Real Investor Radio Podcast

Craig (00:02)
Well, hey, welcome back, everybody, to Real Investor Radio. I'm Craig Fuhr joined again by my great friend, Jack BeVier And Jack, we have a very special guest on today that we'll just jump right in. We have Odetta Cushi on the line today. Cushi, I'm sorry. apologize. Like sushi with a K, Jack. She's the deputy chief economist at First American Financial. And they're one of the most respected data voices in housing and mortgage markets.

Odeta (00:19)
Exactly.

Craig (00:30)
Odetta's research on affordability, demographics and policy is regularly featured in the Wall Street Journal, CNBC and Bloomberg. Jack, she's a star. This is we've got a real star on the show today and we just couldn't be so honored to have you and for you to take the time to speak with us, Odetta. So welcome to the show. We have so many things we want to jump into you and get your thoughts on on ⁓ everything. So welcome to the show. Thank you.

Odeta (00:57)
Thank you for the very generous introduction. It's really wonderful to be here and I'm excited for the conversation.

Craig (01:03)
So, so ⁓ I'll just tell folks off the bat that you also co-host a podcast called Re-economy. And I would highly encourage all of our listeners to go check it out. ⁓ You can find it on Google. Re-economy. R-economy. Like economy with an R on the front. And so again, Jack, why don't you, you know, I'm sure you have a...

Odeta (01:12)
That's right.

Craig (01:27)
bunch of topics, a little framework to start us off here. And I've got a whole bunch of things I'd like to jump into, but I'll hand it over to you,

Jack BeVier (01:34)
Yeah, man. So I was super excited to ⁓ have you accept our invitation to come on. I was watching the podcast that you did at there or rather the webinar that you did at the end of 2025, kind of like the forecast for real estate and mortgage, broadly speaking in the economy for 2026. And I got a ton out of it. It was really a fantastic ⁓ webinar. ⁓ And I think that that's like, it's super topical, particularly for our listeners in because they're, know, it's beginning of the year.

2025 for real estate investors wasn't great. It was, you know, kind of a softer, you know, softer housing market each month, continually high interest rate environment. We've seen even some price declines in certain sub markets. And so, you know, our, think our listeners are trying to figure out like, Hey, is it that, you know, are we through that? Was that, know, was that the worst of it? Is it still going to get worse? there's been talk about mortgage rates coming down and a lot of like,

I've heard, you know, some, cautious optimism that like, Hey, we got through 2025 and now like the, you know, the, the housing market's going to thaw. What is your kind of like, and so for, you know, a bit from a business planning perspective, obviously the, you know, direction, you know, directionally where the economy and particularly the housing market is going is super important for, for planning your business for 2026. What's your, what's your perspective on kind of where the world's going in terms of the housing.

it right now.

Odeta (03:05)
Yeah, so there's a lot there. I will start by saying I'm cautiously optimistic and our outlook for 2026 is improvement. So not perfection. We're not expecting a normal housing market. And by normal, I'm just looking sort of at activity pre-pandemic. So we're not quite going to get to normal when you look at sales activity, but it will be trending in the right direction. And I think that there's a lot of different reasons for that. But

I always come back to the fundamentals and the broader macro economy. We're starting the year with lower interest rates. Obviously, the Fed cut rates a couple of times last year. So we're starting the year with lower rates. I think a little bit more macro certainty. We had a lot of those, the tariff changes last year. Tariffs are still higher than they were pre 2025, but we might look back and see that 2025 was the high point for those tariffs.

one of the pieces of the macro economy that I'm looking at is the labor market. And the labor market's interesting because we've sort of been, you if you want to call the housing market frozen, you could probably also call the labor market a little frozen as well. We haven't seen massive layoffs, but the hiring rate has been quite low. In fact, when I look at the data, it's at about 2013 levels, which is when the unemployment rate was 7%. So

not a ton of hiring happening. And that has implications for the housing market because job changes are a trigger for sales activity. And certainly, of course, a frozen labor market is maybe dampening some consumer confidence. So not seeing a ton of layoffs, but also not seeing a lot of hiring. And I think that that's been that's sort of one piece that I'm monitoring closely. And certainly the Fed is monitoring closely as they make their interest rate decisions for the rest of the year because they sort of balance.

their dual mandate of price stability and maximum employment. And they've been prioritizing the maximum employment piece. They want to prevent a job loss recession that explains some of the rate cuts that we've been getting. But now they're sort of cautiously approaching rate cuts because they also fear reigniting inflation. So Jerome Powell has really taken quite a signal to us that they're going to take a very data-driven, cautious approach to rate cuts for the rest of the year.

Jack BeVier (05:26)
I mean, so what's your perspective on concerns about consumer recession and how that might impact the housing market? Because people are talking about, hey, yeah, mortgage rates might be coming down because maybe inflation is past us to a larger extent. But if we see a consumer recession, then you wouldn't expect to see higher defaults and perhaps a widening of credit spreads, which would increase mortgage rates and kind of further dampen the housing market. And also, we consumers not going to

houses. like, where's the like, I lean a little bit more pessimistic, you can probably already tell. And so I'm like, where's the, what's the, what's the optimism? Like, why are how like, why are things going to stabilize for me, it feels like a very concerning 12 months to be walking into because I don't feel very confident in the kind of the underlying consumer economy.

