Animal Spirits Podcast - Talk Your Book: The Housing Market with Mike Simonsen

Episode Date: August 5, 2024

On today's Talk Your Book, we are joined by Mike Simonsen, Founder and President of real estate analytics firm Altos Research to discuss how easy to access real estate data has affected buyers, the effects rates have on buyers and sellers, a realistic scenario for a housing market correction, thoughts on the iBuyer phenomenon, and much more! Find complete show notes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation.   Check out the latest in financial blogger fashion at The Compound shop: https://www.idontshop.com Past performance is not indicative of future results. The material discussed has been provided for informational purposes only and is not intended as legal or investment advice or a recommendation of any particular security or strategy. The investment strategy and themes discussed herein may be unsuitable for investors depending on their specific investment objectives and financial situation. Information obtained from third-party sources is believed to be reliable though its accuracy is not guaranteed.   Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Ben Carlson are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnik and Ben Carlson as they talk about what they're reading, writing, and watching. All opinions expressed by Michael and Ben are solely their own opinion and do not reflect the opinion of Ridholt's wealth management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ridholt's wealth management may maintain positions in the securities discussed in this podcast. We're joined today by Mike Simonson from Altos Research. Mike, Altos was acquired in the past years. Is that correct? That's right. We are now part of Housing Wire, which is a bigger media

company and media and data in the housing market, mortgages. Okay, and we know Housing Wire from our friend of the show Logomodoshani. That's right. So you guys are all, you guys are, you guys teamed up like the Avengers. Wait, one more question on Altos before we get to all the housing stuff. Who are your customers? What's a core business? So the core business is. So Altos, we track every home for sale in the country every week, all the pricing, all the supply and demand, and we have two sets of core customers.

One are the realtors and the loan officers, people who have to help consumers understand what's happening in the housing market. You know, like the market's changing every day. And if I'm shopping for a house, I need to understand what's happening. So we help, do we do like local market reports for those folks? folks. Then we also have an enterprise data license business. So investment firms and home builders and all kinds of financial firms, if you have exposure to the U.S. housing market and you need to know like what's happening in Kalamazoo right now, you have the data that we had a big

giant data files so that you can go build your models from that. You named a ton of West Michigan just to suck up to me. Is that right? So I'm curious because you always say that I always listen to your weekly updates, which are great. And you always talk about, like, you're getting the data first before the monthly readings from the different agencies. How did you ever go about building this model in the first place to gather all this information? So originally, it is a personal need for me. I am a longtime data software guy, Silicon Valley. And I, you know, when I was 30 years old, and I bought a tiny little piece of shit Silicon Valley house with a giant mortgage. And it was, it was 2001 and so that was the NASDAQ bubble two bubbles ago as I like to say the NASDAQ bubble was bursting and at that time it was the first moment in the internet when you could figure out what was for sale without having to go talk to the guy with the like dot matrix printout of the listings and so so I was able to start building models going like I know exactly what's

for sale. I know where they're price. I know which ones are doing price reductions. And it was literally, I did it for several years just for myself to know that I wasn't upside down on my mortgage. And then after a while, we decided to commercialize it for the whole country. And, you know, we have a giant database of every house in the country. And we can say, that one's for sale and that one's for sale. And that one was sold last week. And this one's for rent. And you know, we can go, we can go build all that giant list together. And then bubble up the, the analytics, you know, and traditional housing data is focused on these houses sold last month or two months ago. But there's so much signal in the active market in how many are getting

listed this week. How many are going into contract? How many of those are doing price reductions? And so none of that, nobody had ever studied that signal because nobody ever knew what was for sale before the internet. There's 700 different local realtor associations, and they don't really talk to each other. And so there was no common database of everything that was for sale. So we started tracking it. And now I've been doing it as Altos research for 18 years.

