The Fed Must Save The Housing Market!

0:00Hello, everyone. We've got a very special episode for you today. We've got a housing expert that's going to join us and explain exactly what's going on with home affordability, why it's actually been improving in 2025, but it's probably too little, too late, and people don't care about that small little bit of improvement. On top of that, we're going to talk about the fear and greed index and why it just flashed a sign that explains that investors that are buying right now may actually be very, very happy in a couple of weeks. We're live today from the desk of Anthony Pompliano.

0:38Before we get into today's episode, I need your help. That's right. We currently have 40 ,000 subscribers on YouTube, but my goal is to get to 1 million subscribers. It's a big number, and the people are saying we're not going to get there. But with your help, we are going to defeat all of those evil people who don't want us to hit a million subs. Go ahead and hit the subscribe button, and let's get into today's episode. Now, I've got a very special treat for you the day before Thanksgiving. as I said, we are going to sit down and talk with Lance Lampert. Lance is the co-founder and editor in chief of ResiClub.

1:09It's the number one destination for residential real estate information in the country. Now, Lance is a housing expert. He really understands what's happening with home affordability, and he's here to explain a number of data points that are going to shock you because it's very counter to the public narrative that you're used to hearing. Here's my conversation with Lance Lampert. All right, Lance, I thought a great place to start this conversation is the Federal Reserve, they've got a big decision coming up on December 10th. Are they going to cut rates or are they not? It seems like there's a lot of dissent that's happening and kind of playing out in the soap opera in public.

1:38What do you think is going to happen in December and how do you think it'll affect housing prices in America? Yeah, I think when you look at long-term rates and short-term rates, the Fed does control the short-term rates. So they can come out, they could cut another 25 basis points. I think some people are kind of worried a little bit more about some of the softening in the job market would feel more comfortable with a 50 basis point cut. But regardless of what they do, that's for the short term rate. The long term rates like the 10 year treasury yield and 30 year fixed mortgage rate, those don't get directly set by the Fed, but by the expectation of where the economy is going, inflation is going and future Fed policy is going.

2:19And so the long term rates can actually jump ahead of the Fed. And we have already seen this year, a 75 basis point decline and the average 30 year fixed mortgage rate. Now, some of that is kind of other long-term yields have come down. Sure. And some of the Fed expectations are probably filtered into some of that, but some of it is also the longer that we've stayed in this post rate shock environment, some of the volatility in the bond market is coming, is, is being reduced. And so when the Fed started jacking up rates in 2022, the market realized that, you know, what was occurring with inflation and what occurred then is the long-term rates and mortgage rates spiked up from 3 % to 4 % to 5 % to 6 % to 7%.

3:06But that jump up actually exceeded what happened to other long-term yields. And so the spread between the 30-year fixed mortgage rate and the 10-year treasury yield, which has historically moved it around an average of 1.75 percentage points since 1972, it got up to 3.3 percentage point difference. And so what that meant is that all things considered, mortgage rates were more than a whole point higher or 1.5 percentage point higher than where you would expect them to be given where other long-term yields like the treasuries were. And so what drove that? Well, the Fed during the pandemic period had been buying up all these mortgage-backed securities, right?

3:51Buying up all those mortgage-backed securities. And when they stepped out in early 2022, they stopped buying them. And then the market did not have another buyer who stepped in immediately to fill that void. And so over the past three years, slowly the bond market has kind of started to get a bit of an appetite for those. And so the yields have come down as some of that demand for those securities has come in. And so the average 30-year fixed mortgage rate now is around 6.25 percentage points, which is well below the 7.04 on the same day last year. And it's even more below the peak of around 8 percentage points back in October 2023.

4:36So we have seen some improvement there. If the Fed does do some more cuts, maybe it creates a bit more. But we have seen the market for the long-term fixed mortgage rates come down from the highs. Now, what's interesting to me is you've got what I'll call like the price of the mortgage, which is really this interest rate. And that's coming down and providing some relief. But there's also a lot of people who are trying to make the mortgages themselves look differently. And so whether that is the ability to move it, there's a company called Rome. We've seen Bill Pulte now start talking about at the federal level, could they be portable to a degree?