Craig (06:13)
you

Odeta (06:18)
Yeah, no, and that's a great point. And there are definitely reasons for concern. The thing that's really been helping the US economy is a very strong US consumer spending. Consumer spending drives 70 % of economic growth in this country. And so when the US consumer feels good about their job prospects, feels good about their spending habits, then that means we can expect a pretty resilient economy. And so far,

that's been the case, I think in part because real wage growth has been positive. So wage growth on average has been outpacing inflation, which has allowed consumers to spend. But the other side of that that we see in the credit card data is that credit card debt has been rising on a nominal and inflation adjusted basis. And importantly, the delinquency rate, ⁓ the late stage delinquency rate, so share of credit card balances that are 90 days or more past due.

That delinquency rate is at its highest level since 2011. And so we do see some stress among the consumer base. And when we dig in a little bit deeper, it tends to be sort of borrowers, younger lower income borrowers specifically that are feeling some of that stress. So there's some cracks in household finances that I'm concerned about. But generally speaking, the US consumer has demonstrated resiliency. we're expecting some fiscal stimulus this year as well.

And so we're expecting that to prop up the broader macro economy. On the inflation, yeah, sorry. No, no, I'm curious to get your question.

Craig (07:46)
I'm sorry. Keep going, please.

What

would you say to the folks that would say that a lot of the consumer spending data is coming more from the upper income folks in the US rather than those that are sort of like middle class and lower?

Odeta (08:07)
Yeah, we do see some evidence of what's being called this K-shaped economy, where the top of the income distribution is doing quite well and the bottom is not doing so well. There's certainly some evidence of that. And that's a little bit of where my concern lies, is that the average is showing a strong consumer. But when we look under the hood, lower income people are struggling a little bit more, and of course, under the weight of multiple years of inflation. ⁓

And so that there is some concern there. But on the inflation point, I think you had mentioned that there's reason to believe inflation is coming down towards target. And I do think that's the case. The way that I tend to look at inflation is breaking it up into its core components, the first of which is goods inflation, so durable and non-durable goods. And that was a big source of inflationary pressure over the pandemic because we all

shifted our spending to the goods sector, right? We all started buying things for in the home because we couldn't leave our home. And also we had some supply chain issues during that time. So it was a bit of a perfect storm. And then once goods inflation started to come down because we all could leave our homes again, then services inflation started to go up and we saw a ton of upward pressure on wages. And now in today's environment, we're actually seeing goods inflation re-accelerate and that's partially a function of tariffs that's hitting the goods sector.

inflation for services has been trending back to normal. And then shelter inflation, which is more relevant to our world, is really dependent on what's happening with rents. And that's been trending towards historical average as well. And we know that that number lags ⁓ data on new leases. So we can forecast it pretty accurately. So services inflation coming down, shelter inflation coming down, a little bit of upside risk on goods inflation.

But overall, we have reason to believe that inflation will slowly continue to trend towards the Fed's 2 % target. I think it's gonna take some time. I don't know that it'll get there this year or even next. It's been pretty sticky, but it's made a ton of progress and I would expect it to continue to make progress.

Jack BeVier (10:16)
So let me ask the blunt, question, ⁓ annoyingly blunt, simple question. So what are housing prices gonna do this year? Are we up a little, flat down a little?

Odeta (10:25)
Yeah.

I were expecting so right now, according to our data and analytics house price index, national price growth is at about the slowest pace since 2012. So 0.5 % was I think our national year over year growth number. We're projecting low sort of single digit growth this year. So not too hot, not too cold. We're not expecting massive price decline, certainly not on a national basis. There's no reason to think that because we're not expecting a massive distress event.

⁓ of any sort, and there's still a historical shortage of housing, which should keep a floor on how low price growth can go. sort of slow single digit price growth, but increasingly local, right? When you look at the regional variations and what's happening around the country, it really depends on where you are.

Jack BeVier (11:20)
what about mortgage rates? What's your perspective on that?

Odeta (11:23)
Mortgage rates, we're generally looking at the consensus in the industry is sort of roughly flat from where we are today, which today we're at about 6.2%. So right around that mark through the rest of the year. Not to say there won't be pockets of opportunity as I'm sure you both know, the markets are responding to every incoming data report, trying to sort of forecast what the Fed's gonna do. And so certainly we could have... ⁓

some zigzagging in mortgage rates, but the general expectation is these push and pull factors will keep mortgage rates at about 6-2.

Jack BeVier (11:57)
I'm just going to keep peppering you with macro questions. ⁓ what's the, so what about, what about transaction volumes? Right? Like the rate, you know, the, lockup of, of mortgage rates is obviously the predominant factor driving volumes right now. But, ⁓ do you think we're going to see any relief in terms of by relief? I mean, an increase in transaction volumes, with a flat

You know, with the flat mortgage rate projection, the spread between all the in-place mortgages and what's available is still pretty not great. So like, what's the, what's, know, what do you think about volumes, transactional?

