the close. I want to get

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Speaker 1: your thoughts as we go into that, But first let's

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Speaker 1: start with Tesla. I mean, Elon Musk is worth more

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Speaker 1: than you know, pretty much the rest of the stock

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Speaker 1: market at this point here, this stock to me is

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Speaker 1: showing really no signs of concern about rising competence from

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Speaker 1: the existing O E M. How do you view that? Look,

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Speaker 1: I think we're seeing the biggest transformation to the auto

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Speaker 1: industry since nanteen fifties, and Tesla's leading the way on

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Speaker 1: ev s and it's really been the one to punch

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Speaker 1: in terms of what we saw on deliveries last week.

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Speaker 1: Profitability and it hurts is a tipping point. I think

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Speaker 1: it's an inflection point overall on evs. There's a five

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Speaker 1: trillion dollar market and I think this is just sort

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Speaker 1: of the middle innings of the street. Further appreciating this

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Speaker 1: Tesla and ev story, Yeah, I mean, what an amazing story.

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Speaker 1: Ordering a hundred thousand Model three Dan As close as

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Speaker 1: I can figure, this is basically list price that they're paying. Well,

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Speaker 1: that's really what sticks out. You know, normally you'll see

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Speaker 1: discount tenss price because right now Tesla, it's Tesla's world.

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Speaker 1: Everyone else paying rent and evs because demands out strip

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Speaker 1: being supplied by about ten per cent. Now you start

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Speaker 1: the trajectory out where this could go along with supply

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Speaker 1: coming on with Berlin in Austin million today, this could

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Speaker 1: be two million a year, and I think that's what

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Speaker 1: you're started seeing the stock even look, the heaters will

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Speaker 1: heat continue here, but right now, as you're seeing this,

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Speaker 1: it's hard for investors to dismiss this green tide away

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Speaker 1: playing out, And Dan, how do you think this EV

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Speaker 1: market will shake out in ten years time? Well, when

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Speaker 1: assuming everybody who's in anybody will have a full complement,

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Speaker 1: a full lineup of electric vehicles, where do you think

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Speaker 1: Tesla's position will be? Would they kind of be the

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Speaker 1: Porsche of the auto industry? Can I just can I

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Speaker 1: just point out, speaking of Porsche, the owner of Porsche

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Speaker 1: and Lamborghini, Ducatti, Bentley, Bugatti, um Folkswagen and Audi, they

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Speaker 1: have a market cap of a hundred fifty million dollars.

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Speaker 1: Tesla's billion dollars. Tesla's worth more than a trillion. How

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Speaker 1: does that make any sense? Well, look, it's a great point.

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Speaker 1: I I've never viewed, and I know we've talked about

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Speaker 1: the last decade Tessa as an automotive company. View them

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Speaker 1: is the disruptive technology player. But I do think to

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Speaker 1: Paul's question, v W for GM and and others is

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Speaker 1: part of this five trillion dollar e V transformation. It's

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Speaker 1: it's not a zero or some game. They're all going

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Speaker 1: to benefit. I mean, you put on perspective, you have

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Speaker 1: three million evs in the road globally, have a hundred

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Speaker 1: million cars. I believe that's fifty million the end of

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Speaker 1: the decade, and Tessa is going to have a significant

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Speaker 1: market share of that. But but others are going to

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Speaker 1: benefit as well. And that's why this is something you

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Speaker 1: look at the rerating that's going to start to happen

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Speaker 1: so or what happened GM forward VW because more and

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Speaker 1: more investors are going to value that disruptive e VPS

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Speaker 1: like a technology ps, not traditional automotive. All right, let's

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Speaker 1: switch gears here to our good friends from Seattle, Washington.

