Odd Lots - Jim Egan on the Mortgage Gap That's Dividing America

Episode Date: June 16, 2025

Somehow, the American consumer remains quite strong. Despite higher interest rates, tariffs, general economic uncertainty and so forth, people are continuing to spend. And yet there are some pockets of weakness that you can observe, especially if you look at delinquency data for various types of credit. But even here the patterns aren’t totally obvious, as it doesn’t break down nicely among prime vs. non-prime borrowers. But there is one important divide: Do you have a ZIRP-era mortgage or not? According to Morgan Stanley housing strategist Jim Egan, there is a massive difference in how strained people are for those who locked in their housing costs prior to 2021 vs. those who didn’t. People with ZIRP-era mortgages are benefiting from low stable payments (which have declined on a real basis), as well as broad equity accumulation. Those who didn’t are much more strained in their finances. We discuss how this is playing out, as well as the state of the housing market more broadly, which has seen rising inventories, and the possibility for an overall downturn in prices nationwide. Only Bloomberg.com subscribers can get the Odd Lots newsletter in their inbox — now delivered every weekday — plus unlimited access to the site and app. Subscribe at bloomberg.com/subscriptions/oddlotsSee omnystudio.com/listener for privacy information.

Thanks for listening to Odd Lots. Follow the show on Amazon Music for more future episodes or just ask, Alexa, play the Odd Lots podcast on Amazon Music. Bloomberg Audio Studios, Podcasts Radio News. So and welcome to another episode of the Odd Lots podcast. I'm Tracy Alloway. And I'm Joe Wisenthal. Joe, there's been this very long running now. It feels conversation about the health of the American consumer. Yes. You've seen all that commentary, right? So you see these headlines that are like consumer debt at a record high. And you see some of the sentiment surveys, which have for the past two years been coming in pretty bad. They started to look kind of bad when all the tariffs were announced again. They've improved a bit since then. And yet, consumers seem to, you know, pretty much keep doing what they've been doing for a long time, which is spending, buying houses, things like that. Well, they're spending for sure. But this is the thing. all this dismal sentiment data everywhere you look, and yet by and large, you know, you read

like CEOs, you look at the retail data, et cetera. It's not like that terrible. Companies seem to be doing fine. But there are pockets of the economy clearly that are softening. There is rising inventory of homes. This is like one of the huge stories in the economy. So there are clear areas where high rates and stuff are having an effect. But to your point, like it has not been some sort of linear story of people are depressed in the economy. But you're right. We have seen some signs of softening. And so, you know, we have to ask, is it going to be different this time? Is it the start of some sort of real deterioration in the health of the U.S. consumer? I have also seen some very interesting stats recently, specifically about

consumer lending and mortgages and things like that. I've seen, for instance, that existing homes sales are down 1.9% year-to-date and have recorded the lowest volumes by count. at this point in the year since 2009. And when you hear those, you know, since 2009 dates, you start to get a little worried, right? This is definitely the case. I saw something I think it was from Redfin. They said there was a record gap between sellers and buyers

in the housing market right now. Look, this is one area where the high rates environment, like there's clearly something going on. We haven't gotten like big, you know, and rates shot up in like late 20, 2021 or whatever that was. Do you know, by the way, this occurred to me last night. 2021 is kind of a long time ago now. Like, no, I was thinking about this last night because it's sort of a cliche to point out that

the pandemic 2020 was a long time ago. But some of those really pivotal years where we got the surge of the rate hikes, we got the surge in inflation. Even that's starting to fade into history a little bit. I don't know. Maybe just last night I was thinking about getting old. And Joe, time is a flat circle. That's all I'm going to say.

But there's something like, you know, house prices didn't fall off a cliff. No. When rates hike dramatically, which was a surprise to some. Like some people thought, okay, they're hiking rates dramatically. The housing market is going to be affected. The housing market is the U.S. economy. Therefore, the U.S. economy will fall off a cliff. That did not happen.

