Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
Speaker 1: my co host Matt Miller. Every business day we bring
Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
Speaker 1: at Bloomberg dot com slash podcast. The conversation of the
Speaker 1: morning certainly for me. Dan Eyves, Mountaging director Equity Research
Speaker 1: at web Securities, UM, Penn State alum and a bad
Speaker 1: loss last week Matt, Penn State lost to Illinois. At
Speaker 1: saw that and I thought of Dan when I saw
Speaker 1: it nine overtimes? I mean, who plays nine overtimes? Anyway?
Speaker 1: All right, Dan, thanks so much for joining us here.
Speaker 1: We got Microsoft after the close. I want to get
Speaker 1: your thoughts as we go into that, But first let's
Speaker 1: start with Tesla. I mean, Elon Musk is worth more
Speaker 1: than you know, pretty much the rest of the stock
Speaker 1: market at this point here, this stock to me is
Speaker 1: showing really no signs of concern about rising competence from
Speaker 1: the existing O E M. How do you view that? Look,
Speaker 1: I think we're seeing the biggest transformation to the auto
Speaker 1: industry since nanteen fifties, and Tesla's leading the way on
Speaker 1: ev s and it's really been the one to punch
Speaker 1: in terms of what we saw on deliveries last week.
Speaker 1: Profitability and it hurts is a tipping point. I think
Speaker 1: it's an inflection point overall on evs. There's a five
Speaker 1: trillion dollar market and I think this is just sort
Speaker 1: of the middle innings of the street. Further appreciating this
Speaker 1: Tesla and ev story, Yeah, I mean, what an amazing story.
Speaker 1: Ordering a hundred thousand Model three Dan As close as
Speaker 1: I can figure, this is basically list price that they're paying. Well,
Speaker 1: that's really what sticks out. You know, normally you'll see
Speaker 1: discount tenss price because right now Tesla, it's Tesla's world.
Speaker 1: Everyone else paying rent and evs because demands out strip
Speaker 1: being supplied by about ten per cent. Now you start
Speaker 1: the trajectory out where this could go along with supply
Speaker 1: coming on with Berlin in Austin million today, this could
Speaker 1: be two million a year, and I think that's what
Speaker 1: you're started seeing the stock even look, the heaters will
Speaker 1: heat continue here, but right now, as you're seeing this,
Speaker 1: it's hard for investors to dismiss this green tide away
Speaker 1: playing out, And Dan, how do you think this EV
Speaker 1: market will shake out in ten years time? Well, when
Speaker 1: assuming everybody who's in anybody will have a full complement,
Speaker 1: a full lineup of electric vehicles, where do you think
Speaker 1: Tesla's position will be? Would they kind of be the
Speaker 1: Porsche of the auto industry? Can I just can I
Speaker 1: just point out, speaking of Porsche, the owner of Porsche
Speaker 1: and Lamborghini, Ducatti, Bentley, Bugatti, um Folkswagen and Audi, they
Speaker 1: have a market cap of a hundred fifty million dollars.
Speaker 1: Tesla's billion dollars. Tesla's worth more than a trillion. How
Speaker 1: does that make any sense? Well, look, it's a great point.
Speaker 1: I I've never viewed, and I know we've talked about
Speaker 1: the last decade Tessa as an automotive company. View them
Speaker 1: is the disruptive technology player. But I do think to
Speaker 1: Paul's question, v W for GM and and others is
Speaker 1: part of this five trillion dollar e V transformation. It's
Speaker 1: it's not a zero or some game. They're all going
Speaker 1: to benefit. I mean, you put on perspective, you have
Speaker 1: three million evs in the road globally, have a hundred
Speaker 1: million cars. I believe that's fifty million the end of
Speaker 1: the decade, and Tessa is going to have a significant
Speaker 1: market share of that. But but others are going to
Speaker 1: benefit as well. And that's why this is something you
Speaker 1: look at the rerating that's going to start to happen
Speaker 1: so or what happened GM forward VW because more and
Speaker 1: more investors are going to value that disruptive e VPS
Speaker 1: like a technology ps, not traditional automotive. All right, let's
Speaker 1: switch gears here to our good friends from Seattle, Washington.
