BiggerPockets Real Estate Podcast - 568: BiggerNews February: Analyst Who Predicted '07 Crash Sees "Yellow Flags" w/ Ivy Zelman

Episode Date: February 8, 2022

The housing market is an evolving beast that almost no one can accurately map. With so many investors on opposite sides of the fence when it comes to housing market crashes and corrections, it’s nice to hear the thoughts of someone who has accurately predicted past crashes. We’re honored to have Ivy Zelman from Zelman & Associates on today to discuss the modern housing market, supply chain shortages, and overbuilding problems. Zelman accurately predicted the 2007 housing market crash and has been on the front line of analysis and forecasting when it comes to all things housing market-related. She’s seen the data firsthand and has a broad understanding of which factors specifically impact prices, demand, and overall availability. David Greene and Dave Meyer take some time to ask her the top-of-mind questions that investors and first-time homebuyers want answered. If you’re planning on purchasing real estate in the next year or two, it may be best to get Zelman’s opinion before putting in your offer. She’s seeing multiple “yellow flags” that may signal stark changes within the housing market, either allowing you to scoop up better deals in the near future or at least mitigate loss when buying at these record-high prices. In This Episode We Cover: The similarities between the 2007 housing market and today’s housing market Affordability and how it greatly impacts both buying and selling behavior The “overbuilding problem” we’re seeing with many multifamily developers Supply chain problems, labor shortages, and other factors impacting new construction Who should (and should not) buy real estate over the next couple of years And So Much More! Links from the Show BiggerPockets Jobs BiggerPockets Youtube Channel BiggerPockets Forums National Association of Realtors (NAR) Cradle to Grave by Zelman & Associates Zillow Listen to the full episode: https://www.biggerpockets.com/show568 Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets podcast show 568. Well, we were bullish from 2012 to really 2020, the end of 2020, when we started seeing the momentum that we just didn't think was sustainable. So we're not looking to be bearish, but we do see a cautionary number of yellow flags that we need to continue to monitor. What's going on, everyone? It is your host, David Green, of the Bigger Pockets Real Estate Podcast. Here with a special edition, I am doing bigger news with my cohort friend and real estate genius,

Dave Meyer. Dave, what's going on? Not much, man. It's great to be back. I feel like it's been a really long time since we recorded together. We have a natural chemistry. It's like John Stockton got Carl Malone back. I know that's a sports analogy.

And part of my pledge of 2022 is to make less of those, but still, it fits. Yeah, I know. You've had so many good co-hosts and awesome shows. I've been listening to them all since we last recorded, but I like that we get to do this every once in a while. I think it works well. And I hope that our listeners appreciate it because there's so much changing in the market these days. And it's really important for investors to stay on top of the economic situation to help inform good investing decisions. That is exactly right. So basically, we at bigger pockets have recognized that the market is changing faster than it ever has.

So we need to be putting out more content than we ever have. and more relevant content at that. So today's guest, Ivy Zellman, was one of the people who called the crash in 2005, 2006, and works by looking at data, which is why we have Dave here to help me tag team this show to predict what is going to happen in the market in the future. And Ivy brings a very practical, consistent, logical approach using data about supply to try to help us determine when we might see a market correction. Do you mind sharing Dave what some of your favorite things from today's show were?

Yeah, I think that there's been this overwhelming narrative that there is not enough houses in the U.S. And this is something I've talked about a lot. And she has a very contrarian perspective about this. And it's given me a lot to think about. I really want to sort of dig into the different methodologies. But I think it's super helpful to listen to people who have other opinions and to be able to now have new information and new ideas to consider in my own investing. I think that her analysis of population growth, of supply and demand, is extremely well informed and is a little different than everyone else.

So I hope people take the time to listen to what she has to say because it really could be a great read on the housing market that we haven't really considered yet. Yeah, I agree a thousand percent. It definitely brought, sort of like rounded out some of the perspectives that we had. And as we talked about, it's great to hear people's opinion, especially if they can support it with facts. and I think Ivy did a very good job of sharing what she's seeing. And, you know, there's a few insightful things having to do with which markets might be headed for a correction faster than others would be.

And one thing she mentions is that supply chain issues that we've had mostly due to COVID-related challenges have actually been helping to keep prices higher. It's been one of the things that has stopped this supply from coming in. And so when we see some of those supply chain issues get resolved, we might see new product come on the market quicker. which could lead to a change in prices. So there's a ton of really, really good information that if you're somebody who's been saying there's no way this is sustainable, it's got to change. Well, Ivy agrees with you and she's giving you some data that you can consider regarding the timing of when you might expect to see that happen. Yeah. And one thing, it's not until the very end, so people should stick around with this. But I think the three of us got into a really good conversation at the end about

how to approach a situation like this. Because even Ivy, who, has so much access to data and information is saying that it's cloudy. You know, they're reading it one way, but they're calling them yellow flags and not red flags. And that just indicates how much uncertainty there is in this market. But that doesn't necessarily mean that you have to stay out of it. It just means that you should be cautious, stick to fundamentals. Think about the long term. I think at the end of this episode, we get into a really good conversation about the things that you should make sure to do as an investor in this type of market to make sure you protect yourself and don't expose yourself to excess risk. That's exactly right. We actually got into some

defensive moves that people can make to protect the wealth that they've been creating as they've been investing. So yeah, make sure you stick around all the way to the end because it's not something you'll hear anybody else saying. I even give a caveat there that this is not typical advice, but I still think it's really helpful. Do you ever notice how every passive investment somehow turns into a very active lifestyle. Active spreadsheets, active phone calls, active stress. Here's a better question. What if you could buy brand new construction homes,

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It can manage reservations and keep things running smoothly so you don't have to check your phone between beach days. That means less stress and more time enjoying your time. trip. You can relax, knowing guests are taking care of, and your place is in good hands. You travel, your house works. Everyone wins. If you're ready to host, but could use some help, find a co-host at Airbnb.com slash host. Dave, anything you want to add before we get into this thing? No, I think this is a great show. I'm excited for everyone to listen to it. Ivy has a really unique perspective and hope everyone spends the time to hear her out. All right. With that being said, let's bring in Ivy.

Good morning, Ivy Zuman. Welcome to the Bigger Pockets podcast. Thank you for having me, David. Nice to see you. Oh, thank you for that. Now, you have quite the impressive resume. You're the CEO of Zellman and Associates, the Division of Walker Dunlip. You've recently written a book, and you are known for calling the last housing crash in around the 05-06 time. So it is our pleasure to be able to kind of dig into your mind and get a perspective that you have so we can see what you're seeing if that's all right with you.

