Track 5 – Top Economists on Market & Lender Outlook

TRACK SPONSORED BY:  CI&T

When will multiple consecutive quarters of negative lender profitability finally end? Will the Fed's inflation fight finally result in rates buyers and sellers can act on? Will any recession be mild or prolonged? And will demographics and homebuilding solve or strain home affordability in 2024? Our industry's top economists break it all down for you.

Transcription:

Young Pham (00:06):

So Hi everyone. Welcome to our track. I'm Young Pham, hief Strategy Officer for CINT. We're delighted to host track tech, ROI, as well as full cycle outlook for the next three panels that we're going to have. So the First panel and we're really Delighted to have, are the prognosticators of both market and lender Outlook. So how about a warm hand of welcome for Zillow, CoreLogic and KBW Ryan? I forgot about that. My apologies.

Ryan Tomasello (00:47):

Thanks everyone for joining us for some geeking out on the economy housing mortgage rates. I'm really excited to be moderating this panel today. My name is Ryan Tomasello. I'm an equity research analyst with KBW, which is a subsidiary of Stifel. I'm an investment bank. My responsibilities focus on covering the housing and mortgage technology and broader real estate technology sectors. Today's panel top economists on the market and lender Outlook. I'm very honored to be joined by two such economists, Skyler Olsen with Zillow and Selma Hepp with CoreLogic. Thanks for being with us. Thanks for having us. We have about 40 minutes to talk all things housing and mortgage. We're going to save plenty of time at the end for questions and I'm hopeful we'll have a few of those before we kick things off. Maybe if both of you can just provide a more thorough overview of your backgrounds and your precise roles within your firms Selma.

Selma Hepp (01:50):

Sure. I'm a Chief Economist at CoreLogic. I've been doing this, well, I've been housing Economist for a number of years. It doesn't really matter at this point, many years, over 10 years, I have worked at the National Association of Realtors, California Association of Realtors, Trulia Pacific Union, which was a large brokerage out of the Bay Area that was later bought by Compass Real Estate and now I'm at CoreLogic. At CoreLogic, I lead a group of some five analysts and we are responsible for forecasting and developing a housing story that we share with our clients and public.

Skyler Olsen (02:31):

Yeah, I'm Skylar Olsen. I'm the chief economist at Zillow. Yeah, it's probably similar-ish background and got a permanent head damage at the University of Washington. I've been studying housing with Zillow's dataset for about a decade. I haven't been at Zillow the whole time during that though, or actually it's maybe 11 years now. Yay anniversary. But I spent two years at the beginning of the pandemic. I popped out and worked at Real Prop Tech. So if you're familiar with Tomo Mortgage, I did that for about a year as well, starting their econ program and then has since been back at Zillow. One of the ways to kind of think about maybe economist roles at Zillow a bit different is my audience, probably more than other E-com shops will be very real people. So owners, sellers, renters, and then also housing professionals that support them. So loan officers and agents.

Ryan Tomasello (03:31):

Great. Just to set the agenda, I think we're going to hit the major high points in mortgage housing demographics. Before we dive into the specifics of those sectors, maybe if we can just start big picture. I mean we just had the fed meeting last week, signaling higher for longer rates. The key question, recession, no recession, soft landing, hard landing. Let's get some big picture thoughts around what your firms are forecasting for big picture macro heading into next year.

Skyler Olsen (03:59):

Yeah, yeah, I think with big picture macro part of it, it's kind of maybe a reflection on the general economy as well. Confusedly, optimistic or optimistic with trepidation. A runway is a little bit more possible or clear. A soft landing maybe is possible, but I think a lot of macro economists still reserving the right to say, Hey, it's really uncertain out there. A lot of these data sets that we are watching in a macro picture still really jumping around. So willing to think that slower growth is coming, but still feeling good. Now what that means for housing though can be very different.

