Hey welcome back to the podcast today i have who i refer to as the oracle of all things: housing, ivy, zellman uh. You know her name and if you don't, you need to google her, you need to try and get on her newsletter, but ivy. I want to jump right in to interest rates, inflation, inventory and now a potential war. A lot of people are asking.

Is there a correction coming? Well, it's a long list you gave, i think we you're in a war - maybe maybe the united states isn't, but there is a war going on. So you know that should make everyone feel very uneasy. Yeah um, we have significant inflation and we are looking at many of the uh tailwinds, that drove the economy, from stimulus, delaying paying student loan debt, having child care tax credits and, of course, unemployment, excess benefits. All of that was tailwinds that, with that, as that is evaporating, it really arguably becomes headwinds as it relates to residential real estate.

I think that i don't see a correction coming near term and i think that the moderation is what i would call it, because thinking about where we didn't expect and where we've gotten it wrong, is that as the primary buyer is so challenged to find a home, They want to buy homes, they're, certainly um we're seeing pent up demand unleash that, and we see that reflective in the number of young adults, the 20 to 39 year olds that are leaving home and that number just um not shockingly went up call it from the End of 2000, or, let me think, um from 1990 to 2000. It was 16.4, which is kind of like a normal number 20 to 39 heroes living at home and at the end of 2010, it shot up to 19.7, which really wasn't surprising because we were in the middle of a great financial crisis and all these young adults Back at home - and we thought we called it - the the coiled spring that we would see all young adults leave once they were gainfully employed and it's hard to date - imagine living in your parents, house and or basement. So i think that the reality is that number we expected by the end of 2020 would normalize. Unfortunately, it didn't normalize, it went up even further and it went up.

Another call 100 basis points. We were puzzled by it and we can go through a lot of reasons where maybe the stigma is not so bad anymore, living multi-generational. Maybe it's affordability. You know the data is telling us one thing and we're just not.

You know confident. We really appreciate if this is a secular change. You know certainly par people getting married later, but the good news is kobet started unleashing some of that and we started seeing that we were seeing decoupling. The numbers are still above where 19 were and they were elevated from the end of 10..

So the reason i give you all that is to to recognize that millennials are buying and at the end of uh really 16 was the inflection point for home ownership rate. So people think about millennials are now buying they've been buying for the last five years. Arguably you know that's been the whole trajectory of the growth off. The bottom was early millennials, stepping up and time to get more shelter with their families growing.

Now what we've seen happen is that the primary buyer is whether they can't afford it, which is definitely potentially the case or, secondly, they just can't compete with cash buyers, so, starting at the second half of 21, we really started seeing which was a lull in the Market started um evolving relative to the strength we had seen in you know: 20. In the back half of 20, first half at 21. summer started hearing more builders, saying you know things we're removing our sales caps we're seeing homes on the existing market maybe sit a little bit longer. Some things feels like it's changing and then, as rates started, moving higher, we actually well.

This was in advance of rates moving higher. We started seeing sequentially in the second half acceleration greater than typically seasonal, slowing, normally sequentially, you see slowing, so we were doing better than historical seasonality and i think what we explain that in the second half of of 21 is what we really saw was a shift In investor sentiment, yes, investor sentiment above and beyond. Second home private customers, i'm sorry go ahead. I want to unpack all of that and for the listener um this ivy.

This could be the first interview. I've ever done. Where i didn't say, let me tell you who we're listening to right, but you're such a legend and you've been so kind to be. On my show multiple times um.

I actually want to unpack each one of these because you know you're the one guest. I know if i can just say one thing and and you're going to share brilliance, but i want to. I want the listener to unpack one at a time. So, let's go to interest rates.

First, the fed told us that they were going to raise the rates. Three times this year, right as of today, we talked about you know the the 10-year being of you know: uh 189., you got massive sell-offs in terms of the equity market, with all the possible uncertainty or very real uncertainty. Why are they raising the rates? Well, inflation right now, you know, according to cpi running at seven percent and recognizing that you know pce, which is another measure that the fed really focuses on consumer expenditures, personal consumer expenditures, running hot over five percent, with inflation. Only accelerating right now we're seeing oil prices.

