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Hello and welcome to another episode of the Odd Lots podcast. I'm Tracy Alloway.
And I'm Jill. Why isn't thal Joe.
There's been this very long running now it feels, conversation about the health of the American consumer. Yes, you've seen all that commentary, right, So you see these headlines that are like consumer debt at a record high, and you see some of the sentiment surveys which have for the past two years been coming in pretty bad. They started to look kind of bad when all the tariffs were announced. Again,
they've improved a bit since then. And yet consumers seem to, you know, pretty much keep doing what they've been doing for a long time, which is spending, buying houses, things like that.
Well, they're spending, for sure, But this is the thing.
There's all this dismal sentiment data everywhere you look, and yet by and large, you know, you read like CEOs, you look at the retail data, et cetera.
It's not like that terrible.
Companies seem to be doing fine, but there are pockets of the economy clearly that are softening.
There is rising.
Inventory of homes. This is like one of the huge stories in the economy. So there are clear areas where high rates and stuff are having in effect. But to your point, like it has not been some sort of linear story of people are depressed in the economies.
Farm But you're right, we have seen some signs of softening, So you know, we have to ask is it going to be different this time? Is it the start of some sort of real deterioration in the health of the US consumer. I have also seen some very interesting stats recently, specifically about consumer lending and mortgages and things like that.
I've seen, for instance, that existing home sales are down one point nine percent year to date and have recorded the lowest volumes by count at this point in the year since two thousand and nine. And when you hear those, you know, since two thousand and nine dates, you start to get a little worried.
Right, this is definitely the case.
I saw something I think it was from Redfin they said there was a record gap between sellers and buyers in the housing market right now. Look, this is one area where the high rates environment, Like, there's clearly something going on. We haven't gotten like big you know, when rates shot up in like twenty late twenty twenty one or whatever that was. Do you know, by the way,
twenty this occurred to me last night. Twenty one is kind of a long time ago, Like I know, I was thinking about this last night because it's sort of a cliche to point out that the pandemic twenty twenty was long time ago. But some of those really pivotal years where we got the surge of the raid hikes, we got the surgeon inflation, even that's starting to fade into history a little bit. I don't know, maybe just last night I was think about getting.
Old and Joe, time is a flat circle. That's all I'm going.
But there's something like, you know, house prices didn't fall off cliff when rates were high dramatically, which was a surprise to some Like some people thought, Okay, they're hugging rates dramatically. The housing market is going to be affected. The housing market is the US economy. Therefore the US economy will fall off the cliff. That did not happen. But there has been this slow down and lately we've been seeing like, okay, like rates are still high, even
with talk of raid cuts, et cetera. They're still high and there's clearly this sort of accumulation of household inventory, these imbalances that are emerging. I don't know, maybe we will get price to clients.
What's going to happen.
Well, I'm glad you brought that up, because we actually do have the perfect guest. We're going to be speaking with someone who was very, very correct in calling that we wouldn't see a massive house price.
I thought it was wrong.
I didn't say it at the time, but he came on the podcast like, we're not going to say and I was like, there's no way.
I'm glad I didn't say. This is why I never get.
Anything wrong, because I don't state prediction because you don't have opinions. But as a matter of professional accountability, when we were interviewing him, in my head, I was skeptical.
All right, well that's a big maya coupla from Joe. Okay, without further ado, then we are going to be speaking with Morgan Stanley housing strategist Jim Egan. He's been on the show quite a few times before. And here's where I produce my disclaimer, which is that stat that I just quoted about existing home sales actually came from one of his recent notes. So, Jim, welcome back to the show.
Thank you so much for having me back. It's an honor to be here.
I'm going to start, Actually, I'm going to go back in time for a second. Let's just start. Why has the American consumer been so resilient? And it's kind of funny because you see people even talking about it still. So we just had corporate earnings and there was this funny comment from the AMEX CEO where he basically said, our card members say they don't have any confidence in the economy, but they keep spending, which is pretty funny to me. But why this strength?