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Speaker 1: UM Microsoft all time hyphe poy put up that max

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Speaker 1: chart on your Bloomberg terminal GP go just extraordinary. What

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Speaker 1: do you expect after the close from Microsoft? In I

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Speaker 1: think another world series performance by by Nidel and Microsoft,

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Speaker 1: I mean continues out the golden touch on cloud cloud

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Speaker 1: Armor is playing out, but Microsoft is gaining more and

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Speaker 1: more share. This is just the growth story still underestimated

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Speaker 1: by the street. So we have a three seventy five

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Speaker 1: price target. I think it's just another sort of beaten

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Speaker 1: raised special coming out of Redmond. And you see that

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Speaker 1: for the other tech companies as well. For Alphabet, Oh yeah,

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Speaker 1: I think this is gonna be just a headline week

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Speaker 1: for tech across the board Social Media week link because

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Speaker 1: what we're seeing on the Apple privacy, I think Apple,

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Speaker 1: you're gonna see robust coming out despite chip short just

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Speaker 1: right now, demand now stripped and supply by about ten

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Speaker 1: million iPhones. Alphabet as well in digital advertising. I believe

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Speaker 1: this is sort of the fuel in the tank now

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Speaker 1: to get Nazac to our Yarine target of sixteen thousand.

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Speaker 1: You know, it's funny day when I look at Microsoft,

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Speaker 1: I look at the stock and you know, I'm I've

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Speaker 1: been in this market long enough to really kind of

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Speaker 1: follow the Microsoft story from day one. When there's a

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Speaker 1: you know, I lost decade or so for this company,

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Speaker 1: and I feel like such an Adela it doesn't get

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Speaker 1: the do that he has deserved, you know, even like

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Speaker 1: maybe not an Elon Musk but a Tim Cook or

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Speaker 1: some of the other guys from Silicon Valley. The job

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Speaker 1: he's done in repositioning this company, I think it's just

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Speaker 1: an extraordinary story. How do you think about it? Nadela

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Speaker 1: is in the Hall of Fames. I mean, for any

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Speaker 1: company what you see in the last fifteen years play

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Speaker 1: out what he's done in Microsoft, transforming them into a

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Speaker 1: cloud behemus go back to when he took over stocks

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Speaker 1: thirty and forty, Mini thought that was really just gonna

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Speaker 1: be another mature company playing out. I believe he is

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Speaker 1: up there with the likes of Besos Cooking others in

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Speaker 1: terms of what he's done. Nonetheless, when you look at

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Speaker 1: the I mean I look at cop charts all the time, UM,

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Speaker 1: which is automatically a five year chart on the Bloomberg terminal.

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Speaker 1: And although Microsoft has done better than almost all of

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Speaker 1: the mega tech peers. In fact, Microsoft for the last

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Speaker 1: five years done better than Google, Apple, Netflix, Amazon, UM,

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Speaker 1: but it just pales in comparison to Tesla. Like this

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Speaker 1: chart is unbelievable to look at. Look it is. I mean,

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Speaker 1: we're seeing, you know what what what's really some of

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Speaker 1: the most transformational growth they're really ever been witnessed in

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Speaker 1: the last thirty years. And I think you put these

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Speaker 1: stories on a pedestal Tessa, Amazon, Netflix, of course, Apple

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Speaker 1: and others, and I think what you're seeing there is

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Speaker 1: that more investors are starting to recognize the transformation that's happening,

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Speaker 1: and you're seeing the stock continue to reread as this

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Speaker 1: all takes place. All right, It's it's a pretty incredible story,

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Speaker 1: to say the least. And Dan has been at the

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Speaker 1: forefront of this without performs. Yeah, it's it's been amazing

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Speaker 1: and I'm sorry about Penn State. I really was thinking

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Speaker 1: of Dan. Now. We have to go to Columbus this weekend.

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Speaker 1: Hope boy, oh, the Ohio State University University. Dan ives

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Speaker 1: there from web Bush Morgan. Always great to get a

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Speaker 1: little bit of time with him. This is Bloomberg, all right,

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Speaker 1: Let's bring in David Harden right now. He's the CEO

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Speaker 1: and chief investment officer at Summit Global Investments. They have

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Speaker 1: one point eight billion dollars in assets under management. And uh, Dave,

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Speaker 1: I'll just ask you what I've been asking everybody today. Um,

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Speaker 1: we're at an all time high on the S and

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Speaker 1: P five, even though we face so many headwinds and

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Speaker 1: there are so many question marks out there as well, Um,

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Speaker 1: what do you make of the SMP. It's pretty amazing

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Speaker 1: and the markets always had to climb a wall of

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Speaker 1: worry and so definitely, I continue to think this is

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Speaker 1: going to be choppy, but I do think it's higher ahead.

