Lisa Sturtevant from Bright MLS on Today’s Biggest Housing Market Trends

Welcome to the Top of Mind podcast from Altos Research. This is the show where we talk to real estate industry insiders and experts about the trends shaping the market today. Enjoy the show.

(00:19)
Mike Simonsen here. Thanks for joining me today. Welcome to the Top of Mind podcast. This is where I talk to the smartest leaders, thinkers, and doers in the real estate industry. For a few years now, we've been sharing the latest market data every week in our weekly video series from Altos Research with the new Top of Mind podcast, we're looking to add some context to the discussion about what's happening in the market from, from leaders in the industry. Each week, of course, Altos research tracks every home for sale in the country, all the pricing, all the supply and demand, all the changes in that data. And we make it available to you before you see it in the traditional channels. People desperately need to know what's happening in the housing market right now. Margaret was frozen so solid last fall. Then suddenly the landscape's changing again.

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Everyone's really worried about what will happen this year in 2023. So if you need to communicate about this market with your clients, go to altos research.com and just book a free consult with our team. We can look at local market and talk about how you can use market data in your business with your buyers and sellers. So, speaking of data and informing your clients, the buyers and sellers in this market, I have a terrific guest today, Lisa Sturtevant. Lisa is the chief economist for Bright mls, which is one of the largest multiple listing services in the in the country. She's been involved in research on economic demographic and housing issues for more than 20 years. Prior to her position at Bright mls, Lisa was the chief economist for the Virginia Realtors Association. She ran her own consulting firm, LSA Planning, and has served in other research capacities in nonprofit organizations.

(02:05)
Universities. Lisa has a PhD in public policy from George Mason, a master's in Public policy from the University of Maryland, and a BS in mathematical economics from Wake Forest University. Lisa is, is really one of the top experts on what's happening in the housing market right now, so I'm very excited to talk to her today. Bright MLS covers a huge section of the country, including the DC area and all the mid-Atlantic states, so we'll dive in on those markets a bit too. All right, Lisa, welcome. Hey, Mike. Thanks for having me. I really appreciate it. You know, I love to, I, when, when we get started, I'm, I'm interested in talking market and, and all of the, the things going on, but first, tell us about your background a little bit and how you got, how you developed your expertise in housing and, and how you got here. I

Sort of this question and it like, this idea of becoming interested in housing is so important because it's one of those topics that everybody has an experience with, right? We've all bought a home or rented a place, but I remember I became interested in housing back in grad school when my husband and I were actually buying a home, and I was looking around and we were looking at different types of neighborhoods, different types of homes than, than our friends were, and we were all demographically pretty similar. So it got me very interested in how and why people make decisions about where to move. And from there I was able to do a lot of research at George Mason University that sort of looked at housing preferences, frankly, looked at some of the stability in housing preferences over long periods of time in the US and got me thinking about the economic and demographic factors that not only drive housing, but also how housing is critically important to local and regional economic development.

(03:58)
Right. The extent to which housing is being more and more thought of as an economic development tool really sort of fueled a lot of the work at George Mason and the future, sort of looking into how housing affordability is actually a constraint not only for individuals and families, but also for local and regional economies. so all that's to say like answering questions, love having access to data, and while there's no shortage of of data out there, for sure, I'm super interested in how to kind of break it down, talk about what's important in the data and help people like you mentioned at the top, use data to be a resource for their clients, their colleagues, and, and really their communities.

Yeah. And serving those, those realtors to, to get to the, the, the home buyers and sellers really help them right now. So housing preferences and stability in those preferences. Tell me about what, what that means.

Yeah, so I think that's a great question. We talk a lot about housing preferences and we know that there's been some changes over time, right? In terms of what people prefer. So for example we know that in the fifties and sixties there's a big boon in, you know, living in the suburbs and people wanna move out of the cities. And then, you know, in the nineties and two thousands we heard that there was, you know an exodus from the cities and then a back to the city movement. And then there were you know, all sorts of different trends that were getting a lot of attention. At its core though, you can predict a lot about housing preferences by looking at the incomes and the stage of the lifecycle of individuals. and so as one example, a lot of talk about millennials, for example, being very different than us, yet me, I'm a Gen Xer.

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it turns out that millennials are different, but they're different in that they came into their adulthood in a, during the great recession, they have a very different financial like landscape that they, they encountered. So they got married later, they had children later, they started their careers later. When they did those things, they made a lot of housing choices that looked very similar to us, gen Xers and those baby boomers who bought the bigger home in the suburbs in the good school district when children came along. So I got really interested in how those kind of stages of the life cycle actually provide a lot of kind of stability overall in housing preferences, even as there are of course, ships in what people, you know, wanna buy. And just one other point on that, you know, we always talk about housing preferences, right? But it's really preferences with a constraint, right? You can prefer to live on the beach in a 11 bedroom mansion, right? But you're constrained by your income, or you could prefer to live in a, you know, a great walkable community that also is on a half an acre, but of course you are constrained by by what's available. So anyway, I got really interested in sort of people's choices, given what, you know, constraints they were facing in the market,

And the, the, the much maligned millennial is i is in that I entering that, that their peak home buying years. Are they, are the, are the preferences really universal or are there things that we know that are maybe in fact different this time?

