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Mike Simonsen

Mike Simonsen is the founder and president of real estate analytics firm Altos Research, which has provided national and local real estate data to financial institutions, real estate professionals, and investors across the country for more than 15 years. An expert trendspotter, Mike uses Altos data to identify market shifts months before they hit the headlines.

The long-awaited millennial homebuyers have finally entered the real estate market. Where are they buying homes? How are their purchases influencing the market? 

In this episode of the Top of Mind podcast, Mike Simonsen sits down with Odeta Kushi, Deputy Chief Economist at First American Financial Corporation, to talk about millennial and investor real estate trends. Odeta explains why millennials wait so long to buy homes, where the real estate hot spots are, and how the data at First American demonstrates these trends. 

About Odeta Kushi

Odeta Kushi

Odeta Kushi is the Deputy Chief Economist for First American Financial Corporation. First American is a leading provider of title insurance settlement services and risk solutions for real estate transactions. In this role, Odeta offers analysis commentary forecasts on trends in the real estate and mortgage markets. Much of her work revolves around demographic trends, especially when it comes to millennials. Odeta monitors and analyzes the quarterly surveys and economic data related to the housing industry. Her research is regularly cited by leading businesses and trade publications like Business Insider and Housing Wire.

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Here’s a glimpse of what you’ll learn: 

  • Why Odeta Kushi became a housing economist
  • The gap between new household formation and new house construction
  • Will the underbuilding trend continue in the coming years?
  • What areas of the US offer the highest return for real estate investors?
  • The data at First American that helps them understand real estate trends
  • Why millennials are buying homes later in life and moving out of the city
  • International real estate market trends
  • Why today’s market is different from The Great Recession
  • How financial technology innovation is impacting the housing market
  • Is the housing market contributing to inflation?

Resources mentioned in this episode:

Sponsor for this episode...

This episode is brought to you by Altos Research. Altos is the #1 market data company for realtors, title, and escrow. 

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Schedule a demo to see Altos in action. You can also get a copy of our free eBook: How To Use Market Data to Build Your Real Estate Business.

Visit Altos Research at for more information or set up a call with us here.

Episode Transcript

Introduction  0:02  

Welcome to Top of Mind the show where we talk to real estate industry insiders and experts about the biggest trends impacting the market today. Enjoy the show.

Mike Simonsen  0:13  

Alright, 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, doers in the real estate industry. For a couple of years now, we've been sharing the latest market data every week in our Altos Research, weekly market videos. With the new the Top of Mind podcast, we're looking to add some context to the discussion about what's happening in the market from from leaders and thinkers in the industry. So now each week, Altos tracks every home for sale in the country, all the pricing, all the changes in pricing, and all that data and we make it available to you before you see it in the traditional channels. So visit for more on the data that we do. And now we're going to use the podcast time to do conversation. And so speaking of leaders in the industry, especially people who understand the data, I am thrilled to introduce my guest today. Odeta Kushi. Odeta is the Deputy Chief Economist for First American Financial Corporation. At First American is a leading provider of title insurance settlement services risks solutions for real estate transactions. In this role, Odeta offers analysis commentary forecasts, on trends in the real estate and mortgage markets. We're gonna talk mortgages today for sure. Much of her work revolves around demographic trends millennials, that's another big topic for today in home ownership. So she monitors and analyzes the quarterly surveys and economic data related to the housing industry. Research is regularly cited by leading businesses and trade publications like Business Insider Housing Wire in the news. I look at Odeta’s work especially on Twitter, in the framing that she does with the the trends in the data and I find it particularly cogent. So I am thrilled to have you join us today.

Odeta Kushi  2:14  

I am thrilled to be here. I'm excited for our discussion.

Mike Simonsen  2:17  

Right. So as a place to start, why don't you tell us more about First American and your role there?

Odeta Kushi  2:27  

Sure. So as you mentioned, I'm Deputy Chief Economist. So I do a lot of work forecasting, doing research, commentary around real estate trends. First American is first and foremost a title insurance company. So you know, providing title insurance and settlement services. And Mark Fleming who's the chief economist and myself really work on kind of the real estate research side of things. So looking at housing supply demand, specifically affordability, kind of offering our take and analysis on all things housing, and there, there's never a dull moment and doing especially not in the last couple of years.

Mike Simonsen  3:04  

Everybody needs to know what's going on. Yes, and I've known Mark for years but but I've really been enjoying your the content in the writing that you've been doing. So I you can you can tell him that I wanted to have you on the podcast first. We'll get we'll get to Mark later. I terrific. So so how did how did you get to be a housing economist?

Odeta Kushi  3:24  

I've always been obsessed with with real estate, my backgrounds, you know, obviously economics, but really kind of focused on more econometrics and statistics than I did some of my early thesis on more macro. Just ironic because I've gotten so micro now I'm all things micro, but I kind of did my thesis on privatization and developed nations. And so I've always really been interested in this thinly traded heterogeneous, good, that is housing. You know, I think housing the housing market, you can study labor market, you can study, you know, finance, all of these things are so important to the decision to buy a home and like I said, Never a dull moment in our world. So lots of reasons. But but those are just some

Mike Simonsen  4:07  

Did you the work you said you did macro wise with like, develop. Did you say developing nations?

Odeta Kushi  4:14  

Yes. So I was born and raised in Albania. And so I've kind of inspired by my upbringing there to study, you know, what drives economic growth in some of these countries and, you know, really looking at kind of privatization of these kind of former closed economies.