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Speaker 1: And hey, thanks for having me on your should today.

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Speaker 1: But that's what I'm that's what I see all right, David.

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Speaker 1: You know, as Matt was just suggesting here, you know,

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Speaker 1: with this market at the all time high, a lot

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Speaker 1: of valuation concerns in there. That's a big part of

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Speaker 1: that wall of worry. But we've had really good earnings

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Speaker 1: this third quarter period. Do you think earnings are strong

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Speaker 1: enough to support the valuation here? Well, clearly, and and

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Speaker 1: the earnings have been crushing it. And I think that

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Speaker 1: the earnings revisions will continue. I think that the earnings

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Speaker 1: will continue to do well. Yes, growth is slowing, and

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Speaker 1: that absolutely inflation is out there, and I think that's

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Speaker 1: flattening the yield curve, and I see the tenure going

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Speaker 1: to two percent. But I don't see the bubble bursting

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Speaker 1: until the FED becomes negative towards the market. I think

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Speaker 1: this thing continues and so choppy trading, but you know,

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Speaker 1: for me, it's still equities ahead and and cautiously optimistic here,

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Speaker 1: but equities still it's the place to play. What what

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Speaker 1: is the FED gonna do? I mean, especially now that

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Speaker 1: so many people are talking about the possibility of Chinese

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Speaker 1: growth slowing maybe less than five percent next year, it

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Speaker 1: seems to me difficult for the FED raise rates in

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Speaker 1: that kind of situation. Um, and it is and it's

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Speaker 1: going to be difficult, and I think that there's gonna

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Speaker 1: you know, it doesn't mean that we're going to be

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Speaker 1: straight up forever. The market has cycles and people have

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Speaker 1: to understand. I think that risk management needs to become

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Speaker 1: more central in their investing mindset, and that's one of

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Speaker 1: the things we do at s c I is that,

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Speaker 1: you know, we focus on managing risk and providing the

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Speaker 1: protection that the clients deserve when they're in those situations

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Speaker 1: in the future. Because let's face it, the more risk

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Speaker 1: management you put in your portfolio, the more that it

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Speaker 1: will perform how you designed it to do. So you know,

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Speaker 1: there is gonna be a time a time of reckoning,

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Speaker 1: and it's gonna and it's gonna be very important to

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Speaker 1: investors that their positioned correctly. Many times we just talked

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Speaker 1: about the next trade and not about the investment long term,

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Speaker 1: and those are two different conversations. David, you've got to

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Speaker 1: sell on Southwest Airlines. Is that a call on the

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Speaker 1: sector or a call on the fact that Southwest Council's

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Speaker 1: flights every day? It's more well the latter, right, I

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Speaker 1: think that if you're in this sector UM and and

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Speaker 1: there's still business travels still extremely weak. We know that

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Speaker 1: right and we know that UM with the pandemic with Delta,

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Speaker 1: even though maybe the numbers look better than they did

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Speaker 1: last week, so to speak, are we coming out of this?

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Speaker 1: We get scarce all the time, but people are getting

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Speaker 1: their third shot now. So I think the sector. I'm

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Speaker 1: not negative on the sector. But Southwest has continue to

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Speaker 1: have problems. It's had problems in their c suite. We've

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Speaker 1: seen that this year. We can CEO changes and different things.

