Deep Dive on Rentals with Zumper’s Anthemos Georgiades

Mike Simonson here. Thanks for joining me today. Welcome to the Top of Mind podcast. If you follow along with Altos Research, you're familiar with our weekly real estate market data video series with the top of Mind podcast. We like to add context to the discussion about what's happening in the market 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 those insights available to you before you see it in the traditional channels. People really need to know what's happening in the housing market right now. So if you need to understand the housing market or communicate about this market to others, go to altos research.com and just book a free consult with our team. Let's review your local market and teach you how to use market data in your business.

(00:52)
Alright, let's get to the show. Today we're talking about the rental market with Anth Gidi. Anth is the co-founder, CEO of Zumper whose mission is to make renting a home as easy as booking a hotel. The rental market interacts in sometimes surprising ways with the rest of the housing market. So we're in this period where massive apartment construction that started in the free money years is now coming online, so there's so much to learn about rental housing in this country. So we're going to dive into Zumper data and explore everything we can about the rental market in America today. So Anth, welcome to the show.

Thank you for having me. Mike.

Let's start with Zumper and your background. Tell us about the company and you.

Zumper is, as you mentioned, an online residential rental marketplace based in the US and Canada. We are about to turn 12 years old next month, which for a startup makes us very old, but as a marketplace in PropTech makes us like a teenager. Our competitors are typically much older and I started Zumper during business school when I moved to the US as a frustrated renter. So came at the problem from the consumer side, but as all marketplace founders know, to build a great marketplace, you kind of have to become probably more of an expert at actually the B2B side. And so spent the vast majority of my last decade understanding landlords, property managers, what they need, what gets them going. So yeah, here we are

Here and we can spend an hour talking about the dynamics of marketplace, e-commerce marketplaces and that sort of a challenge. But you've managed to build a really big site with a lot of coverage for the country and so it's terrific to have you here with us today. We're talking apartments and rentals today. You've been doing Zumper for 12 years, so can we start maybe with an overview of the US rental market now? What are the big things we should be paying attention to and maybe how it's changed over the last 12 years that you've been watching the data and working with folks in the industry?

Yeah, I mean high level stats to start at 50,000 feet, roughly 110 million Americans rent, they live in about 45 million rental units and typically rents grow just above inflation. In the 10 years we've run zumper and track the data of the millions of listenings posted to Zupas marketplace every month. Typically rents grow just above inflation, typically around three or 4% every year, and occupancy typically is around 94, 90 5%, meaning the vacancy rate's about five or 6% in the us That was how we experienced the first six or seven years of zumper. And then obviously in 2020 there was a massive dislocation in the rental market. Rentals cooled off. They then during peak zero interest rate environment in 21 and 22 became super hot and most regions popular regions saw double digit rank growth for various reasons we can go into in 21 and 22. And then when the fed burst the bubble, we then saw that swing very firmly back.

(04:21)
At the same time, like you mentioned Mike, we saw record supply came to market. So in the last four years we've gone from rapid rent acceleration to enormous cooling off in rents and I would say 2024. The unsexy reality about this year is even though there are enormous regional differences that we can probably get into, actually it's the first pretty normal year of rent growth I have seen in half a decade. And so 2024 looks more like 2019 than it does any other year. We've had since the pandemic. And so actually we've cooled off a bit and started to regress to the 10 20 year equilibrium, but it's been a wild ride in the last four or five years to get back to this.

Yeah, okay. So 2024 is normal, meaning a three to 4% or just above inflation rental rent increase. Okay, so that makes sense to me. One thing that comes to mind in here, and maybe we just jump into this right now, which is over the years I've observed this, people often assume that home prices and rents would move countercyclical to each other. If I'm not going to buy, I'm going to rent. But my observation is that they actually move in tandem and tell me what you know about that phenomenon.

Mike, you nailed it. When I was at business school, I was literally, there was a case study I did that said exactly from a macro point of view, said they're inversely correlated. If people aren't buying they must be renting. If they're not renting, they must be buying. And so we went into the pandemic and the high interest rate environment thinking, okay, cool, maybe high interest rates will stimulate enormous demand for rentals or vice versa. In the zero interest rate time, maybe that will have create negative demand for rentals. What we actually found Mike, was when interest rates were jacked up by the Fed to combat rampant runaway inflation, it had this effective cooling household formation. And when net new household formation is low or even negative, meaning people move out of room share, they move out of living on their own back with roommates or they stay with their family instead of going to a new unit after college, actually that affects both the for sale and the for rent segments uniquely.

(06:42)
And so actually exactly to your point in a period of high interest rates, we didn't see this huge move back to rentals. We actually just saw people when they're uncertain on economic times, they just halt economic activity and when you rent, it's a third of your income typically. And so we didn't see people take the plunge in rentals. We actually saw them hold tight or actually go back in with family or go back in with roommates that actually shrinks household formation. So against everything I was taught during my MBA, they are less substitute products than we all thought they were and they actually go together as a pair.