Just hitting 115 dollars a gallon um you're, really thinking about the risk. If the fed doesn't start to pull back on the liquidity, they've provided this market, it's going to hurt consumers significantly already is hurting consumers yeah about discretionary and non-discretionary spending. You know we all have to pay our rent, our mortgage and utilities, and all the costs of our of everything in our lives are rising faster than our wages, yeah and the wages are. There are upward pressure on wages which helps a little bit, but really the the fed's um rationale is not only late but so necessary.

Otherwise, we'll have you know. The continuation of our buying power is just going to be under tremendous pressure and it's hurting the very you know, people that arguably the administration and the government should be helping because the affluent right right just they can get richer from it. So you know if your real estate has always been a hedge against inflation yeah. So if you own, a portfolio of assets and home prices are rising at a very fast double-digit pace you're the winner and you can borrow against that.

You have a lot of equity, but it's really incremental buyer. If we're talking real estate and as mortgage grades, you know we always focus on the 10-year, but you can't focus on tenure any longer. Yeah. Okay, tell us! Why tell us why? That's always been the sort of leading indicator of what's to come, the leading indicator has been the tenure, and you know when you look at the 10-year uh versus the 30-year fixed mortgage rate spread right and that spread historically used to be anywhere, and i talked basis Points or 1.6, 1.7 percent, 116 170 plus basis points.

You know when forbearance was first announced in the industry, was really uh scared to death that they were gon na get. You know massive um advances and and people just morally uh, taking on forbearance against um, better judgment, so spreads blew out to like over three points, yeah and then they've since come back, but the tenure it's not following its normal course, because as mbs um overall spreads And demand are are being viewed differently from the investor, so if the fed is no longer incrementally buying, as many mbs you know, securities there's less demand for it. So therefore the investors want a higher return. So, as you'll see demand weakening they're, you know, assumingly supply might also weaken.

In other words, originations are going to fall off because of refi is going down, but i do think that right now, um the spreads are widening. It's closer to 200 today, so it's above its historic range and the mortgage companies are kind of killing each other right happily, which for the consumer is good. You know because that means that they're not passing the full extent of the pressure on mbs price to the consumer, but they're giving some of it to them, because otherwise they they can't write mortgages and make no money. They can't lose money on every mortgage.

So, there's a little disconnect from the typical 10 to 30s. It's really the primary secondary spread. So if the conforming today is is call it a 30-year. Conforming loan is under four you and i both know just looking back over time.

That's still a historically low rate, but when you're going from a 2.65 right. What feels like you know a less than a year ago to four. It feels like an enormous amount of money and when you're talking about a first-time buyer, the incremental increase of either their payment and or their purchasing power going down feels like a lot. So if you could, if you could talk broadly to every real estate agent on the planet, who has five buyers right now that are concerned about interest rates or maybe they're not, but i think they are what's the advice you say to that buyer about settling their You know their mindset around, i should still buy a house or maybe i should wait.

You know, i always think about um ownership and the perspective. It's better you're, better off than renting and and many cities. That may be mathematically, not the case like new york, city or, let's say san francisco, but in most cities in their days you are better off being a homeowner than a renter and the real simple reason is: you can lock in a 30-year fixed mortgage rate and And have your just, you know what i call non-discretionary shelter capped and you can also build equity um. You know there are costs associated with property taxes and other costs above and beyond, and maintain your home.

On the other hand, as a renter every year, it's a variable cost and that could increase on you in an inflationary environment. Rents are going to continue to rise. So that's the setup. Now you have to ask yourself so from a timing perspective am i buying at the peak? Am i buying at a market level where prices could start to moderate and therefore you know sequentially, i may be buying right when i should arguably be on the sidelines.