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Speaker 1: They've had problems now with their computer systems. And what

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Speaker 1: you want to understand what those thousands of cancelations is

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Speaker 1: the next time people go to book a flight, do

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Speaker 1: they think in their minds, I don't. I don't know,

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Speaker 1: maybe Southwest is going to cancel me. Once that happens,

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Speaker 1: they booked somewhere else, you lose revenue. So the seventy

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Speaker 1: five million one time charge great, but what about the

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Speaker 1: next flight? That's what I'm worried about with Southwest. I

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Speaker 1: see a lot of downside volatility here or risk, and

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Speaker 1: so from my standpoint, short term struggles. If you're going

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Speaker 1: to be in this sector, avoid Southwest. You do like

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Speaker 1: x On Mobile, and this is a company that I

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Speaker 1: think a lot of people with E s G concerns

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Speaker 1: would have void what draws you to the big oil?

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Speaker 1: You know, it's interesting we've been doing E s G

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Speaker 1: before e SU was sexting that and and before it

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Speaker 1: was even called that, And so sometimes E s G

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Speaker 1: is not always about not uh, it's it's more about

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Speaker 1: doing what you do really well and avoiding damage. Right. So,

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Speaker 1: if Exon was responsible for the oil spill that was

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Speaker 1: off the hunt it'son beach coach coast last two or

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Speaker 1: three weeks ago, that'd be really bad. But they're not,

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Speaker 1: and they're doing really well and you're getting a really

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Speaker 1: well paid yield here. Um, you're getting very manageable risk,

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Speaker 1: really good management team. And our call is that oil

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Speaker 1: stays above where it's at, or stays where it's at

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Speaker 1: right now for a longer period of time. And let's

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Speaker 1: face it, at this price of crude, excellent is a

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Speaker 1: really good opportunity and it's a good value play too.

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Speaker 1: So from my standpoint, energy right now is a really

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Speaker 1: good play and I would be increasing my energy exposure

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Speaker 1: if I was a client. Dave, you're salt Lake cities

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Speaker 1: at right correct, we're out of Salt Lake with offices

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Speaker 1: in Boise, San Francisco, and Tampa. Let's getting the important stuff.

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Speaker 1: How's the snow going to be in Utah this year? Well,

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Speaker 1: after a foot of snow last night, nice continued going

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Speaker 1: this morning, and a storm every about three days. Our

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Speaker 1: resorts are opening up sooner than they've ever done before,

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Speaker 1: and so I think it's gonna be a fantastic ski season.

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Speaker 1: But I love the skis um book. I've already booked

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Speaker 1: two trips out there, so it you know, better keep

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Speaker 1: dumping after missing skiing for a couple of years, it's

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Speaker 1: gonna be great to get back. Boy. We always make

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Speaker 1: plans to do something different, crazy Montana or this or that.

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Speaker 1: Then again, he screw it. It's flying to Salt Lake.

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Speaker 1: We got world class resorts, you know, minutes away. It's

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Speaker 1: just Park City, much easier. Yeah, I know. Awesome, awesome,

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Speaker 1: all right. Dave Harden, CEO and Chief investment officer Summit

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Speaker 1: Global Investments and our Utah ski man on the ground.

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Speaker 1: We appreciate that. Markets again trading higher again. Good earnings,

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Speaker 1: we had some good earnings. We have more big tech

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Speaker 1: after the close today, but as Dave said, earnings doing

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Speaker 1: their part here for this market. Let's bring in Fiona

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Speaker 1: Sencata right now, senior financial markets analyst at City Index,

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Speaker 1: and Fiona as a journalist. We have to try and

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Speaker 1: be skeptical. It's not hard right now. Uh, supply chain,

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Speaker 1: I don't think crisis is a is a too strong

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Speaker 1: a word to use. Labor shortages, inflation scares, and yet

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Speaker 1: we're trading at basically forty six hundred right now on

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Speaker 1: the SMP. That's got to be a game of like

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Speaker 1: twenty year to day what's going on, that's right. I mean,

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Speaker 1: it does feel that very much, this sort of optionism

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Speaker 1: that's coming out of earnings at the moment, which is

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Speaker 1: actually just lifting the stocks. There's very much the shadowing

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Speaker 1: the concerns that we saw heading into earning seasons that

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Speaker 1: the inflation confirms, just to surroundings of the labor market,

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Speaker 1: the sort of energy crisis and supply chain bottlenecks, all

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Speaker 1: that seems to be just being overshadowed right now by

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Speaker 1: some some nice strong earnings that we've seen, and I

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Speaker 1: think we're not seeing sort of the reflection yet of

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Speaker 1: those sort of concerns thing really shown through in the

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Speaker 1: earnings from that's something that's helping sort of investors optimism. UM.

