 Today I have an absolute treat for you. I've got Logan Matashami. He's the lead analyst for housingwire.com. You see the article here that I've got pulled up about new home sales. We had the most incredible in-depth conversation about the housing markets, everything. This guy's on the news all the time. Check him out, check his Instagram out. I'm gonna put all the links in the description for you to connect with Logan, HousingWire and all that good stuff. I read all of HousingWire's articles. They're one of the most positive mainstream media companies concerning the housing market that I've seen, honestly. And that's why I wanted to have Logan on to get his perspective on the market, on affordability, election year coming up, everything. And we spent a good hour together. And this is just a very, there's not a second in this interview where there's not some incredible information being talked about. So I hope you enjoy it. Let me know in the comments what you think. And let's just dive right in here. Enjoy. Logan. Ricky, how you doing? Good, man. How you doing? Doing good. Thank you. Yeah, thank you for carving out some time. No, no problem. Yeah. You in Cali? Irvine, California. Yeah. Nice, nice. Let's dive right in, man. I've seen a lot of stuff. I mean, I read a lot of you guys' articles. And you got the 8%, you got prices, you got unaffordability through the roof, inventory shortage, mortgage delinquencies. Let's dive in, bro. Yeah, I got all the data. Tell me your thoughts on the whole thing right now. You know, when I think of the housing market, a lot of this ties to my work over the last 15 years. Years 2020 to 2024 was gonna be this once in a lifetime event because the demographics for housing during this period was the best ever. And what I mean by demographics and housing, housing economics is very simple. We rent, we date, we get married, three and a half years after marriage, we have kids, people that make good amount of money, typically buy homes. Well, years 2020 to 2024 had the biggest housing demographic patch ever in history. Ages 28 to 35 is the biggest. So when you put move up buyers, move down buyers, cash buyers, investors, first time home buyers all together, you're gonna have very good replacement buyer demand. The only concern here was inventory has been slowly moving lower and lower for over 10 years. And if housing breaks out like it should, home sale should be rising during this period, it could force us into a very low active listing environment, which it did and prices escalated out of control. We had too many people chasing too few homes. It wasn't like the housing bubble years where we had massive credit and sales boom and then all of a sudden a major collapse in sales and rising inventory. It's much different right now. So the structural dynamics could not be any different than what we saw from 2002 to 2008. So it has some benefits for homeowners. Homeowners are doing great. Fixed debt costs, rising wages, especially against inflation. The 30 year fixed mortgage was the best hedge on planet earth against not only inflation but also against that aggressive Federal Reserve. But what's that's done is it's kept inventory lows as most sellers or buyers. And as rates escalated out of control recently, a lot of those people are just sitting at home waiting for rates to come lower. You said it's not really comparable to 2000 to 2008, right? Is there a time in history that is kind of comparable to what's happening right now? You know, a lot of people would like to bring this back to the late 70s. In the late 70s, existing home sales went from 2 million to 4 million. Inflation took off, mortgage rates went up higher. A lot of people had lower mortgage rates than that was being provided. And home sales went from 4 million down to 2 million. We have somewhat similarities. The only reason I don't like to compare this period of time to any other period of time is because after 2010 when qualified mortgage laws came into place, the home buyers now in America, the home owners themselves have never been in any, have had the best financial profiles we'll ever see in our history. And our family has been in banking since the late 1950s. The amount of the unbelievable positive cash flow that they have. And when we talk about cash flow, you buy a house, 30-year fixed mortgage, your wages rise every year. Naturally, your housing cost becomes a little bit less to that. We've had three refinancing waves since 2010 and 2012, 2016, 2020, and 2021. So people are living in their homes longer and longer from 1985 to 2007, it was five to seven years from 2008 to 2020, 23, it's been 11 to 13 years depending on who you listen to. Some people live in their homes, 15 to 18 years on average now. I've lived in my house for 20 years. So where people's wages are right now to their housing costs looks, it's great for them. So it can prevent some natural sellers in a market, especially when rates go up. So you could kind of refer this to the 70s because we had the mortgage rate inflation issue. But I would say that the home owner profiles now have never looked this good. Also over 40% of homes have no mortgage either. Yeah, yeah, yeah, like 45% or something. So we're in this predicament with low inventory. And I think the big question is, is where's the inventory gonna come from? I haven't heard anybody on the news or any gurus really give an answer that made a lot of sense. So what we have seen in the data in the last 13 years, the only way inventory actually grows, higher rates creates weakness and demand in the days on market grow. And that can facilitate more inventory. But to give everyone a good example, let's use the NAR's inventory data. And this is a topic that nobody ever talks about because I don't think people will remember this. Back in 2000, active listings were 2 million. In 2005, it was 2.5 million. We had rising sales and rising inventory because the credit markets back then people can freely list their homes by another one. There was no restraints. Now it's a little bit different because of qualified mortgage, everybody has to qualify before they even list a home. So inventory can only slowly grow with weakness and demand. It's not much really. Last year was such an anomaly of the year. We started the, in March of 2022, we only had 240,000 single family homes available for sale for a country of 335 million and 157. So prices were escalating out of control, but