Moody's Talks - Inside Economics - Housing Recession, Homeownership Retreats

Episode Date: February 10, 2023

Chris Herbert, Managing Director at Harvard Joint Center for Housing Studies, joins the podcast to discuss the state of the housing market, from the current housing recession to the outlook for homeownership.Go Eagles!Full Episode TranscriptFor more on Chris Herbert, click hereFollow Mark Zandi @MarkZandi, Cris deRitis @MiddleWayEcon, and Marisa DiNatale on LinkedIn for additional insight  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 Zandi, the chief economist of Moody's Analytics, and I'm joined by my two trusty co-host, Chris Doridis and Marissa D. Natali. Hi, guys. Hi, Mark. Action-packed week. I'm here at Moody's HQ, seven world trade, and it's a Friday. And I'll have to say, it was quiet the whole way from Philly. And I got on the train in Philly at 30th Street Station, got on the Amtrak Ocelo, took the train up to newer. took the path over to world trade and walked over out. Remote work is really cheap. It was, you know, very quiet. It felt like a Sunday morning to me. Wow.

You didn't factor in Super Bowl? Oh, you think that's what's going on? Yeah, people are celebrating. Already. I'm preparing, yeah, those tailgates. I noticed that Marissa's already prepared. Look at that. She's got.

I am. I'm wearing an Eagles jersey. Yes. I'm ready. And that's a fashionable Eagles jersey. Thank you. Yeah, I can't see the whole thing, but, you know. It's a vintage.

It's a Donovan McNabb jersey. Oh, is that right? Yeah. From back in the day. Yep. And even though you moved out to the West Coast, you're still an Eagles fan. Yeah, good for you. Right, right.

Oh, yeah. That's our guest. He's making fun of Marissa. We're going to introduce him in just a minute. I was going to ask something. Oh, Marissa, do you know the Eagles' fight song, touchdown song? Of course. You know, can you, can you sing it?

Absolutely not going to sing it. You know, because I went to a couple of games this year, and I should know it by now because they scored like I was, I watched the Green Bay game and they must have had like eight touchdowns that felt like it. I was singing that damn song eight times. I still can't remember it's catchy. It's catchy. It is catchy. E-A-G-L-S. Of course, we're all Eagles fans.

Yeah. And we had a webinar this week too. which is kind of like the three of us, you know, it's kind of like we take the podcast and we make it with slides and that turns into a webinar. It's kind of a weird thing. Have you noticed like what's the difference between a podcast and a webinar? You know, the salt.

It felt very, yeah, it felt like we were on the podcast. A lot less banter, though. Yes, more. Less banter, more formalized. More professional. We had a lot of folks. I think we had 1,800 clients on that call. Yeah, on the webinar.

And, you know, we had, this is bugging me. Oh, gosh. We had 300 on the nose people give feedback. You know, you ask for feedback. One person didn't like it. I was, what? Why? Why didn't you like it?

Should I call that person out? I'm not going to call that person out. Although, no, no. It's kind of like President Biden at the state of the union. Yeah, yeah. All right, we got to introduce our guests because he's biting it into this conversation. Yeah, all right. Okay, that's not fair. Okay, Chris Herbert from the Joint Center of Housing Studies, Harvard Joint Center for Housing Studies, is our guest today.

And Chris, we're going to have a formal introduction where you're going to tell us about your life story. But before you do that, what do you want to say? You want to say something. I just wanted to say with it. I hope it wasn't your mom who was the one guest who didn't like the show. Oh, what said? I missed that. What did you say?

I said, I hope it wasn't your mom. was the one person who was critical of your show. Oh, not my mom. No, no, she, my mom is a fan. So, yeah, through thick and thin, she's a fan. I thought you were going to say my mom would never listen to a webinar. Well, that too. That too.

That too. I felt that that might have been a little too, you know, like a son wouldn't say that about her mom, you know, but, you know, kind of thing. I'll say it, yeah. Yeah, you can say it. But yeah, you think I want to call this person up and say, what's the deal? You know, what could we have done to, you know, usually when that happens, they just disagree with the message. They're shooting the messenger, you know. That's possible.

That's a possibility, yeah. But the other big event this week, was action-packed week, was I was in D.C. And I saw you, Chris Herbert. And we got two Chris's here. So I'm going to say Chris for Chris Herbert. I'm going to say Chris D for Chris Derrides just to make this easier. And the Joint Center had it, was it his first in-person meeting since the pandemic? First one in Washington.

Yeah. It's our third in person, but the first in Washington. Got it, got it. And you told me that I was your second favorite economist. That's the message I took away. Second favorite. Your co-favorant. Co-favorant.

Okay. You have two favorites. It's like our children. You can't love one child more than the other. I got it. I got it. But I still can try, though. Can I try?

You can. I wasn't that one person, by the way. No, no. I know you were definitely not that one person. Well, the meeting was fascinating. Well, maybe this is a great place to pause and for you to give us a sense of the center, a little bit of the history, because I don't know the history. And I'm really curious.

And your role. there and how you got that role. So maybe just give us a sense of things. Sure. So the joint center, so the joint center has been around since 1959. So we're pretty old by academic research center standards. We were established with a major gift from the Ford Foundation to Harvard and MIT to create a center focused on urban issues. And so it's coming out of time when there's a real concern about what was happening in cities across the globe. So Ford Foundation said, we want to get these two universities thinking about it. So they created the joint center. for urban studies of Harvard and MIT. So two things, it was joint Harvard and MIT, and it was also

broadly urban studies. Fast forward, 1971, like, there was a long, you know, pretty renowned history of the center during that period of time. People like Daniel Patrick Moynihan, who was the director of the center and his work on the black family came out of the center, Nathan Glazer, the melting pot. So a lot of, like, very seminal urban work came out of the joint center back in the day. But then in 1971, the Ford money ran out. Ford said to the, universities, hey, we did our job, we got to launch, you keep it gone from here. The university said, that's not the way we operate, you know, up to the senators to figure out a way to do this. So Derek Bach, president of the time, said John Dunlop, who was an economist,

Labor Secretary and General Ford, sent him over to say, shut those guys down. Donnelloop really appreciated the fact that having a center at Harvard, and we were very outward focused. We were very intended to be multidisciplinary and also to link academia and policy and business. And so John said, I think we should keep it going. And I think what we should do is get a funding model that gets the private sector to provide funding to provide basic research into these urban issues. And that point, he focused it on housing and got a group of companies, which was called

our policy advisory board. So that was established in 1971. It's been around for 52 years now. And that created the stable source of funding for us to go forward. We got divorce from Harvard. and we got the divorce in the 80s and Harvard got custody. So we've been in the joint center at Harvard since then. Oh, I see.