Okay, that's good to know that it's not just my vibes there that you're watching the same data that we see in that phenomenon. Okay, so they move in tandem. And right now it's kind of fascinating because on the home price side we have slight increases in home prices for the year. On the for sale side, inventory is still actually relatively restricted. There's fewer homes for sale than normal like 2019, but that's not true on the apartment rental side. Correct.

Yeah. The story of the rental market right now is all about supply. So you hinted this in your intro in 2020 and 2021, there were record new permits, new starts and construction projects that tried to capture this enormous multifamily demand. We saw in 2021 when the economy was booming, they're now coming online right now they've been constructed, they've been approved, they are coming live. Last year we saw about 440,000 multifamily units come to market. In 2024, we're going to see about 650,000 multifamily units come to market. They are like 50 year high numbers. And going back to econ 1 0 1, what happens when you flood the market with new inventory and new supply? And it turns out it doesn't matter so much if it's class A, class B, class C, any new supply puts enormous downward pressure on price, which is fantastic news for renters. And so when you're reading reports at the moment, including zupas data that is showing in Texas, in the Sunbelt, in areas in various across the country, but especially in those regions across the Sunbelt, you're seeing not just rents slow down, but you're seeing rents go negative, meaning declining rents year on year.

(09:12)
For new prospective renters, a large piece of the story is record supply flooding the market, giving renters enormous leverage in their negotiations. And the story of the rental market, very different to what you mentioned before in the for sale market has been supply, supply supply 50 year highs in the last couple of years. So

We have 50 year high of new supply in those apartments, but we still have slight appreciation in price overall.

Yeah,

What's

Going on there? Yeah, the overall prices are now tracking to just below inflation. So one beds are climbing about 1.7% year on year two beds are currently at 2.6% year on year growth. So tracking just below the fed's printed inflation of around 3%. Typically they're above right now they're a little below. You are seeing the sunbelt pull that average down, but then you're seeing some other regions very hot. So if you combine the fact that some regions recovered very strongly post pandemic with the fact that they also didn't build enough supply to catch up with demand. If you look at New York, Chicago, and interestingly many Midwestern cities, these were cities that actually did very well through the pandemic and post pandemic of attracting the next generation of professionals and also didn't build quite enough supply to catch up with demand. You're seeing double digit rent increases in some of those markets. And so whereas the overall US is tracking in line with inflation, you have these outlier markets that are fascinating and somewhat contradictory to this overall trend.

That's super fascinating because like we mentioned already, that also mirrors the for sale side, those the Midwest and some of the northeast markets have been the hottest, tightest inventory and hottest on the resale side as well. So those parallels are happening in both places. It's counterintuitive because you assume everybody's moving out of the Midwest and moving to Texas. So you assume that that trend is underway, but because of the construction side, it looks like the supply and demand the supply is actually down where in Texas coming on.

Yeah, correct. And I think the most fascinating one of all of those trends is New York. I think both anecdotally from friends of mine in my network who I watched where people migrated post vaccines, post pandemic, and then you just look at the data New York, it's not a competition, but just from a purely objective point of view of migration trends and the impact that had on rent. I mean New York is continuing to see over demand. There has been a huge net migration to New York. It is absolutely captured many of my friends imagination in terms of what's going on in New York right now. And there has been, it's not like there's no new supply in New York like they've built, but they've just built nowhere near enough supply. And so you're seeing double digit ranking increases in Manhattan and in Brooklyn, which are already starting to tip over $4,000 a month in rent, which is extraordinarily expensive. And you've also seen this spillover to Jersey where look at Jersey City and some migrator hubs of people who come into New York, but then go back to other places. Jersey City and other New Jersey towns and geos have also seen enormous rent growth as the spillover effect has been real in the kind of tri-state area.

Fascinating. Yeah. Are you based in San Francisco?

Yeah, Zum. The HQ is in San Francisco, yeah.

Okay. Yeah, me too. And so it's not a competition, but I'm paying attention to who's moving to New York. So it's funny, the thinking about it is, one way I've described it is we used to build homes where people want to live now people want to live where we build homes. And so you can see a lot of that activity going on that way. Okay. So while to wrap up this big supply, so you said 650,000 units coming online this year

Expected to come online in 24, correct. 24 in multifamily, six

50 year high. But then is it also true that the permits, the starts now are really low? So we're in the next five years, we're going to actually switch it totally around.

So just like the same lag effect that in and 21, we knew there'd be this record supply. Now the record supply was slightly delayed by supply chain issues that happened during Covid, but somewhat predictable. You are absolutely right in 25 and especially in 26, there will be a significant dropoff in multifamily deliveries to market for obvious reasons. The asset class is under question right now. There's a lot of distress in the system. Variable interest payments have just gone through the roof for anyone who has floating rates and also people are studying occupancy and supply, and the opportunity is not as attractive today as it was in 2020. And so I think whereas we're testing the lower bounds of occupancy right now, I think occupancy sits at around 94, maybe slightly below 94%, which is within a standard deviation of the median, but starting to test the lower bounds.