when rates started to grow up, the slope of the inventory curve on our housing wire weekly inventory data was rising faster than normal. And then when rates started to fall, November, December, January, the structural dynamics of housing change, we go back to a stable demand in a low inventory situation. So inventory can really only come through as long as the economy is expanding, kind of weakness and demand, slow growth, something to that nature. And even today, as we talk, almost Halloween in weekly inventory data, still negative year over year, new listings data, which I think is a very new concept for a lot of people. New listings data has been trending at the lowest levels ever recorded in history since mid-July, 2022. Right, because most sellers are buyers. It supplies a function of demand. So it's just preventing inventory to grow at a normal pace with demand being this soft. So it is a, how I call it, a savagely unhealthy housing market in that context, not because homeowners are in trouble or inventory sky-ranging, it's just homeowners are doing good. Right, so what has to happen to get back to a normal, not unhealthy market? Well, inventory just getting back to 2019 levels would actually get us back to days on market being over 30 days, and that gets us somewhat normal. And there's only two ways that happens, weakness and demand, or you create a job loss recession where we call forced equity sellers. The foreclosure story, it's a funny topic. Foreclosure data right now, 30, 60, 90 days are near all-time lows. So this whole concept of forbearance was gonna crash the market. Summer of 2020, I created the term forbearance crash bros by a bunch of professional grifters on YouTube, but forbearance itself crashed. So until you have a job loss recession, there is literally no reason for homeowners to sell their homes or move in the sense to where they have to pay a higher cost to living. So job loss recession could create forced equity sellers, but the foreclosure process, whenever the job loss recession happens, it would take minimum, and I'm being graceful by saying minimum, nine to 18 months before that supply even hits the marketplace because you gotta go through a 30-day, 60-day, 90-day notice of default, there's judicial states, non-judicial states, in some cases it'll be two to three, even four years. So that, you're not gonna get that supply anytime soon, but if a job loss recession does come because so many people have nested equity and enough equity to sell their house without going underwater, that can provide some inventory faster, but outside of that, the only thing we've seen is weakness in demand, days on markets growing. That's it, it has been notoriously slow this year. Yeah, yeah. So do you think that a job loss recession is a possibility, or what do you say? Right now jobless claims are still way too low. I mean, part of my economic labor work post COVID-19 was really talking about how the labor dynamics are gonna be structurally different this time around. I was the only person on planet Earth talking about job openings are to get to 10 million, just because job openings itself have been slowly rising since 2014, and then here comes the baby boomers leaving the workforce. So as the potential to get up to 10 million here, it got up to 12 million. So we have replacement consumers, but we also have replacement workers. But if your baby boomer leaves, and then a younger person comes in, takes your job, wash. So the demand for labor, if it keeps on continuing to grow, because productivity has been terrible here and around the world really for a long time. The manual need for labor will keep those people employed longer than people think. So until jobless claims, the four week moving average, the data line comes out every Thursday, 5.30 a.m. Pacific time, until that number gets above 323,000, it's roughly at 200,000. We don't even mention the word job loss recession. So we're far from that. The Fed would like to create more labor supply, but raising short-term rates can only do so much. Maybe there's a credit event and credit deteriorates, the commercial loans eventually come due. But until jobless claims rise, the labor market is still firm in that regard. So basically you're telling me that there's not really a path to more inventory. There's not a fast path to inventory. What we track every single week, at the end of Friday, we track the weekly new listings data and active inventory data. And new listings data is, to me, forming a bottom, but it's forming a bottom at the lowest levels ever. So until that data line grows, it's very hard to get what we call escalation inventory or inventory growing above trend. And even today, the NAR or R data or a lot of people's data's active listings are still near all-time low. So you have to think of it as sellers or buyers, that natural supply and demand equilibrium has changed after 2010. And it's just been a struggle. We've been slowly moving lower for so many years. Nobody paid attention because everybody keeps on talking in housing 2008 and we didn't have the credit backdrop then. So it's just been a slow ride. And the builders, today the new home sales report came out and when I speak at events, I would go, does anybody know how many new home sales are available for sale today? Nobody answers. And it's a 75,000. That's it. A country of 335 million, 157 million working, 75,000 homes are available for sale. The builders do not oversupply a market that goes against their business model. So they manage their supply and right now they just pay down rates. They move product that way. New home sales are growing this year. Mortgage purchase application data is falling because that divergence is because the builders have a sub 6% mortgage market. And if we had a sub 6% mortgage market for the existing sales, sales are 650 to 725,000 higher than what they are today. You think builders, and I put this on a video of people really trashed to me on it, that builders kind of do it on purpose. Like they're not overbuilding on purpose. They don't want to get too far. Oh, yeah. It's, it's, it's. They're controlling price. They're controlling inventory. They're controlling the whole thing. There's another institution that does this, OPEC, you know? They have little control. So the builders have realized, you know, hey, listen, we need to manage this because in a sense, think of their business model. They take a contract for