Moody's Talks - Inside Economics - Holiday Sales and Housing Supply

Episode Date: December 17, 2021

Ed Golding, Executive Director of the MIT Golub Center for Finance and Policy and a Senior Lecturer at MIT Sloan, joins Mark, Ryan, and Cris to discuss all things related to the U.S. housing market. Full episode transcript. Questions or Comments, please email us at [e-mail]. We would love to hear from you.  To stay informed and follow the insights of Moody's Analytics economists, visit Economic View. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Inside Economics. I'm Mark Sandy, the chief economist of Moody's Analytics. And we got action-packed podcasts for you. Of course, let's do the introductions. And we have the two co-hosts, my two co-hosts, Chris DeReedies and Ryan Sweet. Hi, guys. Hello. Seems like we've been doing a lot of these podcasts.

I think we've been stockpiling podcasts for next week, Christmas week, and New Year's, the week of New Year's, because I don't think we're going to record those. two weeks. So we've already done those podcasts. And, and we're, this one's going to be released today, though, I think, right? I think, I think it's for today. Yeah, good. And any words of wisdom, guys, before we move on? Anything you know what going out? Chris always has words. Always words. I don't know about it, the wisdom, but definitely looking forward to it. If you are feeling a deficit, certainly, I think Ryan and I would be happy to come back next week and, you know, jump on the line here. I really love these podcasts.

In fact, I would have no problem coming back next week. There's so much fun. I look forward to it every week. Yeah. It's Christmas Eve. That's telling, isn't it? Yeah, we would probably jump on and do it Christmas Eve. Hey, well, we have a guest today.

Ed, Ed, Ed, Goulding. Ed, welcome. Welcome to Inside Economics. Good to have you. And where are you speaking to us from, Ed? Are you, where are you in DC? I'm in DC area, suburban Virginia, Tyson's Corner. Got it.

Ed and I go way, way back. You know, but I'll have to say, I'm a little embarrassed because I get confused. You were at Freddie, weren't you? You were at Freddie. Freddie Mac, yeah. And we got to know each other, it must be 20, 25 years ago now. I don't know, something like that.

And how long were you at Freddie, Ed? 23 years. I'm sure you know the number of days and hours, too. Some seem longer than others, but yes, the last one's dragged on. Yeah. And then you went from Freddie to where? Did you go directly to FHA? Well, as you know, it takes forever.

to get cleared. So I sat at the Urban Institute for a while. My good friend and our good friend, Lori Goodman, gave me a seat. So I sat there waiting for the FBI to talk to my neighbors. And once my neighbors gave me the AOK, I moved over to HUD, first as a senior advisor for Secretary Donovan, and then for head of FHA for Secretary Castro. Right. And you were, you ran FHA. for at least a couple of years. Maybe. Yeah, well, no, about just shy of two years.

Just shy of two years? Yeah. And what were those two years? They were, when, when was that? Well, again, it was sort of basically March of 2015 to basically noon, January 20th, 2017. Something happened at that point. Oh, yeah. Oh, that's right.

That happened. Yeah. That which we will not talk about happened. We can talk about it. FHA goes on beyond any administration. It's one of its beauties. Yeah. And then you came back over to Urban, the housing finance center, and you were there for a bit.

And I think we might have worked on a paper or two together, I think. Yes. And now you're the executive director of the Golob Center at, MIT. Correct. Yeah. Yeah. He was the CEO. I'm sure he's still alive. I'm not sure. No, no. Ben Golub is the chief risk officer at Black Rock and has been with Black Rock and Larry Fink from really the beginning of the company. As you know, Larry started off as a mortgage trader many years ago before building Black Rock. But so Ben as being one, one of the early executives at Black Rock has done quite well and very graciously endowed an

existing center about seven years ago at MIT. Ben's a double MIT grad, both undergrad and PhD. Are you an MIT grad too? No. You're Princeton. You're Princeton, I believe. Princeton, PhD, correct. Yeah.

You act like a Princeton grad, just saying. Oh, it's all good. It's all good. Coming from a Quaker. Oh. Oh. I was going to ask something. Oh, can you just tell us a little bit about what the center is up to, you know, what kinds of things you're doing there?

Yeah. You know, it's the Center for Finance and Policy. It's, you know, mission is to try to get financial policy to be better, better informed. You know, as you know, MIT is sort of the center of a lot of modern finance. Bob Merton's there as one of our co-directors. and much of the technology and the tools that are used in the private sector haven't found their way into the public sector. And so it's to really inform and to educate both on the regulatory side, but probably more

importantly, the government is the largest provider of financial services. Think of Social Security as a retirement service. Think of student loans. And really think of the mortgage market is a government, you know, exists because of government policy. So it's important for the government to understand discounting options, you know, and the like in evaluating how to be more effective in the services that they provide. We've done, we do annual conferences. We did one on retirement. We did one on housing finance.

our most recent one was on the environment and climate change and the role of financial institutions in that. A little bit of, you know, is it better to divest or engage one of the different returns? We had a very good discussion, including one that you're probably familiar with from your graduate studies. You know, what's the right social discount rate? What do we do about, you know, future generations are not in the market. to express their preferences and views. So how do we struggle as a society to decide how to discount the future on that?

So it was a fascinating conference. We even had a geologist to remind us that we economists are a little short-sighted of looking at 10-year budgets. He looks at millions of years at a time. So, hey, there's a bit of a tangent. And I will come back. But on the discount rate, I've got this kind of pet theory that because interest rates are so low and they've been low, feels like they're going to remain low, that that actually makes it more economically viable to consider these longer term costs, like the risks of climate risk. it kind of brings forward, you know, the threat here.

And that, you know, we should be thinking about this more deeply at this point in time, in particular because of the low rate environment. Is that sound right? Well, yes. I mean, although one of the speakers said, why stop at zero? I mean, there's just that's sort of an arbitrary, that's an arbitrary number. I think the other consensus that, I don't know if it's consensus, but another theme that came out is these are difficult social policies,

don't look to the market, you know, don't look to the, treasury market to answer them. For better, for worse, you know, you need to look at, you know, democratic consensus as much as you can look at a market. But it was very, very well-established economists didn't have any answers, which is maybe not too surprising for our profession, but it's a tough one on what to do about a climate change and how to quantify. by the future costs. Well, that sounds it. We should definitely have you back for that one, perhaps, for another podcast.

But this podcast, we are going to focus on housing, housing, finance, and your expertise. And as I mentioned, Chris, Chris is a, as a houseer too, he came from, did you guys ever run across each other? I think Chris was at Fannie. You were a modeler at Fannie. Did you ever run across Ed, Chris? Only by name. Only by name.

Never. All good, I assume. Absolutely. Absolutely. Absolutely. But there was quite a bit of cross-pollination between the institution, certainly. So there were definitely ex-Freddie Macgers that I worked with, vice versa. Is that another Zandism, a Hauser?

Yeah, that was a new one. No, wait. That goes way, way back. Okay. I never heard that. I should have taken credit for it, though. But, yeah. Yeah, you should have called me on that one.