(14:44)
I think as we go through the next couple of years, we'll probably rebound to more of an occupancy rate of say 95% or a vacancy rate of about 5%, which is inverted comm as normal. So I think we're on the slightly lower end of equilibrium now. I think we'll return to equilibrium in the next 24 months. However, I would say the lack of supply in the next two years, we'll just absorb and get us back to equilibrium. I don't think we're going to whiplash back to a wildly low vacancy rate. Again, I think we're more now operating in a 10 20 year average where there'll be a bit of stuff to work through the system, but we're entering a much more predictable market with fewer exogenous shocks, and this is now starting to feel like normal.

Okay. Oh, that's really useful. So that we're at the low end of occupancy now. We've got a lot, obviously a new supply online. How much of the low occupancy now do you think is a household formation thing for the year? And how much of it is is just adding to the numerator?

Yeah, I think it's still being caught up by supply. When I talked to some of Zupas clients, like I recently came off course with clients in Jacksonville and Atlanta who have lease ups coming online, meaning they have 400 unit buildings that are currently empty and they're going to try and lease up from 0% to 98% in six months, which is why people use zumper. They're scared because those markets are already at 10% vacancy rates. And so shoving more supply into those markets is really going to put pressure on those numbers. So I'd say the slightly lower occupancy is less about demand. I think renter demand is actually very healthy now. People are moving, I think we're through the fed's rate hikes and everyone knows that, and people aren't looking for the fed necessarily to drop rates. I think they're looking for the certainty that there isn't more disruption ahead.

(16:40)
And I think if you look at renter behavior, people feel more confident today than they did a year ago in the economy, despite all of the drama we're about to go through with the American election. And when there's less fear in the system, there's much more positive household formation. And when there's positive house household formation, people start to move again. So I think this is far more testing the low vans of occupancy being low because there's so much supply in the market and much less about a demand issue. Demand is actually very healthy. It's just that it's being met by so many new units.

That is really useful way to understand what's happening out there. I noticed in your, I think it was your July zumper rental report, there was, or maybe no, it was the end of the year report from 23, you did a survey, you did a renter survey at the end of the year, and one of the things that your survey said was that 72% of the people at the end of 23 said we were in a recession right now coming up a year ago, 70%. And while data-wise, there was no recession in sight, but people thought we were, and especially maybe renters thought we were. And so is that what's changing now or are those folks feeling more confident or what else are like how do I think about what does that mean for the rental market?

Yeah, I mean Zupas typical user is like a 30-year-old woman that's like a younger millennial professional, typically living in a secondary, primary secondary market. She felt like her real wages were declining at the end of last year. If you think about it, we absolutely did not hit the technical definition of a recession. However, at peak inflation, we are seeing very large inflation prints that were growing at faster than people's wages. And so obviously if inflation is at 9% and your wages are growing at 4%, your real wages are declining. You are able to buy less stuff year two than you were year one because your wages weren't growing in line with the prices of your rent and your mortgage and your holidays. And so our renters were feeling that pinch big time at the end of last year. And I think when you ask 'em a question of are we in a recession, they'll often answer it from the perspective that they feel that stuff is unaffordable and they feel like their purchasing power has gone down.

(19:18)
So consequently, if you extrapolate or that the economy must be slowing down, I can't buy as much stuff and we weren't far off. And by different cuts of the data, if you take out government investment for example, I think we were closer to a recession than it looks. But if you look at government investment and GDP growth, that allowed us to keep going. So back to your original question, with inflation now printing much lower at say 3% or close to it, and wages being in line or actually slightly above that, now you're feeling people thinking, okay, I have predictability and I have more confidence. They still took a punch to the face because they still encountered those two years of feeling their real wages were negative. But I think now predictability is where economic activity gets going. Again, renters especially through this busy season college has graduated in May and June.

(20:09)
It's typically cycles through a bunch of inventory and new moves and people moving to new cities. Stuff is busy, stuff is busy. The one wrinkle our ads, which is one nuance is renewals are up, so actually demand is strong, but we're seeing an increase in renewals, meaning actually Z parentis who a year ago found a unit are now actually staying in that unit and negotiating with their landlord. So they're not moving out and moving back with roommates. They're sticking the landing, but instead of just constantly switching and finding new things, a lot of people are still staying in place, but they're using the fact that rents are down or slowing to actually renegotiate, which is a slightly different pattern in 24 to what we used to see before the pandemic. But overall, consumer confidence is definitely up. And I think the fact that we have a very uncertain election ahead and yet consumer confidence is higher than it was at the end of 23, tells you a lot about how much better people feel about the economic situation.