Absolutely. Appreciate the opportunity. So let's start with 2005, 2006, right around the last. time that the market was just ridiculously hot. There's a lot of speculative buying that was going on. What were you seeing at that time that caused you to sort of take one view when everyone else was taking the other? Well, I think that there was many ingredients. I think of it as making a great stew or great soup. You know, there's not necessarily one component that really makes and drives the decision. But the lack of affordability that was very obvious by any measure that we utilized was

really pretty astounding. And that was even evident in 2004. And on top of that, we had significant inflation in land, and builders were buying land in tertiary markets and paying up for land without infrastructure and speculating on building new construction out in these markets. And our industry contacts, which we have fortunately lots of boots on the ground. So the relationship starting at the C-suite with private entities across every silo within our ecosystem, whether they be private home builders, land developers, mortgage originators, real estate brokers. So really talking and they aggregate to about 1,000 C-suite executives that we are exchanging information with on a regular basis through proprietary surveys that we do.

And in the early years, back, you know, I'd already been an analyst for 15 years plus during that time frame, you mentioned. But the commentary was like, this is crazy. I can't believe what builders are paying for land. And oh, my God, you wouldn't believe the number of investors were selling to. As well as hearing the real estate brokers and loan originators that were telling you that they were seeing people buying that didn't have the money to buy. And they weren't putting any money down. But they were doing so through these exotic mortgage products.

So it was a combination of what was to me almost blatantly obvious. I felt like I was at a raging party and the only one that was sober enough to see clearly. So it really wasn't that difficult. But I think those were some of the pieces that we saw that really got us to step on the sidelines. And one thing about our firm is that because we are really rooted in deep dive thematic research that we overlay with these proprietary surveys, we could be pretty early. We don't care if we're wrong in the near term. So I think that's one thing that people are very trading oriented and worried about what's the next

six months going to bring. We want to give our clients a roadmap and help them navigate what we see as maybe some of the obstacles that they may face or challenges strategically that they could overcome if they utilize the deep dive thematic work that we do and then and stay regulated by utilizing the surveys and the timing of it. I really like your analogy of being in a raging party and the only one sober. That is exactly. I remember I was pretty young at that time, but I remember thinking I'm just going to save up money and just build my own house from scratch. This is so stupid what you're seeing. And now...

Did you do that? No, I didn't have to. It crashed before I got to the point. Thank goodness. And I bought like four houses with that same money. So it worked out pretty good for me. Right. But one thing that I noticed that came after that was the whole too big to fail, right?

We saw there was a point where the government was like, well, we can't let the whole thing collapse. So let's just shove a bunch of money into the system. And then quantitative easing came into place. And then this is just my perspective. Politicians learned that. they could create stimulus that would make them look good because the economy always performs better if you're shoving drugs into it. And then no matter who the politician was, they all just kind of did the same

thing, right? Like, it doesn't matter if they're, they were conservative or liberal. And now we're sort of in what appears to be an addiction that if we stop doing that, whoever is the person who turns off the drugs is the one getting blamed for how you feel when you're jones and for it, right? When you're going through that withdrawal. And so it makes investing in these assets that are based on leverage, and based on the overall confidence in the economy, like no one wants to buy a house if they think that the economy is terrible or we're going to go to war or something, it makes those decisions tougher because they've introduced extra variables.

And I'd like to get your opinion on what you're seeing in the market right now and what your perspective is. Are we in something similar to 05? Is it different or is it completely different? There's similarities in some respects, but I think the level of more prudent lending on the origination front, mortgage originators because of Dodd-Frank in 2014, a legislation that was passed, that you had to show and prove the ability to repay your mortgage, which the industry deems as, you know,

acronym QM. And by having what I call regulators, the mortgage industry is much more prudent, and their underwriting is not going to be the same risk that we had because of the crazy exotic mortgage products that, you know, you can fog a mirror and get a mortgage. So that's a positive, relative to prior cycle. I think that there are those similarities with runaway inflation that is significant and surging, whether we're talking about home price inflation, rent inflation, cost inflation, labor, land, materials, and being able to incrementally allocate capital and do so and get a return that you promise your investors, that's the similarities, that that's going to be really challenging. And the sustainability of where we are in home

price inflation and rent inflation, we just don't think is really reflective of the true underlying fundamentals. A lot of what you said about stimulus, you know, the government and the Fed stepped in and we provided an economy that was arguably in desperate need of support. But the question is now that you pull back on that and the stimulus is no longer there, people were able to basically accumulate savings, whether they weren't spending or they got a stimulus check or they had an unemployed partner and that person had excess unemployment benefits. All of the child care tax credit, people weren't foreclosed, people were not evicted from their apartments. And you had what we call a lot of cloudiness. But what we've seen that is very evident

is that the Fed's policy to continue to on their 80 billion bond purchase program, you know, with respect to 120 billion, sorry, 80 billion, I think it's 40 and 80, versus MBS, that kept mortgage rates artificially so low. And as a result of that, we've seen increased investor activity. So we look at the similarities to last cycle. We're starting to see investors nowhere near where they were in absolute terms back in 2005-06, but the incremental sequential improvement we're seeing in the market, we believe, is being driven by non-primary. And non-primary, David, is really in a bucket because we have non-primary buyers like second homeowners, which are more stickier than, let's say, private investors looking for diversification from the stock market or from crypto.