The Walzer is, I don't know who coined that term, but that's been around a lot. while yeah for the housing industrial complex right i mean the folks that are in that world and i'd say ed and i'd been kind of in that world right when you say yeah yeah yeah yeah but don't forget uh you know how i was saying as well you know we'll talk housing goes way back uh there are great quotes from lincoln and fbrr about how housing is important to this nation so being a houseer is not a bad thing oh oh yeah different than a homer right yeah A Homer. Yeah.

Right. Well, let's dive into, we're going to start with the, Ed, as we were discussing earlier, we're going to dive into a bit of the economic statistics. We play a bit of a game. Each of us identify a statistic and the rest of the group tries to figure out what that statistic is. You can questions and clues, that kind of thing. The best statistic is one that's not too easy so that it's a slam dunk, that Ryan will

get it and not too hard that no one gets it. And maybe even one that is relevant to the topic of the day, the big topic, which is housing and housing finance. And you're more than welcome, Ed, to play this game. I know you have many statistics up your sleeve. I make them up. It's my problem. Fair enough. They're harder to guess if they're made up. All fair and loving statistics. And, you know, Ryan likes to throw in one more rule. And that is, it has, it has to be a statistic from the last week, but that doesn't apply to you, Ed. That just applies to the rest of us. And housing doesn't change that quick place. That's a good point. That's a good point. So we're going to begin with Ryan. Ryan, you want to lead the way? What's your statistic for the week?

All right. So I'll give you two numbers. The related 1.6% and 2.5%. And this is a statistic that came out this week, presumably. It did. One. One. 0.6 and you said 2.5. Correct. Okay. And is it in the retail sales numbers? It is not. Okay.

Is it in the industrial production numbers? No. No. This release, you usually don't associate it with numbers, but once in a while, it comes out with numbers. Oh. Is it the beige book? No, the base book didn't come out.

No, no, no, no. No. No. You're on the right track. I am on the right track. Something the Fed, oh, is it in the FMC release? Because the Fed met this week, and they came out with their statement. And their forecast, I'm getting close, right?

You're getting very close. Okay, one, say it at 1.6 and 2.5. Is it in their forecasts? One of their forecasts? It is. A projection, yes. It's a projection. Oh, Chris, we ought to be.

Oh, two, I know. Oh, wait. Interesting. 2.5 is the terminal federal fund rate. Yep. What's the 1-6? Huh? Okay.

Go ahead and explain. Okay. So the terminal fund rate is where the fund rate should land in the long run, consistent with a full employment economy with inflation at target and the economy growing at its potential. How about that for that? Exactly. That's perfect.

2.5. Okay. Now, 1.6. Chris, help me out on this one. Red. They're related. 1.6. Oh, is it, is it, they give us a distribution of, of.

Oh, I wouldn't send you guys on that rabbit hole. So 1.6 is what markets expect the terminal Fed fund rate to be. Two and a half percent is what we have and the Fed. So there's a little bit of a disconnect. When you say that, how do you know that you're going into futures markets and teasing out where the long-run contracts are landing? Yeah, I mean, you look at the five-year, five-year-fourth nominal treasury yield. Okay.

And right now that's 1.6%. Oh, I see what you're saying. Oh, I see what you're saying. You take the 10-year yield, you decompose it, you get the real short-term rate, you add in inflation in you're at 1.6. Correct. Oh, wow. And historically, so it's the whole idea is, I mean, things can change.

could move higher closer to the Fed's target. But this tightening cycle may start sooner than people anticipate, but it might end faster because markets may push back against how high the Fed fund rate can get. Hey, Ed, do you have a view on all this on, you know, thinking around where rates should be in the long run? And this is, you know, a key question for housing, obviously, you know, particularly long-term interest rates. And that's why it was a beautiful number. Yeah, I mean, you know, and the 10-year rate still sticking it around, I don't think it's broken 1-5 yet, hasn't. It's like down to 1-4 or something. Yeah.

Yeah, so it's interesting what, and of course, mortgage rates are keyed more off of the 10-year rate. In some sense, either the markets think the pandemic's going to last forever, I hope not, or it goes back to sort of the fundamental demographics that there's going to be more savings than investment globally. Right. Right. Hey, one thing, though, that maybe also be playing a role is all the QE, right? I mean, the balance sheet, the Fed's balance sheet is so bloated at this point.

And it's not only the Fed, every central bank on the planet has larded up on sovereign debt. And that has to be taking a big chunk out of long-term interest rates, right, Ryan? Yeah, I mean, when you decompose it, you look at the term premium, and that's where QE quantitative ease and mostly affects long-term rates, it's still negative. And it's actually over the last couple weeks falling even further. Yeah. Right.

So do you have a kind of a rule of thumb, you know, translating the size of the Federal Reserve's balance sheet, the amount of quantitative easing they've done in what it means for long-term rates? Have you thought about that? I used to have a rule of thumb. I can't quite remember. I think it was like for every percent, QE as a percent of GDP, for every percentage point of GDP,

it was four, it was like four basis points, something like that. That sounds right. Okay, so if you do the arithmetic in a, if you go back before the pandemic and look at the balance sheet as a percent of GDP and look at it today, I think it's up about 15 percentage points, right?

Something like that. Correct. And so you take 15 times four, that's 0.6 percentage points. So instead of, let's say, 1.4% today, if the Fed had not QE did not bond bonds, but not expanded its balance sheet, the long-term yield, all else being equal would be 2%. Two, right? Yeah, 2%. I mean, the first few rounds of QE after the financial crisis,

when you add it all up, reduced long-term rates by 100 basis points. Say that again? After the Great Recession, those three, four rounds of QE that the Fed did, including Operation Twist, reduced the 10-year treasure yield by 100 basis points. Or full percentage points for folks. Oh, no, basis points. Okay. Okay. So it's consequential, significant.

One other quick question about that. I know I'm going down a lot of rabbit holes, but just I'm curious because it bugs me. Do you think because of the Fed's QE and the impact we did? articulated for long-term rates, that it's messing with our ability to glean inflation expectations from 10-year yields that maybe what we think we know we don't really know because everything's all messed up by the Fed's QE? Yeah, I mean, it's particularly messed up, messing up tips. So Treasury, inflation protective security.

So the Fed's been buying a boatload of these things. And we use that to calculate market-based measures of inflation expectations. So I do think it's distorting it a little bit, but you know, you can go and look at other measures of inflation expectations that are not being affected by the Fed. So inflation swaps. And everything suggests that markets think, you know, inflation is transitory, we'll get back to 2% at some point. Okay. So what you're saying is even though there's these distortions created by the Fed's bond buying,

it's quantitative easing, even abstracting from those biases that result, market is, investors are still saying inflation is coming back down. Yes. A survey say similar things as well, right? Which surveys? Consumer surveys, economist surveys, business leader surveys, they're all suggest the same. Right.