Do you think the proliferation of data, housing data, has made the industry more, maybe not more productive, but more efficient, better insights, less prone to booms and busts? Oh, I think for sure. You know, when we, when we launched a company of January, we, and at that time, we could, you know, we, we were like, nobody knew anything about what was happening in housing. And, you know, by the time you got the data, it was months old. Wow. And, and so like, we could tell you, like, I could tell you, the days on market, for houses in San Jose the day that Lehman Brothers broke and, you know, two weeks later and four

weeks later. And you could watch at that time in 2000, whatever, that was 2008, that when you could still get a million dollar mortgage, but you couldn't get a subprime mortgage. The low cost homes in San Jose were all subprime. The days on market flips. So normally it takes expensive homes longer to sell. Dazan Market Flip, so the cheapest homes in San Jose were taking the longest and you could still buy a million dollar home for, you know, in a week. And so nobody had any of that insight. You know, the local realtor associations, the MLSs, they would save these houses sold last month, but they couldn't, they weren't, you know, data companies. They were, you know, they were realtor association. So nobody knew anything about the houses.

market when 2008 happened. And so now we do. And there's a lot of places, you know, I quit my job and started my company January when 2006. And like 10 days later, Zillow was on the front page of the New York Times with a hundred million bucks of venture capital doing the, not the exact same thing, but it was in the zeitgeist. We can finally solve these problems. And you started, you basically top tick the housing market, too. That was pretty close to the peak, right? In 2006? It was, but I think it's probably not a coincidence in that, you know, it was Silicon Valley. It was that first part of the, coming out of the NASDAQ bubble burst, we know, like, where money was flowing into housing. Like, there was a lot of things going on. And I, you know, I had a housekeeper at

the time who, you know, bought a house and two hours away in Central California. And I thought, oh, man, you know, this is a big deal right now. So before we get to the state of today's housing market, how do you think all of this data changes the way that buyers and sellers and lenders and realtors and bankers, how does this change the behavior of the whole ecosystem? You know, there are, if you were a realtor, if you've been a realtor in this business for decades, you know, the great realtors know what's happening, They can communicate it well to a buyer and seller.

They help them make wise decisions. But it can be very difficult to communicate what's happening in the market to a buyer and seller. A buyer comes in and they say, oh, well, I hear the market's tanking. I ain't going to low ball. And a wise realtor says, look, you're shopping in the highest demand part of the market. If you want to get this house, we need to make a real offer. So using the data helps consumers understand what's happening.

It helps them know, you know, that the market changing. You read these headlines. And if you read the headlines on the housing market now, you'd hear it's crashing, you hear it's not crashing, you have all of these different messages. And depending on what you've picked up, you might have no idea what's happening, even if you're paying attention. So for a, for a realtor or a loan office, somebody who's working with consumers, homebuyers, and sellers right now, like, it's really important to pay attention to the data in your local market, in your price range. And so, you know, they can.

It probably makes the market more efficient. I think so. I think it's one of the factors that makes, you know, we can see measure in general time to sell a house has declined over, over the years. We can see all of those elements. And at the very least, you know, it helps us understand, make feel stronger about our buying decisions, you know, like understand what we're doing. You know, for example, I bought a house when I bought my house, I did the classic, you know, buy the cheapest house in the expensive neighborhood move that they talk about. And when the NASDAQ blew up all of the stock option multi-million dollar homes, the median price in my town in Silicon Valley, Los Altos, at the time, it, it, the median price fell by a third in 2002 or 2003.

But the low price didn't go anywhere. I'd bought the cheapest house in town. Interesting. And I could watch that and say, I'm still the cheapest house in town. So, you know, that was very meaningful to me. It was very meaningful when I said, you know what? What I want to do is add a thousand square feet to this old house. And is that going to make me money?

And I could say I can make a thousand square feet and it's going to be a good investment. But I can't go bigger than that because the more expensive homes have bigger lots. And you can see that in the data. So, you know, those were the kinds of insights that we're able to have that you never could have before. I think a good way to talk about what's going on in the housing market now comes down to like some of the rules of thumb that you've created. Because often when you give your updates, you talk about the relationship between rates and inventory or the fact that season out. You take the data, but then you put it in context and say, well, we expect this to happen because it happens every year because of season. seasonality, because rates being higher or lower.