a person on that day and then they have to build a house for whatever 12, 15 months. And then that person has to qualify, you know, with the same rate and what happened is, you know, rates escalated. So here they're just, they have, their profit margins are so much higher now than they were in the last decade. So they can pay, they can eat it on the mortgage rate side. And they didn't have this advantage in the last decade, but now they do because inventory is so low and rates are so high that they're peeling off some existing home buyers and say, listen, this home is going to be ready in three weeks. We can get you a sub 6% mortgage rate all day. So they're managing, cause that's their business model. They are here to make money. They are not the march of dimes. Money is what they need to make. So. Well, some people say, well, if they could build more, you know, they would cause they want to make a bunch of money. But that's the whole point is they're controlling, they're controlling the whole game. The builders biggest competition is the existing home sales market. And that marketplace is much bigger than them. And it's older, cheaper homes. So they don't put their heads down and build, build, build. Also construction productivity has been terrible for five decades when we're still building homes with nails and hammers. We were doing that in the fifties and sixties. So the US housing market, it costs a lot to build a home. It doesn't really go down in any meaningful fashion. So the builders have to build it with inflation and make it work for their business model. I bought five DR Horton Homes here in the past 90 days or so. All investor loans, 30 year fix through their mortgage company for 5.9% interest, you know. 5,000 closing costs paid, all kinds of stuff. I was like, yeah, let me take care of those. They are efficient sellers. They do what they need to do to sell products. I mean, think of the builders as they sell homes like they sell a commodity. Where the existing homeowner has to sell their house, find somewhere else to live, make sure they could qualify. They have the human element. Builders are just build it, make it, sell it, make as much money, next. Come here, hold on a minute. There's a completely different type of atmosphere in terms of how they sell homes that were an existing home seller is. Yeah, so what do you, what do you, I mean, a lot of people have been priced out of the market, prices, you know, interest rates, the combination of the two, you know, there's this crowd of people who can't afford that should buy right now, I think. And when interest rates drop, okay, here's what I think's gonna happen. You've got the trade up seller who's gonna add inventory to the market but also take one off the market. So it's a net even for active listings. Then you got the first-time home buyers that come in that bring active listings down without adding anything to the market. I feel like inventory could hit a new all-time low. That's how you described it is how I describe it at events. 90% of millennials or first-time home buyers financed their homes through a mortgage. The boomers are under 50%. So whenever mortgage rates fall, people think, well, if mortgage rates fall, inventory will skyrocket and mortgage rates were at 3% in 2021. New listings data was trending at the lowest levels then but the first-time home buyer is not part of that equation because they're not offering you to house but they are the biggest demographic patch. So now you can understand my concern about inventory. Here's the biggest housing demographic patch ever in history and they don't offer homes. So they take those homes away. So the seller's a buyer, that's washed. Then the first-time home buyer comes in and they slowly pick up those homes. So traditionally lower rates means flat to lower inventory, not higher. The only variable that could change that if lower rates are coming due to recession but recessions are short-term events in the sense they're not protracted five, 10-year cycles. So that could only do so much and this is kind of the problem. The only other thing I could think about is something that would happen 10 years down the line when a lot of the baby boomers will pass off. None of us are Dory and Gray. Basically nature wins, they die off, they give their homes to their children. What their children do with the homes is questionable but right now we can see this that sales are down but inventory is still near all-time lows and that's a function of homeowner's being in a very good spot. In 2008, there were four million listings. We had four million transactions. Do you think we're gonna have about four million transactions this year? But we have under a million listings. Do you feel like if we had more inventory that we would have more transactions? Cause a lot of people are comparing this to 2008 like it's apples to apples where I don't really, I feel like we would have more transactions if we had more inventory. So the difference between now the inventory channels now is that the spike that we saw in 2005 to 2007 from two and a half million active listings to four million is what I call forced credit sellers. So one of my more popular charts that I show people around the country is I show the foreclosure bankruptcy data. And we had two laws change early part of the century. We had the 2005 bankruptcy reform laws and the 2010 QM laws, but people don't remember this. Foreclosures and bankruptcies were rising in 2005, six, seven and eight, all before the job loss recession. So those are forced credit sellers that could not buy a home. So the seller that becomes a buyer is not part of that equation. They were selling and renting. They're selling and renting or living with their family. So that was the first time in history. And a lot of times I like to do the NAR charts going back to 1982 and I draw these lines to show people that was the anomaly event, but it would make sense if we had a massive surge in foreclosures and bankruptcies before the job loss recession. And then the job loss recession happened after that. And then you have another wave of foreclosure. So the inventory channels back then broke the standard between two to two and a half million active listings where sellers or buyers. So I always take that period out of the equation. Because- You think back then two and a half million listings was really the true inventory and then it got inflated by the- If