Interesting way, they did that, those surveys by age of the respondent. Yeah. And us oldies who remember the inflation were much higher than the people who have never seen inflation. It was, I think, a good percentage point or more difference between, you know, broken out by age of respondent. That is really cool. I didn't know. Where did you, where do you see that data, Ed? The New York Fed, I believe. York Fed. I read that in the Wall Street Journal, but I did, yeah, the source. Yes, New York Fed. That is really cool. That's interesting. So the, so people's inflation expectations are conditioned on what they've lived through. I guess that makes

sense, but I, yeah. Yeah. Really. Wow. You can probably argue that some people's inflation forecasts are also based on their experiences. Are you referring to me, Mr. Sweet? I'm saying the three of us. Okay. Remember, we go back to our inflation forecast. You're higher than I am. And Chris is right in the middle. I'm on the high side of you guys. You're on the low side. I'm the old guy and you're the young guy. I'm not saying that. I'm just saying you live through an inflation period. I've never experienced inflation. You have the regression of age and good fit with three points. Interesting.

That is interesting. I'm going to have to go take a look at that day. Okay. Mr. DeRides, you're up. All right. 152,000. I know what it is.

Ding, ding, ding, ding, ding, ding, ding, ding, ding. I know why I know this, Ed? Because he keeps going to the same well every single feels like a week. No, this is topical. This is housing. This is housing. It's a good statistic, though. Ryan, you don't know this statistic?

All right, let me give you the corollary. 752,000. What corollary? 7502-th-related. Ding, ding, ding, ding. You got that too. I know the answer to that one too? All right, go for it.

Actually, you know why I know all this? Because those were my statistics, Derides. You took my number. We're right. Ryan, do you know these numbers? I can't believe that. No. You're going to be digging into the bowels a little bit of the report,

of the housing starts report. Oh, you're going... Can't just give you their top lines. This is important. These are important statistics, actually. I agree. Yeah. I give Chris credit for this, because I was going down this road, which makes me now...

I got to come up with another statistic. Oh, no. Okay, I can do it. I can do it. Back to normal. We know. Yeah. Okay, all, seven, 750.

That is the number of homes that are under construction. Single family. Single family homes under construction. and that's the highest level since I think March of 2007, I believe. Is that right, Chris? Yeah. Yes, that's right. That's right.

Yep. You guys got to be impressed with this, no? Yeah. Ed. No, I am impressed. Ed is thinking, Chris told me this is what he was going to ask. That's how impressed Ed is. 152K, that is also interesting.

That's the number of homes that have been author. authorized to build but haven't even started. And that also is, is that a record high or pretty close to a record high? Chris, I don't know. That's the highest since 2006. Oh, oh, it is. Okay. So, you know, you had those two numbers together.

That's a lot of housing out there that's going to come to, you know, you know, partly it's because, well, you explain what's going on here. Chris, that's your statistics. So what's the significance of these numbers? Yeah. So the 152,000, that's, other important point about that is up for 41%. on a year-over-year basis. Right.

And it points directly to the supply chain issues, right? So builders are certainly interested in building. They see plenty of opportunity. They are getting the permits and they are, you know, starting where they can, but they have a boatload of homes that, again, have been authorized but not started. They're kind of in reserve. They're waiting for workers or other supply chain issues to resolve themselves. And it just points to the backlog that they're facing.

So they're not able to actually put up all the homes that they actually would want to, given this current environment. Yep, yep, good statistic. That was a good one. That was a good one, right? Yeah, very good one. See? All right. So, said, you're learning.

You're learning this game? Do you want to play the game? Yeah. All right. Mine are not this week, but mine are November since, as I said, a lot of housing data is quarterly, if not on that. but 74 point, I'm going to give you four numbers in descending order. Okay. 74.0 percent, 60.2 percent, 48.3 percent, and 44.0 percent.

I know. I know the, I know this. I think I know. Were you guys emailing? No, no, no. I think I know. Because there is no way. Yeah. Those four numbers. Rattle off. I know this. I know these numbers. Yeah. Unless I'm, I could be wrong. There are pretty obvious ones if this is what you follow. But yeah. Chris, Ryan? Chris should know this.

If Chris doesn't, look, he's looking. He's trying to, he's Googling. He's Googling. I can see him. He's looking down. He's Googling. I wrote them down. Oh, yeah.

Okay. You want me to go? What's throwing me off is you said quarterly. So it rules out, that rules out in age, B. So quarterly. I think they're- ownership rates. I'm going to put you out of your mind.

By age, right? Home ownership rates by racial ethnicity, right? And 75 is like white. What, 62 is what, Ed? 60.2 is Asian American. Oh, Asian, Asian Americans. And then Hispanic is 8.3, yes. And the black home ownership rate is obviously very low.

Right. And then I actually, very quickly, I'll add three numbers that were not in the release, but to show that I can multiply. If you turn those into households, what each group would be if they had the same homeownership rate as whites, you would have 5.2 million additional black households, 4.7 million additional Hispanic households, and 1.0 million more Asian American households owning houses. So you better start building more than 170,000 units if we're going to close those gaps.

Hey, you know, if we don't make any as a nation progress in improving homeownership for minority groups for black, Hispanic, Asian Americans, the home ownership rate is going to decline pretty significantly here, isn't it? Because the share of the population that is minority is going to continue, is rising pretty rapidly, particularly Hispanic share, and that's going to continue to rise. So home ownership is going to fall. pretty dramatically if we don't make some progress. I would think.

Am I thinking about that right? Well, I mean, yeah, I think that is right. I think, and of course the Joint Center on Housing Studies up at Harvard, you know, has done those types of projections and, you know, sort of broken it down by, again, age, vintage and when the households are coming on. But, yes, you'll see a drop in the overall home ownership rate if we don't change. that mix. Does it surprise you add that,

and I know we're getting a little bit into the big topic, but you know, since we're kind of here, that, you know, we, when I say we, the collective, we have not seen any improvement in homeownership and really since I think soon after the Great Depression, there was a big increase in homeownership, obviously, because of all the policy changes. Fannie Fred, Fannie was put on the planet, FHA,

was put on the planet. There was a lot of policy put in place to promote home ownership. And it worked. But really since I'm speaking from my, from memory, so I may not have exactly right, but really since the 60s, 70s, we really haven't made much progress. Gosh, that's right. You know, the black homeownership rates went down to what they were in 1968. Right.

So does that go to policy or is that, what is that? What do you, I mean, Fannie and Freddie were put on the planet to promote homeownership, you know, most fundamentally, right? I mean, well, you know, in some sense, even today, you know, it is the FHA, B, O, and VA programs that are the gateway to first-time home ownership. Freddie and Fannie do great things, but it's not their basic product where with FHA, it's, you know, 80% of what they do, 80 to 90%. our first-time homebuyers. FHA's, you know, been around, you know, a long time. A lot of this comes back to questions of how the bottom quintile has, and the bottom two quintiles have done in terms

of income and growth. And, you know, really their wages have not kept up. And that's where you'd expect to be, the margin to be, where if you're going to increase the homeownership rate, It's people in the bottom two quintiles who have to make the leap to homeownership. So you say what you seem to be suggesting is it's not housing policy per se that's failed. It's just broadly the inability of our society and economy to lift up the financial fortunes of folks that are renting. Yeah. I mean, we can, it's one of those things if you're trying to get, you know, those four numbers that, I just, you know, the numbers I just gave you, you know, represent 10, you know, 10 million households.