And we kept our multidisciplinary nature going with the joint part by being joint between the Kennedy School Government and the graduate school design or urban planning it. So we've been focused on housing at Harvard. Used to be much more aligned with the Kennedy School. Now we're more aligned with the graduate school design. I report to the dean of the design school. Oh, I got it.

And Chris, you've been, is it? Are you the executive director or what's your? My title is managing director. Managing director. How long have you been managing director? Since 2015. Okay. And I was research director for five years before that.

And was it, I can't remember. Was it Eric Belski? Yeah. Were you? Eric Belski? Yeah. I succeeded Eric and Eric before him was Nick Rucinas. Oh, Nick.

Yeah. I forgot about that. He was the director for about 12 years and was really seminal. And he built up the policy advisable. board and did a lot to make us a much more prominent player in a lot of spaces. So you were a researcher at the center before you became managing director. I see. Okay.

Yeah. So you've been kind of a housing guy for a long time, kind of a call-in-house. Yeah. I've been a hazard for a long time. So I got a master's in the 80s, and then I went out and worked in affordable housing for a little while. I decided I wanted to be a researcher, came back to the Kennedy School, got my Ph.D. in public policy in the 90s.

Worked at Apt Associates doing research and evaluation on housing for about 12 years, and then I came back to the Joint Center. Great, great. And so one thing I find so cool about the Joint Center in these meetings is you've got a large number of folks from across the house. It feels a lot is from the home building, housing supply, building materials. You've got a few mortgage folks sprinkled in there, a few. mortgage originators, but it feels more kind of housing supply related. Is that, is that fair to say? Yeah, and we actually, we actually try to curate the group who are part of the policy advisory board.

So right now it has 64 members, and they're basically all household names in the housing sector. We try to make sure we have a good group of home builders. And the reason is, is that they are driving so much of the housing market in terms of the industry side. And then we had all the manufacturers you can think of, you know, Pella, Armstrong, Kohler, all the kind of, we walked down an aisle in Home Depot or Lowe's, those companies are all there. Then we have housing finance. We have folks on information transaction sides of Zillow and CoreLogic and Move.com.

And then we're trying to get into some more of the spaces that are emerging. So we've got invitation homes, so the single family rental space. So we really try to make sure that when we have that group come together, and Mark, after you spoke to and we passed the mic around and say, what's happening in your world, it's like a Fed-Bage book for housing. So you've got the home builders, single and multi, you've got the manufacturers, you've got the distributors, you've got the retail distributors, you've got the realtors, you've got the financiers, and so you're seeing from all those different parts of the ecosystem what's happening.

And that's where the group gets a lot of value is sharing insights among each other. Yeah, it makes sense. Well, obviously housing is kind of front and center here from a macroeconomic perspective because it's in recession, I think it's fair to say. I mean, home sales got nailed since mortgage rates rose. They've risen quite considerably from where they were at the end of 2021, going into 2022 when they were at record lows. And we've seen home sales come back down to kind of levels we see and saw in the teeth of the pandemic or not quite to the lows of the great recession financial crisis, but pretty close. home building is weakening and now house prices are rolling over. So I suspect, and I got a sense of this, but maybe you can give us a better sense of it.

The mood in the room was, how would you characterize it? Was it consistent with what I just said or are they, of course, these guys are always glass-half-full kind of guys, which is important, very important for business. Otherwise, they wouldn't be in that business. You know, the mood of the room was, oh, that's a lot. going to say cautiously optimistic. I would think it was kind of surprisingly optimistic and surprising on their own self. I mean, I think there's a lot of chatter. People will just come back from the international builder show. Builder confidence is moving up. There's a lot more traffic that the builders are seeing than they expected to see in the early signs of the spring season.

The manufacturers, you know, when they're in that room, they're looking over with the home builders to see what they're saying because they know that's what's going to hit them six months later. they had a big backlog. They're still working through. Multi-family has stayed up. Commercial has been doing well. So they're all still feeling pretty good and kind of saying, I think bad things are coming,

but now the homeowners are saying that they feel like this might be the bottom. So the room was much more optimistic than I would have thought. And I say optimistic. It's not like glowing optimistic. Yeah, yeah. They think that on the single family side, they might be at a bottom. Multi-family actually, I think what we I heard was there's red lights flashing and a downturn

common. Yeah. Yeah. Do you think on the single-family side, I think we have to make a distinction clearly from the single-family and the multifamily, is it, do you think it's largely related to the movements and mortgage rates? So mortgage rates, they were, just for context, the 30-year fixed was sub-3% back late-21 at the low.

if you go back to late 2020, it peaked at about 7%. And now that it's come in is bouncing around, but it feels like it's somewhere closer to six, maybe six and a quarter or something like that. And with those movements, it does feel like it is having some impact on kind of demand, general sentiment. Do you think the mood in the room is reflecting those swings in the mortgage rate? Yeah. And I think it's important distinction between.

between, as you said, between single and multifamily. So the movement in rates hit the single family market pretty much immediately. And so it, you know, single family starts went from pushing 1.2 to 900,000, I think, now, and certainly softening. Multifamily starts stayed up. And I think the interest rates really just drove the buyers out of buying homes. That meant that they were going to stay in the multifamily market longer. Other thing I think is that the interest rates are going to affect multifamily, but with a lack. And so, multifamily folks have deals in place that got their equity and debt financing lined up. They were not about to stop last year because I knew if they stopped, they were going to have

trouble getting that financing in the future. So there's a lot of momentum. It takes a long time to get that. But what I heard of that table was the financing is now not available for 2023. And so trying to get new starts to pencil out is going to be tough. And so I think the multifamily kind of defied gravity for a little while, but it can't do it forever. So I think we're going to see multifamily starts turned down. And what I think people are seeing is that consumers were shocked by 7% interest rates, but then the movement from 7 down towards 6 says, oh, six doesn't feel so bad anymore. Right, right, right. Yeah, you turn up the temperature to scalding and you turn it down a little bit, and you go, okay, you can live with that. Yeah. Yeah, that's the sense I got when I was there that,

you know, on the single family side, a bit of relative optimism, you know, maybe the worst is over kind of optimism. But on the multifamily side, I got the opposite feeling that, you know, the storm is about to come. And of course, they were looking at it through the prism of supply and construction. And they're saying, look, we can't get financing. The capital markets have shut down. Banks are pulled back on their underwriting. They've raised the bar here for getting credit. And we're not going to have the financing we need to continue to produce at the pace we have been, you know, in in 2023. That was kind of the sense I got. Yeah. Yeah. You know, I think the market fundamentals are that, you know, vacancy rates were at historic lows, rents were growing through the roof.