Selma Hepp (04:47):

Yeah, agree. I mean there's so many mixed messages, not just in housing, which this does feel like it's a tale of two markets, but in the economy too, there are sectors that are doing really well, sectors that are not doing so well, and so you have this mixed message that's hitting you all at the same time. So you're unsure really what's going on in the economy. But overall, I think one thing that we focus on is the labor market. If people have jobs, they have money to spend, they have money to buy a house. So labor market is doing really, really well. Which on the flip side is what's impacting inflation, which is driving federal reserves policy. So unfortunately the higher for longer is having a negative impact on the housing market because mortgage rates are getting higher and higher instead of getting lower and lower as we were all expecting them to be at this point of the year. But overall, the outlook in terms of the economy, I think we are going in a direction of soft landing. I think it's achievable absent some huge black swans, Unpredictable events, we could end up with a soft landing and now what does soft landing mean? It means that we get to a 2% inflation rate without any significant increases in unemployment or economic recession. That would mean soft landing. I think it is possible at this point.

Skyler Olsen (06:15):

And I think just to characterize a bit of the confusedly part, if we just, I'm sure you also, it's kind of the play by play I call it. It's kind of like riding the wave. So if you remember some of the macro data releases over the past two months, it was surprisingly strong job growth and yet we were watching CPI and inflation come down, and then you get the restatement, right? It's like, oh, maybe the job growth wasn't that strong and then the next time you see the inflation numbers, oh, well maybe the inflation is a little bit stickier. So that's what I mean by confusingly optimistic. I think we receive a lot of signals that are about optimism and then they get corrected. So I think we're still in so many ways it's uncertain and we're still kind of slowing down to that soft landing and it can be confusing each month.

Ryan Tomasello (07:08):

All this debate over soft hard landing recession, no recession, the housing and mortgage markets are arguably already in a hard landing recession scenario in terms of volumes.

Skyler Olsen (07:20):

And even that scenario of soft landing. When we mean hire for longer, if people don't need the really safe asset vehicles like the tenure or the mortgage backed securities, then those things kind of elevate. If inflation is continuing to come down a little bit, the fed doesn't have a lot of incentive to jump back into the MBS market. So to continue that. So all the softer landing or the macro optimism I think in so many ways sometimes actually is or can spell harder times in some ways for us because that higher mortgage rate, if the economy is doing fairly well and that spread between the mortgage rates and the tenure doesn't come down until repayment risk is done, until the Fed is back in there stabilizing their MBS balance without that big buyer. So it soft landing means where does the supply come from? If we don't have joblessness owners are still locked in, where does the supply come to return our volumes? And so in some ways I think when we have good macro signals for the housing market, it can mean more challenges.

Ryan Tomasello (08:38):

Should the housing and mortgage markets be rooting for a recession based on that logic or do you feel that the idea of higher unemployment, the impact on the consumer balance sheet is probably the bigger risk as it relates to housing and mortgage demand?

Skyler Olsen (08:54):

I think I'll never go on record saying I'm reading for a recession, but I mean I think it depends on who you are in the housing market, right? I mean a buyer, a first time buyer in particular is very challenged because they did not get the record accumulation of home equity to move that over, lower their debt load. So they're facing that mortgage rate full on. So I think that first time buyer who's not only facing that high price, it's a high price because owners are locked in and they pull that supply back. So without that new supply, not only do I just not have the physical opportunities, the volumes of new listings coming into the market, but I also face a higher price. So I think if you're a first time buyer or a current renter, you might have a voodoo doll.

Selma Hepp (09:48):

I think it helps when the economy is growing and people have jobs and income is growing longer term and we'd like ideally for this to develop in a healthy way where we have more new construction and hence home press growth starts slowing and people accumulate down payments because they have really good incomes. I mean, that's ideally how we want this to play out. We don't want people to, because when you have a recession, there's always a sort of impact, a longer term impact. Think about the great recession and how long it took us to climb out of that. So we definitely, that would not be a good scenario. So I think just healthy growth in terms of wages, in terms of income, in terms of ability to buy homes, I think that's ideal.

Ryan Tomasello (10:36):

Let's shift gears and dive a bit deeper into mortgage. And before we do that, I think it'd be helpful to have some context, historical context around volumes today and importantly, the delineation between unit volumes and absolute dollar volume of origination. So Selma given CoreLogic's expertise in that area, maybe you can provide some background on just where we are today in the state of mortgage.

