 What's up guys? I just got through interviewing Lance Lambert. He's the real estate editor for Fortune magazine. The student is an absolute beast when it comes to data. His Twitter account is literally the best on the internet when it comes to housing data and keeping up with trends and all the details. So that's at news Lambert. If you want to go follow him, but this is a full hour packed full of data and everything concerning the current state of the housing real estate market. We talk about everything from mortgage rates to home prices to inventory supply, demand, Zillow, everything. We talk about it all in this interview. So definitely enjoy and let me know in the comments what you think. And here we go. Hey, what's up, everybody? Ricky Careuth here and I'm sitting with Lance Lambert, the real estate editor for Fortune magazine. What's up, bro? Hey, Ricky. Thank you for having me on. Housing, housing, housing, always a lot going on, especially right now. You know, we're kind of at the end of the Fed's rate hiking cycle. Yeah, no doubt, man. So I really I I tell you where I found you because, of course, you're the editor of the Fortune article. So I put some of those articles in my green screen Instagram videos. And then I followed you on Twitter and then come to find out. You're just posting just housing data all day long. All day long. Yeah. This is what you do. Yeah. And I and before going to Fortune, I used to work at realtor.com. So I, you know, was very much into the listing data down to a metro level and tracking it closely with their company, which was a great learning experience. How long have you been with Fortune since fall of 2019? So right before things got really interesting for housing. So it was good to spend a few years at realtor.com, get a good feel for real estate. And then, you know, once 2020 hit, it was off to the races and very interesting. Yeah. So I want to get into the current market, right? Interest rates and inflation and, you know, all this stuff. But but now that you're talking about 2019 and coming into the pandemic and all that good stuff back in 2020, during the complete economic shutdown, it was actually April 28th. I put out a video that was before any economic, you know, before we return economically to anything except for like Walmart and, you know, whatever the necessities were, but I put out a video and I said, we're about to have the largest real estate search we've ever seen while we're sitting on our homes, not really knowing what's going to happen if our friends are going to die, if we even have jobs, if the world's going to exist. But the reason I saw that's because number one, transactions retracted and pending deals retracted so much that I knew that there was a lot of demand, you know, building from that. But then we started printing money. Yeah. I was like, OK, here we go. And I knew this, I knew that the pandemic wouldn't be anything that lasts forever. So but I had no idea what was going to happen in terms of like the whole 2021 situation. I mean, it was way bigger than I thought. What was your thoughts going into, you know, when the economy shut down? Like, what were you thinking during that time in terms of the housing market? Yeah. So with housing, it's really interesting because 2019 to 2023 was always going to be really interesting because those five years where when the five largest birth years for millennials, which is 1989, 1990, 1991, 1992, like myself and then 1993, between 2019 and 2023, that was the five year period where they were all going to hit 30. Is the big first time buying years. And if you Google U.S. births by year, you will see that it is actually the late eighties births and the early nineties births where millennials are a big generation. Yeah. The millennials born in the early part of the eighties in the mid eighties, the people who are now, you know, close to 40, they're not that big of a cohort. It's really that back end. So it was always going to be interesting to see what it was going to look like as we had that bigger demographic group move in. And so that was a part of the backdrop. But in spring 2020, I think less of the attention was on housing because it just wasn't a troubled area. It was an area with very light risk in terms of stress. The market was underbuilt. You know, there was a lot of favorable things. It was the other parts of the economy, given that, you know, tourism, which is, you know, a chunk of a big chunk of employment for the country. We contracted by like 40, 50 percent. So it was the other areas where it was more concerning. And, you know, Neil Kishari, who's the Minnesota Fed president, I spoke to him a couple of times in 2020. And he actually describes spring 2020 as a financial crisis, which we don't ever think about it like that. But that's how the Fed jumped into the market was as if this was a financial crisis. Yeah. And they brought up the financial system. But from there, the really interesting thing for housing is that in the first two years of the pandemic, we had 2.2 million more household formations than otherwise would have been expected. And that was from the fact that there was all the stimulus money. And so that sped up household formation. But also the fact that there was an elevated demand for space. There was a lot of these roommates who were together and they're like, you know what? I'm working from home. I just can't see you anymore. I'm done. And so there was that that was that, you know, between the stimulus and the elevated demand for space, it created 2.2 million more household formations that otherwise would have been expected. And that occurs at a time when mortgage rates had dropped. And when you have mortgage rates going to 2%, everything cash flows. So all of these investors pile in too. And and there is only so much supply on the market. And the Fed, economists at the Fed in 2020, at last summer, released a paper finding that housing supply during the pandemic would have had to increase by 300% the elevated demand that occurred during the housing pandemic. So you didn't have a supply response to a demand response. Demand stacks on top of limited supply. We overheat prices overheat and we jump up 40% for prices within, you know, barely a 24 month window. But then that takes us to last year, which the Fed moves into its rate hiking cycle, the economy is more resilient than expected. The long term rates in the economy race up. And we go from 3% mortgage rates to four to five to six to seven. And when you stack that on top of the huge price appreciation we saw during the pandemic, it takes us to a point where affordability gets deteriorated at a level that we hadn't seen in quite some time. It's really right now, you know, in terms of buying the pressurized affordability is on par with like the height of 06. It's just not affordable in the market. Now it's a completely different dynamic in the marketplace. If back then we had