Hello, and welcome to another episode of the Odd Thoughts Podcast. I'm Tracy Alloway.
And I'm Joe Wisenthal.
Joe, do you remember this time last year some of the discourse around the housing market.
Yeah, of course.
I mean this was like really like when people were like waking up to these sort of like eye popping mortgage rates, at least by recent standards, you know, zoom out. Maybe not that high, but by recent standard, like, oh, this is it. Housing is sort of over crash. Prices plunge, We're back.
That's exactly it. So we had a really historic run up in benchmark interest rates and those were translating into higher mortgage rates, and everyone thought that this was going to lead to a you know in some people thought it would be a house price collapse. Others thought it would be some sort of impact, something signific one way or the other. And yet fast forward twelve months. I'm
looking at the case, Chiller intokes. We had like a tiny dip, you know, relatively small going into the end of last year, and now house prices are rising again.
We basically hit like the shortest housing bear market ever. We did really tiny dipping prices. Every index you mentioned, I saw some other one just yesterday, like one of those like National like Freddy Ones. I don't know, that's like rocketing up again. Obviously we know that like the homebuilders sort of like slammed the brake. So it's like, okay, here's prices following buyers drop out, homebuilders get crushed, their stocks are is we've been talking about on a bunch
of recent episodes. They're like basically at all time high. So somehow this huge repricing of mortgages did not cause the housing bear market that many but not everyone expected.
Yeah, and I mean it's bad news if you were hoping that house prices would collapse that you could finally enter the market, news if you are a homeowner potentially. But anyway, you remember we talked to a guest last year, I think it was last October, and the idea is basically, we were getting this really weird housing market with rates going up, but house price is actually not that vulnerable to a decline. And I think that scenario has more or less panned.
Out totally and it's been the theme of a few episodes, but it is totally true. Which is that a precondition so to speak of like a real housing downturn is unemployment and the existence of forced sellers, and so it's not a very good time to buy. But also very few people are forced sellers other than I think we like talked about, you know, their divorces and things like that,
or people who have to move for their work. And you know, this has manifested itself, not just in firm prices, but like no housing inventory, and the people who track levels of housing inventory, it's like record lows are close to it. And so yeah, demand has dropped with high high mortgage raise, but so is supply and you get your price stability.
That's right.
So on this episode, I am very pleased to say we're going to be doing a checkup of the weird housing market. Let's put it that way. We're going to be speaking again with Jim Egan. He is, of course the US housing strategist over at Morgan Stanley. So, Jim, thank you so much for coming back on all thoughts.
Thank you for having me back. It's a pleasure to be here.
So since we last spoke, I've been following your research and your thesis when we spoke was this idea of basically a subdued impact on house prices, maybe less housing activity itself. Since then, you've sort of ratcheted down your expectations for house prices and then ratcheted them back up, not by a huge degree, I should say, but walk us through what the past ten months or eight months or so have been like from your perspective, trying to gauge what's going on here?
Right, So, I think you two both brought up a lot of kind of the key underlying points for how we think about the housing market, our general framework, we like to call it our four pillared framework, where we're talking about demand for shelter, supply of shelter, the affordability of the US housing market, and the availability of mortgage credit. But a lot of what's been going on has been
this kind of juxtaposition between supply and affordability. Mortgage rates move incredibly higher, and we see affordability deteriorate at a pace unlike anything that we've ever really seen in twenty twenty two. But the key question to ask on the
back of that is who's affordability actually just deteriorated. And the structure of the mortgage market this time around is such that you have what we'll call strong hands, a lot of homeowners were able to either buy their home or refinance their mortgage at record low rates, and so they have these thirty year fixed rate mortgages where they're just incentivized not to list their home for sale. And so, Joe,
you mentioned that inventories are close to historic. We have existing listings going back over forty years, and we're pretty much at the lows right now. And so if you don't have those homes listed for sale, then all of a sudden, despite the fact that affordability might theoretically warrant lower home prices, homeowners aren't willing to sell or they're not forced to sell into those lower home prices that affordability might theoretically warrant.
