Doorify Real Estate Podcast

UNC x Doorify Quarterly Roundtable Discussion: The State of Starter Homes and Housing Supply

• Doorify MLS • Episode 79

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We have UNC Kenan-Flagler Business School with us today for a quarterly roundtable discussion on current market trends. 

This time, we’re tackling one of the biggest challenges in real estate—starter homes and the shrinking supply of affordable housing.

Eric Maribojoc, Jacob Sagi, and Roberto Quercia from UNC join us to break down the state of the housing market, focusing on the critical shortage of entry-level homes. With the average first-time homebuyer now at a record-high age of 38, affordability is slipping further out of reach. 

They dive into why fewer small homes are being built, how zoning laws and regulations play a role, and what possible solutions exist. The discussion also highlights trends in townhomes, manufactured housing, and condos and whether they could fill the affordability gap.

Tune in to hear what experts say about the future of starter homes and what can be done to make homeownership more attainable.

Specifically, this episode highlights the following themes: 

  • The decline of starter homes and why fewer are being built
  • The role of zoning laws, regulations, and land costs in affordability
  • Potential solutions, including townhomes, manufactured housing, and policy changes

Links from this episode:

1ae5b43598204883b524f061d4880e6d10fca88c (for podfollow.com)

Andrea Siracuse [00:00:07]:
Hi everyone. Thank you so much for joining us today. We have UNC Kienler Flagler Business School with us today and we are going to be going over quarterly roundtable discussions on our current market trends. So let's go ahead and dive in, starting with Eric on starting up starter homes.

Eric Maribojoc [00:00:30]:
Thanks, Andrea. Thanks again for dorify for hosting this podcast. And we at UNC are always glad to come in every quarter and talk about our housing situation in the Darfi area as well as throughout North Carolina. So here at UNC for the last couple of months, we've been having some conferences. We just finished our housing Affordability conference in December, and we hosted the North Carolina Housing Roundtable just a few weeks ago. And a lot of the discussion has been about housing supply. And so that's what we decided to talk about today is looking at housing supply in North Carolina and particularly housing supply for entry level home buyers, or what we typically call starter homes, which is very important for the market and also very important for the audience of Dorify. So NAR came out a couple of months ago with a stat that said the average first time home buyer in the United states is now 38 years old is a record high.

Eric Maribojoc [00:01:34]:
And that just means that people are having to wait later in life and later on in their career they have an income big enough to buy their first home, their starter. And that to me was a very alarming statistic that the, you know, the dream of purchasing your first house, moving from a rental to your first house, working with a realtor to buy your first house is now more and more out of reach for younger people, which is definitely not, you know, not a good thing for, you know, for our communities. So Roberta and I and Jacob are going to be talking about, you know, what has changed, you know, what has typically been the starter home for many communities in the past. And you know, what might be some discussions or issues we need to talk about in order to make starter homes more abundant again in our market. So traditionally, starter homes, as this slide shows, are mostly smaller homes. Freddie Mac defines them as homes below 1400 square feet. As you can see from this chart, we're just building less of them. It used to be a very big part of our market in the 70s and 80s and now we hardly build any houses that are 1400 square feet or less.

Eric Maribojoc [00:02:54]:
And so the average house right now in the United states is about 2200 square feet. And of course, larger houses are more expensive. And if we don't build, if we stop building starter homes for the last two decades. There aren't any starter homes to sell today. And so I think the policy of having smaller homes and smaller homes means you have to allow smaller lots. And by and large, many of our jurisdictions, including here in North Carolina, you know, don't allow lots small enough to make small houses feasible for builders to build on. A national case that's very famous is Houston, which did allow very small lots in its area about 20 years ago. So in Houston, for example, most suburban lots are allowed at about a 3,500 square foot minimum.

Eric Maribojoc [00:03:48]:
Just for comparison, Wake county is probably like 5 to 6,000 square foot minimums. And of course, Houston has evolved 20 years later into a much more affordable, much more abundant starter home market. Townhomes are another traditional way that people have bought their first home. We've had more success in townhomes. You see a lot more of them being built. You can see here we're building almost as many townhomes as before the housing crash of 15 years ago. But also as a proportion of what we're building, we're now building almost 16%, 17% of all our construction is now townhomes. This is much more affordable.