And then you have institutional capital, and that includes fix and flip. That could include private investors doing fix and flip. We have liquidity providers like eye buyers. And a lot of that buying done with cash up front and levered after the fact, I think is really, really making the difficulty for a primary buyer to buy right now. So competitively, they're overpaying, they're bidding up pricing, and affordability is really being constrained. The monthly payment for an entry-level buyer right now through one month of the new year,

we're up 20% year-over-year. And mortgage rates are still low, so you still see people a lot of FOMO right now. Like what we typically see a rate surge like we've seen, we actually get the fence that is jumping in, feeling like they're going to last chance. And that can last for a few months. But what happens if rates continue to rise, you know, I think that the housing market will moderate, even if rates don't rise further. And I'm happy to delve in why and go into more detail, because I don't forecast rates. So we just use the forward yield curve. And I can tell you, no one can forecast rates accurately, whether the long end of the curve is going to basically flatten

now wherever the Fed funds rate. So it's tough to say that rates are going to go much above, call it a 30-year 4% fixed rate, as most experts believe. But if we just put rates aside and talk about what concerns us, I'm happy to do so. But I'll stop there and take a breath. So hold that thought for one second. I want to unpack what you just mentioned because some of our audience doesn't understand sort of the higher level economics of what you described, but it was very, very insightful. When you talked about the Fed sort of like pulling back on some of the stimulus, what you referred to was the MBS, that sense for mortgage-backed security. That's the market where when somebody gets a home loan, that loan gets sold to someone else,

sold to someone else, eventually ends up in this big pool of mortgages. And investors buy them as security, similar to a stock often held in like a 401k or a retirement plan. And when you make your mortgage payment, a little piece of that goes to whatever investor bought it. Now, when the federal government is subsidizing those, it makes it so people want to buy them more, which means that the rate can be lower and someone will still buy it. And what I believe you're explaining is that when they stop doing that in order to get people to buy these mortgage back securities, the interest rate on the loan itself has to be higher so that the payment the

person gets is higher and the yield to the investor is higher. Is that more or less accurate? Correct. Okay. So that's important to know that's why rates have been going up this year is we've been pulling back on some of that stimulus. And so I think a lot of people who don't follow what you're describing Abby, you're under the impression that rates are supposed to be under 3%, that that's just what they are. And now that they're going up to 3.5, this is ridiculous. And they shouldn't be that high. But it's actually more like they were kept low, like holding a beach ball under the water.

And at a certain point, your arms get tired and you got to let it come back up. And they naturally are rising to. So, okay. So I just wanted to make sure that everyone understood what you said, because I thought it was really insightful. Do you mind continuing with what your thought was there? Yeah. I mean, one thing we should think about, too.

I'm not sure with your listeners interested. The nice part about real estate is everybody cares because we all have shelter, so we all live somewhere. And, you know, I get like over the weekend, I had a C-suite executive call me and asked me if I think, is it okay for them to buy a home in San Diego? You know, I think what we all are concerned about is we know the market's frothy. We know that the inventory is extremely tight.

And I think there's a lot of nervousness about buying at the peak. But what really concerns me, let's just say mortgage rates go to four, and a quarter, four and a half, even four. If you look at the number of people, thanks to the Fed's, I think, bad policy to continue to artificially keep rates low, we have so many people that have refinanced, which is great for them, right? They've locked in at a lower cost basis for themselves, but when you look at the number of people that have a mortgage rate locked in 30-year-fixed mortgage rate below 4%, it's 70% of homeowners. And if you go back in 2018, if you go back in 2018, at the end of 18, it was 39% of homeowners.

So when you think about what does that delineation really translate into, it's a disincentive for the existing homeowner that says, you know what, I don't want to give up this low rate. Now you can say, wait, they've made a ton of money, though, right? Somebody just gave them double what they paid. So there could be less of an impact because of the surge. Like the guy I was talking to was like, you know, I bought a house for a million five and I just got an offer for like three eight.

I'm like, take it. You're out of your mind if you don't take it. So I think that their rates absolute. It's more about the renter who's trying to convert to home ownership. That affordability impact, the monthly payments up 20% on average, couple that with the difficulty coming up with down payment. Maybe they've absorbed or spent all the savings they had. Then the move-up buyer, who's not your luxury, you know, seven-figure plus buyer,

sort of middle of the road, their house. is up a lot, but the house they want to buy is also up a lot. So then you say, well, do we really want the cost of living? Do we want to spend all of our disposable, our income, our shelter, or do we just stay put and maybe fix up the kitchen or redo the bathroom? And that's what starts to happen. You make a very, very good point that a lot of people that don't think about where sort of the velocity of transactions, I don't know if there's a metric we could just describe that, but how quickly real estate changes hands has a lot to do with where people. people make money. So I have a real estate team and I own a mortgage company and we only get paid if

there's a transaction. That literally is why we exist. And I've been very aware that prices have been going up. So you feel wealthier. You're more likely to do a cash out refinance or you're more likely to sell because you have equity and buy another house. Rates have been going down. So if you sell your $3.75 mortgage and we could have got you at a $2.75 on the next house, you can pay more, but it still make sense because your rate is lower. There's a lot of just wins at your back that are making it makes sense to continue trading in real estate and creating wealth, but it doesn't take that much for that to slow down. I don't think it makes values plummet. Like you mentioned, if rates go up to four, four and a half percent and someone's sitting at a 3.1, it's harder to decide they want to sell

their house unless it has so much equity that it's a no-brainer. Part of why this has been happening, at least that I'm seeing is they've just pushed so much money into the economy and it needs a home and it usually ends up in the hands of smart wealthy people and they've recognized real estate as a really good place to park a whole lot of dough with relatively low risk compared to sort of like putting it in a startup and you can leverage a ton of money from the bank at a really low rate and take some of the risk off yourself. So I don't think there's anything that we didn't have helping real estate prices in the last couple years. Like there couldn't have been anything better. And so I do think that's important to acknowledge that it doesn't take much to slow it down. But do you see a slowdown coming,

or do you see like we're going off a cliff like we did before? I don't think we're going off a cliff. I think we have to appreciate the dynamics of the backdrop of the economy. Obviously are not my expertise in what's going to happen with overall employment and GDP growth. But if we just look at the level of inventory in the United States, it is extremely tight. So what's really more contingent on what would be a correction is if we oversupply the market with new construction. And new construction right now is booming. If you just take multifamily, for example, the amount of units in backlog, that means shovel has already been, grounds already been broken,

they're going to complete the unit is surge to a 1974 multi-decade high. And that backlog, as it gets delivered, you know, assumingly those institutional investors that are the developers and the operators, if they're challenged to get leased up at the rates that they underwrote, that will start to disincentivize new capital to develop more. And that's where you start to see lease rates come under pressure on home ownership. If you look at what's being built and developed predominantly single family townhomes, that backlog is at 2007 highs. And it's a lot more concentrated. There's not as much construction going on in, let's say, the Midwest in Ohio and in Illinois and Pennsylvania and Wisconsin. But, you know, there's no secret that

the institutional and public home building companies all sort of operate in the same perspective of let's go where the growth is. So everybody goes to the southeast. They go to Texas. They go to overall southwest, mountain states. So the amount of building happening in those markets are at levels even surpassing in certain markets where we were at the great financial boom period. And so they believe wholeheartedly that there's just a massive deficit that we need to overcome by building new construction. The slowest population growth almost at record level. So in the decade from 2010 to 2020, population growth in the United States grew 7.4%. That was the second slowest to the 1930s at 7.3.