several things. It was really, you know, and I don't know if I'm allowed to curse on here, but it was really historically it was the worst biggest ship brew you could ever brew 06 or 708 because you had the oversupply and resale listings. We got an inventory built into the millions. Very different story from now when we have like 600,000 active listings. Builders were over their skis. There was a lot of spec homes being built. Affordability got deteriorated to a historical degree, which we are seeing now. That's one of the things we do have similar. We had overvaluation, quote unquote, it was steep overvaluation. That's one part that we do have now. But then you had this mortgage bubble that was there. That we did not have. We did not we do not have this mortgage bubble and subprime issues like we do. And when you take all of those factors last time and then at the back end of it, two very important things occurred last time. There was a tightening of mortgage lending standards. Credit became harder to get. And then there was also the fact that the labor market broke. Unemployment moved up quickly into that backdrop. And that's the 07 drop or the 08 drop down. And so we don't have that backdrop now, but we do have affordability that's very pressurized. And you can see that across the data because this affordability shock has translated into very few people wanting to list their home and sell and then go buy some. You know, because you give up that two or three percent mortgage rate you'd be taking on six or seven. So that affordability shock we can see in the market, but the overall old dynamics that could bring that leg down in terms of price were not seen very little in the story despite the fact that affordability is deteriorated. That's what I was going to ask. Well, do you think home prices because I mean, dude, I've been one of the bulls the whole time. And in December, I said, I think we've hit a pricing bottom, which we hit in January in April. I said, we're not only going to go positive year over year prices. Heck, I think we're going to hit an all time new high here the way things are going. And everybody was just talking so much smack, you know, you're crazy prices are going to go down 40, 53 percent. There's two camps out there. There's the everything's going to be OK, you know, prices are going to appreciate, you know, five percent a year, continue to appreciate. And then there's the oh, it's going to crash and burn. There's no way that this can keep going. Right. Is it it? Where's the truth? Is it somewhere in the middle or so? I think the eye on the ball thing was going back to spring 2022. And at that point, active listings was down to like 300,000 across the country. But the reason that inventory got so low is that days on market had literally just completely tanked. Everything was just going on the market right off. It was just flying off the market. So if there was any type of impact to demand, inventory could build there as you kind of halted things, right? You kind of break checked that overload. And at that time would be the risk for prices declining until the market was into equilibrium. And this is a thesis that was shared, not very much publicly. But this is definitely something that a lot of these investment firms that own several thousand homes, they were thinking going into spring 2022. And what they thought they were thinking that it would balance out and that prices could drop more than they did when prices could drop. They didn't know how much it would be. And that then the market would meet an equilibrium. If that makes sense. And if you saw last year what happened is mortgage rates moved up and we were having that frenzy in spring 2022, which actually got accelerated a little more because people realized, oh shit, mortgage rates are going up now. Yeah, there was that window where it was like, I don't know, 30, 60 days where it stayed around five and a half where the market wasn't as crazy, but it was still crazy. Yes, and so we had that. And then by about, so it was taking a little while for the effect from the rates to kick in, but then we hit many in June and July. And it was a really accelerated move down that took a while for us to actually see it for prices. And the prices had went up so fast, so quickly in spring 2022, some of it wasn't as sticky initially because prices had moved up so quickly and the mortgage rates moved up so fast. And during that window, there were some of the groups like the iBuyers, like Open Door, that it actually not only bought a ton of homes at that price, but they were actually overpaying at the peak, so they overpaid at the peak. So we had in some of these markets, especially out West, some for selling going on through the iBuyers. And what Redfin CEO Glenn Kelman told me is that essentially what they were doing is once the market was out of the equilibrium, if the home didn't sell, two weeks later, they cut the price by 2%. Didn't sell, get two more down. And that's how they were removing inventory. So there was this period last year where the affordability shock was so acute and it was happening into the housing market's slower seasonal period that we did see the market move out of equilibrium for a while. But then by October, November, even though rates were really high, inventory kind of went into its seasonal bottom. Then mortgage rates came down a bit, seasonality kicked into gear, and then into this year, the national market went into equilibrium and price growth returned to its normal. And so that's how I look at the market was, it was a period of correction. The market met into equilibrium. The downside risk wasn't realized as much as some of the more bearish economists expected. And then this year, given the fact that there's so little inventory out there relative to the demand, even though the demand is way down too because rates are so high, the market was just into a place of equilibrium. And this is natural for the market. This happens. You look back at history, look in 1981, when mortgage rates went to 18%, we didn't see a national home price crash, but we saw a period where the market was knocked out of equilibrium and some markets did see price declines. And then moving forward beyond that point, there were some markets that then and the following years did go actually bust. There were more significant corrections, especially down in Texas, Houston in particular. What kind of bust, what kind of percentage do you recall? Over 20%, I believe. Yeah. You could Google Houston home prices. And I forget which, just type in Fred and I think you'll find one of the indices that can go back into the 80s. Yeah. Now, and then moving forward, right? So like over the next one, two, three years, is there a chance that we're gonna see a 20% drop nationally or even in specific markets? Well, I'll tell you this. I try to avoid making predictions with prices because as far as the fundamentals