I will take the argument that there is more universality in housing preferences than there are differences. And that said, I think there was a big push among baby boomers to move further out to suburban neighborhoods and big single family homes that were separated from commercial activity. And there's been a kind of growing interest in living closer to amenities such as retail restaurants and commercial activities. But think about that, isn't that really a return to where we were back in the forties and fifties, right? Where we lived near stores and near other things. So in some ways, it's just a return to housing preferences that have always sort of been out there, but the sort of mortgage market and federal government policy really encouraged suburban living. And so maybe we're just returning back to sort of those more historic preferences that we've seen in the past.

Yeah. The, the I suppose it, it makes sense that it would be cyclical, it would be moving its waves in and out. Are there, were there things in, in your research that you found notable about trends in, in preferences or, or things that, like, you know, sometimes we have assumptions about the world that aren't, right?

Yeah. Well, you know so my dissertation was actually around the housing preferences of recent immigrants. And one of the things I was really interested in as I think, and this was sort of a, an evolution in the nineties and the two thousands, we had this sense that when people were newly arrived to the United States, that they lived in cities and urban enclaves, right? The China towns, the little Italys of, but it turns out that the sort of most recent wave of immigrants, you know, prior to the pandemic, prior to, you know, the current time really to the suburbs driven to single family neighborhoods and really driven to home ownership in a way that that native born residents weren't, you know, willing to combine incomes to combine family members. so I was really interested in the fact that there was this interested in suburban living among immigrants who many people often were thinking were living in, in cities and living you know, in those ethnic enclaves, it turns out that there was this sort of boom right, in folks living in non-traditional immigrant gateways when they first arrived in the United States, and that drove a lot of the, the drive to the cities.

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There were no established ethnic enclaves in the, in the city. But to your point, I, you know, that's one of the things I really enjoy about research is, you know, not dispelling myths, but at least, you know, lifting the hood on some of the commonly accepted sort of things we, we think we know about the housing market and about demographic.

Yeah. Or at least confirming our hypotheses, right? Like, yeah, it turns out this is true. that's really interesting in the, the, the, in, in, you know, my personal experience, experience, I can, I can see, you know, the, the suburban migration, immigration growth, like the difference between like the town that I grew up in and suburban Chicago and like the makeup of that, of that population now you know, those were, when I grew up there you know, it was, it was families that moved, had moved out of the city and the, you know, as ethnic as it got was like Polish, you know, like, you know, or Irish, right? It was like and so very, very different world now. That's, that's really neat stuff. That's really interesting. do you have one of the things I like to do on this podcast is talk about the future, and do you have a view of, while we're talking about immigration and migration patterns, do you have a view of what, what that looks like for the next, for the future?

Yeah, I think there's, so there's a couple things, and I think, you know, we sort of touched a little bit on immigration, and that's a, there's a, you know, bigger story of course with federal immigra immigration policy and you know, how folks come into this

Country. Yeah. Like, we don't let people in anymore.

Well, something, you know, like that <laugh>, there's, so immigration housing is so in, in strictly tied together, right? You know, one of the reasons why we're not building enough housing is because we can't find enough construction labor, which is very closely tied to Latin American immigration. And that has been slowed down so, so dramatically. I do think we find that when we do see upticks in immigration that by and large new immigrants come to where the jobs are. and in many cases, that's, those are those places that haven't been traditional magnets. So you mentioned Chicago is long, you know, magnet for immigration, but job growth is in the southeast and the Southwest and not in Chicago. You know, that's where like a lot of the jobs are. But I, I think in general, I think there is there's been like a shift right in where people in the country move and even within metro areas move.

(11:50)
You mentioned migration, and I'm curious to see, you know, what, what you're thinking as well. But, you know, we saw a lot of people moving further out during the pandemic when they could work from home and learn from home. And now the you know businesses are calling people back a couple days a week. It's really hard to commute three hours a day, you know, if you're trying to go in a couple times a week. And so this question about whether pre, you know, migration patterns that we saw during the pandemic, are those gonna stick around? so far we're seeing an a retrenchment a little bit in our market in the mid-Atlantic. we're seeing kind of a, a moving back to those first core suburbs and less demand out in those further exurban, more far flung kind of zoom towns.

That's a great segue. So I'm interested in diving in there. So, so bright MLS is mid-Atlantic covers, like what, what's the total area that, that you guys cover?

Yeah, so it's six states from New Jersey. It's all the way down to Virginia. So New Jersey, Pennsylvania, Delaware, West Virginia, Maryland, the district, and Virginia. So the nice thing is it covers you know, it's a little microcosm, right? Of lots of different kinds of markets. We have high cost markets, we have rural markets. Overall, though, the mid-Atlantic tends to be a pretty vanilla, for lack of a better word, market. We don't have the wild swings of a Phoenix or a Miami relatively stable housing market. But we are seeing those sort of first tier suburbs, which are, have attracted people. you know, over time we've starting to see people begin to move back and demand to be very strong in those markets.

Okay. So first tier suburbs around, you've got some major metros in, in that area. So first year suburbs around dc around Philly. Is that, is that what you're talking about?