Odeta (12:30)
Bye.

Yeah, well,

even on that front, there's been some good news. mean, in 2022, 93 % of mortgaged homes were locked into a rate below 6%. I mean, is 93 % that's massive. Today, that share is 79%. So the rate lock-in effect has eased, and we expect that it will continue to ease as people lock into higher rates and as existing homeowners make the decision to move because of life events, right?

They might lose their ultra low mortgage rate, but they're also sitting on quite a bit of equity if they were able to benefit from the pandemic house price appreciation. So they could use some of that to offset the higher interest rate that they'll be locking into. So we certainly expect the lock-in effect to slowly continue to ease, which should help to drive ⁓ transaction volume. And when we look at the purchase application data from the Mortgage Bankers Association, that started the year on a

on a positive note as well, up from year ago levels and even 2024 levels. So we're starting the year a little bit stronger than we started last year, which I think is good news. Inventory is higher than a year ago, ⁓ depending on where you are in the country. Real estate is local, so it really depends. But nationally, it's higher than a year ago. And you can't buy what's not for sale. the fact that we have, you know,

positive inventory trend I think bodes well for transaction volume as well.

Jack BeVier (14:04)
Gotcha. so if you're a flipper, you'd argue, you know, with regional adjustments in mind that the, that, we should see, we should see at least price stability on the home price side. And so if you can buy a house that needs work for a price that is, makes sense, given the work that needs to be done and the spread that you're looking for that, you know, the, the coast is kind of clear. It should be a pretty good environment to be, to be a flipper in.

I might argue.

Odeta (14:35)
Yeah, I mean, you made the point to pet sorry, Craig.

Craig (14:38)
I was going to say you guys recently did an episode debunking the scariest housing myths and ⁓ which I thought is a great headline by the you guys are your show titles are absolutely viral. So where but you talked about like you know all of these myths the scary things like we're going into a 2008 style recession. But so you know for the folks that listen to our show mostly real estate investors.

What are one or two hard numbers that you would point to as proof that we're kind of in a normal cycle, slow down here, sort of rebalancing rather than going into something more scary?

Odeta (15:16)
Yeah, there's several that I would point to. mean, debt to incomes are still quite low. ⁓ Equity levels are near historic highs. And when we think about what it takes to cause a 2008 style crisis or a foreclosure wave, it's really two triggers. It's a lack of equity and some kind of ⁓ income event.

a job loss recession combined with insufficient equity levels. And in today's market, as I mentioned at the top of the episode, we're not seeing widespread layoffs. And so for the most part, the unemployment rate is still quite low. So we don't necessarily have the income event, but we also have really strong equity levels across all of our top markets. Sometimes I look to Austin.

Austin is an example of a market that I would call it like a pandemic darling market. It saw 65 % house price growth over the pandemic, ton of people moving into Austin and house prices absolutely reflected that. Since then, house prices have fallen by more than 10 % from the peak, which seems like a big number, but compared to the 65 % growth over the pandemic, if you were able to capture on that appreciation, you're still sitting on a ton of equity.

So the folks that I'm worried about are people who came in, really bought at the top with low down payment, are maybe facing a job loss situation. And certainly there are pockets of the country where we might see a little bit more of that. But generally speaking, equity cushions are still quite strong. And so we're not expecting ⁓ any sort of foreclosure wave. I would expect foreclosure activity to continue to rise. It's still below pre-pandemic levels, especially as the job market softens.

Jack BeVier (17:03)
looking at this good.

Craig (17:03)
speaking to a check I was speaking

to a borrower yesterday who is he's got a very sizable portfolio in Texas and he's buying everything he can right now by the new day the new data center that's being built and he cannot get them you know on on the market fast enough and he was like hey man if you'd have called it if you'd have told me five years ago that this would be an area that I was really focused on in Texas I had told you

crazy. And all my friends told me I was crazy when I started buying all the rentals here. But the rent growth has been the the the upward trajectory and rent growth where he is is insane. He's getting, you know, unbelievable short term rental rates at six to 12 months, which are not really short term. But yeah, I think there's a lot of there's there's a lot of bright spots in certain markets around the country that you probably wouldn't have thought as traditional great markets.

Odeta (17:50)
Right.

Jack BeVier (18:02)
I was like, I was, I was nerding out. I was nerding out on this, ⁓ we, pay attention, lot of attention to the DSCR data data, cause that's been fueling the, the landlord growth, ⁓ or, know, rental property, rental portfolio growth for landlords. And, ⁓ so, know, and that's, that's like the main product that we're, that we are borrowing using to borrow for longterm. And, so, and we also originate those loans. So I was paying attention to the performance of it. Cause I'm.

Craig (18:02)
Nothing to come.

Odeta (18:09)
Mm-hmm.