I think it's too difficult to time the market and i don't see a massive correction and we can talk about that. What i would say is if you need a home and you're busting at the seams wherever you're living, whether it's another kid you just guys - and you know everybody uh - has an extra kid in this in their square footage and they need um more space. Those are the life decisions that should be the catalyst to determine to buy today. Not because you know, oh, my god, am i going to lose money and make money.

I think it's more about lifestyle and that's how we've always presented it. So if you're, not in a rush and the market feels frothy, which it does, i think that it'd be better to probably be patient and maybe sit on the sidelines as long as you're comfortable in your current space. So i approach it so so, let's look at it from a different perspective. The the second of the three eyes is inventory, and you know you go back to two thousand 2456 right where we had this massive number of new construction at all kinds of different price ranges.

We made it easy for first-time buyers to come in. I was told we have an equal or, in some cases greater number of new construction inventory currently in process that will be hitting this year, like another 1.5 million properties. Can you talk about that? Can you talk about what what you're forecasting for regular everyday sellers putting their home on the market? What what's going to happen because inventory is, i don't want to say it's an issue because we sold six and a half million houses last year. We just don't have enough inventory for the right type of buyer today.

Is that ever going to get fixed well right now the supply chain is broken and, to the extent that you know cycle times are extended with um. You know two months on average takes longer home so right. The backlog of single family homes is at a 2006 record level or not a record, but back to 2006 levels. It looks like a hockey stick, so we've got a tremendous amount of homes and backlog that will get delivered.

Do they get delivered as fast as the consumer would like as fast as the potential prospective buyer would like, because they're building spec, as well as doing um for sale, and that, on the multi-family side, we've got a backlog that looks like a hockey stick as well, And that's coming in suburbia, very small amount of it being condo, but mostly within suburbia. There is urban as well. That's at a multi-decade high, so you know it's. I feel, like the you know, the boy who cried wolf or winter's coming.

You know at some point the homes are going to come, but i think that where they're building the predominant new construction is going to be on the called tertiary market on the outer rings because they can't come closer and not because there's not land. But it's because it's so expensive and there's less land to build on so for builders. You know they typically will drive out to you know whatever tertiary hinderlands. You know where the cows don't want to live and build our building and, in addition to the builders, we also have developer operators that are doing a build for rent strategy.

So you know we'll we'll see as the supply we're watching completions, which have been under pressure and because we know the builders what they're telling us. You know we're talking to 45 percent of the new home market through the public companies and then we actually survey. Another 15 to 20 percent, so we have a pretty good read on what their at least expectations are call it for the next three months. Next uh nine months and they're very confident that they're going to grow community count.

Toll brothers said we'll grow communities this year, 10 percent. We have other builders growing five others trying to grow 20 percent so whether they can get those communities up and in the timely fashion that they expect is a lot to do with some of the you know, challenges we're seeing not abating. So the good news is that, even with those challenges they plan on growing - and i think that will provide more supply to the market now. Where and what price point you know there's places you know, there's really a rare part of the country.

Now that is in the top called 40 msas, where you can help find a brand new home in the twos, maybe high twos and brayer community you're in the threes, and that's also getting harder and harder to find so you're. Finding yourself in the force and you're. Not on the phone with a builder in um, the um, what's it called um richmond virginia? Yes, that area and they're a little bit more primary in that market than non-primary, uh, military and uh. It's a thing.

It starts with the v hampton road. That area is um. You know in the fours, seeing a little bit of um moderation where you'd gone from selling and having to cap at four a month now they're, not in some of their communities, hitting that four. So i've talked to some brokers in areas like houston, san, diego austin um, seeing a little bit of change.

Nothing, that's you know concerning, but it's just on the margin, maybe home sitting a little bit longer, nothing everything flying off the shelf. You know counter that with uh. You know uh open houses that you have people, you know around the block, and so i'm not suggesting that the market everywhere is slowing that you'd. So i'm really worried.