5:11How much of this is just like, get the price down and that solves a lot of the problem versus there may need to be new types of mortgages, whether they're portable mortgages, whether they're 50-year mortgages. There's a lot of ideation as to what is a mortgage itself and what are the parameters. Do you think that's a solution or is it really just get interest rates down, get mortgage rates down, and that'll be 80 % of the solution? Well, two things is we have had these periods of deteriorated housing affordability in the past. It happens, right? Demand can move up and down much more than supply.

5:42And so you can have that elastic jump up in demand. Prices overheat more than they should have. And it takes the market a period of time to stabilize that. And whenever you have that happen, two things always occur. There is always political pressure for politicians to create solutions. And so some of that is going to be politicians kind of, you know, you know, scapegoating some of the industry, perhaps going after all these different groups. And it's also politicians just throwing out ideas, Democrats and Republicans, of things that they think could maybe help. But the truth is, in the short term, there's not much you can do other than time for housing affordability to improve.

6:22Number two is that this also creates business opportunities, right? When affordability is this strained, if there are things that you can do to improve some of that affordability and unlock some of the demand, that's good business, right? And so a company like Rome, assumable mortgages on FHA and VA that are out there, that's around 10%, maybe 15 % in the market that's out there that can be assumable today. But it's very complex. You have to get the seller to buy in. And so that's where a business opportunity comes for a company like Rome. Do I think that all mortgages are going to end up being portable anytime soon?

7:03No, I don't expect that. And really, if you did do something like that, you could end up creating worse affordability, right? Because you would unlock so much of that churn, right? And so I don't think it will happen. And if it did, it would be a little bit concerning. Now, one of the other companies I think people are paying attention to is obviously Open Door. And they seem to be much more of like the front end, right? They want to provide this user interface where it's easier to find a home and quickly buy it. But also they want to make the selling experience. And I think the language they use is like tilt the world in favor of the homeowner, which is great kind of marketing message.

7:42But it does feel like maybe they more so than most are trying to take a very technology first approach to the housing market. And for people who don't pay attention to housing on a day to day basis, they think of it as antiquated, very kind of paperwork driven, you know, something that people want to get better, but there just hasn't been as many companies. I don't know how true that actually is. You see lots of ads on television for the rocket mortgages, and there's figure technologies in these companies. How do you look at a company like an Opendoor in kind of the grander scheme of things in terms of technologists trying to solve some of these problems?

8:15Yeah. So the iBuying business model, there was a lot of capital pushed into it. Redfin got into that. Zillow got into it. Opendoor did. The model really ran into some trouble once the interest rate environment shifted. And we kind of had that abrupt end to the decade long bull run in housing. But I think that a few things is that I think that Opendoor, because they're kind of they're here, they're still here. They're the only one left, right, or just about. And the other thing that they have that's unique is while their original business model still faces challenges, they also have scale in a way that very few players do in the space.

8:57And so I think there's the potential there to add other types of businesses as other technology comes along. And the other thing is the industry is also going through a period of regulation shift, right? There's a lot of court cases occurring. How the actual legal structure of residential real estate looks like in the next three, five, ten years, it's going to change. And so Opendoor with that scale, if they can adapt to the new technologies and then the changes in the environment, they might be able to find other avenues of business that aren't clear as of today. Now, when you look kind of nationally at the housing market, where are the areas of strength and where are the areas of weakness?

9:40Are there pockets of, you know, kind of enthusiasm where people are moving and there's home volume that's coming back? Yeah. So a lot of that question comes down to what is the weather like there? And it's not because of the weather, but a lot of these warmer parts of the country, a lot of these markets in the Sunbelt, those are the places that are softer and weaker right now. And a lot of the places that are more resilient-ish are these Midwestern markets, these Northeast markets. Actually, of the 300 largest metropolitan areas in the country, 105 right now have negative year-over-year home prices and 195 are still up.