You have to look at all levers. You know, we can talk about this. The mortgage market can do a few things that it hasn't done, but it's not financing. That is, to a large extent, are questions of income and supply of afford, you know, we need to build more supply of affordable houses. on that. And traditionally, a lot of these cities, you would build at the high end and you would see filtering down to the lower end of affordability. There's been some studies to say that filtering process has slowed down considerably.

So it's, you know, it's difficult to find affordable housing in a lot of communities. Got it. Chris, do you have a perspective on this? I mean, in terms of the lack of progress in the last 50 years? on homeownership? You know, what, what, you have a perspective on that? I agree,

we need to identify the root causes. I don't see that it's, I don't see that it's financing, right? And Fannie and Freddie, like I don't, their mission is liquidity, first of all, all right?

Keep the mortgage market operating, make sure that there's ample liquidity in all environments, right? The, they don't control the levers in terms of supply. Neither does FHA really either, right?

So, and that I view as the real factor here. In addition to certainly incomes and the ability of folks to pay the supplies outside the purview of the federal governments, much more in the purview of local governments in terms of zoning and where we choose to locate housing, permit housing to be built. Right. Okay. Well, let's come back to housing.

You guys want one more statistic to round this out? I'm going to mix it up a little bit, just to mix it up. 16.5%. 16.5%. I guess this is non-housing-related. Yeah, non-housing-related. Okay. And it is from this week.

Indeed, it is. Probably not. Oh, it is. Okay. We go in retail sales, something in the... Go on retail sales. Okay. All right, let me think that.

Yeah. Is it year-over-year? It is year-over-year? Yeah, building materials. What is it? Building materials. No, I would consider that to be a little over the top to go that deep into the balance. Are you doing control retail sales year over year?

Close. Control meaning X auto, X, gas, X building materials, right? And X restaurants. So a lot of X's. Yeah. No, I didn't quite go there. But you're close. Non-auto?

Non-auto, non-gas. So retail sale, this is year over year, percent growth in retail sales, excluding autos and gasoline. So kind of my proxy for, you know, for Christmas sales, holiday sales. So, but this is through November. This is through November. So we need one more, of course, data point for December, but it could be a disaster in the year-over-year increase in holiday sales.

So that would be retail sales, X auto, X gas, November and December, this year compared to last year. is going to be well into the double digits. Again, even if December is a wipeout, you know, that, you know, bad. It shouldn't be. Huh? It shouldn't be. It should not be, right?

We're already halfway through, so hard to imagine that it would be. You know, obviously some of that's inflation. You know, clearly retail goods prices are up a lot. And, you know, I'd say, you know, maybe seven, eight, nine percent. might be retail, because CPI is up almost 7% year over here. So it's probably higher for goods. So that still leaves you real growth of close to double digit, right? Right?

I mean, this could be the best, if you measure Christmas sales by that measure, this could end up being the best Christmas on record, I think. I think, just amazing. So all the hand-wringing, all the, you know, gloom and doom, you know, everyone's really, it feels like everyone's so pessimistic. The economy's chugging, right? At least up until now. Now, it could change with Amacron and Delta, obviously, you know, the way, another wave's coming here pretty fast.

And we'll see how that plays out. But, you know, it feels like economy's pretty strong. Yeah, it's going to be strong this quarter. Yeah. I'm worried about early next year, as this is early next year. Yeah. Yeah. If you look at case counts, it's, look at Chester Count.

We're almost higher than, that's where we're located, is almost higher than it was at any point throughout this entire pandemic. And that's just in a few weeks. No, no, it's true. Hey, are you guys, one thing that confused, another thing that confuses me, and then we're going to dive into housing is if you look at the economic statistics, I mentioned the holiday sales, but, you know, many others as well, the economy feels strong, you know, feels like it's growing strongly. yet consumer sentiment surveys are very, very weak. You know, the University of Michigan survey is a low point in the entire pandemic. How do you square that circle? What's going on there?

Do you have a view on that? You want to have a gas prices and the pandemic? And the pandemic. Especially for you, Mish. That's very sensitive to fluctuations in gasoline prices. The University of Michigan survey. Yeah. What do you think, Ed?

Is that, do you find it, is this gotten on your radar screen? Is this something you've thought about? Not much. This clearly, you know, it is, the inflation is, at points can be shocking to people who haven't experienced it. And then, of course, you know, what, as we know, wages, you know, sort of keep up, sort of don't. And I think it adds to the volatility for the consumer.

if they don't expect their wages to climb, or if you have savings, right? If you had your money, you know, a senior who had this money or her money in a savings account, all of a sudden has 10% less money than they had a year ago, you know, not quite. But I think there's people are trying to grapple with what inflation might mean to them. So I wouldn't discount. I mean, gasoline is one of it. but it's not the only element that's experiencing inflation. You know, rents are way up in many areas.

And I think, you know, as you know, how we put housing into the CPI is rudimentary at best, especially the owner-occupied stock. So what's happening to those numbers, both the headline numbers, and then the gas pump, the grocery store, and the like, I think very concerning to people. Yeah.

And what you're referring to on the rent is, you know, if you actually look at the rent increases that people are seeing for new move-ins for people who are actually starting to rent, it's like, I don't know, it's like 15, 20% increase over last year. But that's not what's showing up in the consumer price index because of the way the Bureau of Labor Statistics, the Keeper of the Data translates the rent increases into what it means for, you know, the CPI rent. Right.

It's the, it's that, you know, it's that owner occupied two-thirds that gets just, you know, it gets in there, but it gets in there probably with some, a lot of noise or a lot of lags. A lot of lags. Yeah. Right. Chris, do you have any of you on that on the disconnect between sales, what consumers are saying and what they're doing? Yeah, I'm increasingly concerned about measurement errors in the surveys and so in terms

of who responds to the survey. and how they respond. If you look at the University of Michigan, they have a breakout by political party. There's such a gap between the Democrats and on current economic conditions, let alone your views on future economic conditions, but it's so closely tied to who's in the white odds. It switches like the day after an election, right?

So I don't know how credible that is in terms of a true measure of sentiment, right? do I it's in terms of the soft data you look at the hard data which is how people are actually spending it I think that's that's where the rubber hits the road yeah that's why I always watch what consumers do not what they say yeah well there are times when what what they say is important right inflection points yeah sure yeah but I don't think we're at an inflection point that's not typical yeah okay all right it was Mark you had a strong showing I know that was good I was waiting for someone to say that yeah i'll take i'll take it i had a strong showing this you know this sounds very strong whatever it's 38 we need to mark it down

i'll give you your cowbell there you go i get my cowbell wearing see now we have to have an episode next next week because we can't let mark and the year and the year like this because we're not going to hear it the end of it until next year i have a strong showing baby all right let's turn let's turn to housing more formally and i think the there's a lot of things to focus on but i think the that is now clearly the most significant pricing issue is supply, right? The lack of supply. Would you agree with that, Ed? Is that fair in the top of list of things to be worried about in housing?