go, right? So I try to avoid actually making calls with prices. And the reason I do that is I'm the resource that goes and tracks them all down. And everybody's talking to me and trying to figure, they try to figure out different things about like where everybody else kind of stands. And so coming into this year, I actually tracked down 29 different forecast models. And so I present them all. And because I present them all, I don't wanna also then have my own call because I think it works the integrity of what I'm trying to do. And the reason I'm trying to do it this way is because one, I think that all forecasts for housing should be taken with a grain of salt. It's very hard to predict. Home prices are inventory-lessly and historically sticky, but downside events can occur, especially regionally. And the other thing that I value in the forecast is that I value less what they're actually showing in terms of the number of forecasts and I value the trajectory of the revisions. So last year from February through November, December, all the models essentially were moving in one way with the revisions downward. They were realizing downward. And actually in March, 2022, Zillow is still calling for 18% price growth between March, 2022 and March, 2023, which of course it's actually zero nationally. But everybody was moving down. Right around January, it switched. And it switched, it was actually kind of a hard move where the revisions were moving upward. And so I think that was interesting. And some of the ones that were still down for 2023 and February and March, they were revising in a way that was taking them closer to zero. So you could see that movement. So that's the first point is I try to avoid actually making the calls. The second is that the number of people who are actually out there still calling for something that would be like a 10% drop from where we are today is very, very small. And if they are still seeing that in their model, they're not really coming out and saying it. So there's not much of a belief and a big risk to the downside from here. I think there are definitely people who think there is still a group that isn't sure that this is the bottom. They're hesitant about that part because affordability is very deteriorated. And we have seen the Fed move up interest rates by 500 basis points. And there can be a lag to policy. And especially given the fact that we have pumped so much stimulus into the economy and some households are quickly running through that excess savings. So that could potentially create even a bigger lag. So I think that's why there's some hesitancy because affordability is deteriorated and the outlook for employment is uncertain. Then there's other groups that are kind of like, you know what? It looks like the economy is gonna soft land. It looks like employment isn't gonna break. It looks like inflation has decelerated. It looks likely that next spring, the Fed will start to cut rates. And it looks likely that the long-term rates in the economy are gonna start to move down now, which would mean mortgage rates would come down. That group is more willing to say, they think that home prices, the move up from the bottom in December, January was the bottom and then we have bottomed. But there's a good amount of variety in terms of outlooks. But I will say that we have shifted dramatically from the place where outlooks were in November, December, 2022. Yeah, no, absolutely. And it seems like the few that are still calling for the downside, because I read some of those comments and it seems like a lot of what they're talking about is just the seasonal normal fall price decreases that we see every year. Yeah, so well, so a part of them, the ones who think that, you know, like this year could end at zero, what they would need to have happen is that they would need seasonality to bite harder than normal in the second year. And some of that thinking is interesting because if you think about it, we have these two, we have a really big tailwind in the market that's the positive, which is that resale inventory is so tight. That's what drove up prices this spring is that despite everything, resale inventory is still very tight. On the other side of the market is deteriorated affordability. So that would be the headwind. So there's a very big tailwind, very tight supply and a very big headwind, which is deteriorated affordability. So some of the thinking by some of the people who still think this year might end closer to zero percent appreciation, think that, okay, this year, the appreciation was made bigger by the fact that resale inventory was so tight as we moved through the seasonal strong period. But this headwind could have regrab power and move the equilibrium the other way is we pass through the seasonally softer window that we're in right now. I don't know because last year, the market took a significantly bigger shift down than we're seeing right now. Inventory was a quicker last year as rates moved up. We saw more price cuts. And we just saw a bigger shift in the market and we're not seeing that right now despite the fact that rates are higher. I guess the thing that we would have to look out for there, if any of the people who are still calling for zero percent appreciation this year, if they were gonna get it right, we would need to see the April reading from the repeat sales indexes be negative and for more markets. Now I will say there are a few markets that were headfakes through the spring and I've kind of got people following these. Austin is one, I'll start later this week. And what you'll see is, and you'll see why I called it earlier this year head fake because the appreciation was just so low through the spring that its trend line looks like a market that falls back into a correction mode at the end of the year. The thing about the national market is the appreciation through the first half of the year was actually slightly above normal. It did not look like the correction years in the past. As far as like on a percentage basis from January 1st. Yeah, exactly. And I'll share, I could share more charts to show it. But what we saw on 07, 10, 11 is that we saw some appreciation in the spring nationally but it was very, very, very faint. And then we dropped down and the drops happened in the second half of the year. 08 was different, it was just down the whole year. It's the only time in history where every single month was down. But what you'll see this year is, what we had last year in the second half of 2022, the second half of 2022 was on par with the second half of 07, 09, 10, 11. It was a correction in the second half of the year. But what we saw is, as soon as we came out of that December window, we swung right back into the normal rate of appreciation for the market. So it kind of looks like, and I could share a chart today to show it on Twitter, but it looks like the market was essentially shocked and it's like rhythm, it's