CoreLogic’s Selma Hepp Helps You Better Understand the Current Economy

you know i' love to bring on guests who can help us understand the economy how to navigate it and how to profit from it and today we have got a great guest I'm Kathy fedy and welcome to the real well show you're listening to the real well show with Kathy fety the Real Estate Investors [Music] resource Selma Hep is the chief Economist for core logic America's largest provider of Advanced Property and ownership information analytics and data enabled Services Selma leads the economics team which is responsible for analyzing interpreting and forecasting housing and economic Trends in real estate mortgages and insurance and she's here with us today on the real wellth show so selo welcome thanks so much for having me Kathy I love having economists on because it is uh so confusing out there and everybody's got a different opinion about where the econom is headed what the fed's going to do does it matter how it's going to affect housing so what metrics do you look at uh that that help you answer these questions yeah I mean I agree with you I think this the signals are there out there are really mixed and I think it's really confusing to people um the economy may be doing really well but they are feeling the impact of inflation and people are feeling increasingly fatigued by that and so when you listen you know surveys after surveys asking people how they're doing they they feel like they're not doing well because of that um so it it is very confusing and then when it comes to housing markets I think it's confusing as well too because you know rates are up rates are down you know is it is it a better Market is it a worse Market you know it's it's it's very confusing to people and it matters very much where you're sitting in the country you know some parts of the country are doing better in terms of number of transactions and um and just availability of inventory where some other markets feel very Frozen still um and and so I think I can I can relate to that feeling of of of confusion out there so if the economy is doing well you know the GDP is up um It's actually kind of at average right it's not good not bad it's just pumping along but if if the economy is doing well who is that who's doing well if when you do consumer surveys consumers and and Americans are frustrated because they're paying more for everything so who's doing well in this economy well I think um generally people that are fairing better coming out of the pandemic are people are in higher income groups um and you know the when you look at what H what's happened in the stock market over the last few years and the generation of wealth that was generated as a result when you look at you know people's equity in their homes you know that's for a lot of people um the only wealth that they have but but it does feel better uh because their wealth is up and you know for example average homeowner has over $300,000 in equity which is the highest that that we've had um so so you know I I think in terms of being those that are employed uh those that maybe have gotten changed their jobs during the pandemic because if they changed their jobs they tended to get a better income as a result they get they got a raise so they may be feeling better um I think the the issue is that those with fixed incomes those that um didn't get any income gains uh coming out of the uh pandemic um are feeling these high prices of everything around them um and so so I think yes in many ways this is a you know the our inequality um issue got worsen probably as a result of how the pandemic played out it certainly seems that way but you know I've been saying this for 20 years that I've U Been on the radio or having podcasts that if if you get into real estate it grows Within inflation so if we experience inflation you're going to kind of ride that wave versus not being on the shore or whatever not ever getting on the wave so you know this is kind of expected inflation isn't really new is it I mean it's obviously been bad but it's not new I mean we've had inflation um you know inflation is part of the economic growth you know for for as economy grows um you you it's you know it's part of that is an inflation the issue with more recent inflation is that it was um you know we had a many many years you know really when you think about it coming out of the 1980s um and into 1990s we pretty much had stable inflation since then um and in some points in time even felt like we were not having as much inflation as as the uh economists would would would like like to have um and and so I think the the shock of it is more an issue right now than the fact that you know people are not familiar with um 20 30% inflation on some products that they buy regularly you know and so you know if you remember last year I think it was about eggs and then it's about you know gas prices are always up and down but we are not used to seeing or feeling the inflation in food items as much as we did uh over the last year or so or a couple years the other thing is you know the what helped inflation leading up to the pandemic was that um durable goods were increasingly produced abroad and the cost of production was lower there and so things that we are used to spending you know on durable goods the prices on that on those items kept going down so think about TV in many ways Autos as well um you know any washer and dryers you know a Furniture anything you can think of that that are big bulk items those costs were coming down but because we sort of piled up on that during the pandemic and now we wanted to get out and spend on other things on services for example and and eating out in restaurants and traveling and and you know hair you know maybe not good example right now but I'm getting ready for my hair appointment this week too but you know um you know we wanted to to to consume services that uh we didn't consume dur during the pandemic and um the labor costs on those Services increase so significantly coming out of the pandemic because we don't have as much we have a labor shortage in in many uh of those sectors of the economy now you're seeing those costs go up uh a lot right and and the other thing I think people are to some extent feeling is that you know maybe some companies are um raising prices Beyond uh what their own costs are and and and their profits are growing um and and people you know generally it doesn't feel good you know it doesn't feel good when when you see you know cor uh corporations doing so much better and and then you're struggling with your own expenses so I think that's part of it as well um and um so you know so so I think it's just again it's it's more the most most recent version of the of inflation uh that that's bothering everybody yeah so the bottom line is people who have been able to invest in stocks and real estate are benefiting from um from the last few years but also from the last few decades um it's it's not new it's if you want to stay ahead like I said get on ride that wave instead of paddling hard to get on it um and I have to use surf metaphors because we've had a great surf week here