What the economy is really telling us — and what it means for your pipeline

Name: What the economy is really telling us — and what it means for your pipeline
Uploaded: 2026-06-23T21:55:00+00:00
Duration: 1 h 2 min 15 s
Channel: HousingWire

00:00:00Welcome, everyone. I'm Zeb Lowe, the Vice President of Media and Events here at HousingWire.

00:00:05And today's webinar is What the Economy is Really Telling Us and What It Means for Your Pipeline.

00:00:11It's produced in partnership with Longbridge Financial. Now, before we dive in, I've got a

00:00:17few housekeeping notes for you. At the top of your screen, you'll see an option for chat, ask a

00:00:22question, resources, and you even have emoji reactions at the bottom of your screen. This is

00:00:29an interactive webinar, and we want to hear from you. So we'll be hosting a Q&A towards the end

00:00:34of

00:00:34today's session, but you can submit questions at any time using the chat. A recording of today's

00:00:39session will be sent to all registrants early next week, so you'll need to worry if you missed something

00:00:44or you want to re-watch part of the webinar. Our webinar today will be led by Dr. Chris Mayer.

00:00:50Dr. Mayer is the CEO of Longbridge Financial and a leading voice in housing finance, with a career

00:00:56spanning academia, public policy, and capital markets. Since 2013, he has guided Longbridge

00:01:03from a startup to one of the top two reverse mortgage lenders in the United States, driving

00:01:09product innovation and scalable growth. Professor Emeritus at Columbia Business School and former

00:01:14Federal Reserve Economist, Dr. Mayer, has testified six times before Congress and has been featured in

00:01:19the New York Times, the Wall Street Journal, Bloomberg, CNBC, and NPR, among many other media

00:01:26outlets. His work focuses on helping older Americans access home equity through responsible,

00:01:32transparent solutions that support financial security in retirement. He holds a PhD in economics

00:01:38from MIT. In today's session, Chris will bring a unique lens to where the economy and mortgage market

00:01:46are headed and what it means for originators. Additionally, he'll talk about the impact those

00:01:50market forces have on one of America's largest mortgage segments, older borrowers. Chris, the floor is

00:02:00great. Thank you very much, Seb, and welcome to everybody. We have lots of good friends attending on

00:02:09the webinar, so thanks to all of you who are here. And for those of you who are watching this

00:02:15in the

00:02:15recording, hopefully it will be interesting for you as well. So the agenda for today is actually, a lot of

00:02:23this is going to be, as Seb said, kind of back to my, you know, putting on my professor hat

00:02:29for a little

00:02:30bit and researcher to talk about the economy and how to think about what's going on now. And I will

00:02:36say

00:02:36it's, you know, to say it's an unusual time might be appropriate. That's not quite clear to me that we're

00:02:43at a point in time where we haven't seen some of the things we're seeing before, but certainly we're in

00:02:49an

00:02:49unusual period. And we're also in a period where I think there's a lot of uncertainty. And that

00:02:54uncertainty is driving what's going on in the housing market, the mortgage market, the economy.

00:03:03And more than we've seen in a very long time, there's really a bifurcation in terms of how you're

00:03:10viewing the economy from where you sit today. And so I will talk some bit about that and definitely

00:03:18I'm open to questions from those of you who will, you know, hold some time for questions at the end,

00:03:24but I'm going to start by talking about economic trends. And in particular,

00:03:28what people are sometimes referring to as the K-shaped economy, which means the top is getting,

00:03:37is doing even better and people at the bottom are doing even worse. And unfortunately or fortunately,

00:03:43that's where we're sitting today. I'll talk a bit about economic fundamentals,

00:03:47inflation, jobs, interest rates, and how that all plays out for the housing market,

00:03:55including where we're seeing strengths and weaknesses in the market. And then I will,

00:03:59you know, I'm not going to give exact numbers, but I am going to give some thoughts in terms of

00:04:04what I

00:04:04think the future holds for us, at least in the near term, in terms of the economy, housing, mortgages,

00:04:11et cetera. And then I'm going to, at the end, talk a little bit about the senior lending market.

00:04:17And in particular, the teaser is going to talk a little bit about some of the new project and product

00:04:25that our company's working on. It's not a mortgage product. It's actually a research product

00:04:34and a marketing product for those of you who are going to be out in the space. So that's the

00:04:41game

00:04:41plan. So let me start. There's been, you know, AI is driving, you know, almost the entirety of the

00:04:54growth in our economy. If you looked at the fourth quarter of last year, AI investment represented

00:05:02almost all of GDP growth. And that investment in AI, you're seeing this year estimates that

00:05:11the largest companies are going to be investing $800 billion in AI. Things got so bad in terms of the

00:05:21investment requirement that Google actually announced an equity raise. Google may be the most profitable

00:05:29company on the planet actually needs to raise capital in order to fund what they're spending

00:05:36on data centers, which is really, really, you know, a, you know, kind of a turning point or certainly a

00:05:44stark reminder that if you kind of look at what the AI spending is doing, even for some of the

00:05:51largest,

00:05:51most successful companies, AI is eclipsing what they're earning and is eclipsing their cash flow.

00:05:58And that spending has got to get a rate of return. And the question of how and whether that AI

00:06:05is going

00:06:05to get a rate of return is going to be a huge factor in terms of thinking about where the

00:06:10economy is.

00:06:11So far and away, if I'm, you know, circling these AI spending is far and away the biggest driver

00:06:17of what's going on in the economy right now. Industrial Renaissance, semiconductor, pharmaceuticals,

00:06:23defense, we're certainly seeing increases in spending, but nothing like the dollars that are going

00:06:30into the AI side of the equation. And then we have the one big, beautiful bill, which was intended,

00:06:36maybe not coincidentally, this being a congressional election year, it was intended to put immediate cash

00:06:42into household pockets and into business pockets in an election year. Unfortunately or fortunately,

00:06:49I don't think the people who are getting some of that cash are appreciating the how that is impacting

00:06:56them from an economic perspective. But this is really where we see growth. And the question is,

00:07:01how nervous should we be? And, you know, when I think about being nervous, I'm really thinking

00:07:05about AI spending, you know, more than anything else, because the rest of the economy is not that

00:07:10strong overall. And even if you look at the Industrial Renaissance side, things like semiconductors

00:07:16and defense, a huge share of this economy is either driven by AI or the government and the government

00:07:22running really large potential, you know, really unsustainable deficits during a time when we're

00:07:29otherwise in a boom. And that's putting a lot of pressure on the overall economy. If you look today,

00:07:36the largest companies, the 10 largest companies make up almost 40% of the S&P 500. I would say

00:07:43this

00:07:44isn't unprecedented. But the last time you saw a concentration of the largest companies that was

00:07:50this large was the 1920s. I'm not sure we want to point to the 1920s as a period of time

00:07:56where we had

00:07:56sustainable, you know, equity markets where things were going really well. So, you know, but that is

00:08:03the last time we saw this kind of concentration. And this is before SpaceX, Anthropic, and OpenAI

00:08:09go public. SpaceX is looking to go public at, you know, $1.77 trillion, I think is the estimate.