Selma Hepp (11:02):

So when you look back to late 1980s on average there was about 8 million loans originated. Now that includes really low numbers in eighties and nineties, and then a surge in the early two thousands when we had a lot of refis and then some leveling off and then surge again. Really the refis are the ones that have been making the numbers much more volatile over the years and where we are currently. So we are currently anticipating of some 5 million loans being originated. Now that is really low when you compare them to 2020 or 2021. In 2021, there were some 15 million, but again, the decline mostly comes from refis because they declined some 70% from 2021 to 2022, and now they're going to decline another half of that in 2023. So it's the refis that are constraining the growth in number of originations. But where in terms of purchases alone, where we are today at, so 5 million would include refi and purchases.

(12:11)

And purchases. Let's say we have about 3.8 million originations this year. That lines up to where we were coming out of the great recession in 2015. That's where we were about, but with the really low Refis, when you add it all up, it's actually the lowest we've been going back to late eighties, early 1990s. So that's why some media would say, oh, we are at the lowest levels that we've been in some 30 years. It's because the refi dropped so much. But yeah, I mean it is a very challenging environment and it will be because of higher for longer.

Skyler Olsen (12:49):

Yes, absolutely.

Young Pham (12:50):

And the 5 million unit volume is for 2023. And in terms of next year, 2025, I mean maybe we leave 2025 out of the discussion, are your firms operating around any internal benchmarks, baselines? How do those compare to some of the bigger forecasts that NBA Fannie Freddie put out there?

Selma Hepp (13:10):

Yeah, well we are somewhere in the middle. I guess in terms of mortgage rates, you'll have anywhere from low mid fives from NBA to high sixes from the end of the year. You mean for the end of the, well, for 2028 average like terminal rate? No, no average for 2024. Oh, okay. Yeah. And so right now we are seeing rates go up, they're over seven, 7.3 I think was the last I saw. So at this point, we're not looking at that six handle by the end of the year, but we're thinking seven handle by the end of the year, which means that 2024 will average 6% or six handles. So by the end of 2024, we're expecting now rates to be average at about 6%. So that's that higher for longer. And I think that's our baseline. Hopefully things will, and it depends again on the mortgage spread you were mentioning.

(14:08)

It depends on the economy and investor activity because the mortgage spread is now at the highest that it's been, right? Even looking at the great recession or at the onset of the pandemic, and it's been hanging there at this highest level for over half a year now. And so until we see some measurable change in the number of investors coming in or I don't know, we can get away from uncertainty. I think certainties just a word that's with us and it's remained with us for a long time. We always refer back to uncertainty. Everything is always uncertain it feels like. So I don't know if that part of the drivers in the mortgage spread is going to change much, but maybe getting some certainty around interest rate risk, prepayment risk, what Fed is going to do. Ideally if the Fed does a cut middle of next year, I mean, I think that would bode really well for the housing market. I think that would provide a lot of optimism in the market.

Skyler Olsen (15:11):

The way that I think about that spread has I think a lot to do with what the Fed is doing to their balance. So that extra spread is a lot of risk. Boy, it takes the risk down. If I've got a big institutional buyer in there that says, Hey, I buy this price, that takes a lot of that edge off. So it's not just repayment risk, it is absolutely what the fed's going to do when it comes back to inflation. And they don't have to be building their balance of MBS, they just can't be letting that balance go down anymore. So alright, our forecast for mortgage rates fairly similar. We don't have us coming down into six until 2024. And then I think it's pushed out more to the end. And then when we think about what that does for volumes and housing, I don't have a public forecast for our mortgage application. Zillow home loans. We're trying to take business still, but what we do for sure forecast you betcha is sales volumes. And then if we think about sales volumes, say pre pandemic, five and a half million a year kind of thing from the existing housing market. Our forecast for the course of 2023, we'll finish the year probably around 4.1 million. And then 2024 will be a little slower than that 4 million. So 4.1 2023, 4 million 2024. So a bit more to go before volumes come back.

Ryan Tomasello (16:34):

Let's double click on that topic around mortgage spreads because I feel like beneath the surface is something that if you're not really in tune with the dynamics of the mortgage market, you might underappreciate going on there. Do we think that this higher spread environment is a structural shift following this decades long support for the MBS market from the Fed?