Household growth slowed to 8.7% for the decade, which was the slowest ever on record. And those numbers are poised over this decade to get even more negative. And it's not just in Ohio or in the blue states in New York or California where people perceive everybody's leaving in masses. They're moving from the Bay Area, L.A. to Austin or to Boise. And in New York, they're going to Naples or Miami or New Jersey. And everybody's leaving the Midwest and they're going to Texas or Florida. You know, those numbers are not as big as people perceive them to be.

It's the affluent. It's, you know, call it the top 5 percent that get to do that. And in reality that the level of household growth has decelerated across the entire United States, as has population growth. So our foundational view is that the demographics are really sobering. And we're not going to have enough bodies to fill up all these homes. Like, I don't know about you, Dave or David, but I'll tell you right now, how many homes do you actually either rent and own? Like, there are people that you talk to. Well, I have my primary residence, but I also have my vacation home.

or I'm renting a house because I wanted to get out of the city until things calm down. I'm actually in transition. I'm in a rental right now, but I'm waiting for my new home to be built. And when you start looking at the dual property aspect of right now what's happening, a lot of the developers extrapolate that. And they don't take into consideration. Oh, by the way, we also didn't have a normal course of foreclosures and rent evictions. So that's keeping what we call physical occupancy higher than it would otherwise be versus

economic occupancy. And so there's a lot of cloudiness that makes it difficult to know. We don't think it's cloudy because we think the demographics, again, are very negative and cautionary. But if we do get to the overbuilding that we think that is in the pipeline, then we're going to start to see prices correct. Phoenix, for example, is like at the center of, the epic center of everything I'm talking about. I mean, there's been more capital coming into Phoenix to pursue a build for rent strategy. And oh, by the way, they're out, I jokingly call it in the tertiary markets where, you know, there's no infrastructure where even the cows don't want to live. And that's really where the for sale homes are being built as well. So they're building boxes that look very similar

to one another, comparable and monthly payment, but in some cases, even higher than the for sale product. And the question is, will we have enough demand to fill up all these homes? And if we don't, where we've seen the most supply in the backlog? And right now, the best friend to this industry is that fact that we've got major supply chain governors, and we can't get the homes completed. If we didn't have those bottlenecks, all the supply would be hitting the market, even if rates didn't go up, we might start to see that demand would moderate, home prices would start to decelerate, might still be rising. But I think in certain markets, we're going to see corrections. And corrections could be five, 10 percent high price corrections, contingent that it's not

rates, just supply. So those are the things. that we're watching. But I know that, you know, we called the bottom of the market in January of 2012 because I always like get crap and being told that I'm a perma bear. Well, we were bullish from 2012 to really 2020, the end of 2020 when we started seeing the momentum that we just didn't think was sustainable. So we're not looking to be bearish, but we do see a cautionary number of yellow flags that we need to continue to monitor. And I think that we may see another year of continued strength because it's very contingent on this supply more so than the absolute rate because the investors will keep buying and funding until they can't lease up or they can't sell

that house. And all of a sudden, their traffic and their models don't have any prospective buyers. And they're like, oh, man, we got to start incentivizing. That's when investors, may start to say I'm hitting a wall. Or the private investor could be smarter. Hey, you know what? Fed's tightening, raising rates, home prices are going to hit a wall. I made 80% on my investment in Austin. I'm going to sell now. So these are the things that we'll be watching. Velocity you asked about, interestingly, David, that is the most important thing that we look at in terms of the existing inventory market. Because when you look at the last 20 years pre-COVID, the number of homes, and we define velocity for everyone listening as the number of homes available for sale at the end of a month,

and then the 30 days subsequent, how many sold. Historically, pre-COVID, that was about 21%. So 21% of what was available for sale sold in the given month, in the given 30 days. Right now, that's almost 50%. So even though inventories are record tight, they were record tight pre-COVID. And I used to get a lot of questions from institutional investors saying, why are inventory so tight. And why are home prices really not rising, and especially in the move-up luxury market, even though inventories are so tight? And the answer was because people are disincentivized to move, because they've locked in at a better rate, or two, that they are landlords and they're making a really nice cash-on-cash return, or on a demographic basis, they're aging in place. And they're

not going anywhere because we have an aging population, which slows down mobility. So I was getting tremendous inquiries, not appreciating why home prices weren't rising fast enough. In fact, the entry-level market, which really started accelerating in 2016 as millennials were aging into homeownership, carried the whole weight of the market. The move-up market, second-time move-up, luxury was lackluster at best. Luxury was even under pressure in certain markets like Greenwich or New York City, San Francisco. You were seeing markets challenged. So all of the incremental strength that we've seen, I think is being fueled incrementally by what was a pull forward, young couples that were in apartments that said, you know what, okay, we're not starting our family yet,

but let's get out of Dodge. Let's go get some space. And people ran out of New York City to the tri-state area, or they're now looking at speculating and saying, how do I make money in this robust, crazy market? You know, you hear about crowdfunding and people are finding ways to participate. So it doesn't feel good, but I don't think it's going to be, David, without seeing something changed materially beyond what my expertise is. There's a lot of skin in the game. Will there be foreclosures? Yes.

The government withheld in foreclosures. And normally between evictions and foreclosures, we're talking about probably a combination could be a two million person negative impact that wasn't felt and is only. now on the margin starting to be felt. So let me stop there. People love to call real estate passive income, which is interesting because most of the investors I know are very busy. Busy finding deals, busy managing teams, busy worrying they pick the wrong market. Rent to retirement flips that model. They help investors buy turnkey new construction homes, often 10% below market value in top rental markets across the country. Their local teams handle the build, the property management,

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It's sitting there in the dark thinking, I could be contributing right now. Your side room wants a side hustle. Even your Wi-Fi is like, we could be. networking. You're on vacation, spending money like it's a sport while your staircase at home is fully capable of sending your income upwards. Here's the twist. You can go on a trip and actually earn money. Airbnb makes that possible with the co-host network. If you're away for a while or have a secondary property, you can hire a vetted local co-host with real hosting experience to handle it all. A co-host can handle guest communications. It can manage reservations and

keep things running smoothly so you don't have to check your phone between beach days. That means less stress and more time enjoying your trip. You can relax, knowing guests are taken care of and your place is in good hands. You travel, your house works. Everyone wins. If you're ready to host but could use some help, find a co-host at Airbnb.com slash host. I have one quick question then I'm going to turn it over to Dave. It's pretty much universally understood that the crisis that caused the 2006 housing crash was bad loans.

mention that. Someone could not afford to pay for the property. So the lender found a way to fudge what would have been a quality, safe, qualified mortgage product, and they gave you money that you couldn't afford with the hopes that the prices would just keep going up. It sort of became a game of like musical chairs. My stance is that the next thing that causes a similar crash probably won't be loans because like you said, we have Dodd-Frank and that's still fresh in our minds. It's always something very close to it, but not exactly the same that bites you. it would be crowdfunding what you mentioned. And to me, I see it's the same, like I don't have much skin in the game.