00:08:17I mean, these are astounding numbers. Just to give you a context of how large that is,

00:08:21if you look at the last internet boom going into 2000, and you add up all of the companies

00:08:28that IPO'd going into 2000, and you adjust for inflation, SpaceX's IPO loan is the size of the

00:08:38entire IPO sector in the internet boom, and our last really big internet boom. And that doesn't count

00:08:47any of the other companies that are, that have or are going public in the markets. So, you know,

00:08:55a lot of people are betting that AI is going to be the thing that is going to drive the

00:09:01economy.

00:09:02It may, but, you know, the kind of return that people need to get from that investing

00:09:09is astoundingly large, and, you know, certainly leaves one somewhat concerned.

00:09:15If you look at the consensus, this is a poll from Bloomberg earlier today,

00:09:23you know, the economic consensus is solid growth and high inflation. And those are usually two

00:09:29things that don't go together for very long. Because the Fed starts responding to high inflation

00:09:36by raising rates, and raising rates has historically resulted in slowing the economy, which is really

00:09:43the, you know, the only tool the Fed has in terms of pushing down inflation. And even relative to what

00:09:49I, you know, to making this chart, you know, last talk I did a couple of weeks ago, the near

00:09:54term

00:09:54inflation has continued to rise, we're now up to three point, you know, 3.9% in Q2. And in

00:10:02fact,

00:10:03the reports on year on year inflation were even above that for the, you know, for the May estimate

00:10:08for inflation. And it doesn't show inflation get any getting anywhere near the Fed's target

00:10:15until we get to the back half of 27. And, you know, these numbers have continued rising over time.

00:10:22If you look, that inflation is not having the same impact on everybody in the economy. And there's a lot

00:10:29of people talking about how do you think about the K shaped economy, I'll show you some data that

00:10:35basically shows you what the K shaped economy means. So the first is this is consumer sentiment.

00:10:43And if you look at consumer sentiment, notice, by the way, this is 100. 100 is basically where

00:10:50people are sort of neither positive nor negative. You can see there are some people who are higher

00:10:55on the consumer sentiment. Those are people who make over 100,000 a year. And there are people who

00:11:01are negative, almost historically negative. And those are people who are making under 50,000 a year

00:11:08in green. And the middle is the 50 to 100,000. And so you actually post the Iran war, you've

00:11:14actually

00:11:15seen people with 100,000 plus, whose sentiment is rising a little bit, I'm going to guess that has

00:11:20more to do with the stock market, and things about AI, whereas on the bottom, you see particularly people

00:11:27at the bottom, consumer sentiment just continues to drop, as people are looking at the world,

00:11:33you know, it's pretty much as bad as it was in 22, when rates started skyrocketing. And for many

00:11:38households, inflation rates are skyrocketing again, the way they did in 22. And, you know, for those

00:11:44folks, that's why they're looking at things so negatively. Part of the problem is the impact of

00:11:50inflation isn't hitting all households equally. The bottom 40%, if you look at the consumption bundle

00:11:55that those households have are actually experiencing a higher level inflation than people in the 40th to

00:12:0280th and the top 20th portion of the income distribution. If you look today, it's basically

00:12:09the bottom 40 are experiencing higher inflation than the middle, the 40 to 80. And, you know, the top 20

00:12:15are, you know, the top 20 are, you know, experiencing the least amount of inflation, given the consumption

00:12:21bundle that they have. And so that's a, you know, that's a tough scenario for many Americans. And

00:12:29the circumstances they're facing are, you know, really challenging. If you look at where the gains

00:12:36are, and maybe you'd say this isn't that surprising, but it's still the extent to which this is happening

00:12:41is striking. If you look at where the financial gains are, the top 1% is seeing far and away

00:12:48the

00:12:49largest gains, the 80th to 99th percentile max, the 60th to 80th, these are income, not wealth

00:12:55distributions. And then the bottom 60th, 60% of Americans are experiencing far and away the least

00:13:04gains in real net worth or real financial assets. And again, that bifurcation really has profound

00:13:12implications when we're thinking about lots of parts of the economy. And it's certainly going to be

00:13:17something that's going to have real implications for the elections and for where we see, you know,

00:13:23where we think, see things going, you know, coming forward. If you look at delinquencies on the

00:13:30consumer side, what are we seeing? Well, credit card delinquencies are here, are nearing, you know,

00:13:37the highest level that the New York Fed has measured the data. So I don't, they go back to 2003,

00:13:43for credit card delinquencies are, you know, just about 13%. Auto loan delinquencies are at a new

00:13:50high. All those higher interest rates are really pushing up payments for people. People who used to

00:13:56do a five-year, 60-month auto loan are now doing auto loans of seven or eight years. And if

00:14:02you

00:14:03understand what happens to a car when it drives off the lot, basically you're underwater when it drives

00:14:08off the lot. And it takes quite a bit of time for you to pay down that auto loan to

00:14:12the point where

00:14:13the car is again, worth what you owe on the loan, because you drive it off and it's immediately worth

00:14:18less. And, you know, that is leaving people effectively underwater on their cars, which,

00:14:26you know, is a kind of concept, you know, underwater for substantial periods of time in their cars,

00:14:31which is also a concept that, you know, we haven't seen to this extent before.

00:14:36But at the bottom, if you look at mortgage and home equity revolving credit, those are performing

00:14:41pretty well. Delinquency rates have gone up a little bit, but nowhere near where things have

00:14:47been historically. So we're not at all-time lows, but we're certainly at pretty reasonable levels,

00:14:51with one exception. And some of you on the call are probably saying, yeah, but what about the FHA?

00:14:57So within the mortgage sector, there is one sector which is not doing well, which is the FHA

00:15:03in green. So FHA loans have seen substantial increases. Some of that's technical about

00:15:08how FHA has changed the way it deals with delinquencies, but that's not the only problem

00:15:14with FHA loans. And we are continuing to see those default at a much higher rate than other kinds of

00:15:20loans. And it's almost surely driven by the data that I was showing you earlier, because folks in the

00:15:26FHA, you know, folks who are borrowing for FHA debt are people who are facing many of the kinds of

00:15:31challenges that we're talking about at the bottom. All right. So, you know, that wasn't, that wasn't so

00:15:38exciting. How do we think about this in terms of inflation, jobs and interest rates? So, whoops,

00:15:52we're not advancing. Zeb, do you have control over the slides?