So why don't you talk about maybe some of those different rules of thumb and things that you've teased out of the data that, like, people should expect and then where we stand now based on that? Yeah. So, you know, right now there are 677,000 single family homes unsold on the market. And it is 40% more than last year. So that's a pretty significant gain. But it's still, you know, this time in 2019 at the end of July, there was no.

nearly a million homes for sale. So pre-pandemic. So there's still a lot fewer homes for sale than pre-pandemic. So the big question is, when do we get back to normal? How do we get back to normal and the normal levels of inventory? And the answer to that question is one of the rules of thumb. And the rule of thumb is inventory rises when rates rise. Inventory falls when rates fall. We can, and it's pretty tightly correlated so that we can see, for example, 20-20, rates fell dramatically, in inventory, we bought everything inside an inventory of unsold homes, fell dramatically. Starting in 22, two years ago, rates started rising, inventory has started rising since then. Why does that relationship hold? It holds because on two sides. One is that demand slows,

inventory grows. So, you know, it's more expensive to buy a home. We buy fewer homes. It also impacts on the supply side. Over time, as rates have been super low, that, and that's really not just two years of the pandemic, but really the last decade, 12 years, rates were super low. And that incentivizes us to hold more real estate. So we have a 30-year rate locked in at 3%. Like, I might hold two of those. I am perfectly happy to buy my second house and keep the first house.

But if rates are 7%, I go to buy my next house. I have to sell the first one to finance the second one. So not first one's now back in the active inventory that keeps, that keeps inventory higher. That means we're hoarding less real estate. And so as a result, higher rates tend to lead to more active inventory. So did we see an uptick in rental housing purchases then? Because that's like one of the other big misnomer's is the fact that people think it's all institutions buying the rental houses. but it's really just more mom-and-pop people are smaller, small-time investors.

So did we see an uptick in that in like the 2010s? Yes, we did. We took 8 million or more homes out of the resale environment and put them into second home or investment property. Basically, they're now rentals that they would have been resold before. And if you think about it, you know, if you could finance these at in the two decades ago, you know at six or seven percent or eight percent you then some of those get put back in but now if I'm buying them at three percent four or three percent like the last decade then I'm going to

hold that thing forever and so the and so you can watch each year for the last decade at 12 years really early 2010s each year the peak of inventory which would be like now and the summer lower. And the trough of inventory in January, lower. Each year lower, we take fewer, we take more and more homes out of the resale. And you're right, it's not just institutions, institutions like that companies that own more than a thousand homes, it's like 4% of the market. It's very small. It's like 96% of the homes are. Tell the truth. To that point, I don't know if either of you guys have seen Twisters yet, but the bad guy in the movie was buying up all the homes that have been destroyed by tornadoes.

Oh, is that? Not quite Blackstone, but not too far off. Well, and I do say that, you know, there is no more ready-made villain than Wall Street landlord. Like, both of the, like, we're ready to blame those guys for everything, you know. And so it's a real headline villain, even though it's a small part. And in fact, it's like, you know, it is us. It's the people listening to this podcast are going, I have a second home.

And, you know, I have a, you know, an investment property or a few because I'm building wealth. And, you know, when rates have been, when money's been really cheap, it's, it's been a really good decade to own real estate. And so we have. Did the interest rate inventory relationship hold up this time around? because we'll get into it, but this was an awfully odd hiking cycle with respect to real estate. Yeah, it did hold, it held up.

And in fact, it even is, the slopes are similar in that rates were hiking the fastest in 22, right? 500 base points in 22. And inventory went from the record lows. And so that like two, I don't know, like doubled or whatever the number was in that in 22 to 23, that was a big, so they both climbed hand in hand at the same time, very steeply. And this year, you know, rates are still higher than they were last year at this time. Maybe we're going to start to see that adjust back down. Like maybe we're past the peak of mortgage rates.

And so, you know, then we can see that what I expect is that we would have then flattening of the inventory growth. So we're 40% more homes on the market now than we had a year ago. But that's not really growing. That gap isn't growing. And late in the year last year, September, we had a rate spike and we had an inventory spike, September, October, November. So inventory didn't peak last year until middle of November, like the week before Thanksgiving.