(16:55)

The Banks having less appetite to hold MBS on their balance sheets with new capital requirements? I mean, I think Selma, you mentioned that NBA Fannie, I think NBA has rates coming down to the low five is by the end of next year, and part of that is being driven by the assumption that spreads tight. Is that misguided? I mean, any views on if we're in this new norm of spreads?

Selma Hepp (17:19):

Well, I've seen some estimates that looked at how much federal reserve's MBS purchases impacted the spread and their estimate was that it dropped the spread by 50 basis points. And so on average, we've been at about 170 basis points between 30 year fixed and 10 year treasuries. And so in theory, if you add 50 basis points, meaning that fed is out of the picture, at least to some large extent, that means the goes up to what, two 20 or I guess two 20. So I think I've heard arguments for that being a structural change and the spread being remaining wider for longer. But I don't know necessarily, I wouldn't say that the appetite is lost for mortgage backed security. I think it's just that this time and high mortgage rates is what's making it maybe a little bit less attractive. But I do believe investors will come back. I think so.

Selma Hepp (18:23):

Yeah, I think that repayment risk goes, it has to go. It's not just that mortgage rates are high, it's that they're high so recently and we just need time for fundamental moves to push people out of lock-in. And then you have a higher share of people are current owners that won't, or excuse me, that will purchase, that won't have that repayment problem. Yeah, it is such a tricky question because that repayment issue is in itself like a sub fulfilling prophecy. Higher rates now will lead to a higher likelihood of repayment later. I think the way that we think about it, it comes down but nowhere near as fast as the NBA says. I think that's incredibly optimistic.

Ryan Tomasello (19:10):

And just for reference, I think NBA and Fannie are at around one nine 2 trillion for next year. So it seems like there could be risk to those forecasts depending on how spreads and rates evolve.

Skyler Olsen (19:21):

And actually just to say one, as someone who talks a lot to consumers, sometimes I get anxious that a buyer's message that they hear is that rates are going to come down because one, I think the way that we speak when we say that speaks to way more confidence than we actually feel. And then people make real economic decisions using that information. And I don't think they've made possibly the right decisions over the last six months how it played out. So it's like to have that certainty, does our customers, excuse me, the borrower, I think a disservice and maybe even our business leaders. So just saying.

Ryan Tomasello (20:01):

Just switching gears to housing, it seems like the current environment has twin challenges on supply and affordability. Skyler, I think you were mentioning that you had some stats that you thought you could share just to put some context around affordability and supply today.

Skyler Olsen (20:19):

Sure. Yeah, let's talk about supply first. So a lot of Zillow's, if you're just going to compare the forecast, like home price forecasts out there, say like CoreLogic or ours, I think ours end up ours are going to be much more inventory sensitive. So the supply picture is really important to our, so for example, our price forecast from this August to next August is an increase of 4.8% home price growth nationally. That's weirdly kind of aggressive for the affordability picture that we're in. And it has everything to do with our forecast is really driven as well by our new listings series that we're using to incorporate into the structure for our forecast. So what's happening with new listings over the past six months? I mean since the beginning of the year, and actually it started mid last year, we saw new listings from existing homeowners pull back aggressively kind of averaging around third down, so like 30 fewer homes dropping into the market every month.

(21:21)

That puts sustained pressure on prices above and beyond even the strong wages that we've done. Okay. How do I think about affordability? I think mortgage professionals, you're going to be really intimate with that monthly affordability idea, what share out of income, home values growing. But let me, let's just take the mortgage rate out of it for a hot second because we're all aware of that one. So let's just think about prices versus incomes and be like what happened over the course of the pandemic? So let's say you were saving up for 10% down and you were saving for the typical US home and you made the typical median income in the us. How long would it take you to save? If 5% of my income every month saving for 10% down pre pandemic, it would take you around seven years. Now you're looking at around nine years.

(22:14)

So two years longer, seven and a half to nine. So a year, year and a half longer. So that's a difference between buying your first home at 30 or 32. Right? Okay. Well back when the boomers were doing it, because we've had home prices growing faster than comes for a while now only five and a half years. So I talk about these things, it'd be like it's not the avocado toast question. And if I'm in this situation where interest rate lock-in causes supply to pull back so that price growth is sustained, this is your picture. Okay, years to save nine years. So it's a bigger barrier to a first time buyer. And I don't know that we can promise that that comes down if we don't see that supply that brings that price picture down.