Jack BeVier (18:31)
wondering if we're going to see guideline shifts, for example. And the, so I've been watching this data from DV01. They, it's a company that looks at the remittance reports for non QM securitizations and, you know, carves it up six ways from Sunday to try to isolate the variables that are leading to different performance, you know, indicators, right? And the, 2023, 2024 vintage is a problem. Like that period of time,

specifically is leading to higher default rates amongst all non QM products. And it's pretty consistent across all non QM products too. ⁓ DSCR is a little bit on the lower end actually than some of the other non QM products in terms of absolute performance. ⁓ But anyway, like what's your take on that vintage just because the rates at that time, but why aren't this folks refining, right? Like what is it about?

Odeta (19:23)
Yeah.

Jack BeVier (19:27)
What is it about that vintage that is leading to performance issues? ⁓ If not the canary in the cold, if it's not the canary in the coal mine, you know what I mean?

Odeta (19:38)
We do see certainly the 23 and 24 vintage. is when we see refis, that is really who's refining. That's who's in the money to refire more are these recent vintages because everyone else refied in 2021 and 2020. And I've seen the data that you're referring to higher DTIs among some of those vintages as well.

like I said, pockets of concern. When we look at the delinquency data, you certainly see for FHA borrowers, it's higher and sort of trending in the wrong direction. So lower down payment borrowers are feeling a little bit more of the stress, but I'm still not seeing sort of a massive ⁓ event because of the equity picture. And because when we look at where we're seeing house prices going, we're not expecting any sort of big crash. Of course,

Pockets of the country will still experience ⁓ probably more price declines, places that we built quite a bit over the pandemic because they were experiencing a lot of net in-migration and then when interest rates went up and demand sort of pulled back, they're now experiencing a recalibration. But even in those markets, the decline has been ⁓ sort of more measured.

Jack BeVier (20:52)
So just to play the bear here, like credit or auto delinquencies have been historically high for a pretty long period of time now. Credit card defaults have increased and are getting, I don't know if they're getting worse, but have increased certainly. And then you layer on the student loan debt delinquencies because all of sudden we decided to enforce student loans, whereas before we just weren't.

Odeta (21:03)
Mm-hmm.

Jack BeVier (21:20)
And, and then I'll, and then I'll, I'll throw in the, and concerns about AI's impact on particularly entry level jobs. None of that is enough to get you worried about the entry level consumer recession, like a consumer spending recession driven by just a change in the mood, frankly, of like middle America of like a middle, you know, middle class America. None of that's that none of those are.

enough to like get you worried about that.

Odeta (21:52)
I'm absolutely concerned. I'm not dismissing any level of concern. We certainly see that stress, like I said, in the delinquency rate data and among younger, ⁓ often ⁓ lower income borrowers. So I do see those cracks in household finances that could ripple through the economy. But a lot of the other measures that we typically see as highly correlated with a near term recession, those flags just aren't there.

So when we look at the GDP data and understanding that it's a lagging indicator, not necessarily a leading indicator, when we look at the underlying, the data sort of removes some of the fluctuations from imports and exports, right? Cause that can move things around. Where we look at true underlying demand in the economy, ⁓ those numbers still look very, very strong. Some of that is AI investment, but a lot of it is still just being driven by consumer spending. ⁓

Certainly you could make the argument some consumers are spending by dipping into savings. We do see some evidence of that in the data. Other consumers are spending because they're using their credit card. And now we're seeing the delinquency rate on those credit cards go up. It really depends on where you are in the income distribution, where the stress is more acute. So there are certainly reasons for concern. And forecasting a recession is very, very difficult. And it's more than just two consecutive

periods of GDP decline. It's so much more than that. You have to see it in the income data, in the employment data. So there is pockets of concern. I'm not saying it's going to be hunky dory, but combine that with the fact that we're entering the year with lower rates. We are going to keep getting some investment in AI. And now we're also getting the fiscal stimulus from Big Beautiful Bill. All of that could be stimulatory for the broader economy.

Jack BeVier (23:45)
Gotcha. Let's ⁓ let's talk about immigration. ⁓ What's your you know, how what's your take on ⁓ changing to the changes that have happened to immigration policy and how those are trickling through the economy, right? We know we no longer have this tailwind of a rising population, ⁓ you know, which is like huge for housing prices is just throw more people in there into the market and like, kind of takes care of itself. But without

without the influx of immigration, how are you seeing that play into the picture here?

Odeta (24:23)
Yeah, that's a really interesting question. Historically in the US, population change, which can be driven by, you mentioned one of it, which is immigration, both domestic and international, but also natural change, which is just that we have more births than we have deaths. And in this country, natural change has been a major driver for a long period of our history. But in the last several years, our population, ⁓

population change has really been driven by international and domestic migration. And in some pockets of the country, if you look at Florida and parts of Texas, it's really been dependent on international migration. And to your earlier point, increasing population is demand for all types of housing, rented and owned. And so a pullback in population growth, I certainly think could impact the demand side of the equation in the construction world.

the supply side of the labor market, right? We know that ⁓ construction is heavily dependent ⁓ on ⁓ migrants working in the construction field. ⁓ it's maybe too soon to tell exactly how it's impacting the demand side, but ⁓ certainly will, I think, the pullback if we don't start to see strong population growth across the country.