Speaker 1: UM Microsoft all time hyphe poy put up that max
Speaker 1: chart on your Bloomberg terminal GP go just extraordinary. What
Speaker 1: do you expect after the close from Microsoft? In I
Speaker 1: think another world series performance by by Nidel and Microsoft,
Speaker 1: I mean continues out the golden touch on cloud cloud
Speaker 1: Armor is playing out, but Microsoft is gaining more and
Speaker 1: more share. This is just the growth story still underestimated
Speaker 1: by the street. So we have a three seventy five
Speaker 1: price target. I think it's just another sort of beaten
Speaker 1: raised special coming out of Redmond. And you see that
Speaker 1: for the other tech companies as well. For Alphabet, Oh yeah,
Speaker 1: I think this is gonna be just a headline week
Speaker 1: for tech across the board Social Media week link because
Speaker 1: what we're seeing on the Apple privacy, I think Apple,
Speaker 1: you're gonna see robust coming out despite chip short just
Speaker 1: right now, demand now stripped and supply by about ten
Speaker 1: million iPhones. Alphabet as well in digital advertising. I believe
Speaker 1: this is sort of the fuel in the tank now
Speaker 1: to get Nazac to our Yarine target of sixteen thousand.
Speaker 1: You know, it's funny day when I look at Microsoft,
Speaker 1: I look at the stock and you know, I'm I've
Speaker 1: been in this market long enough to really kind of
Speaker 1: follow the Microsoft story from day one. When there's a
Speaker 1: you know, I lost decade or so for this company,
Speaker 1: and I feel like such an Adela it doesn't get
Speaker 1: the do that he has deserved, you know, even like
Speaker 1: maybe not an Elon Musk but a Tim Cook or
Speaker 1: some of the other guys from Silicon Valley. The job
Speaker 1: he's done in repositioning this company, I think it's just
Speaker 1: an extraordinary story. How do you think about it? Nadela
Speaker 1: is in the Hall of Fames. I mean, for any
Speaker 1: company what you see in the last fifteen years play
Speaker 1: out what he's done in Microsoft, transforming them into a
Speaker 1: cloud behemus go back to when he took over stocks
Speaker 1: thirty and forty, Mini thought that was really just gonna
Speaker 1: be another mature company playing out. I believe he is
Speaker 1: up there with the likes of Besos Cooking others in
Speaker 1: terms of what he's done. Nonetheless, when you look at
Speaker 1: the I mean I look at cop charts all the time, UM,
Speaker 1: which is automatically a five year chart on the Bloomberg terminal.
Speaker 1: And although Microsoft has done better than almost all of
Speaker 1: the mega tech peers. In fact, Microsoft for the last
Speaker 1: five years done better than Google, Apple, Netflix, Amazon, UM,
Speaker 1: but it just pales in comparison to Tesla. Like this
Speaker 1: chart is unbelievable to look at. Look it is. I mean,
Speaker 1: we're seeing, you know what what what's really some of
Speaker 1: the most transformational growth they're really ever been witnessed in
Speaker 1: the last thirty years. And I think you put these
Speaker 1: stories on a pedestal Tessa, Amazon, Netflix, of course, Apple
Speaker 1: and others, and I think what you're seeing there is
Speaker 1: that more investors are starting to recognize the transformation that's happening,
Speaker 1: and you're seeing the stock continue to reread as this
Speaker 1: all takes place. All right, It's it's a pretty incredible story,
Speaker 1: to say the least. And Dan has been at the
Speaker 1: forefront of this without performs. Yeah, it's it's been amazing
Speaker 1: and I'm sorry about Penn State. I really was thinking
Speaker 1: of Dan. Now. We have to go to Columbus this weekend.
Speaker 1: Hope boy, oh, the Ohio State University University. Dan ives
Speaker 1: there from web Bush Morgan. Always great to get a
Speaker 1: little bit of time with him. This is Bloomberg, all right,
Speaker 1: Let's bring in David Harden right now. He's the CEO
Speaker 1: and chief investment officer at Summit Global Investments. They have
Speaker 1: one point eight billion dollars in assets under management. And uh, Dave,
Speaker 1: I'll just ask you what I've been asking everybody today. Um,
Speaker 1: we're at an all time high on the S and
Speaker 1: P five, even though we face so many headwinds and
Speaker 1: there are so many question marks out there as well, Um,
Speaker 1: what do you make of the SMP. It's pretty amazing
Speaker 1: and the markets always had to climb a wall of
Speaker 1: worry and so definitely, I continue to think this is
Speaker 1: going to be choppy, but I do think it's higher ahead.