Great. That is really useful. And it's actually more optimistic than I would've guessed. So that's terrific to know. And I think it's really fascinating that you point out that renewals are up. So the percentage of people who are not moving when their lease is up is high. And that actually also mirrors the for sale market. It also mirrors things like the job market. So there are fewer people quitting their jobs, there's fewer fires that we have, much more staying in place. The great stay happening, and I've noticed a parallel on the for sale side with the employment numbers, and I don't know if it's exactly the same phenomenon, but I hypothesized that it might be where it's like things were roaring during the pandemic, I got a great deal, I am messing with it. I'm like, I'm not moving. I'm like, you're rocking the boat whether it's a job and you've got races then and you don't want to screw around or you don't want to or you're an employer and you're like, okay, we've got our team, we're not going to mess with it. And so that's staying, we're not hiring as much, but we're not firing anybody. So everything is kind of doing a stay in place and it's really fascinating that you could see it in a renewal percentage increase. Do you have off the top of your head, do you know what the numbers are in those renewal percentages is like up,

I dunno if the numbers off top of my head, but if you listen to some of the REITs earnings calls this season, they all talk, and again, there's a little bit of nuance regionally, but they all talk about a surprise to the upside in their renewal rates. And by the way, for REITs and our customers who are publicly traded, that's a huge success because then they need to spend less money on companies like zumper to fill vacancies because instead they renew their existing tenants. And by the way, we are all in the game to help our customers and our job is to make them long-term successful and help them. So we're fine with that. But it's been a topic of conversation on earnings calls that has come up repeatedly that they're renewing to the upside, which is really interesting. And one thing I'll say, Mike, is both of us who run tech companies is in terms of employment where we are in a, I guess people would say this is more like the norm, but we've seen software engineering, zumper employees, a bunch of software engineers.

(23:34)
We have a phenomenal software engineering team, but we really haven't hired many software engineers in the last 12 months, whereas five years ago we'd be hiring tens and dozens and it would be a very, very competitive and hot market this year. You've read of reports of CS graduates, computer science graduates who can't find jobs in Silicon Valley or on the East coast. It's unheard of before the pandemic, but this year we've seen people not be able to find coding jobs. So there's definitely a shift afoot. And in terms of your point about people staying in place and not undertaking crazy spend but conservatively inching back into growth, I think we've seen that as zumper ourselves just as an employer as well,

That those are really, really fascinating trends to know and I appreciate that the rental perspective on there. We talked a little bit about the 24, 25, maybe 26 with fewer properties coming online. Do you have a vision for the longer term future? What should we be thinking about? Do you think about the big demographic trends? So a 30-year-old is your demographic, 30-year-old professional that's like late millennial now as that big bulge of millennials moves on, what does that mean for Reynolds in the second half of the decade?

Yeah, I think you may not expect me to say this as someone who runs one of the big residential rental platforms, but I think the core message is the American dream and homeownership is not dead. I think you've read like a million articles saying, including using zumper data because we survey our renters all the time, fewer Americans today believe that home ownership is a part of the American dream. I think 30% of renters we surveyed at the end of last year said, home ownership is not part of the American dream. However, let me just flip that. 70% of Americans still do believe, and these weren't just Americans, they were renters who currently rent 70% still do believe that home ownership is part of the dream. Actually, the kind of non seismic answer to your question is I think most renters still absolutely have the ambition of ownership.

(26:13)
Typically, a great predictor of that is the age of marriage. The age of marriage continues to get higher and higher. People are postponing it for their careers. So that's probably the best predictor of why. And maybe in people's lives they'll buy two and a half homes now instead of three homes, and that's a big demographic shift. But despite talking my book and obviously building a residential rental platform, the honest answer is now the pattern's pretty strong still that people will rent between 18 and 38 and 10 years ago that would've been, or maybe 20 years ago, that would've been 18 and 28, it's now 18 and 38, but they are absolutely still looking to buy. I think in the last two years with interest rates where they were, that was just off the table for so many people. But Zumper is very comfortable with the fact that our job is to look after those first two decades from college through your first few jobs, and then there's just a natural handoff point where people will decide to buy and we are delighted for them.

(27:07)
The only final wrinkle to that is you've also seen people after home ownership and after their kids have left for college or their first jobs have actually gone back into the rental market. And there's this really cool segment right now of 55 plus who are now downsizing and renting again. So that's kind of an interesting trend to watch. But I think the honest data-driven answer is home ownership is here to stay. There's no seismic change, and renters will continue to have the ambition of moving into home ownership. And typically from the data we see the age of marriage and the point at which they could have entered their first relationship, whether it's serious and move in with someone is the point at which they'll consider it. So I think our job is to capture them in their young years and then potentially in their older years.