But there has been this slowdown. And lately we've been seeing like, okay, rates are still high. Even with talk of rate cuts, et cetera, they're still high. And there's clearly this sort of accumulation of household inventory, these imbalances that are emerging. I don't know. Maybe we will get price declines. What's going to happen? Well, I'm glad you brought that up because we actually do have the perfect guest.

We're going to be speaking with someone who was very, very correct in calling that we wouldn't see a massive house price. I thought he was wrong. I didn't say it at the time, but he came on the podcast. He was like, we're not going to say. And I was like, there's no way. I'm glad I didn't say. This is why I never get anything wrong because I don't state predictions.

Because you don't have opinions. But as a matter of professional accountability, when we were interviewing him in my head, I was skeptical. All right. Well, that's a big Maya Copa from Joe. Okay. Without further ado, then, we are going to be speaking with Morgan Stanley Housing Strategist, Jim Egan. He's been on the show quite a few times before. And here's

where I produce my disclaimer, which is that stat that I just quoted about existing home sales actually came from one of his recent notes. So Jim, welcome back to the show. Thank you so much for having me back. It's an honor to be here. I'm going to start, actually, I'm going to go back in time for a second. Let's just start. Why has the American consumer been so resilient? And it's kind of funny because You see people even talking about it still. So we just had corporate earnings. And there was this funny comment from the Amec CEO where he basically said, our card members say they don't have any confidence in the economy, but they keep spending, which is pretty

funny to me. But why this strength? Yeah. So I think there are a number of different things driving the underlying strength in the consumer. We do a lot of work across our debt analysts in Morgan Stanley Research with our economists to kind of try to tie these positive macro numbers to some of the. things we're seeing on a more micro level. And look, the unemployment rate, we're at 4.2% very low unemployment rate. It's been low for a few years now. And on top of that,

you've had an incredible amount of wealth growth. There's been volatility in markets recently, but whether it's home prices at record highs and the record amount of equity that homeowners and 65% of Americans are homeowners, the equity that they have in their home or the wealth they've been able to gain from appreciating financial assets, that's contributed to consumer's ability to spend. This tracks completely with me because I'm anxious about the state of the economy. I read all the headlines like everyone else. But, you know, like I own a home.

I bought a home. I have my retirement account. It seems to be doing fine. Despite my anxiety, I don't think I'm like changing my behavior in anyway. And I think another piece to that when we think about just the consumer balance sheet, one of the statistics that gets quoted all the time is the just debt. service ratios, the debt service to income, it's above where it was in 2021, but it's still at some of the lowest levels we've seen in the past couple decades. The Capital C consumer,

the holistic balance sheet of the consumer, that still looks healthy. We don't think that the consumer holistically is over levered. There might be some pockets of pressure, but we don't think they're in aggregate over levered. Yeah. So this is exactly what I wanted to ask you, because one of the things that I've been sort of internalizing from recent years is this idea that the aggregate hides a lot of stuff happening in the tails, right? And the question, I guess, is always when the tails start getting fat enough that they start affecting the hole. And this is one reason why your recent research really caught my interest. And I actually wrote it up in the All Thoughts newsletter. But you are starting to see some pockets of strain. Describe what you're examining right now.

Yes. So thank you for writing that up. Visibility was very much appreciated. No, thank you for producing it, honestly. And I think what we're seeing, and this is something. something, as part of my role at Morgan Stanley, I work on the teams that look at auto credit within asset back securities, credit cards, all of those other consumer products. And one of the, I'll call it, apparent contradictions that we were seeing was the macro consumer data that we were just discussing incredibly healthy. Consumer keeps spending. And then we're seeing delinquencies climb.