you, yeah, if you go back to 1982, if you take the 2008 credit crisis out of the equation, naturally we're between two to two and a half million. And that seller and buyer equilibrium keeps the inventory levels at that stage. Now people go, well, how can we have so many home sales in 2021 with active inventory so low? I think this is the other part of the discussion that people don't have. We sell homes a lot faster now. So unless the home is in the marketplace over 45 days, it doesn't really get accounted in the active listings. So you get a home, you get a buyer right away, you put it, offer in, we can close loans in 10 to 11 business days now. So it's not like it wasn't in the before. So just the process of homes being closed faster also keeps the inventory. So if the homes get an offer within the first week or two, it's not gonna be created in the active inventory less. The active inventory can grow with weakness in the man and days on market growing. But even today, the days on market per the last existing home sales report is 20 days. Let's say back in 2011, it was 105 days. So the days on market are just too low for active inventory to grow in any meaningful way. The, when interest rates come down and this scenario I'm talking about with the trade-up seller selling and then buying another one. And then the first time home buyers that have been able to afford whatever those rates come down to and inventory or active listings drop, that's what I think could possibly happen. And active listing could do it all time low, okay? But in that process, transactions probably hit five million, five million plus. There's gonna be so many more transactions that you're gonna say, well, how did this happen? How did the inventory drop, dropping, but it's the turnover? A really good data line for this to even show this example was last November. November, December and January mortgage rates went from 7.37% down to 5.99%. During those three months, for the majority of the time purchase application data was positive on a week-to-week basis. It wasn't booming or anything, but just that three months of lower rates gave us one of the biggest months a month existing home sales print ever recorded in history, not tied to COVID or some kind of crazy event. We went from four million to about 4.55 million. We do not have like half a million sales in a month, but that happened and inventory was still low. And actually because that demand was coming in, what it did is it took inventory off so much that we had the latest start in the seasonal bottom of inventory ever in history in 2023, it was April 14th. Usually what happens is inventory bottoms out in January and then at the end of January and February, we see the spring inventory increase and then we see the decrease in inventory go into the fall and winter, but just that three months because home sales are so, it's really rare in America to go under four million monthly sales in existing home sales. We had it for a few months in 2008. We just barely broke underneath here, but rates just getting down to 6% gave us one of the biggest month to month sales reports. So yeah, sellers or buyers, first time home buyers come in, this is how the inventory channel has worked really after 2010. What do you guys do forecast? Do you guys forecast what next year? I do a yearly forecast at the end of the year and a lot of my work is based on forward-looking housing data, which is every week we talk about new listings, active listings, where the 10-year yield's going, what economic data, because one of the things I did last year is starting from November 9th, the housing market dynamic shifted, right? Rates started to fall, forward-looking data started to get better and what we used to talk about is like, none of you are gonna see this until March and April because if purchase application data grows, it takes 30 to 90 days for that to hit the data line, the sales data line is another month or two. So by the time March and April comes, you can see we're no longer crashing in sales. So that's how we view it. We call it the housing wire tracker every weekend. We give people the most up-to-date information so they're not stuck with old sales data because you can get positive and negative there and be behind the curve. And every single year we do forecasts and we do bond yield channels, mortgage rates, things that specifically tie to the housing market and the structural dynamics because housing is one of these sectors that disproportionately gets hit negative when the rates rise, even with a good economy. I mean, in 2022, we had 4 million jobs created and we had the biggest crash in home sales ever. When rates fall, housing is disproportionately impacted in a positive way. I wrote a COVID-19 recovery model for housing wire April 7th, 2020. I just started working for them. So they were thinking, do we really want to publish this? It was designed to show the recovery of housing within a few weeks, you know? And again, that's a lot of forward-looking data and even in the summer, I remember telling people, existing home sales are gonna go positive. And people go, there's no way, there's 20 to 30 million people. So how I explain this is back then people told me that there's no way home sales could come back because 20 to 30 million people are employed and we had 5 million in forbearance. I go, that's cute. I got 133 million people behind me still working and rates are at 3%. My army's bigger than yours. So when the next job loss recession happens, remember that there's 157 million people working right now. We cannot possibly lose enough jobs to really impact that much people working. It's the highest workforce we've ever had for a housing market. And the demographics for housing are very good. So assume a two to three million job loss recession, the Fed gets kind of what they want in a sense, that's still 154 million people working with lower rates. So when the next recession happens, always be mindful of that because that's what happened in COVID, the 133 million, you don't need a lot of sales versus to the workforce to get housing going, especially when you're working from this low level. So we were 4 million back then in 2020, we shot right back up very quickly. Here, we don't have that kind of COVID-19 recovery, but demand can pick up because the bar is so low, we can all trip over it. Yeah, I think we have a historic pent up demand that we've never seen before