It would be supply. Yeah, I mean, you know, partly, yeah, there's always the question. Prices are, you know, up almost 20%. You know, the question I always get asked is, is it a bubble? Oh. And, you know, I go back to, you know, our economics 101 days. You know, there's the alternative to a bubble is just an old cobweb model. I don't know if you remember the cobwebs.

Oh, sure. We talk about that all the time on inside economics. Yeah. This is a record. The cobweb model has come up. Oh, okay. But, you know, in some sense, it doesn't feel like a bubble. You know, it's if you look at prices of houses versus rents, we just talked about rents

going way up. So if rents go up, you know, you would expect the asset value to go up or prices to go up. The amount of flipping speculation, irrational exuberance, you know, there's some there, but not a lot. And, you know, the alternative is we've just underbuilt. People have estimated, you know, pick your number, three to five million units over the last decade that should have been built in terms of, you know, housing formation and potential housing formation that we need about three to five more, three million to five million more units. And, you know, unfortunately, even the tornadoes that we experienced this last week reminds us that there's a good, you know, several hundred thousand units a year get destroyed

through fires and natural disasters and just sort of depreciation. So we've been sort of underbuilding and, you know, it clearly, you know, we expect to see a supply response. It seems like it's going to take a long time for that supply response to be so great as to bring prices way down. People expect a slowing of prices with that increased supply, but I don't think anyone that I know of is forecasting prices to drop that we still need to work through, you know, a good deal of supply. So what you're saying is, obviously, house price has been rising very rapidly, depending on the index, the house price index you look at, it's up 15, 20% year over year nationwide. That's nationwide. But there's good fundamental reasons for that, most significantly being we got a severe shortage of just homes. There's just more people out there looking for homes than there are actual homes. And that if you, it's not a. prices are up not a bubble because you have this fundamental supply side support but also you just don't see the kind of traditional characteristics of a bubble

flipping you mentioned which is I buy with the intent of selling quickly at a profit back in the financial bubble the financial crisis the housing bubble which was I think we all concur as a bubble yet a lot of people a lot of flippers and they were using debt you know borrowing money to finance the purchase to leverage up and you don't see that today is what you're saying. So it's not a bubble. Chris, do you concur with that view? Is that your perspective, too?

Do you buy into that? Would you push back on any element of that? No, I guess the only caveat I would throw in there is the time horizon. I don't see a bubble certainly right now. I think the factors are there, right? A big demographic wave with the millennials coming in. So it's actually justifying additional billing and certainly the additional demand. That's different than the financial crisis where we actually had the reverse.

We had that smaller Gen X generation coming through, which actually exacerbated the issue. But I do get worried as I look 5, 10, 20, 30 and beyond because that wave will pass through. The next generation is smaller. And the baby boomers are going to be downsizing at that point. So there's going to be more supply if you were less demand at that point. So I wonder if that does also factor into the minds of builders as they're thinking about their investment decisions. Yeah, times are good now. I want to certainly meet the market, but I'd like that wave to continue.

I'm going to extend that as long as possible versus a boom and bust type of cycle. Really? I don't know. I think you're giving builders way too much credit. Oh, maybe I'm wrong. Well, given the experience they went through, right? The publicly traded builders, which are now a larger share of the home building market, they're probably more disciplined, yeah, for sure.

I think so, yeah. Huh. I think first order is just their capacity constraints. Capacity. You're right. Yeah, for sure. But maybe in the back of their mind, they're also thinking, I'm not going to overpay. I'm not going to really ramp up the capacity, do everything I possibly could because, you know,

better to let the cycle. Oh, it's also better to have bigger margin. Yeah, exactly. Yeah, absolutely. They're not sitting there, yeah. It is the competition that it'll eventually come in. And, you know, the big immigration policy is sort of always lingering in a variety of ways. First and foremost, household formation is very dependent on immigration.

And second, a lot of the skilled labor comes from many of the recent immigrants, too. So lots of uncertainty there. Yeah. We also put together these, well, recently we've been, because we get the actual housing transactions, and we can see, you know, who the owner is and how quickly they hold on to the property. And we have seen a significant increase

in the investor share, investor defined as a corporate owner of the property. but it turns out that it's mostly long-term institutional investors, you know, the folks that are buying property to rent the property, so to buy and rent. And that's become a very popular kind of business model, you know, since the financial crisis. And that's come onto the fore. So the actual flipping, those would be people who buy and then we can see this, sell the property. It's an arm's-length transaction, at least within one year. of their purchase, that remains low, right? Chris, we haven't seen any real pickup there.

That's right. There's some markets is starting to pick up, like some of the real juiced, right, markets like a Phoenix, for example. I think we've seen some increase. Some of that. There are also some oddball or markets you wouldn't think of as having some of that activity as people perhaps are working remotely and looking for deals in the second tier, cheaper cities. But yeah, by and large, we don't see speculative behavior across. the board. Yeah. Hey, Ed, you said one thing I want to probe a little bit more deeply about no price declines. No one's forecasting price declines. You know, one thought I had was that one reason why we're seeing the surge in prices is that mortgage rates have come down in the

pandemic. They, the 30-year fix is going for 3%ish, which is, you know, about as low as it's ever been in history. And that that juices up demand, right? Because, you know, people can get a home with a low mortgage rate. That bumps up against the lack of supply, and that just causes prices to go skyward. So if you buy into that kind of narrative, then if mortgage rates rise and it feels like they ought to rise at some point, but, you know, who the hell knows when, but they ought to rise, that that's going to suck the energy out of the market pretty fast. that affordability, the higher mortgage rates conflate with the higher house prices, affordability gets crushed, demand gets nailed, and we actually could see some price declines.

Does that, does that resonate with you, that kind of thought? Well, you know, there's always a question, some of this goes back to the question of the underlying inflation. Do we see real declines versus nominal decline? So keep that, just put that on the aside for a moment. You know, it's obviously it'll dampen demand. Although rents, you know, a lot of these decisions are not purely based on interest rates. You know, future expectations become an important part. And then there's people really want to live certain places where they want to buy a house.

They want the extra bedrooms that rental won't always afford them. You know, I don't see it happening with the 50 basis points increases or the even the 100 basis points being a major effect. When mortgage rates went to back, you know, 1981, when Volcker stepped on the brakes or slammed on the brakes, and mortgage rates were at 12, 13%. Of course, that would be a big dampening and could dry prices down.

But if mortgage rates are 4%, 4.5% instead of 3%, don't see a big effect out there. Let me ask you this. Okay. You come back a year from now. A year from now, mortgage rates are still 3%ish, maybe up a little bit. House prices have risen another 15 to 20% nationwide.