10:21But in the Midwest, there is not a single one of those negative markets year-over-year. The vast majority of them are either in some pockets of the West or in much of Texas, Florida, Georgia, the Carolinas. And so the story there is a fewfold, is that during the pandemic housing boom, those southern markets saw an even greater run up as there was this net domestic migration burst. And so in Florida, between summer of 21 and summer of 22, there was over 300 ,000 Americans on a net basis who moved into Florida. and a lot of those people had higher incomes, right? And the number one correlator with home prices is income.

11:00So if you get a lot of people with higher incomes, you're going to see even a greater acceleration in housing. And so prices went up instead of just like 40 % nationally during the pandemic housing boom. And a lot of those places in the South, 50, 60, 70, there's even 80, 90 % jump ups in some counties in Florida and Texas. And so then when the pandemic housing boom fizzles out, mortgage rates jump up, those markets during that period had also seen a lot of investment into construction. And so there was a lot of multifamily supply and a lot of single family supply coming into the market. And so when suddenly you have a pullback in net domestic migration, whereas Florida had 300 ,000 net basis between summer 21 and summer 22, this most recent 12 month period, they only had 60 ,000 Americans move in on a net basis.

11:52So from 300 ,000 to 60 ,000. And so when that occurs, your local housing market has to rely less on the higher income folks moving in and more on your local income base. And oh, by the way, during that pandemic housing boom, local incomes got stretched further from prices because prices saw an even greater acceleration. So it creates a greater negative demand shock in those markets. And then the other thing is, as that supply comes into those parts of the Sunbelt, into Florida, into Texas, some of those areas, builders in the shifted affordability environment, they will do the things to meet the market.

12:30So if they need to throw$60 ,000 towards incentives to buy down the mortgage rates, Lenore right now is spending 14.3 % of final sales price on incentives. So on a$450 ,000 house, That is like$60 ,000 getting shelled out to do a permanent buy down on that mortgage rate. And so we've seen that. And on the multifamily side, given all that multifamily supply that came in the market, they're doing some discounts there, right? They're doing some free months of rent. And so as that occurs, what it does is it pulls some of the buyers who would have went to the existing resale market. Some of them are like, oh, these deals in the rental market, they're nice.

13:11I'll go there. and then some of them look at the new construction and they're like, you know what? This existing home seller, they're stubborn. They don't want to come down on their price. I'm going to that builder who's going to do all these incentives. And so as that occurs and the resale and existing market loses some of its natural level of demand, existing inventory rises more there and creates a greater cooling effect on the resale market. So nationally, what you'll see is that home prices are up like zero, 1%, but in some parts of Florida, they're down four or five, six, seven percent year over year in some of these Sunbelt markets.

13:44And then some of the areas like Cleveland and Cincinnati and Rochester and Buffalo and Milwaukee and Detroit, some of those places are up three, four percent year over year. They didn't have as big of a run up in prices. They don't have as much of that new construction creating the softening effect. And oh, by the way, some of those markets also benefited as maybe some people came back and they weren't, you know, they, and as fewer people leave those markets as that net domestic migration has kind of slowed down given, given the lock-in effect that's occurred. And that's the last part that I want to mention is this, a part of the regional bifurcation, which is if you have a lock-in effect, right, where people have these three, 4%, 2 % rates and this lower monthly payment, and they don't want to sell and take on that higher payment, That is a lost seller and it's a lost buyer, right?

14:37But those two different people, that lost buyer and that lost seller could be in two totally different places. If you're in Illinois and Connecticut and you're not selling your house to go buy in Florida, that's the lost supply in Connecticut, Illinois, and it's lost demand in Florida. So the lock-in effect has also played a role in the bifurcation. What's interesting to me is on one hand, you have a whole bunch of potential buyers who they need the price of homes to go down. or at least stop going up. On the other hand, you've got millions of homeowners who that's catastrophe for them, right?