like own heartbeat of appreciation was knocked off path last year. And then this year, it kind of went back into rhythm. It's so cool. Speaking of 2008, we're basically, are we not basically really close? Not all the way, but we're kind of almost down to the same levels of transactions as 2008, right? We're supposed to have like 4.2, 4.3 million sales. We had like 4.1 in 2008. Yeah, and the decline in 2008's activity was entirely because of demand, right? Demand just disappeared, right? And there was a huge amount of supply. So if there was the demand, the transient volume then could have been much higher because there was a ton of supply out there. Four million listings. Yeah, so it could have been much, much bigger in terms of transactions. Like the opportunity for transactions was very high then. Right. It's very different. Part of the reason that transactions are down is because demand has pulled back. But the main reason that we're not seeing more of a rebound this year, given the fact that we've went into more equilibrium, is there's just not the churn. There's not the supply coming into the market. And when I talk about churn, I'm talking about the group in the housing market that takes their home, sells it, and goes to buy something new. That churn is gone because there's not a financial incentive to take a home with a two or 3% mortgage rate and then go buy something with a six or seven. So the transaction decline isn't apples to apples with that 08 decline. It's a different story. It's drained by supply and demand. That story was just constrained by the complete blowout on demand. Yeah, it's like a complete opposite situation yet. Pretty close to the same results in terms of transactions, but because of lending regulation, it's kind of prices are holding tight. Yeah, thank God for that. That's why it's important for people to see, to look at many housing charts and not just like one. Like somebody will share that type of chart and be like, oh, you know, and look at how much it looks like 08, but it's like you need to be looking at more of the charts. What do we look like in terms of stress? How many people are like near foreclosure or in delinquency? How many active listings are on the market? What's the unemployment rate look like? All of those factors too, if you wanna see a potential lever down on a market. And speaking of delinquencies, MBA just came out and said that we're basically at the lowest level that they've ever recorded. Did you see that? Is that correct? Yeah, and that's a big part of the story here, which is that going into the credit, the affordability shock last year, homeowners at large were at a very good place. Mortgage debt service payments, the amount of the economy that's going to pay mortgage debt, if you look at the entire GDP or all disposable income, back at the top of 08, 7% of disposable income in aggregate was going to pay mortgage debt. Now it's only 3%. There's a lot less stress there. And that's not like the share of people with mortgages or the percentage of households with mortgages of their money going to debt, but it's the overall economy. And what you'll see is that, just a lot of households have an extreme amount of equity. They have fixed debt payments, because many of them bought even before the pandemic. And then the group now who is stressed, which are the 2022 buyers in 2023, they are spending a lot more of their household income on mortgage payments. But the truth is that there are very few of them because there's not much transaction volume occurring. So people buying now are getting stressed more, but they're a very small piece of the overall market. Yeah, and if you go back and look at 05, 06, heading into the 08 crash, there was actually a lot of transactions occurring. And then a lot of them were getting in with suspect financial situations. And so there was a big cohort of them buying at the housing markets, it peaked the deterioration. Right now it's a very different story where affordability is deteriorated, but very few of them are getting in, and those who are getting in are having to meet much higher credit standards than 15, 16 years ago. Yeah, there's another argument out there. Is it the DCRS loans? Is it the no-dock loans? Is that the abbreviation for that? There's a lot of people that argue that there's just so many of those out there. Do you actually know the numbers? I've tried to look it up of how many loans out there are no-dock loans or suspect-type loans. There's a lot of theories that are always going on, whether it's the Airbnb stuff or the fact that snow loan payments are about to come up, but what can't be skewed are the hard numbers. And if there are things that are suspect underneath, we should be seeing more active listing growth. We should be seeing prices moving down more or sideways. And we're just not seeing a lot of the bearish narratives come to fruition, and at the end of the day, we have to follow the hard data, and we're just not seeing it. And if we started to see those things, the people who follow housing closely would say, I think one truth about housing now versus then is that people know that home prices can drop. There aren't as many people saying, hey, home prices can never drop because people have said that. And I think that people also care about their credibility, and so if there was a mounting of the really big downside risks, I think more people would be speaking out. Yeah, yeah. Now, affordability, right? That's really one of the biggest things here, and there's a lot of people that are sitting on the sidelines, so there's two things. I mean, one, I'm in the camp that we have more, we have a historic amount of pent-up demand coming from people that are 33 this year. You said there was a spike in birth rates in 1990. You know, the NAR said that the average, first-time homebuyers like anywhere, like 36 and 2021 and 33 last year, something like that. It's like 33 to 36, and it seems like we have a record amount. I mean, at least more than we had since the baby boomers came through. And it seems like that birth rate spike kind of stay, kind of hangs around for like a decade and a half from what I can tell. Just that with the amount of people that do feel like they're handcuffed with their low mortgage rates, right? I have a theory that there's a big group of those owners who are sitting in their homes that just are dying to move. They're just dying to sell that house or just upgrade or downgrade or whatever it is, and that demand is just brewing and brewing and brewing. It's like the roommates that you talked about earlier, how when they got the stimulus, they're like, okay, I'm just, I'm tired of seeing your face. I wanna go take my own place. I think we've got, in my opinion, I think we have two groups there that's just gonna be so strong for so long that's kind of, we don't even realize that in my opinion, because of this, we've got more demand than