00:16:05It should have just advanced to the next one.

00:16:10So it's not showing advancing. Is that my internet? Am I coming through okay?

00:16:16You're coming through just fine. So I have it on slide 14 right now.

00:16:22Okay. All right. I'm going to go back. Can we go back to slide 13?

00:16:27Yes, sir. This is just, I get a, I'm getting a spinning wheel in front of the slides. So I

00:16:31can't

00:16:31see it. All right. Hold on. Let me pivot my screen for a second. I guess I should have shared

00:16:38my screen

00:16:38against that. That's okay. So I'm not seeing the, um, let me,

00:17:06Can you hear me? I can. All right. Everything is, everything on my screen is blank right now.

00:17:16So I can't see anybody and I can't see the slides. Um, all right. Okay. I can see you. All

00:17:26right. Um,

00:17:27okay. So I can see the slide. I hold on one second. I can't really see it very well. All

00:17:33right. So

00:17:33slide 13, give me one second. I'm going to pull up the, pull up the, the, uh, PowerPoint over here.

00:17:41Um, worries. This is how you guys know that this is a live audience. So to my audience,

00:17:47if you guys have any questions for Chris about anything that he's mentioned so far, I know that

00:17:53he covered what a K shape economy was after he announced it in the beginning piece, drop those

00:18:00questions. We're keeping an eye on them. Philip, I saw your question. Don't worry. We're going to get

00:18:06through the first piece of this, and then we're going to jump into questions at the end. Okay.

00:18:13All right. Um, thanks a lot. All right. I am on slide 13. Okay. Um, all right. So this is,

00:18:25this is another not so exciting slide, which is this is where inflation is inflation is up sharply. Um,

00:18:30it's over 4% since the Iran attacks and is well above the feds target. Remember I said, people are

00:18:36projecting, projecting, you know, 3.9% for the, uh, for Q2 in terms of reported inflation. Um, you know,

00:18:47the longer things are going on in the Gulf, the tougher that's going to be. So we go to the

00:18:53next

00:18:53slide. Um, it is weird. I think I can advance them, but I can't see them. Um, all right. So

00:18:59if we look at

00:19:00the 10 year treasury, the 10 year treasury is back up to four and a half, we are not far

00:19:05from the high

00:19:06levels we've been at since COVID. And I have to say that, you know, if you sort of pulled my

00:19:16hand

00:19:16behind my back and said, you know, what can happen with, um, with the 10 year treasury, is it possible

00:19:22that the 10 year gets to five? Um, I don't think that's not my forecast, but would I look at

00:19:28it and say

00:19:28that that, that just could never happen? I wouldn't say that either. Um, and so I do think

00:19:34we're in a place where rates have been rising. We don't have a great solution to what's going on

00:19:39in the middle East and inflation is rising. And what we've been doing at the moment is playing

00:19:45off of the problem of the Gulf, you know, being closed, but a lot of countries are using stocks

00:19:53to feed the demand, um, in their economies. But the problem is China has enough oil for years,

00:20:01but not everybody else does. And as we see demand come into the summer and as we see other parts

00:20:07of

00:20:08the economy start to pick up a little bit, um, you know, we're going to see oil prices start to

00:20:14bite

00:20:14a little more and bite a little more for overall economic growth. And so my hope is that we don't

00:20:21end up in a position where this gets worse, but you know, there's a part of this, you just keep

00:20:26looking and saying, where are we headed? And is there, you know, is there a real path to find a

00:20:32resolution, um, right now? If you look at the treasury yield curve, basically there's, you know,

00:20:39the upward pressure is being driven because on the front end of higher inflation in the middle,

00:20:45this is where, you know, demand for investment by the hyperscalers is really large. And that's pushing

00:20:54up, um, that's pushing up interest rates as borrowing is going up. And at the high end, um,

00:21:01there's real concern when you get out to 30 years, if you look at the treasury yield curve,

00:21:06there's real concern that the government, um, debt and deficits that if the U S government doesn't get

00:21:11that under control that, you know, we're going to see meaningful increases and long-term increases

00:21:18in rates. And if we think we have challenges now in about six or seven years, a social security trust

00:21:24fund is going to start to be a really big problem also. And over time, the social security trust fund,

00:21:30which isn't fully funded, um, is going to create more pressure on borrowing and more pressure on

00:21:36government debt. And we're either going to be in a position where we're going to have to cut back on

00:21:40what we do in social security. And that's, you know, surely the third rail of American politics,

00:21:46actually politics anywhere is touching pensions. Um, but it's the third rail of politics, but it

00:21:51doesn't necessarily leave us in the best place in terms of where we're going to be sitting.

00:21:55So from a government perspective, um, I would not want to be one of the folks coming into the

00:22:02presidency or Congress next year to have to deal with some of these issues. It's just a very

00:22:07challenging time, you know, given the economic structure. Now we did run in the late eighties.

00:22:12We ran also really large deficits in this country, but we cured them by basically some combination of

00:22:19tax increases and some reductions in government spending. But given the military situation,

00:22:25given that a large part of government spending is going to social security, given the rising cost

00:22:30of healthcare and expenses with Medicare and Medicaid, and given, you know, what Doge did or

00:22:38didn't do, which was really have any chance of, you know, there's just not enough left when you add up

00:22:43all those things to really deal with things from the spending side of the ledger. And Doge was an attempt

00:22:50at that. It did not succeed, but it is something that probably most economists would have said wouldn't

00:22:55have been able to be very successful. So the higher for longer rates, unfortunately feels like a part of

00:23:02the economy for a while. It doesn't mean that, you know, that rates won't, you know, drop again. And if

00:23:07we get a resolution to the war, um, you know, in the Middle East, that would certainly help a ton

00:23:13in terms

00:23:14of starting to put downward pressure on inflation. And if the US economy grows faster than, um, or at least

00:23:21where some people expect with AI, that's another way that we have a way of kind of growing out of

00:23:26some of the place, you know, we're in now, but we're in kind of a bit of a hole or

00:23:30maybe a significant

00:23:31hole from a government and economic perspective. So if you look at the, um, if you look at the mortgage

00:23:39market, you can see the 30 year mortgage rates have been going up. If you look over the right hand

00:23:43side of that chart, this goes back, um, a decade, but if you look at the purple on the right

00:23:49hand side of

00:23:49the chart, those mortgage rates have been rising again, but they've mostly been rising,

00:23:54if anything less than the 10 year treasury has. And if you look at the chart on the right,

00:23:59this is the spread. And we'll see that, you know, if you look at the spread, you know,

00:24:03probably the average spreads been a little bit, you know, probably 210 basis points. If we look over

00:24:09the last 10 years, mortgage spreads right now are just below that. That's a good thing in general,

00:24:14because it's meant that mortgage rates have kind of stayed contained relative to where things were.