Jack BeVier (25:45)
What's your perspective on like the regional changes in home price appreciation or rather like just like days on market, ⁓ have been like completely flip-flopped, right? From, from the COVID period of time, right? The sunbelt used to be like the houses are flying off the shelf and now it's Connecticut that like, you can't find any inventory. What's, what's your, what's your take on, on that flop? Is it just an adjustment down in the other places?

and has the domestic migration stopped? Because like, how does the Northeast where the people are supposed to be leaving, you know, they're dying and leaving. Why is that the place where we've got no housing inventory relative to the rest of the country?

Odeta (26:28)
Yeah, it comes back to supply. So the markets that we saw the most home building, ⁓ so our Sunbelt markets, pandemic darling markets, when interest rates were really low and domestic migration was really strong, builders were working away building homes. And then when, of course, 2022 hit and demand was impacted by higher interest rates, population growth is still positive in a lot of these markets. The Sunbelt markets are still

relatively popular. It's just that it's slowed from where it was during the peak pandemic time. So still positive in a lot. was just ⁓ in Houston and similar stories sort of pulled back, still a popular market. Texas is still ⁓ a place where people want to move to, still offers relatively more affordable homes, space. There's still a growing economy. It's a large economy. And so there's still interest in moving to those places. It's just pulled back.

where it was before. And so you sort of see that impacted in the inventory numbers and then in house prices as well as inventory starts to pile up in some of these markets. In the Northeast, I grew up in Western New York, Rochester, New York to be specific. And that's a market that's been growing like crazy. ⁓ It's cold, but they don't build quite as much and certainly builders didn't build as much over the pandemic. so house prices have been strong in the Northeast.

in the Midwest where we didn't have as much building activity. so ⁓ house prices have shown some relative resiliency in the Northeast and Midwest markets. And I expect that to continue.

Jack BeVier (28:10)
in JISC.

Craig (28:11)
Do

you, you, ⁓ home builders you think will maintain that advantage that they have over existing, over the existing home market?

Odeta (28:20)
Yeah, I the homebuilder, the new home market's been a relative bright spot in the housing market. ⁓ And builders right now, I think, are focused on selling the inventory that they do have before breaking ground on new homes because they do have ⁓ elevated inventory levels, especially in builder friendly markets like Florida and Texas. So that's why we're seeing moderation in housing permits and starts on the single family side, because builders are sort of focused on selling what they've got.

But I still expect them to retain a relative advantage because they can offer buy downs, is rate buy downs specifically and other incentives, which existing homeowners can't necessarily do. ⁓ even if builders face their own set of headwinds, and they certainly do, ⁓ I still expect them to maintain that edge over the existing home market.

Jack BeVier (29:15)
I'm curious, the circling back to the immigration impact, the change in immigration policy. Like, I feel that this is anecdotal, right? I mean, Baltimore, I'm sure other parts of the country felt this way before we did, for example. But I think it was like four months ago, three, four months ago, I started to hear anecdotes from other landlords in this market who...

work predominantly in area or work in areas that are predominantly Latino. And the, the, the, to be, you know, the, the, the reputation there was that credit credit profile for that community is fantastic. They're here to work. They don't want any trouble and they're great. As a result, it's a great pay. Three months ago, they got scared. People started to scatter a little bit.

Odeta (29:47)
Mm-hmm.

Jack BeVier (30:08)
And all of sudden, you know, that's really shaken up that community. you know, it's, uh, not a perspective that a whole lot of people think of, but as a tenant base, right? Like that changes the profile of, of that tenant base. And I think it's shaken up some people's business models, at least, you know, folks that I know here locally who work with that, you know, predominantly with the Latino community. And then conversely, we also saw that kind of cycle through the narrative.

⁓ from on the construction side, because like guys just didn't show up to work. and that has changed the, you know, that has changed the dynamic, the, you know, the power dynamic in negotiating with guys because there's not this like, there's tons of labor out there. ⁓ some of those guys are disappearing or just not showing up the job sites. You can't go to home Depot right now.

and tell three guys and find three guys and tell them to get in the back of the truck. And like, I know that that's an informal economy thing, but it drives a lot of it, but it's a pretty big that drives a lot of renovation activity, renovation and construction activity in the country. And that labor market is like significantly disrupted right now and is like very much in flux. ⁓ So anyway, I don't know, I don't know, I'm not sure if there's like, if you have any thoughts on that, but it's just kind of like a couple

trends that I'm hearing from guys on the street that I'm not reading about in like in the paper. But I think that it's it is affecting business.

Odeta (31:38)
Yeah.