on the sidelines. In April 27th or 28th of 2020, I put out a video and I said the name of it, it's still there on YouTube. Real estate market is gonna surge more than we've ever seen in our life. As soon as the economy reopens. And my thoughts were the stimulus, but also the retraction, I felt the demand, like the retraction of transactions and pending deals. And I was like, man, something's ruined. As soon as May came, the purchase application data was actually recovered. By June and July, we were already back. And that's why we always try to focus on purchase applications, the forward-looking indicator for housing 30 to 90 days. But yeah, I mean, it was the sharpest V-shape recovery in history. And a lot of this is the demographics for housing are better now and the credit markets are better now. In 2008, the housing market needed credit to expand in such an accelerated rate. The mortgage availability credit index went up from like 200 to 900 and then it collapsed from 900 to 100. And we haven't gone anywhere for 13 years. So we're not relied on exotic loan debt structures to push housing demand. It's simply boring 30-year fixed mortgages, right? So the credit markets can't get tied unless Freddie and Fannie were like publicly traded companies again, not under their conservatorship. So that's not gonna happen either, but it does need lower rates and lower rates with duration games back on. We got a glimpse of that last November, December, January and it gave us one of the biggest month-to-month sales print. Imagine 157 million people working with sub 6% rates. Oh, we see it with the builders and the builders are growing sales 22% year over year because they can work in that environment. The existing home sale market has a lot bigger buyer pool than they do. Yeah. So I wanna know what you would tell people that you have been priced out of the market. Is this a new world we're living in or wherever you can go back? I don't, I feel like we're in a new world, but I don't know that this is a good thing where prices keep going up and unaffordability gets worse and worse and worse because I feel like we're dividing this top 1% of people and it's like... It was the biggest concern for years 2020 to 2024. The reason I say this is that if you look at Canada, Sweden, Norway, Australia, all these other countries, they had much higher home prices versus disposable income than we've ever had and we've got the bigger demographic pool. So unfortunately, this can... We don't get the 30 to 40% price crash that we had after 2008 to get affordability down. And you gotta remember back then we had lots of inventory and affordability was great, but the credit markets were broken and the demographics weren't that good back then. Here it's the exact opposite. We have good demographics, not a lot of inventory and rates are high. So hopefully over time what occurs is that the growth of prices cools, wages keep rising every year. You get some better equilibrium with wage growth and prices and hopefully more inventory and more choices. That's where I think it's a more plausible situation as long as price growth is cooled down to allow wages to kind of come back up. It should work. Now for me, I was so worried about this five year period that I said, as long as home prices only grew at 23% for five years, we would be okay, right? 4.6% and all that. And then I was like, every media report, everything on end of 2020 and 2020. And I was like, oh God, it's about to take off. This is not a good thing. But in this case, home prices got passed that by the summer of 2020 or 2021. We were already at 30% there. So the fact that the growth rate is cooling down, and wages grow, we could find a better equilibrium a few years from now. But that's as long as price growth remains calm and cool. And that's good. That's the most positive story. Like I'm such a pro supply person just because we want more choices. But the fact, one of the positive stories is that the price growth has really cooled down and where it just takes time to get wages. And also we have to remember that home buyers have a different kind of financial profile than renters. One third of our workforce are somewhat lifetime renters unless they get married. Dual household incomes are really a powerful potion against any kind of housing inflation story. But slower growth of prices, wages grow, you'll find a better equilibrium a few years from now. But we are stuck here. And this is why I said this is, housing market is savagely unhealthy not for the reasons of back then. It's just too many people chasing too few homes. And even today the days on market is 20 days with demand near 21st century lows. So if rates come down, it sounds like we're on the same page. Inventory is gonna come down and prices are gonna go up. Prices will go up. It should not have the same impact like we'd sit in 2020 and 2021 just because rates, if rates got down to 3%, that's a whole different ball game, right? If rates got down to 3%, I think we have 50 million additional home buyers into the mix. And now at 8%, that 50 million number is down to 22 million. But if rates just get to six, six and five to 6% is that sweet equilibrium. If rates got down to 3%, that would, to me, that's, again, the savagely unhealthy. Too many people chasing too few goods and prices can escalate. But we shouldn't see those kind of gains anymore between five to 6% mortgage rates. That was a sub 4% phenomenon where prices were. But we will see increases, right? Like three to 5% a year or something like that. Something to where adjusting to inflation would be flat to slightly higher on a real terms, you see very little growth. On a nominal terms, you would see growth still, if rates, I mean, it's simple. Rates fall down, demand picks up, inventory is low, prices increase, right? It's just the growth rate of seeing 20% home price growth. No, I mean, that, that was not 3%. My point is, is that because of that, right? Is it better to keep rates higher longer to kind of prevent that price growth and acclimated to higher rates and so forth? Here's the thing, the higher rates for longer, the Fed doesn't really target housing directly because their inflation is rents. Yeah, and I'm not referring to the feds with their little higher for longer quote. I'm just saying like mortgage rates, wouldn't it be better? And what I fear, Logan, is that when the Fed says we're done raising, where it's now certain that