00:24:19And it's certainly a lot better than where things were in 2023, 2024, when the spread was,

00:24:25you know, 60, 70 basis points higher than that, which really meant 30 year fixed mortgages had

00:24:31eclipsed 7%. And were we to see 7% mortgage rates, it would not be good news for any of

00:24:38us in the mortgage

00:24:39market or in the, uh, or in the housing market period. So, you know, having spreads come down,

00:24:45I think oddly enough, higher for longer is actually good for mortgage spreads.

00:24:50One of the things that bondholders don't like are refinancing waves. And that's because they do,

00:24:56you know, they take out a long-term mortgage and, you know, if rates fall and they get paid off,

00:25:00they don't like that. So the more the chances are that rates fall, go down,

00:25:06the more that spreads are going to come in and mortgages become more affordable today,

00:25:10because the chances of a refi wave tomorrow become lower. And so that's overall a good thing from,

00:25:17you know, at least for people who are in the market today.

00:25:21If we look at the wages, we're starting to see wage growth pick up a little bit,

00:25:26but obviously that depends specifically on who and where and what you're doing.

00:25:31Um, you know, if you've got stock in Anthropic or open AI or SpaceX, you know,

00:25:35the world's looking great, but that doesn't describe, you know, most of the rest of us.

00:25:41All right. So let's, let's then pivot to the third theme,

00:25:48which is how does all of this impact the housing market?

00:25:51So if we look at the, if we look at home prices, what we've seen in the housing market is

00:25:57really,

00:25:57you know, the, you see the, this goes back to the earliest data for Case and Shiller.

00:26:03And you can see home prices were rising a lot. They started accelerating during the global financial

00:26:09crisis, you know, up to 2005, 2006 by 2007, when they hit their peak home prices fell,

00:26:16they fell appreciably nationally, you know, almost 25%. That was a tough, that was a tough pill to swallow

00:26:23for all of us. But the housing market started picking up. And for a long time,

00:26:27home price growth was in sort of a nice sustainable range. COVID hit, demand for housing picked up,

00:26:33home prices accelerated, then rates collapsed, you know, rates started rising a lot as inflation

00:26:40picked up in 22. And we've seen the housing market home prices grow, but at a much slower rate

00:26:45than they were before. And, you know, if you look at this, if you look at the very top of

00:26:49that chart,

00:26:50the top right, if you look over the last 18 months or so, there's been very, very little

00:26:54growth in housing prices in the United States. If you look across the country,

00:27:02the people who sort of said, well, in the South, all these people are moving into the South and

00:27:07we're going to see all these, you know, home prices continue to rise. And people are, you know,

00:27:13California and New York and, you know, Massachusetts, everybody's evacuating. They're never going to be

00:27:18there again. You know, that's, that's not how economic history works. It certainly hasn't been

00:27:22how the economy was worked. We've seen immigration down South slow. We've seen, um, some people relocate

00:27:29back out to some of those States and, you know, where we've seen the strongest housing markets in the

00:27:36Midwest and the Northeast are the same places where the housing markets were weakest, um, a couple of

00:27:42years ago, two, three, four years ago. So that pickup has really been kind of offsetting places.

00:27:49It got carried away. And if I looked at home prices in Austin, you know, Austin is down 20 plus

00:27:54percent

00:27:54from the peak of where it was a couple of years ago. But if you look across the South in

00:27:59Florida,

00:28:00um, California, people in Florida and California are getting hit with multiple whammies, not just the

00:28:05impact, um, of rising rates, um, and inflation, but also, you know, really high, um, insurance

00:28:15expenses. And a lot of those places are seeing, you know, seeing a tough, a tough market right now

00:28:21for people who are living there. If you look at what's driving the housing market, I'm going to sort

00:28:28of argue that the way to think about the housing market post COVID has everything to do with the cost

00:28:34of

00:28:34building and, you know, construction in general. So if you look home, how, if you adjust home prices

00:28:40for inflation, you can see the average growth rate has been about 1.1%. Obviously home prices today are

00:28:47about 12% above that trend. And so if you look at that, you'd sort of say, gee, you know,

00:28:53does that mean

00:28:54we're going to see home prices fall relative, you know, over the next several years? And I can't say that

00:28:59won't happen, but it wouldn't be my best guess. What's driving this, however, is if you look at

00:29:05the next chart, construction costs post COVID are up about 13%. So if you look at these are construction

00:29:13costs after inflation. So if you look at the very beginning of the series in 1987, the index value is

00:29:19100. And at COVID, the index value is pretty close to 100 also. In other words, for if you look

00:29:26over a,

00:29:27you know, 30, almost 40 year period, we saw construction costs have basically moved with

00:29:34inflation. They're not gotten better, they're not gotten worse. What we saw after COVID has been

00:29:40construction costs have jumped a lot. They've jumped because of the, you know, because of the cost of goods

00:29:48and materials have gone up. And then subsequently, we've seen tariffs rise, which are further put

00:29:54pressure on things like hardwood and steel and, you know, other inputs to housing, which have pushed

00:30:00up the cost of building. And then as we've seen immigration reform, which has pushed people who were

00:30:07working in construction, you know, putting pressure on them to leave the country, that has further

00:30:13created labor challenges, which is also pushing up the cost of construction.

00:30:18So if you look at this from the perspective of adjusting for construction costs, actually,

00:30:23home prices are very close to adjusted for construction costs about the level that they've

00:30:28been over, you know, going back to 1987. So going back to the last 40 years. So what that tells

00:30:35us is,

00:30:36a lot of the challenge in the housing market has been construction costs. And, you know, if you look

00:30:42at builders today, there are a lot of people that argue that we just don't have as many homes in

00:30:46this

00:30:46country as we need. I think that's right from a data perspective. But if you ask the question,

00:30:53why aren't builders building more houses, the answer is, it's not profitable for them to do it.

00:30:57So if home builders could make money building more houses, it's not like somebody sitting there,

00:31:02say, ah, gee, we decided not to build houses today. Of course not, they're going to build houses,

00:31:08and they're going to try and, you know, try and generate, you know, the ability to get growth in

00:31:14housing if they can do it. The problem is that, you know, construction costs are high. And so we're

00:31:19seeing multifamily stuff get built, but we're not seeing a lot of single family. And I'll show you

00:31:24that on the next slide. Here you can see single family housing starts. And you can look going into

00:31:312008. So from 1989 to 2008, over almost a 30 year period, we averaged 1.2 million single family houses

00:31:39a year. If you look post 2008, we've averaged 773,000 single family homes being built. And while that number

00:31:49was rising, we haven't had a single year post 2008 that got to the average construction that we had

00:31:56over that time period. And so we're just not building a lot of single family homes. What are

00:32:02we building? More apartments. That construction of apartments has been, you know, notably higher.