Yeah, absolutely. So, and you know, the interesting thing that we're seeing is that imagine who might come to mind if you think about a home buyer in a, in a moving to a suburb of a big city like Philadelphia or dc, they are probably a repeat buyer, right? They're probably a family that's able to roll some equity into the purchase of their next home. and I think in some ways that's why we're seeing those kinds of markets a little bit stronger now, these folks are a little bit less sensitive to higher mortgage rates because they're able, not compared to a first time buyer, right? They're, cuz they're able to roll that equity into their home purchase and sort of in essence, kind of buy down the rate in some ways. conversely where we're seeing slower demand is among those markets that have typically attracted first time younger buyers, like the cities themselves and the sort of just right, right outside the city. as, as you are well aware, first time buyers very sensitive to mortgage rates really challenging environment for them, but the suburbs are really doing quite well in terms of buyer activity in our, in our local markets. Anyway,

That's it. That's really interesting. So how, how when you say the suburbs are doing well, like by what what mechanism are we measuring here? Totally

Right? That, I love that question, right? Because people say that all the time. They're like, oh, is it gonna be a slower year than last year? Well, what exactly do you mean? Because I do think you know, if you're looking at transactions we're, of course we're gonna be down compared to a year ago, we have to be, last spring was still very, very busy. inventory's still a constraint. Mortgage rates are higher in terms of price growth. We in our market anyway, in our suburban markets, we never saw, we, I mean, we saw prices come down from their peak levels, but that's mostly a seasonal trend, and we're still seeing prices up five, six, 7% year over year in, in February. in, in those sort of first tier suburbs, those sort of high demand suburbs. and so that's how I would, at least, that's how I'm thinking about like, sort of strong

Being strong, right? Right. So year over year price, still plenty of year over year price gains in those towns it's still supply constrained with, with, with, in my, in, in our data view. It's like, I would describe it as surprising amount of demand given adjustments in, you know, affordability from, from mortgage rates. But is that what, is that roughly what you'd see as well?

Yeah, so, and I know you're the one asking the questions, but I think that, you know, I'd be curious to know what you say because people do say that, I mean, I have my own thoughts on this, but people do say, you know, how can prices still be rising when mortgage rates are double what they were? And incomes have gone up, but not by that much. and prices are still rising pretty briskly. And in some ways the, the logic is, well, don't prices have to fall if mortgage rates are up at six and a half percent, 7%? And I, I do think that it depends on who you're talking about. And I, I just think that all that equity that current homeowners have built up in their home is just allowing the market to continue to move forward without those price drops because people are able to, to kind of get in with a higher down payment and, and, and sort of kind of take, you know, take a little bit of the edge off those higher rates. But at least that's what's been happening in our market, we're still seeing pretty stable price growth.

Well, and one observation that we've had is that, that in a supply constrained market, which we are in you know, you have normally you'd have a relationship between the median home price and the median income. But when you dramatically reduce the number of homes available, you're actually not addressing affordability for the median income. You're only addressing affordability for actually a, you know, a richer subset of people like who can afford it in that time. Like, like there's, there's fewer homes for sale than, than, and so like there are people who, who can't afford those. so that's one, one phenomenon that, that I keep try to keep my eye on very closely, and that there are some markets that we can see around the country where inventory has climbed up to pre pandemic levels. But most of the country, and I, and I think most of most of the area you cover is, is, is true as well. Which, which is the available inventory is still at pandemic Lowe's, like crisis, Lowe's a third of what it might have been in recent years, like really, really few homes available.

Yeah, I think that's right. And I think I'm, I'm glad you say that because we hear a lot you know, sort of in the media or just sort of reported that inventory's up 30% year over year. It's up 40% year over year. Sure. It's still, as you said, 40% of what we had in 2019 or a third or half or whatever. And it, it, in some ways, I, I sometimes worry that the, this sort of conversation about inventory rising year over year kind of diverse attention away from the fact that we still have a structural deficit of housing and that structural deficit in housing is the primary reason why affordability is such a big challenge and why first time home buyers are particularly challenged. you'd mentioned the sort of inventory and, and the folks at the higher end. I think about this a lot.

(19:03)
I thought about a lot during the pandemic folks at the higher end of the income spectrum, they have choices. They're the ones that were moving further out to those zoom towns with their kids and, you know, buying the second home, you know, during the pandemic. But folks at the more moderate income level are, you know, they're not the ones that have choices in the same way. And they're the first ones who are impacted when inventory is so constrained. and I think as a, you know, as a a country, it's this idea of you know, if we're going to, if wealth is being built through home ownership, the extent to which folks are being left out is is pretty problematic, I think. And the low inventory is really you know, the key, key driver there.

Yeah. And, and so have you noticed in your region policy shifts or like, we tend to know, I think it seems like in the zeitgeist we understand that like, you know, we've, we've done policy that has made it hard for first time home buyers to buy, made it unaffordable, made it difficult for them to partake in the wealth benefits of home ownership in the us. Have you noticed any, are there any optimistic signs or are we screwed <laugh>

<laugh>? No, I think, I think that's right. And I think, you know, we often try and tackle the housing wealth and, and access to home ownership challenge. We often try and tackle it from the demand side, right? You hear a lot of programs that provide down payment assistance, right? Or that provide a different way to look at credit in order to allow more people to become eligible for mortgages. Those are all that's great, but all it does is put more buyers in the market for those ever shrinking number of homes and just bids them up even further. And again, the people with choices, the ones at the higher end, they benefit from that. And so in, in my, in, in my experience, in my, my opinion is that you know, you have it, it's a supply side, right? It's a supply side and, and, you know, intervention and to your point, I mean, the, the issue is housing doesn't get built because of something the federal government does.