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Speaker 1: Just for example, the as far as supply chain bottlenecks

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Speaker 1: were concern, I think that's very much to see that

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Speaker 1: sort of starting to come through in the following quarter.

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Speaker 1: And I think that's just what we're seeing at the moment,

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Speaker 1: is the market or at that sort of happy point

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Speaker 1: where things although we know there are a lot of

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Speaker 1: headwinds coming and there are problems surrounding, the numbers just

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Speaker 1: aren't quite showing that yet. And also we've got sort

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Speaker 1: of consumer confidence data came through today much better than

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Speaker 1: expected as well, and so that really helps lift up

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Speaker 1: the mood. Adding to that upb we were expecting to

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Speaker 1: meet consumer confidence to come in much lower and to

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Speaker 1: fall for a fourth straight months. It's actually had a

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Speaker 1: surprise jump. So that does bode well in fact for

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Speaker 1: the the the economic pick up picture for the start

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Speaker 1: of the fourth quarter. UM. If you know, we have

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Speaker 1: some big techno names reporting earnings after the closed Microsoft

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Speaker 1: alphabet and which I prefer to as Google on old school,

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Speaker 1: how are you thinking about the text base right here? Yes,

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Speaker 1: so we've had some good numbers, haven't we I mean,

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Speaker 1: I think we've had as far as the Facebook was concerned,

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Speaker 1: that was as far as I'm concerned, that came better

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Speaker 1: than we were expecting in the sense that we saw

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Speaker 1: that beat on the earning pressure. Revenue was a little

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Speaker 1: bit on the disappointing side, but that perhaps isn't so

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Speaker 1: surprising given what we know about what's happening with Apple

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Speaker 1: and the the privacy policy change there, and as far

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Speaker 1: as what we're expecting from from Microsoft to Alphabet, I mean,

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Speaker 1: if we think about how these have rallied over the

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Speaker 1: past six months, I mean Microsoft are up thirty over

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Speaker 1: the past six months, Alphabets up year today, So there

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Speaker 1: are pretty high expectations for these stocks. But I mean

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Speaker 1: with Alphabet, for example, not only Google proved to be

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Speaker 1: resilient as far as sort of advertising revenue concern, we

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Speaker 1: do see it sort of picking up as well from

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Speaker 1: that gain in the pickup in travel sector and travel searches,

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Speaker 1: which is going to help it along as well. Microsoft

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Speaker 1: very much been involved with that remote working companies sort

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Speaker 1: of increasingly spend on cloud and on digital transformations because

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Speaker 1: of that remote working. This is all very supportive of

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Speaker 1: the tech sector. I think we've still got you know,

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Speaker 1: we've seen these stocks trading out record highs and they

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Speaker 1: have eased off some of them. I think they could

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Speaker 1: potentially push higher if we get some more solid numbers

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Speaker 1: in terms of the in terms of next year, what

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Speaker 1: are you expecting, because the consumer confidence numbers, although they

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Speaker 1: were good just now, have been lacking of late, and

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Speaker 1: I've heard more and more people use the word recession.

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Speaker 1: I think recession is quite a strong word sense still,

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Speaker 1: I think we we will see a sort of very

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Speaker 1: much a change as we're going into next year. Obviously,

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Speaker 1: let's not forget this year has been very much about recovery, rebounding.

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Speaker 1: We've had the support from the fiscal support. We've also

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Speaker 1: had military policy support. And those taps are going to

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Speaker 1: be turned off, we know, sort of as far as

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Speaker 1: the Fed is concerned, will be looking for that for

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Speaker 1: the taping in them. Those bond purchases to start happening,

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Speaker 1: you know, potentially as soon as November December, and then

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Speaker 1: as far as interest rates being heiked, that's something that

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Speaker 1: could really start to flow the growth that we're seeing.