15:09They're like, no, no, no, no, we need this thing to keep going up. And so I think that really is kind of the problem in the market. Before I let you go, ResiClub has built this incredible terminal. It's kind of like a Bloomberg terminal for the real estate market. Can you talk a little bit as to what the product is and what you guys are able to do with it? Yeah. So we set out to create the Bloomberg of housing. And if you go into the ResiClub terminal, you can see home prices, you can see inventory, you can see existing home sales, you can see home builder footprints, demographics, you know, migration trends, all of that stuff in there.

15:43Metro level, state level, county level, zip code level. Even soon, we're going to roll out some individual property level data. And everything that I gave you, you could figure that out really quick. And the other thing is you can change time throughout it. And so you can go back a year ago, you can go back two years ago to really see that shift. And you can also spot some of these individual zip codes that are maybe starting to get some of these people with higher incomes or higher degrees moving into those areas. And that's a sign of gentrification and an excite that that neighborhood is probably going to move up from maybe it's an average of$500K price, maybe to a million over the next several years in some of these cities.

16:31And so it's a really great tool for home builders, developers, investors, land investors, single family investors to really figure out what's going on in the market. And the way I think about what you built is basically it makes you smarter. And if you need this information for your job working somewhere in the real estate market, not only is it really fast, really clean, a ton of data that you can very quickly access, but also it's something that you can expense to your company. And so it's kind of this business expense that makes you better at your job and hopefully drive more revenue for your company.

17:03So it makes sense to me. Where can people go if they want to learn more about ResiClub or the terminal? Yeah. If they want to find out more about ResiClub, go to resiclubanalytics.com, put in your email, you'll find out more about our newsletter and then also ResiClub Terminal. You can follow me on Twitter at News Lambert. And the last thing I want to leave people with is that 2025 is actually seeing a national improvement in housing affordability. Mortgage rates are down 75 basis points. Incomes are up 4.1 percent and national home prices are only up one percent and half of the markets are down.

17:39So all three of the levers are coming together finally to create a little bit of improvement in housing affordability. It's just this improvement in the grand scheme of things. It doesn't move the numbers a lot. But if you have multi-years of this, you would get to a closer to an average level of national housing affordability. It's funny. It's like an improvement of 3%. People are like, I don't care about that. You string together enough and it's a 30 % improvement over time that people really care about that. And so I think that leaving with a message of optimism is exactly what I would expect you to do.

18:10I appreciate you taking the time, Lance. We'll do it again next time. Anytime. time. Bitcoin is falling and investors are freaking out, but maybe it's not as bad as you think. Binance research shows that on November 15th, the Bitcoin fear and greed index flashed a number of 10. It's a level only seen on 40 of the 2 ,849 days since the indicator was created. Now, historically, when the index reaches or falls below 10, it reveals that on average, Bitcoin has generated a 10 % return over both the subsequent seven and 30-day periods. And it's also delivered a 7 % return over the following 15 days.

18:47Now, notably Binance research shows that since 2022, Bitcoin's price has shown slower recoveries after major market sentiment declines. And of course, as Bitcoin matures as a global macro asset, price movements should be expected to become more gradual and have much more subdued volatility. That's what happens when an asset grows up, it matures, and it gets more mass adoption. Bitcoin's just going to be fine. And the fear and greed index, sure, it flashed extreme fear. But usually, the investors who keep calm, who understand that maybe that's a good time to buy, history says they end up being very happy a couple weeks later.

19:22That's it for today's show. Thank you guys so much for watching. Please remember to subscribe on YouTube. 40 ,000 subs. Congratulations to you. Congratulations to us. But we're not done. The job's not finished. We're trying to get to 1 million subs. So tell your friends, tell your family when you're at Thanksgiving, hit the subscribe button and I'll see you guys on Monday morning, live from the desk of Anthony Pompliano.