(21:14)
By and large housing doesn't get built because of something the state government does. Housing gets built based on a conversation at a seven o'clock zoning meeting in your local town, right? And the problem, the challenge is that because those decisions are made, so locally, local folks are really invested in keeping the status quo and prohibiting more housing from being built. So where we've seen some promising activities are places where this, the state has come in and, and intervened in a way that takes that political pressure, frankly off localities to, to, to per permit more housing. and then in a place like Arlington County, Virginia, for example, following minneapolis's kind of lead in this light touch density where single family zoning districts are being amended to allow duplexes and quads and, and triplexes. and so it'll, it's still kind of a open question of whether that's gonna have a real impact on affordability, because so many people wanna live in those very desirable communities. But I do think we're starting to see that localities are understanding that a lack of housing supply is is a constraint for their kind of economic wellbeing and are, are beginning to make changes to expand you know, expand zoning to a lot more housing.

Yeah. And, and, and the people making those local zoning decisions, they have kids too, and those kids are, you know, I can't buy in my town. I have to move somewhere else.

It's so interesting. And I, I do think that's what it's, I spent a lot of time in my career working on housing affordability stuff, and I think that you gotta talk to people where they're at, right? Some, it's the sort of heart head pocket book argument of housing affordability. For some people, housing is a right and, you know, everyone should have access to housing they afford for others, you have to make the logical case. And, and, and that's an example you just gave. Will your kids be able to live in your, you know, in your neighborhood? And then the pocketbook issue? Look, if you want retail and you want restaurants and you want you know, school teachers, you need to have housing that is priced at price points everybody can afford, or else those folks are not gonna be in your community. sorry, we didn't, getting off on the affordability topic here, but I think it, it's all tied in, right? And it's in this very tight labor very tight housing market. it is supply is really critical to helping to ease those, those affordability challenges.

Do you do, do you, so I love being on that, the affordability topic. It's, it's an important part of what we're, we're doing here. And do you have do you have a view on investor trends that have contributed or like in, in, into that mix of either affordability inventory?

Yeah. Yeah. So I think, you know, I think it's interesting because I was just reading the other day that, for example, the National Association of Realtors said 13% of all home sales in 2021 were bought by institutional investors. CoreLogic said 3% of 2021 home sales were bought by institutional investors. But institutional investor, that term gets thrown around and gets vilified, frankly, very, very quickly by folks on the hill in, in government, and by other folks who want to look for a scapegoat for some of the you know, price growth that we've seen that has really priced folks out. Don't get me wrong, there are some local markets where we have seen large scale portfolio investors come in and by large swaths of homes, right? And in many cases, they're converting those homes to rentals. I have, I'm of two minds about that we need rental housing as well, right?

(24:53)
and if these are good landlords, and I'm, I don't know but I'm not that doesn't stress me out as much if, if folks are maintaining those homes as rental properties. and I, I just, I do think there are some markets where there are bad actors where it has had, it had been harmful to more likely to be low and moderate income folks where people are coming in and buying up houses. I just worry that the focus on institutional investors takes our eyes off the main culprit, which is really a lack of supply. Because if investors go where there's a good return, right? And if you introduce more supply to the market, that short term return on that investment wouldn't be as great. And so investors would be looking elsewhere for, you know, returns on their, and you would find less upward pressure on prices. So let's, you know, don't want people to take their eye off the, off the ball, I guess as it were

Off the ball, you know, it's, it's, yeah. It's funny that there, there are fewer readymade villains than the hedge fund landlord. Really like <laugh>. Yeah, yeah, yeah. Who, who can we, who can we safely vilify in the headlines? so that actually gets to the other side of that investor. Que question is, is construction and in your in your, in your geographies, who, who's doing construction? Well,

Yeah, no, that's a great question. It's funny. you talked about who's easy to vilify. It used to be you vilify the home builders, right? The home builders were just gouging, you know, gouging us and everything. And it's interesting to watch the home builders react to the current slowdown in the housing market. I think they learned a lot of lessons from the great recession where frankly, builders were building right up till we dropped off the precipice of the housing market in 2006. And now we saw a lot of pullback in new construction. And we, we saw in our market, and it's probably around the country after the great recession, we a lot of consolidation in the home building industry. We saw a lot of the local smaller guys and girls go out of business. and now we're left with a lot of national home builders in our market that are able to weather these kinds of cyclical you know, moments a little bit better.