Right, I mean, you the first part of what you mentioned is a bit of a demand shock, right, ⁓ in what you described, but the construction piece is interesting because the home building industry has suffered from a shortage of skilled workers since the end of the global financial crisis. I mean, this has been a persistent issue for... ⁓

for home builders, you can see that reflected in the fact that wage growth for the construction sector is higher than for the overall private sector because they need to increase wages to attract and retain labor. And that's just one of many supply side headwinds that builders face, right? They have the chronic shortage of skilled labor, higher material costs, material costs for construction are up more than 40 % compared to pre-pandemic.

credit conditions are still tight for ADNC lending. And then of course, they have all the regulatory costs on top of all of that. think NHB has a good study showing that regulations account for 24%, I think it is, of the final price of a new single-family home. And that's regulations at all levels. And so they're facing quite a few headwinds. And certainly ⁓ more impact to labor is something that they, you know, is not,

good news for an industry that was already suffering from skilled labor shortages. And I also think from a demographic perspective, you mentioned remodeling. ⁓ Baby boomers own a ton of homes in the United States and the population of 80 plus is expected to double between now and 2040. And when we dig into that data, we find that these homes are located in pretty prime locations, but they will need

some work to be made attractive to the next generation of buyers. so, and these homes are also sitting on a lot of equity. So we do see a positive storyline for the remodeling sector. ⁓ And, you know, you need more skilled workers to be able to meet that demand, which we think is certainly coming. So yeah, it's a good point.

Jack BeVier (33:49)
Yeah, like from the, from the real estate investors perspective, like I'm looking, I'm looking for like some shoots of growth and like where I should still be nervous. Right. So like 2025 sucked. was, it was very hard to be a flipper in 2025. And from the rental perspective, rents didn't go up, but rents didn't go up and prices didn't come down or in rice prices came down a little bit, but not, not enough to offset it. And interest rates didn't do anything. And I'm

And then operating, you know, in the environment that I described about the credit profile of the tenant base decreases. Well, that's my source of income, right? Like that is, that is my revenue. And if all of a sudden my credit loss that was 2 % should now be 6 % and the cost of renovating that house went up because those folks cousins are not around and it costs me 20 % more to get that rehab done. Well, you know,

pricing has to come down pretty significantly for me to right size both of those and still hit the risk adjusted return that I think is appropriate for this, for this business, right? Like both of those are negative things in my pro forma, right? When I'm, when I'm thinking about adding the next rental property and, ⁓ and so I'm, I'm, and maybe I'm, maybe we're talking, maybe I'm, we're like using two different sets of vocab or two different concepts with the same vocab, but

Odeta (35:01)
Right.

Jack BeVier (35:14)
⁓ it makes, leads me to the conclusion that at least as is pricing, like that older inventory that those, that, that, that, that inventory that needs fixed up, that the, there's older folks. ⁓ they own that you're talking about. makes me think that that market is going to be pressured. ⁓ because how can I pay the same for that house that needs work that needs work? That's going to cost me more. And when the rental pro forma has just degraded because the, you know, frankly, the, the

the renter profile, right? Like what's the positive aspect? If you're somebody who's renting a house and you're not a homeowner, what's the optimism? Like what's getting better about the economy? Like again, the auto delinquencies, the credit delinquencies, the threat of AI against my entry level job, the student loan debt, those are all factors that went on a total macro perspective.

Yeah, we haven't like they're still being outweighed on the total macro perspective of the GDP level by all the haves, right? The haves are doing great. And there's still lots of like, you know, reason for optimism for the haves, but the have nots, I'm having a hard time finding like sprouts of optimism in the have nots category. And that's, and for the investors from the investors perspective,

then that's my revenue stream, right? That's, those are all my people. And so like that makes me more scared to be in this business, frankly, in 2026, and makes me want to pay less for houses as a result, if I'm gonna, which leads me to think that that as is housing prices may behave differently, even if top line, even if the, you know, even if the homeowners with equity with, you know, two, you know, two income households are doing just fine. ⁓

that lower end of the market is going to behave materially differently or has greater risk of underperforming.

Odeta (37:13)
Yeah. Well, I'll give sort of two thoughts. You mentioned, you know, what's sort of a silver lining in the housing market. And it's not great news, but it's moving in the right direction news, which is that even with mortgage rates where they are today, and even if they remain stable, we are still seeing an environment where income growth is outpacing house price growth because house price growth is weak, right? It's below 1%, according to our data, and income growth is outpacing that. So affordability,

is currently at its best level in over three years. It has improved. It's still well above where we were pre-pandemic. And I think there's more affordability improvements to come, but sort of buyers on the margin, that allows some buyers to enter the market. On the rental side, we have this ⁓ scatter plot where we look at the top 75 markets and we look at rent growth relative to a measure that essentially is capturing

⁓ new excess stock as a percent of inventory. So we look at net deliveries of units minus net absorption as a percentage of the stock in that given market. And we find this really strong relationship in markets where we built a lot relative to the existing stock. That's where we're seeing downward pressure on rent. And then ⁓ the opposite of that in markets where we haven't built quite as much, we're seeing upward pressure on rent. there's still, particularly in the Northeast and Midwest markets that are seeing ⁓ some positive rent growth.