Of the inventory that exists, how much of it is people who are selling for some reason or another. Because there's some selling, it's none versus the role of new supplies. So basically new homes.
When we think of inventory, we break it down across three lines, right, existing listings, new home builds, and then you have kind of what we call the shadow inventory. This is distressed this is your forced sellers, this is foreclosures. Right, We're going to put that to the side for this conversation, because we do think that mortgage credit standards that fourth pillar.
They've been so robust, they've remained so tight in the aftermath of the Great Financial Crisis, that we just don't necessarily see a substantial increase in defaults and foreclosures coming now from a new home sales perspective versus an existing home sales perspective, a new listing's perspective versus an existing listings perspective, this is still largely going to be an
existing listings market right new home sales. One of the characteristics over the past six months of this year has been the fact that new home sales have made up a larger percentage of total transaction volumes since two thousand and six versus existing However, that just means they've climbed back to about twenty percent of transaction volumes, So existing listings are still call it, eighty percent of those monthly transactions, even if those listings are kind of running at forty year lows.
So one of the interesting things that's happened in recent months is the home builders seem to have really ramped up activity, which is somewhat unusual because you would assume with interest rates going up, their cost of capital would be increasing, and yet it seems that supply is still so tight that everyone wants to get in on building new houses. How big of a surprise has that been for you? And would you expect the new home building response to moderate at some point?
So I think if we take a little bit of a step back and look at the total starts figures, because I agree, if we look at some of the housing data that's come across in the past month, the past two months, I'd say that the three data points if you wanted to grab an optimistic housing view, would be do home sales? Wait, what's optimistic?
Yeah, I don't even I don't even know what the optimistic side is anymore.
That's a good question, I guess if you want to say that we're going to enter I don't even want to call it a V shaped recovery, but a significant increase in housing activity and then potentially even an increase in home prices on the back of that, as opposed to maybe an L shape. Have we found the bottom and we're moving or another leg down? Okay, So if you wanted to grab a we're entering a recovery activity? Is going to increase. Sales and starts are going to increase,
Prices are going to increase. By the way, these are not our forecasts. You would grab new home sales, you would grab housing starts, and you would grab home builder confidence. Right, those are the ones that have been increasing. I mentioned already new home sales making up a larger share of transactions than really any point since two thousand and six to begin this year, that we think, in part is
helping home builder confidence increase. It's climbed every single month for the first six months of this year after falling in every single month with twenty twenty two. But one thing that we would say here is a growth in new home sales is not necessarily indicative of a growth in the overall demand for shelter. That housing starts number, we think we have to take a step back and
look at it in terms of single unit and multi unit. Right, single unit starts have historically made up call it, seventy to eighty percent of that number. They're a slightly smaller share of that total number now, as multi unit has made up a bigger share from peak in this cycle. In April of twenty twenty two, single unit starts are
down over twenty percent now. The rate of that decline has slowed in recent months, and one of the reasons that we think that builders are also turning a little bit more optimistic is the backlog of homes under construction has been able to clear that built throughout last year supply chain issues related to the pandemic labor constraints. It just took longer to finish homes. As starts have come down.
Units under construction have come down from peak. Units under construction are down about one hundred and twenty five one hundred and thirty thousand units. That's not the case on the five plus unit construction side. Units under construction continue to grow and the numbers that have beat expectations recently. We still think that multi unit is driving the bus.
There.
May of this year, remove all seasonal adjustments. May of this year we saw more five plus unit starts than any month since nineteen eighty six. Wow.
I think it was this conversation that we had last year, and I learned like a bunch of terms that I had only pretended to know before, like headship raids and how you measure household formation. So I really appreciate you I really appreciated that because I finally got to learn
a few things. But one of the things that we did see, especially during the sort of like the pandemic boom, weirdly enough the twenty twenty one the sort of surgeon household formation, people leaving their roommates, people moving out of you know, maybe moving out of their parents' house, like the sort of like twenty tense cliche of like living in your parents' basement, et cetera. What are we seeing in like current trends of household formation.