(27:50)
But I think that middle year of bringing up a family and having the ambition to own a home, if rates come down to something more affordable, I think you'll continue to see it. The one caveat to everything I've said is if the new normal for interest rates is significantly higher than what we're used to now, clearly I don't think it's going to stay at four or 5%, but I also don't think we're going back to zero interest rates anytime soon. And so maybe the resting heart rate of home ownership is going to decrease a little bit, but I think that'll be more about the Fed than it will be about the dream and the ambition.

Okay, that's really insightful. This is terrific. So are there other things you were mentioning in the survey, are there other insights in that survey that we should be paying attention to when you survey Zumper renters?

Yeah, I think the most interesting thing we heard related to interest rates and the for sale market was 69% of renters who thought about buying last year said they couldn't buy because of interest rates 69%, and that would've been a fraction of that number five years ago. It's a really obvious point, but sometimes the most obvious points that need restating because I've read a million articles explaining what's going on, but let's just cut to it. Most first time buyers aren't taking out a 7% mortgage when they're putting 20% down. So the most obvious data point we found last year was that 69% of our renters said buying was off the table because interest rates were way too high. And so I guess to join our conversations in your last two questions up, yeah, the question is as interest rates dip, how sensitive is demand to that?

(29:31)
And again, we're not going back to 2% mortgages. I think that's not at all going to happen anytime soon. And so how sensitive are renters to 4% versus the 6.5% or 7% they're facing today? Not as many are going to take out a 4% mortgages, a 2% mortgage or a two and a half percent mortgage that they could have got in 2020. But let's see. So I think for the homeownership side of the equation, the next two years, it'll be fascinating. And I think watching what the Fed do and what they signal around the resting heartbeat of their interest rates is going to be fascinating. But my guess is we're 15, 18 months away from knowing what the resting heart rate is. And we still haven't seen the first rate cut as we talk in early August, 2024. And I think most people think we'll see one this year, but we haven't even begun the journey down yet. And let's see.

Yeah, right, exactly. And we don't know how. One of the things I wonder about is how far back do consumers look? Is a home buyer now thinking about 7% rates in May or are they thinking about 3% rates from two years ago? My guess is they're actually dialed into seven, so six and a half feels cheap, and if it comes to six, do we start seeing a lot more action? We really, a fascinating view six will still be difficult for affordability for your users, switching from renting to buying. And so we have, one of the things we see, a scenario that I think is possible in the for sale side is that we don't have a crash in home prices, but we have a extended period of flat rates while incomes are catching up. So we get a little bit more affordability each year and then maybe in a few years we get an interest rate dip, but suddenly things feel more affordable.

And I think Mike, to your point, that's where the trade-off and the substitution effect that we said didn't exist during Covid actually might start to exist. The unique thing about Covid was it was such an economic disruption and then the Fed raising rates so quickly with such an economic disruption that everyone paused activity and new household formation shrunk. Now where that doesn't apply is now if we're in a normal economy that gets back to very boring normal growth, then we actually might see sales and rentals as substitutes because at with interest rates at 4% or 3% or mortgages, sorry, I should say at four or 5%, then you would have a renter and I think a first time buyer consider, can I afford a four and a half percent mortgage or should I just keep renting? And I think that's where the substitute effect that comes in.

(32:22)
Econ 1 0 1 does apply, but it didn't apply before because you had so much economic uncertainty that it just shrunk formation before it did anything else. So I think there's probably nuance to our previous conversation that will maybe happen in the next 12 months, but those economic textbooks didn't really account for what happens where the Fed has to raise rates faster than it's really had to do in a very long time. I think you saw very bizarre behavior then. And then there's one funny meme, Mike, it reminded me of that you've probably seen online that has funny photos of someone looking over a whole crowd fighting while they're just enjoying the view and it kind of has the meme as people that took out a 2.5% mortgage in 2021. And so back to your point about what will people reference, part of me thinks they'll reference 7% and think that five point a half percent is cheap. But part of me because of meme culture and all the stuff that's gone on the internet is people remember that their peers who were risky in 2021 who took out a 30 year mortgage at 2.8%, that's a hard comp because I don't think there'll be a generation who's able to get a 2.8% or less mortgage now. So let's see.

That's a really fascinating observation. I remember when I bought my, I've said I've been wrong on interest rates for 30 years. I bought a first house in the nineties at whatever it was, seven or 8%, and I locked it in for 30 years. I figured it's got to go from here. And then I bought another house in 2001 and at 6% I locked it in for 30 years and I bought another one at 4% and I was like, I've just been wrong for 30 years, but I also know I didn't know anything about rates. And I go shopping for that first home and it's like somebody hands me a mortgage and I go, okay, this is my pay. I didn't know what mortgage rates were eight days ago and maybe we're now in the online world where people are more informed about the market and about things like rates and maybe that has impact on what they are, their decisions.