Vacancy rates have started to turn up. Rent growth is clearly slowing along with house prices. So that's also going to give them some pause. But still, vacancy rates are as much as they're coming up, they're still not high by any kind of historical standards. And so, and those two markets are linked, right? If there is recovering the single family market and people are able to get into home buying, that's going to mean less demand for apartments. And so they're kind of moving on, you know, which way is demand flowing will affect

the relative strength of those two markets. Hey, Chris, let me turn to you. I mean, does that surprise you what we just said about the mood in the room? Does that consistent with? No, I think that's consistent with some other data points as well. One thing I would say on multifamily is just the pipeline is still full, right? So even though new permits, new starts may be down, certainly because of the financing issues, there's still a lot of supply that's going to come online over the next couple of years here.

So the building is going to continue. There's still quite a bit of demand or quite a bit of activity, I should say, to complete those projects. But that's also going to potentially have some downward pressure on prices and rents as well. So I can understand the mixed emotions around the two markets. Yeah, and that's exactly what a large multifamily developer in the room told me. He said starts are going to weaken next year because we've been in the starts, the actual beginning construction very strong in 2022 going into 23. but that's going to really start to tail off because I can't get credit.

But the completions, you know, are going to remain very high and even improve in 2023 because I've got all these units sitting in the pipeline going to completion. In fact, it's almost a million record number of units, million units that got bottled up because of supply chain issues and labor market issues related to the pandemic, immigration, that kind of thing. A lot of immigrants work in the construction trades. And they, now those, those, those constraints are easing. And I can finish these, these homes.

And it's going to show up in completions next year. So I thought that was very interesting. Which, you know, does, I think we talked about this in the past, does, call into question what's going to happen with construction jobs, right? You know, they may not fall off. They haven't fallen off. Chris, have you noticed they, construction. employment continues to rise. There's been no decline in construction employment. And that feels like

that's going to continue here going forward. Well, you got the infrastructure as well, though, right? So that's, that's certainly going to continue and even increase in the future. So there'll be some offsetting. If you're looking at construction overall, but the resi will remain strong because of the pipeline for now at least. Yeah. The manufacturers were saying that commercial construction is in a bright spot for them. And I don't know, Chris, if you've got insights to that. I was a little surprised I was thinking office space has got to be weakening. Retail space has been weak for a while, but there is broadly Rick commercial they were saying was a bright spot for them, so offsetting what's happening on the residential side. Well, I think we're seeing a lot of construction in manufacturing,

believe it or not, manufacturing facilities, which goes to kind of supply chain, resilience and de-globalization. A lot of manufacturers are bringing production back home. And that's really lifted manufacturing construction. And warehousing and that kind of. What's that, Marissa? And warehousing and the stuff that's sort of adjacent to manufacturing. Yeah, been very strong. Yeah.

So, Chris, what do you think was kind of at the top of concerns for the group? What's kind of most worrisome? I guess other than the general economic environment, which I was there, hopefully I'd shirt them up a little bit because I said no recession at the end of the day. I don't know if they bought into that or not. But other than that, you know, what else is on their minds? What's kind of top of mind for them? You know, it's the same issue that's been some sense top of mind for the last decade.

And it's labor. It's amazing. Given where we are in the business cycle, you know, the issue that keeps coming up is just a shortage of workers. And so even at a time when you might be thinking about slowdown, They're all talking about how hard it is to get workers. And it's, you know, obviously the construction side we've talked a lot about, but manufacturing and transportation drivers that keep talking about that. And one of the themes, too, was that the manufacturer was saying,

even if we have a slowdown rain, not letting anybody go because it's taking us so hard to get them. Amazing. That's amazing. So labor, labor, labor. So one of the speakers we had the next day was this guy, Andrew Seeley, from the Migration Policy Institute. Because one of the things that keep coming back to is we don't. don't have enough workers. We need to get more immigration because we need to get more of workers of all

stripes. Yeah. Yeah. That is that that's definitely a theme that is evident across a lot of industries. I think businesses are very reluctant to lay off workers because they know on the other side of the current adjustment we're going through the number one problem they're going to have is finding and retaining people, you know, so it's going to be very, very difficult. And construction is an older occupation, right? There you have people retiring out, right? So how do you do. Did you see that paper written by Austin Gouldsby and another researcher on construction industry productivity growth?

I mean, one way out of this box is to improve productivity, make, you know, be able to produce more homes with fewer people, fewer workers. And the point of the research was that's not happening. that there's no meaningful improvement in construction productivity growth, you know, in recent decades, really. Did you see that paper? You know, I haven't read the paper directly. I've seen the news accounts. I read Ezra Klein's piece on it. So I need to go back to read the paper.

But, you know, it goes back to the 1970s. And in some sense, my takeout it was probably in response to that McKinsey work a few years ago pointing out the lack of productivity growth. And this one seemed like it was even more pessimistic, that it wasn't to slow. it was almost negative over the period of time. Yeah, I belong to this kind of email group of folks in the construction industry broadly. And one of the members sent out this paper and said, you know, what do you think? And it was pretty amazing, right, Christy?

I mean, there was a lot of different theories. A lot of it revolved around regulation. Right. You know, they're moaning people. That's not the right way of saying it. People were pointing to the increase in the, regulatory oversight and a lot of things, you know, some of which are good, you know, like worker safety, you know, would be an example of, you know, some regulation. But they were pointing

to that as the key reason for the lack of productivity. Yeah. Did you find the paper believable since you read? Well, I did. You know, and Austin is good. You know, he's now going to be the, well, I think he already is the president of the University of, president of the Chicago Federal Reserve. Right. And he's a great academic from the University of Chicago. So, yeah, I find it very credible. I mean, there's a lot of measurement issues like in everything. So I wonder if there's, you know, in the construction trades,

it might be particularly difficult to measure some of the things that are going on, I guess. But, you know, it is shocking how the data, the numbers that are produced suggests that there's been very little productivity growth, if at all, in the construction. It doesn't, aside of the fact that people use nail guns now, There's not a whole lot about the process that's very different. Exactly. Yeah, exactly.

I mean, there's been some of, maybe some of the safety measures, right? Some of the processes, right? So one question, I guess, or one pushback. Maybe we've been measuring productivity in a very naive way or an incomplete way, right? For producing houses with fewer deaths of construction workers, right? But it takes longer. That's, you know, if you did a full social calculation, it may not be look so bad, right? may actually improve.

Right. Well, I think the other thing that came out of the discussion for me was just, you know, how serious the shortage of housing still is. I mean, you know, that kind of's gotten kind of pushed the sidelines in the last year because of the housing recession. But the severe shortage, particularly affordable housing, it continues to be an issue, continue to be the problem. And actually, to some degree, maybe getting work.

because construction activities come down, producing fewer single-family homes today than we were, you know, a year ago. And so that's not helping. And you had HUD Secretary Fudge there, and she was talking about, you know, what can we do to kind of address these supply-side issues, you know, to try to get more supply. Do you have, you know, if you were king for the day, maybe king for the week? Is there a policy or two that you would focus on that could move the dial here in terms of supply, trying to help with regard to more affordable housing?