Ryan Tomasello (23:04):

Everyone talks about this, so-called unlock rate of what gets supply off the sidelines. I mean it seems like the higher we are, the longer we are in this higher rate environment that unlock rate gradually moves higher.

(23:19)

I Mean I think there's been some survey data out there. I think maybe Zillow even did some recent survey data. What do we think that unlock rate is today?

Skyler Olsen (23:28):

Yeah, we have it around five, five and a half. And what that's coming from is Zillow does a big survey. We ask sellers part of our Q ship survey every quarter, how likely are you to sell in the next three years? Yes, 80% of existing mortgage holders have an interest rate below 5%. But for those that do have a mortgage rate above 5%, they're twice as likely to say that they will sell in the next five years. And you might imagine that there's a relationship there. They're deeper locked in. I am. Yeah. No way. The people that have very low rates are very locked in. So to a certain extent there kind of becomes enough that say yes at five and a half.

Skyler Olsen (24:11):

And on the rate picture Selma, the other half of that is refi on the mortgage side. And this idea that X percentage of mortgage mortgages out there are below a certain rate. I mean, what are the stats you see around that? And on the refi side, what level of rates do you think ultimately starts to move the needle on refi volumes?

Selma Hepp (24:34):

Well, I think we would have to see a much significant decline in the rates to get to unlock the refi potential. I mean, we are as of now building a refi potential because people are getting locked in at seven plus percent rates. So we did estimate some million loans currently being at refi potential if rates go to five and a half percent. But going back to your earlier question about what unlocks the market, and you said how things may have moved in terms of what that magic mortgage rate is. And I do believe, I did see the surveys on five point a half percent, but think back about the beginning of this year. So mortgage rates went up to 7% in November of last year, and then they dropped to 6% early this year. And we saw market, we saw a rush of buyers coming in.

(25:28)

Granted it wasn't sellers who were coming in, but buyers were coming in. But I think with sellers, if we come back to that 6% at this point now we've been again over 7% that would bring them back in the market despite the fact because people move, people are not just locked into the homes because of the rates. They have to move, they have kids get a new job, they get a divorce, or they get married. So people move too. So I think the further we just move away from that idea of 3% will unlock the market just in itself.

Young Pham (26:08):

Is there a certain level of rates in the affordability equation where things just break? I mean it seems like, Demand has held up at least maybe better than people would've otherwise thought. And given supply dynamics, the balance, the equal of the market has still allowed things to kind of trek along, albeit at a much lower pace of volumes. But rates going from bear case scenarios, you have some people out there talking about 10 years topping out at Six, Seven percent.

Skyler Olsen (26:40):

Yeah.

Young Pham (26:41):

So I mean, if we are in this doomsday scenario, 8, 9% Mortgage rate environment, How do you think the market responds to that?

Skyler Olsen (26:49):

Yeah, the market definitely stops liking it and it can really shut it down. So there becomes a part where it can, I think, get real bad. And one of the ways that I think about that one is just think about the median household income and whether or not they can qualify, if that's all is their income and their DTI and at 7.12, which I think was how it ended above seven, at least let's not be so specific with my significant digits here, but at above seven, if I match up the typical value of a US home and I match up incomes and you have 20% down, you're at 35.6%, so you're like just under 36% of your income. So play that out, keep it going. The rate up, at what point do you get to 43 or qualify for the conventional loan? I forget. I did do the math, but then the income always changes and the home values keep growing. So I haven't done the math for six months, but yeah, it is in the eights where that gets it hurts. Do you have a heard of them?

Selma Hepp (28:00):

Well, no, I was just going to say that. Okay, when we talk about affordability, I mean there's different income groups in the US that the range is very wide. And so there are folks out there that can still afford no matter what. And there's baby boomers who have a lot of equity buildup in their homes and some 50% of baby boomers, older baby boomers own their home free and clear meaning they can just sell the home cash out and buy another home for cash. So for them, it doesn't make that much of a difference with mortgage rates are. So it's really, I think loss of opportunity for younger buyers when we get that's the bigger issue than if the market log, well, not that it's not a problem if the market locks up, but the point being there's still a lot of buyers out there who can actually afford, and that's why I think we do continue to see home prices grow at the pace that they do. The other thing is that these baby boomers may be migrating. There's still quite a bit of migration going on. And we looked at incomes of folks into moving into a different metro area, and on average incoming home buyers were of much higher income than local residents. And with supply being as low as it is, they're able to put that pressure on home prices and in essence sort of push out local residents out of the market.