Speaker 1: And hey, thanks for having me on your should today.
Speaker 1: But that's what I'm that's what I see all right, David.
Speaker 1: You know, as Matt was just suggesting here, you know,
Speaker 1: with this market at the all time high, a lot
Speaker 1: of valuation concerns in there. That's a big part of
Speaker 1: that wall of worry. But we've had really good earnings
Speaker 1: this third quarter period. Do you think earnings are strong
Speaker 1: enough to support the valuation here? Well, clearly, and and
Speaker 1: the earnings have been crushing it. And I think that
Speaker 1: the earnings revisions will continue. I think that the earnings
Speaker 1: will continue to do well. Yes, growth is slowing, and
Speaker 1: that absolutely inflation is out there, and I think that's
Speaker 1: flattening the yield curve, and I see the tenure going
Speaker 1: to two percent. But I don't see the bubble bursting
Speaker 1: until the FED becomes negative towards the market. I think
Speaker 1: this thing continues and so choppy trading, but you know,
Speaker 1: for me, it's still equities ahead and and cautiously optimistic here,
Speaker 1: but equities still it's the place to play. What what
Speaker 1: is the FED gonna do? I mean, especially now that
Speaker 1: so many people are talking about the possibility of Chinese
Speaker 1: growth slowing maybe less than five percent next year, it
Speaker 1: seems to me difficult for the FED raise rates in
Speaker 1: that kind of situation. Um, and it is and it's
Speaker 1: going to be difficult, and I think that there's gonna
Speaker 1: you know, it doesn't mean that we're going to be
Speaker 1: straight up forever. The market has cycles and people have
Speaker 1: to understand. I think that risk management needs to become
Speaker 1: more central in their investing mindset, and that's one of
Speaker 1: the things we do at s c I is that,
Speaker 1: you know, we focus on managing risk and providing the
Speaker 1: protection that the clients deserve when they're in those situations
Speaker 1: in the future. Because let's face it, the more risk
Speaker 1: management you put in your portfolio, the more that it
Speaker 1: will perform how you designed it to do. So you know,
Speaker 1: there is gonna be a time a time of reckoning,
Speaker 1: and it's gonna and it's gonna be very important to
Speaker 1: investors that their positioned correctly. Many times we just talked
Speaker 1: about the next trade and not about the investment long term,
Speaker 1: and those are two different conversations. David, you've got to
Speaker 1: sell on Southwest Airlines. Is that a call on the
Speaker 1: sector or a call on the fact that Southwest Council's
Speaker 1: flights every day? It's more well the latter, right, I
Speaker 1: think that if you're in this sector UM and and
Speaker 1: there's still business travels still extremely weak. We know that
Speaker 1: right and we know that UM with the pandemic with Delta,
Speaker 1: even though maybe the numbers look better than they did
Speaker 1: last week, so to speak, are we coming out of this?
Speaker 1: We get scarce all the time, but people are getting
Speaker 1: their third shot now. So I think the sector. I'm
Speaker 1: not negative on the sector. But Southwest has continue to
Speaker 1: have problems. It's had problems in their c suite. We've
Speaker 1: seen that this year. We can CEO changes and different things.
Speaker 1: They've had problems now with their computer systems. And what
Speaker 1: you want to understand what those thousands of cancelations is
Speaker 1: the next time people go to book a flight, do
Speaker 1: they think in their minds, I don't. I don't know,
Speaker 1: maybe Southwest is going to cancel me. Once that happens,
Speaker 1: they booked somewhere else, you lose revenue. So the seventy
Speaker 1: five million one time charge great, but what about the
Speaker 1: next flight? That's what I'm worried about with Southwest. I
Speaker 1: see a lot of downside volatility here or risk, and
Speaker 1: so from my standpoint, short term struggles. If you're going
Speaker 1: to be in this sector, avoid Southwest. You do like
Speaker 1: x On Mobile, and this is a company that I
Speaker 1: think a lot of people with E s G concerns
Speaker 1: would have void what draws you to the big oil?