I think that's one of the key questions to where we're moving going forward. And I will caveat this by saying, the data here is a little lagged. We are starting to see it slow. Okay, for all the trends that you just mentioned, household formation really increased over the course
of the past three years. If I was on this podcast in twenty nineteen and we were talking about demographics, yeah, and what they would have meant for household formation going forward, we would have said that demographics warrant one point three to one point four million formations per year for at least the next five Okay, the last three years, we've seen something closer to one point eight wow million.
Wow.
Yeah, you mentioned headship rates. If we don't think that headship rates systemically should have moved higher, they certainly have over the last three years. But if you don't think that longer term they're moving higher, that means that we've pulled forward. If our original numbers were somewhere close to correct, call it one point two to one point five million households. Just real quickly.
I know, I said I learned last year on the podcast what headship rates are, and now I forget what's a headship rate again?
So a head ship rate, when you look at the population, you break it down by whatever cohorts you want to. Let's just do it by age, okay, right. So a headship rate is if you take everybody who's call it twenty five to twenty nine years old. Picture At twenty five year old, they're living in an apartment with three other people, the headship rate of that very small four
person cohort twenty five percent. Right. If all of them moved to their own apartments all of a sudden, you have oh four people heading exactly, okay, right, And so typically headship rates for that early to mid twenties, you're talking twenty five ish percent, and through your late twenties early to mid thirties they climbed to the fifty five percent where.
They The household formation is a verb and headship rate is a noun kind of or stock versus flow maybe one way to think the stock versus full Okay.
Yes, so I realized I should have asked you this directly at the beginning of the conversation. But what is your base forecast for house prices?
Yes, and so you did talk about a little bit of oscillation and what we were calling for. When I came on in October, we had brought our end of twenty twenty three number down to minus three percent year over year. We have just raised that we're back to flat zero point zero by the end of the year. And that is despite the fact that we continue to see in our forecasts a handful of months of negative year over year prints. We just did so the case
Shiller number for June it's two months lagged. It's April data. It's the first time they've turned negative year over year since twenty twelve. We think that's going to be short lived. It's going to be a couple months, it was only about twenty four basis points negative, and we think by the end of the year we're going to be back to flat.
I just want to say when you when we hit you on in October, you were there was an out of content.
I mean, yeah, it was.
I think it was a lot of credits.
It got a lot of pushback, and then it turned into the consensus space.
But like it really did, like at the time, this was it was a real out of consensus called and I think that we should like sort of take a moment to recognize and that's you know, that's how I have you back. But that was like at the time you people must have thought you were crazy.
Listeners can't see Jim's face, but he's thinking how to Reswand first.
Of all, thank you. There were certainly a lot of conversations in the fourth quarter of last year that asked why we weren't calling for home prices to fall further. Yeah, I would say that you made the comment that it moved towards consensus. It certainly did. And I don't think that our zero percent call by the end of the year is too far from consensus right now.
So what's the biggest wild card or risk factor in your outlook at the moment, because I know you mentioned that you have this sort of four pillar way of looking at the housing market. I think the four factors are supplied demand, affordability, and credit availability. And then there's also this question of unemployment, which seems to be a big one sort of hovering over the industry or the market as a whole. So what are you looking at as the biggest risk factor to your outlook, Tracy?