00:32:09Notice that the scale, you know, averaging 329,000 is nothing like the drop of almost 500,000

00:32:18or 450,000 from 1.2 million to 773,000. So while we're building some additional apartments,

00:32:27even if you look at the peak of that, where we got to 550,000 apartments, which by the way

00:32:32was the

00:32:32highest level in 40 years for apartment construction, we're still not seeing construction levels on the

00:32:39apartment side that are really offsetting the reduction in single family starts. And so the

00:32:45combination of those things has meant that we don't really have a lot of supply because it's

00:32:50expensive to build. And we're not really seeing the political consensus, I think, necessary both at

00:32:57the federal level and at the state level to take the kinds of steps that will make housing construction

00:33:02more affordable. And so for those of you out there who are, you know, lending to first time home buyers

00:33:09or trade up buyers, that market is kind of stalled because without first time home buyers, people who

00:33:14want to trade up, they need somebody else to buy. And if those people aren't in the market or those

00:33:19people are really pressed and we're not building more houses, just the whole cycle of the housing

00:33:23market becomes a more difficult dynamic. And that's really what we're seeing today.

00:33:30Now I'm going to sort of show you, you know, given the comments I made

00:33:34and given the challenges that people at the bottom have, you might be surprised to see

00:33:40that home prices at the bottom have been rising much more than home prices at the top.

00:33:46So this is data from New York and I'm going to show you four different markets. Case and Schiller

00:33:50don't publish an annual series. You have to look at individual markets to see it. But if you look at

00:33:55the

00:33:55low tier, particularly since COVID, we've seen a huge run up in lower price, you know, in the lowest third

00:34:03of the housing market relative to the highest third of the housing market. It's not only in New York,

00:34:08you see the same thing in Chicago. You also see the same thing in San Francisco, less in San Francisco

00:34:16than other places. And you also see the same thing in Phoenix. And so that run up at the bottom

00:34:25really reflects a profound challenge that people in the middle class are facing. So remember about

00:34:32two thirds of Americans own a home. So when you see the low tier of the housing market running up,

00:34:38you're really looking at people who are sort of somewhere between the 50th and the 75th percentile

00:34:44of the, you know, somewhere in that range or the, you know, the four, the something like the 40th to

00:34:50the 60th percentile of the income distribution. And those people are getting are facing tough times

00:34:57from an inflation perspective. But, you know, if you're in an age where you get married, you want to

00:35:05have kids, you want to live in a house where you can raise your kids, you know, that's what you

00:35:10spend your

00:35:10money on. And you're seeing people spend a higher share of their income on buying houses. And while

00:35:17the, you know, while people in, you know, some people in Washington have really been saying,

00:35:22well, gee, it's all these private equity investors. For a lot of people, given how much home prices have

00:35:26gone up, it's a real challenge to be able to come up with a down payment. And so if you

00:35:31look at rents

00:35:32for single family homes, they've gone up further. And if what you do is pass a law that basically says,

00:35:37we're not going to allow people to buy single family homes and rent them out. What you're going

00:35:42to effectively do is make it even harder for people who are, you know, who are trying to get

00:35:46into a single family home, can't afford to buy. Now they're not going to be able to afford to rent.

00:35:51And you're not going to be very surprised if they show up in the polls and they show up in

00:35:55responses

00:35:56to surveys and basically say, you know, my life is in terrible shape right now because I can't move

00:36:02on. I can't do the things I really want to do. I'd go on vacation and gas was expensive. I

00:36:06go to the

00:36:07store for a hamburger on the 4th of July and that's expensive. So again, just lots of pressure

00:36:13on people at the middle right now. And, you know, it's a tough time. If you look at the home

00:36:18ownership

00:36:19rate, it's basically been flat, nowhere near where it was in the prior decade. But given demographics,

00:36:24and I'm going to show you the demographic adjusted home ownership rates in a second,

00:36:28given where demographics are, we should expect the home ownership rate to be rising

00:36:32because the American households are on average getting older because people are living longer

00:36:38and you have more, you know, and seniors have a higher home ownership rate, but we're not seeing

00:36:42that in the data. So where does this lead us in terms of kind of thinking about the future? And

00:36:47again, I'm not going to give you, you know, home prices are going to go up 3.2% or

00:36:51whatever,

00:36:52you know, or 0.2, or they're going to fall 5%. I'm not going to give you a projection like

00:36:56that,

00:36:56but at least talk about things that I'm looking at and things to think about in the market.

00:37:03So the first thing is, let's see, where are we?

00:37:09Sorry, I didn't advance this. All right, here we go, because I can't see what you're seeing

00:37:15very easily. All right. So let's look at opportunity for lending today first.

00:37:20Anything that you can build that will help affordability will have a market from a lending

00:37:26perspective. The headwinds are very high for middle and lower income buyers. They're impacted

00:37:31by all the things that I've been talking about. And so, you know, if you look at that, that is

00:37:39certainly a place where there's an opportunity on the lending side. I will say that, you know,

00:37:45for me, it is really kind of depressing to see fewer and fewer people transition to home ownership.

00:37:50In this country, two thirds of households that never graduated from high school at one time could

00:37:59have expected to become homeowners. So homeownership truly was something achievable

00:38:04as the American dream. And we are really moving away from that. I think that is terribly unfortunate

00:38:10for our country. And I hope we are able to find some political resolution to some of these problems.

00:38:16I'm not saying politics explains all of it, but, you know, politics has put up a lot of headwinds

00:38:22for people who are trying to, you know, to become a homeowner right now. And it would be really helpful

00:38:29if the political environment were to get, you know, people were to take seriously the idea that we ought to

00:38:36be supporting homeowners in this country. If you look at lending the elderly of the other place,

00:38:44I often sort of say, I think, you know, at the young end and the old end, people who are

00:38:48not

00:38:48yet homeowners are one opportunity and the elderly the other. I'll show you some statistics. But 33%

00:38:54of all homes are owned by households 65 and older. I didn't make that up. That is an actual fact.

00:39:01One third of all houses in the United States are owned by people 65 and older. And if your lending

00:39:07book doesn't reflect that, that's because you may not be offering products for older potential

00:39:14borrowers. And I'm going to show you data to suggest that they do want to borrow. Just we as an

00:39:19industry

00:39:20are not offering them products that are attractive to that. And finally, on the lending side, I think

00:39:24mortgage rates are likely to be range bound as long as interest rates, the 10 year doesn't go up

00:39:30further. But I think that is a material risk. And if you think about a recession or increases in defaults,

00:39:38you know, or inflation picking up further, like all of those present upward risk to to mortgage rates.