Do you be saying the same thing, do you think, as you're saying today? Well, that's always the, yeah, that's all else being equal, all else being equal. I would, yeah, this is always the. I'd worry about it being a bubble at that point. At that point, okay, all right. You know, if you look at FHFA's capital requirements, they have a long-term trend. You know, they adjust LTV for the long-term trend.

Many of us, I think maybe even you, have written on that's not a great way of locking in what you want to accomplish in terms of controlling capital. You just sort of put it on automatic pilot. The Fed and the whole Basel arrangement allows for people to FSOC to do capital, countercyclical adjustments. But the FHFA rule puts it on automatic pilot.

I think the last I checked, and this is a quarter ago in terms of their adjustments, so before the latest increases, they thought we were about 60. percent above long-term real averages. Yeah. They give you a corridor of 5 percent, so they adjust all the LTVs by 11 percent, I think, was the number. At, you know, at that point, again, you know, instead of 11 percent above the corridor, what you hypothesize would be, you know, more than 20 percent outside that corridor

of long-term trends. We haven't seen that before. That would be worrisome. Yep. You set a boatload. I know, Chris, you've been using my term boatload. That boatload is my, that's a zandism. Oh, that's a zanism.

But you really said a lot there. There's a lot to unpack. And I'm not going to attempt to do that, except to say that the 50, what you're saying is FHFA, the regulator of Fannie Mae Freddie Mac has capital standards for those institutions. As part of setting those standards, they try to account for whether housing markets, are richly valued, overvalued, and certainly if they're a bubble. They want to say, hey, Fannie, Freddie, these markets feel really hot, sizzling, overvalued, there's froth.

We think you need to hold more capital against that. So that's the principle here. And what you're saying is in that calculation, they're coming up with the, at the current point in time, based on the FHFA house price series, which is actually, obviously, just for Fannie and Freddie loans, not the entire market, that it's overvalued. value by about 15%. Right. And by the way, Chris, correct me out wrong, that's based on our modeling that we've recently been doing. That's where we're landing about 15%. That's right. And what that means, though, Ed, that's nationwide. That means that you've got a lot of markets out

there that are overvalued by a lot more than that, you know, by 25, 30, 35%. So, you know, I think the market is actually quite vulnerable, you know, if rates rise, even a little bit, I suspect. Not nationwide. Here's the other thing about house prices that people forget is important. It's measured house prices, right? Because what happens is, you know, if markets go weak, people just pull the home off the market. They're not going to sell their home. They got, you know, everyone's seeing these house prices today. Like I look at Zillow for this home in Pennsylvania. And I'm going, oh my gosh, that's how much this is worth. And it's going to take me a lot to sell my home for less than that anytime in the near future, because that's my so-called

reservation price. So if I don't have to sell, I'm not going to sell. So what you see is transactions come off. You don't see actual sales and you don't measure it in prices. So you might not see the price declines because the shadow, so-called shadow price might decline, but not the actual price. Anyway, so let's go, let's now go back to supply because, you know, this is key to, you know, a lot of what we just talked about in terms of house prices, but also in terms of, you know, what's going on in terms of people's lives, you know, they're paying more in rent, single family housing is less affordable. They have to move further out from wherever their job, go farther away from their job. It's not good for, you know, commutes and the environment.

It's not good for the macro economy. Lots of problems with the lack of supply. What, you know, and there's a lot of debate and discussion around this, what, you know, and I'm sure there's a lot, you have a long list of the reasons why supply has been so constrained. But what would you put at the top of the list of reasons in your mind, Ed? Yeah, it goes back, I think, to, you know, local policy. At the end of the day, we don't want the density. We come up with ingenious reasons why density is not good for, you know, whatever. And so I think that's a large part of it.

I'll go back to, you know, you go down the list, but just in broad categories. Our transportation policy doesn't, you know, we get just more congested, very hard to build a dense subway system the way New York has and the like. It would be much easier to build density if you had the transportation. We tie, and then so the other big category is education. the way we fund our schools are very tied to the tax base and, you know, and the like. We don't tie it to general economic well-being of the, you know, the larger area. We tie it to the house prices of that community and the number of units. So it's like a per capita type thing.

So education policy, transportation policy. and then just sort of generals, which then shows itself in our zoning policy and permitting policy, very hard to get the permits on that. So that's where it is. And then, of course, lumber and labor has gotten more expensive in this area. We don't invest in the building trades the way we used to. So it's just more difficult. There was always the hope that, you know, 3D printing was going to drive down costs.

I was always a little bit of a skeptical, skeptical on that. But it's, you know, we're seeing more stuff manufactured, you know, trusts and the like in factories. But the cost does not come down with technology on that. So we haven't seen the technological improvement that you would have hoped to see either. So, and that's also largely policy. driven. So it's, you know, I'm up at MIT. They keep on having all sorts of nifty things in their laboratories. Maybe one day we'll find a house that grows itself. I will solve it right after we

get nuclear fusion and don't have to worry about energy costs. So technology may get us there, but, you know, so far, we, outside of TikTok, we really haven't seen things that have you know, affected this market the way it would be nice if we could. Yeah. So at the top, there's a long list of reasons why supply has been lacking. At the top of the list is restrictions on development, zoning issues and other, which, I don't know. It seems like that's a pretty tough one to tackle, right?

I mean, politically, I don't know how you do that because the federal government really doesn't have a whole lot they can do here, although, you know, they can use sticks, but politically using sticks to change zoning laws would be pretty tough, I think. I wouldn't count on it. So, well, this gets to, Chris, I should ask before I move on, is that, that will sound right to you? Yeah, I've been beating the zoning drum on this on this podcast for a long time. Do you want to push back at all? Ryan's kind of a gadfly.

He'll take the other side of most anything, but I don't know about this one. No, I agree. Zoning, a big problem. Buildable lots is another one. You look around, you know, the availability of finding buildable lots. Yeah. Land development. Exactly.

I mean, if you look in South Jersey, you know, you think of beach towns where they knock down old homes to build new ones. Now they're doing it in suburban Philadelphia. They're going into neighborhoods, buying houses, knocking them down and building new ones. Yeah, I would put it more broadly than just zoning. It's clearly zoning. It's the permitting process and the sewers and everything you need to do to. put, you know, get the shovel into the ground.

The estimates of both the time cost and monetary cost to get a shovel into the ground. It's just, if anything, technology should have made that faster, you know, all sorts of ways. And it hasn't. I mean, even going back quickly to the mortgage market, it's still not any cheaper to originate a mortgage. And yet we have better technology. And someone needs to step back and sort of wonder why we haven't harnessed the technology to make these things less costly. Yeah, good point. Good point. So this takes us to policy and, you know, what should

policymakers be doing? So I've got two specific questions, policy questions for you. The first is around the housing policy in President Biden's build back better legislation. What do you think of that legislation. I mean, it is focused on the supply side of the market. How do you think about it? Well, I, you know, in some sense, it's a catch-up. It's really not that bold. Absolutely needed. But it's sort of a catch-up if we had had sort of normal policy all along. You know, I think of that as whether it's public housing that had when I was there, the estimate was we were short of $50 billion of capital improvements in our public housing. You know, two million of our most vulnerable households absolutely needed.