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Speaker 1: I do think recessions a very strong word. I think

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Speaker 1: there are concerns about as far as growth is trying

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Speaker 1: to flow, particularly as we see those these supply chain

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Speaker 1: bottom x the energy crisis sort of moves through the

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Speaker 1: market and the markets come to terms with those and

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Speaker 1: moved past them. But I think the as Sara's actually

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Speaker 1: greatest concern, and do you think we'll continue to see growth,

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Speaker 1: but just as a much slower pace, And obviously any

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Speaker 1: rising interest rates that bring sort of inslation back under

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Speaker 1: control will just sort of stem that groat a little

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Speaker 1: bit more. You mentioned energy just real quickly, I'm seeing

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Speaker 1: w t I just about eighty five dollars a barrel.

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Speaker 1: Have I missed the energy stock trade or the energy

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Speaker 1: commodity trade. No, I think there is more here. I mean,

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Speaker 1: I get energy, and as far as oil is concerned,

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Speaker 1: it's had a very impressive run I mean we know

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Speaker 1: sort of coal prices and gas prices have absolutely surge,

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Speaker 1: and w t I has also had a very good

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Speaker 1: run up. Was just in the the gas and the

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Speaker 1: coal prices starting to edge down after we've had that

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Speaker 1: intervention from China, particularly in the coal market. But I

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Speaker 1: think as far as oil in this concern, we know

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Speaker 1: that demand is still very strong, particularly in the US,

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Speaker 1: and then we've also got to very tight supplies from Ope,

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Speaker 1: they're not looking to sort of move so far beyond

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Speaker 1: those four D extra barrels they agreed back into life,

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Speaker 1: So so I think there is further to run that

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Speaker 1: all right, Fiana, thank you so much for joining us.

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Speaker 1: As always, Fiona and card A, senior financial markets analysts

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Speaker 1: for City in next giving her her thoughts on these

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Speaker 1: markets again earnings after the close, Big Tech, this is Bloomberg.

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Speaker 1: Now we got us new home sales numbers um UH

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Speaker 1: sales of new homes in America increase in September to

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Speaker 1: the highest level in six months, underscoring what we already

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Speaker 1: knew was pretty solid underlying demand. Brad Dillman joins us

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Speaker 1: right now, chief economists at Courtland out of Atlanta, And Brad,

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Speaker 1: what do you think I mean? We knew it was

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Speaker 1: going to be hot, but I'm not sure everybody knew

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Speaker 1: that purchases of single family homes would grow fourteen percent

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Speaker 1: to an annualized eight hundred thousand. It's definitely higher than expectations.

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Speaker 1: The figure I had had in front of me for

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Speaker 1: the expectations figure with seven twenty thousand on a seasonally

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Speaker 1: does at annualized basis so it's certainly be what most

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Speaker 1: models have been predicting. You know, one of the things

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Speaker 1: as we think about the housing market bread it's been

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Speaker 1: so consistently strong through this entire economic tumult from the pandemic,

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Speaker 1: But when we think about the supply of housing in

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Speaker 1: the US, it hasn't been necessarily where it's needed. I'm

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Speaker 1: thinking the entry level home. We haven't seen new home

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Speaker 1: construction really address that market. Uh, Is that changing at all? No, Unfortunately,

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Speaker 1: it's not that. If we look at the price movement

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Speaker 1: in what's happened on the new home sales side. For example,

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Speaker 1: the median price came in it fo UM. That's up

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Speaker 1: from about eight thousand pre COVID and US. To put

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Speaker 1: it an a broader reference, twenty years ago, the price

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Speaker 1: for a new home would have been about a hundred

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Speaker 1: and sixty eight thousand, So that's a two and a

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Speaker 1: half times increase. So we are definitely seeing those prices