It's not my money. I'm spending other people's money. I'm speculating that things will continue to improve because a lot of the people who are crowd funders that are investing aren't really experts in the asset classes that they're buying. They're relying on people who are relying on people who are relying on people. And now you get removed from actually having some personal capital or skin in the thing. And that's when people make poor decisions. Do you share that perspective?

or do you think that it would be something else? No, I think that's definitely part of it. I think that, you know, the incremental buyer today, especially the non-primary buyer, is really, you know, out of the loop in terms of the returns are being promised. We have high net worth investors, country club investors, that these built for rent funds go and raise money with and promise them, I'm going to get you an unlevered return, high single, double digit, levered return,

and invest in this fund and it's going to be completely safe. You're totally in a defensive position. And now they actually have to go do it. And the question is, when does the investor find out? Is it three quarters later in a statement that says, oh, our returns didn't materialize? So then you start to see things really potentially at risk of unwinding faster. But I think the bill for rent, like we aggregate through a thematic report that we published

late summer, August around that time frame, just tracking. the amount of institutional capital that has announced a strategy to be in the build for rent market. And at the time, it was 60 billion plus unlevered, which predominantly unlevered doesn't sound like a lot. In just three or four months, we're now at 85 billion. And even the operators will tell me, like, I think it's FOMO, like people are rushing in because if you're a single-family rental operator and you only bought existing homes, now you're thinking, well, we should really be building communities. We can get scale. We'll have to go further out. The land is not as expensive, but people prefer new. And so you're just seeing institutional investors that are trying to

provide new construction to then eventually lease up. But everywhere in the country, private investors are trying to lease up too. So where, again, are all the body's going to come from? I'm just read an article where renewal levels, when rents are going up, they're going up anywhere from 10, 15% to 35% just to get them at what they perceive market rents and people are being forced to consolidate households back living with friends, family. We've created so much lack of affordability through the surging rents that it's not like these people are going to be able to go buy a house alternatively. The reality is that, you know, we had more than a third of the country that's never owned and there's a reason for that. We're 65 plus percent homeownership rate. So I think that

there's risk that these investors are being misled. And what the backlash of that will be, will only be time will determine. You know, it's kind of like the pig and the python with foreclosures. It took so long for the foreclosures and judicial states to come to market, that the impact was much less severe had there been just the flood that would have otherwise come. So if the investors are seeing supply not coming to the market that quickly, or they can't allocate the capital that they've raised as quickly, that might mitigate the type of correction that otherwise might come to fruition and severity might be less so. You made a point that just gave me chills.

I remember, like, if you ask, well, how did so many loans, how were they given, right? We were always looking to point the finger. Well, it was because bad paper was sold to someone else and sold to someone else and ultimately ended up in your mom and dad's 401K who did not understand how that thing worked. It's when the decision is made and passed to someone who doesn't really understand. the risks they're taking or what they own, that that is possible to happen. And the crowdfunding thing, like you mentioned, these people at the country club that are being promised these returns and they're being given a marketing flyer that looks really good and the person drives a nice car and sounds

smart. They don't know what they're buying. And they're the ones that are fueling it. And I just thought that's exactly the same recipe that was involved last time. Well, you know, the argument is inflation, real estate's a great hedge on inflation. So if you buy now and inflation is surging, then you'll be protected because your asset will increase alongside inflation. So I can understand why, you know, the individual is looking for alternatives because the stock market feels with, even though the correction we've had, feels frothy, crypto's frothy. What, what isn't frothy right now? What doesn't feel like it's a bubble? Like, so people are trying to hide and real estate seems like a better hedge than other asset classes, at least the resi piece. That's a really good point. David and I were just

bantering about that before we jumped on here about how unattracts. other asset classes are and how that's propping up real estate prices. One of the things I was really looking forward to talking to you about Ivy is what you mentioned earlier about this narrative in the news about an under supply of homes in the United States. And just for context for our users, big institutions like NAR are saying that there's up to a six and a half or six point eight million unit shortage in the U.S., and I think Freddie is at about $4 million as their projection. It sounds like your analysis is showing something different. Could you break down a little bit what the different methodologies are and how you're

coming away with such different conclusions here? Well, I can't speak specifically to their methodology, but if you read the NAR's forecast, I think the word demand might have been mentioned only a handful of times. So when you're looking at the demographic side, what we're really looking at is what ultimately determines the need for more shelter. So if you were running a manufacturing plant and the plant was flat out at 100% capacity utilization and you get more orders, the incremental orders would drive you to have to go build a new plant or source elsewhere. So similarly, we look at housing based on the incremental rate of change, which has been decelerating, not growing. And therefore, when you think about our review, we are incorporating household growth that is incremental growth, plus incremental need for demolition replacement, replacement of demolitions, as well as just excess vacancy. And that equates to about a million three in total units that we would need.

So if we look at what's actually been completed, we're not far off from that. Now, single family, we're running normalized, we believe, of those three components, incremental household growth, incremental demolition, incremental vacancy. We think that number for single family should be roughly 900,000. Right now, completions are running right around that. So we're really not seeing overbuilding. But if we took what's in the pipeline, the latest 12-month starts actually get completed based just on latest 12-month starts, which are running over a million one,

then to at least normalize demand, we would be 20% above that. Now, that doesn't incorporate what hasn't been started yet, because we know through our land development survey, which we publish today, which we do quarterly, that the number of lots owned and controlled by public companies really since 19 are up 40 plus percent, inflation in lots are up 35 percent. So they're out there building their pipeline

to bring even more communities to market that are not even reflective in the start numbers. So that's one piece of it. That's the single-family piece. Multi-family, you know, again, looking at what's completed today versus what is normalized is really not that out of whack. But when you start looking at what's coming, that's why the governor and regulator of having delays, you know, municipalities typically are staffs with six to eight people. they might have two people now because they got poached away for better paying jobs or absenteeism

because of COVID. There's inspectors and lawyers and everybody's so backed up that that's really been the best friend of the industry, whether it be securing appliances from Asia or anything from windows and doors. Homes are being delivered without garage openers are being delivered in some cases with temporary appliances. So there are a lot of bottlenecks. And the builders like to call it as what they call it whackamol because they're frustrated and problematic to their interactions with their buyers. But it's been their best friend and they don't even know it. So and then when I look at the forecasters, the way I think that they look at it is say they start counting. How many units did we build from 2010 to 2020? And what was that? that relative to sort of household growth plus demolition plus excess vacancy.