Delinquencies climbing with the unemployment rate as low as it was. That was something that we had been asked to explain a fair amount of time. we're trying to find better data to explain. And so the impetus behind that report was to kind of say, look, subprime auto delinquencies have been climbing to a point where they're higher now than they've been at any point. I mean, some metrics there above where they were in 2008, 2009 at their prior peaks. Now, there are some apples to apples issues there. But you'll see those numbers.

Prime auto delinquencies have started climbing. Unsecured consumer delinquencies are up. They're not at local highs, but they're up. And so from a pocket's perspective, we are seeing a little bit of those delinquencies climb. I just want to explain the terms really quickly. But what's the official definition of delinquency? So delinquency, as we're talking about it here, is somebody who is 30 days past due on their loan. So we'll either talk about it in terms of 30 days or sometimes 60 plus days, but you've missed at least one or two payments on a debt instrument, whether that's an auto loan.

We'll look at it for mortgages, credit cards, and so on and so forth. So this is really important, though, because in the aggregate, things are mostly fine, but we're seeing this rise across different categories, which is not entirely intuitive. So what you're saying is that there are these tails, there are these sources of stress, but that they're not a function of credit worthiness. What are they a function of? Might not be a function of aggregate creditworthiness. And that's when it comes into looking at these statistics that,

that we need to use to think about just kind of broadly how the economy, how the consumer is going to move forward. But I mentioned debt service ratios, right? When we think about what's brought debt service ratios down to kind of some of the lowest levels we've seen in decades, the mortgage market plays a big role. The largest piece of debt on any household balance sheet that owns a home is almost certainly going to be that mortgage. And the lock-in effect that we've heard in the housing market, that's a function of the fact that a majority, an overwhelming majority of mortgage debt in this country, 30-year fixed-rate mortgages. Most of those borrowers were able to take out that mortgage at historically low rates in 2020, 2020, 21. The effective rate on the outstanding right now, 4%. Prevailing mortgage rates, 6.8, 6.9% as we're in this studio today, so when you think

about two-thirds of the country are homeowners, their effective rates at 4% are dragging down that payment. Only 60% of homeowners even have a mortgage. So 40% own their home free and clear in any debt. They're not contributing to the numerator. and the 35% of households that are renters, rents don't count as debt service in these equations. They're contributing to the denominator in terms of the income piece of this calculation, but they're not adding to the service piece, right, or the debt service piece. And so that's all helping to drag this down and potentially missing a few pockets of specific borrowers that are under a lot more pressure than those aggregate numbers would suggest.

Just to be clear, so is the story that the stress is building basically, among the unfortunate people who have a mortgage but don't have a Zerpeer mortgage. I think when we started to see delinquencies climb, and this is two to three years ago, we started to see it subprime borrowers. And those tend to be borrowers who in this post-GFC past 15 years lending standards have been tighter, more likely to be renters. We're not capturing rent. I see. And so their payments are getting tougher. But then to your point, now over the past 12 to 18 months, now prime delinquencies are moving higher. These are households that are much more likely to be homeowners.

And what we think we're seeing there is exactly the dynamic you're talking about. Right. If you bought a home prior to 2021, let's say you bought in 2016, median priced home, 20% down, prevailing mortgage rates at the time, that was a 30-year fixed rate mortgage. Most homeowners who bought at that time refinanced at record lows in 2020, 2021. And if we just assume that their incomes have been growing along the levels that median household incomes have been growing for the past nine to 10 years, Their monthly payment as a share of their income is 8 to 9% today.