Mike Simonsen  4:30  

Interesting. And is is was housing a significant shift in places like that in the in the late 90s.

Odeta Kushi  4:40  

Yeah, absolutely. I mean, you went from you know, a state owned economy to kind of opening up to the world economy hydel issues of title and and how to determine who owns property was was a big was a big thing. Really difficult to get access to data, particularly kind of micro level data for for some of the countries I was studying. So I had to kind of look at the macro level look at, you know, what's happening to privatization, are you having, you know, rapid privatization some of these countries among some other economic variables. So but but that's a former life and now I get all of the, you know, all access to micro level data household level data, which is fantastic.

Mike Simonsen  5:18  

That's yeah, that's great. Let's start with this, you know, we call the the podcast Top of Mind. So what's top of mind for you in this world?

Odeta Kushi  5:29  

Well, goodness, I think I'm gonna maybe choose two things. So the first is perhaps a little predictable coming from housing economist in 2022. But it's inventory. And Mike, I know you track this inventory data so closely, and I wait for you to post your weekly update. So I can see what's going on as well. But one of the things we've been trying to understand is really the gap between supply and demand new household formation and supply of homes. So if identified a couple of different ways to do that. The first is we wanted to measure the housing deficit or surplus by comparing new household formation rented and owned, which represents the new demand for shelter to total new housing units completed and added to the housing stock. So that's what we did, we compared new household formation to total new housing units. And in order to measure that deficit, you kind of have to make an assumption of when was the market normal or balanced. So we kind of decided that 2000 would be that year that we had the right number of supplied units relative to demand. And then we determined the shortage of supply relative to demand. And The finding was that we've been we overbuilt relative to demand in the housing boom, not necessarily surprising to anyone while household formation was slowing. But we've been under building since 2008. And that, you know, that's a significant driver of the house price appreciation that that we've been experiencing over the last couple of years. And while COVID did slow, likely slowed household formation in 2020, the pre COVID trend was rising household formation. And so you know, if we make a couple of assumptions to kind of forecast what this would look like moving forward, even if we slowed household formation, because of all of that under building will still likely have a housing shortage for many years to come. And we've also analyzed this by looking at vacancy rates over time and kind of benchmarking to what we consider a normal vacancy rate. And what we found was that the shortage, the deficit, as of the third quarter of 2021, was about 1.655 6 million units. And we were building at about 1.5 6 million units. So, you know, even if we had no how new household formation, no second home buying, you know, no destruction of home, then we could get back to that historical vacancy rate within a year. But we know that's not realistic. So all of this to say will be under supplied for for a little bit of time.

Mike Simonsen  7:52  

That's okay. There's a lot there. So lots, and under buildings since 2008. So the first question in top of my mind is, so we have we have finally up to like maybe historical average new home construction. Right. And is it? Are we above average yet? Like is it researching that the starter home starts? Are they are they starting to get back to?

Odeta Kushi  8:15  

Yeah, so housing starts in 2021. We're, we're great. So So you know, a lot of progress there, particularly during the year of so many challenges for builders, right? A lot of those things that we've heard about, it was actually an impressive year for homebuilding. Unfortunately, not enough, not enough to to really kind of bridge the gap between supply and demand, not enough for this the deficit that we're experiencing. And so more, more needs to be done.

Mike Simonsen  8:41  

And so you see, based on forecast trends for household formation, that we're in deficit mode for the foreseeable future.

Odeta Kushi  8:52  

Yeah, I would, you know, my crystal ball gets hazy, but but I would say the next the next couple of years.

Mike Simonsen  8:58  

Okay, so there are a couple of other there are a couple of analysts, folks who have a different view on this. Have you have you looked at for example, I've used Hellman's latest stuff. And help me help me process what she's saying there. And so and and for the listeners, so Zelman has been saying and she's as well informed as anyone in the housing space that we aren't under building, or we we are, maybe haven't under built, Have you have you taken a look at that argument and see how to process it?

Odeta Kushi  9:32  

Yeah, and this, this initial analysis that I mentioned was was partially to try to wrap our minds around what's going on there. You know, is it is it really true that household formation is slowing to such a pace that that we are in danger of being overbuilt? And so that's why we kind of decided to look at it from from all sorts of different angles, all of which were telling us know, the housing market is severely under built even if, as I mentioned, even if household formation slows in In the next couple of years, because of that growing deficit will still be under built.

Mike Simonsen  10:06  

Okay. So you know, so even as even as household formation may be slowing, we have an increasing deficit rather than a decreasing deficit. Right. That's, that's really interesting. And I mean, we see it in the data. And one of the things I was, you know, the crystal ball gets hazy, as you say. And so are there phenomenon are there changes that, you know, the long tail risks the The Black Swan things that that could impact us and derail this current trend? Have you seen anything like that? Do everything on your radar?

Odeta Kushi  10:39  

No, not in terms of inventory on a national scale? I would say I would say I'm not I'm not afraid of being overbuilt. I'm not afraid of a foreclosure crisis by any means. We're sitting on so much equity. Right. So and we can talk about that later. And I'm sure we will. But you know, of course, real estate is local. So certainly there could be pockets of the US that are, you know, that are more imbalanced or maybe are getting to be overbuilt. There aren't any markets that we've necessarily isolated as being overbuilt. But certainly that could be the case, because, you know, location, location, location.

