00:00So there's a lot to dig into there. Let's start with just mortgage rates overall just below six percent.
00:05Am I supposed to get excited about that? It's the first time that we've been below six percent since 2022
00:11for all intents and purposes.
00:13So affordability in the U.S. housing market is improving but it's improving from a level that we hadn't really
00:19seen in 40 plus years.
00:21Big picture we'd say housing is still unaffordable. It's just not as unaffordable as it's been.
00:26Mm hmm. And I have to though imagine the fact that rates even though they're coming down mortgage rates the
00:32fact that they are still sitting near some of those levels has to contribute to what we were just talking
00:36about in the intro that homeowners are staying put for 12 years at a time on average.
00:42I mean how does that compare historically and what does that mean for supply.
00:47So from a historic perspective the rule of thumb when we were and this is years ago you were thinking
00:52something in like the six to seven year range.
00:55But as you can see from some of the data that's been shown right like we've been picking up for
00:59quite some time a deterioration in mobility has been a theme of the housing market for several years at this
01:06point in time.
01:06But you're right where mortgage rates are today versus where they've been over the course of the past 12 to
01:1115 years is one of the things that's keeping the homeowner kind of locked in to their current residence.
01:17Just to put that into context we're still in a place where over 50% of mortgages are below 4
01:22% so breaking a hair below 6% you're talking about a mortgage market that is still roughly 200 basis
01:28points out of the money and we've been sitting there for over three years.
01:33Well something I always wonder about you know if we do see mortgage rates move meaningfully lower you know not
01:39just inching lower but you know a percentage point or two.
01:42I mean what does demand look like on the other side of that could you actually see prices get a
01:47lift there because you have people finally moving around and all these buyers on the sideline finally comfortable jumping in
01:54more.
01:54That's the $40 trillion question in the U.S. housing market right now and we think there's a number of
01:59ways to get around that.
02:01One of them is I mentioned 50% below 4%.
02:04One of the issues we have from a locked in perspective is that we went from 3% mortgage rates
02:09to north of 7% mortgage rates incredibly quickly.
02:12So as we break below 6% you're almost hitting this air pocket of outstanding mortgage balance.
02:16There's not a lot of outstanding mortgages between 4% and 6% so you're not unlocking an incredible amount
02:23of that.
02:23When you think about what it really means from an economics perspective of the homeowner if you bought a home
02:28in 2016 30 year refinance with 30 year fixed rate mortgage freely refinanceable most people probably refinanced in 2020 or
02:362021 if they're still in that house.
02:38I didn't go 12 years back I went 10 years back but their monthly payment is lower if their income
02:43has been picking up the same way as just median household income their monthly payment is a share of their
02:47income today probably below 10%.
02:50If you bought in the past three years so if you're somebody that might get unlocked if you will your
02:54monthly payment is a share of your income is probably north of 25%.
02:57So you're asking somebody to step into a dramatically less affordable situation.
03:02We think this will unlock marginal supply we've already seen it listed inventories are higher than they were in 2023
03:08they're still about 20% below 2019 right wash in supply in this country.
03:13But we think that it only will raise demand if you talk about sales volumes marginally our forecast we had
03:19mortgage rates already getting a little bit below six five seven five to six we're calling for three to four
03:23percent growth in sales volumes this year so nothing to write home about.
03:26Jim I only have about 30 seconds left with you but broadly speaking here I mean what do you think
03:31is the solution or do you think that it's realistic to think that we're going to see supply increase in
03:36this country or is it going to have to be something causing prices to come down.
03:40So when we think about prices coming down the main angle that we're going to look at from that angle
03:45is supply.
03:47We do think that you're going to see supply increase marginally but we don't think it's going to be enough
03:51to truly bring prices down.
03:53We think that it's we're going to be in a tight supply environment for a few years and we think
03:57home prices are kind of stuck in this one to two percent growth range.
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