Anybody who bought before 2021, that median household, we think that payment is probably below 12%. If you bought the past three years as rates moved materially higher, your monthly payment as a percentage of your income, median household probably 24 to 26%. This is like the most important state in the world. Yeah. This is like you have the halves and half-nots of renters versus homeowners, but you also have the have-nots. in homeowners themselves. Yes, and so we think that the Joint Center for Housing Studies at Harvard, right? They have some great statistics on affordability, and they will qualify 30% of your income

as the threshold for are you cost burdened on shelter. So 24 to 26 percent, we're not saying that those homeowners are cost burdened, but they're spending two to three times more of their monthly paycheck on that mortgage than somebody who was fortunate enough to buy prior to 2021, which you'd think has to be crowding out something. And maybe that's, it hasn't been spending. That's clearly been the case from the data that we talked about earlier. But maybe it's these marginal payments on other debt service products. The news doesn't stop on the weekends. Context changes constantly. And now Bloomberg is the place to stay on top of it all. Hi, I'm David Gura. Join us every Saturday and Sunday for

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Listen on Bloomberg Radio. stream the show live on the Bloomberg business app or listen to the podcast. That's Bloomberg this weekend. Saturdays and Sundays starting at 7 a.m. Eastern. Make us part of your weekend routine on Bloomberg television, radio, and wherever you get your podcasts. One of the results of having a lot of people locked into mortgage rates that maybe they got before everything went up by quite a lot is the lock-in effect and the idea that people don't want to move houses because they'd have to get a new mortgage and then they would end up. potentially being cost burdened. And I'm curious if we're still seeing an impact from that particular, or as much of an impact from that particular dynamic, or are we at the point now where people are

thinking like, well, maybe mortgage rates aren't going down anytime soon. And so I'm just going to bite the bullet and do something new. So if I were to take a 10,000 foot view and answer your question, the lock and effect is clearly still playing a role. Right. If we look at overall inventory levels is a share of the outstanding housing market. The chart still looks like there's a typo, given how low inventories are. But I can't sit here like I have been able to in the past and say, we're at historically low inventories, right? We are starting to see, to the point that you're making, we are starting to see for sale inventory volumes move higher. Year over year, inventory volumes are up almost, it's almost 18 consecutive months now, almost a year and a half.

They're up almost 20% from those lows. And while that's, still below where we were in the fourth quarter of 2019, below where we were, when rates picked up massively and inventories kind of retrenched, that's still a pretty healthy increase. We're starting to see a little bit more supply come on the market here, despite the fact that the lock-in effect remains 250? Who's selling? Is it just eventually, like, what is the source of the inventory? Is it the people who have needed to sell for a while are finally capitulating?

And you know what, I finally got to sell this house. is it that there are some marginal buyers who have dropped out because they've been waiting. I don't know. Like, what is the source of this inventory? And this is the longest inventory growth since the GFC, right? It's the highest percentage change. When I look at year-over-year growth, like what we just saw with the most recent data that came in, it's now the biggest it's been on a year-over-year basis since the GFC.

It's also the second largest it's been in the history of the data, which goes back to the early the largest streak. A year-over-year growth. Oh, okay. Like just in terms of how much we're up. Now, the question as to who is selling, I'd argue probably one of the more important questions in the housing market right now. Yeah. So it's a question we're trying to answer.

But it's one that's a little bit more difficult to answer. We can identify at this point where the inventory is picking up more, right? You look in states like Florida has some of the steepest increases. Texas has had some pretty steep increases. And we get a lot of questions, for instance, in Florida, cost of insurance increasing. Are the ancillary costs of homeownership? Is that forcing inventory? We don't know if that's the case.

We can't empirically prove that right now. But I think you combine that with 2021 was a long time ago. Yeah. This was my realization last night that actually 2021 was not yesterday. Yes. And these people have been, like Locke in effect has had people stuck in their homes in a lot of instances for probably longer than they wanted to be. growing families, both in terms of number of children as well as larger children, like just growing needs for more space. If those, for lack of a better word, if those dreams have been delayed,

like maybe the realization that rates might not come down all that much. Maybe it's time to do that. And home prices are up 50% since March of 2020. Like over the past five years, you've 50% growth in home prices. It's insane. Perhaps those homeowners with that equity might be just a little, like marginally more willing to list. Yeah, the economics make a little bit more. Yeah, this is right, yeah. Wait, can you talk a little bit more, since we're all about digging into the aggregate and finding the different tales here, can you talk a little bit more about the different pockets and geographical differences between what you're seeing in supply and home prices?