And normally it would be, you know, heading down for a few months before that for the holidays. And so, but that's rates spiked and inventory spiked at the same time last year. So that's one of those rules of thumb. It's really easy to tell the story now about why housing prices didn't crash from rates going to 7% or whatever. And, you know, it's always easier to drive in the rear of remear. But if you would have told me, you know, two, three years ago, listen, mortgage rates are going to be above 6, 7%, and they're going to get there in a hurry and they're going to

stay there for, I don't know, it's been 18, 24, or whatever months, I would have said, yeah, sure, a 10, 15, 20% correction in housing prices after rising 50%. It wouldn't have shocked me. I think there was even someone on your podcast who made the case that that could happen. I know you don't make price forecast, but did it surprise you that housing prices didn't fall more? Because I think it was, what, 3% nationwide, maybe? For, yeah, for four months or something that they were actually negative year over year.

Very quick. So yes and no. I mean, I, you know, there is a period there in 22 when we're watching, for example, example, we watched the percent of homes on the market that take price cuts and watch that skyrocketing and watching that get to the highest level in many, many years. And like, that's a pretty bearish scenario. And it turned out to be that price reductions peaked in November or 22. That leads the future transaction. So houses on the market now and doesn't get an offer, does a price cut now. It gets an offer next month and it closes the month after that. So the price cuts are

leading the transactions. So by the spring of 23 is when we had the negative year-over-year home price changes. What was the surprising part was how resilient 23 was to me. And when rates flattened, you know, one of the questions I had was, like, there's a lot of investor capital on the sidelines. And in places like Phoenix, do the investors say, wow, Phoenix is down on the second have a 22, I should get out. Do investors exacerbate the downturn? Or do investors say, wow, suddenly prices in Phoenix are back into my buy box and go in? And it turned out they went in

and put a floor on pricing. And they got their cap rates to where they, the cap rates fell to where they were comfortable. And they said, we're going to go buy that. And so that surprised me that that happened. And I didn't have negative 10 or 15 or 20 percent on the forecast, but I was thinking down zero to five percent, so flat to negative five percent. And we finished the year up five percent in 2023. So that definitely took me by surprise. One of the things that we've been talking about is what happens when rates come down. And you would think, like, be careful what you wish for if prices are high now. When rates come down, prices should go up. But I've been thinking about what happens to the inventory. Because the demographics, the people that

want to get the young people that want to get into houses, they're still, they're still shopping, albeit obviously at a lesser pace, does the supply unlock outstrip the demand that's in place and that will come to market? But then we've also been twisting our head into a pretzel. Well, it's sort of like the stock number. Well, for every buyer, there's a seller. So do they net each other out? Because the amount of new homes on the market is sort of like rounds to zero. So how should we think about this dynamic of what happens 12 months from now when mortgage rates go from, I'm making this up 7% to 5.5%? Yeah. So in general, rule of thumb, you should think about rates hitting demand faster than supply. So rates fall from 7 to 5.5 that spurs demand. It'll spur some

supply because you get some sellers who are buyers, but it spurs demand more than supply. So rates fall, inventory will fall again, or at least, you know, level off, not necessarily crater because, you know, we're not going to 3% in mortgage rates. But if we go, you know, we go five and a half or we go to five, we go into the fours, like that's going to spur a lot of demand. And it gets back to the dynamic of, you know, what we had over the last decade, which was we were pulling inventory out and owning more real estate. Like, it was a good deal to own it. There's, you know, the concept they call the mortgage rate lock-in, right? Mortgage rate lock-in effect. And the, you know, if you have a 3% mortgage, you're holding onto that house forever,

you're locked in. The, I think the misconception there that I like to point out is that people think that it's high rates now that create the lock-in effect. But I like to point out that it's actually low rates that are what we're locked into. So if rates fall again, we're actually creating more people who are locked in. And, you know, there's... Wait, how? Because they're, say, five million transactions a year. And if those transactions are now happening at four percent, now we've got five million more people with a great deal on their, on their mortgage that they never want to sell. The new buyers would be locked in. Got it. Okay. So based on everything you just said, Is it, I know you don't make predictions, but would you say, like, you would think that prices would, given this, that's an area you just outlined, probably not go down?