Speaker 1: You know, it's interesting we've been doing E s G
Speaker 1: before e SU was sexting that and and before it
Speaker 1: was even called that, And so sometimes E s G
Speaker 1: is not always about not uh, it's it's more about
Speaker 1: doing what you do really well and avoiding damage. Right. So,
Speaker 1: if Exon was responsible for the oil spill that was
Speaker 1: off the hunt it'son beach coach coast last two or
Speaker 1: three weeks ago, that'd be really bad. But they're not,
Speaker 1: and they're doing really well and you're getting a really
Speaker 1: well paid yield here. Um, you're getting very manageable risk,
Speaker 1: really good management team. And our call is that oil
Speaker 1: stays above where it's at, or stays where it's at
Speaker 1: right now for a longer period of time. And let's
Speaker 1: face it, at this price of crude, excellent is a
Speaker 1: really good opportunity and it's a good value play too.
Speaker 1: So from my standpoint, energy right now is a really
Speaker 1: good play and I would be increasing my energy exposure
Speaker 1: if I was a client. Dave, you're salt Lake cities
Speaker 1: at right correct, we're out of Salt Lake with offices
Speaker 1: in Boise, San Francisco, and Tampa. Let's getting the important stuff.
Speaker 1: How's the snow going to be in Utah this year? Well,
Speaker 1: after a foot of snow last night, nice continued going
Speaker 1: this morning, and a storm every about three days. Our
Speaker 1: resorts are opening up sooner than they've ever done before,
Speaker 1: and so I think it's gonna be a fantastic ski season.
Speaker 1: But I love the skis um book. I've already booked
Speaker 1: two trips out there, so it you know, better keep
Speaker 1: dumping after missing skiing for a couple of years, it's
Speaker 1: gonna be great to get back. Boy. We always make
Speaker 1: plans to do something different, crazy Montana or this or that.
Speaker 1: Then again, he screw it. It's flying to Salt Lake.
Speaker 1: We got world class resorts, you know, minutes away. It's
Speaker 1: just Park City, much easier. Yeah, I know. Awesome, awesome,
Speaker 1: all right. Dave Harden, CEO and Chief investment officer Summit
Speaker 1: Global Investments and our Utah ski man on the ground.
Speaker 1: We appreciate that. Markets again trading higher again. Good earnings,
Speaker 1: we had some good earnings. We have more big tech
Speaker 1: after the close today, but as Dave said, earnings doing
Speaker 1: their part here for this market. Let's bring in Fiona
Speaker 1: Sencata right now, senior financial markets analyst at City Index,
Speaker 1: and Fiona as a journalist. We have to try and
Speaker 1: be skeptical. It's not hard right now. Uh, supply chain,
Speaker 1: I don't think crisis is a is a too strong
Speaker 1: a word to use. Labor shortages, inflation scares, and yet
Speaker 1: we're trading at basically forty six hundred right now on
Speaker 1: the SMP. That's got to be a game of like
Speaker 1: twenty year to day what's going on, that's right. I mean,
Speaker 1: it does feel that very much, this sort of optionism
Speaker 1: that's coming out of earnings at the moment, which is
Speaker 1: actually just lifting the stocks. There's very much the shadowing
Speaker 1: the concerns that we saw heading into earning seasons that
Speaker 1: the inflation confirms, just to surroundings of the labor market,
Speaker 1: the sort of energy crisis and supply chain bottlenecks, all
Speaker 1: that seems to be just being overshadowed right now by
Speaker 1: some some nice strong earnings that we've seen, and I
Speaker 1: think we're not seeing sort of the reflection yet of
Speaker 1: those sort of concerns thing really shown through in the
Speaker 1: earnings from that's something that's helping sort of investors optimism. UM.
Speaker 1: Just for example, the as far as supply chain bottlenecks
Speaker 1: were concern, I think that's very much to see that
Speaker 1: sort of starting to come through in the following quarter.