(34:44)
So I hadn't considered that really. Maybe it makes 'em have a longer form and maybe it makes that great stay longer. It actually gets me to another question I wanted to ask you, which is on the technology side, and when we think about zumper has only existed for 12 years, it's been 12 years, but even in the 2010s, you still had to go hack through Craigslist frauds to try to find a place to rent. And before that it was walking around a neighborhood looking for a sign in a window. Does the technology, what's the technology change done for the market and what's next for the consumer?

For Zupas first 10 or 11 years, we were very firmly like a web 2.0 marketplace, meaning you can transact in the marketplace, you can read write, and I count mobile, iOS and Android as part of that Web 2.0. Other people talk about native mobile as like a compute shift. I think that was more like a format shift that you could use it on different things. I think it's very clear in the last 24 months that we're entering a quantum leap in computing, which is Web3 0.0, forget Web3 and crypto, I think that was a very clever branding exercise. I think Web3 0.0 is the true computing shift we are underway, which is ai. And the differentiators will be obviously answering your questions, not just giving you a bunch of options and also action like assistance agents doing things. And so as someone who runs a pretty large marketplace in Web 2.0, 3.0 is both an amazing opportunity, AI, but also an existential threat unless you get it right.

(36:36)
So the two ways Zumper thinks about 3.0 is how do we find renters where they are tomorrow, where they're going to be searching, and then how do we use AI to give them a phenomenal experience on zumper? So in part one, we built the first ever GPT on chat GPT for meaning you can use Zupas GPT from the GPT store on chat GPT, it's a bit like an app. And then you can talk to Zupas API and do a rental search in chat GPT. But using zupas real-time database, it's still a small percentage usership of Zupas users, but it's more like skate to where the puck is going. And I think we know that more renters will use Gen AI one browser windows in the future and Zumper has to be part of that. And we are currently the only rental marketplace that does that.

(37:21)
Then part two is well, right, once we bring them onto zumper, all of those gen AI platforms, I'm still bringing users back to Zupas marketplace where we have the best information on zumper. We are going to launch something later this year that is a rental assistant that will go far beyond just q and a. She will help renters actually transact book into things, order their open houses and stuff like that. And so I think 3.0 for us is both find renters where they're going to be tomorrow and then when they're on our platform, allow them to take actions that is far more seamless than what they had to do before. And I think that if you think back to companies like Zillow who launched way beyond way before I'd even moved to America, and it already existed when we launched zumper, they completely crushed it because they won Web 2.0 specifically at SEO, they just have dominated SEO for 20, 25 years. I think the opportunity now is as the world's changed, how do marketplaces like zumper go early on Web3 point and become the absolute winners of the AI transformation? And I think we're at the first pitch of the first inning and I don't have a clear answer, but I like experimenting with things with my team and failing fast and often, but I think we have a pretty good foothold on the beginnings of something really big, but it's still very early.

Yeah, fascinating. So the AI SEO as one of, with the chat GPT plugin, the GPT app there. So let's walk through that for a second. That experience, what is that LLM text experience? What does that get me as a searcher that didn't happen in Web 2.0

Totally. I think there's two things literally specifically I'll answer it with any of you can do this if you just go to chat GBT and type zumper or type apartments or houses for rent and you'll get zumper and use our GBT and talk to us two advantages. But again, I want to be clear, Mike, this is super early and it's under 1% of our traffic. We have millions of monthly users and this is under 1%, but it is exciting. Two things. First of all, you can search semantically. So instead of clicking the filters or narrowing things down, you can just talk to us and to our API if through chat GPT, and it is a nice way to search. The second one is probably more powerful, which is we can marry Zumper API queries to web queries that chat GBT can do and give you a really great answer.

(40:00)
So my favorite example of this, which is actually something that many of our users want is, Hey, I'm moving to la I'm looking for a two bedroom for under $4,000 a month. It's got to be in these neighborhoods and I want it to be within a six minute walk to a Whole Foods. Now zumper on our platform can give you the first half of those queries, but what we don't have embedded in our course search experiences, we don't track commute times to Whole Foods. And by the way, they could have said Whole Foods, they could have said Walgreens, they could have said a pub with a four style better rating. And obviously Zupas Marketplace isn't acute enough to have all of those specific ratings, but if you marry the API call on zumper to get real time inventory to chat GBT using its real time could have LLM to understand where Whole Foods are.

(40:48)
That query is amazing. It will give you the perfect overlap of Zupas API and what Chat GBTs LLM knows. And so the Whole Foods queries or the, Hey, I want to live near a nightclub, they're really cool. And I would say it won't replace zumper or marketplaces because we've still had to do all the plumbing for real-time inventory. And actually that's a lot of the value I think now marketplaces have is the backend infrastructure of real-time level availability. But now I think our job is to capture the demand in more advanced ways before bringing it in. And the Whole Foods query is so simple, but it is so good and it is the perfect example of something Zupas own website wouldn't do, but using an LLM, you can do add infinitum because instead of writing Whole Foods, you could write anything and it will answer the question.