Yeah, So I think there are a number of different things driving the underlying strength in the consumer. We do a lot of work across our debt analysts and Morgan Stanley Research with our economists to kind of try to tie these positive macro numbers to some of the things we're seeing on a more micro level. Look the unemployment rate. We're at four point two percent, very low unemployment rate. It's been low for a few years now. And on top of that, you've had an incredible amount of wealth growth.
There's been volatility in markets recently, but whether it's home prices at record highs and the record amount of equity that homeowners and sixty five percent of Americans are homeowners. The equity that they have in their home, or the wealth they've been able to gain from appreciating financial assets. That's contributed to consumer's ability to spend.
These tracks completely with me because I'm anxious about this date of the economy. I read all the headlines like everyone else. But you know, like I owned a home, I bought a home, I have my retirement account. It seems to be doing fine despite my anxiety. I don't think I'm like changing my behavior anyway.
And I think another piece to that when we think about just the consumer balance sheet, one of the statistics that gets quoted all the time is the just debt service ratios debt service to income. It's above where it wasn't twenty twenty one, but it's still it's so of the lowest levels we've seen in the past couple decades. The capital c consumer, the holistic balance sheet of the consumer that still looks healthy. We don't think that the
consumer holistically is over levered. There might be some pockets of pressure, but we don't think they're in aggregate overlevered.
Yeah, so this is exactly what I wanted to ask you because one of the things that I've been sort of internalizing from recent years is this idea that the aggregate hides a lot of stuff happening in the tails. Right, And the question, I guess is always when the tails start getting fat enough that they start affecting the whole. And this is one reason why your recent research really caught my interest and I actually wrote it up in the All Thoughts newsletter. But you are starting to see
some pockets of strain. Describe what you're examining right now.
Yes, so thank you for writing that up.
Visibility was very much No, thank you for producing it, honestly.
And I think what we're seeing and this is something as part of my role at Morgan Stanley, I work on the teams that look at auto credit, within asset back securities, credit cards, all of those other consumer products. And one of the i'll call it apparent contradictions that we were seeing was the macro consumer data that we were just discussing, incredibly healthy consumer keeps spending and then we're seeing delinquencies climb, delinquencies climbing with the unemployment rate
as low as it was. That was something that we had been asked to explain a fair amount of times. We're trying to find better data to explain, and so the impetus behind that report was to kind of say, look, subprime auto delinquencies have been climbing to a point where they're higher now than they've been at any point. I mean some metrics there above where they were in two thousand and eight, two thousand and nine at their prior peaks. Now there's some apples to apples issues there, but you'll
see those numbers. Prime auto delinquencies have started climbing. Unsecured consumer delinquencies are up. They're not at local highs, but they're up. And so from a pockets perspective, we are seeing a little bit of those delinquencies climb.
I just want to explain the terms really quickly, but what's the official definition of delinquency.
So delinquency as we're talking about it here is somebody who is thirty days past due on their loan. So we'll either talk about it in terms of thirty days or sometimes sixty plus days. But you've missed at least one or two payments on a debt instrument, whether that's an auto loan, we'll look at it for mortgages, credit cards, and so on and so forth.
So this is really important though, because in the aggregate things are mostly fine, but we're seeing this rise across different categories, which is not entirely intuitive. So what you're saying is that there are these tails, there are these sources of stress, but that they're not a function of credit worthiness.
What are they a function of might not be a function of aggregate credit worthiness, And that's when it comes into looking at these statistics that we need to use to think about just kind of broadly, how the economy, how the consumer is going to move forward. But I mentioned debt service ratios right when we think about what's brought debts service ratio is down to kind of some of the lowest levels we've seen in decades. The mortgage
market plays a big role. The largest piece of debt on any household balance sheet that owns a home is almost certainly going to be that mortgage. And the lock in effect that we've heard in the housing market, that's a function of the fact that a majority, an overwhelming majority, of mortgage debt in this country thirty or fixed rate mortgages. Most of those borrowers were able to take out that
mortgage at historically low rates. In twenty twenty, twenty twenty one, the effective rate on the outstanding right now four percent, prevailing mortgage rates six point eight six point nine percent as we're in this studio today. So when you think about two thirds of the country or homeowners, their effective rates at four percent are dragging down that payment. Only sixty percent of homeowners even have a mortgage, so forty percent own their home free and clear any debt. They're
not contributing to the numerator. And the thirty five percent of households that are renters rents don't count as debt
service in these equations. They're contributing to the denominator in terms of the income piece of this calculation, but they're not adding to the service piece, right and or the debt service piece, And so that's all helping to drag this down and potentially missing a few pockets of specific borrowers that are under a lot more pressure than those aggregate numbers would suggest.