But you know the best way to cure. Inflation is just at some point, keep raising prices and, at some point the consumer will push back so but the consumer's, not the only buyer. Right now, that's the problem. I think you've got multiple buyers and they're having the primary buyers having that trouble competing.

So before we talk about the investors, because you know i'm saying the same thing - you're obviously much closer than i am but i've one of my clients has an account where he's buying 75 homes a month in phoenix he has enough for, for i won't name the Fund, but it's you know, it's significant and now he's getting two more. Let's just call it msas, you know denver and i think the other one's going to be dallas and in each one of those marketplace they want to buy 75 house a month, but we we're going to get into that. But i want to stop first and say what about the normal everyday homeowners? Are we still seeing migration patterns what's causing that seller to sell? Today i go back to like john burns stuff around um super seniors or the you know the move up trade up. You know homeowner, who wants to get to that next level in terms of housing.

What are you seeing from a from a trend standpoint that my clients should be paying attention to who's going to be selling next? Well, i think that the boomers and exers are taking advantage of lifestyle changes and you know, as the boomers are in re retreating, you know. Arguably retirement age and they're in the 60s and they've have tremendous equity. The the pandemic is really fueled or created. So a catalyst to maybe push them into a co-primary or dual property situation, and, and that's been migration in from the north and the midwest to the south, a new thing by the way it's been going on for decades.

If you went and just looked at the data that we have that's 100 sample size from the decennial survey, just go back to 2010 and look at that data. You know the blue states are growing at best kind of low single digits where the red states - and you know, if you want to call smile states growing. You know double digits so that that divergence is is not new. What what's happened in the last two years with the pandemic? Is it just magnified it, and the biggest winners are no income stack tape, no income tax states, whether the taxes, you know clearly tennessee and those are benefiting from a sharp increase in sort of the boomers.

Taking advantage of an arbitrage, the arbitrage is, i not only. Can i, with rates that that trough to 2.65, could i sell my expensive. You know northeast house that now i can finally sell at a price. You know in the suburbs of new york that i was never going to see now i can get that price.

I can go to the south anywhere, have a way better cost basis and lower taxes, so we're seeing that migration continuing. I think that there is some you know signs of some places, it's starting to cool like in utah, where it was on fire and then boise um. So i think that that trend won't change. I think that the the the secular tailwind is as we age and our boomers are just as big as our millennials.

The difference between the boomers and the millennials is that the boomers increased from prior the generation prior before them by 53. The millennials were a 14 increase for the generation before them, so they're both about the biggest size, but everything has to be ready to change. We can't ever live in absolutes as incremental boomers or aging they're, going to be contemplating selling their homes downsizing. Looking for dual properties and the x'ers are right there with them, but the size of the xers which i'm an x or you're an x, or maybe, i think, you're an exer, so yeah you're an exercise and the boomers combined have also accumulated a great amount of Wealth, you know for those that are exposed, even if just through their 401k we've had a 30-year tailwind in the stock market.

So there is a lot of opportunity and the boomers and the extras are also helping their children, their millennial, children and they're, giving them the down payment. I thought it was interesting. Redfin came out and said that 25 of the purchases, i believe in 21, were um used um from the stimulus checks that they were given, so young adults that would otherwise have not been able to buy, got stimulus, money and then redfin said 13 use their cryptocurrency Gains to buy homes, so we we have had maybe more incremental buying, because people have been flushed with cash. What i'd like to watch and and try to appreciate, is when that cash is diminished whatever, incrementally it's coming from right that that starts to become.