I think you mentioned a really good factor here from the unemployment perspective, But I want to take a step back and frame this in terms of the risks to the call to the upside and the risks to the call to the downside. We do think that if we're wrong, it's because home prices ended up climbing more than we expect by the end of the year. And we think that because look, affordability still remains incredibly low, close to
multi decade lows. And so if you were to see affordability start to improve, and perhaps it improves because maybe we get more of a soft landing than we're expecting, Maybe the labor market starts to slow down, doesn't necessarily fall off a cliff. Maybe inflation really starts to slow down, and all of a sudden you get a world in which perhaps the Fed can start cutting earlier than people expect rates start to come down. Affordability is largely a
three prong declaration. It's incomes, it's rates, and it's home prices. And if rates start to come down, yes, affordability going to be very difficult for that to get back to where we were in the twenty twenty twenty twenty one timeframe. But if people start seeing five and a half percent mortgage rates as opposed to seven, that could bring more people off the sidelines, and supply is still going to
be low. Jaybackau and our agency MBS team calculates something called the truly Refinanciable Index, and I do think this is one of the more important numbers in our forecast, or at least interesting. It measures what percentage of the mortgage universe has at least a twenty five basis point incentive to refinance at any given point in time, given where prevailing rates are. As we're sitting here today, it's
less than two percent of the universe. If mortgage rates would rally all the way to four percent, that is nowhere close to our forecasts by they if they get to six percent by the middle of next year, we think that would be roughly in line with expectations. They might be higher than that. But if they get to four percent, that truly refinancible index only climbs to twenty one percent of the mortgage market. Seventy nine percent of mortgage homeowners have a mortgage rate of three and a
half percent. They're not to be incentivized to list their homes as these rates start to come down. So you could get this demand reaction into what is still an incredibly tight supply environment that leads to upside risk to our call.
Interesting, So the demand variable just seems way more potent than the supply variable on the upside, on the upside downside, Yeah, now we're looking at supply. Okay, if you don't necessarily see an improvement in affordability, if you do get a harder landing than we think, if the unemployment rate picks up, and so all of a sudden, you do have issues that remain there from the demand side, and you have some impetus for supply to start being delivered into this
lower demand environment. That's where you could start to see on prices come down because of where lending standards have been. We don't think it's going to be defaults and foreclosures. You anticipated where I was going to ask, because I imagine, so we're at like three point six percent unemployment, Like you know, there's a world where like it goes over
four and a half. Yeah, I don't know, but like I imagine that let's say that went up to five percent in a recession, that that would have much less of an impact on housing supply than an equivalent move in the year two thousand and seven, with so many of the ninja loans and variants.
I couldn't have said it better myself. Like one of the huge differences you mentioned ninja loans just the overall structure of the mortgage market, the percentage of the mortgage market that were adjustable rate. You had mortgages that were resetting into a lower home price environment had a tighter
lending standard environment, so that monthly payment was increasing. Those homeowners effectively needed to refinance that mortgage, and it was really difficult for them to access that credit, which meant a larger a large share of mortgages falling to Linquin. This time around, not only do you not have that lending environment, you have a much stronger just mortgage base.
On top of that, services have a much more robust toolkit, if you will, for closure mitigation, options, modifications, servicers working to help borrowers stay in their homes. That wasn't something that we as an industry had had a whole lot of experience with in two thousand and eight. Services are much more comfortable with that now, right.
I forgot like all those stories of like people trying to get their banks on the phone, even I just.
God, yeah, I just had big flashbacks to writing a lot about like the hamp modification program post two thousand and eight. But like now we have blueprints for doing these sort of modifications or like loan forget, not forgiveness, but the modificing.
Yeah, somehow to stave off the like the wastefulness and the costliness of a foreclosure.
Yeah.
But since you mentioned banks and credit availability, we have seen some banking drama this year, and there was some talk initially that concerns around bank portfolios and maybe banks preparing for higher capital regulation or requirements was going to lead to less willingness to underwrite mortgage credit. Is there any evidence that we're seeing that or is that something that's on your radar.