You know, it shouldn't even be a question. You have to maintain, you know, that type of housing and infrastructure. It's also housing vouchers. And again, you know, people have, you know, on this very important. And it's, I think the Bill Back Better creates like 200,000 to 300,000 additional vouchers. But we haven't expanded, even though our populations expanded from when it was 200 million to 330 million, we haven't increased the number of vouchers. Only one in five people who are eligible for those vouchers can actually get them. This would be, you know, a very modest step.

in closing that. People throw around big numbers, but these are 10-year numbers, right? The estimate of really to close that gap would be about 50 billion a year. It goes back to, you know, where do we want to spend money? You know, I go off and back to FDR's

1944 state of the union address. We are still, you know, in the middle of a war. My father was still in Italy and the Air Force at the time. And yet, you know, he said now is the time to start planning for the future. And he basically outlined that, you know, decent housing should be an economic right. And, you know, in many ways, the Biden administration's, you know, picking up that mantle and trying to, you know, advance it. But the really modest numbers in terms of, you know, in terms of the needs, whether it's public housing, whether it's vouchers, down payment assistance. is important, some of the construction of affordable housing through housing trust and low income

housing tax credits. In some sense, we're just scaling it back to where we were in 1970. Yeah. Yeah, I mean, I think when President Biden proposed his build back better agenda, you know, soon after he got elected, there was about $500 billion over 10 years for housing-related initiatives. And of course, that got scaled down because the size of the package has been scaled down. And now it's at $150 billion over 10 years. So you're right. You divide 150 by 10. You get, I don't know, 15 billion per annum in a $23 trillion economy that doesn't take you very far. Yeah. But it's moving you down the path in the right direction, I suppose, generally speaking, but because it is, a large part of it is focused on affordable rental supply, but,

you know, how far is it going to take you, you know, with that kind of, that kind of funding? That makes a lot of sense. I did have two other quick policy questions. One, the other one is around the, and this is a little bit more in the weeds for, I think, some of our listeners, but, you know, I think important and, you know, clearly in your, you're down your, in the middle of your strike zone. And that works, I know that metaphor works for you because there you go. Yeah, now tell me, where's that baseball coming from?

Is that, you says, 1983 World Series? 1983 World Series. Okay. It was the Phillies against the Baltimore Orioles. Cal Ripkins' only World Series ring came from that year. Oh. And the Phillies still had Tony Perez, if I'm a big red span, as you know. So no longer had Pete Rose, but they had Tony Perez still on that team.

You're a Nats fan now, aren't you? Yeah. Yeah, hard not to be because they won, when was it, a year or two or two, three years ago? Two, three years ago, yeah. Two or three years ago now. Because Ryan is like a, you know, the shameless Red Sox fan. I know that I find that highly irritating. What about you, Ed?

Well, you know, I'm at MIT, so I did get to Fenway Park. Yeah, you got to remember. Yeah. Yeah, so it's, if I have to root for an American League team, I'll go. with the Red Sox now. It's hard not to root for the Red Sox. Yeah. And such a great, it's a great stadium too.

It is. It definitely is. Yeah, I used to go there when my uncle lived there and as a kid, I'd go in the bleachers. They're in the, with the wall. Yeah. Yeah. But at least the Boston Braves won the World Series. They won the World Series.

Boston Braves. Boston Braves. Yeah. Mm-hmm. So talking about in the Straves. in the strike zone. FHA, at least on paper, is doing pretty well, you know, from a financial perspective. You know, the insurance fund that backstops the FHA is, according to the actuary, you know, pretty fulsome, you know, I think it's 8% kind of. Yeah, 8% of the mortgage balance is

outstanding. Six percent of that is already in the bank. if you will. There's already receipts that Treasury has gotten and 2% sort of that 30 year net present value calculation. So it's doing quite well. You know, not to go in the weeds, but, you know, that's kind of a capital. Is it capital? Kind of that's the sort of there to max. If you have losses, then in theory this money would be said if this was set up like a private institution. But it's not a private value isn't quite right. It's not exactly. Well, I mean, it's, you know, There's no backstop. It's a government program, just like Social Security.

It has the eagle on it. It's full faith and credit. The insurance is good on the Ginny Mae Securities. So really that 6% that's already in the bank is the amount. This was conceived as a mutual type of mortgage product. That 6% can also be thought of as how much has been overcharged given the actual path of the economy. We could have gone down a different path.

But, you know, we, over the last basically eight years, we've overcharged by about 6%. Yeah. Yeah, I guess then that was, there will be points in time when you undercharge then, too, right? Because if you're in the downside of an economic cycle, you'll lose money. So the idea is that you want to keep the government, the treasury kind of whole, so to speak, through the average. On average. That's kind of the idea.

Yeah, absolutely. In a good time, I want to build that insurance fund so I can draw that down in the bad time. Yes, no. I mean, why not, or you can just, it's going to, why not let it fluctuate and just price what you think the average over the cycle is? The government doesn't need the money. You're basically pre-funding, you know, you're pre-funding taxes for bad times.

And it's the same as a tax. Yeah. Mathematically, it's absolutely the same as raising taxes on middle class homeowners. Yeah, I'm not, just to be clear, I'm not arguing this is the right way to, you know, run the railroad. I'm just saying that's kind of sort of the idea. It's not a great way of running the railroad. It's kind of sort of the idea. I'm going to push back just a little because obviously, you know, in many ways, you know, as you get a lower number,

if you're the head of FHA, you know, you get called in front of Congress and you get yelled at more. So really what we're doing now, you know, if you go back into what I call the physical space, we're charging homeowners and a lot of, most of them first-time homebuyers, many of them communities of color, we're charging them more now so that in five years, the head of FHA is less likely to get yelled at as much by Congress. Okay. It seems like that's a silly thing to do. The political economy of it makes it particularly silly.

Yeah. Yeah. I mean, it's, you know, you should charge what you think, you know, the long-term cost is. That is the vision of the program. It's a mutual program. You know, in the old days, we would have rebated that 6%, you know, back to the actual homeowner because it was a rebate program that as, you know, the, as your vintage paid down, If it collected more than it paid out, you would get a refund check.

They stopped that many years ago. Okay. So with this conversation is a backdrop to the question, it sounds like, you know, right now the FHA is charging an insurance premium, you know, that's embedded in the rate that's charged the borrower for this to set this money aside for the fund. it feels like what you're arguing is we should we shouldn't be doing that we should cut the insurance premium at this point because it's set too high it's and therefore should be lower absolutely i mean there are some discussions of whether how it should be targeted and the like

upfront versus the overtime premium should you know low ballots loans get or low income borrowers get a bigger break than others. So there are some policy questions that need to be discussed, but in aggregate, there's no reason to be charging as much as they do. Let me ask you this question, though, in the current context with the lack of housing supply and given house prices are rising very quickly, a cut in the insurance premium is like effectively cutting the rate. It is cutting the rate.