that spread of the 10 year and the 30, you know, gets back, maybe not back to normal, but it eases a little. And even if the Fed doesn't lower rates, if they just say we're stopped, we're done raising for now, we'll see what happens. You could see mortgage rates come down in like a- Mortgage rates could come down by the spreads, but usually what happens when the Fed is done hiking and everyone believes that, bond yields rally and mortgage rates go lower. That hasn't occurred right now. So that's the one difference, even though if some people agree or disagree, the Fed is almost done. When the economy gets weaker though, 10 year yield falls, mortgage rates get lower. If the spreads get better, that's your sub 5% mortgage rate. You know, the 10 year yield's getting to, you know, just a near 3%. But we're far from that sub 5% conversation, but 5% to 6% in that area, you can see that. And we see it, you know, in the new home sales sector, they're selling homes, but it's not like prices are booming for them in that light. So that would be like a sweet little equilibrium for the existing home sales market. And again, I think a lot of things with mortgage rates, people don't understand, global bond yields matter a lot too. So we have a global market where global yields are so much higher than they were. We used to have like trillions of dollars in negative yields. We don't have that anymore. So in that context, it's hard to get back down to lower rates unless the global markets start to see real deflationary issues and then brings rates down altogether. What's your thoughts on, cause you've studied the data, what's your thoughts on election year, you know, type behavior in the market? You know, if inflation was a problem, the Fed doesn't care if it's election or not. You know, it's just their job. Now that the growth rate of inflation is falling, I don't think anything really changes. They were going to stop hiking anyway. Even if there was no election next year, they kind of got to their point. How I explained that is that the Fed, the Fed now finally believes they're in very restrictive territory because the growth rate of inflation is, you know, falling and rates are so much are higher now than inflation that real yields are now restrictive for them. So they're kind of in a historical spot here where the economy has to deal with really restrictive rates. This is why some of their Fed presidents were trying to talk down the bond market in the last two to three weeks because the 10-year yield rising makes it more restrictive under their own model and they kind of don't want it to get too much so they have to cut rates faster than normal. So they would prefer probably the 10-year yield to never get above 5% and just let inflation kind of slowly work itself lower. Another big difference in now in 2008, right? The institutional buyers, you know, they kind of emerged out of 08. Blackstone started buying and then these other institutions started to follow suit until it got to the point where we are now. And of course they've slowed down on buying. But I feel like that's another piece of the puzzle in the housing market that we didn't have back in 2008. That's a big factor. Here's the thing. When we break down investor buyer profile, the post-COVID institutional buyers went from 0.4% to about 2.1%. So another thing to talk about scale terms is back from 2011 to 2017, there was over 35 million homes bought the pension funds and Wall Street firms together were 200,000. It's like a Blackstone owns, I think, 0.02% of all the homes. It's a really small number compared to the overall market. They are in it for that single family rental, but investors in general, the mom and pops, they're the ones that drive most of the volume and they have always been part of the sales profile post-2010. And even if they have slowed down to a degree, there's a lot of properties where they're willing to make the time and effort, get them fixed up, either sell them or rent them out. And if rates go lower, they get back into the ballgame and they're still there. So the mom and pop investors to me are like the real show and they have not shown to a slow down when demand gets better. Some have pulled back, but we have a lot of people that buy vacant homes, homes that nobody wants to own or buy, fix them up and rent them out and they're still there, but if rates fall again, those investors get more and more active. So that's why I would say move up buyers, move down buyers, cash buyers, investors, first time home buyers, that's how you should look at the housing buyer profile. And they're always there. So really rates fall, inventory is low. There's your problem with prices. Yeah, like myself, I just bought 5D or Hortons. I've bought a little empty two-bedroom, picks it up, rented it out. And I feel like a part of this unaffordability has to do with a single family home to an investor based on the ROI of the rent is worth more to that investor than a first time home buyer who's looking at their debt to income ratio and trying to figure out if they can afford this thing. I think that's a problem. That's where the growth of the single family rental variable kicks in in the sense that if housing is unaffordable for a lot of first time home buyers that might be in the lower bracket income pool, they can still rent, right? And because the demographics of millennials and Gen Z, I mean millennials and Gen Z are bigger than the total population of Japan. So, I mean, these are not small groups. So they see futuristic buyer demand for a rental. Not so much, so that's why you see that pick up in certain areas. And again, single family rents are holding up a lot better than apartments. Apartments are dealing with a lot of supply coming into the market over the next year hitting and you see the rent decreases in that and people are offering free. But the five unit construction is a whole different ballgame than single family. Yeah. Speaking of rent, I saw a bunch of data around your rents cheaper than buying in a lot of markets. Like how do you see the whole rent thing playing out? Historically it's been cheaper to rent than buy for some time but the natural home buyer profile just has a lot bigger starting base wage pay. So when they kind of get into the first time home buyer age they traditionally buy a home, they don't rent. There's a group of our labor force that simply are lifelong renters unless they get married and