(27:01)
we do have a fair amount of new construction still going on in a lot of our markets, particularly in Sussex County, Delaware, for example, is this like market that's halfway between Baltimore and DC and is still seeing quite a bit of new home construction. And that's really where we're seeing most of our new home construction is really in those kind of second, those third, you know, third tiers out from, from the metropolitan area where frankly there's more greenfield development possible. I will say though, we have in, in the Washington area actually been seeing quite a bit of multi-family construction on the rental side which is, which is playing out really interestingly because, you know oftentimes a first time home buyer is in our market, is looking at a condo. and, and maybe now, now that there's a kind of a lot of rental housing come on, coming onto the market, we're actually seeing rents begin to moderate a little bit. And so rent renting for longer is actually becoming a better deal for some first time buyers in our local market simply because of the increase of supply of rental housing that has come online in recent months,

Renting for longer, meaning like, you know what the, like my payments are just a lot less if I'm renting rather than if I were to buy

Well at this point, right? And there's also, you know, they're getting two months free rent and they're getting free parking and, and, and then landlords know that, or property managers are seeing that there's a lot more competition because there are, so, there is so much new product coming online that, that relatively speaking, it's n in some local markets in our region. It's not bad. It's not a bad time to be a renter.

That's, that's interesting. Yeah. Not a bad time to be a renter. I mean, I live in San Francisco and that's, it's, it's true, true there too. great. So let's, let's shift gears. Let's shift gears into talking about the broader economy and your view about, you know, we're in inflation, we're in recession, we're in, like all of these things going on. What's your view on, on the economy, the economy for this year? Where, where do the risks lie? How do you, how do you're looking at things when, when you're talking, especially when you're talking with, you know, our constituents out there, the home buyers and sellers, what are you thinking about?

Look, this is a very unusual <laugh> time, right? What I will say is if anybody is out there trying to, to tell you that they know exactly where the economy's going in 2023, I would take it all, I would take it all with a grain of salt, right? because I think we're in such unchartered territory where, you know, we, we have been seeing a lot of positive signs in the economy, right? Would be at 517,000 jobs added in January. Unemployment is lower than it's been since 1969. I mean, this is a very tight labor market by those traditional measures. at the same time you're seeing high profile layoffs right? In the media every day. And, and honestly, those seem to be still pretty focused on the tech side and, and frankly, unfortunately for our industry, a little bit on the mortgage the mortgage side.

(29:50)
But but I, I, and then we saw inflation had been falling, but it it didn't fall by as much as folks had thought, right? I do think we're in this period of kind of start and stop and I, I think we need to start, stop thinking about a soft landing in terms of the economy. We, we hear that about a lot. Can the fed bring it in for a soft landing? I heard another sort of airline, me you know, sort of motif is this sort of touch, touch this touch and go this sort of, I think we're gonna touch down and come up and touch Dana come up. And I think it's gonna be really bumpy until we get to sort of a period of economic stability. So I think that, I think it's gonna be a period of economic uncertainty here for the first half of the year.

(30:32)
and I think that's gonna hold some businesses and consumers back for sure. but if I were to speak directly to someone who is thinking about whether I should go buy a home at this point, I think one thing I would caution against is I think it's a bad idea to try and time this stuff. You know what I mean? I, and what I mean by that is I think it's it's a bad idea to you know, try and say, well, if I, if I wait, I might have a lower interest rate. And well sure, you might also have less to choose from. And so if it is the right time for you and your family to purchase a home, and you have the financial wherewithal to do so I, I fear people are trying to time things that are just impossible to time at this

Point. Yeah. That, that's that's roughly the way it comes to me too. I had somebody on Twitter today say, well, what should I do about, you know, timing? And, and first of all, I don't know where mortgage rates are going. I have no idea. But secondly, the way I phrase it is like, it is like, look, if you love the house and you can afford the house, buy the house. If you don't love it or you can't afford it, don't buy it. Don't buy it because you think you have to, or you think the timing is gonna get worse. Or like, just like if, and, and, you know, buy the house, live in the house, markets go up and down. and, and and, and it's like I've given that, you know, all the way up and on the way down as well, the same sort of view. I

Think that's absolute. Absolutely right. I think we've you know, we, we've, we've lo lost a little bit of sight sometimes I think in the fact that, you know, housing is a place to live. It is also an investment, right? It's also a financial investment. But at the end of the day, if you're looking to buy a home to live in for 5, 7, 10 years I feel like it's there's so much to worry about in the transaction, but whether you're timing it exactly right to get the best interest rate you can get, and the best price you can get at this moment, I feel like is an added stress that a prospective home buyer doesn't need to put on them, put on themselves.

Yeah. right. And, and you know, if you happen to time it right, it's pure luck as opposed to skill.

Right. Well be as an anti personal anecdote, my husband and I purchased a home you know, remember when mortgage rates Mike hit 7% <laugh>? Guess who may guess who was putting an offer on a home? right, right. Back then. So, you know, we closed on December 2nd,

Like last all 7%. Yeah.

Right. When nobody was buying home. We closed, we closed on the December 2nd on this home. And it was one of those things that it sort of like highlighted to me that cuz people would ask me, why isn't the market slowing even more? Right? Why aren't even more buyers pulling back? Because there's always people who will decide it is the right time, it is the house they love. It is, you know, the time, the time to make that choice. And if financially it works out, they're gonna do it.