Yeah, you know, I think a lot of the conversation about just the complexity, the length of time, the obstacles in place, particularly to smaller, higher-density housing, is a big part of the problem. And so I think we would, if I were king for a day, or maybe better put, if I were governor for a day, then I think in the state level we need more action to take back from local governments, the ability to make building restrictive.

It's really a state prerogative. They delegate that authority to local governments. And obviously local governments are not thinking about anybody's best interest but their own. And in their interest, it may be good to restrict supply because it pushes up. prices and keeps out folks that might demand more public services from them. And so I think states need to take steps to say, no, we have a collective need to produce housing of different types in a broad range of communities. So I'll give an example of my own state in Massachusetts under Republican Governor Charlie Baker passed a law that communities served by the mass transit system or either

directly or adjacent. And it's 175 of them in the broader Boston area have to have a minimum of 50 acres of land zoned as of right for housing at a density of 50 units an acre. And that 50 acres is a minimum. If you're a bigger town, you'll have to have a larger requirement. My own suburb of Lexington, that came out to 82 acres. And I can tell you it changed the whole dynamic in my own town from as a planning board. I was on a comprehensive plan advisory committee, you know, coming forward to say we need to have a greater range of housing in town. And there's a lot of public sentiment in support of it. But it's difficult to push through.

But then when you say, oh, there's a state mandate, we have to do it. Where are we going to put it? It just changes the whole conversation. I think it'll be interesting to see what happens in Massachusetts as a result of this, because it's going to allow as a right development in every community in the Boston area and not huge areas, but enough to say that's a lot of housing if it got built out. So I guess that would be my magic wand. do that kind of a thing in a broader range of places.

So you're saying that you need leadership from the governor to kind of lay down the law to the rest of the local governments to say, hey, you know, you've got to change your zoning and permitting to allow for more higher density kind of construction. Yeah. And it's flipping it. Rather than saying, it's up to you, we suggest it and say you have to do it, where are you going to do it? Yeah.

Isn't that a tough thing to do? I mean, maybe in Massachusetts, but, you know, I don't know. That feels like it's a pretty tough thing to sell. I mean, Massachusetts is a blue state, but I will say that the typical the mantra has been that liberalism ends at the driveway. And so even though we're a blue state, the governor was pushing for a number of years to try to change the laws relative to votes at the local level to have zoning change, which had been two-thirds majority.

And it took forever to get it to change just a simple majority. But he got it through. and then he got this through. And I think, you know, he's a Republican. I think it does bring together Republicans and Democrats. Folks interested in affordable housing from the point of view of folks, the residents needing that housing, but also business who said as a state,

we're not going to grow if we don't have an opportunity to bring more people in. So Utah is another state that's having a lot of action at the state level to try to overcome local barriers. And that's a very red state. But the business community is spearheading it out there. Okay. I think we can allow you to. to be governor for at least a day. Which state do you want to be governor for? Just asking.

I think a big one. I love my own, my home state. But Mara Hayley, she's doing a good job. I don't want to kick her out. Well, it sounds like you're announcing for governorship. That's what it sounds like. No? Not here. On site, not it. Yeah, yeah, got it. Hey, Chris, Dee. I've lost a little bit of track here. We estimate the shortfall in housing supply based on looking at the vacancy rate. If we look at the vacancy rate across the housing stock today, it's extraordinary alone.

You compare that to kind of typical levels. And you do a calculation of how many units need to be constructed to be able to get back to those kind of typical levels. Do you have those numbers? I'm putting it on the spot, but do you have those numbers at hand? Yeah, I just looked at this last night. 1.5 million. 1.5 million.

Units, homes. Oh, units, correct. Correct. Right. So that's about a year's worth of construction. Yeah, and that's what the home builders have a very similar estimate. I think they got it from us, Chris. I'm just saying.

They're all our cars around. Yeah. Do you know why Freddie Max? For some of them, I'm their favorite economist, Chris. I'm just saying. I'm just saying. Yeah. Go ahead.

Chris, do you know why Freddie Max number is so much higher than yours? I believe they. Yeah, they're just wrong. Yeah. No offense to Sam Cater, the chief economist. But he's, Chris, Dee, you want to explain? I was going to keep it simple. I believe they're assuming a higher vacancy rate at equilibrium than we are, right?

So that match, you would assume that we're looking at the vacancy rate for homes for sale and rent. And they're looking at the broader universe of homes off the market, which is a mismatch of all kinds of stuff. And it makes a number feel a lot bigger. So I don't think that's my own view, obviously. I think it's the homes for sale and rent that you need to focus on. And if you do that calculation, it comes up to about one point. As Chris D said, 1.5 million years. It's possible.

You might pull more of those vacant homes out, but a relatively small share. Right. I don't know if you are Woody Allen fans, but there was a line. I think it was in Andy Hall where he talks about, you know, the two kinds of people in the world is the horrible and the miserable. Yeah. You just want to be miserable. You don't want to be horrible.

Yeah, there you go. I mean, either way, it's horrible or miserable, right? it's 1.5, 1.6, or 3. It's a lot of homes. It is. It is. Yeah. Let me turn to another kind of thorny topic in the housing space, and that is investor demand.

This also has kind of been pushed to the side a bit in this housing recession. But if you go back a little over a year ago, there was a lot of hand-wringing about the increase in the share of sales, home sales are going to investors and an increasing share to institutional investors, big financial institutions that are able to go to capital markets, raise a lot of money, and come into communities and buy up homes and then rent those homes out. So buy to rent. And a lot of worries that that is a problem for home ownership because, you know, these institutional investors are going to be able to buy these homes long before the average American household.

can't because that household has to go out and get a mortgage and negotiate a price. And by the time they figure all that out, the investors bought the property. How do you think about the advent of increased investor? I'm sure this is going to come back. As soon as that housing market kind of finds its footing again and we're recovering, these guys, the investors are going back with, I think, quite aggressively because they've got a workable business model. And they're going to be in these markets buying a lot of property. Do you have a, a perspective on that? Yeah, I guess the short answer is it's complicated.

But one thing I think that that's challenging in this space, too, is this focus on institutional investors. And there are a lot of different classes of investors. And so I think it's important to differentiate them and their relative advantages and their differences in their management strategies. because you highlighted a concern about crowding out homebuyers. There's other folks who are really concerned about their practices as managers and how well they treat their tenants and their potential predilection to evict more quickly or the like.