they become part of a dual household renter. So people go, why are people still buying homes? Well, they can still afford it and they prefer to own something than renting. So that's traditionally families, right? Yeah. A lot of families don't household formation in apartment, small, people like single family homes like backyards and their base pay is just higher. So it's cheaper to rent for a lot of people versus home buying. But that home buyer bracket of income, it's still functional. And this is why it's really rare for us to break under four million home sales. And also, you know, you don't kind of move down from a single family home to an apartment unless you're at a certain age where you just need that. You always get people that need bigger homes or smaller homes, but they traditionally are buying another property. And with so much nested equity there's a lot of people whose mortgage payments isn't that much of a problem for them because they're putting so much down. Do you think buying a home is a good investment? I always look at this as housing is the cost of shelter to your own capacity to own the debt. What investors do either for rental yields or for flipping, that's their own business model and the successful investors always know what they're doing because they're more experienced than others. But generally home buyers is a fixed debt cost payment and your wages rise. This is why millions and millions of homes are bought every single year. It's, I mean, we're gonna have near five million total home sales this year. About 4.1 million for existing homes and another 700, 800,000 for new homes. So majority of that are primary resident home owners. And to me, that question is always answered by where you are in your life. Right now, and the investor size are very savvy. They do things with their investments that other people traditionally don't do and the good ones are just experienced. And they know when to pull the lever or not. And that's an individual thing. What about for a first time home buyer? To buy a house and live in a house, is that a good investment? You buy a house, you get a fixed debt payment for the rest of your life and you build equity, not even a question. Yeah, yeah. I mean, when you look at the financials of home owners versus renters, the amount of, I mean, it's not even close, like 40 times more. So it's like those are such different planets that it's almost the easy answer just because of the nested equity. But the real benefit was always that fixed payment, right? And it just now showing itself because all these other countries, they have short-term loans. They don't have Freddie or 30 or 50. You have people in Canada waking up who had a $4,000 mortgage or going on the 8,000 mortgage. So we don't have that here. That's the security of the 30-year fix. That's why homeowners get that. And it really showed itself the last 18 months where stock traders are on margin calls. Everybody's freaking out all the time. Homeowners just chill. And that was always the benefit. That's the investment you're making. You're messing for a lifetime of something fixed payment that gives you forced equity savings, not even a question on that. And that's why the data is so divergent between homeowners and renters. And it's just, it's a 30-year fix product now. There's no more exotical and debt structures. Speaking of that, and the YouTube gurus and everything, some of them will argue with that, the 30-year fix is the problem with inventory, because we're locked into these lower rates and now they don't wanna sell. But I think no system's perfect. And I would much rather have a system where everybody has a house that they're not forced out of or have foreclosed on or have to double their payment and not have inventory than a market of a bunch of empty homes that's getting foreclosed on and we have a lot of inventory. I'd rather have this system than another system myself. I always say boo-hoo, the biggest first-world problem in the history of mankind. Americans have low total housing costs and we shield them. And like you said, prices in these other countries are higher, right? Yeah, I mean, you wanna talk about the stress in the housing markets are all the countries with short-term rates. Yeah. We are the most privileged society ever, first living in America, but to top it all off, we have a 30-year fixed mortgage which shielded the entire middle class against inflation and high rates. Oh my God, if you wanted a first-world problem ever in the history of mankind, that's it. And I think there's a lot of frustration from housing crash YouTube fanatics who are just like, why won't people sell their homes to be homeless? This damn 30-year fixed mortgage is making everyone's life good. Well, you know, if it was up to them, nobody'd own a home. You just would keep waiting for the market to crash. Yeah, I always call them the housing bubble boys 2.0 is for 12 years. 12 years they've been doing this. And I've been documenting this and every year they have something new. And this one, the Airbnb bust, the funny part is the Airbnb bust happened in a year where new listings data was trending at the lowest levels ever in history. You wanna talk about a group of people who don't track housing data but do everything for clients versus people that actually track housing data. So I understand the frustration from housing crash addicts on a 30-year fix. Is they go, why won't these people sell their homes? They're doing great. Right, right. And that's what we want. Yeah, that's what we want. That's exactly what we wanted it for. We would not change a thing. This is the benefit and strength of the United States of America and other countries would love. They would trade spots with us in a second, but they have short-term rates. I mean, they're talking about 90-year mortgages in Canada now because their payments have accelerated and they have to find some kind of loan mod situation. No, we don't want any of it. Yeah, we don't want any of that action. 