Oh, interesting. Well, that's good to know. It's it's, it's you know, it's always good to like you know, where the skeptical consumer is out there saying, well, you want me to buy, but what are you doing? You're like, well, I'm buying much time for me to buy too. <laugh> <laugh>. You know, one of the things that's that, that I'm interested in in the MLS side of things is we have we have had a there there's a, there's a common perception in the industry about the number of realtors that there should, that should exist, or we have too many, or there's, there's 2 million realtors and 5 million homes that sell in a year. Like so can you tell me about like what's going on with the folks in your, like are is that growing now? Is it shrinking the number of realtors with bright m l s? Yeah,

That's a good question. So we have about a hundred thousand subscribers across our footprint. So that's a hundred thousand brokers and agents working in those six states in DC. And we did see more people enter the real estate industry like we did nationally, right, during the pandemic. And we are starting to see some some of those numbers come down at some firms where real, real estate agents who became agents during the pandemic maybe at, came in as a part-time basis are finding that, you know, now is, and we've seen that kind of turnover after like two years or so pretty often. But we're seeing a little bit more of it now as the longer term real estate agents and brokers who have been in the market for a long term are, you know, are be, are, are a little bit more successful, right?

(34:56)
in these more challenging housing markets. and we are seeing then we expect our subscriber base to shrink in 2022. It's, it's a little bit of a lagging thing, right? Because they get their license and then it, you know, why not just you stay a member while you have your license? but but I do think that, you know, it's, it's tricky, right? When you have nationally, what over you know, over a million real estate agents or realtors, but you have, you know, something like 800,000 homes available for sale, like that, that is a, that, I mean, that's not a good industry to be in if you wanna make any money cuz you're competing after a lot of you're competing with a lot of people to list and sell homes. so I do think there's a rebalancing that's going on here after we kind of come out of the pandemic.

(35:44)
And I think it'll be interesting though to see if we do go into a recession, if we do find that there's a downturn. We know that people enter the real estate industry during economic recessions because, you know, they may lose a job and then they can go get their, their license and then they can, you know, find a firm to join. That has happened in past recessions. And I wonder if, if we do enter recession, if we might see the number of agents more stable than we might otherwise think because people are making that move from a full-time W2 job to to a real estate agent job.

That's an interesting insight. I wasn't aware of that, that the number of agents grows during recessions, but it makes sense. I have a, I have a hypothesis about, about the number of realtors and that, that, that because it's relatively easy to get licensed and then to let it lapse, it doesn't, it's actually a really great example of a, of a, of an efficient market. And so, like the number of realtors we have is always the right number as if that's my view. It's like, it's always exactly the right number. And like when the market's hotter and there's more going on and there's more commissions and more people come in and as soon as it then, then they leave. And so, like, I like to say we always have the perfect number of real, maybe a little lag.

No, no, but that's really interesting. Cause you're right, like if you are a rational individual and you are in the real estate business and you're not making any money, as you're saying entry and exit into the industry is relatively painless. I think that what, you know, what what I've seen is that the folks who've worked in the industry for a long time have really been focusing on sort of getting people up to speed on professionalism, making sure that, you know, all the transactions are still happening, you know, in a way that is, you know, good for the consumer. And that's a little trickier when you have a lot of flow in and out,

Right? It is still a, an expertise business and that's the reason and, and therefore it makes sense to have somebody with expertise as opposed to just brand new in the space. Yeah.

So we're seeing the same thing in our market. We're probably seeing a little bit of, of of a little bit of shrinkage in the number of, of real estate agents and brokers.

Yeah. that's great. are there do you have views about inflation this year and how we should think about it? Like it, it looked like it was coming down, but then the economy's been so strong that those has been hitting. Do you have views about where they might you know, how how we might, like what might happen and, and how it might impact our, our industry that the rest of this year?

Yeah, no, I have a couple of thoughts and I, I don't, you know, I don't know exactly right, of course. but but I think we saw that you know, do you, have you ever been on a diet, Mike? I'm sure you haven't, but if you've, if you know when you're on a diet or even when you're starting an exercise program, the first few pounds are really easy, right? Those are the ones that's easy. And I think that what we've done is we've worked through some of the supply chain induced inflation and that went pretty well. and that wasn't that was a lot of luck in some ways. And there was also some policy of course, and the federal reserves rate hikes. and so we went from 9% inflation down to 6.4% inflation, inflation seeing a lot of decline in goods inflation and a lot of deflation in energy prices, which is, again, outside of the federal reserves realm, it's the services inflation that is now on the rise.

(39:11)
And I think that's gonna be a harder nut to crack, right? And we're sort of seeing that the cost of health services and personal services and airline tickets and things like that which are still rising relatively quickly will keep inflation a little bit high. On the flip side though, I think there's a really technical point of inflation in how housing is accounted for inflation, right? We know that housing makes up usually about 40% of overall inflation. and we know that the way in which rent, for example, is, is entered into the inflation calculation is lagging because it has to do with when people that, you know, we see rent inflation up when people renew their leases. You don't get a rent increase if you're got a lease. and so, you know, we've started to see those rent, those new leases, you know, start to come in a little bit lower, and so we'll start to see those housing costs reflected in, in lower inflation and that might offset some of the services.