And I just caution against, you know, painting too broad a brush of institutional vests versus others. We had a doctoral student who did some work on this using some, I believe it was, I mean, now I'm going to remember it was Zill or CoreLogic. It was a cross-sectional point in time, but he linked all the different buyers and was able to use, it must have been mailing addresses like to try to aggregate up to see how much the portfolio was with these different classes of owners. And institutional owners, what he characterized were more than a thousand units, but there are a whole bunch of folks, institutions, entities that own between 100 and 1,000 units. And he looked at where they were buying homes in terms of the rate.

composition, the income level, the price level. And institutional investors tended, the largest scale investors tended to be in the kind of moderate income suburbs. And a lot of the smaller investors were in lower income minority communities. And so you think about the kind of old investors of, you know, slum large of all like, right? So there's a whole bunch of class of investors in different places. So I just want to make sure we kind of distinguish what our concerns were.

but to go back to your question about crowding out home buyers, which can happen from Wall Street, but it can happen from all these other investors too. I do worry about there not being a level playing field in the sense of what's the financial return to the investment. And if you think about it, with the mortgage interest deduction, homeowners should have an advantage, right, because I can deduct my interest in my property taxes and I don't have to claim any income. but we have very few people, particularly lower income folks who claim the mortgage interest deduction because it's so limited now, but given the standard deduction and everything else. So, but if I'm an investor, I can claim all these expenses plus depreciate the asset.

So I was in conversation with one institutional single family firm, and they noted that their cost to rent the home was less than what a home buyer would pay in a monthly payment. And, you know, and one disadvantage Wall Street might have is that they might have a pretty high, you know, required return from equity investors that might raise their cost of capital in some ways, even if their debt is lower. But if they get the other advantage of depreciation, et cetera. Yeah. So that I would, I think we need to think about how do we make sure that homeowners don't have a higher cost of capital, a higher cost or than these investors that we think that giving them an opportunity to own is important. Yeah, that makes total sense. Kind of from a tax code perspective, you don't want the tax code to benefit one class of a buyer over another class. And that's what's happening, particularly in this case, we're saying we're going to give the benefit to the tax benefit to an institutional investor over, you know, an American family.

I mean, really, that doesn't make a whole lot of sense. So we got to. Right. That's a thorny, that's a really thorny problem, you know, trying to figure that one. It is. And we don't really have. So what's the policy solution? You're going to make it so investors can't own single family homes?

You can't do that, right? There's a whole host of reasons why actually having capital flowing is a good thing and having that supply of housing. So it's really, you need to have tenant protections to make sure people are treated fairly. And then I would think we need to think a little bit more about how do we make sure on the financial side is more of a level playing field between homeowners and investors. And we say financially you mean the tax code. Tax code.

The tax code, yeah. Hey, Christy, you know, you've done a lot of work in this area, too. Anything else you want to bring up here? Or Marissa, I've been kind of locked you out. But just wait. I'm coming back to you. We're doing the game shortly. And tradition is you start.

So you're up. But do you guys have anything you want to bring up here with regard to investor demand? I would agree that it is complicated. I do think we need a mix of buyers. A little wishy-washy to me. Yeah, it's complicated. Yeah, but I'm, well, it is complicated. Okay.

I've been on both sides. You know, personally, I've been on both sides of this issue, right? I've rented from small-time mom-and-pop landlords. I've rented from big corporations. I have been a landlord, right? So from that perspective, I can understand the complication. And I can't say that one is necessarily better. There's good and bad in all the different camps.

And if the number one goal, though, is to increase housing generally, right? let's solve that problem first. I think you need those investors to be in the market, building, you know, risking capital. So locking them out or just painting them with a broad brush, I think, does a disservice as well. So it is complicated, but I think we need a good mix of all types of buyers and sellers. Yeah, yeah. I mean, there's certainly a benefit. You know, you got to go back to the financial crisis.

in the wake of the crisis, the housing market was evaporating. House prices were down 20, 25%. And the only thing that turned it around as fast as it turned it, it ultimately would have turned around, but the thing that turned around as fast as it was turned around was investor demand, right? I mean, these institutional investors were kind of borne out of that period. They came up, came in, took a lot of risk, bought up distressed, foreclosed property,

and, you know, helped put a floor under, finally put a floor under pricing. and allow the market to start to recover from a price perspective. So it's not like they don't provide some benefit, but in this case, you know, I worry about the homeownership effects. I do want to come back to homeownership, Chris and Christy and Mercia. I think that's also something I'm worried about longer run. But just to break things up a little bit, I want to do the game, the statistics game,

and I'm sure it's going to be very housing-related anyway, so I'm sure that'll be the case. but the game we each put forward a statistic the rest of the group tries to figure out what that is based on questioning clues deductive reasoning the best stat is one that's not so easy we get it immediately although that's pretty hard to do with christie in the in the podcast he's you know he's pretty fast and not too easy not too hard that we can't we'll never get it so and if it's apropos to the topic at hand that's a bonus. So the tradition is now, Marissa, you're first up in the game. What's your statistic? Okay, there's two statistics related. One is minus 1.6 percent and the other is plus nine and a half percent.

Is it related to the senior loan officer survey? No, no. No. She's laughing. That's laughing. Because we were going back and forth on not one all week long. Is it housing related? It is. Oh. Minus 1.6 and positive 9.5. 9.5. MBA related?

No. Is it a house price related? Yes. Is it from the Realtors median existing house prices? It is. Yep. So these are Q4. Oh, I know. I think I know what it is. It's the highest and the lowest house price change over the past year across metro areas.

No, no. It's not. It's not. It's it's two metro areas that I picked. Oh, geez, Louise. That are 400 plus metro areas. Okay. Okay. All right. Fair not. They're not randomly selected. Okay. Okay. You're over year. Thank you. Kansas. Year over year?

Yeah, it's year over year in the fourth quarter. San Francisco is the minus one four. No. L.A. You're close. L.A. San Jose. San Jose.

Orange County. Oh, you're where I live. Where I live. Yeah, where you live. Yeah. Oh, they're down minus one four. That home one six, one six. It's looking less like a good financial.

Yeah, right? Yeah. Down one six. And then the plus nine and a half percent is, Philly? No, but good guess. Let me think. Is this small area?

Uh-huh. Of course. It's like Kalamazoo, Michigan. It's, no, it's. York PA. No. Cala, Florida. It's Vero Beach.

Ouch. Ouch. I'm very, so. So. So this is where Mark lives, Chris, half the year. Yeah, I know. It's unusual. Housing economists usually don't buy in places where prices go up.

I've owned this place for 15 years, Chris. I'm just saying, yeah. Oh, my gosh, really? It's up 9-4. I'll take it. I was going to say, I'm putting that realtor data. So this is the National Association of Realtors, median house price, quarterly data, not seasonally adjusted in the fourth quarter of

22, 90% of the metro areas in the country had positive year-over-year growth in house prices. But there were a bunch that actually are now declining year-over-year. And most of them are in California. Most of the ones that now have year-over-year declines are in California, L.A., San Francisco, San Jose, where I live, Orange County, all negative over the year, plus a few other metros like Nashville, Austin, Salt Lake City, right, that had a lot of demand over the past couple of years. All of the metro, almost all of the metros that have the largest year over year increases

still are in Florida. And so this is the realtors, right? So it's what's transacting. This is, right. This is the realtors. It's the median. And it's median. Yeah.