As i said, it's not it's not exactly a headwind, but when you reverse a tailwind or you eliminate it in essence, is a headwind and so we'll see where consumers come up with the down payments which they were struggling with for certain for if at least as A first-time buyer, i think that on the good news for the existing homeowner once again is they've had so much equity accumulation, just in the last two years, two years and and looking at the actual dollars, it's almost four trillion dollars of incremental equity. That's been realized, and so you know, will you unlock that equity by contemplating selling? Well, if it makes sense for you because you have a great arbitrage, so is the united? Is everyone? Is a shuffleboard of the united states going to go berserk and everyone's going to go from the north to the to the south or the midwest to the southwest? I think that starts to moderate, because i think the people that can do that for the most part they'll still do it. So just the question is: will it sustain at these elevated levels or just moderate back to where we were and what we were doing? So that's something i think about. I do think the first time.

Buyer is the loser in this because you know when you look at the rent - inflation - it's just it's so egregious to the consumer and and the prospective buyer who would otherwise want to save - is now going to be spending a lot more of their income on non-discretionary Uh parts of what they have to spend i.e rent, so the primary buyer is the loser in all this really i was going back yeah. I was going back to inflation. It's like i wrote down the notice. You know we're at a 40-year high of inflation.

How do you see this impacting the rental market broadly and and you're exactly right, people that are paying rent are, i think, in more trouble than the person that's trying to save money to buy their first house and there's no inventory for them. Well, i think what ultimately happens is that we'll we'll force consolidation we'll force consolidation of households, because people cannot continue to pay the rents and everything else is going up in their lives. I mean renewal rents, they have what's called loss to lease. I don't know if you've heard the terminology, so there's a gap between the renewal and where move-ins are and people are getting notices to get get them to mark to market and they're, forcing them to have to find alternative shelter.

And that's like maybe more evident in the class b product, but we're seeing stress in the market and you're going to see evictions rise, you're going to see foreclosures increasing you see, delinquencies rise, we're already seeing it. So what we all forget as a nation, is that prior to covid, you know it was housing was you know, just okay and it really a tale of two markets, but now that we do had or we have had consumers struggling with down payments, consumers struggling with Too much debt, and so that kind of all went away, and so that's why, when you snap your fingers in two years later, what's really changed? Mortgage rates went down right. The government flushed the system with cash and liquidity and money and gave you checks like from the from the sky. You know there, we were raining money and what do people do? Well, i'm not going to pay my mortgage, i'm not going to pay.

My student loan debt - i can go, buy a house so take that out of the system and what's left, we have a primary buyer who, by the way, at the end of 2020, in the fourth quarter, the number of renters converting to homeowners skyrocketed from court. We we went from a trend line of call it two plus million 2.3 million a year, renters convert to owners and it got to 2.85 million nearly in fourth quarter 20, which would look like a hockey stick. And then it stayed elevated for another quarter or two and then is now back to like 2.45 million. So it's still trending above where i guess historical trend line would be, but that moderation in the renter converting to homeowner is either suggesting one of two things.

They can't afford it anymore or they're still buying. Obviously 2.4 is above the trend line, but it's not as robust or they just can't compete with cash buyers, because in the cash market year-over-year two-year stacked purchases over forty percent of purchases are made with cash on an annualized basis. The nar just reported twenty seven percent of the january closing data, whereas mortgages were down thirteen percent. So your primary barrier is moderating in the face of acceleration in investors and that's really the dynamic that we're faced and even if the builders provide more shelter in the third ring of the market and they're bringing on quote-unquote a first-time buyer product.

You know, you've got to you know, deal with what is now a much more significant level of inflation to buy that house today, and i do think that rates matter each. You know i never think about absolute rates. I never forgot, i think, that's a rate of change and what would be the monthly payment so as a fourth quarter of 21, with home prices up as much as they were and rates not even yet up the monthly payment on average for a first-time buyer using Fha, mortgage and assuming you know, none of the incremental cost of property taxes. We do incorporate insurance, um, homeowner insurance was running up year over year 17 right now year to date we're up more like 25 percent, so it does matter, but the good news for the consumer that can get a home if we are actually going to remain in An inflationary environment - they can be winner unless we start to see that the demand on the investor side really peters out for various reasons that we can speak to you.