Yes. So we've been trying to figure out what are the most, because we talk about home prices nationally. The housing market is so hyper-local that those national numbers are helpful, but they don't describe the dynamic. that are going on at the ground level at any individual place in the country, right? And so when we look at the growth in inventory, looking at it year over year, looking at it since the fourth quarter of 2019 before the pandemic started, you're seeing the sharpest increases in the south, right? Like you've seen it in Florida, you've seen it in Texas, a couple states that show up a little

bit more on the year-over-year numbers are Colorado, North Carolina. When we look at the implications from a home price perspective, what we've seen to be more, at least statistically significant for now, are places where either those inventory levels are higher, highest compared to the fourth quarter of 2019, which you have New Orleans, 11 of the top 14 MSAs from that perspective are in Florida or Texas. And that's where you're seeing softer year-over-year home price growth or in some instances where you are actually seeing prices come down on a year-over-year basis. The other side of that coin is the northeast.

It's New York. It's New England. It's the northern Midwest. Those are places where inventories are still falling. inventories are far shy of where they were in the fourth quarter of 2019. And to put all of these percentages into context, nationally, inventories are down, I believe it's 28% from the fourth quarter of 2019. So to talk about places where inventories are actually up relative to 4Q 2019.

That is an outlier relative to national numbers. This conversation wasn't on the record, but I'm going to quote him anyway. I was trying to my friend Connor, San, here writes for Bloomberg opinion. Hopefully he doesn't mind me quoting him. We were talking about this phenomenon of the fact that inventories are very tight in the Northeast. And one of the things that he said was that, and again, I don't think he told this to me for publication, but maybe he's written about it. So I'm just going to take a risk that it's okay to quote him from a chat that I had with him.

But I want to give him credit, but that there's this natural longstanding migratory pattern in the U.S. of people moving essentially to the Sun Belt from the Northern. And that the way he characterized it to me is like imagine a university town in which suddenly for a few years no one moves out of the town after graduation, how inventories would rapidly diminish. And that because of the lock-in, the mortgage lock-in, you're not getting the same sort of migration out of the cold areas to the southern areas. And so people are stuck in the cold areas, basically, and that is, does that resonate as a reason for why vacancy rates would be very low or inventory rates in the Northeast? be very low right now. So from the data that we've looked at, his comment around the migratory patterns, they didn't start in COVID when people moved to the southeast.

They were happening before that. That makes sense to me. I don't have the specific numbers to completely agree with that as a research journalist on air. But what I can say as well, which could be contributing to that, we've talked demographics in the past. Yeah. And one of the underlying trends in the housing market has been the fact that we're now at a place where over one out of every three homes, over 33% of the housing market is owned by people over

the age of 65. And when you look at where, yes, there's Florida and there's Arizona and there's South Carolina, but when you look at where they're more concentrated as a percentage of the housing stock in particular, it's in the Northeast. It's in New York. It's in New England. And we've rerun this analysis post the pandemic. Their tendency to age in place has continued to get more and more prevalent.

So I think you combine some of these trends. and this is what you're left with. Yeah. The Northeast is nice. I'm just going to put that out there. Nothing wrong with the Northeast. Okay, so we're talking about an increase in delinquencies, a slight pickup, even in prime borrowers. But we're not saying foreclosures yet.