It is definitively on our radar. We've done a lot of work under an umbrella that we've kind of called a new regime for bank assets. For the reasons that you're mentioning, we do anticipate more regulation either being proposed
or announced through the end of this year. Where regulations like LCR liquidity coverage ratios t lack total loss absorbing capital, banks away from the gesips having to have their mark to market losses on available for sale securities moving through to their regulatory capital which they could have opted out of up until what we believe these proposals will look like. All of that, we think means they have to hold more cash. Effectively, they have to have a higher level
of liquidity. It means they're going to have less dollars to lend. It also means they're probably going to be looking a little bit more shorter duration on the asset side, and banks by a lot of mortgage backed securities. By our estimates, banks hold about thirty three percent of the agency MBS universe. They buy that as longer duration assets, so we do think that that's going to impact mortgage
rates from that perspective. When we originally thought through this, again Jay back out of the agency strategist, he went underweight mortgages because this is a structural change to bank demand for mortgages on a go forward basis. But valuations matter as well, so we're neutral at this point. Mortgages did sell off, and so we think that at this point they're effectively fair value. But that is how we
kind of have to think about affordability moving forward. And then from a credit availability perspective, if you ask where from a four pillar perspective we were in that outlook the last time I was here versus now, I would have told you that we probably expected lending standards to ease, at least on the margin over the course of twenty twenty three. We no longer believe that lending standards. We think, if anything, they'll stay tight, probably going to tighten from here.
Some of the credit availability indices are already showing a little of that behavior, but lending standards have remained so tight for fifteen years. The question is really how much tighter can they get.
I want to talk about another dynamic of this sort of pandemic housing boom. You know, we talked about the surge and household formation and roommates no longer being roommates and people moving out of their family's homes. The other thing we saw is people with high incomes leaving cities and going into markets in which they had above average income.
So if you're working for Facebook or something and suddenly you can like go live you know, in Arizona or Utah or whatever, and suddenly you're the highest paid person in the area, you can outbid all the locals for homes. Obviously, like that wave ended, probably reversing a little bit, and then some companies like, no, we actually don't want you out in the middle of nowhere. Come back to the office, Ecerea. How much did that sort of just stort things and
contribute to price appreciation? And how much is this sort of like I guess it's like ameliorating some of that wave like affecting the market now.
So from a contribute to price appreciation perspective, if you ask me the one data point I really want to know for home prices six or twelve months forward, it's supply. If you ask me five years forward, it's population migration
and where people are moving. But if you think about what happened when at the outset of COVID, it was almost a perfect storm from a home price perspective, where you had this demand people their ability to work from home, maybe their desire to get a little bit more space
leave densely crowded areas. I think I mentioned this last time I was on but the home price appreciation between less densely populated zip codes and more densely populated zip codes bifurcated in a way that we'd never really seen in our data going back to the late eighties early nineties, because not only did you have that demand, but with mortgage rates coming down to historical lows now all of a sudden, the buying power of that demand is increased
and supply was racing to all time lows. And so you kind of had this three pronged demand plus buying power of demand plus tight supply leading to real incredible home priz croak in some of those areas.
Since we're throwing out sort of idiosyncratic things here, can I ask about airbnb supply And this is something that has been cropping up lately. People talking about like, oh, well, no one wants to stay at an airbnb anymore. It's too much hassle, it's too expensive, you have to clean up the entire apartment or house before here how to leave. I've never stayed in an airbnb, by the way, so I have no idea. People are talking about that as
a potential source of marginal supply. So if airbnb hosts can no longer get people coming into their properties, maybe they just decide to sell. Is that at all something that you're looking out for, or is that maybe wishful thinking on the part of people who are hoping for a flood of supply to come into the market so they can finally buy.
Look, I think that's an important question because something that I hit earlier on the downside is where could supply come from? And we're constantly trying to figure out if there's some pocket of homes that could hit in a lower demand environment, a challenged affordability environment. And one question that comes up has been are these kind of individual investors who maybe bought homes for short term rentals, could
they become that supply? And I don't have the exact numbers in terms of how much supply that could really represent when we look at the mortgages holistically that were originated over the course of the past three years, it's a lot of fixed rate paper, it's a lot of really low interest rate paper. You've locked in a very low cost of shelter, even if it's not your primary shelter. You have an elevated amount of equity in that home.
Perhaps you're not seeing the rental demand that you might otherwise see, but it's not necessarily something that we think is going to end up being enough supply. We're targeting a few other areas that we think might end up materializing as that potential supply that does drive our barecase.