Skyler Olsen (29:27):

And you actually just described one of the connections between housing and the general economy. So the more unaffordable housing gets, the more friction full our labor gets. And so when you just think about how do we grow as a healthy economy in general over the next 10 years, housing is a really important part of that. Right. And building more. And anyway, I think we have about 10 minutes left. Maybe a good time to pause and see if there's any questions for the panelists up here.

Audience Member 1 (29:58):

What do you think the election year will do to influencing some of the data that's presented in front Of you?

Skyler Olsen (30:06):

Yeah, interesting. Election year's, usually pause.

Selma Hepp (30:12):

Yeah, usually they slow down.

Audience Member 1 (30:14):

The housing market is so critical to the overall economy. And then going into an Election year, are you taking any of that into consideration when making any forecast?

Selma Hepp (30:27):

I mean, not election per se. It depends. I think there was a study done that looked at the impact of election and it did have some slowing impact on home sales activity. But I think there are other bigger, what I worry about more is the government shutdown. What does that do? The rates, what does it do to our ratings and cost of borrowing availability of credit. Those are kind of bigger things I would think about right now.

Skyler Olsen (30:58):

And maybe why a key's on it is I think. So what are the biggest levers that are going to happen to influence housing from the policy space? Think it's more the regulators and finance rules is probably one of the bigger places where policy can impact housing and then much more local. So not the national campaign, right? Land use is all about local. Sometimes you can do it at the state level, but mostly it's a local thing. But there's lots of exciting things happening in terms of cool land use changes across the country, even not just the Californians of the world. So there are cool things happening. Yeah, no, oddly no, I don't think we've formally incorporated the Election Year into our forecasts.

Audience Member 2 (31:47):

So is there much data that you collect or publish about second mortgages and home equity volumes? Because what we've seen is a lot of interest in that market really almost in of ance cash as an alternative to cash. But I haven't seen any place fine in the industry about volumes for that.

Selma Hepp (32:10):

Yeah, we do publish actually some data. I think there was some blogs written by one of my team members on that. If you go CoreLogic intelligence part of the page, anything share? Yeah. Yeah. So HELOCs went up significantly in 2022, and it was at the highest level that we've been since 2007. Obviously during the great recession, prior to great recession, there was a lot of HELOC activity using homes as ATM, as we used to say. This time around it's a little bit different because people do have much more equity now. The utilization of that equity HELOC has not been as high. So definitely at the level that we saw back then. But then now in 2023, we saw a pullback in HELOC, I guess HELOC authorizations to where they're significantly down from, I don't know exact number, but they're significantly down from that.

(33:15)

2022 was odd year where it all jumped up and then it went down. And I think rates make a huge difference. But when you think about why that is, people on average, and we do estimate equity in people's homes, and on average people have 300, almost $300,000 on average a borrower has in their home. If you look at by market markets with higher prices, higher home appreciation over time, much more like Bay Area residents average a million dollars in equity. Highest is, for example, in Hawaii, lowest is in states like Louisiana and Alabama states with generally slower pace of home price growth. Lot of, because hazard risks, hurricanes and things like that do impact people's equity in their home if they lose a home. So on average, that drags that average down, so people with least amount of equity are in those areas. And then when we look at by geography where people took most HELOCs out, it was in the areas where they have the most, so west coast and just western part of the US.

Skyler Olsen (34:30):

And what you're following when you say people are more interested in the second mortgage, is that the fixed? Yeah. Okay. So HELOC being the adjustable option and you pull and you don't, yeah, upfront. Whereas this one I'm pulling a big upfront and I'm fixing it. I would think adjustable rate would be more appealing, kind of like your cash out or your refinance fee is just built in. If everyone believes the mortgage rates are coming down, maybe they don't. Maybe we're starting to put that through that it's not happening. Interesting.