Speaker 1: And I think that's just what we're seeing at the moment,
Speaker 1: is the market or at that sort of happy point
Speaker 1: where things although we know there are a lot of
Speaker 1: headwinds coming and there are problems surrounding, the numbers just
Speaker 1: aren't quite showing that yet. And also we've got sort
Speaker 1: of consumer confidence data came through today much better than
Speaker 1: expected as well, and so that really helps lift up
Speaker 1: the mood. Adding to that upb we were expecting to
Speaker 1: meet consumer confidence to come in much lower and to
Speaker 1: fall for a fourth straight months. It's actually had a
Speaker 1: surprise jump. So that does bode well in fact for
Speaker 1: the the the economic pick up picture for the start
Speaker 1: of the fourth quarter. UM. If you know, we have
Speaker 1: some big techno names reporting earnings after the closed Microsoft
Speaker 1: alphabet and which I prefer to as Google on old school,
Speaker 1: how are you thinking about the text base right here? Yes,
Speaker 1: so we've had some good numbers, haven't we I mean,
Speaker 1: I think we've had as far as the Facebook was concerned,
Speaker 1: that was as far as I'm concerned, that came better
Speaker 1: than we were expecting in the sense that we saw
Speaker 1: that beat on the earning pressure. Revenue was a little
Speaker 1: bit on the disappointing side, but that perhaps isn't so
Speaker 1: surprising given what we know about what's happening with Apple
Speaker 1: and the the privacy policy change there, and as far
Speaker 1: as what we're expecting from from Microsoft to Alphabet, I mean,
Speaker 1: if we think about how these have rallied over the
Speaker 1: past six months, I mean Microsoft are up thirty over
Speaker 1: the past six months, Alphabets up year today, So there
Speaker 1: are pretty high expectations for these stocks. But I mean
Speaker 1: with Alphabet, for example, not only Google proved to be
Speaker 1: resilient as far as sort of advertising revenue concern, we
Speaker 1: do see it sort of picking up as well from
Speaker 1: that gain in the pickup in travel sector and travel searches,
Speaker 1: which is going to help it along as well. Microsoft
Speaker 1: very much been involved with that remote working companies sort
Speaker 1: of increasingly spend on cloud and on digital transformations because
Speaker 1: of that remote working. This is all very supportive of
Speaker 1: the tech sector. I think we've still got you know,
Speaker 1: we've seen these stocks trading out record highs and they
Speaker 1: have eased off some of them. I think they could
Speaker 1: potentially push higher if we get some more solid numbers
Speaker 1: in terms of the in terms of next year, what
Speaker 1: are you expecting, because the consumer confidence numbers, although they
Speaker 1: were good just now, have been lacking of late, and
Speaker 1: I've heard more and more people use the word recession.
Speaker 1: I think recession is quite a strong word sense still,
Speaker 1: I think we we will see a sort of very
Speaker 1: much a change as we're going into next year. Obviously,
Speaker 1: let's not forget this year has been very much about recovery, rebounding.
Speaker 1: We've had the support from the fiscal support. We've also
Speaker 1: had military policy support. And those taps are going to
Speaker 1: be turned off, we know, sort of as far as
Speaker 1: the Fed is concerned, will be looking for that for
Speaker 1: the taping in them. Those bond purchases to start happening,
Speaker 1: you know, potentially as soon as November December, and then
Speaker 1: as far as interest rates being heiked, that's something that
Speaker 1: could really start to flow the growth that we're seeing.
Speaker 1: I do think recessions a very strong word. I think
Speaker 1: there are concerns about as far as growth is trying
Speaker 1: to flow, particularly as we see those these supply chain
Speaker 1: bottom x the energy crisis sort of moves through the
Speaker 1: market and the markets come to terms with those and
Speaker 1: moved past them. But I think the as Sara's actually
Speaker 1: greatest concern, and do you think we'll continue to see growth,
Speaker 1: but just as a much slower pace, And obviously any
Speaker 1: rising interest rates that bring sort of inslation back under
Speaker 1: control will just sort of stem that groat a little
Speaker 1: bit more. You mentioned energy just real quickly, I'm seeing
Speaker 1: w t I just about eighty five dollars a barrel.