And I think that's an important differentiator. But what would you expect to be a sort of catalyst, I guess, for things getting worse? And since we keep bringing up the great financial crisis in this conversation, I mean, back then, people were too indebted, too over-levered, and when house prices started to fall, they couldn't keep up and everything basically collapsed. But to your point earlier, we don't really have that level of indebtedness anymore. So what's the catalyst? Right. So I think there are a few things going on. Another piece to the different levels of leverage today versus back then was the fact of the types of leverage we were giving borrowers. According to data from, I believe

it's the FHFA. 92 and a half percent of mortgage balances in the country right now are fixed rate. Most of those are 30-year fixed rate. Back 2005, 2006, almost half. Option-arm era and all of that. Adjustable rate mortgages and not just adjustable rates. Short reset arms with teaser rates, option-arm mortgages that could negatively amortize so the balance of your mortgage could get bigger over the first couple years of that product.

Those were payments that as we hit kind of an economic hiccup, unemployment rate picks up, money becomes a little bit more tight, and then your mortgage payment ratchets higher. That makes it even more difficult for you to make that monthly payment. We don't have that this time. Not only that the home ownership rate back then was over 69%. Today, I believe it's 65.1 as we walk in here. Four percentage points does not sound huge. Given how big the United States is from a household perspective, that means that we have

four to five million fewer homeowners than we would have if the homeownership rate was over 69%. So your marginal homeowner is a lot cleaner from that perspective. They're not necessarily going to see, certainly not going to see that changing mortgage payment that's going to drive things there. And because of our experience, 17 years ago now, mortgage servicers have a much more varied toolkit at their disposal to prevent, we'll call them foreclosure mitigation options, modifications and the like. Loan workouts, basically. So it's difficult for us to foresee a a place where mortgage foreclosures pick up too significantly in the forecast horizon. Could we see national home price declines?

We could. We're talking about inventory increasing. Demand has not increased alongside inventory. Affordability is still very, very challenged. And we mentioned 1.9% decrease year to date from an existing home sales perspective. As supply increases and demand stays flat, sometimes it's just as simple as looking at the supply and demand piece. We've started to see home price appreciation decelerate 4.1 to 3.4% just over the past two months. Twenty-five percent, a quarter of the largest 100 MSAs in the

country are already seeing home price declines. I don't think it's out of the realm of possibilities for this imbalance of supply and demand to take us through zero percent. I think that what we're talking about from how healthy mortgage credit is, the locked-in homebuyer doesn't need to sell at lower prices. I don't see a true home price correction. That's not in our base case. That's not in our bear case. But we do have a bare case of negative 3% home prices by the end of this year.

Base cases plus two. It's decelerating from here. It's slowing growth, but it's still positive on the national level. But I think there is a realistic bear case where we go below zero percent. This is Caroline Hyde. And I'm Ed Ludlow inviting you to join us for Bloomberg Tech, a daily podcast focusing exclusively on technology, innovation and the future of business.

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then bring you the most important conversations and analysis in our podcast. Search for Bloomberg Tech on YouTube, Apple, Spotify, or anywhere else you. you listen. Join us every afternoon on your commute home and stay ahead of the tech news cycle. That's the Bloomberg Tech podcast. I'm Caroline Hyde in New York. And I'm Ed Ludlow in San Francisco. Subscribe today wherever you get your podcasts. Can you talk maybe a little bit about the wealth effect? Because if we're talking about like how important it is that people have locked in mortgages

at low rates or maybe they have big portfolios of stocks and bonds, maybe they're a baby boomer and kind of lucked out in their wealth building lives. that seems like a big factor. And in the current environment, we've had some volatility, although things are looking better as we record this on June 12th. So I'm just curious, like, how do you start to look at how people feel about their actual financial assets and financial position when it comes to making decisions about home ownership or whether they should move and things like that?

Yeah. And it's that piece of it. The wealth effect in particular is something that our economists have been talking about a lot to talk through just how confident the consumer has been in. spending over the past quarters over the past couple of years. And so when they think about the consumer's ability to keep spending going forward, whether it's smaller purchases or larger home purchases, durable goods, they are looking more at the financial aspect piece of this. When we look at the growth in wealth in this cycle, it's been more on the financial asset side than it's been on the

real estate side of things, which, as the housing strategist with home prices at record highs, took me a couple seconds looking at those numbers to see that that's what that is kind of what's going on underneath. And so when they think about the borrower's ability or the borrower's willingness, and by borrower, I should say, consumers' willingness to keep making those expenditures, they are looking at equities. They're looking at financial assets and they're looking at the volatility there, but they do think we need a pretty healthy correction for it to really impact that in a material way. It's interesting.