Mike Simonsen  11:12  

So, yeah, so speaking of location, I saw that you recently did some work on investor opportunity markets. Tell us about that.

Odeta Kushi  11:25  

Yeah. So you know, obviously, investor, the investor share of sales has increased over the pandemic. And so we wanted to kind of understand that a little bit. And one of the things that that we noticed it, what we developed kind of a cap rate, if you will, which is typically a term that that is heard in the commercial real estate market, but we kind of wanted to do that for the residential market. And we identified some of the kind of most attractive markets for investors. But one of the things that I found interesting in while we were doing that we're looking at our investor share of sales, those markets with the highest investor share of sales were also some of the markets are experiencing some of the fastest house price growth. Also some of the fastest or highest net in migration areas as well. Phoenix stands out, as I'm sure you've seen reported in the s&p Case Shiller so a lot of interest from investors in in the market experiencing the fastest house.

Mike Simonsen  12:21  

Did you do any work? Did you done any work on cause and effect there?

Odeta Kushi  12:28  

That's the question are, you know, are they entering the market? Because because there's so much house price goes? Or is house price growth, kind of a consequence of so much investor activity? And unfortunately, I don't have a clear answer for that. I think it's a little bit of both, but certainly, increased demand against a relatively fixed supply would yield you know, incredibly fast house price growth. And so, you know, you have investors entering a market with with relatively limited supply. And certainly I could see that that extra demand boosting house price growth.

Mike Simonsen  12:59  

Interesting, some of the investors that I've been talking with lately, they they shifting their focus from a place like Phoenix to some of the the tertiary markets in the South that have lower median price. So places like Memphis or, or Birmingham or like Jacksonville, what do you see in those areas?

Odeta Kushi  13:24  

Yeah, so those, you know, some of those markets, actually, they they made up the top markets for areas that could offer the highest return in that cap rate analysis that I mentioned. So I believe the top were Pittsburgh, Birmingham, Memphis, Detroit, in Virginia Beach in our analysis of 2021 data, so I can confirm that.

Mike Simonsen  13:43  

Yeah. So the Pittsburgh and Detroit have have a good cap rate because the because prices have been depressed for so long, but the others have good migration and migration. have not yet had big price appreciation, like a lot of the other Sunbelt cities. Oh, my goodness. Yes. Okay. That's interesting. Cool. So so when you're sitting at your desk at First American, one of the advantages is that First American processes all lot of real estate transactions. So you have presumably some visibility that the rest of us mortals do not. What do you what do you see in in the data, what do you have it First American that really stands out that that you know that? You know, you can have visibility where the rest of us do not? 

Odeta Kushi  14:33  

Yeah, well, so I'm an applied economist, and I'm very lucky. As you mentioned, I work for an organization that has a deep treasure trove of public records and tax assessor data. One really interesting asset that we have is a repository of images of recorded documents of deeds and deeds of trust. So, a deed conveys ownership deed of trust secures alone, and we use you know, modern AI and natural language processing to extract information from these images and create structured data from unstructured data. So we've got about seven and a half billion images. And you can imagine that's a ton a ton of data that that we can leverage kind of on top of all of our public records and data assets as well. And you know, for closure data that we have assignments, releases, pre foreclosures, personal boundaries, HOA data, lots that we can use when I definitely take advantage of that. But we've created some derivative work from all of that data. So our tenure data, which measures the average length of time that that homeowners, you know, stay in their homes, which gives us a little bit of insight into the supply issue again, right, a lot of a lot of homeowners are staying in place, they're not moving, the average tenure length has reached historic highs. So we can create that 10 year data, we've created a house price index, a repeat pair House Price Index, not unlike the s&p Case Shiller so track foreclosure activity, all of that. And so I'm very lucky to have access to all of that data covering basically all you know, all properties in the United States.

Mike Simonsen  16:00  

Yeah. When you so 10 years an interesting phenomenon, people staying in their homes longer. I think that's especially boomers. But is there more to that trend that we should know about?

Odeta Kushi  16:12  

There's there's a couple of factors going in. So older generations aging in place, compared to kind of their, their generational predecessors, a lot of reasons for that, you know, they can their home suits their needs, technological advancements that have allowed, you know, people to live a healthy and full life in their home. So certainly aging in place is is one for those that experienced the the housing boom and subsequent decline, obviously, kind of waiting out to recoup some of the equity in their home. That's one factor as well. And then I think those who have locked into historically low mortgage, they don't really have an incentive to sell particularly now that that mortgage rates are going up. I mean, I think we, the trough was about 2.6 in mortgage rates last year. And so if you locked into that, you know, you're, you're kind of locked into place, there's there's not a lot of incentive for you to sell and buy a home at a higher rate. So I think there's there's a lot of different factors that are contributing to that rising tenure length.

Mike Simonsen  17:11  

Yeah, for sure. The the, the, is the the, I'm not sure if you can measure this, but can you measure things like the the construction rate, for example, for retirement communities? And are we under building there? So that, you know, another factor is that if I, if I have a home, and I'm, you know, a 75 year old? And I'm thinking about a retirement home, but I don't have a place to move to? Is that? Is that a factor going on?