That's, that's my take. There's nothing in the data right now that shows big price declines, even though we're at the real weak, you know, demand. And that's partly because, you know, every homeowner in America, and you guys have discussed this, every homeowner in America has got so much equity and such a good deal on their mortgages. There is no signal of any flood of supply, but each year we'll get a little more if it's slightly less a good deal to buy a home. There's 5 million people who don't have the locked in rates each year. So that loosens up.

So multiple years at higher rates is what gets us back to the normal level. And so because there's like a floor in that sense, then the opposite side seems to be true to me, which is if we spur demand faster than supply, that seems to be upward pressure on home prices. And there's probably a lot of other factors in there. There's like, right now, it seems like people are, people may be not buying because they're waiting to see what happens at the election, or, you know, there's other macro factors in there. Maybe we finally get some unemployment. How does that shift people's buying demand? What, you know, when we work through all the pandemic cash, does that impact? So there are those other factors.

that are in play, but there's nothing in the data right now that shows like a big home price downside correction. One other important component of all of this is that a lot of the new buyers are younger people. And a lot of these younger people can't afford homes on their own because they're so gosh darn expensive. And a lot of them are getting help from their parents. And that seems to be like a trend that absent some sort of economic meltdown is probably going to remain in place. It sure seems like it to me. And, you know, the dynamic of where the cash comes from and the demographic is a little

outside of what we study day, what I study day today. But it sure seems like those are factors when there's only 67,000 single family homes available, you know, those are going to the people that are the best capitalized. And in fact, you know, baby boomers are still like, in most. months the biggest net buyers of real estate. Huh? In the catch. Wait, is that like from the like as their primary or secondary residence or is that

because to explain? Well, they have all the equity locked in, right? They can use their equity from their current home that paid off. Right. And they're not going to, they say, listen, I've got 20 good years left. I'm not going to wait around. I'm going to do it. All right.

So don't be mad at Wall Street. Be mad at the boomers. Always. That's right. Blame boomers for everything. I always blame boomers for everything. But yeah, it's, it's, it's, but yeah. For most months, there's still the biggest net buyers.

And so the other thing, so the boomers have the cash and there's also more of them, right? So like there's the net buyers. You can see sometimes a millennial cohort kicks up. I have seen that one of the interesting things as rates have climbed, the first time home buyer's share of buyers is increasing. And that's because there is less competition. you know, for investor competition or boomer competition, if it's not as good a deal right now, the people who are like, I'm buying, I'm having my second kid, we're buying a house,

are they start their share like is, it becomes slightly less competitive for them. And so therefore they are the ones who are like gaining share over time. So that's an interesting fact that we were looking at lately. So it's also, it's going to depend on where rates go and when a recession hits and all this stuff. But like, when do you think we get back to normal levels of inventory and existing home sales? Because what did it drop to? Four million and it's usually five and a half or six. Like, when do we get back to normal?

Inventory, the way I think we get back to normal levels of inventory is multiple years of higher rates. So like we got, we went from $250,000 to $677,000, you know, in the last 26 months, 28 months with higher rates. If rates go down from here, inventory caps, caps, cap, out or even declines, if we go, for it, stay higher for longer, then you could imagine we get fewer people with those deals penciling out, we get more homes back on the market, we get taxes and insurance in Florida and Texas that those costs are up so we, so those houses come back on the market, so we get multiple years of higher rates that get us back to the normal, the old normal levels of inventory. On the other hand, the, if rates fall, transaction volume

picks up, right? So we buy more than, and that's why inventory is falling. So demand is kicking up. And so over time, the scenario I get to get back to a, you know, is a to a more affordability with more transactions is like multiple years of higher rates, flat or slightly down for multiple years on prices. Meanwhile, incomes are catching up and then rates fall. Then you get to a world where there's more selection, there's less competition, there's now cheaper money, there is incomes have caught up for multiple years with prices. That's where, you know, it's like it was, we had a decade of a really good deal and a, and so four years of slow time, we're two, over two years in now. That's how I can imagine it. If we get into a world where rates drop now,

I think we go back into competition. We go back into falling inventory and rising home prices. Your scenario makes sense. Like what they say in the stock market, what do they say in a market correction over time? Like if the stock market is trade sideways. So your point, a realistic scenario for the housing market correction, if there is such a thing, is housing prices kind of staying flat, but income's catching up.