Just to be clear, so is the story that the stress is building basically among the unfortunate people who have a mortgage, but don't have a Zerbier mortgage.
I think when we started to see delinquencies climb, and this is two to three years ago, we started to see it subprime borrowers, and those tend to be borrowers who in this post GFC past fifteen years, lending standards have been tighter, more likely to be renters. We're not capturing rent, and so their payments are getting tougher. But then to your point, now, over the past twelve to eighteen months, now prime delinquencies are moving higher. These are
households that are much more likely to be homeowners. And what we think we're seeing there is exactly the dynamic you're talking about. Right, If you bought a home prior to twenty twenty one, Let's say you bought in twenty sixteen median priced home percent down prevailing mortgage rates at the time, that was a thirty year fixed rate mortgage. Most homeowners who bought at that time refinanced at record
lows in twenty twenty twenty twenty one. And if we just assume that their incomes have been growing along the levels that median household incomes have been growing for the past nine to ten years, their monthly payment is a share of their income is eight to nine percent. Today. Anybody who bought before twenty twenty one, that median household,
we think that payment is probably below twelve percent. If you bought the past three years, as rates moved materially higher, your monthly payment as a percentage of your income median household probably twenty four to twenty six percent.
This is like the most important state in the world.
Yeah, this is like you have the haves and half knots of renters versus homeowners, but you also have the have and have nots in homeowners themselves.
Yes, and so we think that the Joint Center for Housing Studies at Harvard right, they have some great statistics on affordability, and they will qualify thirty percent of your income as the threshold for are you cost burdened on shelter,
So twenty four to twenty six percent. We're not saying that those homeowners are cost burdened, but they're spending two to three times more of their monthly paycheck on that mortgage than somebody who was fortunate enough to buy prior to twenty twenty one, which you'd think has to be crowding out something and maybe that's it hasn't been spending that that's clearly been the case from the data that we talked about earlier, but maybe it's these marginal payments on other debt service products.
So one of the results of having a lot of people locked into mortgage rates that maybe they got before everything went up by quite a lot is the lock in effect and the idea that people don't want to move houses because they'd have to get a new mortgage
and then they would end up potentially cost burdened. And I'm curious if we're still seeing an impact from that particular or as much of an impact from that particular dynamic, or are we at the point now where people are thinking like, well, maybe mortgage rates aren't going down anytime soon, and so I'm just going to bite the bullet and do something new.
So, if I were to take a ten thousand foot view and answer your question, the locket effect is clearly still playing a role. Right If we look at overall inventory levels as a share of the outstanding housing market, the chart still looks like there's a TYPEO given how low inventories are. But I can't sit here like I have been able to in the past and say we're at historically low inventories, right, we are starting to see to the point that you're making. We are starting to
see four sale inventory volumes move higher. Year over year, inventory volumes are up almost it's almost eighteen consecutive months, now almost a year and a half. They're up almost
twenty percent from those lows. And while that's still below where we were we are in the fourth quarter of twenty nineteen, below where we were when rates picked up massively and inventories kind of retrenched, that's still a pretty healthy increase where we're starting to see a little bit more supply come on the market here, despite the fact that the lock in effect remains two hundred and fifty selling.
Is it just eventually, like, what is the source of the inventory? Is it the people who have needed to sell for a while are finally capitulating and you're not what, I finally.
Got to sell this house.