in California um but you know if if you don't you could still make a lot of money um and then spend that money on things that are costing more money so if the the sooner you can get your money into assets that inflate the better whatever it takes this is just my advice to the audience like don't do what Selma said don't spend it on restaurants and travel and so forth until you're on that wave life gets a lot easier once you have assets once you own either stocks and real estate of course I'm going to say real estate because we've seen it inflate for how many decades it you know even even during reset even even in the 10 years where there might be a big recession even the Great Recession we see over time those values come back up even higher true so with that a lot of people are scared right now because real estate prices are so high there's belief that if they're this high they it's not sustainable it's going to crash is that a possibility well you know there's always a possibility of a shock to this to the economy you know we've seen that you know with the pandemic that was just the you know the most obvious you know un one of those unexpected uh huge shocks to the economy that that really rattled um everything so yes you know there is a possibility but all the housing fundamentals suggest that that's very unlikely scenario uh basically what you know I I do agree that home prices um are growing um it's seemingly Pace that that may you know seem unsustainable in many ways given the how much more mortgage rates have increased over the last year or so but at the same time we you know we started this conversation off with talking about how a resilient us consumer is how much more wealth people have um and then also the fact that um coming out of the Great Recession we have not been building enough so you know there are many estimates out there looking at uh housing shortages in the US and they average anywhere you know two to four to six million depending on what estimate you're looking at and in some markets that that under Supply is is much more significant um and and so this that's really the driving Factor behind a mortgage U behind home prices at the moment is just the fact that we have more buyers and we in fact have more buyers with cash and Equity um and we don't have enough Supply yeah so it's just mind-boggling to me that there's still economists who are denying that and saying oh no be careful I mean I see them on I won't say which stations or on YouTube but um who are just must be looking at something different than that because it's super obvious what's what's not been obvious is how many are we're short of because like you said you you'll see some people say two million some say three I've I've heard 15 million I mean who knows uh but how could an economist say that you know say that we're going to be flooded with housing like with you know things like um the silver tsunami all these you know people are going to die off you know is that well yeah no I I you know it's it's a valid concern what happens down the road you know and and I think um you know we do know one thing we know for sure is that we're going to age I hate I hate the part of uh aging myself it's not nice it is not nice it's it's very much not nice but it's it's it's it's a it's a reality and so so we know people will move on to other things in in this universe and and so you know there Remains the stock of housing that they they previously occupied the issue there is that you know um we have you know still really large uh number of uh young adults and and people being you know born into this country in addition to having a lot of IM immigration um and you know I I know the headlines are mostly about illegal immigration but we've had a lot of legal immigration um and actually in the latest CBO report the immigration counts are up double from where where we were historically historically we get about a million and a half immigrants per year um over the last couple of years we got over three million each year um and so these each year oh oh yeah last couple of years yeah so so um now we're not expecting that level of immigration or immigration to to persist but but okay we had this additional three million people um I'm adding million and a half over the million and a half that we would have anyways yeah um so um so we have a lot of people right we have a lot of people and we have a history of under under Supply so even with folks uh you know passing on passing away and and and moving maybe to to retirement homes or or just you know uh going away horizontally um you know the the the rate of the the additions uh is going to be really slow and gradual so not it's not a tsunami it's maybe a tidal wave you know I've heard people call it a tital wave so it's only a gradual addition to um to to current uh number of homes available for sale or available for for people to be living in and you know there there was an estimate from Freddy that looked at um uh this particular issue and and they estimated over the next 10e period there's going to be 9 million homes uh uh coming on Market as a result of uh um baby boomers uh um aging out of home ownership and you know we just talked prior to this about the size of the housing shortage which is significant and and so you know I I'm more on a five to six million uh uh five to six million range and so you know with the 9 million over 10year period you know it hardly feels like a a tsunami right it hardly feels like a shock it it more feels like in many ways actually normalization in the housing market um because I think what we are experiencing right now we had such a huge shock uh to the housing market during the pandemic that appended all the uh historic trends that we used to rely on and so now we are you know it's hard to figure out what the actual new trend is and um but when we sort of take a really long look and say okay what is you know in a in an environment without shocks what what should be the number of um uh home sales activity number of homes available for sale uh turnover in the housing market we're only now slowly starting to return to those averages um so so I am you know so that's giving me in many ways confidence that we are not um in unsustainable environment yeah makes sense especially when people realize there's four to five million homes that trade every year that that sell uh given the popul ation of of um Millennials who want them yeah I forget the number but it's big do you do you know how many Millennials well there are about 15 million Millennials who are turning first-time home buying age um so yes significantly more 15 million yeah 15 million turning home buying age and we sell four to five million every year 25 to 30 I'll say 25% tends to go to investors um yes it doesn't it's not like we're trying to sell 10 million homes every day to keep the market afloat um there's there's a especially when you said immigration was an extra three million people is that legal or combining illegal and legal it's it's combining both it's combining both but we have ramped up in uh immigration of uh people on H1B visas which are the working visas um and and