Ryan Tomasello (35:04):

 We have time for probably one or two more questions out there in the back.

Audience Member 3 (35:07):

Do you foresee a possibility for some of these investment companies will start releasing some of their assets? From what we have seen, least in my area, a lot of these homes that are owned by investments are not paint very well. And it seems a very expensive product to keep in your, I'm wondering.

Skyler Olsen (35:33):

Yeah, I love thinking about this, not just because I think so often about the normal American consumer and they love the story that bleeds about investors taking their homes, so we can all get righteously angry. But I think it actually, it is an important, and it's such an interesting story to kind of think about too, because the headlines we hear are so not really reflecting what's happening in the data. Despite those headlines about private equity money and single family homes and renters, the percent of single family homes that are rented actually fell over the course of the pandemic. So that storyline is probably much more about mom and pops getting out of the game because their cap rates got decimated when home prices jump up and you want to do something with that extra equity, you don't have that earn you regular income.

(36:20)

So you probably had a lot of mom and pop landlords that sold those to investors. And then if you think about today, right now home price growth is as our forecast, 4.8%. Lots of uncertainty make resilient decisions out there folks, but rents are much slower lower. So that means the cap rate for single family homes is actually continuing to not be good. It's not good. So you might see a little, but I think a lot of that has already played out, but maybe a little, but I don't know. That's so interesting. I think a lot about the short-term rentals too, but that also just feels like a sexy storyline. That's a little overblown, but fun.

Selma Hepp (37:07):

All right. I'll add something to, so we track investor data at CoreLogic two. And investor activity did go up significantly during the pandemic, and it remains as a share high because overall sales came down and investor sales came down. But as a share, it remains at three out of 10 homes get bought by investors at this point 30%. Now the difference is that institutional investors, which you're talking about, they're very focused in only few markets. There is a handful of, or maybe two handful of markets where institutional investors are very active. In the other markets, it's more likely to be a small mom and pop investor. And also since mortgage rates went up, what we saw is more decline from institutional investors and more activity from smaller investors. And there in markets, smaller investors are markets that are very inventory constrained because they know long-term, they'll be able to either increase rent or sell at the, they're counting on appreciation. So in markets like California, we're seeing huge amount of small mom and pop investors. But going back to question.

Skyler Olsen (38:21):

That's where new listings is pull back the most.

Selma Hepp (38:23):

Right, And that's where new listings is pulled back. Now we are not seeing any increase in new listings or any, I've heard stories that some larger investors are selling off their portfolios, but not enough to make any dents in inventory. When you track inventory anywhere in the country, we're barely seeing any increase. So the other thing that I looked at recently because of Elon Musk's commentary on Airbnb's and that because Airbnb's are a declining in usage or a vacancy or increasing, that there's going to be a huge inventory increase. And we're not seeing that in the data. So maybe people are not doing short-term Airbnb's, but are now turning them into longer Airbnb's. There are a few markets with some increase like northeast of Austin, it's Temple, I think the name of the area is, and then little few parts of Arizona that are more vacation, not Phoenix, but Sedona for example. There's been some increase. So potentially we could attribute that to fewer occupancy, lesser occupancy of Airbnb's. But I cannot say with certainty there's been a huge increase anywhere in the country because of that.

Skyler Olsen (39:45):

I also, the Airbnb storyline has some wisdom in it too that we can apply to. I think a lot of things like how dramatic that has gotten because I think headlines are made with year over year numbers and they can look really dramatic and then they speak to a big change. So the huge increase in the number of inventory Airbnb that was we're all suddenly traveling after having not done for a while. And so actually when you dig into more of the Airbnb numbers, it's a little bit more about growth is slowing than that inventory is coming back anyway, just like year over year. You can hear home values are down 10%. Actually it's not 10% in Seattle, it's 8%, 9 or 8% in the Seattle metropolitan area year over year. And the headline will say, home values are falling in Seattle, but if I looked at a quarter, a quarter or a month, over a month, they're not falling. They're actively increasing again because inventory pulled back aggressively. And that was a story about last year.

Young Pham (40:50):

Alright, I think we'll have to wrap it up there. This is very fun conversation. Thanks Selma, Skyler for being with us. Thanks everyone in the audience