we actually had pre-pandemic, and we don't even know it. My view is that the fundamental setup was much better 2019, 2023 than the next several years we're going through, but it's still solid. But that one- You think 2019 was a better fundamental setup for housing than 2024 or 25? Yeah, I think that's why we saw that perfect storm. I mean, and we did set the biggest appreciation year ever, 2021, I think that that will be remembered as a perfect storm, but there is a lot of pent-up things happening right now in housing because affordability is so deteriorated, and we've seen such a pullback by both segments of the market, one being demand, and then the other being the move-up seller buyer, and we've seen that pulled back, and the area of the market that has seen transaction volume move up is the one area of the market that can get more supply, which is builders. So builders have seen more of a rebound because they can do the sales. Now, the one issue there is to bring pent-up demand in and to create like a release where it's like a big flow in of both like the move-up seller selling their home and then going to buy something new and then the sideline first-time buyer is getting in to create a big release, in theory, you'd have to create a big decline and a big improvement in affordability, and affordability can improve through three levers. One being rising incomes, which are occurring, although it's decelerating now, which the Fed wants. The other being home price declines, well, that's not happening anymore. We've went to declines to now rising high home prices. And then the third lever is a decline in mortgage rates and a move-down in mortgage rates or move-up is the thing that can move affordability the most in the short-term because long-term rates can fluctuate. But the issue there is how much of a move-down in mortgage rates would have to occur to create like an over-release of pent-up activity and housing, and the problem there is that, one, the economy is just so strong with it. It's went through this rate-hiking cycle and stayed so strong, and while inflation is decelerated significantly, there's a good chance that we're staying over the Fed's goal of 2%, which could mean higher for longer, and long-term rates staying higher for a longer period of time, and it might take a longer period for the spread to come in on the spread between mortgage rates and the 10-year treasury. And so in that scenario, it's just harder to see the release, but I agree. There's a lot of pent-up things in housing, but it's a question of can you get the affordability release that would create, or affordability improvement that would create a big release? Or is it more gonna have to come through acceptance where people are like, you know what, home prices aren't coming down, mortgage rates are high, I gotta move on with my life, I gotta buy something. That we have already seen in 2023. It's a gradual process of people in terms with the market reality, but it doesn't create a big change in the market in a very short window. And then on the seller side, the move-up seller and the move-up buyer, acceptance would probably be even a higher threshold than for the first-time buyer, because the first-time buyer is still dealing with rising rents. So once they see that prices aren't dropping and that rates aren't moving down quickly, they come to terms with acceptance quicker, whereas that move-up seller slash buyer, you know, they're sitting on that two, three percent mortgage rate, and yeah, life is happening for them and many of them will slowly accept over time, but there isn't that urgency. And so I hear you on the pent-up, it's just a question of what type of affordability improvement would have to happen to get it going, and how likely is that affordability improvement to happen? You're more in the camp of, and I agree, that this gonna be a kind of a longer-term, gradual thing. Yeah, I try to prevent calls, but it seemed kind of like that for a while, given the fact that the economy's been so resilient. If I had to make a base case, it would kind of be like, you know, this is gonna, it's gonna take a while. Oh yeah. But, you know, I think there's a certain type of affordability improvement that if it were to occur, I think it could bring more of the pent-up demand and supply in. It's just a question of, you know, what is that level? John Burns Real Estate Consulting thinks it's five and a half percent mortgage rates. Five and a half percent mortgage rates and activities churning. Thanks, hope to hear that. And I mean, I think that makes a lot of sense, because I think some of the people with three, four percent mortgage rates, if it's five and a half. Yeah. If you had more kids. Yeah. You kind of move on like that. But it's, you know, how likely are we to actually get to a five and a half percent mortgage rate? Because they've been pretty sticky. Yeah, anytime soon anyway. I mean, a lot of people were calling for, you know, they hit five by the end of the year. And here we are well over seven for a while. You said something while ago. What does spring 2024 look like if mortgage rates are down to five, five? Given the economy doesn't go to hell in a handbasket, like let's say rates came down to five and a half. Economy is so strong. What do you think the housing market would look like in 2024? Oh, it'd be an explosion. It'd be an absolute surge. I mean, you'd have more inventory and you'd have even more buyers. I mean, you still have an inventory crunch, but you would have more inventory, but it would get eat up quick. Well, I think we're probably thinking in a similar space, it's just a question of, can you actually get that big of an affordability? Yeah. And you never know with an election year, right? Well, you know, the Fed, you know, tries to stay neutral on politics, but there's always been, you know, you could go read about about what happened like Richard Nixon's term and, you know, they think about it a little bit. And there is some theories that one of the reasons that Jerome Powell waited so long to start hiking rates is he was waiting on Biden to renew his term. There's one theory and then once, you know, once he got renominated and it looked like he was gonna be the Fed chair for another five years, all of a sudden here we go into the fastest rate hiking cycle in 40 years. I don't know if that's the case, but it is a coincidence on the timeline. And it is interesting to see how low the Fed cap reached through 2021. An economy that was very strong had clearly moved beyond the COVID lockdowns and a market where housing was going completely gangbusters and somehow you moved into 2022 with mortgage rates still at 3.1%. Right, right, exactly. That kind of, you know, and I've wondered about that. It's like if they would have kind of started slowly increasing 12 months ahead of time, you know, some of this seems like some of this could have been avoided. That reminds me, did