So that's influenced by the mix of home. Right. Right. Not our favorite house price measure, but very granular at the metro level. And it's what people are buying, so it's not unimportant. That feels just weird, but I can't figure out why, what, I mean, you would see the high end's gotten hit harder. So you would have thought that that would buy us lower the NAR median price, right? But it's not.

Yeah. And nationally, it's up 4% year over year. Yeah. From the NAR. interesting. I guess it's actually transacting, right? I guess it's what's actually transacting, right? Sale prices, yeah.

Yeah, right. If the lower end of the market is just, there's no inventory, then I don't know. So you think there might be just more transactions at the low end that's driving down the price? That doesn't feel right. Yeah, maybe. Maybe you're right, maybe. I don't know. It sounds like a mix issue, is what I'm saying.

It sounds like a mix issue. Yeah. Anyway, we're deep in the weeds. I've got to say, I feel very much at home here with you housing data nerds. This is fun. We're right there with you, Chris. How many households are there in the United States and how many of it has it changed over the past quarter or the past year? Answering that question is a debate where we're having with each other.

And we've agreed to disagree on that, which means we, you know, there's no definitive number, which is really bizarre. I just find that so weird. But anyway, I'm ranting. You know, I mean, there's two ways to do it, right? One way to do it is you say we know how much housing there is. Yeah. We know the size of the stock. We go out and we count, what's the vacancy rate in the households or the residual?

And so trying to capture how many housing industry there are, I think, is challenging because there's a lot more fluidity in the stock than we realize in terms of subdivisions and the like. The other way you, like that's what the HBS does. The CPS says, I'm going to ask you if you had a household and you, Mark Zandi or what, however old you are, you know, white male. And I know there's X million in the country, and of the ones that were answered the survey, X percent, say, had a household,

weighed it up using the population control totals. What's interesting is the CPS and the HBS are the same survey. Mm-hmm. But they each give a household count. One uses housing control, one uses population controls, so they get two answers. And quarter to quarter, sometimes like massive differences between them. Yeah, that's the same survey.

Yeah, bizarre. Okay, Chris D, Chris Deerees, you're up. What's your stat? 61.6. The homeownership rate. Nope. That's more like 66%. Yeah.

Is it a housing statistic, Chris? It is. It is. One of the few housing statistics that came out this week. Oh, and it came out this week. Say it again? 61.6. It's not the realtors data.

Nope. It's not anything related. It's housing, not mortgage related. It is housing related. It's not, it's housing related. Oh, is it the increase? My favorites. It's one of your favorites.

I've used it before. Oh, you have? Is it from the housing vacancy survey? Nope. Okay. Is it the increase in the average monthly? mortgage payment over the year? He said it was housing.

Nope, that's not it, but that's a good one. Oh, it's along those lines. No, no. Oh, okay. I'm just saying, just acknowledging that that would have been a good statistic. Can I just stop for a second and say, doesn't Chris look like George Clooney? Look at him. Yeah, he looks like George, because of the beard, you know, there's like he's grown a little bit of a beard here.

Oh, I thought you missed Chris. See, that Chris. I was being louder. Sorry. I'm so sorry. I'm sorry. That's so funny. Yes,

he does. Absolutely. Doesn't he? Yeah. It looks like George Clooney. You know my mother-in-law says the same thing. Yeah. There's a cleany-esque element there.

Not a bad person to look like. No, I'd say. Yeah. All right. Back to 61.6. Give us a hit, Chris. Or you can't give us a hint. Is it related to existence?

home sales? No, it's sentimental. Oh, it goes to sentiment. It's a Fadie Mae kind of, oh, home builder sentiment. You know, it's the Fannie Mae home price sentiment index. It's his favorite and I never look at it. That's why I never get it. Can you explain that? Yeah, can you explain it? Yeah, good. It's a survey they conduct to get perceptions of buyers and sellers' opinions about the market.

So this 61.6, it's an index level. It's a combination of several of the questions that they ask. I guess the most important part of it is that it is up.6 points from December, which was the low, right? So it's consistent with this idea. Maybe you are coming off bottom, but we're not roaring ahead, right? Maybe we're putting in a bottom here. One of the key questions I would focus on is buyer sentiment, right? about only about 17% of the survey respondents said that it's a good time to buy. I'm sorry, 17% said it was a bad time to buy. 82% said it was a good time to buy. Good time.

Oh. 82% said it's a good time to buy. I'm sorry. I'm confusing that. 82% said it was a bad time to buy. Yeah. Yeah. That makes sense.

Yeah. Very pessimistic still. That's a quarterly survey that comes out from Fannie? Monthly. Is it monthly? I got to start looking. at that. Yeah, I don't look at that. I should look at it. That's a good one. That's a really good one. Chris H. Do you want to go? Sure. I'll give it a shot. I'm not sure that I'm up for the

caliber of this group. But here's my, the answer to the question is 42. 42. 42. I'm sure it's housing related. Housing related. Yeah. And is it a statistic or is it just It's a statistic. It is. Okay. If you tell us the units, will it give it away? Yes. Okay. But let me see if I can give a hint.

It's indirectly related to the supplied issues we've been talking about. Indirectly. Indirectly related. 42. Is it a measure behind? Oh, sorry. Go ahead. Chris, Marissa, go ahead.

Is it a measure of time, Chris? Is it? It's related to time. Uh-huh. Like, is that the length of time it takes to put up a multifamily unit? Start from permit to complete? Or to get a permit? Number of months?

It's not, but that's actually not a bad number to have. 42 would be a long time, though. That would be three and a half years. That feels long. But maybe from start to completion. But that's not what this is. That's the time to get solar. It was 42 at the last measure in 2021, but in 1995, it was 28.

Oh, in 1995, it was 28. Is that, I don't know, is that, I want to say the average, is it days? No, it's years. Oh, it's the, oh, the, you can't be, oh, is it the average, oh, is it the average, No, the home buyer is older. It's not the age. Is it the average age of the single-family housing stock? No.

Of the overall housing stock. Of the overall housing stock. Does that mean, it's the median housing unit is now 42 years old. It's the oldest it's ever been. And it was in 1995, it was 28 years old. So one result of not building housing is that the housing we have is a lot older. Wow. That is interesting.

So in 1995, the average age of a housing unit, single and multi, together, was 28 years and now it is 42 years. Yeah. Wow. That is an interesting statistic. So you think about in the 90s, right? We had post-war, housing stock was old and decrepit. And then we had enormous wave of building in the 70s and 80s, 60s, 70s and 80s.