Odeta Kushi  17:42  

Well, I we haven't measured that. But I think you touched on a really important point. You know, the other reason that that tenure length is increasing is because you're if you're an existing homeowner, and you want to move, there's not a lot for you to buy, particularly if you're trying to move up, you're trying to get something bigger and better. There's just not a lot of inventory. And so right, that's the thing that's unique about the housing market is the seller is also the buyer. And so I think the inventory shortage is also kind of preventing preventing existing homeowners from selling which is driving up that tenure length as well.

Mike Simonsen  18:20  

Yeah, okay. So and that phenomenon has not showed any signs of slowing yet. Right. So that that is the 10 year keeps growing at this time in the home.

Odeta Kushi  18:31  

Yeah, we just we just looked at the data this month and other historic high

Mike Simonsen  18:35  

historic I would said, you know, off the top your head with uh, how long

Odeta Kushi  18:39  

about just over 10 years? average tenure length nationally? Yep.

Mike Simonsen  18:43  

And a decade ago, there was like seven years. Exactly. Yeah. That's a big change. Big

Odeta Kushi  18:48  

change. Yeah, absolutely.

Mike Simonsen  18:51  

That's fascinating. You do have data on second home ownership.

Odeta Kushi  18:56  

Week? Yes. So we can identify second home share of sales, which unsurprisingly also increased during the pandemic pretty unsurprising there. But yes, we can track second home shares as well.

Mike Simonsen  19:07  

And second home shares sales. Yes, spike during the pandemic, but also is I think one of the things where we see people one of the reasons inventory has been declining over time as we accumulate more second homes or investment properties individually.

Odeta Kushi  19:24  

Absolutely. That That reduces you know, me as a potential first time homebuyer that the number of homes that are available to me.

Mike Simonsen  19:31  

Yeah, I said this a lot. It's like all of our policy in the US is designed to help the homeowner to keep the homeowner in the home to count the taxes of the homeowner and it works it works really well to the detriment of those who don't yet own.

Odeta Kushi  19:49  

Yeah, I mean, I you know, looking out into the 2022 housing markets the thing we keep saying is it'll likely be another really good year for those who own their home but for the rest of us that that are yet Yeah, they're not yet homeowners. It's an incredibly challenging market. And I mean, even the Alto status showing we're starting the year with record low inventory prices continue to go up, mortgage rates are going up. And you know, potential first time homebuyers don't have the money from the sale of an existing home to use the down payment. So a lot of hurdles for that potential buyer.

Mike Simonsen  20:18  

So, on that topic, let's talk about millennials and the Fed that demographic, what should we know about what's happening there?

Odeta Kushi  20:29  

Yeah, lots. You know, when I first started at this job, about six years ago, now, everyone considered millennials, the Forever renter generation, the avocado toast generation, they were never gonna buy homes, they were, you know, they had all the student loan debt that was gonna prevent them from buying their first home. And you know, a big part of that is because if you look at the homeownership rate data, millennials at the same age, their homeownership rate is significantly lower than their generational predecessors. So we can kind of map out the homeownership rates for millennials, Gen X baby boomers, the same age of 30, millennial homeownership rates are about eight percentage points lower than their generational predecessors. So, you know, it's it's not hard to see why people thought that, but I think if you if you take it one step further, you realize that it's not that millennials weren't interested in homeownership, that they were never going to be homeowners. It's just that they're doing it much later in life. Compared to their generational predecessors.

Mike Simonsen  21:24  

Yeah, it Yeah. The millennials story shifted from a bearish housing market story to a really bullish one. In the last handful of years.

Odeta Kushi  21:34  

Yeah. And I'm glad because I don't have to convince people anymore, because the data is finally starting to show that millennials are driving the housing market. You know, they're between the ages of 25 and 40. I think people forget that sometimes. Yeah. And so you're having those, the bulk of millennials turn 30 in 2020. So you're really starting to see millennials enter, enter the housing market. And, and, again, they've been delaying all these lifestyle choices, that delay the decision to become a homeowner. So they're getting married later in life. They're having kids later in life. There's staying in school later. And so all of these factors kind of move along that the age of when a millennial may buy first.

Mike Simonsen  22:15  

So in your in the last six years that you've been doing this role you started, you're saying, like you were kind of bullish on millennials, when everybody else was bearish. Was that? Did you have to go through that period? 

Odeta Kushi  22:27  

Yeah I did. I was convincing people, you know, we're serving. And, you know, obviously, there was the interest survey after survey indicated that millennials, you know, really viewed homeownership, as you know, the core of the American dream. And they were very informed about housing as a driver of wealth creation. And it just was that they weren't, they weren't there yet, you know, they were still in graduate school. This is the most educated generation in history. And they're staying in school later, which is yielding higher incomes, which, of course, you know, helps with with the home buying, but of course, the question I always got was student loan debt, you know, isn't that going to prevent them from buying the home? So, of course, we did that research. And we found that student loan debt is much more likely to delay than prevent homeownership. And you know, there's there's a lot of reasons for that. But But what we ended up finding in the survey of consumer finances data was that the average student loan debt has increased significantly over time. But the interest rate on student loan debt has come down significantly, and the loan repayment terms have nearly doubled. Right. So as you and I know, going from a 15 year mortgage to a 30 year mortgage allows you to buy you know, borrow a whole lot more money for the same monthly payment, and the same thing has happened to student loan, so that the payment to income ratios on student loan debt have actually remained fairly flat.

Mike Simonsen  23:48  

So it's a much less bearish story on student loan debt than you hear normally. 

Odeta Kushi  23:54  

Yeah, absolutely. So again, more likely to delay than to prevent homeownership.