00:39:46Certainly mortgage rates could come down to where they were, you know, a little bit ago. The idea of

00:39:52the 10 year getting down to three or three and a half to bring, you know, mortgage rates back into

00:39:56the

00:39:56fives or, you know, etc. I think that is not very, I'm not saying it won't happen. I think it

00:40:03would

00:40:03take a real recession and getting inflation somewhat under control. That doesn't feel like it's the

00:40:08likeliest scenario at the moment, unfortunately. So finally, if you look at the economic risks,

00:40:17you know, this chart could go on for pages, I'm not going to go on for all the pages of

00:40:21economic risks.

00:40:22But, you know, inflation, the closure of the Gulf, the renewed attacks, the lack of political solutions

00:40:28for the Iran situation, the Iran war spreads on mortgages reflect relatively low default risk.

00:40:36And they assume refinancing is not going to be prevalent. Both of those things could change. We

00:40:42are seeing, you know, spreads could easily go up again. I say easily could go up again. That's

00:40:47certainly not out of the question. AI productivity boom, that would be great news for the economy.

00:40:53Hopefully, it translates into income. And I will say I'm optimistic about that. It's a subject for

00:40:59another day. But the bigger question for me is not so much as AI going to improve productivity,

00:41:04I expect it is I don't necessarily think that productivity is going to 5% growth anytime soon.

00:41:10But, you know, to me, the other question is, are AI companies going to earn a return on their

00:41:14investments? And why does that matter? Because the stock market is assuming that AI companies are

00:41:20going to be extraordinarily profitable, and that they're investing this 800 billion plus dollars

00:41:26this year, forget about next year, that that's going to have to earn a real rate of return. And if

00:41:32it

00:41:32doesn't, you know, I worry a lot about what could happen in the stock market and things happening in

00:41:39the stock market will have repercussions throughout the economy, and certainly throughout the housing

00:41:44and mortgage markets as well. And so, you know, we will see how the market absorbs all of the new

00:41:52stock that's going to be issued with some of the IPOs. And when you start seeing companies like Google

00:41:57issue stock, you know, that is kind of a sign that you start to wonder if Google really thinks that,

00:42:04you know, do they think their stock is expensive? Is that why they're selling stock as opposed to

00:42:08issuing debt? You know, that's, that's like not a great sign from a corporate finance perspective.

00:42:15How will the stock market manage the IPOs? Anyway, there's a lot of stuff happening. And, you know,

00:42:21there's a lot of uncertainty that probably all of you feel in one way or another. So let me finish

00:42:26up

00:42:27by saying something about the senior lending market today. And I see, as I say, I see a lot of

00:42:30clients and

00:42:31friends, you know, on the market, as many of you know, Longbridge Financial is a senior lending

00:42:36focused company. If you look at the data, what you see is that, you know, people 65 and older

00:42:45have a much higher homeownership rate than people in other demographics. A third of all homes are owned

00:42:50by people in that demographic. And they continue to own homes and they want to live in their home as

00:42:57long as they can into retirement. Longbridge is creating, and we will have more announcements

00:43:03over this over time, a senior home equity data hub. And I just want to show you a few kinds

00:43:08of

00:43:08things that you might, interesting sorts of facts that we're going to be talking about that you might

00:43:13find in this area to think about what's going on for older Americans. And I will stop and answer

00:43:19questions. So for those of you who are on for the economic forecast and, you know, we'll, we'll get

00:43:24there, we'll get there to a Q&A as well. So if you look, for example, we just built a

00:43:29home equity

00:43:30confidence index for older Americans, how homeowners 55 and older view their financial future home equity

00:43:36in the gap in retirement. And we are really trying to understand how homeowners think about their home,

00:43:44the pressures they're under from debt payments, from maintenance, from insurance, etc. There really

00:43:49are very few statistics on how older Americans are dealing with the challenges they're facing today.

00:43:56So when I went to put together a lot of the data for this chart, there's a little, you know,

00:44:01a lot

00:44:01of stuff that isn't there, but I can show you some other data as well. So just a couple of

00:44:06other facts.

00:44:07If you think about, if you want to lend and do cash out lending and you're not thinking about older

00:44:13Americans, you probably should be primary residences and other real estate for people who are 65 and

00:44:20older represent almost $18 trillion of housing. So that number is larger than, you know, almost 30 years

00:44:32of households below age 65. So there's an enormous amount of housing wealth for older Americans.

00:44:40Now you might sort of say, well, you know, maybe those people are just happy living in their home.

00:44:45Maybe they don't really want to tap their home to cash out. The answer to that is actually, it's not

00:44:50true.

00:44:51So if you look at people who are older, so 62 and older who are borrowing last year, the rejection

00:44:59rate

00:44:59for seniors applying for a mortgage was 29%. Almost one in three mortgage applicants 65 and older was rejected.

00:45:10That totaled almost $84 billion of mortgages that people applied for that they didn't get.

00:45:19Again, households 65 and older. So you sort of say, well, why didn't they get the loan?

00:45:24Well, one of the things you can look at is how much debt they had. The thing is people who

00:45:30are

00:45:30under 62 have tremendous amounts of debt. 45% of homeowners who applied for a mortgage and were

00:45:38rejected for a mortgage had a CLTV less than 60%. That's right. Almost half of the mortgage applicants

00:45:48who are rejected had less than a 60% CLTV. I'm using CLTV because this includes purchase loans where it's

00:45:56CLTV and this includes cash out, closed end seconds and HELOCs where you're looking at the CLTV of what they

00:46:03did.

00:46:04And another quarter of them. So over 80% of them had at least 20% of equity in their

00:46:10home.

00:46:10Those are standard metrics that we ought to be able to provide credit for some of those households.

00:46:15And yet we haven't been able to do it as an industry. If you look further and you ask the

00:46:21question, what about, um, you know, what about, uh, denials? Um, oops, sorry. There we go. Um,

00:46:30what's the leading reason people rejected DTI. They don't have enough income. Not surprising.

00:46:35When you're older, your income is going down, not up. So older Americans do want to use their home

00:46:41equity, but they don't have enough income to pay the loan back. And what that says is that you should

00:46:47expect that people are going to be able to tap other kinds of products, whether the reverse mortgages

00:46:54products like our HELOC for seniors. This is an 84 billion opportunity just for the people who

00:46:59applied and rejected. Forget about the people who didn't apply because the loan officer said,

00:47:03you know what, this isn't going to work. Mr. and Mrs. Jones, I'm sorry. It's not really worth your

00:47:09time. I don't want to take fees from you to apply for a loan that you're not going to get.