Is it that there are some marginal buyers who have dropped out because they've been waiting. I don't know what is the source of this inventory? And this is the longest inventory growth since the GFC.
It's the highest percentage change when I look at year over year growth. But we just saw with the most recent data that came in, it's now the biggest it's been on a year over your basis since the GFC. It's also the second largest it's spin in the history of the data, which goes back to the early second nineteen eighties.
What streak a year over year growth?
Oh?
Okay, Like just in terms of how much we're up now, the question as to who is selling i'd argue probably one of the more important questions in the housing market right now. Yeah, so it's a question we're trying to answer, but it's one that's a little bit more difficult to answer. We can identify at this point where the inventory is picking up more. Right You look in states like Florida
has some of the steepest increases. Texas has had some pretty steep increases, and we get a lot of questions, For instance, in Florida, cost of insurance increasing, Are the ancillary costs of home ownership? Is that forcing inventory? We don't know if that's the case. We can't empirically prove that right now, but I think you combine that with twenty twenty one was a long time.
Ago Yeah, this was my realization last night that actually twenty twenty one was not yesterday.
Yes, and these people have been lack of effect has had people stuck in their homes in a lot of instances for probably longer than they wanted to be. Growing families both in terms of number of children as well as larger children, like just growing needs for more space, if those for lack of a better word, if those dreams have been delayed, like maybe the realization that rates might not come down all that much, maybe it's time
to do that. And home prices are up fifty percent since March of twenty twenty, Like over the past five years, you have a fifty percent growth in home prices. It's perhaps those homeowners with that equity might be just a little like marginally more willing to list.
And the economics to make a little bit more. Yeah, this is yeah.
Wait, can you talk a little bit more Since we're all about digging into the aggregate and finding the different tales here, can you talk a little bit more about the different pockets and geographical differences between what you're seeing in supply and home prices.
Yes, So we've been trying to figure out what are the most because we talk about home prices nationally, the housing market is so hyper local that those national numbers are helpful, but they don't describe the dynamics that are going on at the ground level at any individual place
in the country. Right. And so when we look at the growth and inventory, looking at it year over years, looking at it since the fourth quarter of twenty nineteen before the pandemic started, you're seeing the sharpest increases in the South, right, Like you've seen it in Florida, You've seen it in Texas, a couple of states that show up a little bit more on the year over year numbers,
or Colorado, North Carolina. When we look at the implications from home price perspective, what we've seen to be more at least statistically significant for now are places where either those inventory levels are higher highest compared to the fourth quarter of twenty nineteen, which you have New Orleans eleven of the top fourteen msas from that perspective, or in Florida or Texas, and that's where you're seeing softer year over year home price growth, or in some instances where
you are actually seeing prices come down on a year over year basis. The other side of that coin is the Northeast. It's New York, it's New England, it's the northern Midwest. Those are places where inventories are still falling. Inventories are far shy of where they were in the fourth quarter of twenty nineteen. And to put all of these percentages into context, rationally, inventories are down. I believe it's twenty eight percent from the fourth quarter of twenty nineteen.
So to talk about places where inventories are actually up relative to fourty twenty nineteen, that is an outlier relative to national numbers.
This conversation wasn't on the record, but I'm going to quot him anyway. I was trying to my friend Connor saying he writes for Bloomberg Opinion. Hopefully it doesn't mind me quoting him. We're talking about this phenomenon of the fact that inventories are very tight in the Northeast, and one of the things that he said was that, And again, I don't think he told this to me for publication, but maybe he's written about it.
So I'm just going to take a risk.
That it's okay to quote him from a chat that I had with him. But I want to give him credit, but that there's this natural, long standing migratory pattern in the US of people moving essentially to the sun belt from the northern and that the way he characterized it to me is like imagine a university town in which suddenly for a few years no one moves out of
the town after graduation. How inventories would rapidly diminish, And that because of the lock in, the mortgage lock in, you're not getting the same sort of migration out of the cold areas to the southern areas, and so people are stuck in the cold areas basically, and that is does that resonate as a reason for why vacancy rates would be very low or inventory rates in the northeast would be very low right now?