Now speaking of idiosyncratic things, and again maybe it's not enough to move the dial, But what about the eye buyers? And I remember there are all these stories about like, you know, we even talked about it recently on an episode with Greg Jensen, which is like people had these algorithms and everyone's like, oh, these are the real suckers.
They'll buy anything at any price.
Did that really move the dial in your view? Like how much of a are you thinking about things like that? Disappearance of the eye buyers?
Any numbers that we can see about the amount of homes that have been purchased. Kind of on the institutional side, I think if you look at the markets, and this is more broadly not just eye buyers, but if you look at the markets where institutional investors have been a little bit more active over the past few years, those also tend to be some of the markets that saw
the highest degree of home price appreciation. So did that demand maybe lead to home prices increasing a little bit more than they otherwise would perhaps perhaps on the margins. But one thing we'd say is that it doesn't appear as if the number of homes purchased was really that large a percentage, at least as far as the total housing market is concerned. And then, Joe, to your point about that demand perhaps not being there. Demand has been
pretty weak. The bifurcated housing view that we talked about from last year was a function of sales volumes coming down, but home price is not following because supply has been so low. And so here we're thinking it's another world in which look, as long as supply remains contained, this is just another piece of that weaker demand part.
Right, I have to ask again on the topic of idiosyncratic factors. But I remember we spoke to you about this the last time you were on but baby boomers and the idea that baby boomers own a lot of houses, in some cases multiple houses that they might be using for additional income. What are the prospects that that supply gets freed up anytime soon? And I think your answer to this last time was not within the next decade. But has anything changed?
I mean, that's our bair case. You've hit it on the head. It is they own roughly a third of the housing stock. Not boomers in general, but people over the age of sixty five hold one third of all owned homes in the United States right now, and over fifty percent of them bought that home before the year two thousand. So you're talking about a homeowner who has seen an incredible amount of home price appreciation. They're also probably less likely to even have a mortgage attached to
that home. So the whole lock and effect that we've been discussing doesn't necessarily apply in the same way to these homeowners. Another big difference, going back to that shadow inventory foreclosures between two thousand and six, two thousand and seven and today. Roughly sixty nine to seventy percent of owned homes back then had a mortgage attached to them.
That's down to sixty one or sixty two percent today, and I think part of that's being driven by these older homeowners who've paid that off.
So a huge chunk of the housing stock is unforeclosable under any economic environment because there is just no debt attached to it at all, Virtually unforeclosed, virtually.
Unforclosable, okay exactly. And so we think that that's also contributing to the fact that foreclosures are going to remain low now. It it's our bare case, it's not our base case, because we're still seeing a trend towards aging in place. My grandfather's in his early nineties in Connecticut, and I know that he's not thinking about selling his
home at any point in the near future. But they own more than enough homes to create a supply issue by the very definitions we just spoke about owning their homes before two thousand for instance, that means they own the home in two thousand and eight, they watched the value plummet. If we get a harder landing, if you
start seeing unemployment rates take up. If you start seeing a little bit more weakness than we're expecting in home prices, perhaps they're going to be willing to start listing these homes at a larger clip or a faster clip than we're expecting. As you mentioned, in our base case ten to fifteen years, it will become supply at some point, but can really change dynamics if it becomes one to two years.
So we talked about your arguments last year about the sort of frozen slash weird housing market, how that became consensus, and your base case for this year is for house prices to remain relatively flat. What are you looking out for for the rest of the year, like, what is top of mind for you?
So I'm going to come back to supply and affordability. Why we've tweaked our forecasts is because of the fact that affordability historic levels of deterioration. It's still challenged, but affordability is no longer getting worse. In fact, over the past six months it's improved on the margins supply close to forty year lows. It's no longer setting new historic lows every month. You mentioned that kind of people who are forced to sell, death and divorce, maybe moving for jobs,
or the turnover rate. It seems like from a supply perspective, we've kind of hit that, and so the rate of change, the direction of travel for those two metrics matter because of the lock and effect. We don't see supply increasing all that substantially moving forward. We don't think you have another leg down here. We don't see affordability improving hand over fist as we move forward, but we don't see a lot of deterioration moving forward from an affordability perspective either.