We had young housing stock in the 90s. And now we haven't been building that much. And so it's old. So this is why our modeling market is so strong. Yeah. Of course, in the 80s, we had a boom in multifamily, right? Tax-related. I mean, it was a massive, a massive number of units went up in the 80s, so that might

have had an impact. Yeah. But it's interesting. Okay. That's a really good statistic. Okay. You ready for mine? Yeah.

And it is housing related. I'm going to give you two numbers. Ready? 5.8 and 0.8. 5.8. and point date, both in their, you know, very much related, same release, housing. Came out this week? I think it came out this week.

It's all blur to me. So it's in the vicinity of this week. If it wasn't this week, it's in the vicinity. Spitting distance of this week, if it wasn't exactly, you know, this week. This week went fast. Housing not mortgage. Very much housing. It goes to supply, the supply issue.

existing home sales related? No, no. Vacancy rate? Vacancy rate. Exactly. Very good. Mercer. Homeowner and rental. Excellent.

Excellent. Excellent. So the, what's the 5.8? Rental. Rental. Rental vacancy. What's the point eight? Homeowner.

The homeowner vacancy rate. So this goes to supply. I mean, the homeowner vacancy rate will start there. That's the vacancy rate for homes, homes for sale. Point eight is the lowest on record. And that comes from the housing vacancy survey, the HVS that you mentioned earlier, Chris. And, you know, obviously goes to the 1.5 million shortfall in units. I mean, we are very low.

And typically you would see a vacancy rate of 1.5%. So it's, you know, we need, we're about half of what we typically would want in a kind of well-functioning housing market. And by the way, that's one reason to suspect that if we. get price declines and we are getting price decline, house price declines, they should be modest, right? Because we have this really tight physical market and that should provide a lot. That should provide a proverbial floor under price and that should be very, very helpful. And it's across the country. It's all over the country. We're seeing these kinds of shortages. 5.8 is the rental vacancy rate. That's not the lowest on record. That was lower back in the 70s and 80s when we were

putting up with all those homes, rental homes. But it's pretty darn low. In a typical market, a well-functioning rental market, you would want a vacancy rate around seven. So, you know, we're still well below, you know, those kind of vacancy. So it goes to the shortage. So, yeah, very good. Mercy, you got that one. Very good. Okay, let's, we're coming to the end of time. I do want to double back and ended with one longer term issue. You know, we kind of began with near what's top of mind right now, the housing recession. I want to end with, you know, thinking a little longer run here in the homeownership rate. And I want to try something out on you, Chris, Chris Herbert.

And I've tried this out on Chris D before, but I would like to try it on you. I'm nervous that the home ownership rate is at a high watermark, you know, going forward. going forward, it's going to be very difficult to raise the homeownership rate for three broad reasons. One's affordability. I mean, you know, right now the fixed mortgage rate is about six to six and a quarter. In my calculation, in the long run, the fixed mortgage rate should be somewhere between five and a half to six. And so that means if we have an affordability problem at six and a quarter, it's still going to be an affordability problem at five and a half to six. So that is going to remain an issue. Second, the investors that we were talking about, my view, those institutional investors,

they figure this out. This is a business model. And they're going to, they're going to take advantage of that tax code, you know, all day long. And it's going to be very difficult, particularly for lower income households who need a mortgage, particularly like a FHA mortgage, because it's going to be harder to get that home. And the third is just pure demographic. It's the, you know, the distribution, the ethnic distribution, the racial distribution of the population, the white home ownership rate, the overall home ownership rate is two-thirds. The white home ownership rate is 75%. The Hispanic homeownership rate is about 45%ish, maybe a little higher. It's about 40 for the black Americans. And we know that the racial composition, excuse me, racial composition of the population is going to

continue to move away from white to non-white. And that near fact means if home ownership rates don't change across races, that we're going to see the home ownership rate decline. So it feels like to me, unless there's some kind of policy change or reduce something, 10 years from now, 20 years from now, the home ownership rate is going to be lower than it is today. Two questions. One, should I be worried about this? You know, do I care that the home ownership rates declining? And I And that's become more of a topic recently. And secondly, if we should care, do you agree with my characterization of things? And finally, I guess, third question, what should we do about it to address it?

So a lot there to unpack. And I'll just throw it into your court and have you respond. All right. Number one, should we care? I would say yes. And, you know, the joint center, we'd like to be fair-minded and equal. And so I don't want to say that renting is bad. I'll make sure people recognize that I realize renting has value.

There's lots of people choose the rent. We have to have a well-functioning rental market. But there are a lot of benefits. He is running for governor. Do you see how we're going to get a call from? He's appeasing everyone. No, but it's what most people prefer. It is an important source of financial stability.

I mean, you can generate wealth. It locks in your mortgage payment. And there's a whole host of reasons why people prefer it. So I think we do care about it. I think it should be a policy concern, particularly in a market where house prices keep going up, which they've only done over the long period of time. And so if you think about what just happened with house prices, if you were a homeowner, you hit the lottery, right?

Your house price went up 20%. And so you're a hedge, right? So you're insulated. So in the housing market, I benefit from that upturn. So I think there really are a lot of strong reasons why we should encourage and enable people, not a back of encourage, enable people to get into homeownership. So your second question was, should you agree with my forecast that if we, you know, nothing changes here. It feels like ownership is going to be lower 10, 20 years from now. Yeah, it's hard to see.

Yes, I think all those, there are three things that you pointed to, so the affordability, the demographic changes. And just the racial composition of the population. Yeah, are all going to be ones that are make it more difficult to buy a home. And one of the things that we point to is, you know, as much as the interest rates going up to five and a half to six percent, but it's also house prices at the level they are. You know, it used to be 25 years ago. Typically, prices were three times income. Now they're more nationally level about five times income and some markets, they're eight, nine,

ten times income. And more places have that five times income ratio at Denver, you know, places that didn't have that. What that means is you have to have a whole lot more cash, even for a small down payment mortgage. And a lot of folks, particularly folks of color, don't have anywhere near that amount of cash. And they don't have the bank of mom and dad to go to. So I think their affordability issues are going to be really significant. And what do we do about it? Well, you know, and here's the challenge, right?

It's that you want to try to create pathways to homeownership that help the people who but for it wouldn't get there and aren't themselves inflationary. So I do think we need to think about having an, and I'm a proponent of down payment assistance because I think that wealth barrier, savings barrier is a big one. I'd be a proponent of thinking much more about how do we get targeted down payment assistance, targeted. I think the folks who've talked about first generation buyers that are like ways of targeting it to people who but for this might not get there. I'm also a proponent.