00:47:13Um, so our company is committed to finding, um, responsible lending solutions to help people get a

00:47:21secure retirement. I think of, you know, young households who are not homeowners and older

00:47:27households who are trying to tap equity or want to sell and move to go somewhere else,

00:47:31but don't necessarily have the income to buy another home. When I look at the housing market,

00:47:36those seem to be two places where I really see opportunities in terms of thinking about where

00:47:41people are going to be able to go in the future. We offer, you know, a bunch of products to

00:47:47help some

00:47:47of those people from a hackum to our platinum, which is the proprietary suite of, of proprietary

00:47:52reverse mortgages and HELOC for seniors, but you will see more products coming out from us,

00:47:57um, that are, you know, trying to help all of you tap that market. So I will stop. Um,

00:48:04is that let's, uh, let's, uh, see if we, uh, have some questions.

00:48:09All right. You got me. You hear me. Gotcha. I can hear you. I just can't see the slides,

00:48:15everything else. Good. Uh, so as we, uh, wrap up, uh, audience, please don't forget,

00:48:20you can still send in any questions that you have using the, uh, chat or the Q and A feature.

00:48:25And

00:48:25we'll try to get to as many as we can before we close out our session today. Uh, so, okay,

00:48:31let's get started. Um, you, you come to this event as a professor of economics and yet you're the CEO

00:48:39of

00:48:39a large IMB specializing in senior mortgage lending. Can you just, before we get into some of the

00:48:45specifics of this, like, can you just kind of tell us how you got here? Sure. Um, the, you know,

00:48:52I've had people say, what's a nice guy like you doing it in it, you know, doing it in,

00:48:57doing it in industry, you know, doing reverse mortgages, et cetera. Um, or in the mortgage

00:49:02business period, you, you see very, very few, you know, CEOs who are prior, you know, who,

00:49:07who hold a PhD, you know, certainly not other than in the sciences. Um, you know, for me,

00:49:13I went and got a PhD because what really mattered to me was, um, studying and understanding

00:49:21ways to make people have to be for people to be able to live better lives. And what economists

00:49:28often do are trying to figure out things, you know, with government and non-government solutions

00:49:32to problems to help people live better lives. And for me, I got into real estate specifically

00:49:38in research on real estate because I bought my first home at age 23. I was still a grad student

00:49:43at MIT. My wife was working. You might say my wife bought the home and let me live in it.

00:49:48That would be

00:49:48a fair assessment. Um, but you know, we were married and you know, that that's what spouses do. Um,

00:49:54so, you know, we bought a home and I spent the better part of a year struggling to find a

00:49:59dissertation

00:50:00topic and going and just fixing up everything, you know, hardwood floors, you know, all sorts

00:50:08of stuff all over the house. And at some point I said, why don't I actually write about the house

00:50:13that I'm spending all my time in? And so that transitioned into doing research on housing.

00:50:19I went to the Boston fed. I worked with chip case and Bob Schiller, um, and started understanding

00:50:27more and more. And I wrote a paper about reverse mortgages back then predicting that that would be

00:50:32a real solution for people using them, um, in retirement transfer, you know, flash forward during

00:50:38the global financial crisis. I was involved in doing a lot of legislative stuff. I testified six times

00:50:44before Congress, I literally wrote, you know, I wrote out of papers that I wrote, we actually

00:50:50legislation occurred that was word for word, some of the stuff that I wrote and studied.

00:50:55But at some point in time, I started to recognize that if you really want to fix a problem,

00:51:01going to Washington to get the problem fixed is not really going to get it done.

00:51:06And if you really want to fix a problem, you know, spending time writing about it,

00:51:10and I'm a huge believer in academia, you understand the problem better. But if you

00:51:14really want to fix a problem, you have to do something. And for me, you know, being involved

00:51:20with a team of people at Longbridge who are really committed to helping older Americans have a better

00:51:24retirement. It was really about getting out of the, you know, getting out of the Ivy League and

00:51:29getting into Main Street and really starting to figure out how can we build products and how can we do

00:51:35things that are going to meaningfully help people in retirement and writing papers about them just

00:51:40wasn't going to cut it. What was going to cut it is really being able to, you know, to, you

00:51:46know,

00:51:46walk the walk, not just talk the talk. And so that's what, you know, that's what got me

00:51:52into this and, you know, kind of at, you know, at a later stage of my career than many,

00:51:57you know, than many of the other people have gotten, you know, into the mortgage business.

00:52:02Right. One of the questions that we had is, is it possible that we can get some information,

00:52:06some form of written information from this session for education, for, for LOs?

00:52:14Um, I mean, I'm happy to, you know, I, there may be a couple of the slides where the data

00:52:19is

00:52:19proprietary, but I basically will be able to, you know, well, I think actually all these slides are

00:52:23fine. You know, I'm happy to do, you know, I'm happy to, uh, um, to share the slides. These are,

00:52:30you know, I am from time to time doing, um, you know, continuing to do work, um, on this and,

00:52:37you know, I'm happy to, you know, happy to, uh, to try and do other, you know, other kinds of

00:52:43talks from time to time. I will sort of say, if you want places to understand the economy and mortgages,

00:52:48my friend that Tony and the mortgage bankers association does a, you know, fantastic job of

00:52:54studying, um, what's going on in the economy. Housing wire has made really large investments

00:53:00in data and housing altos and, you know, acquiring a bunch of other platforms and is building out a

00:53:06data, um, you know, platform as well. So there are certainly places, um, to look in addition to some

00:53:12of the stuff that I'm doing and that Longbridge is doing to look for different data. But if you're

00:53:17looking for data on seniors, stay tuned, um, reach out, reach out to the company and we're happy to

00:53:23share the, uh, the senior data hub, um, when we put that up, um, and online later this year. And

00:53:31I

00:53:31think I gave you a teaser of some of it, but there's going to be a lot more coming up

00:53:34on that, uh, coming

00:53:36up on the data hub. I have another one from, uh, Jared Goodwin. How much of the increase in auto

00:53:43and

00:53:43car delinquencies can be attributed to expansions and credit offered at lower ends of the spectrum

00:53:48versus increases and delinquency within credit mix. In other words, uh, our customers getting

00:53:53more distressed or is credit being offered to poor credit customers? Um, now you're eclipsing my

00:54:02knowledge of the auto industry. I suspect there are other people who are going to be better equipped

00:54:06to look at this, um, than I am in terms of, you know, what's driving specifically, you know, the

00:54:12increases in auto delinquency. So I should probably pass on, uh, pass on that question, but to suggest

00:54:19that we certainly, I think it, my view is the part of the, when you see defaults rise like that,

00:54:25part of it is a sign about who you were lending to, but part of it is a sign about

00:54:29what's going

00:54:30on with the borrowers. And we know that the borrowers at the bottom are facing stress and the

00:54:36bottom of the auto lending distribution are people who have relatively low credit scores and are

00:54:42facing an enormous amount of distress right now with inflation and the costs of, you know, living,

00:54:48et cetera. So it's not surprising me to see that. Okay. Uh, another one from, uh, Heidi Hawk.