But my i'm an analyst that understands what the investor impact will be and how much of its investors and tell i can tell you more about the investors. I understand what the primary buyer is doing. What i never can get my arms around is: what's going to turn the investor sentiment and when and and that's the only way we can, you know obviously think through the the potential reasons, but to actually time that right one it just is not something that i Think that any of us truly understand, because the alternative investments in the world we live in right now are not compelling and until they don't get their return, that's when they'll probably continue it's only when they hit the wall and when do they hit the wall. Is the question so i'm being mindful of your time, but i got four questions i got ta ask and we're touching on one which i want.

I want just your insight on investors, um you touched on migration patterns and and the note that i wrote behind it. You know you're talking about back since 2010, blue states versus red state, single digit versus double digit. My second question is: where do we get? Where do we get this information? If an agent's listing right now or a team leader or broker, is listening right now? What are the let's just start easy: what are the go-to sources to get the kind of information that they could be more educated to create better content, inform their buyers and sellers? Let's go info first. Well, everything you have to just go to zellmanassociates.com.

Thank you very much, read our newsletter and read our blogs, and if you want to purchase research, you can also do so, but you know we rely on you know. Our secret sauce is really more owners and operators, so we rely on c-suite executives, not public. We watch what they're saying, but we really are relying on the people with boots on the ground, and then we have that married with lots of data. That's available publicly available data and we do have some proprietary data that we aggregate and have some ai and things that we are utilizing.

So i would say it's secret sauce that you know, unfortunately, not everyone can replicate, but the government provides a tremendous amount of data that is accessible and is available um to anyone and looking at census, bureau data reading the decennial survey that came out anyone can access That yeah so listen everybody um. I am a subscriber with ivy zellman and just first of all, just for your saturday morning, emails of whether it's you know personal or fun or the team um, but to be able to go deep on the daily to know exactly. What's going on from your you and your analysts perspective um for me, is there is no greater education if you're in this space and you get paid in direct correlation to the value that you deliver the marketplace. The value we deliver today is certainty and certainty comes from data points right, so hands down, so not even a shameless self-promotion.

I'm telling them sign up. Okay. The big question we started with in the beginning was when i said to you: interest rates, inflation inventory and a war is a correction coming correction coming ivy tell us: what do we need to know will be um parts of the markets that correct and that's really Contingent on when the supply hits what, with the amount of supply we have in backlog, i'm not worried about a significant correction in the midwest, where there's very little new supply and backlog. I think there are parts of the country where supply is very constrained and probably will have more weather the storm that might be brewing.

You know you get into the southwest a market like phoenix, even with the strength of the inbound migration, even with the strength of what is perceived to be the strongest job market and amazon's, adding this and this one's adding there. I think that the reality is that we're building more than the incremental households there. So i think phoenix would be a market, that's ripe for correction. I think you could see in austin texas markets, the carolinas, where there's just tremendous amount of new construction, that the sad news of the industry is like everyone's using the same data to determine where to go and expand and work best capital.

Is it a shock that they're picking austin or phoenix or boise so at some point, because they don't talk to each other about it? They just go out and buy land and developers are happy. They've got a lot of incremental buyers, but like plant prices nationally are up nearly 40 percent right and that's not even including like a madison wisconsin, that's up 10.. You know look at phoenix and austin, as example, they're up significantly more that 50, 75 and builders just have to drive further out, so they keep building more and more product um right now, fortunately, they're able to sell what they've completed, but we we just look at That inventory and backlog and think that that's where they'll be pressure and then that circles back to ring two and ring three and ring one, because if that market's cooling, i think that the eye buyers, you know if they were to step away like in phoenix. You know think about 20 um.

I think that's too high. I think it's more like 12 percent um world market, when zillow was buying open doors out so yeah, but there's enough that uh activity we'll just say that matters, but it probably is more zip code dependent. But if they were, for whatever reason, liquidity such where they were to pull back, i think that would enable the primary buyer to kind of come back back in and - and i do think that there's a lot of the um - i buyers - are selling direct to sfr. Yeah and and therefore the primary buyer doesn't really even get a look at it because that's a really nice easy channel for them to sell to not all of it.