Mike Simonsen  23:59  

That's great. It's been my observation over the 15 years doing altos research, the best times the most fun times are when we can be contrarian and bullish. So when the market is bearish, and we can say, Guys, the data is actually pretty good. Like, those are fun times to be, yeah, you don't want to be in the opposite situation. You don't want to be the opposite situation. You know, and there are times when, you know, like right now the markets on fire, everybody knows the markets on fire. That's, that's great. But when when the market assumes that everything is tanking, but we can see data that shows it's not so like at the beginning of the pandemic lockdown, we had, you know, four weeks of downmarket and then it started coming up. And so there were still a lot of headlines about you know, well for a whole year and a half we had people worrying about you know, foreclosure flood and things like that. And we we could be bullish when everybody else is bearish. It's that's a fun time.

Odeta Kushi  24:55  

It is and it's tough, right? It's a tough position to be in. I think we came out in March or April of 2020, for that with a blog post talking about, you know, what we thought was going to happen to the housing market. And one of the signs that we were looking at is unemployment as a proxy for financial distress. And what we realized was, well, this is a services recession. So it's likely to disproportionately hurt younger, lower wage renters, not so much the prospective homebuyers or current homeowners. And so that allowed us to kind of build that into our forecast, and we're looking at these numbers were like, I think housing is going to be just fine, especially when you factor that, you know, the Feds response and what will likely happen to yields and mortgage rates or like low mortgage rates, ongoing demographic demand and labor market decline, that's not likely to hurt, you know, those that are likely to be homeowners, I think we're going to be okay, so we kind of put this blog out there. And we're like, oh, we're hopeful, right. But the data, you've got to follow the data, you know, and when the data changes or story changes, it's just like the Fed. We're data dependent, right?

Mike Simonsen  26:02  

Yeah, for sure. That's, that's super cool. So So So millennials are delaying have delayed now they're now they are buying and the demand is super high. to two other factors than that, that I'm curious about is when did the boomers sell? And is that something we should worry about? Or think about? Or, you know, how do we factor that in? What do they finally sell?

Odeta Kushi  26:27  

Yeah, I mean, that is the question that that's been top of mind, because it's, you've got to forecast a lot of different things and make a lot of strong assumptions, because they're not behaving like Like previous generations. So we can't make the assumption of one baby boomers may age out of homeownership, if you will. But certainly, you know, if if baby boomers age out of homeownership, if they sell that frees up a ton of inventory. So trying to figure out that timing of when the millennials will need those homes, and when the baby boomers will leave those homes and then you know, are those the kind of homes that millennials want to move into? You know, how much work will need to go into that home to make it livable for that first time homebuyer family as well. So lots of questions there. I don't have a year for you. I wish I did.

Mike Simonsen  27:12  

Yeah, I mean, the boomers are now 75. Right? I started turning 75. Like, there's some real change to be happening here. 

Odeta Kushi  27:20  

Yeah, absolutely. And that's something that we'll be turning our research focus to, because again, implications on on supply, which obviously has strong implications for prices.

Mike Simonsen  27:30  

Yeah, let's, let's talk about that. So that I love the question of, you know, are the boomers homes that they're selling? That is that where the millennials want to be? So help me process through that. So in some ways, the boomers all own the stuff that's closer in, like closer into downtown, like the better locations. And the new construction is in is, you know, far suburban or x urban. I think about this. Often I live in San Francisco in the city. I haven't seen new construction, you know, it's hours away to get new construction. I have no idea where that is. And it's also not a place that I'd be buying. Right. There's no new construction in any part of the world that I would buy it. So what what should we think about what what, what the millennials think about? Where is that? Where are we looking where the trends there?

Odeta Kushi  28:18  

Yeah, so migration trends and migrations not just to other states, but within within the same state and even within your same kind of CBSA, we saw Millennials migrating out to the suburbs and exurbs, even prior to the pandemic. So this was a trend that preceded the pandemic was accelerated by the pandemic and the ability to work from home. So I foresee that trend continuing because it's not just you know, it's not just do you want the condo or the single family, it's also the schools. I mean, a lot of millennials are moving out to the suburbs because they're getting married. They're having that first child and they want the school district that is typically associated with, you know, an area outside of that urban core. But with that said, I do not subscribe to the death of the city ideal. I think they're the city offers quite a few amenities that, you know, the Gen Zers right behind the millennials will still be interested in but certainly we have seen this migration to Xserve suburbs over the course of the pandemic. And that has implications not just for the residential market, but also for commercial real estate. You know, obviously I'm not going to the office anymore. I used to go to my downtown office and get my Panera Bread nearby the office I'm not doing that anymore. My demand has now shifted to the local bagel shop near my near my condo. And so you have this demand that's kind of relocating and following where the residential demand is going which is which is in the suburbs, kind of a more macro view and some of the the migration patterns we've been noticing I think you mentioned it earlier. Moving out of places like New York, LA Miami more to Sunbelt markets. We know all the Texas metros are experiencing a ton of in migration from young people and uncertain I think that that's that's here to stay in places like like Phoenix as well. But over again over the course of pandemic really movement to the suburbs was accelerated.

Mike Simonsen  30:08  

That's a dream. So um, the the work topic, are you never going back to the office or just not yet.