And therefore, they say we underbuilt. But wait a minute, maybe you should start counting back at 2002 because we overbuilt throughout that cycle. So it's really like what point did they start counting? So I think that that and they look at absolutes. So if someone says, United States has 330 million people and we're starting less homes today than we did in the 80s, then how can we not need more home? So tough to know, Dave, what their methodology is, but we're all about the rate of change and not absolutes. And one more

thing on that, in Japan, Japan has an aging population, which everyone knows about, you know, we joke that they're all they buy is depends. And the number of people under 35 has been shrinking. Well, the U.S. looks exactly the same. And when you look at their population growth from the 70s, grew all the way through the last decade 2010, but housing starts were down 40 to 70 percent because it's not the absolute growth in population. So it's very hard for us to know what is driving these massive deficit numbers that they're predicting. But we know the work that we've done and feel very good about what we think is a much more cautionary outlook. And only time's going to tell when we start delivering that supply on who's going to be right. That goes back to

my earlier point. Like we have so many industry executives, C-speed executives that are actual developers or their private home builders with their own capital. They're not using somebody's funds that they went out and raised. And they're like, what do you think we should do? And we're saying, you know, you've got to be more opportunistic. If you've got to invest in the market, we'd be very careful on what you're buying and where you're buying because that's what we try to give people time. And right now, probably time is on the builder's side. because you may have another year before all this product gets delivered. It wouldn't be till latest second half where we start to see the supply coming to market.

Again, that's excluding any spike in rates from here. Yeah, I just had a similar question about the NAR methodology, because it seems to be based entirely off of this idea that we were building at a certain rate, and now it's declined, and therefore we're at a deficit. And I thought your point about the lack of mention of demand or any measurement of demand is particularly interesting because really that's all that really matters when it comes to supplies if there's enough demand to meet the need of all this inventory coming online. So I just wanted to touch on that.

We published a report called Cradle to Grave in September. And it really was a deep dive in understanding the demographic analysis that we did. And we got a lot of pushback from people because they were just like completely shocked on how cautionary it was. But I think when you heard from the C-sweets in the industry, like we get a call from, let's say, pick a builder in Utah, who says, well, I'm not in trouble because, you know, we had household growth, double-digit growth here. And what we'll say to the builder in Utah, well, it's decelerated from 20% to 14%. So your rate of change has been decelerating in the face of accelerating.

So the supply coming in Utah might be up 30, 40 percent where the rate of change for household growth has been decelerating, but still better than the 8.7 for the United States. So unless you scream, oh, my God, and see a fire in the auditorium and everything looks good, no one's going to run, right? You have to see it, and they don't see it right now. What they see is a very tight market that is driven by more than just primary buyers. and the question is, as supply comes to market, will we be vindicated and be proven right in the way that we've looked at it? Or will the dynamics of the market surprise us for other reasons? Like household growth has been negatively impacted because young adults between the age of 20 to 39 and across all of that cohort, not just 20-year-olds, have stayed living at home with mom and dad well longer than people anticipated. In fact, from 2000 and 2010, no one was surprised to see it go up over 300 basis points.

So it was 16.4% at the end of 2000. By the end of 2010, it went at 19.7. And that wasn't surprising because we knew that there was a ton of people that were unemployed that were young adults. And they had to go back to live with their parents. So during the great financial crisis. Fast forward, the end of the decade for 2020, we were at over 23. I think it was 23.4%.

So why? Why are young adults staying living with their parents? It wasn't just one year. It wasn't due to the shutdown. It's people delaying marriage. People are maybe less negatively impacted by the stigma of living with their parents' home, even though they're in their late 20s or 30s. Or you have affordability constraints. I think there's a lot of reasons that we can't answer why young adults are staying living at home longer. But we know that that's part of the factor why household growth is decelerating at a faster rate than people might have thought otherwise. Is that a trend you see continuing Ivy? You know, it's one that we don't really see a lot of reversal. I mean, fertility rates are plummeting all across the globe. Top 20 developed nations are seeing fertility rates under pressure, the U.S. included. And we know that just thinking about rents today, how many households are going to be forced

to consolidate, how many people can't leave mom and dads because they can't afford the down payment or they can't come up with the rents because rents have gone up so much. And I do think the one thing to caveat is during the pandemic, we did see a decoupling of households. We did see that number come down from the high at the end of the decade, but it's still above 19s levels. And that was really, we believe, a lot of the benefit of guests of the excess savings, as well as the pull forward of, you know, like my colleague Ryan, him and his wife, were living in an apartment in Chicago. And they'd only been married for a year and a half. and they said, you know what, let's go buy a townhouse. But they wouldn't have done that until they typically start a family.

A lot of times, 82% of people that have two plus children live in a single family home. So family formation is really a driver to changing the size of your shelter. So people that didn't have kids yet that said, you know, we got to go by. That pulled forward that demand and therefore also helped to support the surge in overall demand. But I do think that that was a temporary phenomenon. And just looking at the backdrop of what drives household growth, underlying drivers, population growth. The population growth, we've had from fertility rates under pressure, I mean, the July 21 over July of 20 was the slowest population growth ever on record that grew 0.1%. And then you have death rates, which you can argue is temporary due to COVID, but you also have immigration at a fraction of what it was.