Speaker 1: Have I missed the energy stock trade or the energy
Speaker 1: commodity trade. No, I think there is more here. I mean,
Speaker 1: I get energy, and as far as oil is concerned,
Speaker 1: it's had a very impressive run I mean we know
Speaker 1: sort of coal prices and gas prices have absolutely surge,
Speaker 1: and w t I has also had a very good
Speaker 1: run up. Was just in the the gas and the
Speaker 1: coal prices starting to edge down after we've had that
Speaker 1: intervention from China, particularly in the coal market. But I
Speaker 1: think as far as oil in this concern, we know
Speaker 1: that demand is still very strong, particularly in the US,
Speaker 1: and then we've also got to very tight supplies from Ope,
Speaker 1: they're not looking to sort of move so far beyond
Speaker 1: those four D extra barrels they agreed back into life,
Speaker 1: So so I think there is further to run that
Speaker 1: all right, Fiana, thank you so much for joining us.
Speaker 1: As always, Fiona and card A, senior financial markets analysts
Speaker 1: for City in next giving her her thoughts on these
Speaker 1: markets again earnings after the close, Big Tech, this is Bloomberg.
Speaker 1: Now we got us new home sales numbers um UH
Speaker 1: sales of new homes in America increase in September to
Speaker 1: the highest level in six months, underscoring what we already
Speaker 1: knew was pretty solid underlying demand. Brad Dillman joins us
Speaker 1: right now, chief economists at Courtland out of Atlanta, And Brad,
Speaker 1: what do you think I mean? We knew it was
Speaker 1: going to be hot, but I'm not sure everybody knew
Speaker 1: that purchases of single family homes would grow fourteen percent
Speaker 1: to an annualized eight hundred thousand. It's definitely higher than expectations.
Speaker 1: The figure I had had in front of me for
Speaker 1: the expectations figure with seven twenty thousand on a seasonally
Speaker 1: does at annualized basis so it's certainly be what most
Speaker 1: models have been predicting. You know, one of the things
Speaker 1: as we think about the housing market bread it's been
Speaker 1: so consistently strong through this entire economic tumult from the pandemic,
Speaker 1: But when we think about the supply of housing in
Speaker 1: the US, it hasn't been necessarily where it's needed. I'm
Speaker 1: thinking the entry level home. We haven't seen new home
Speaker 1: construction really address that market. Uh, Is that changing at all? No, Unfortunately,
Speaker 1: it's not that. If we look at the price movement
Speaker 1: in what's happened on the new home sales side. For example,
Speaker 1: the median price came in it fo UM. That's up
Speaker 1: from about eight thousand pre COVID and US. To put
Speaker 1: it an a broader reference, twenty years ago, the price
Speaker 1: for a new home would have been about a hundred
Speaker 1: and sixty eight thousand, So that's a two and a
Speaker 1: half times increase. So we are definitely seeing those prices
Speaker 1: continue to take up. Now. I would make the argument
Speaker 1: that that's in part due to financial conditions, and I
Speaker 1: think part of the reason that housing has been so
Speaker 1: strong since the onset of the pandemic has been what's
Speaker 1: gone on and with mortgage rates, which is that they've
Speaker 1: come down so much and remain quite low. Um. I've
Speaker 1: talked in the past about the tenure tregury rate being
Speaker 1: negative in real terms once week factor and inflation and
Speaker 1: an aspect of this passing through the mortgage rates with
Speaker 1: they're being really low as well. But when we look
Speaker 1: to new homesale too, you know, we had this huge
Speaker 1: rebound in the wake of the pandemic that it's then
Speaker 1: cooled a bit. And now I'd say when I look
Speaker 1: at this figure, I'd say it's it's really resuming its
Speaker 1: pre COVID trend. So maybe we'll see a continuation of
Speaker 1: that going for what is I mean, it's a very
Speaker 1: regional market, right The United States is gigantic and um,
Speaker 1: you know I realized that even more having lived in
Speaker 1: Europe for for years. Now, where do you see the
Speaker 1: strongest growth and where do you see a little bit
Speaker 1: more normalcy? So month to months, the big games have
Speaker 1: been in the Northeast and the south. Um, I wouldn't
Speaker 1: really say that we're you know, the other parts of
Speaker 1: the country and again we're talking large regions, you know,
Speaker 1: are in a bad spot. We gotta remember when we
Speaker 1: look at the new home sales figure. While it was strong,
Speaker 1: it actually is still down year to year. And so
Speaker 1: I mentioned earlier, you know, in the latter half of
Speaker 1: we really saw some strong figures that cooled off a
Speaker 1: lot in the first part of this year, and we're
Speaker 1: now seeing them swing back up again and resume that
Speaker 1: pre COVID trend. Brad, you know, I'm still at a loss.