you hear that quote that Warren Buffett said about how he could fix the national, the books? No. He said every time that the books aren't, you know, balanced correctly or whatever, that that Congress person cannot be up for reelection. All right, he said the entire, all the numbers and all the books would be fixed overnight. Well, Buffett's a smart guy, so it would not surprise me if he was right. So I want to back up because you said something and a lot of people may not have understood it and I wanted to let you tell them in layman's terms, right? It's the 10-year treasury, right? It's a 10-year treasury and the mortgage rate spread and how it's like 3% now. And normally it's like one and a half to 2% historically. So it's much higher than average and, you know, it's the 10-year and then it's, you know, where mortgage rates are. Can you kind of just touch on that for a second and kind of give it to us in layman's terms? Yeah, so there's two types of rates. There's the short-term rates, the effective federal funds rate that the Fed sets and they'll have their meetings and then they'll write down on their note in their book like where they think their target should be and then they all vote and they can either hold, decrease or raise the short-term rates for the economy. And when that occurs, now when that occurs isn't necessarily when it will be reflected into longer-term rates like the 10-year treasury yield and mortgage rates. Long-term rates look forward and they are already expecting future moves from the Fed. And so what we saw in 2022 is that in February or March when the Fed did their first rate hike, which was like, you know, just to, you know, like 25, 50 basis points, already mortgage rates had soared up to four and we're heading to five and by June would be 6%. And that's because the long-term rates in the economy were already expecting not just one Fed rate hike, not two, they were expecting several all the way out. And so the long-term rates of the economy move much quicker based on expectations and not necessarily the actual rates that are happening. And it's possible that the Fed could do another rate hike at the end of the year and that even as it occurs mortgage rates could be falling because they could already be like, okay, next spring we're already gonna price in a few cuts and more cuts in the next year and they could go ahead and come down. Now the 10-year treasury yield and 30-year mortgage rates have historically moved in sync and there's about a 1.5 to 2% percentage point gap between them. And so normally if the 10-year treasury was at 4%, which it is today, that mortgage rates would either be at like 5.5% or 6%. But right now the 10-year is at 4 and mortgage rates are at 7. So we're at a 3 percentage point spread. It's about double the normal spread. So if the spread were to normalize, mortgage rates could be 5.5 already without the 10-year moving down. And so that's what a lot of people in housing have been hoping for is that the spread would come in between the 30-year and the 10-year. Now some people like Mark Zandy, who's the chief economist in Moody's analytics, what he's been telling me the whole cycle is that he didn't think the spread would come in, like start to normalize more until the Fed was actually cutting rates. Is that right? And so far that has held, we haven't seen the spread come in much even though the fact that we might already be at the terminal rate, which is the terminal rate is the top rate that the Fed does in their cycle. So we've already seen that potentially, although there's a chance another one could come, another hike could come later this year. So it does look like it is possible that it could take longer for that spread to start to normalize. But most of the forecasters over the next year I think rates are gonna drift down to 6 or go under 6. And most of them think it occur through a normalization of the spread has been what their models say. Now, I find that mortgage rate forecasters have done a terrible job over the past couple of years. Like there's no reason to even like make it not sound bad. It's the truth. They came into 2022 and most of them thought that we'd be at three or 4% last year. And then by November, we were up to seven. So it was a pretty big miss there. And then heading into this year, a lot of them thought we would be closer to six or get down into the fives this year. And it hasn't happened yet. We've actually tightened back up. Yeah, no, it's went pretty opposite of what everybody has thought. On price and rates. Rates have been much stronger in terms of. Yeah, yeah, the other day you tweeted that as you looked deeper into the CPI report, you saw things that made you feel like we could be at the Fed's target 2% inflation this time next year. Well, I must have retweeted somebody. I try not to make calls like that, but growing belief. Maybe it was a retweet. We'll be closer. Although, you know, a lot of them are like two and a half to something not necessarily under two. There's, oh, and Mark Sandy said that. He said that, you know, he took a deeper look and he thinks given everything that he's seen that, you know, inflation is gonna be closer to the Fed's target come this time next year. And Mark Sandy is interesting. He's somebody who the whole cycle did not think we would go into recession. He had his recession odds very low. He thought inflation would come in quicker. He actually thought that rates would stay higher for longer. His forecast for this year heading in was six and a half average for 23, which is gonna be pretty close. Yeah, I think, you know, I think it'll be just under, but and then next year he had six and then 2025 he had five and a half. And these are all calls that he made last summer. He went ahead in the whole cycle. Where he's missed a little more so is on house prices. He thought things would be softer. He thought we'd actually be down 4% this year. But where he was right is that in spring 2022, he was the first one to come out and say, he thought we would year over year, the next 12 months would be zero. So which at the time was a very bearish call because we had had so much growth for the year coming for that we knew that was coming that for him to be right, we would actually have to knock off prices in the second half of the year. And that was also the time when he called five to 10% declines in Austin and Boise. But after that, he had a few more down revisions, which one took us 5% peak to trough and then the next was eight something percent peak to trough with him, you know, saying his outlook was 10% peak to trough. And obviously we didn't make it that far down. Now, yeah, it's interesting to watch all of it because like you say, the forecast are like a grain of salt. But at the end of the day, what I realized closings happen every day, you just got to get out there and take advantage of it in whatever aspect of the business. Exactly. And you know, these