So unless the politicians on both sides of the aisle decide that we need to have a much more favorable immigration policy, all of that's hurting population growth in total, which feeds household growth. And so we see household growth continuing to slow, which will also be problematic for lots of various impact across the country, but specifically for the need for more shelter, yet the industry hasn't gotten the memo. they've been getting the memo. Build is in, you know, like back, you might be too young for the movie, Kevin Costner, Field of Dreams, you know, if you build it, they will come. But that's the philosophy right now. We can build indefinitely. And not only that, but we can build a rental product that looks exactly like our for sale product and pretty much charge more because people have no choice. Oh, well, they've got to pay 300 a month for a four-bedroom rental that otherwise if they were to buy it and use today's mortgage rates would cost them $2,000 for the same house, but some people just can't come up with the down payment or they don't have, they have too much leverage, you know, as a loan originator and knowing what it

takes to get a mortgage, right now they kind of have the consumer, unfortunately, without a lot of choices with the supply where it is today. That's a really fascinating and detailed breakdown. And I think as David and I being two guys in their 30s who don't have kids, we're contributing to the problem. But, you know, it sounds. like a lot of the risk that you're focusing on, and I agree that there's sort of systemic risk in the housing market right now, that a lot of it is in builders and development and in some of these exurb locations. Do you see that as the same type of risk for primary home buyers or in urban centers? Or is the risk that you're seeing equally spread throughout the market,

or are there areas that you're more concerned about? I definitely would put more weight. on where development is the heaviest. I think where the concentration and that we call it smile states, sand states, is where really most of the development's happening. Not to say that there wouldn't be corrections on closer end to job centers because if there has been more speculation by investors to fix and flip or incrementally, you know, an eye buyer who's buying homes in the existing market, who's going to fix it up and turn it around and sell it,

there's been a lot of people buying just from the perspective that, you know, they can afford it. And certainly if they've had enough appreciation in those homes, maybe they stay put. And there's less of velocity impact from them wanting to sell. So I think that, again, it goes back to sort of the incremental buyer in the infill slash, call it the first ring of the market, seems more insulated than the out tertiary markets where the new construction is, the strongest, and the state that is the number one area is really Phoenix. And then you've got all the Texas markets, the Carolinas, Atlanta, not surprising where the market is. Florida, certainly you could say the southeast and southwest Florida don't have as much supply coming because there's just more limited availability to develop. But when you go into central Florida,

northwest Florida, there's certainly a lot of speculation going on in those parts of the country, too. So I would be more negative on those outer rings than the, in rings, but everything's a food chain. It all gets impacted. Just to magnitude-wise, it doesn't necessarily all look the same. So for a lot of our audience are relatively small to medium-sized real estate investors, people who are looking to pursue financial freedom, not, most of us probably not involved with development. I'm just curious if you have any thoughts or words of wisdom for this audience about how you would handle the next year or a couple of years given everything that you've shared with us today. If you're in a situation where you're busting at the seams living in a two-bedroom

with three kids, you know, and you really need to buy today, then you go by. You know, I think that ultimately owning a home is better than, in many cases, when you do the math, better than renting. at least that money, you know, arguably you could have equity at risk of being obviously pressured, but the rents, you're kind of throwing it away. So it really comes down to the math, and if you have to move, then I say move because you know what? I mean, you can't stop living. But if you're in a situation where you can wait and the housing market could continue to go strong for another year, yeah, you might leave money on the table, but there could be a lot more deals for you in those markets where supply is going to be the most significant. So if you're looking to relocate from, let's say, New York to Phoenix right now, and that's a market

that you really want to retire in or you're going there in your 30s because you're going to, you can work remote now and you can work anywhere you want. And maybe you go to a tax-free, no-income tax date like Texas or Florida or Nevada. And you just say, well, if I buy here, the question is, am I okay with the equity of the home being under pressure a little bit or should I wait? It's really the, I guess, urgency of how much you need that big. bigger or different location of the shelter. But my druthers would be to be more patient and let's see this play out of the next year and a half before I jump in and continue to spend, you know,

what would be arguably a much higher cost than what I'm currently paying if that's the ultimate outcome. That makes sense. In my mind, as a, you know, a medium-sized landlord, I see rising rates, but still think that a 3.5% interest rate on residential sub four unit resi is still extremely attractive. And so I'm curious how you think of that strategy just in general, that if, you know, to me, this debt and the leverage that you can get is potentially worth a retraction in prices in a year or two if I'm investing for the 5, 10, or 20 year time horizon. So I'm curious what you think about that.

It's all about what you can afford. If you're a landlord and that cost of capital is low enough and you can cash flow it and you're leased up and you don't have vacancy and the expenses are really accelerating, the cost from everything from a turn or just overall maintenance. So it really comes down to the math. But I do think that locking in at a three and a half percent rate on your cost of capital could be of a long term a good cash flowing asset for you that, provides good returns. But I do think buying right here, you have to realize what the outcome would be if your expenses surge, the roof collapses, you have problems. Can you afford to deal with those potential increased costs that are definitely inflating right now? Yeah, it's something we preach to our listeners all the time is, you know, the key here is about liquidity. If you are going to get into

a market right now, you either need to be, have such a great deal that even if your expenses surged or you had some vacancy that you'd be able to weather that storm, or if, you know, maybe you're a landlord with other cash-selling assets that could help you cover any losses or you have a great job. The key really here in investing in a market like this, to me, as Ivy just said, is really making sure that you have liquidity to cover any risk because there is more risk in the market right now than there has in, you know, the last 10 years, at least in my mind, there's definitely, it could keep going up. There's a lot of uncertainty, but I think exercising caution and making sure that you have strong

fundamentals, not in just an individual deal, but across your whole portfolio balance, is especially prudent in today's day and age. And I think it's fair to say that, you know, if you think about the consumer who feels like they're kind of stretched a bit and maybe their liquidity could be a little bit better, they turn to residential real estate because they want a cash flowing asset to provide supplemental income. So what we saw during the pandemic is that there were a lot of individual landlords that might be their house with Airbnb and they're trying to generate cash flow that were thinking they were going to bankrupt because they use that supplemental income to basically

increase their standard of life, which therefore they had nicer houses, bigger cars. So what happens if the overall recession comes to fruition because all the stimulus is gone. And the Fed can't thread the needle and we go into recession. And a lot of people that have invested in real estate that really can't afford now to carry two homes because they're out of a job. So the way I would think about it is that not only you need liquidity, but you need a hell of a lot of job security that your industry that you're in is not benefiting as well from the inflation inflated environment. Right now, the individual in the labor force, they're holding

the carts. They can demand more wages. They can say, I'm not happy. The number of people leaving jobs is at record highs, job quitters, to better opportunities. So they better hope everyone that's now in real estate that they have that liquidity and job security, because there's many industries right now that are artificially inflated that are able to pay more or forced to pay more to secure that those people don't leave or they are being poached and going elsewhere. So I think that I worry about a recession because I don't think the Fed is going to thread this needle. And I think we can wind up having maybe rates stay low, but people out of work. Yeah. That would decrease the velocity of the transactions significantly.