30-year fix is good enough. That's it, you should go with it. What's the median or average mortgage payment right now? Well, the thing is that because so many people have very low payments currently, No, no, no, no, no. If you bought a home right now, If you bought a home now, it would be about 31, 3,200. Okay. Coming from then, which for me in California, even 15 years ago, that sounds really cheap, you know? But, you know, prices and rates, the thing is that how are we having five million home sales with total mortgage payment? Well, wages of increase in dual household incomes can still facilitate that demand. So, you know, we have a few areas of the country that are really expensive and then everywhere else is not as bad. You know, especially the Midwest and the South, but of course, coastal California. I mean, where I live, the median sales price here is like 2.2 million. One bedroom condo in my neighborhood is 700,000. That's not real America. That's coastal California. Everywhere else, it's not as bad. And especially when you have the dual household incomes put together, it still makes sense for a lot of people to buy homes. And that's how I explain how total existing or total sales this year is almost gonna be five million this year. Yeah. So in, let's say five years, is the median or average mortgage payment gonna be more than $4,000? Do you see a continuing increase? Payments tend to always rise. The one thing that changes that variable if mortgage rates just shoot a lot lower. If mortgage rates got back down to 3%, of course, you have the price factor rising but the payment factor gets really impacted. So the only way mortgage payments, in a sense, can fall is mortgage rates fall or you have an escalation of inventory in home sales, home prices crash. Those are the two variables. And in normal situation, it tends to always rise because prices rise, inflation rises, and rates stay within a range. But if mortgage rates fell itself, that would be the only variable outside of prices crashing, which is, it's very hard to have prices crashing on a national level. And that's why the history of nominal home price crashes don't really happen. 2008 was the one anomaly of it. Even in the 70s and early 90s, we didn't really have like big nominal home price crashes. Real home prices could come down adjusting to inflation, but nominal home prices needs a lot more inventory, distress sales, something like that to keep that thing going longer and longer. Right now we're in the, what I wanna call the down cycle of the 10 year housing cycles. We had 08, we had 2022 slash 23. We're in the down year of the yearly cycle, where in the fall it tends to slow down price, days on the market increase, prices soften, so on and so forth. Is right now the double edged whammy of the down moment in the 10 year housing cycle, the down moment in the yearly housing cycle, is right now the best time moving forward to buy a home? Here's the thing, new home sales literally are up 22% year over year because it's a sub 6% market. You get a sub 6% market. It doesn't matter what any of us think. Home sales are rising, okay? And a low inventory virus prices are rising. And just for the audience, right? Just for the audience, when you say sub six, you're just talking about under seven. Yeah, yeah, yeah, in that mortgage rates, rates getting can increase sales. We just saw, I mean, just last year, we saw demand pick up even with prices where they were when rates got to 6%. But if mortgage rates come down, demand typically rises. The velocity of the demand rising depends on where mortgage rates stay longer. But rates fall, demand picks up. We see this every single time. Rates rise, demand slows down. We had the biggest home sale crash. It's really rare. Like I can make an argument that this is the lowest sales level ever in history. Just because we have 157 million people working. Is this the home sales at 3.9? I mean, back when the baby boomers had their boom in sales, that was 2 million. There was a lot less people back then. Here we went from 6.5 million, we're slightly under 4 million. So there's a lot of demand out there that is just waiting for one variable to change and that's rates. To me, it's historic pent-up demand. I don't think we've ever seen pent-up demand. Well, we haven't had this kind of demographic patch sitting and waiting for rates because we haven't had rates really. I mean, mortgage rates went from 3% to 6% to 5%, 5% to 7.5 last year. That's not normal. That was such an abnormal year. So there's a lot of upside to sales with falling rates. Yeah. When I go and speak, I'm like, how many people are working with a buyer or tens or even hundreds of buyers who are waiting on the market to come down or rates or prices. Everyone's working with massive amounts. Everybody's working with sellers who want to, like I know people that need extra bedroom. They can't move because they're locked into a 4% rates right now or whatever the case may be. I saw a forecast, forgive me, I forget exactly what group it was, but they were calling for 3.8 million existing home sales next year. They're calling for less home sales. I think that was Goldman Sachs. Okay. What's you guys' forecast on number of transactions for on existing home sales next year? To me, there's a better backdrop next year for mortgage rates to fall. And when that happens, especially if it gets just to 6%, you could be trending up to 4.5 to 4.62 million. But it does need mortgage rates to fall. I think what Goldman is thinking is rates are going to stay 8% and hover around this level for a whole year. You get any lower rates. You're already above 4 million on the trend sales because we're working from such a low bar. It doesn't really take much even. And again, I use the new home sales as an example. They're up 22% in sales this year. That's because of low rates. So it really depends if the labor market gets softer, the 10-year yield should go lower by itself. And then you have this massive group, 157 million people working and a lot of them that were waiting for rates to fall, they'll go in there. But it does need that 10-year yield, does need mortgage rates to fall. And the longer it does with duration, it's better for the housing market because you could grow sales. Last year or this year, we just had that one big print and sales were slowly falling after that because rates were rising. You get rates, lower rates with duration. Oh, you're easily above over 4.6 million. It just needs that rate factor to kick in. Yeah. Bro, thanks for your time, man. Hang out afterwards for a sec. And man, it's been a pleasure jamming with you about the market and stuff. I love talking to people who actually know what they're talking about. I love talking to people who actually know what they're talking about. I love talking to people who actually know what they're talking about.