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Speaker 1: continue to take up. Now. I would make the argument

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Speaker 1: that that's in part due to financial conditions, and I

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Speaker 1: think part of the reason that housing has been so

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Speaker 1: strong since the onset of the pandemic has been what's

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Speaker 1: gone on and with mortgage rates, which is that they've

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Speaker 1: come down so much and remain quite low. Um. I've

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Speaker 1: talked in the past about the tenure tregury rate being

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Speaker 1: negative in real terms once week factor and inflation and

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Speaker 1: an aspect of this passing through the mortgage rates with

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Speaker 1: they're being really low as well. But when we look

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Speaker 1: to new homesale too, you know, we had this huge

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Speaker 1: rebound in the wake of the pandemic that it's then

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Speaker 1: cooled a bit. And now I'd say when I look

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Speaker 1: at this figure, I'd say it's it's really resuming its

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Speaker 1: pre COVID trend. So maybe we'll see a continuation of

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Speaker 1: that going for what is I mean, it's a very

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Speaker 1: regional market, right The United States is gigantic and um,

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Speaker 1: you know I realized that even more having lived in

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Speaker 1: Europe for for years. Now, where do you see the

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Speaker 1: strongest growth and where do you see a little bit

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Speaker 1: more normalcy? So month to months, the big games have

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Speaker 1: been in the Northeast and the south. Um, I wouldn't

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Speaker 1: really say that we're you know, the other parts of

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Speaker 1: the country and again we're talking large regions, you know,

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Speaker 1: are in a bad spot. We gotta remember when we

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Speaker 1: look at the new home sales figure. While it was strong,

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Speaker 1: it actually is still down year to year. And so

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Speaker 1: I mentioned earlier, you know, in the latter half of

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Speaker 1: we really saw some strong figures that cooled off a

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Speaker 1: lot in the first part of this year, and we're

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Speaker 1: now seeing them swing back up again and resume that

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Speaker 1: pre COVID trend. Brad, you know, I'm still at a loss.

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Speaker 1: I'm gonna follow on my prior question. Why isn't the market,

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Speaker 1: the housing market more efficient? I e. There's demand at

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Speaker 1: the low end, and there's where's the supply to meet

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Speaker 1: that demand. I mean, I know the margins on the

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Speaker 1: McMansion are better for builders, but at some point the

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Speaker 1: pricing dynamic has to drive supply of lower end housing. Yeah,

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Speaker 1: and I argue to a degree. We have seen, of course,

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Speaker 1: over the last ten years, we've seen supply pick up.

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Speaker 1: It just hasn't kept pace with our population growth. So

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Speaker 1: there's estimates out there related to our total deficit of housing.

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Speaker 1: The The estimate that I have is one point one

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Speaker 1: million housing units. That's to say that we would need

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Speaker 1: to build one point one million housing units instantaneously just

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Speaker 1: to satisfy what we would need right now. That's nothing

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Speaker 1: to do with sort of a go forward basis, just

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Speaker 1: to clean things right now. And so when I look

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00:24:28,480 --> 00:24:30,800
Speaker 1: at the last ten years, I see the difficulty for

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00:24:30,840 --> 00:24:33,680
Speaker 1: home builders really being in what I would call artificial

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00:24:33,760 --> 00:24:36,000
Speaker 1: home price appreciation that came about from the kind of

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00:24:36,080 --> 00:24:39,120
Speaker 1: policies that we've set about on to stimulate housing coming

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00:24:39,119 --> 00:24:41,760
Speaker 1: out of the Great Recession. If you raise home prices

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00:24:41,840 --> 00:24:44,440
Speaker 1: to the point that people can't afford them, there's really

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00:24:44,480 --> 00:24:47,359
Speaker 1: not a big market into which home builders can build

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00:24:47,400 --> 00:24:49,560
Speaker 1: and deliver supply. And that's precisely what's happened at the

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00:24:49,640 --> 00:24:53,520
Speaker 1: low end. Even though this situation has to a degree

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00:24:53,960 --> 00:24:57,639
Speaker 1: uh been solved over the last ten years, as as

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00:24:57,640 --> 00:25:01,480
Speaker 1: our total amount of housing completions has in increased, we

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00:25:01,600 --> 00:25:06,119
Speaker 1: haven't have we seen UM rentals keep up then with

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00:25:06,320 --> 00:25:09,760
Speaker 1: the demand for housing. I mean, do people who can

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00:25:09,880 --> 00:25:13,680
Speaker 1: afford to buy houses, do they end up renting places instead?