(40:09)
But I do think that as a consumer, so back to the consumer some things are gonna be a little less expensive than they were, but I think inflation is still gonna be top of mind of many peop of many people. And I think it's gonna be important to see if, you know, how, if wages continue to go up you know, we always think wages growth is good, but that's also a sign that we're likely to see prices stay high in inflation to stay high. and so I think what I, so back to your original question. What, what does inflation mean for our, our business? I think I think it's definitely something we should be watching, and I would watch it in tandem with what we're seeing about credit card debt, for example, and spending, and we're seeing that people are beginning to run up credit cards and credit card debt levels are rising again, and we know the student loan deferment program is going to end here coming up in the spring. And so people are having to take another look at their household budgets and may think gosh, we, we thought we were going to be able to get out there and buy a home this year. But inflation prices are still a little too high. I'm not getting as big a wage increases, I thought. And I think that is one of the, I I still think inflation is one of the risks out there to to the, the buyer side of the housing market.

So, so if we were to look at the risks for the coming year, recession versus inflation.

Yeah. <laugh> man. I don't know, <laugh>, I think it's gonna, like last year I feel like was like kind of a tail of two years, right? We had the first half of the year where everything was really a boom, and then we had like the second half of the year where stuff slowed down. I'm, I'm kind of gonna bet on a tail of two, two years this year as well. I think we're still gonna see inflation be kind of front of mind in the first half of the year. I think. I think there is a potential though for us to find that as the interest rate hikes take their toll, that by the end of next year we will start to see a softening in the overall economy. And so while prices might have fallen, we might start to see overall economic growth begin to, to slow down into sort of recessionary levels. So look, if you want something to worry about next year, this year, I think there's going to be plenty for everyone. and I do think inflation is gonna be sort of the short term kind of top of mind issue for folks who are out here.

Okay. Inflation short term and, and recession recession risk next year,

Soft recession risk at the end of the year into 2024.

Okay. That's, that's

Check back in a few months. We'll see.

Yeah, yeah, for sure. It's great. The best thing about making predictions like this is nobody holds you to 'em, so. That's right. That's right. So I love to hear, I just, what I like to do is really, I'm, I'm interested in your, in the, in your thinking about like, how do you approach, how do you approach it? Because you know, who knows if it happens, but, but what are the elements that, that are important to you? That's really what is, is valuable to me in these discussions, in these discussions, so I appreciate it. let's do a, let's do a, a little turn. We got a a few minutes left. George Mason University where you did your PhD has a, like a really like powerful economics program one of the most notable ones in the country these days. tell me about that experience at that school.

Yeah, so, and I will say I wasn't in the economics department, I was in the public policy school, but I, what I appreciate about George Mason's approach to economics and to research more generally is sort of the interdisciplinary approach to it, right? We were located in my school was located right, you know, in the heart of, of the Washington metropolitan area right outside of dc. So understanding the ways in which you know, policy and economics intercept I think the idea of being able to use the Washington area as a lab basically, you know, for research is really it's really an interesting place because in some ways the Washington area is like let's say, you know, west Chicago or you know, or Seattle or lots of other places. but then on the flip side, we're also, you know, we're three states plus the District of Columbia.

(44:10)
If you throw West Virginia in there, cause we, we go into West Virginia. And so when you're thinking about, we were talking about housing policy, for example, and, and you can, you can think about researching sort of the economics behind housing policy and the housing economy. but it difference whether you're in Maryland or Virginia or whether you're in the district or West Virginia, because that influence on housing is really, you know, critical and is what we really were able to focus on at George Mason when, you know, sort of you can take the macro look at things, but at the end of the day what goes on at the local level ends up being you know, almost, I would argue more important when it comes to the housing supply and demand picture. I was also fortunate enough to be on the faculty of George Mason for a little while and I I got to teach statistics Thursday nights at seven 30 at night for three hours. but but this idea of being able to use data, use analysis to answer questions it was just like such a, such a great opportunity, you know, great experience that I was able to have there.

I love it. I love it. Yeah, that, that, that DC metro area has, has a really diverse set of policies to, to pay attention to when you're studying policy. That's, that turns out to be really, really interesting. I can imagine.

Yep. Absolutely. Absolutely.

Cool. let's talk about the longer term future. We've talked about demographics and migration and immigration a little bit, but let's talk, you know next, the later in the decade housing and, and what you see, you know you know, we have migration patterns and, and in the mid-Atlantic you have, you actually kind of have both, you have a little bit of inbound migration and you have some of the like the, the migration, the, the New Jersey, Pennsylvania, down to Florida, like out migration there. So tell me about the next 10 years or what your vision of the future is or things we should pay attention to.

Yeah, so I think I know we've touched on demographics before, but I, I don't think you can overstate the importance of demographics to the longer term outlook for the housing market. I think that we are gonna be in a low inventory high demand market through the rest of this decade. So we're in 2023 right now. Think of, you mentioned the millennials earlier, they are between the ages of 27 and 42 right now. Median, first time home buyer age 33, 34. We've got 'em for another seven years, right in this, this prime first time home buying age. On the other end of the barbell, you've got the baby boomers who are remaining in their homes longer, locking down inventory, keeping inventory tight. it's hard to be delicate about, you know, but over the next seven, eight years, those folks will, you know, move into senior housing or will sort of, you know, move on to a better, a better place or whatever.

(47:01)
And so in 2030 when we see you know, generation alpha coming up smaller than the millennials we see gen Xers sort of, those will be the drivers in the market and we'll have a much more inventory favorable market in the 2030s. I think it's gonna be easier to be a first time home buyer in the 2030s than it is, than it is now. And then the only other thing I'll say, and I think that I'm really fascinated by it, I don't know the answer to, is I do think there's been this shift in, in back to the supply issue in how we deliver housing. If building new housing is the primary solution to tackling the housing affordability challenge, we need to find a different way to build housing. Cause we've been building housing about the same way for like a hundred years, right?