Those are the things that we're going to be tracking the most closely. But what does that mean. It means that from a housing activity perspective, a sales perspective, a starts perspective, we think the big legs down are behind us. We think we're kind of moving sideways here. The year over year comps are going to get a lot more attractive in the second half of twenty twenty three, in particular, in the fourth quarter, you're going to see some year
over year growth. I think for the full year, existing home sales, housing starts, single unit housing starts are still going to be down ten to fifteen percent, but they're down twenty five percent through the first five months of the year, so that's a much a pretty significant improvement versus where we've been. Home prices they'll stay negative year over year for a couple months, they're going to keep growing month over month. By the end of the year
will be flat. And the new home sales are the one statistic that we do think is going to show year over year growth simply because on a relative basis, they're the only game in town that luck and effect keeping existing inventory off the market.
All right, well, Jim, thank you so much for coming back on odd Lots. Really appreciate it.
Thank you very much for having me. Thanks Jim. That was great.
So Joe, that was really interesting, and I really enjoyed being able to catch up with Jim, given that, you know, given the call last year was pretty out of consensus and then sort of became the de facto thing. One thing I hadn't realized was that stat about housing starts, like the differentiation between single housing versus multi I didn't realize it was so segmented.
No, that's what I know.
It's a really it's a pretty extraordinary start. And the fact that like rents have like really slowed, and yet at the same time multifamilies starts continued to be setting like these like monster numbers, is like kind of wild.
I also just think that like the degree to which the housing market is much less frail than it was in two thousand and eight or the last time we had a bear market, because obviously, and we've talked about this on a couple episodes, like unemployment would of course be a driver of more supply, but if you don't have like bad underwriting and you don't have people at
the brink. And his point about how now there's a sort of like modification infrastructure, like these are like huge things working against the sort of like bare case in housing.
Yeah, and I mean I remember post two thousand and eight the stories about how some of the mortgage servicers just didn't have enough people to go through all the paperwork and it was just a massive mess. But now that infrastructure seems to be in place. The other thing I would say is, speaking of segmentation, I wonder it feels like the economy overall is just increasingly segmented between
homeowners and on homeowners, and it really is. I know, he talked about affordability having increased to some degree, but it really does feel like it's getting increasingly hard to get on that housing ladder totally.
It's like it could be for years to come, like in the year twenty thirty or the year twenty forty, Like there are still this huge divergence between like millennials who had a pre twenty twenty two mortgage and yeah, seriously, and yeah, I think you're right on, Like that's like a really interesting It moved so fast and so sharp, and some people are sitting on these like there's incredibly cheap loans and some people never see them, and that's going to weigh on people, and they like have these
huge consequences that we have no idea about.
Yeah, and that refine boom that we saw post twenty twenty. I also think the tail of it is incredibly long in some respects and probably unappreciated, because if you lock those lower housing costs in, you have them for years, yeah, years and years, while others do not. And so I think that's feeding some of the frustrations as well.
And to his point, like you could have mortgage rates going back down to four percent, which is far outside of anyone's base case, like not even close, and even that no longer moves the dial that much because so many people have rates on some level locked in below that is pretty wild.
Yeah, it is all right. Shall we leave it there.
Let's leave it there.
This has been another episode of the All Thoughts podcast. I'm Tracy Alloway. You can follow me on Twitter at Tracy Alloway.
And I'm Joe Wisenthal. You can follow me on Twitter at the Stalwart, follow our producers Carmen Rodriguez at Carmen Erman and dash Ol Bennett at Dashbot. And check out all of the Bloomberg podcasts under the handle at podcasts.
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Content, go to Bloomberg dot com slash odlots or we have transcripts, a blog, and a newsletter, and we have a real estate channel on the odd Lots Discord, which is a really fun place to talk about all these topics. Discord dot gg, slash Odlogs.
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