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00:25:13,960 --> 00:25:17,320
Speaker 1: Has it working out? Yes? So there's been some huge

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00:25:17,320 --> 00:25:19,680
Speaker 1: strength in the multifamily space and in the single family

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00:25:19,720 --> 00:25:22,240
Speaker 1: rental space, and in fact q Tree annual rent growth

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00:25:22,400 --> 00:25:25,880
Speaker 1: in multi family came in much stronger than expectations UM

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00:25:26,040 --> 00:25:29,320
Speaker 1: and the occupancy rates and multi family remained very tight. Now,

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00:25:29,400 --> 00:25:31,840
Speaker 1: what's interesting is during the pandemic, when we saw lots

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00:25:31,880 --> 00:25:34,400
Speaker 1: of people move out to buy homes, we did see

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00:25:34,520 --> 00:25:37,560
Speaker 1: that these vacant rental units were back silled by something

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00:25:37,600 --> 00:25:40,280
Speaker 1: that we've covered in surveys as first time renters. So

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00:25:40,359 --> 00:25:42,480
Speaker 1: that's something we can see with call it your younger

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00:25:42,560 --> 00:25:44,679
Speaker 1: millennials at this point or older gen zers who are

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00:25:44,680 --> 00:25:47,399
Speaker 1: able to move out and form their own household as

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00:25:47,680 --> 00:25:51,199
Speaker 1: as those units become vacant um. But where that's going

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00:25:51,240 --> 00:25:52,960
Speaker 1: to be heading going forward. You know, if we if

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Speaker 1: we do see mortgage rates take up in the wake

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Speaker 1: of a taper, and we see activity in the floor

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00:25:56,840 --> 00:25:59,400
Speaker 1: purchase space start to slow down a little bit, maybe

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00:25:59,440 --> 00:26:02,639
Speaker 1: in some ae month's time, we may see higher renewal

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00:26:02,760 --> 00:26:05,440
Speaker 1: rates again in multi family, something that's already been relatively

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00:26:05,480 --> 00:26:07,680
Speaker 1: consistent over the last call it six months or so.

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00:26:07,800 --> 00:26:11,520
Speaker 1: That's the same increase in renewal rates in Reynolds. Interesting stuff.

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Speaker 1: You can always talk real estate lots going on out there.

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Speaker 1: Brad Dillman, chief economist for Courtland, joining us on the

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00:26:18,119 --> 00:26:21,200
Speaker 1: phone there, and again, the real estate market remains very,

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Speaker 1: very strong. We saw that in the in the ECO

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Speaker 1: numbers today coming out of d c UM. So good

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Speaker 1: time to be a seller of a house. Not so

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Speaker 1: sure enough already a buyer. But Matt's going to give

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Speaker 1: us some on the ground, real world feedback starting next week.

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Speaker 1: Thanks for listening to the Bloomberg Markets podcast. You can

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00:26:40,600 --> 00:26:44,359
Speaker 1: subscribe and listen to interviews with Apple Podcasts or whatever

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00:26:44,480 --> 00:26:48,119
Speaker 1: podcast platform you prefer. I'm Matt Miller. I'm on Twitter

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00:26:48,440 --> 00:26:51,879
Speaker 1: at Matt Miller three pt on Ball Sweeney I'm on

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00:26:51,920 --> 00:26:54,840
Speaker 1: Twitter at pt Sweeney. Before the podcast, you can always

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00:26:54,880 --> 00:26:56,720
Speaker 1: catch us worldwide at Bloomberg Radio