Odeta Kushi  30:15  

I'm hybrid, I'm going to be hybrid, I think I go in occasionally, I like the office atmosphere. And I do think that it does foster collaboration when we're all in. So I think we'll see a hybrid scenario moving forward. But that also has implications for what your office looks like. And so a ton of implications for the commercial, real estate market, retail office, everything but but I'll be hybrid. How about you?

Mike Simonsen  30:41  

Well, so I'm in the office, I like being in the office, too. Yeah. But we, but frankly, none of my team really wants to be in the office. It's like for me?

Odeta Kushi  30:52  

Well, you know, younger generations are saying that they're missing out on on key networking opportunities, and being able to build connections by not being in the office. So I do think that there will be some pushback against 100% work from home,

Mike Simonsen  31:04  

yeah, I kind of have a hypothesis that, that exciting companies will have an exciting office environment, and boring companies won't. And so at, like, an exciting office environment will be a recruiting advantage. You know, if, if your company is so boring that nobody ever wants to see each other. That's not a good sign. So I have a hypothesis that we'll get some, you know, bounce back and and I was hoping it was going to be September, and then it got delayed. And that was like in January. And now it's like a little shaky at downtown San Francisco is still pretty, it's still pretty quiet. But maybe a little sciency to

Odeta Kushi  31:45  

DC to but you know, virtual happy hours just aren't quite as fun. But I think it just goes to show us that the pandemic is still kind of in and kind of waiting for the pandemic to wane and and then we'll see When the smoke clears what that hybrid situation really looks like?

Mike Simonsen  31:59  

Yeah. So when you do your data, do you do surveys? Do you like you do you go out and survey data to get things like some of the you're talking about some of the trend data and things like that survey stuff that you actually most of

Odeta Kushi  32:11  

our analysis of survey data is publicly available census data, we used to have have a survey but but no longer do our own surveys, and mostly are analyzing census, census data, census migration trends,

Mike Simonsen  32:24  

got the the process of of serving is pretty fascinating to me, like we you know, that's that's a whole context of information

Odeta Kushi  32:33  

that I believe in the wisdom of the crowd, I think there's been analysis showing that sometimes, you know, wisdom of the crowd can can be more accurate than than an expert. So

Mike Simonsen  32:42  

I certainly feel that way. Okay, so So here's the question. I don't know how much time you spent with international markets and looking at some of the international trends. But one of the things I observe is that high demand, low supply is not just a US phenomenon. It's it is in a lot of the Western markets, which maybe implies it's not a construction thing. Like isn't that like that's kits, you know, new home construction is a is a that's those are local phenomenon, unless maybe everyone's under under building, have you looked at it international at all, and draw any conclusions there?

Odeta Kushi  33:21  

A little bit. So I think, you know, the short answer is, yes, there's the severe kind of the limited supply, high demand seems to be occurring and a lot of other nations, certainly US, Canada, UK, New Zealand, have experienced strong house price growth, which is an indication of a supply and demand imbalance. I think part of it is the low interest rate environment that that a lot of these countries find themselves in, that's contributing to the boom, over the course of the pandemic, the workers need to work from home, I don't think that's specific to the US, you know, that that phenomenon is occurring in places like Canada and the UK as well. And then, of course, you mentioned construction, you know, over the course of the pandemic, at least the supply chain disruptions that that the construction industry in the US has faced so have the construction industry in all of these other countries as well, all of the shortages of material and labor that you know, homebuilding is a very manual job, right. You need constructions workers out there. And so I think that that's contributed, at least over the course of the pandemic.

Mike Simonsen  34:22  

Yeah, okay. So, so there are some global macro trends and impacting our western neighbors as well. That's it. Yeah. So I wonder some of those, in fact, like Canada's even more extreme than US, Australia, I think too.

Odeta Kushi  34:38  

Yeah, absolutely.

Mike Simonsen  34:40  

Those are they're actually a little scary. Like, what? How does that end

Odeta Kushi  34:45  

someone tells me, you know, house prices can't possibly go any further. I'm like, Oh, well, don't look at global house prices, then

Mike Simonsen  34:52  

it's, it's fascinating. So we already talked about like the, the opposite side of that statement, which is the risk that that we have some kind of thing lapse, which feels pretty low in that, like, there's everybody's got cheap mortgages locked in forever. Are there any other risks that we're missing?

Odeta Kushi  35:08  

You know, I would say not maybe not frame it as a risk. But I think that the double digit house price growth that we're experiencing is not sustainable. But that is I want to be very clear, that does not imply that I believe we're in a bubble by any means. I think the fundamentals are supporting the house price growth that we're experiencing, and by fundamentals, you know, record low mortgage rates in an environment of high demand relative to too low supply. And so I did a lot of talks over the last two years on how this time, this time, it's different, you know, right, because everyone's, we're all we all bear scars from the Great Recession. And I think people are quick to think that this is the same situation. But there are so many differences. And I actually think we should be saying last time was different, you know, last time Mortgage Finance innovations, if you will, teaser rates, you know, fixed adjustable rate mortgage structures all facilitated bigger loans at the same monthly payment to keep up with the growing home values, which, of course, is one reason why house prices continue to go up. Not the case, you know, tighter this time around, we have tight underwriting standards, credit meeting credit scores, have historic highs and so much different situation. And certainly the fundamentals are driving the house price growth this time around.