So from the data that we've looked at, is common around the migratory patterns. They didn't start in COVID when people moved to the southeast. They were happening before that. That makes sense to me. I don't have the specific numbers to completely agree with that as a research channelist on air, but what I can say as well, which
could be contributing to that, we've talked demographics in the past. Yeah, and one of the underlying trends in the housing market has been the fact that we're now at a place where over one out of every three homes, over thirty three percent of the housing market is owned by people over the age of sixty five. And when you look at where yes, there's Florida, and there's Arizona, and there's
South Carolina. But when you look at where they're more concentrated as a percentage of the housing stock in particular, it's in the Northeast. It's New York, it's in New England. And we've rerun this analysis posts the pandemic, their tendency to agent place has continued to get more and more prevalent. So I think you combine some of these trends and this is what you're left with.
Yeah, the Northeast is nice. I'm just going to put that out there. Nothing wrong with the Northeast. Okay, So we're talking about an increase in delinquencies, a slight pickup even in prime borrowers, but we're not saying foreclosures yet, and I think that's an important differentiator. But what would you expect to be a sort of catalyst I guess
for things getting worse. And since we keep bringing up the Great Financial Crisis in this conversation, I mean back then people were two indebted, too overlevered, and when house prices started to fall, they couldn't keep up and everything basically collapse. But to your point earlier, we don't really have that level of indebtedness anymore. So what's the catalyst, right?
So, I think there are a few things going on. Another piece to the different levels of leverage today versus back then was the fact of the types of leverage we were giving borrowers. According to data from I believe it's the FAHFA, ninety two and a half percent of mortgage balances in the country right now are fixed rate.
Most of those are thirty or fixed rate back two thousand and five, two thousand and six, almost an ARM era and adjustable rate mortgages and not just adjustable rates short reset arms with teaser rates option arm mortgages that could negatively amortize, so the balance of your mortgage could get bigger over the first couple of years of that product.
Those were payments that as we hit kind of an economic hiccup, unemployment rate picks up, money becomes a little bit more tight, and then your mortgage payment ratchets higher. That makes it even more difficult for you to make that monthly payment. We don't have that this time. Not only that the home ownership rate back then was over sixty nine percent. Today, I believe it's sixty five point one as we walk in here. Four percentage points does not sound huge given how big the United States is.
From a household perspective, that means that we have four to five million fewer homeowners than we would have if the home ownership rate was over sixty nine percent. So your marginal homeowner is a lot cleaner from that perspective that they're not necessarily going to see, certainly not going to see that changing mortgage payment that's going to drive things there. And because of our experience seventeen years ago, now mortgage servicers have a much more varied toolkit at
their disposal to prevent them. We'll call them foreclosure mitigation options, modifications.
In the life loan workouts.
Basically, so it's difficult for us to foresee a place where mortgage foreclosures pick up too significantly in the forecast horizon.
Could we see national home price declines.
We could, We're talking about inventory increasing. Demand has not increased alongside inventory. Affordability is still very, very challenged. And I mean we mentioned one point nine percent decrease here to date from an existing home sales perspective. As supply increases and demand stays flat, sometimes it's just as simple as looking at the supply and demand piece. We've started to see home price appreciation decelerate four point one to three point four percent just over the past two months,
twenty five percent. A quarter of the largest one hundred msas in the country are already seeing home price declines. I don't think it's out of the realm of possibilities for this imbalance of supply and demand to take us through zero percent. I think that what we're talking about from how healthy mortgage credit is the locked in home buyer doesn't need to sell at lower prices. I don't see a true home price correction. That's not in our
base case. That's not in our bare case. But we do have a bare case of negative three percent home prices by the end of this year. Base cases plus two decelerating from here. It's slowing growth, but it's still positive on the national level. But I think there is a realistic bare case where we go below here over something.
Can you talk maybe a little bit about the wealth effect, because if we're talking about like how important it is that people have locked in mortgages at low rates, or maybe they have big portfolios of stocks and bonds, maybe they're a baby boomer and kind of luck down in their wealth building lives, that seems like a big factor.