But you know, i think, there's markets that could correct and you know i'd be more concerned about not not looking for a gfc there's just too much equity in the market for that. Okay. So so i want you to unpack. So when i say correction - and you answer correction - you know that there's a really good chance.

The listener thinks two thousand seven, eight nine ten right. So i i said no gfc, i mean you know what we. What got us into trouble with gfc was that it was all leverage yeah. So i think that there's so much equity in the system - and that gives me the most conviction right - we'll definitely see foreclosures rising.

But a lot of that will be negligible because there is so much equity and people can sell and and right consolidate households. But we will see that. But but if i can, if i can just say, though, around foreclosures correct me, if i'm wrong, we've averaged, you know 200 000 foreclosures a quarter in the u.s, for as long as we can remember, we just had the massive spike of eight nine ten that threw Everything out of whack and then because of the moratorium on payments and making it easier for people to stay inside their houses during covid right all of a sudden. You start reading headlines.

That say you know: foreclosures are up, you know a hundred percent, so it went from one to two right. So so, when you save foreclosures, that's also going to scare people yeah well, foreclosures is a natural part of um. What this country has on an annualized basis. Unfortunately, just like we have a natural level of eviction that didn't happen right, and so you know, maybe there will be an elevated level just because we were so below normal wow.

I'm not really concerned about it um. You know what worries me. Is the investors? The appetite changes so when i look at existing home sales in 2021, the entire increase of nine percent was a hundred percent explained by investors and let's just say that as investors consist of true second homeowners, private investors are looking for diversification from the stock market that Are gon na rent them out and hopefully get cash flow, annuity streams, you've got fix and flip buyers you've got eye buyers, you've got to call those the liquidity providers and you've got sfr slash institutional capital buying. So if you, if you say you know that asset class is in favor, and it's really a new exciting asset class to many, in other words, it's been around single family rental for a long time, but a lot of the um.

I guess last two years it just became exponentially on fire, so is it? Is that asset class going to deliver the returns right right? You see that therefore carry the market for the next five years in an inflationary environment and keep the market tight and keep hpa. Rising or does the bloom come off the rose because a lot of their expectations, their occupancies running at 98, i've got double-digit, rent growth and now, all of a sudden what i bought i paid up for the next house, i'm not getting those rents anymore, yeah. It's going, i can't afford it, there's not enough bodies because there's more supply, so those are the things that we'll be watching. But to me it's not the gfc because of the amount of equity, but i do worry that these investors at some point, don't either whether they don't hit their return metrics or they lose their appetite and rezzy does no longer isn't the prettiest girl to dance and Something changes, maybe that you know inflation's going to guard against that because it's a great place, the world views to hedge themselves - and you know, is it all bad that we have this many investors i mean the canadian market is laden with investors and it's just been On fire for decades, um with investors being the primary driver of that growth, so i just think what is that was disappointing is the fact that the primary buyer is really the loser in this yeah.

So for your for realtors, i guess work with investors. You know there's lots of investors that would like to buy um homes to create this annuity stream to give them. You know, diversification so last question that i'll let you go and - and i'm always so grateful for the time like. Thank you so much i mean i'm.

I'm the interviewer - and i have three pages of notes already so the typical tom ferry podcast, i'm taking notes like crazy. So the last question is when we chatted last, we were talking about. You know called roughly 138 million homes in america. We know that approximately 40 of them have no mortgage of the remaining balance.

It was half had an interest rate lower than three and a half, and the balance had an interest rate higher than three and a half. My question for you is uh. If i'm a smart agent today and i'm marketing, should i be marketing to the people more that have that interest rate? That is, you know 3.6, today, 3.7, that they've, just they just never refined, or should i be just marketing to everybody to find out who wants to unlock their inventory? Well, not inventory. Excuse me who wants to unlock their equity? Well.