We haven't talked about this much in policy circles lately is of ways that encourage and match savings. I do think that you want to make sure people are prepared for homeownership. And the ability to save is an important financial skill and a signal of resilience. I don't think having equity in the house has proved to be as significant in terms of skin in the game. I think what we learned from the crisis was so many millions of people were underwater and never walked away from their mortgage. But the reason why down payments matter was it shows financial capacity. So I think match savings approaches it. Another way to say, you know, we're going to kind of limit who gets it because you're going to have to wait a little while to

build up. But I think down payment assistance is really going to be important. And I think finding ways to make sure it's targeted to the right folks who need it is important. Yeah, there's actually this cool program, I think, that's going to be unveiled in California where the government, the state will provide down payment assistance. In exchange, get a shared appreciation claim. You know, they can, when the home is sold, they get a claim on the some percent of the appreciation and the value of the home so that they could take that money,

that fund, the funds they raise to help make this thing a self-refinancing kind of down payment assistance program. That sounds like a pretty cool idea, particularly I post at California where generally house prices, you know, continue to move higher. Right. And I think if you're going to give, like it's one thing you've given folks five or $10,000 in down payment assistance, you know, then it's not really worth the bureaucratic hassle of tracking it and, you know, getting a shared piece of it. But if you're in California, you're probably going to have to give people substantial amounts of equity to make homeownership feasible. And then having some ability to get it back makes sense. It's another way to limit it, right? Because if I have the ability to buy a home fee simple without that kind of encumberment, then I will. But if I need the help, then I'll take the entanglement. So it's a good targeting mechanism, too. Of course, these down payment assistance programs don't really work all that well unless you have supply, unless you've got homes that you can put people in. Like right now we've got this severe shortage.

So if you layer on something that juices up demand and there's just no homes, it just jacks up prices and rents and no one's better off as a result. So I think the first thing we got to do is we've got to get more supply. We've got to figure out how to produce more housing units. and, you know, make sure that when there is, you know, when we provide that down payment assistance, it just doesn't simply end up in a higher house price. You know, so we've got to make sure we calibrate those things. Christy, is anything there or Marissa that you wanted to add on the homeownership side that I missed? I mean, did you actually, Christy, because I know you think about this carefully,

would you agree with my characterization of home ownership going forward? As usual, I'm going to push back a little bit. Okay, yeah, fair enough. Yeah, yeah. Well, can I just say, as preface, and we're going to come, we're going to end this shortly. Yeah. We forecast a lot of things. We model a lot of things to help produce forecasts, and homeownership is, if not the hardest thing to model and forecast, it's pretty darn close.

You know, it's very difficult to get a good model for that. But anyway, with that as a preface. Yeah, yeah, yeah, fair enough. I think a lot depends on your time horizon, right? because the demographic trends are certainly changing within the country. So if you're talking about the next 10 years, absolutely. I think everything you mentioned in terms of the trends that we're seeing, that's all going to take place.

And yeah, very hard to push up the homeownership rate. As we get on to 15, 20 years from now, given projected growth rates in the population, the aging of the population. So you mentioned the racial composition of homeownership. But there's also a very strong relationship with age, right? So as the population ages, even within those racial categories, you're going to get more homeownership. So I think that might be a factor here. But just abstracting from that, as the population, as hostile formations actually start to come down, right, there are going to be more opportunities.

Actually, we could go from too little supply to too much, having excess supply in terms of housing, potentially. It all depends on, you know, what goes on with the birth rates, immigration. policy, but as you get further out, I suspect we're going to look a lot more like Europe than we have in the past, where we do have, well, that's another question, but in many countries where you have this older population, you do have fairly high homeownership rates. So that would be my own caveat here. It depends what time horizon we're talking about here. Right, got it.

And I think that's a great point, Chris, because we, we, we, get caught up in the conditions at the moment and feel like this is a permanent condition. And I think, you know, we talked a little bit of a household formation, which is running really high. But if you look at the demographics, my our projections and they need to be updated when we get some good population projections from the census, says we're going to slow to about a million households pretty soon. And that's a whole lot less than we have now. There's a piece I'm going to be familiar with. I think Gary Englehart did it for Rihar looking at bathing boom turnover. And he estimates that it'll be about four million housing units a year coming from

the boomers, you know, as they get into their 70s and 8, late 70s and 80s. And so there is going to be a big supply, existing supply response coming. So we could be in a very different market. And I'm not sure the timeline, five years, 10 years, certainly 15 years. So you think your points well taken. Yeah. Good. Well, we covered a lot of ground. And I'll just end by throwing out an open-ended question. Chris, miss anything we should have been talking about? Is there any issues that you think we missed?

Anything glaring? No? Nothing glaring, I would say. The one thing that's percolating up a lot more in the policy front is a question about enhancing tenant protections. Yeah. And five years ago, people said to me, what do you think about the possibility of rent control?

And I said, that's never going to happen. And now obviously various forms of it. And I think it's important to distinguish between what Oregon and California have done and what St. Paul did. And now the renter bill of rights that the Biden administration put forward very contentious. But I think, you know, given the fact that I would say that tenants have don't have a lot of protections. And given the fact that staying stable to the house is so important, we need to have a real conversation about what would sensible tenant protections, look like, sensible meaning they don't discourage supply, that they don't demean the role that landlords play and provide in this housing. But at the same time, you know, renting increases

of 20% are really hard for people to tolerate. And so I don't know, this is a debate that seems to be growing and one that's filled with a lot more heat than light. So yeah, yeah, I kind of feel the kind of the political ground shifting here a little bit. So you're right. I mean, economists hate rent control, you know, with, for the obvious reason that if you control rent, you're going to restrict supply. I mean, builders aren't going to put up units, and that's the exact opposite of what you want. But you're right. I think there's kind of more nuanced thinking around this that's going on.

You know, maybe there's some things that can be done to help address this issue. Hopefully, we get more supply, and rent vacancy normalizes, gets back up to that 7%. And rent growth normalizes, and then, you know, we'll be okay. Right. Maybe it's subject for another podcast for you with some appropriate. Yeah, exactly. Yeah. This is an enormous, I live in California. And you could do a podcast on housing in California. Just there's so much going on. There's state, there's still state moratoriums on rental increases in effect, layered on top of county like Los Angeles County has their own. The city of Los Angeles has their own. I have a friend who's an attorney in, landlord tenant law and she just said it's week by week changing regulations that she has to keep up with to understand what the state's doing, what the county's saying, what the city is

saying. And yeah, it's a huge debate here. Just if you take Los Angeles and then there's the homelessness issue on top of it too and trying to find housing and converting commercial buildings to, you know, residential units. So there's a lot of. going on that I think is fascinating that I would love to hear your expertise on at some point, Chris. Well, we're going to have to have you back, Chris. You can see we're already setting you up for the next podcast. It was your fault because you brought it up. We didn't. But thank you so much for joining us. It was a wonderful conversation, very thoughtful and insightful. And we will be in touch because we do, you know, we do.

inside economics give our guests a small token of appreciation, you know, that's within the guidelines of Moody's gift policy. So, you know, but I will be in touch on in that regard. But thank you for spending the hour plus with us. Much appreciated. And with that, dear listener, we are going to call this a podcast. Talk to you next week.