Terrific. That's super neat. And then on the second side, the booking, the transacting, taking actions for me, those I'm sure are very early to, what are the early examples that you're thinking of there?

Yeah, a couple of things. One is just literally why have renters call leasing offices? We can do that for them and book into a schedule. That's one thing. And especially millennials and Gen Z who don't picking the phone up. I'm an old millennial and I hate picking the phone up, so I feel like I'm still building for myself. So we can do all of that using Gen AI on Zumper, which we're going to be launching at the end of September. And then you can imagine where that goes. Well then you can start to get smart and be like, well, these seven open houses for Jennifer, let's book them in an order that makes sense down West Hollywood or Santa Monica. Let's do them at certain times at certain periods on the weekends where it makes sense. So we can even give her an itinerary and then we can communicate that to the leasing officers.

(42:41)
And so instead of just our renters picking the phone up from Zumper or sending messages on Zumper to landlords, not only can we tell landlords more about our renters, but we can also help renters actually act. Now you can take this way further to say, well, we can also power applications and all these other things, but we're going to be very, very careful how we do that because a fair housing law. And we have to make sure that if and when we do those further things, they are even more objective than what happens today so that landlords can make even better database decisions instead of inferring something about someone in an open house. We want to create a completely equal playing field for everyone. We won't jump to those first, but I think they're very interesting applications of AI down the line.

They make a lot of sense and we do have to be careful about those because the LLMs have not designed with those in those important controls in mind. That's fascinating. So okay, that makes a lot of sense. It actually, it kind of segues into one of the things that I'm interested in. We've been talking about supply, we mentioned the fair housing laws. I'm thinking about policy in general, housing policy in general. Do you have opinions on what we should be doing or things that are going well or stuff like you notice places that are doing good housing policy? Do you have any insight there that you want to offer us?

Yeah, so I'll caveat this by saying I used to temper my strong opinions on this before last year, but I became, so obviously for my accent, you can tell I'm British by I became American last year, very proud to be American. And I feel like I am slightly more vocal now with what I say. I think you feel slightly different on the inside of it. Before I was a green card holder, I think you watch what you say a bit more. And I am incredibly proud to be in this country. So I'll say this more firmly than I would've last year. Anything that tries to artificially meddle in price in the housing market is insane. And virtue signaling, when people talk about putting national rank control, and these are just from an economist point of view, truly insane ideas. There was a survey of economists that an ex RealPage economist called Jay Parsons did recently who surveyed left wing, right wing, centrist economist.

(45:07)
And almost no one in the country thought that these were good ideas to insist on artificial barriers. Just to go back to econ 1 0 1, supply, supply supply, supply supply, everything is solved if you get through the NIMBYs and the crazy housing law that is sometimes controlled by three random people. And we have a more open market approach. None of this is left or right wing. It's purely economics. And one example I'll use is there was a study that Jonathan Bur Murdoch and the T and a few other people wrote about in the Midwest, which basically looked at Midwest average rent prices. And the data they used is there was a lot of class A properties, so high-end luxury units that came to market. And the question was, okay, this isn't ideal. These are all luxury buildings, but does it have an impact on all units including stuff for lower income families?

(46:06)
Will that come down too because there's more supply and without any equivocation, it shows that even high-end supply, the most expensive stuff put over, I think it was like a six to 12 month period flooded the market. And so the helter skelter effect and the domino effect happens, which is you put more high-end supply, then the supply below that has to mark down to be competitive. Then the supply below that has to mark down to be competitive. It showed unequivocally that even high-end supply made cheaper rentals more affordable for the lowest income families. And so the TLDR is that you have to build more housing, single family multifamily renovations, whatever we need to do as a country supply is the only way out of this. And anything else is just a band-aid. And again, it's not left or right, it's just insisting that landlords can't increase price by X or Y.

(47:06)
I love it in theory, I get the ambition of it, but it just doesn't work. And then landlords stop investing and then you get capital depreciation. We need to support communities to build more. And the last thing I'll say on this, because I feel passionate about it, is when I've seen the most resistance to it is in neighborhoods that are the least diverse. And these are the very people that are saying, no, you can't build here. But yes, black Lives Matter and all these other things and they're the most frustrating people because they're often people who reject housing in their neighborhoods but then signal that they're very liberal. And those are, in my opinion, quite differing positions to have. We should be building more housing everywhere. And just as a rental market runner, I know for a fact that more housing equals cheaper rents, which makes life more affordable for every family in America. And who doesn't want that?

Yeah, I recently had a conversation on the podcast with Sly Firth from Mercatus, the Mercatus Center at George Mason University. And we were talking about how Nimbyism is a universal human or at least a western Anglo file human condition where not just in the us but it's like, yes, I want more homes, but can you build 'em in Fresno?

Correct, right.

