Housing market has a fundamental ‘supply and demand’ issue: Amy Nixon

All right. So when the Federal Reserve embarked in this rate hiking cycle, we were told that the the way the Bureau of Labor Statistics collects the data that there'd be like a six month lag with regard to shelter. And then we were told, well, you know, as the data came in, there's a 12 month lag. Well, now we're being told there's an 18 month lag. Meanwhile, Shelter has been over 5% for 26 consecutive months. Is Shelter really in a free fall? Or maybe the experts are wrong. We've got the real expert for you. Let's bring in DFW housing and macroeconomic analyst Amy Nixon. Amy, So what is the real story on Shelter? So, Charles, the the real story here is unfortunately has less to do with monetary policy than it does with just the fundamental market issue of supply and demand. That is the story behind Shelter and that is what has been running the show for the last four years and that is why you have seen home builder stocks have performed incredibly in both a low rate environment. In 2020 and 2021 you had three hundred person wait list for new construction and the builders were basically naming their price. And then when rates were hiked in 2022, we saw that home builders once again dominated the show because they, their main competitor is existing homes. And when there was a rate lock effect that cut demand or cut sellers wanting to sell those. So then home builders took more market share. So they're winning across the board. So, you know, I've got a brilliant colleague last week, I got into a little bit of a scuffle with saying that her position is that Wall Street buying these houses is good for Main St. Now, I know you've been a critic of Airbnb. Do you see, are there any real Silver Linings with Wall Street scooping up houses and trailer parks? I do not see Silver Linings for that. I think it's, it's honestly it's, it's very small fraction of the market right now. And a lot of people point to that. But all that I see when people say that is that that's just more opportunity for them to continue to come in and buy. And anytime you have private equity buying things in bulk, they tend to just try to make things as cheap as possible, raise the rents or the prices to the maximum that they can squeeze out of consumers. It doesn't tend to be good for the average American. So what are we looking at then here? I mean, because, you know, I know mortgages, I was, I was reading or hearing under 7%, we get a little bit of movement. We did have that mortgage application number that spiked here recently. Are we at a place now where people are comfortable maybe paying less than 7% mortgages and maybe that starts to move the needle? The housing market's at an inflection point right now. This year, I think we're starting to see existing supply return to the market. That rate lock effect is starting to have less of an impact over time. And that's actually combining with a little bit lessening of demand as we're seeing a little bit of consumer weakness and a slight tick up in layoffs. The housing market's actually kind of balancing out right now, especially in regions where we've been building a lot. And I think it's actually possible we may see some negative price numbers in some parts of the country like the Texas, the Florida's where we've been building a lot in the upcoming like 6 to 12 months. You know, it always blows my mind that boom bust cycle in housing in these hot markets never stops. Hey, the election just a few months away and many are are shocked. The top issue for Gen. Z and, and by large margin, by the way, is housing much more significant than student loans, for instance. So here's the question of what could the next president of the United States do to help Gen. Z and everyone else get into a home? Because Kamala Harris, Vice President Harris says they're going to make a move and make that right. It's a tough job for whoever is is in the office next. What we've seen from the current administration is they are just offering incentives that are increasing demand. And that's not a great solution in an economy where it's a supply issue is the is the major problem. So I think what we need to see is, is legislation that's going to discourage people from speculating on investment properties, that's going to sort of redistribute or encourage redistribution of some of the current supply that we have and also make it easier to build, remove regulations, remove red tape. The more supply that we can get out there, the better. Yeah, the regulation part I think is is under told story. Amy, thank you so much. I always appreciate it. See you soon.