And that makes it more affordable for people. That makes more sense than the people who are worrying about housing prices falling 30% or something. That's right. You know, the 30% fall worry, it makes sense, right? You see that you look at the chart, it goes up and it goes up steep and, you know, it is intuitive that it must come back down, you know, revert to mean. And, you know, maybe that happens. Maybe there's some catalyst that we, that home prices drop that dramatically. It feels to me like the momentum is the other way

with a floor on those prices because, you know, Americans have such a good deal on their mortgages. Like in 2006, when unemployment started kicking up, up, the first thing I wanted to do was unload that crappy mortgage. Now, when unemployment ticks up, the only thing I want to hold on to is that mortgage. If I, if I lose my job, I can't sell the house and go rent somewhere cheaper. Like, I can't, like, I can't go buy another house later on and get, like, the best thing I have is, is that mortgage. So, like, I'm going to do everything to hold on to that mortgage. And I think everybody knows that. So when unemployment kicks up this time, like my expectation is that there will be significantly

fewer homes that get on the market, relisted, like significantly slower inventory increases because of recession, job loss recession. And even when we get to a point of real distressed, you know, homeowners where they got to sell a home. It's actually, it's a, it's 12 months after the big unemployment that we start to see the distressed inventory. So, you know, if unemployment were to start rising now and get in the next six months, get high, like beginning of 25, now we have unemployment, it's really 2026 inventory, like before you see that, before you'd see any gains in, in that inventory there. So it's like, that's the time frame we're looking at.

I want to ask about the plumbing. In 2021, I guess, when everybody was refinancing, it took forever. There was such a backlog at the banks that processing these things took forever. And then we went into a real estate ice age. And a lot of the people that were working there are no longer working there. Is it possible that we have the opposite scenario or maybe a redone or a redone? of 2021 where a lot of people are trying to transact, but the banks aren't prepared for it because they let so many people their mortgage department go? Yeah, I think that could, I think they could happen.

And certainly there's, you know, I don't know what the number is like 40 or 60 percent fewer people working in the mortgage industry than there was two years ago. It's a dramatic number and a lot fewer, you know, independence and a lot of M&A and stuff going on in that space, try it for folks trying to survive. And so I think that is a, is a possible. scenario. Maybe it is, you know, there's some automation, continued automation kind of improvements and things like that that come into to help mitigate that. But because, you know, people are always investing that way. But, but it's like there's a lot fewer people to be able to do your loans now than there were two years ago. Speaking about the automation, the I buyers, was it just the

worst timing in planet Earth for them to come to market? Or like, were they early, bad timing? Or is it just never going to work? Are we going to see eye buyers reemerge in a couple of years with a better product, more streamlined, or does it just not work for a million reasons? My take on that is that it was primarily a zero interest rate phenomenon. Cheap money, what do you do with cheap money? We're going to go buy a lot of houses. And I think in general, that's the business model there.

I do believe they were solving some interesting consumer problems. Like there are some folks who want to sell their house quickly, and I'm willing to go take a discount to go do that. that's a real problem to solve. So I believe that there's real business there. It's a new part of the landscape. I think, though, that it's primarily a financial innovation in that if you look at the iBiars, they have all the data in the world and really smart people looking at the

data. And they were basically buying the same houses at the same time as everybody else. And they stopped buying at the same time as everybody else. So I didn't see anybody, I didn't see any I buyers who, you know, sold in December 21 and then bought in December 22, you know, I didn't see any of that kind of insight that, you know, they were, they were pro cyclical. And so it seems to me like that that would be, you know, continue even. So I don't expect them to go away. I believe there's some real value that they provide in the market, some interesting innovation, but primarily a cheap money