00:54:55How do you see what's happening in the economy affect private lending to home builders?

00:55:03Um, you know, I, I think home builders, the biggest problem home builders have right now is not

00:55:10borrowing. I'm not saying that people are, you know, throwing money at them, but I think home

00:55:15builders are able to, you know, I'm not an expert on home builder Lynn, but I mean, you know, I

00:55:19met with

00:55:20some folks in the home builder sector, the NBA had a chairman's conference up in Maine that I came back

00:55:25from on Wednesday. And I don't, you know, what I hear home builders talking about are the cost of

00:55:30building, the cost of entitling and getting land, um, and the cost of mortgages for their, you know,

00:55:37for their borrowers. Those are the things I hear, you know, the CEOs and the leaders of those companies

00:55:42talking about. I don't hear them talking about, can we really get credit per se? So I think it's not

00:55:47a credit problem. I think it's really a problem associated with all of the other stresses that,

00:55:52you know, the home builders are facing right now. Okay. I got time for just one or two,

00:55:57one or two more questions. Uh, a pointed question that just popped up just, uh, just a minute ago.

00:56:03So are we in a recession at this time? I'm hearing some conflicting information.

00:56:09The answer is no. Um, although I will also say that you don't know if you're in a recession

00:56:16until a quarter or two or sometimes three afterwards when the data come out,

00:56:21but I'm pretty confident to say that based on how we define a recession, we are not in a recession.

00:56:27The labor market, the most recent data shows the job growth has continued to be strong,

00:56:32but I don't think that is a crazy question because many people feel as if we are in a recession

00:56:38because there are a lot of stresses that are affecting many households in this country.

00:56:43And so it's not a crazy question to ask. Well, when I look at the world, I feel like,

00:56:47and my, you know, my clients feel like we're in a recession. And I think that can also be true.

00:56:54Um, the other thing is just given how much money people are spending on data centers and investing,

00:57:00the tech, it will be very difficult to end up in a, in a recession, you know, in a definition

00:57:06of a

00:57:06recession where GDP growth, you know, turns negative because all of that investment shows up as GDP

00:57:12growth. So I think the data won't show a recession, even if the labor market, you know, really softens.

00:57:18Well, and that's why behavioral economics is so important as something to understand as well,

00:57:23right? Because how people feel really ultimately shapes their reality more than data and more the

00:57:27facts too, especially in a, you know, in a consumer driven economy, how people feel

00:57:31that informs their actions regardless. It's, you know, it's really, it's strange how

00:57:38both politicians and, you know, I'll say Fed economists just often completely miss what you

00:57:44just said, because it's just critically important. You know, the Fed measures inflation as, um, the

00:57:51personal consumption expenditure index, less food and energy. Now, if I asked anybody on this podcast,

00:57:59what are the two most stressed things at the moment, they are food and energy. So does anybody

00:58:06listening think that food and energy should not be considered when you're thinking about policy and

00:58:13monetary policy and inflation? The idea that you wouldn't consider those is really just missing how

00:58:19consumers feel and politicians who, you know, stand up and say, gee, the job market is strong in an

00:58:25environment like this. You know, that's what happens when they, you know, head towards places where they

00:58:30lose elections. And it's why people have lost a lot of confidence in the Fed because they don't get the

00:58:35sense that the Fed really, you know, understands and feels, um, where the, you know, what the households

00:58:42are feeling when you read some of the things that people talk about, um, in the economy.

00:58:48Right. Okay. Uh, one briefly, just one last question real quick. What are the chances of

00:58:53stagflation in the next five years? And is AI or housing more likely to cause the next major recession?

00:59:00Um, the Bloomberg terminal I showed you earlier showed a 25% chance of a recession. So I would take

00:59:11the

00:59:11over on that. Um, and, uh, would AI caught, would housing cause it? I don't see housing causing any,

00:59:22we don't have any of the kinds of imbalances and housing that would cause a recession.

00:59:28Housing is expensive, not because of crazy, you know, mortgages where people aren't, you know,

00:59:35paying them off and doing all sorts of things and lending to people who can't afford to make their

00:59:39mortgage payments, you know, housing prices are high because it's expensive to build houses.

00:59:45So I don't think we have a housing bubble in the sense that home prices are, you know, being bid

00:59:49up

00:59:49out of, you know, lack of fundamental factors. Um, but AI, um, could that cause it, you know,

00:59:57oh yeah, that could absolutely create a recession. And what would do it would be that AI companies are

01:00:04not able to generate returns on their investment. They pull back on investing. And so that AI investing

01:00:11falls. And at the same time, their share prices start really declining and you start to see defaults

01:00:17on the debt that is financing a lot of that 800 billion plus of stuff. And the combination of those

01:00:24things and the loss of income from households associated with, you know, stock gains and, you know,

01:00:30asset price increases, could that cause a recession? Sure. That could cause a recession. I'm not

01:00:34predicting it will, but could that happen? You know, if we don't see the productivity in AI,

01:00:39I can, you know, I could certainly see that as a possibility. And again, it's not something I want.

01:00:44It's not something anybody wants, but you know, there's a lot of, you know, some of the trends I

01:00:49talked about earlier are concerning if I kind of put my financial economist hat on for a little bit.

01:00:55And, you know, you never know what the future holds till it gets there. And our company is

01:01:00certainly finding a lot of things that we're doing with AI that isn't about reducing jobs,

01:01:05but it's really about improving productivity, improving the products that we're doing,

01:01:09allowing us to better interact with our customers and provide things like this data hub that we could

01:01:15never have done without AI. So are we seeing benefits of AI? Huge benefits. Is it killing jobs? Not at

01:01:21our

01:01:21company. Um, but you know, that doesn't mean that that's the experience that everybody has,

01:01:28you know, all the time. That's for sure. Well, thank you again, Chris, for joining today's

01:01:33conversation and sharing your insights on the evolving state of home equity and today's mortgage

01:01:38market audience. If we didn't get time, uh, to your, if we didn't have the time, we didn't get to

01:01:43your

01:01:43question. Uh, HousingWire, uh, we'll pass over all the chat Q and A questions, uh, to the team. And,

01:01:50uh, thank you to everyone who's attended today's webinar. We appreciate your time and participation.

01:01:54A recorded version of today's sessions will be available within the next week on HousingWire,

01:01:59uh, at the same page used for registration. Again, thank you all for, uh, for joining us.

01:02:04We look forward to seeing you at future HousingWire events. Thank you.

What the economy is really telling us — and what it means for your pipeline

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