And then conversely, when we look at our chart, it's like Fort Myers, Florida, Sarasota, Phoenix markets that are seeing downward pressure on rent. And the rental story, I think, also comes back to home building. We built a lot of multifamily properties ⁓ over the last couple of years that started to come to market, put downward pressure on rents. I think we can continue to expect rents nationally to decelerate. But the builders have also cut back on

housing permits and starts for the multifamily sector. So the pipeline of multifamily projects is lower. And if that doesn't start to pick up, ⁓ we might start to see rent growth pick back up as well, because we still are in a housing market that's undersupplied. And we're facing a shortage of housing that's been built up over many, many years. And so if builders don't pick up the pace on multifamily starts,

what's now an oversupply situation in some markets may turn into balance, then ultimately growth. And so it's not just about what's coming to market today. It's also about looking at the builder pipeline.

Jack BeVier (39:47)
I just had a question and I forgot it.

Odeta (39:48)
Yeah

It'll come to you.

Jack BeVier (39:53)
Yeah. ⁓

Craig (39:54)
I'll wait.

Odeta (39:56)
We'll wait.

Jack BeVier (40:00)
Craig, you got any questions? I did, just told...

Craig (40:00)
try to try to surmise what you're thinking. So, ⁓

you know, there's there's a lot of scary headlines and geopolitical sort of bond market. know, Japan ⁓ is appears to be having a massive sovereign debt crisis right now that I think it's really affecting the bond market. Bond market always gets the last say. So give us your outlook on that. ⁓ You know, some of the geopolitical events.

Odeta (40:23)
Mm-hmm.

Craig (40:29)
China is obviously right on the doorstep of Taiwan. ⁓ What happens to the bond market this year?

Odeta (40:38)
Great question. Wish I had a clear answer for you. Well, my crystal ball gets so hazy once we start talking about predicting geopolitics. I think that's a wild card, right? And you could have a situation. When things start to get a little bit uncertain overseas, the irony of the housing market is that we typically get some downward pressure on that 10-year yield, which means that mortgage rates come down. ⁓

Craig (40:40)
So one of those ones, look into your great crystal ball.

Odeta (41:07)
But it's really tough to predict where any of those situations will go and how our market will necessarily respond. But I certainly think it's a factor. It's just one that's a little bit more challenging to predict, at least from where I'm sitting in this role.

Craig (41:23)
Fair enough.

Jack BeVier (41:25)
Um, so yeah, I have a question for you without speaking about the policies specifically, what's your take on like, can the executive branch Trump's trying to, I don't know, at least put out the perception that he's here to help the housing market, right? Once, wants to improve affordability without decreasing housing prices, you know, he's cognizant of both like the same seems the, he's cognizant of both the, the net worth.

that the housing market has built up for a large percentage of the country. ⁓ But at the same time as, know, got this institutional anti institutional ish approach, you know, or least presenting messaging ⁓ to try to support ⁓ entry level home ownership. ⁓ What's your take on, I guess, whether or how effective the executive branch can be in terms of

shaping the housing market when it's such a local, when permits are issued at the county level, you know.

Odeta (42:29)
Yeah, it's a great question. I think there's, what I'm happy to see is that there is some attention being paid to ⁓ affordability, right? Like housing affordability is clearly a top issue among American consumers, especially for potential first time home buyers. They're very concerned about their ability to buy a home, which is the American dream. And so I'm glad that housing is getting more attention. I do think that the more sustainable solution to

the housing affordability issues that we're facing today as a supply side solution. And I say that because if you're trying to improve the demand side, that can be capitalized into house prices. So if you make it, if you give people down payment assistance or what have you, ⁓ that can then show up in higher house prices, which does not bode well for housing affordability. So I think the more sustainable solution is to try and impact.

making it easier for builders to build. But to your point, that's pretty local. There are some things that have been suggested, right? Releasing federal lands and making it easier to build on some federal land. So there are solutions out there where the executive branch can certainly be helpful. But I do think the supply side just tends to come down to a more local level, making it easier for builders to break ground on, easier and more affordable for builders to break ground on new homes.

Jack BeVier (43:55)
Super interesting. guess, um, so, you know, just to kind of sum things up overall, you're generally slightly positive on housing prices. Mortgage rates are going to be flat. Can, you know, keep an eye on the economy, but you're not like freaking out that we're about to have a bunch of defaults or a, you know, a crashing stock market that's going to like change the mood and kill the market. You're like, you're generally like, Hey, not pretty stable. Things are thawing a bit.

⁓ you know, get it, get out there and, know, don't get crazy, but, but, operate. ⁓

Odeta (44:31)
Yeah,

I think so. it takes some discipline in this market because to your earlier point, like operating costs, we didn't even touch on insurance premiums, but certainly that feeds into the higher costs that everyone's facing. And it's a problem for investors. It's a problem for ⁓ existing homeowners. It's a problem for potential home buyers. ⁓ I wasn't talking about insurance premiums.

10 years ago, but these days it's hard to have a conversation without talking about them. ⁓ So there are operational challenges, but I do think that we're starting the year on a cautiously optimistic note. I do see some thought in the market, doesn't mean that there aren't risks and maybe we'll be having a totally different conversation in three months if we talk again. Things are changing very, very quickly, but at least from where we're sitting today, I am cautiously optimistic.