Like when I think about wealth effect, sometimes I think of it psychologically. It's like, oh, people like look at their investment portfolio and it's green. I feel good. I've got to dinner or take a vacation or whatever. But listening to you, it's just crazy. Like, if you have a 2019 or 2021 vintage mortgage and you've been investing in the market for some time, regularly putting money in a 401k or maybe some taxable account, you have a very strong inflation hedge because you have this recurring payment that has not gone up, assuming it's fixed.

And you're just sitting on this like boatload of capital gains. That is just, it's not, that's not psychological. That's real. Now, whether you, the degree to which you can monetize it is obviously questionable because if everyone's trying to monetize it at the same time, that could shrink. But just on your paper, like, that's great. That class of person who has that situation is just an extraordinary large cushion and margin and are sort of winning on every fronts right now.

Yes, the households that were homeowners before the pandemic hit in March of 2020 or made what was probably a pretty scary decision to buy. in 2020 or 2021. Those are the households that on the perspectives that we're talking about to the points that you're making were really big winners here. Huge winners. Payments have stayed flat even at a time of galloping inflation. They're sitting on all these capital gains.

Their wages have probably just assumed they have a normal job, have gone up marginally. So just the nominal payment of the mortgage relative to how much they're pulling in is probably fallen over the last four plus years or however many. I mean, it's pretty nice. Wait, since we're talking about people. who lucked out in their wealth building. I want to go back to baby boomers for a second. So one of the narratives that we hear when we're talking about housing is this idea that one day, the older generation is going to pass away. And eventually a big segment of the housing market

is going to become unlocked and available for sale, maybe at lower prices. Who knows? Is that still something that you're sort of incorporating into your longer term forecasts? Or have you seen anything change on that front, I guess, in the year or so since we last spoke to you? So it is something we're still incorporating when we think about housing not over the next two to five years, but this is really a longer term. Like this is a 10-year plus aspect to this. But we very much subscribe to the narrative that we are underbuilt and undersupplied from U.S. housing holistically. And we get asked the question, well, how do we fix the underbuilt aspect of this? Or how do we fix the aggregate undersupplied aspect of this?

And it's we do come back to this, right? The point I made earlier, more than one out of every three homes in this country is owned by somebody over 65. From 1980 through 2012, that was 25%. It was effectively flat. It's increased pretty significantly. It's very regionally concentrated where those homes are owned. And eventually we do think that that's the supply that starts to help fix this, but it's an eventually thing, not nearly in our two to five-year forecast horizon. And then the other thing I wanted to ask you is, do you speak to home builders at all to try to get like a read on maybe. be new supply of housing coming onto the market. And I would be really curious what I guess the atmosphere is like right now. Because on the one hand, you know, things seem okay. But on the other hand, you have a lot of uncertainty over the long term outlook, lots of policy questions and

things like that. And I guess I'm wondering like how they feel at the moment. So I don't want to attribute what I'm about to say specifically to homeowner commentary, but we do have to look through all of this when we think about our pillars of the housing market, the supply. And aspect of that, which is both existing listings, which we've talked a lot about. But the new build piece. You mean home builder commentary, right? I don't want to ascribe this to home builder commentary. But what I do want to say when we look at the new supply of homes, single unit housing starts, building volumes, look, we work closely with our economists as I've been talking about and our policy team. Tariffs, right? Effective tariff rate now elevated versus where it's been historically,