I certainly think you have to always be marketing to prospective sellers and right now, it's a great time to sell it's an incredible time to sell and and the numbers just to give you some perspective. Roughly 70 of homeowners in the united states are locked in below four percent and and that number um, obviously just for comparative purses purposes at the end of 18 was 39. So we've had a massive refi boom that has unlocked tremendous wealth for people that taken advantage of that significant drop. So if i'm sitting here and i'm thinking, you know it's such a hot market, my house has doubled in the last two years.

Oh, my god, i don't know what i'm gon na do. I think that it's so much more expensive to go, buy another house, but you can convince a prospective seller that you know you can probably keep your payment the same. But if you take that equity out and you you know - are able to move to a market where it's a more affordable, you know that that's the that's the opportunity right now is is the arbitrage still exists. If someone has the wealth and the wherewithal and are thinking about that, demographic of the exer and boomer that, maybe i don't want to be freezing my butt off anymore in you, know pennsylvania or new york and i'm thinking about it and if you can kind of Hit them where it's time to do it now, because the market can't sustain the level of appreciation because we're going to hit really some affordability pressures.

I would definitely be marketing to that group, but keep in mind the closer we get to a mortgage rate that makes that a disincentive like if mortgage rates would go to four and a quarter. We thought four percent for sure would slow the market down because 70 are below that, and it's not right now and i think it's more again because of the incremental cloudiness and the investors that are really fueling the growth. But i do think that the higher the rate environment um, you know, gets the more challenged and disincentivized those homeowners will say. You know what i'm good, i'm locked in at three, i'm not at this low rate.

Unless i'm going to go to nashville and live where my grandchildren are, and you know i can find something and it's still a good arbitrage but those well. Those will start to moderate because people start to get nervous, so um we'll see, hopefully rates don't go up much more than where they are right. Now, at what point i know, i said your last question and i'm asking another question: i can't help it at what interest rate percentage. Do you think it makes everybody pause? Is it five? Is it five and a half or is it 4.25? Like you just said, you know, i think rated change again every if you call a bank you'll, get a different rate, every bank, you call and so there's loan level pricing adjustments there's you know, obviously dependent on fico scores and debt service.

I think just focus on the rate of change of the monthly payment and we're up 25 right now, roughly so if home prices go up, another 10 percent and interest rates continue to march higher. I think that the combination and the rate of change will start to impact. You know if you arbitrarily pick a number, i mean five percent. I think you'd have pretty much see everyone other than those that live under a rock and have really bad credit that have already refined in their lower levels.

I think um some might do is the market is really going to be challenged at a five percent mortgage rate, but i think it could get more challenging just even going up four and a quarter four and a half for the primary buyer. Again, not that investor, because the investor's going - oh, i got 10 inflation yeah. So what if you know i've got to pay an x more dollars? I'm i'm going to get a better return in the long run. If i lever it up, love it love it.

So ivy, what's been so great, is i'm looking at the the two like like the gen wires that are sitting behind me that are actually you know doing all the recording here in social and i've been telling them for the last? How many months now buy a damn house, so i think you guys just got it from the oracle, so she you know she's the wizard of oz, the real deal only only if they need to, though don't don't do it as speculation. Oh, no! No! No! No! We're yeah we're i'm way we're wavy on that. Like i care too much about these two, it's like no buy this forever house or better. Yet do a hack house right and get get three of your buddies to pay your mortgage all right, so ivy zellman from zellman and associates.

Ladies and gentlemen, i you should listen to this at least 10 times, and then you might want to send this to 5. 8 10 clients that are on the fence and nervous because you're hearing from someone that has much broader perspective and can work through all the noise and get to the truth, so ivy you're a blessing. I totally appreciate you i'll. Let you run.

Thank you again. So much and i look forward to seeing you soon take care. Thank you. Take care everybody.

You.