And investors get stuck holding a lot of the back. And so I will go on the record. and say something that's going to be very unpopular to a lot of people, especially the listeners of our podcast. It has frequently been posited that you should buy real estate so that you can quit your job. If you own enough rental properties, you can replace your W-2 income or your job income with rental income, and that's the dream. You save for a couple years, you buy these houses, you get out. There may be a small number of people that that is actually a good idea or that works for their life.

There may be a certain economic environment where that could work better than others. I don't think we're in that environment. Ivy, I think what you said is incredibly important to understand we've used up most of the stimulus that we have, okay? We've shot ourselves full of drugs. We're not going to get that same boost that we got out of it. We've sort of become inoculated to the effect of shooting up

when we need a boost. And if we have another, or when we have another recession, the Fed does not have the tools like lowering the rates and creating the stimulus. already done that. You probably can't cheat your way out of this next one. So that doesn't mean we have to live in fear and just panic, but it does mean we should be wise and prudent and set things aside and look to build skills that will work when the labor market takes a hit, when the job market takes a hit. Continue saving money. Buy real estate, but set the money aside. Don't quit your job

and go just cut off your umbilical cord and just say, hey, I'm good to go. I think what you're saying is very smart is consider where you're buying. You said another thing I wanted to highlight that one of the big, big red flags that you notice that I noticed too is when they start building homes in a stupid area that makes no sense with zero infrastructure because a developer could buy the land cheap and throw these things up fast and some out-of-state investors going to come in and buy it as buy to rent because the pictures on Zillow look really pretty. And then you end up with a property that nobody wants. That is a clear indication of a market that is way too frothy and poor decisions are being made. So don't buy those houses. But if you're buying in an area where the job market is strong, the rental market is strong, the population growth is strong, I would recommend if you can get a deal that makes sense to buy it,

but don't do it to replace your income. I think having multiple streams of income with what is likely heading our way is the smartest, safest thing to do. And if you're that person and you're in that position, when opportunity comes, you can take advantage of it versus the people who quit their jobs and they've been living off of, you know, three or four thousand dollars a month of rental income that is very inconsistent, especially when we have a recession and tenants lose their jobs and now they're not paying their rent for at least a period of time. I think there's a lot of wisdom in what you're saying, Ivy, and I'd just like to

personally commend you for not doing what many people can do in your position, which is play chicken little, and just go scream and create fear and tell everybody, oh, the sky is falling and you need to get out now and that obviously gets attention, but it's irresponsible, right? Like, I love your balanced approach of, well, here's what the number. say there is a lot of supply coming. You should seriously consider where you're buying if that's one of the areas that a ton of supply is coming because it's like when the check engine light comes on in your car, oh, I should probably look at that. But you never take a serious until your car stops, right? And then it's, oh yeah, that light came on six months ago

and I ignored it. It's very similar to what you're talking about with supply. I would never ignore it, David. Well, that's why you're here, right? That's why you're the one banging the drum telling us about the data that's coming because you see the wisdom in not waiting until you feel the pain to do something about the pain. And you also mentioned that this is particularly problematic in the commercial sector. And I think that's just personally, I think that's because it's easier to raise a bunch of money and dump it into commercial properties. It's like, it's just a such a tempting, oh, we can just go raise $20 million and borrow $80 million from the bank and we can buy a $100 million asset and four people can manage it for us. And it's very easy to raise the value

of it because the cap rates and the NOI are somewhat simple formulas, right? And there's property managers that have done this before. I don't have to train someone from the ground up. And there's a lot of money that's flowing into that. And like you said, there might not be enough demand for it, especially if we see a little bit of a correction. A lot of those renters say, I could go buy a house. There's finally enough supply that I'm not getting outbid.

I can get in for a reasonable rate. And now you've got this multifamily asset where vacancy is actually a concern. Can either of you remember any time in the last five to maybe. 10 years that vacancy even mattered, we've been so lucky. There just hasn't been vacancy in almost every single market. And that is not normal. And I think what you're saying, Ivy, is we need to be prepared for that. Well, we did see it in New York. I mean, you did see it. Okay. And San Francisco in certain areas, yes, during COVID. Or areas where there was a tremendous amount of development and there was a lot of pressure on rents. And we did see a correction. But that was related more specifically

some of the urban cities that overdeveloped, there's pockets of where you can point to. But I do think that as a nation right now, if people are diversifying, like you said, and looking for an alternative stream of income, you know, as long as they're not depending on it, like it's like they're almost like they're fund money. Yeah. And the cost of carry, if it's cheap enough, great. But there's a lot of hidden expenses with being a landlord and also, you know, just being a homeowner. And so those are things that with maybe speculation happening might surprise people.

So I think we just have to be cautionary and not just ignore some of the yellow flags that we're seeing out there. Dave, anything you want to add? No, I feel like I could do this all day, but I think that was probably a really good place to stop. This has just been super insightful. Ivy, thank you. It's given me a lot to think about and a lot of data points that you hear about, but having a fresh and new perspective on it has been really helpful for me and I'm sure for our users as well. Thank you for having me. Yeah, thank you.

Ivy, this was a true pleasure. For people that want to learn a little bit more about you and kind of follow you, what's the best way for them to do so? If you're interested in learning more, I actually just published a memoir called Give Me Shelter, hard and soft lessons from a Wall Street Trailblazer on Amazon. And you can just email our chief of staff, Kim, at Zellman Associates.com for more information. But we welcome any incoming inquiries. Awesome. Well, thank you, Ivy. Everybody, go check out. Give me shelter. You can find it on Amazon.

My favorite band, Stones. What's that? I said my favorite ban was the stone. So I figured, you know, shelter and everything. Do you, did you know that give me sheltered? I did not know that. But I figured it out when you mentioned that. Okay. Dave's the old soul. I assumed it was a real estate thing because you're here talking about real estate. Got it. Maybe it was a triple entendre, the stones, the salt. Yeah. Sulfur.

There you go. Well, thank you, Ivy. This has been awesome. I really appreciate you sharing your insight. Thank you guys for having me. This is David Green for Dave the Data Deli Meyer, signing off. Do you ever notice how every passive investment somehow turns into a very active lifestyle, active spreadsheets, active phone calls, active stress?

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