people that with specialty skills you know and and we do need that we need we need one of the reason why inflation remains so persistent is that we have Labor shortages in many sectors of the economy like one you know that relates that's very close to home is is construction um and so we we can use any help we can get um in terms of having more people constructing new homes hey I'm all for immigration we're a country of immigrants my you know most of our grandpar or great grandparents parents you know were immigrants my my grandparents were from Denmark so it's it's uh of course we need more immigrants I just wish it could be you know tracked and and legal because I know so many people who've been here a long time who haven't been able to become legal uh where they've been contributing but that's a whole another that's a whole another conversation uh okay so moving forward what are some of the things we should be aware of that could turn the economy you know what it doesn't take much to change supply and demand right you could you could kill demand you could increase Supply something could happen What should we be looking for and aware of well one big thing that's a concern right now is what happens with inflation uh particularly as it relates to Federal Reserves uh tightening or or loosening of monetary policy and so you know we were uh very um anxious to see uh uh rate Cuts federal rate Cuts Federal um um yeah F rate Cuts right and um and and so clearly that's not you know so so that that uh date keeps getting pushed out by the fact that we have you know persistent inflation and so and and some outside forces some geopolitical forces now are having an impact as well on things like our gas prices you know and that always you know that never sits well with people to begin with um but let alone how it feeds into uh prices of other items right um and so you know so I I think right now really to me is you know what I what I'm keeping a key eye on is inflation uh because it does it will have a determining impact on when we see that uh plane take off in a sense for the for the housing market you know we are sitting here in a on a bottom in many ways and and we're crawling our way out of it and and so but lower mortgage rates will certainly help that um so that's that's a main one you know there's obviously you know the election it's election year so so you know so that can sometimes be keep people on hold in terms of some of the big decisions such as buying a home um you know in some markets more so than others but but you know it is a very contested election so so you you may it's maybe having an impact on people you know the other thing is um because of the so you know in some ways I I feel like when you have more uncertainty or instability um geopolitically that people tend to uh stay put you know they they don't want to make any big decisions because they're worried how that you know those those outside um outside events are going to going to impact them so you know there's a lot going on internationally and and so I I think uh fortunately so far it does seem like we are um fairing okay um and and it's hasn't had a significant impact on our economy but there could be you know something can potentially happen and and could have an impact on our economy um the good thing is you know we we have you know it does seem like we've managed the soft Landing um meaning that we will not have a significant increase in unemployment due to these tighter Financial conditions and companies are holding on to their employees and in in many ways it's turned out in as best as it could have you know so so so the outlook for the economy is really sort of positive you know we're going to continue humming along um and I I I I think you know with time and with inflation coming down and people's wages growing faster than inflation you'll see the real incomes increase and people will um start being happier again okay very good um now a lot of our listeners this is the final question I promise um a lot of our listeners are uh landlords they own single family rentals uh or multif family it sounds like if if there are people sitting on the fence or kind of priced out of the market they would be um forced to rent right do you see the rental market continuing to be strong to with um rents continuing to rise well certainly I I do think that rental market and for no you know if if if it wasn't just for home prices but also the fact that we are you know we have more demand and the pent up demand is so much stronger than than available Supply so and people like to you know when particular in times as I just described of uncertainty and and uh you know young adults like to test out markets so they may in fact try to rent first before uh buying in a certain Market uh if they can in fact afford in those markets but you know we have a um data series uh on single family rentals and in our data uh the most recent uh rent growth has started to accelerate again which is not necessarily good for inflation but it speaks to the continued demand or the persistent demand for for rental for rental markets especially uh the the that detached type of housing because it's um you know as I mentioned Millennials this large cohort of population is growing older and they need more space and so in that sense this the single family detached homes are more preferred uh by that by that group um so yeah I do think that um the demand for rental is going to remain solid well Selma thank you so much for joining me here on the real well show we'd love to have you come out to speak at one of our event sometime absolutely it would be my pleasure wonderful thank you and thank you for joining me here on the real well show if you want more information specifically on different markets in the US where you can find real estate that still cash flows and has a great potential of growing because there's a lot of growth happening in the market just go to real wellsh show.com when you click on the invest tab you will see the different markets that we think still offer a great opportunity and you can speak with one of our very experienced investment counselors that can help you find investment property in those markets that come with Property Management in place all right thank you for joining me here on the real well show and we'll see you next time the views and opinions expressed in this podcast are provided for informational purposes only and should not be construed as an offer to buy or sell any Securities or to make or consider any investment or course of action for more information go to real show.com

Channel: RealWealth

Views: 262

Keywords: kathy fettke, selma hepp, real wealth show podcast, real wealth show, economic forecast 2024, current state of the economy, economic inflation, economist explains, understand inflation, housing shortage, immigration in the us, legal immigration in the us, silver tsunami, will there be a silver tsunami, how much of a housing shortage, income and inflation, job report, real estate investing, baby boomers 2024, millennials 2024 housing

Id: a_mjo4dH1fE

Length: 25min 18sec (1518 seconds)

Published: Fri May 10 2024