innovation. I don't know how often you talk to your customers, but I know some people who are realtors who were saying that 2021 and later parts of 2020, early 2022, is like the best time they've ever had in their career, right? It was easy. Houses were selling in a day. They were bidding wars. If you were a realtor, it was, you didn't have to do a lot of work. And now, It's the opposite. We mentioned the inventory and existing home sales and everything has fallen. Like, what's the general sense of how that community is feeling? Because it has to be just, I mean, this has been a great depression level event for them, basically. It has been. It has been a great depression. Like the whole industry is, it's surprising, right?

Because, you know, consumers are worried about home prices crashing. But the industry is a transaction volume. Like, it's that we get, they get paid on that, you know, when deal gets done. And so the transaction volume falls by a third. That's a big deal. And so the loan officers go away and the realtors are much tighter and all the, you know, all of the people in the space significantly less activity there. And so there's some interesting trends happening that are, you know, some folks are growing in the time. And some of that is with technology and automation, like you watch good realtors go, you know, like doing interesting AI work and doing interesting like scaling of their teams and marketing, you know, like things like doing powerful social

media marketing. Like those kind of things are really, you know, underway. And so there are plenty of people in the business running their business as well. It's not as easy as it was two years ago, but there's still a lot of interesting growth happening there for some folks. Mike, as we come to a close here, that's a professional podcast speak. We've spoken about housing at the national level because that's what we do when we talk about housing, but it's very much a regional deal. What is, is there anything exciting or interesting or like when you look at housing, what stands out, not on the national level, but when you drill down?

Yeah. So this year, Florida, in particular, South, like, Western Florida has led the country slower. Inventory increases, prices coming down, markets slowing way down in Florida, particularly Western Florida. But also, you know, we can look at all of the boom, most of the boom markets from Florida through Texas, Arizona, have had dramatic inventory increases this year. So in a place like Texas, Austin now has more homes on the market than they've had unsold since the bubble burst, like 2011. Wow. And so that's a big deal. It is, Austin's a lot bigger than it was 15 years ago. So, you know, like there's a little bit

of that in play, but there's more houses unsold in Austin. And so Texas is a high tax state. And so if I bought a house in 2019, even if I've got a locked in 3% mortgage, my taxes are way up. You compare that to like California. California has ultra low property taxes locked in forever. And so you have a chronic shortage of homes for sale in California, where in Texas, you have a much more robust market because those holding costs fluctuate, I got to put the house back on the market. And in Florida, things like insurance costs are really catching up to risk now.

And so if I bought a house at Naples in 2019, I have a 2% mortgage, but my insurance cost is going up from $500 a month to maybe $1,500 a month. And if I use that house only three weeks a year, suddenly it doesn't pencil out. So those are coming back on the market. So you've had those trends are pretty strong. My climate change hedge, Mike, is the Midwest by the Great Lakes telling you, we're going to see the reverse migration in the decades ahead. That's my call.

I think there's, you know, there's something to be said for that. You know, and in fact, this year, the Midwest, Ohio, through upstate New York and Boston has been the hottest markets, the tightest inventory. Inventory is up in every state across the country, but in like New York, it's like 6% more than a year ago, where in, you know, Western Florida, it's like 110% more than a year ago. Like it's, it's that kind of different. But inventory is climbing everywhere in the country.

And the biggest places have been, you know, the biggest boom markets are also, they're like high beta stocks, right? They are, they move faster on the upside and they're moved faster on the downside. That makes sense. Mike, where can we send people to learn more about your research? You go to altos research.com. You can also follow us on YouTube. Our YouTube channel is Altos Research.

And every Monday, we put out a video on the national housing market with the data and like, this is what's happening. And I'll talk about my expectations. And I always talk about what my expectations. expectations are not being met by the data. So, you know, we let that out every, every week. I like how you have the Tweetstorm with all the charts and you do the YouTube channel and you also have the podcast. So any different way you can, you can get it. I always listen to your week's updates. It's great. Thanks for coming on, Mike. You're back, guys.