models were not showing 40% price growth for the first two years of the pandemic either. It's just been a very hard period for forecasting housing. There's just been so many supply and demand shocks from the household formation boom with work from home, really great demographics, how far inventory went down, the fact that the builders got the big backlogs. And then, you know, the fact that the Fed got behind on their target. And so we had to go into the fastest rate hiking cycle in 40 years. And so we go from 2% rates to 7%. I mean, what a crazy three, four years for housing. I know, I know it's insane. And I know you don't want to give any calls or predictions or anything, but inventory, right? What are some possible scenarios where we get inventory that's needed? What do you consider inventory? Just like the number of listings coming up in the market or listing sitting on the market? Actives. Well, I mean, what was he saying? I mean, actives are... So there's a possibility, the way that new listings can move up the fastest, the amount of listings coming on the market is that if mortgage rates were to come down really quickly, because people would be like, you know what, gotta move on with my life, I'll sell my home now, and then they'll go buy something new. But when that occurs, they are net supply and they are net demand. Yeah, because of Yumbo. For me, it's active listings. How does the inventory of active listings increase? Well, let me get to that. So then in that scenario, where new listings moved up quickly, which when those new listings occur, if there are people who are quote unquote locked into the rates, you know, the lock-in effect and they're coming back out, that would be supply and demand. But then there's also the big group of people who are priced out of the market. And they're just gonna come in with no supply and they're probably gonna come in faster than the people who are the move up sellers and buyers. So there's a potential that if rates move down quickly and the economy all else being equal and was so strong, new listings can move up and actives could fall because they could accelerate the heat. So that's why I asked what is inventory now? The new listings are active. And that's what I was saying when you asked about springtime five and a half, that's the exact scenario where we would have more inventory, but even more buyers and it would eat up all the inventory. I'm more so wondering, how do we get more active listings? Yeah, so all else being equal, because in that scenario, we get to five and a half, but we got there through the economy, like labor market breaking hard, these household excess savings being depleted, that would be a different type of scenario. But we haven't quite seen anything that's suggest in the short term, that's a very high likelihood. So now to get actives up, it's hard because one view that actives would have moved up is through days on market rising because the mortgage rates shock, right? And we did see that last summer inventory moved up, we had 118,000 listings added net in July last year, but this July it's only 30,000 and rates are still just as high and active listings have not moved up. You know, there's some people who think that if rates were to stay this high for a really prolonged period, that over time active listings would build, maybe, but you know, we just haven't seen much active listing growth even though rates are very high. So it's hard to see quite how we're not really on a trajectory for inventory building. That's a fact. We're just not on the trajectory. Now, maybe we are on the trajectory and it's just like it takes longer for everything to manifest and days on market are gonna soon move up, but you know, if you look at the numbers every day, you just don't see any progress. It's what I mean by we just don't see the trajectory. Yeah, yeah, it's kind of like no end in sight, you know, it's like something's gonna have to happen and we're gonna have to see some new data or something, you know, right now it's like, we don't know. We don't know how we're gonna have new more. And maybe it's, you know, maybe it is the economy, you know, softened more and you know, then if affordability didn't improve quick enough, you know, the market could get normalized days on market and if days on market could just normalize inventory could build up some, not so like, you know, pre COVID level, but enough where we're in a healthier spot, but we're just not seeing it right now. The economy is really strong and prices have stabilized. And so there's acceptance occurring for buyers just enough to keep the market stabilized. Yeah. And in prices moving up just a little bit. And how'd you get into all this? How'd you get into real estate? Yeah, so, you know, I studied journalism and economics for my undergrad. It worked at some different places. I worked at Bloomberg Business Week. I used to run all of their business school rankings and, you know, I'm, you know, I love data and I love numbers and a job opening. I saw a job opening over at realtor.com and they had reached out. And in the back of my head, I was like, you know what, this would be a good place for me to go and to like work with their data scientist and like build up my data skills. And by doing that, you know, I got exposed to a lot of real estate data. And when you look at real estate data every day, you know, you start to pick up on some of the trends. It starts to become more interesting to you because you kind of see how it affects like so many people's lives. And it was just really interesting. And, you know, and I love that there's like the geographical part to housing data. You can look across all these regions and see different trends. And the saying that real estate is local is really true. Although there is a market too, but yeah, real estate is local. And it just really interested me. And when I went to fortune, I didn't go to fortune to cover real estate. I didn't go to cover housing. I actually went there to build some different data stuff and do other data reporting projects. But when the pandemic occurred and, you know, housing started to overheat, it was just like, you know what, this is a huge story. I knew that. And so I pivoted everything I was doing to housing and really got obsessed with it. And the more that I got obsessed with it, somehow, you know, I built this Twitter following, you know, entering 2022, I think I had like 3,000 followers and now it's to 60 really fast. And it was just because I'm obsessed with it. And I, you know, I'm gonna treat about it every day and build up that audience. And a lot of people who are really into housing kind of, you know, came. Yeah, man. No, I appreciate your articles and your data and your Twitter. I'll put all your stuff down below Twitter and everything. What is your Twitter, by the way? At News Lambert. And I knew they call it X now, but I'm still gonna call it Twitter. If I