And in the current environment, we've had some volatility, although things are looking better as we record this on June twelfth, So I'm just curious, like, how do you start to look at how people feel about their actual financial assets and financial position when it comes to making decisions about home ownership or whether they should move and things like that.
Yeah, and it's that piece of it. The wealth effect in particular is something that our economists have been talking about a lot to talk through just how confident the consumer has been in spending over the past quarters, over the past couple of years, and so when they think about the consumer's ability to keep spending going forward, whether it's smaller purchases or larger home purchases durable goods, they are looking more at the financial aspect piece of this.
When we look at the growth in wealth in this cycle, it's been more on the financial assets side than it's been on the real estate side of things, which has the housing strategist, with home prices at record highs, took me a couple seconds looking at those numbers to see that that's what that is kind of what's going on underneath. And so when they think about the borrowers' ability or the borrowers willingness and by borrow I should say consumer's
willingness to keep making those expenditures. They are looking at equities, they're looking at financial assets, and they're looking at the volatility there, but they do think we need a pretty healthy correction for it to really impact that in a material way.
It's interesting, like when I think about wealth effect sometimes I think of it psychologically.
It's like, oh, people like look at their.
Investment portfolio and it's green, so I feel good and go out to dinner and take a vacation or whatever. But listening to you, it's just crazy. Like if you have a twenty nineteen or twenty twenty one vintage mortgage and you've been investing in the market for some time, regularly putting money in a four own K or maybe
some taxable account. You have a very strong inflation hedge because you have this recurring payment that has not gone up, assuming it's fixed, and you're just sitting on this boatload of capital gains. That is just that's not psychological, that's real. Now, whether the degree to which you can monetize it is obviously questionable, because if everyone's trying to monetize it at
the same time, that could shrink. But just on your paper like, that's great, that class of person who has that situation is just an extraordinary large cushion and margin and a sort of winning on every front right now.
Yes, the households that were homeowners before the pandemic hit in March of twenty twenty or made what was probably a pretty scary decision to buy twenty or twenty twenty one, those are the households that, on the perspectives that we're talking about, to the points that you're making, we're really big winners here.
Huge winners.
Payments have stayed flat even at a time of galloping inflation. They're sitting on all these capital gains. There are wages that probably just assume they have a normal job, have gone up marginally. So just the nominal payment of the mortgage relative to how much they're pulling in is probably fallen over the last four plus years or however many.
I mean, it's pretty nice.
Well, since we're talking about people who lucked out in their wealth building, I want to go back to baby boomers for a second. So what if the narratives that we hear when we're talking about housing is this idea that one day the older generation is going to pass away and eventually a big segment of the housing market is going to become unlocked and available for sale, maybe at lower prices. Who knows. Is that still something that you're sort of incorporating into your longer term forecasts or
have you seen anything change on that front. I guess in the year or so since we last spoke to you.
So it is something we're still incorporating when we think about housing. Not over the next two to five years, but this is really a longer term, like this is a ten year plus aspect to this. But we very much subscribe to the narrative that we are underbuilt and undersupplied from us housing holistically, and we get asked the question, well, how do we fix the underbuilt aspect of this? Or how do we fix the aggregate undersupplied aspect of this,
And it's we do come back to this. Right to the point I made earlier, more than one out of every three homes in this country is owned by somebody over sixty five. From nineteen eighty through twenty twelve, that was twenty five percent was effectively flat. It's increased pretty significantly.
It's very regionally concentrated where those homes are owned. And eventually we do think that that's the supply that starts to help fix this, but it's an eventually thing, and not nearly in our two to five year forecast, horizing.
And then the other thing I wanted to ask you is do you speak to home builders at all to try to get like a read on maybe new supply of housing coming onto the market. And I would be really curious what I guess the atmosphere is like right now, because on the one hand, you know, things seem okay, but on the other hand, you have a lot of uncertainty over the long term outlook, lots of policy questions and things like that, and I guess I'm wondering, like how they feel at the moment.