(47:46)
You know, you clear sight, you put some, you put the house up and there's been a lot of movement on manufactured housing and building homes offsite and moving them in and, you know, this crazy 3D printing stuff. And I'm not sure what has legs at scale, but I do think that's going to be a one defining characteristic of the housing market for the latter part of this decade, is that maybe we're thinking about how housing gets constructed in a different way so that we can kind of have a new solution to, to expanding the housing supply. So those are the things I'm kind of excited about and that I honestly am looking forward to learning more about over the, over the years ahead,

The sort of a, a techno optimist view of what we can do to improve housing and like technology comes in to improve building. Do you think like reduce cost in build, one of our challenges right now is it's hard to build affordably build affordable, you know, homes.

Yeah, I think, yeah, no, I think materials cost is key, but I'm gonna argue there's two even more important costs that I think we're looking to find solutions for. and the first is back to that zoning meeting in your local town at 7:00 PM right? We know from the home builders that local and state regulation accounts for between 30 and 40% of the total cost of building a new home. That is a huge opportunity to cut costs by reducing the time it takes to get permits by limiting the number of sort of public meetings that are involved in building housing. The second thing though that I'm really excited to think about is on the labor side, which we also touched on, and we know that there has been a real de shortfall in the number of folks who are going into the trades, right?

(49:30)
That are going and learning about becoming an electrician or a plumber or a female worker. And couple that with all of the trends in accumulating student college debt and people going to college and then not being able to get job that pays enough to pay off their debt, I'm hoping, and I'm, I'm, I'm wondering if there's gonna be a pivot to encourage more vocational training, encourage more students to go into the trades. and I think that will be good for the economy. I also think it'll be good for the home building sector to bring down the cost of labor by bring, well not bring down the cost of labor, but by bringing more people into the labor force in order to build more housing. So I think material's important for sure, and I also think the labor and local state regulation piece is also critical to bringing down the price of, of building new housing.

Yeah, that's terrific. I hadn't known that, that the estimate that 30 to 40% of the cost is essentially a local zoning permitting process cost

And it could be, yeah, state and local. It could also be things having to do with environmental protection and, and things with you know, putting in life and safety stuff. I mean, I'm not saying it's all bad for sure and neither with the home builders, but there they are saying that there is, there are places where costs can be cut and, and regulation and, and the processes are, are definitely one place that needs to be examined.

Yeah, I mean, there, there are reasons that we put these zoning laws in place. Like there are things that we're trying to solve for. but it does seem like there is a, a significant opportunity for cost savings if we can do some, some pull some of the inefficiencies out of that mix.

Yeah, absolutely.

and, and you mentioned a little bit in, in I think Virginia, about taking some of that political pressure out of the local hands and putting it at the state level. That's happening in California too, where there, where, you know, it is it's like state loves the state recognizes that, that there is crisis affordability and availability problems in California. and you know, you get, you get like there's literally a, a, a, a city council person in San in San Francisco who literally said, we're all in favor of our, of of affordable housing. We just don't want it in our neighborhood. It literally said, not in my backyard, <laugh>. And, and, and it's, and it's like how do we, how do we get over those hurdles?

Yeah, no, I think that is the biggest, the biggest challenge and, and it's not an easy nut to crack, but I do think that, like we talked about earlier, I think there is some awareness that something has to change or it's not just going to be like a thing where it's somebody else. I think that's part of the problem is for, for that city council member you mentioned, or for many people, it's, well that's, you know, I don't know anybody who, who has trouble affording their home, but once it hits home, whether it's your adult children or your, you know, then it's, oh, well I, I see this is hitting more broadly my, my kid's teacher, for example. Or, you know and, and so I think, I think there is, there's mo growing movement to understand that, you know, I might, I might not know as much about what it means to have some type of housing that's more affordable in my neighborhood. Let me learn a little bit more about

It. Well, that's a really, I really appreciate the conversation today, Lisa. This is is exactly where we want to go and dive into your expertise and so I, I appreciate it very much. Where can folks follow you and work you're publishing and work you're doing with Bright m l s?

Yeah. No, I really appreciate that. And Mike, thanks so much for the chance to, to join you. I love following what Altos puts out and I watch all your data. You can you can check out brights data@brightmls.com slash research, and please do follow me on Twitter and LinkedIn. It's just Lisa underscore stur event on both those platforms. And and again, thanks so much. I I really enjoyed the conversation. I'm glad we had a opportunity to talk everything from, you know, new construction to housing affordability to to demographics. It was great.

Perfect. Perfect. So bright mls.com/slash research and then Lisa underscore Sturdivant on Twitter and LinkedIn are both good places for you there?

Yep. Yep. Sounds good.

Lisa, thank you so much. Yep,

Thanks Mike. Appreciate

Alright everybody, this is a top of Mind podcast. We'll be back in another week or so with another great guest like Lisa. Thanks for listening to Top of Mind. If you enjoy the show, I'd really appreciate leaving a nice review on your favorite podcast app that helps other people find us as well. Be sure to subscribe so you don't miss future episo