Somewhere else.

I mean, do you remember that thing in San Francisco, Mike? Do you remember there was that when I lived in San Francisco a few years ago, there was that, I think just after I left, there was that famous image of a huge multifamily development that was going to go into the Richmonds that was proposed and it stuck out like a sore thumb. And I thought, I think I joked about this on Twitter, that would be the best thing ever to happen to San Francisco if they built a thousand person community in the Richmond. Yes, it would look very different to local single family housing. Yes, it may even threaten the price of single family housing, but goodness, if we want diverse people to live in, breathe in San Francisco, la, all these other markets that haven't built that much, what a statement of intent it would be if they let them build a thousand unit apartment development. And obviously it didn't get approved, nor do I think it's going to. But to your point, I think it's yes, everyone agrees that everyone wants more housing and yes, no one wants it in their backyard and it's incredibly self-serving. And I think when you can pull up to a few thousand feet, you can see how self-serving it is.

Yeah, for sure. For sure. I appreciate that take and I appreciate getting a little passionate about that. I'm with you. It's on things like rent control and the construction. It seems to me like we have some momentum, some political momentum of people recognizing the extent of the affordability problem, not just on purchase but also rental and that it is solved by supply. And so it feels like we have the start of some momentum of that changing maybe for the next. Do you agree with that?

Yeah, I think so. I just get scared when, I guess it's the 24 election cycle and I've heard some stuff said about the plans to make stuff more affordable and none of the things I heard are about, and this is on all sides of the fence or about permitting, more construction, incentivizing more construction, looking at regen areas to rebuild. And there's so many examples of this working. So I get a little fearful when I've heard the national discourse, but my American friends remind me that often these are soundbites that don't have much behind them. But it is frustrating that we don't have economist first conversation about housing because we can disagree about how to incentivize new construction and how much affordable housing should come with new construction. All these are great debates to have. But the fact that in 2024, I feel like local authorities still need to be convinced that we need to build more housing.

(51:29)
And that the way, again, I don't live in San Francisco anymore, but I read something two weeks ago about some of the supervisors running are trying to ban certain pricing software, which look, I won't wait into that, but their solution to stopping rent increases in San Francisco is to ban price recommendations. It's like, guys, no, we need to build more housing. We need to allow above four stories in the dog patch and certain areas. And by the way, I'm a landlord, I own a unit in the dog patch. Well, I'm the least likely person as a landlord to say we should have more construction, of course we should have more construction. Let us build higher. There should be much, much more construction. We should build way more. And it is very frustrating to hear everyone come up with every idea apart from build more supply. And I literally think a 14-year-old knows the answer to this question of how do you make rental housing and by extension for sale housing cheaper for Americans? But we just deviated off very simple 1 0 1 econ and I just, whoever wins the election, whoever wins local elections, I just hope we get back to the fundamentals of supply and demand. Sometimes it is that simple, not always, but it often is that simple.

Yeah, and I think there's a, on the political side, especially at the national side, affordability and easy immediate solve for affordability is gives some money, give some incentive, give some discount, give some tax credit, which are all demand side boosts, but it's the knob that they have where you can't at the federal level go, let's build more houses because it's all locally controlled. So it's a lot slower lever. And so at the federal level, somebody recognizes an affordability problem and they go, well, we can go tax credit, it'll be more affordable. So I'm with you that there is some momentum at the local level that recognizes that. And especially here in California where you're like, if you're in leadership, in political leadership in California and your kids have to move to North Carolina to afford a house, you start thinking about we might want to change this thing. So it feels like maybe there's some momentum underway.

I'm glad to hear it. Good.

Well look, this has been terrific. I really appreciate your insights on the market and where we're going and the future. So it was exactly what I wanted to get out of the conversation. You guys publish at zumper, you publish a lot of data and a lot of research. Where should we go to find you and obviously zumper.com, what else? Where should we go find, where should people go find you?

Yeah, zumper.com, our apps, our blog is once a month where we publish this big size of rent data that we talked about where we just look at the prevailing rents on our marketplace and publish them once a month for free because like part of the service is just to be one of the thought leaders in the space. And we sit on a bunch of unique data and then I'll typically tweet about this kind of stuff a few times a month if you're interested. I'm just atmos on X and not particularly spicy takes, but we tweet out the prevailing trends that we see and just try and get people's opinions and see if it resonates with people in those markets. So yeah, those are the places we are.

Spice is not required. It probably counter the spice is probably counter to the value actually of what you're providing. So that's terrific. So Aunt Gidi, thank you so much for your time. Zumper zumper.com, Zumper in the rental apps when you're renting your house, go find there. Really appreciate it everybody. This is the top of mind podcast. Thank you for joining us. As always, if you enjoyed a conversation like this, I appreciate a recommendation of five stars so that other people know how to find us and we can continue to help inform the market. Alright, everybody back soon. Thanks