Mike Simonsen  36:18  

That's fascinating. Last time was different. I love that, that characterization that makes a lot of sense. So on that topic, and Financial Innovation and things like that, let's shift to the future. So there are some technical innovation things happening technology things happening there are there are financial innovation things happening. Now, the ibuyers, the the and related things like make a cash offer on your house, even if you don't have the cash like have you looked at any of those trends to see which ones you think are powerful or have legs? 

Odeta Kushi  36:54  

Well, what we've mostly focused on I think are at the onset of the pandemic, one of the things that stood out to me is how pleasantly surprised I was at how the housing industry kind of rolled with the punches in the time of uncertainty and challenges, leveraging new technologies, identifying ways to close real estate transactions with little to no contact, investing in technologies, you know, whether it be on demand, video tours, 3d tours online notarization. So I think, you know, what, what I'm monitoring more closely is the innovations that are happening in being able to quickly buy a home quickly and efficiently. Buy a home in kind of an automated way, removing some of the paper. I think a lot of I'm a millennial, and a lot of my friends when they buy their first home, they're like, What is all this paper? I mean, we don't go to printer, like, you know, I think they're very surprised at the process. And so I you know, I think the ability to stamp a document electronically, all of these innovations that are happening, we're mostly paying attention to that, and how that could really make the home buying process more efficient.

Mike Simonsen  37:58  

And so those technology innovations, create efficiencies, do they create any risk? Or is it is it all good?

Odeta Kushi  38:09  

Well, I think the risk is is that we already have a market that's moving so quickly. Right? So days on market is hitting we hit a lot of records in this pandemic, but that was one of the records his days on market hit a historic low and so the ability to buy a home very quickly I think definitely cuts down on days on market if we're able to really facilitate a faster home buying Yeah,

Mike Simonsen  38:32  

yeah, I did a refinance there and you know, right at the right the low Are you year and a half ago or a year ago months ago, and you know, it's a it was a stack of papers this thick at my kitchen table with masks on and and it's sure seems like we could do this better.

Odeta Kushi  38:50  

Yeah, exactly. Exactly. 

Mike Simonsen  38:53  

Okay so, there are other some other big trends in the the market and this actually not sure if this is something you've looked at but but we look at the big big financial trend cryptocurrency crypto is both an asset for speculation and financial asset but also has transactional potential in the some of the areas that First American works like in the title insurance. Have you spent any time thinking about impact of the crypto changes coming in and is First American doing things on that front? 

Odeta Kushi  39:34  

Well, the way that I that I've been thinking of crypto and I think there's been some work done is not necessarily and you know, buying a home via crypto but but more so the fact that a lot of people have sold made some money from from their transactions and been able to use that money as a down payment on a home but I think that's been particularly important for a lot of potential first time homebuyers that have really benefited from from that market. Whether it's speculative or not a lot of people have been able to benefit from that, and a lot of the kind of acid appreciation that we've seen over the last couple of years and so, monitoring, I don't I know, I've seen kind of published data on the rising share of of buyers that are purchasing homes with the proceeds from their sale of their cryptos. But that's that's the extent to which I'm aware, but certainly a trend worth monitoring.

Mike Simonsen  40:23  

Yeah, for sure that the for at especially during the pandemic, a big spike in some of the value of Bitcoin and some of the others and and put created some wealth very quickly. Yeah, absolutely. And and and I think the way you phrased it was really useful for people, it's, people are not using crypto to buy a home, they're using the proceeds from assets that gained in value that they sold to buy homes.

Odeta Kushi  40:48  

There's a difference there, right, because some headlines can be a little misleading. And I've fallen into that trap myself wherever, like, you know, it says something 20% of people are buying their home with crypto, like, really? I don't I'm not aware. And then you kind of dig deeper like, no, no, they're actually buying with proceeds. So

Mike Simonsen  41:04  

absolutely cool. Are there other things in the future as we look towards the next decade, that we should be paying attention to?

Odeta Kushi  41:13  

So I you know, at least for the next year, obviously, all eyes are on inflation, the implications of inflation. But but looking beyond that, I think, always scale back to that the housing market fundamentals rates are important. REITs have always been important. But you know, people bought homes when rates were 18% in 1981. So the decision to buy a home is not strictly financial, but also demographic. And so I think there's there's not enough attention paid to the demographic trends. You mentioned earlier, what will happen when the baby boomers age out, you know, when will Gen Z begin to think about buying their first home that has strong implications for for demand. And so I think always go back to the housing market fundamentals demographics, obviously rates as well, because buying a home is not just financial, but also a lifestyle decision.

Mike Simonsen  42:00  

That's interest. So you mentioned inflation. Let's talk about inflation really quick. And then we'll, we'll start wrapping up. I had a friend, I have a friend in LA, who has he's an entrepreneur, but has been actually traditionally very conservative with his debt. And recently, he told me in the last year, he bought a multimillion dollar home, which he leveraged up as high as he could, because he thinks we're, you know, and had a 3% mortgage rate, which because he thinks we're in a an inflationary environment for the foreseeable future. And he called it hyperinflation, I think he was talking about like, 6%. But but he's still, you know, he still feels like, so that scares the hell out of me. Like, I could never do that. Even if it like, I get the mat, like, I still could do it. What should we think about inflation?