write something and post it, that's a tweet. And if I post it, that's a retweet. I really don't care. What are we supposed to call it now, an X? Yeah, that's what it's branded. But if you, but to go to the site, you have to type in www.twitter.com. So, yeah. Yeah, Twitter still works. And I do not think this threads thing is gonna knock off Twitter. It's no way. No way. It's actually two different things. You know, two different animals. Are you on both? Uh-huh. Yeah. What do you think about threads? Just, it lost a lot of momentum. We'll see what it does long term. There's people there and there's something there. So we'll see if they can pull something out, but it's not a competitor to Twitter. It's just more bifurcation too. Like there's just so many of these social media sites, Facebook, Instagram, Twitter, TikTok and now threads too. And, you know, if you're somebody who creates content, you know, it just creates too many places to be. And the more places that you are from my view, it kind of watered down the quality of the information. The things I do on Twitter, you know, I kind of view it as me like telling this one really big story and I'm constantly like moving to tell like other little parts to it. And I think it's all like one thing to me. And so the more that I'm having to pull and like do certain things on threads that might be different, it kind of, in my view, waters down the quality that I view on Twitter. Because of the energy that you put into it, because you have to disperse, you know, a little energy, a little of that energy elsewhere, it kind of waters down the- Yeah. And also I, you know, one of the things that I think has made me successful on Twitter is I think a lot about like, okay, my readers and like, are they, like, what are they missing that they need to know? And like I'm trying to pivot to tell like those different stories. What can I give you that empowers you to feel knowledgeable about housing right now? Like what other, what can I do with this? And that's something that I think is the value of Twitter is that you can like take that content to a higher level. And especially if you're somebody who's really into sharing charts and, you know, storytelling, I think it's a great place. And to be doing that same thing with threads, it just doesn't make a lot of sense. Whereas like a place like YouTube or TikTok or Instagram those are different types of, it's a different type of content. And it's a different type of storytelling there. Whereas threads is just a Twitter competitor. And so it's just having to post more of the same stuff. In my opinion. Your audience, do you feel like it's more consumers looking to buy and sell? First time home buyers, real estate agents, investors. What do you feel like the bulk of your audience is? So I've worked to make sure that my audience is coming at it from many different directions. I've tried to build up, you know, the single family rental audience, bring them in. I try to bring in the buyers and sellers who read my articles. And then at the bottom of my stories, I say, hey, if you want more information about housing, go follow and newsletter on Twitter. So I've tried to bring them in. A key for me too is the real estate executives. So it's, so I try to bring them in and it's really easy for me to get these executives on the phone. I just talked to DR Horton CEO a few weeks ago, did a call with KB Holmes CEO last week. And so I'm just trying to audience build and like bring in many different audiences who are rooting for very different things. And so I try to also be a little neutral with things. And I'm not necessarily like rooting for this thing or that thing, although we'll admit, you know, I am rooting for single family home building to not bust because I think that would be a net negative for the country if single family home building were to bust. So I think the fact that the builders have went through their affordability correction from last year or price correction on a net effective basis and now had met the market, I think is a good thing for the country. But in terms of like where prices are going or where rates are going, I try not to root too much in one direction or the other. Yeah, smart, smart. Well, I think you put out the best housing content on Twitter and really probably the internet for that matter. So appreciate you for that. And thanks for coming on today. You know, I do have one more thing. Yeah, what's like the one thing with housing that like keeps you up at night? Like what are you concerned about in watching? Well, I got in in 2002 as an agent and I've been doing that ever since and six years I started coaching. So I became the world's first completely free coach and now I've just got a massive following on a bunch of different platforms. And what I learned through the crash because I went through that and I lost everything. Okay, I made a million bucks before I was 23 loss at all. Went back to Roofing, working on Ulrich, serving tables, sleeping in my car, bankrupt. And I came back in 2008 actually and it was so easy to sell real estate because it was half off. Yeah. And like you say, there was a lot of inventory and any buyer I had was happy to just pick out what they wanted and pay half off. So it was really easy and there was really not a lot of competition at the time. So going through all that and then becoming the number one remix agent in Alabama and stuff and, you know, doing all the things that I did, I realized that closings just never stop. And so for an agent, a lot of agents are, they kind of feel like their success in the business is correlated to the market. The market's down, the business is down and vice versa. And it can fluctuate it, but in reality, it can never actually take you out unless you just let it make you quit, you know, doing the things you're supposed to do. And so when I, to answer your question, when I go to sleep at night, I'm always excited because whether the market goes up, down sideways, left or right, I'm always buying stuff as an investor. You know, I'm a buy and hold guy. And for agents, I run a group of about 800 agents. We do a billion in sales. Oh wow. And so I've been doing this for the last two years. And, you know, we just, we realized that, you know, when the market, if the market goes down, it's like it's a discount for our clients and for us. And the market goes up, all the stuff that we own is worth more and our commissions are higher. Yeah. And so, you know, I used to go to sleep at night scared about what's going to happen. And now I go to sleep at night excited about, no matter what happens, you know, we're going to crush it. I don't know, man, to help you in that context. No, no, I think that was the answer. That was the answer. Yeah. And thank you so much for having me along. And we should do this again sometime. Oh, there's no doubt, man. I appreciate you. And we'll be in touch. Okay, awesome. Thank you, bro.