So I don't want to attribute what I'm about to say specifically to homeowner commentary, but we do have to look through all of this when we think about our pillars of the housing market, the supply aspect of that, which is both existing listings, which we've talked a lot about, but.
The builder commentary.
Right, I don't want to ascribe this to homebuilder commentary, but what I do want to say when we look at the new supply of homes, single unit housing starts, building volumes. Look, we work closely with our economists, as I've been talking about in our policy team. Tariffs, right, effective tariff rate now elevated versus where it's been historically, even if it isn't as high as we might have
feared earlier in April. The primary way that's going to flow through the housing market is, in our view, home building. The cost of goods to build homes going higher, immigration policies. When we look at different sectors of the economy, the sector with the largest percentage of foreign born workers construction, so the cost and availability of labor also going to
be contained. Home Builder confidence has been coming down this year, and when I look at all of the housing statistics that we forecast, what has been weakest in twenty twenty five is single unit housing starts. Over the first four months of the year. We're down seven percent versus where we were in the first four months of twenty twenty four.
And we think that we are significantly underbuilt. So if we're going down and we're undersupplied, like we do, think that that from a home price perspective, provides a little bit of support.
So we have widespread view that there are not enough homes either in the short term or in the long term in America, and the trends are going in the wrong direction.
Awesome, all right, Well, on that happy note, Jim, thank you so much for coming back on Odd Lots. It was great as always.
Thank you so much for having me.
Thanks Jim, transat.
Joe.
That was such an interesting conversation and I always enjoy hearing from Jim. One thing I really like is that he has all the numbers like in his head. He's not looking anything up when we talk to him. He's just you know, I guess he thinks about them all
day every day and so he remembers them. But I gotta say, like the number that sticks out to me is that variation between someone who bought their house in like twenty sixteen versus someone who bought it in twenty twenty four And I guess it's eight percent versus twenty six percent of their housing costs something like that. That is just insane, Tracy.
I'm on the website Know Yourmeme dot Com right now because I am looking for the source of that meme of the girl whispering in the ear of the other girl, and I just keep imagining it.
It's like he has a mortgage, right said he bought t has a Zurpiera mortgage.
But like I always knew that intuitively by the way, it came from the movie Aquamarine.
Which I had literally never heard of, and the one actress I didn't know that.
Yeah I didn't and an actress named Jojo no last name is whispering to Emma Roberts. Anyway, I just thought I would say that now since I'm on the page, and maybe people would find that to be useful. But I did not appreciate quite. I mean, yeah, of course, I sort of intuitively understood that if you had locked in a mortgage at some point in the twenty tens or really nailed the timing and twenty twenty or twenty
twenty one. That was great, But I don't think I had like quite appreciated just how massively that gap is. What is the prospect of that going to change anytime soon? Like there's going to be these two you know, this sort of division in society where it's like, hey, you have a lot of people living in homes and they don't have a mortgage because they're old and they've aged in place b than the lucky people who have this mortgage edge.
And then everyone else, everyone who rents.
Or because they had to buy in twenty twenty four or twenty twenty three because for whatever reason, and now they're paying a massive amount of their income in their mortgage paper.
But I do think this is also a really great example of why it's important to look beyond the aggregates and the sort of you know, single average number and kind of dig into the tails.
Well, just on this point too, a lot of like scare headlines or scare posts on Twitter. It's like, look at the surge in delinquencies or whatever, or versus two thousand and eight, two thousand and nine, and sort of touched on this, you know, one of the things that I do think is important to note, and Jim mentioned you know you have to be careful with apples to apples comparisons.
Is that, like some of these effects can be magnified, not because there's like a massive deterioration and credit worthiness, but because there was so much extension of lending during the boom time, et cetera. Like you sort of have to be careful with some of these statistics because things can change.
A lot for different reasons at different times.
Anyway, No, I mean, the home ownership market is structured very different, really different to what it was in two thousand and eight. Oh, we should have asked about the gcs and Fanny and Freddie. Oh well, maybe next time we do that next time. Shall we leave it there for now?
Let's leave it there.
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