Odeta Kushi  42:53  

Yeah, so obviously, when when we first started to see the inflation measures, the Fed was going out saying transitory, transitory, they're no longer using that language. You know, inflation is, you know, I think sticking around longer than than the Fed anticipated. It's a lot of that was caused by supply chain disruptions. And it's difficult to foresee when those may resolve because, particularly supply chains are so interconnected, and the pandemic still remains a threat in the coming year. labor shortages may ease in some industries, as workers are enticed by higher wages, we've seen the higher wages, but things like transportation, log jams and material shortages, they may take longer to clear up. And then of course, housing will be a significant driver of overall inflation, and will likely linger even longer than some of those, you know, transitory factors. And so, it is difficult to kind of foresee when inflation will peak, but I like to look to the FOMC, you know, economic projections, which, you know, we're indicating that inflation will kind of come back down by by 2023. And so, you know, kind of monitoring what the Fed is doing, and all the data that they're taking in and how they're seeing inflation playing out in the next couple of years. So

Mike Simonsen  44:00  

in a macro sense, you see you you kind of accept the the analysis that says that we'll have another year but but we'll have decelerating, perhaps inflation and then maybe starting to decline in 2023. I think

Odeta Kushi  44:16  

I think that that's a, you know, a reasonable estimate, of course, always data dependent, but But certainly, I think that we could start to see some of that that pressure easing.

Mike Simonsen  44:24  

Yeah. And so one of the questions that like, and this is a fascinating one, I talked to people like Twitter and social media stuff all the time housings impact on the inflation number, and the inflation number impact on housing. So, home prices went up a lot, but that's not exactly how inflation is calculated. And then the other thing is that as rates fell and everybody refinanced for homeowners for me and it like specifically, like my even in a inflationary housing environment, my payments are way lower, like my money's gone down. Right? How do we think about that? Like, like, so is housings contribution to inflation and, and to our experience as Americans?

Odeta Kushi  45:10  

Yeah. So you know, for you as an existing homeowner, and this kind of goes back to investor activity and how you foresee, you know, investor activity, because you can buy a home at a, you know, very low interest rates, I know, rates just went up to three, six, but that's still very low from historical standpoint. And while rents have been increasing double digit, and so that those numbers have not fully showed up in the inflation data, yet, they're starting to the rent data starting to kind of show up and then inflation number, but housing makes up the biggest portion of, of the inflation number. And so it's going to play a significant role in the next year or so. And again, not likely to to be as as transitory as some of some of the other factors. But, you know, real estate is often seen as a hedge on on inflation. And I think, as an existing owner, you're seeing that or you're experiencing that right now. Right? Compared to me, who's you know, rent just went up significantly in the last month. So

Mike Simonsen  46:06  

yeah, that's really fast. Yeah, I love the quote. The best inflation hedge is a fixed rate mortgage and a Costco card. Like that's how we do it. And, and we all had, and American homeowners have really cheap and they're all fixed rate mortgages. Now,

Odeta Kushi  46:27  

mostly fixed rate mortgages. Super. Exactly. And you know, as if you're thinking like an investor, if you can lock in a fixed rate loan, offset it with rising rates are rising rents, and enjoy, you know, the the appreciation, you're in a pretty good spot,

Mike Simonsen  46:41  

pretty good spot. So it'd be really fast. It'd be fascinating to see how my, my LA friends trade works out his his lever up the multimillion dollar,

Odeta Kushi  46:50  

because I'm invested now. Yeah.

Mike Simonsen  46:53  

Yeah. Okay. What a terrific conversation. Is there? Is there any last thing that that has been on your mind that you wish people in this market would know? Or that some some visibility that we should pay attention to? This year?

Odeta Kushi  47:07  

Yeah, all eyes, I think this year are on affordability. And if price house prices are likely to moderate, and I think the dynamic we're likely to see is that house prices will still remain positive because of this, as I mentioned, you know, severe supply demand imbalance, it's unlikely to dissipate in the next year. But as rates rise, in in, you know, in conjunction with this, this rapid house price appreciation environment, you'll likely see some buyers kind of pull back from the market sellers adjust their price expectations, you know, bidding wars become, you know, less frequent, and you're likely to see some moderation in house price growth, which which would be some, which would be welcome, welcome news, but that mortgage rates are expected to go up for several reasons. And we're seeing that today, right. We've seen mortgage rates increase last three weeks. So

Mike Simonsen  47:57  

yeah, I was unable to predict rates, I'm unable to predict where mortgage rates will go, but we think they're gonna go up.

Odeta Kushi  48:05  

We think they're gonna we think they're going to go, you know, inflation expectations are high economy's improving, you know, fed tightening all these factors should play into but, of course, if investors get spooked for whatever reason, whether it's pandemic, whether its geopolitical conflicts, all of those factors, could drive, you know, yields to decline and mortgage rates. So it's it's really hard to forecast mortgage rates, but consensus is up.

Mike Simonsen  48:30  

Yeah, affordability is a fascinating topic. We could probably spend an entire hour on affordability. And but let's, let's wrap it here, where can people find you? And how should they follow your work?

Odeta Kushi  48:42  

Yeah, absolutely. So our blog of Mark Fleming and myself, we put all our content on I'm also on Twitter @OdetaKhushi. So you can follow me there also, you know, you can look me up on LinkedIn, but I'm pretty active, more active on Twitter than than LinkedIn.

Mike Simonsen  48:58  

Terrific. Odeta, thank you so much for joining us today.

Odeta Kushi  49:03  

It was a pleasure. Thanks so much for having me. It was great talking with you. Okay.

Outro  49:10  

Thanks for listening to Top of Mind. See you again next time and be sure to click Subscribe to get future episodes.

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