Speaker 1: I'm gonna follow on my prior question. Why isn't the market,
Speaker 1: the housing market more efficient? I e. There's demand at
Speaker 1: the low end, and there's where's the supply to meet
Speaker 1: that demand. I mean, I know the margins on the
Speaker 1: McMansion are better for builders, but at some point the
Speaker 1: pricing dynamic has to drive supply of lower end housing. Yeah,
Speaker 1: and I argue to a degree. We have seen, of course,
Speaker 1: over the last ten years, we've seen supply pick up.
Speaker 1: It just hasn't kept pace with our population growth. So
Speaker 1: there's estimates out there related to our total deficit of housing.
Speaker 1: The The estimate that I have is one point one
Speaker 1: million housing units. That's to say that we would need
Speaker 1: to build one point one million housing units instantaneously just
Speaker 1: to satisfy what we would need right now. That's nothing
Speaker 1: to do with sort of a go forward basis, just
Speaker 1: to clean things right now. And so when I look
Speaker 1: at the last ten years, I see the difficulty for
Speaker 1: home builders really being in what I would call artificial
Speaker 1: home price appreciation that came about from the kind of
Speaker 1: policies that we've set about on to stimulate housing coming
Speaker 1: out of the Great Recession. If you raise home prices
Speaker 1: to the point that people can't afford them, there's really
Speaker 1: not a big market into which home builders can build
Speaker 1: and deliver supply. And that's precisely what's happened at the
Speaker 1: low end. Even though this situation has to a degree
Speaker 1: uh been solved over the last ten years, as as
Speaker 1: our total amount of housing completions has in increased, we
Speaker 1: haven't have we seen UM rentals keep up then with
Speaker 1: the demand for housing. I mean, do people who can
Speaker 1: afford to buy houses, do they end up renting places instead?
Speaker 1: Has it working out? Yes? So there's been some huge
Speaker 1: strength in the multifamily space and in the single family
Speaker 1: rental space, and in fact q Tree annual rent growth
Speaker 1: in multi family came in much stronger than expectations UM
Speaker 1: and the occupancy rates and multi family remained very tight. Now,
Speaker 1: what's interesting is during the pandemic, when we saw lots
Speaker 1: of people move out to buy homes, we did see
Speaker 1: that these vacant rental units were back silled by something
Speaker 1: that we've covered in surveys as first time renters. So
Speaker 1: that's something we can see with call it your younger
Speaker 1: millennials at this point or older gen zers who are
Speaker 1: able to move out and form their own household as
Speaker 1: as those units become vacant um. But where that's going
Speaker 1: to be heading going forward. You know, if we if
Speaker 1: we do see mortgage rates take up in the wake
Speaker 1: of a taper, and we see activity in the floor
Speaker 1: purchase space start to slow down a little bit, maybe
Speaker 1: in some ae month's time, we may see higher renewal
Speaker 1: rates again in multi family, something that's already been relatively
Speaker 1: consistent over the last call it six months or so.
Speaker 1: That's the same increase in renewal rates in Reynolds. Interesting stuff.
Speaker 1: You can always talk real estate lots going on out there.
Speaker 1: Brad Dillman, chief economist for Courtland, joining us on the
Speaker 1: phone there, and again, the real estate market remains very,
Speaker 1: very strong. We saw that in the in the ECO
Speaker 1: numbers today coming out of d c UM. So good
Speaker 1: time to be a seller of a house. Not so
Speaker 1: sure enough already a buyer. But Matt's going to give
Speaker 1: us some on the ground, real world feedback starting next week.
Speaker 1: Thanks for listening to the Bloomberg Markets podcast. You can
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Speaker 1: podcast platform you prefer. I'm Matt Miller. I'm on Twitter
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