Jack BeVier (45:25)
I have a question for you. ⁓ As like practitioners in the market, ⁓ like it was a tough year to be a flipper last year. And as a result towards the end of the year, some of those flippers decided not to get back out there, not to, know, because they just, they're just licking their wounds from some losses that they took. And so if you did 10 flips in 2024,

Odeta (45:26)
Yes.

Mm-hmm.

Jack BeVier (45:50)
And 10 flips in 2025, I don't think you're doing 10 flips in 2026 because the 10 and 2025 didn't go so well. And you're a little bit more cautious. You're being a little bit pickier. and so that has like this, like secondary effect that most people don't think about. They're like, Hey, it's a bad time to be a flipper. And so they stopped flipping, but then those that do. Aren't competing with anybody. Right? Like the fallout from a, you know, there, you know, there's lots of little supply and demand curves all along the way. Right.

Odeta (46:19)
Absolutely.

Jack BeVier (46:20)
And so then all of a sudden it's better to be a flipper because you're like the only guy left in the room. And so I like, think that in, you know, we're in the Maryland market. I think that the spring is actually could actually be quite good for flippers because they're not competing with as many flippers this year as they were last spring. Expand or translate that same idea to the, to the real estate agent and mortgage market. These lower levels of.

transaction activity have been really hard on all the practitioners out there, right? Like they all made a ton of money in 21 and 22. And so their savings accounts were big and they changed their spending habits because that's human nature. And they've been running a little light 23, 24, 25. Now we're going into the fourth year of like much lower transaction volumes. And those industries, you know, those practitioners don't really care where housing prices are.

They care that transactions are happening. They don't make money off of the top line number. They make money off of how many transactions they did. And so we saw some fallout in the mortgage market in the 23, 24 timeframe, but I'd argue was like the weakest got out, you know, like the guys who just got their license and did a couple of deals. Yeah. Those guys went and got a, got a job, but the full time folks, you know, just, you know, still had a bunch of money, frankly, cause they'd made it in 21 and 22. ⁓

And I'm wondering if enough, but enough time just needs to pass, right? Like enough time needs to pass before your bank account empties so that you change your behavior, right? But you don't change, you don't, you know, humans don't change their behavior until the bank account gets real, real low. ⁓ and I'm wondering if we might see a change in industry makeup, ⁓ here because again, because 25 was a challenging period of time. And if mortgage rates aren't going to go down and if the lock in effect is still prevalent,

I mean, that's just wearing on those practitioners year after year after year. I was looking at a slide that you put in that webinar, which was wonderful. I love the slides too. And it showed the spread between existing mortgage rates, like the weighted average existing mortgage rate versus the new prevalent rate that's available in the market. And

Odeta (48:35)
Mm-hmm.

Jack BeVier (48:42)
It's still quite large, right? Like, yeah, it's, you know, it's, it's started to compress, but if you like extrapolate those two lines, it's going to be like eight years, 10 years before we have a bunch before refis or a business model again, you know, which also suggests that sale transaction activity is going to remain depressed for a long time. And can the industry wait it out? I guess that's what I'm getting, you know, all that to say. And, know, is the industry going to be able to wait it out?

Odeta (48:44)
Yes.

Jack BeVier (49:11)
Or are we going to have a shrinking, are we going to hit that inflection point where the number of real estate agents and the number of mortgage professionals really materially changes and they need to go get a job because they can't sustain themselves at these transaction levels.

Odeta (49:29)
Yeah, mean, you how much right sizing has happened given the demand? You you both maybe would know better than I how much, you know, people are trying to stick through despite, you know, a couple of tough years since 2022. But and I agree with you that I don't think we're expecting a market back to normal transaction volume, certainly not this year, but even the year beyond, I'm not sure that we'll get back to normal. I can change, but

⁓ but the good news is progress, right? We'll still rather than, than down. And even on some of the worst year, we'd still have 4 million annualized transactions from the existing home sales number, right? Even on a, on a really tough year, it's sort of like, well, is this, is this sort of the low point? Is this how low we get even in a very challenging market? and so we'll, we'll have some, an uptick, think in, in transaction activity this year.

⁓ But I don't know what it means necessarily for ⁓ the mortgage brokers, for the real estate professionals and how much it'll change, whether they stick it out or decide to do something else.

Jack BeVier (50:41)
Well, was a bit an absolute pleasure to chat with you today. I really enjoyed that webinar and your podcast very much. I got it in my saved. So thank you so much for joining us today. was a really enjoyed the conversation.

Odeta (50:56)
Thank you. Likewise, it was a pleasure to be here and hope we get to chat again soon.

Jack BeVier (51:00)
Absolutely.

Craig (51:00)
great talking with you. Folks that's the episode for today. Hope you enjoyed it. Please leave your comments and reach out to us if you want to talk.

⁓ Thank you so much Odetta, it was great. Good luck on your trip down to ⁓ warmer weather. We'll see you on the next one folks, thanks.

Odeta (51:20)
That's right. Thank

you.