So that's going to increase demand even more. Right. bump up against that lack of supply and jack up price. So are you really helping anybody by cutting the premium? Well, you're helping the net. You're helping the people who have the cheaper mortgages. So, you know, I actually was asked this question the other day. Might you want to make policy to try to slow down house price appreciation? You should consider it. If you had a list of 20 things to do, and I'll go back to Ryan and Chris's, list is why are you doing quantitative easing to, you know, basically, you know, that would probably

be number one in my list. Number 20 on my list would be the FHJ premium. But why not start, you know, if we want to have this discussion, and we should, and this is what FSOC and the like was, you know, intended for the state, you know, the Dodd-Frank financial stability oversight committee, board, whatever, you would go down that list and see which levers you would want to do. Changing FHA policy might be the 20th on the list. And it has the biggest impact on low-income communities of color. You wouldn't start there. So that's one observation.

Two is by the time you actually get around to it, you know, the dynamic, you know, some of this is really two, three years. out. We announced the price decrease for two years out if that's what you're worried about. But I would not start. I understand the point, and it's a legitimate point, but it should be a part of a bigger discussion of should we do things, whether it's LTV, restrictions as other countries do, whether it's ending quantitative easing, whether it's the tax policy of deductibility. a there's a host of questions. I wouldn't start with FHA. Yeah. I guess I wouldn't, just to push back a little bit, I don't think I'd argue that I would use FHA as a countercyclical tool. I wouldn't, you're right. I mean, I don't think of it. Sometimes that's what people are arguing for when they say

don't do it. No, but I don't know that it helps anybody because if you buy into what I'm, you know, the logic of what I'm saying, rates go down, house prices go up so the net payment for the borrower is still the same. You know, they're not getting. getting anywhere with that. But they're not FHA is only 13% of the mortgage market. So, you know,

so you're distributing, even if it's dollar for dollar in aggregate, gets capitalized, the people who get the lower rate are doing better than the people who don't get the lower rate. Okay.

Fair enough. Yeah, fair enough. You have better models and can do the math. You are, I always like your insights. But my guts. says you're still helping those people.

I just wish there was a way to take that money and help build more bills. Well, we should. I guess like, please, can't we figure that one out? Well, you know, maybe you know, it's interesting, FHA, a quarter, about a quarter of FHA is for new construction. You know, maybe we should lower it. Yeah. Yeah. This is the type of discussion we should have.

Maybe we should target it towards promoting. affordable building and instead of 25 basis points across the board maybe if you're doing a you know 150,000 250,000 dollar new construction you get a full point off. I like that maybe we should I'm going to send you an email let's talk about that because maybe we can write something on that topic that would be you you can target where you put the money where you cut the insurance premium. Hey I did want to also final thing because I I've kept you very long. We've kept you too long on homelessness. I know you've been thinking about this pretty deeply. And obviously this is all tied up with all the things we've been talking about.

This seems like a really big deal. It's, I mean, it's a big problem in many communities already, but just feel like it's going to get worse before it gets better. Or am I just? Yeah, well, it's always been a problem. You know, we made some significant impact of trying to end homelessness, especially among veterans in some cities. There's no doubt as your rents go up, homelessness goes up on that. And again, Bill Back Better was trying to, you know, make sure that the most vulnerable people

got additional vouchers. So, you know, that is of concern. Those are the people who get hit the hardest when rents are increasing. And then the other thing, you know, that I think is, you know, important that we should reiterate is, you know, I always remind folks, these are, you know, these are our fellow citizens, sometimes, you know, very much down on their luck. But we need to provide services for them. It almost goes to some of the zoning things that Chris talked about. You know, we need to make sure that there are, you know, there are decent, you know, outhouses, restrooms. showers, bathing facilities for these communities. In some sense, until you completely get rid of it through a more robust voucher system,

I do think you have to worry about providing services. And, you can walk around any town, especially compared to Europe, it's very hard to find a restroom when you're walking around. So I do think it's important that there's a certain human dignity. on how we treat people who are homeless for a variety of reasons and not to stigmatize them on that. So, you know, it's important to think of the housing ladder and to think whether it's homelessness, senior housing is another, you know, big issue. Housing for people who have disabilities is a big country out there.

And it's not just that homeownership margin that, you know, you and I have spent a lot of our careers focusing on. You have to think of the entire housing ladder out there. And I think homelessness, you know, needs additional resources, build back better. We'll put, is focused a little bit on that. And it definitely is something we need to focus on. Yep. Housing is right. I think that makes...

That's what Roosevelt said. And I really encourage people to look at that 1994 economic rights. He calls it the second bill of rights on that. And I, you know, he has sort of a great quote that says, no matter how rich we are, we need to look, whether it's the one-third, one-quarter, or one-tenth of the most vulnerable. That's how we sort of should measure our progress, you know, not on GDP. It's a great speech.

That is. I'm going to have to go take a look at that. What a great man. Well, thank you. I really appreciate you taking the time and giving us your wisdom, much appreciated. And I hope we can have you back. I love to have that conversation around climate change at some point. Yeah. Sounds like a really interesting. Be glad to. We can hope one day to do it in person in Philadelphia.

Oh, and we go see a game, right? And we can go see in the brigade. Yeah, absolutely. Good. Well, thanks. Oh, you know, guys, have you noticed, I haven't touted. I was going to say, I thought we were going to make it all the way through without it. No.

But here it comes. At Mark Zandi. Hey, Ed, are you on Twitter? I am not. Oh. I mean, I have a time. It's been on Twitter for the Gallup Center when I was at FHA, but not personally, not on Twitter. I've just gotten active in the last month.

or so. So I got my Twitter handle 10 years ago, never used it. And since we had this podcast and, you know, everyone was saying I'm just acting old and I got to get, you know, caught up on social media. And there's no way I'm getting on Facebook or Instagram. I said, okay, I'll try the Twitter. I'm waiting for TikTok. Well, you have to hashtag, you have to hashtag Pete Rose when you, when you Twitter on this one. Okay. I want to know what you're, vast readership or thinks whether Pete Rose should be in the Hall of Fame. It's the most spurting question out there. I didn't realize that was still a question.

People are still debating that one, huh? That's still debate, yeah. Okay. You can. What do you think? What is your view on that topic? I grew up in Cincinnati. Oh, yes, of course.

He was an all-star in five positions. It's not a character reference. It's a baseball reference. Yeah, it's a baseball. There are others out there, too, that need to be in the Hall of Fame. But what do you think, Ryan? Are you on board with this? Yeah, eventually, Barry Bonds, Kirkchilling, they all get in.

And that was like the steroid era. Pete Rose should be in the Hall of Fame. Yeah, you're right. Good point. Yeah, good point. All right. Thanks a lot. Hey, happy holidays.

Happy holidays. Take care. Stay safe. And I hope to shake your hand soon. Take care now.