even if it isn't as high as we might have feared earlier in April. The primary, way that's going to flow through the housing market is, in our view, homebuilding. The cost of goods to build homes going higher. Immigration policies. When we look at different sectors of the economy, the sector with the largest percentage of foreign-born workers, construction. So the cost and availability of labor also going to be contained. Homebuilder confidence has been coming down this year. And when I look at all of the housing statistics that we forecast, what has been weakest in 2025 is single-unit housing starts. Over the first four months of the year, we're down seven percent for is where we were in the first four months of 2024,

and we think that we are significantly underbuilt. So if we're going down and we're undersupplied, we do think that that, from a home price perspective, provides a little bit of support. So we have widespread view that there are not enough homes either in the short term or in the long term in America, and the trends are going in the wrong direction. Awesome.

All right. Well, on that happy note, Kim, thank you so much for coming back on all thoughts. It was great, as always. Thank you so much for having me. Thanks, Jim. Joe, that was such an interesting conversation. And I always enjoy hearing from Jim.

One thing I really like is that he has all the numbers, like, in his head. He's not looking anything up when we talk to him. He's just, you know, I guess he thinks about them all day, every day. And so he remembers them. But I got to say, like, the number that sticks out to me is that variation between someone who bought their house in, like, 2016 versus someone who bought it in 2024. and I guess it's 8% versus 26% of their housing costs, something like that. That is just insane.

Tracy, I'm on the website knowyourmeam.com right now because I am looking for the source of that meme of the girl whispering in the ear of the other girl. And I just keep imagining it's like... He has a mortgage rate that he bought in 2016. He has a Zerpeerra mortgage. But like I always knew that intuitively. By the way, it came from the movie Aquamarine. which I had literally never heard of.

No, I didn't know that. Yeah, I didn't. And an actress named Jojo, no last name, is whispering to Emma Roberts. Anyway, I just thought I would say that now, since I'm on the page, and maybe people would find that to be useful. But I did not appreciate quite, I mean, yeah, of course I sort of intuitively understood that if you had locked in a mortgage at some point in the 2010s or really nailed the timing in 2020 or 2021, that was great.

But I don't think I had quite appreciated just how massively, that gap is, what is the prospect of that going to change anytime soon? Like, there's going to be these two, you know, this sort of division in society where it's like, A, you have a lot of people living in homes and they don't have a mortgage because they're old and they've aged in place. B, then the lucky people who have this mortgage hedge and then everyone else. Everyone who rents. Or because they had to buy in 2024 or 2023 because for whatever reason, and now they're paying a massive amount of their income in their mortgage payment. But I do think this is also a really great example.

of why it's important to look beyond the aggregates and the sort of, you know, single average number and kind of dig into the tails. Well, just to on this point, too, a lot of like scare headlines or scare posts on Twitter. It's like, look at the surge in delinquencies or whatever. Or worse since 2008, 2009. And sort of touched on this. You know, one of the things that I do think is important to note. And Jim mentioned, you know, you have to be careful with apples to apples comparisons is that, like,

some of these effects can be magnified, not because there's like a massive deterioration and credit worthiness, but because there was so much extension of lending during the boom time, et cetera. Like you sort of have to be careful with some of these statistics because things can change a lot for different reasons at different times. Anyway. No, I mean, the home ownership market is structured very differently to what it was in 2008. Oh, we should have asked about the GSEs and Fannie and Freddie. Oh, well, maybe next time.

And we'll do that next time. Shall we leave it there for now? Let's leave it there. This has been another episode of the Odd Lots podcast. I'm Tracy Alloway. You can follow me at Tracy Allaway. And I'm Jill Wisenthall. You can follow me at the stalwart.

Follow our producers, Carmen Rodriguez, at Carmen Armin, Dashobennett, and Dashpot and Kale Brooks at Kail Brooks. For more Odd Lots content, go to Bloomberg.com. We have a daily newsletter and all of our episodes. And you can chat about all of these topics, including housing 24-7 in our Discord. Discord.

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