Eric Maribojoc [00:04:29]:
Again, it's important to find out what kind of townhomes we're building. There can be very expensive townhomes. Also, the minimum lot size for townhomes is also important in order to create affordable townhome development. So more positive news on this front, but we need to find more ways to make townhomes more affordable. Plexes are also another housing tech that used to be very prevalent in the 80s and 90s. As late as the 1980s, we were building about 40,000 of these nationally into the 2000s. Again after the housing crash 15 years ago, that kind of sort of collapsed to about below 20,000. And in 2023, only 14,000 duplex, triplex and fourplex units were ever built in the US A very small amount.

Eric Maribojoc [00:05:22]:
A lot of this has to do with zoning. There's very few available land now that's zoned for plexus. I think Roberto will talk more about that. And of course, of late in the last five years, there has been an effort to rezone more land in order to allow more of these duplex, triplex and fourplexes to be built. Condominiums are another property type that typically first time home buyers get into as the first rung of the home buyer ladder. We used to build a lot of condominiums in the 70s and 80s. As much as 25% of all our home Construction were condominiums that sort of dwindled down through the 90s into about 15, into less than about 10%. But in the last couple of years you see a big drop there.

Eric Maribojoc [00:06:14]:
During the housing crisis, you know, in 2021, only 5% of all homes constructed were condominiums. And a fair amount of that were luxury condominiums. Condominiums in very selective markets like Miami. So we haven't found a way to resurrect condominiums, especially a more affordable mid level condominiums, as a way to provide that first home for first time home buyers. There's a lot of issues holding back condominiums. Liability, you know, liability reform is one of them that some states are trying to tackle right now to unlock more condominium development. But again, that's the property type that we don't build anymore and is in short supply in many markets for first time home buyers. And finally manufactured homes, which is a housing type that's very prevalent in the southeast and in North Carolina, it's kind of a housing type that's very affordable, but sort of suffering from the sins of the past.

Eric Maribojoc [00:07:24]:
Certainly it was much more prevalent in the 70s and 80s, but the quality wasn't as great and the financing was very difficult. And again, during the housing recession that collapsed from. We used to build hundreds of thousands of these units every year. As late as the 2000s, we were shipping between 100 and 200,000 units across the country. Today we're shipping less than 90,000. And I've spent some time looking at the new manufactured housing. If you can go to the next slide, you know, the new manufactured housing are actually very high quality and very high design. There's some data coming out of Fannie Mae and Freddie Mac which I'm showing here.

Eric Maribojoc [00:08:10]:
And these are for condom. These are for manufactured homes that are put on lots that the owner also owns. So these are what the Doris I MLS data would have manufactured on owned lots. Especially the last couple of years. The quality of manufactured homes that are on owned lots is actually showing appreciation, especially the last four or five years. And these are priced. These are usually the most affordable units that you can get on the market. And if they're on own land, they actually appreciate very similarly to stick built according to the data from Fannie Mae and Freddie Mac.

Eric Maribojoc [00:08:48]:
So I think it's something again, what's holding it back right now? Perception. I think the industry has had a difficult time marketing its product. Zoning is a big part of it. Many jurisdictions don't have zoning for new manufactured home Even if their own owned lots. So that I think that's also holding back, especially in our more urban areas, holding back the construction of new, well built, well designed manufactured home on owned lots. A question that's been raised is maybe people just don't like small houses anymore. Maybe that's part of the reason why we don't see a lot of them being built. The national association of Home Builders had a survey a few months ago that asked potential home buyers what size of house do you prefer? 25% of the respondents said they prefer the house below 1600 square feet.

Eric Maribojoc [00:09:43]:
The members of NAHB actually built only about 16% of the stock that the members built were only below 1600 square feet. So there's a mismatch there. And I think if you dig into this data even further, I think that mismatch is actually larger because some people might prefer a big house, but they actually can't afford a big house. The way the question was asked I think wasn't indicative of the true demand in my opinion. So the true demand is at least 26%. It probably will be higher if you take into account that for affordability reasons, some people who want a big house probably can only afford a smaller house. But it's a sizable part of the market that's looking for something that's below 1600 square feet. And as we mentioned before from the stats nationally, we haven't been building those for a very long time.

Eric Maribojoc [00:10:43]:
And so the argument is there is probably a demand for that and a pent up demand for that. And I think the builders are slowly trying to recognize that. So looking at dorify MLS data, I think the data shows that since we haven't been building these types for a very long time, it's not a very big part of the market right now. Single family residential is about 80% of the market from the last two years of sales. Townhomes are more prevalent, condominiums are very low than 2% of the market in our area. And manufactured homes on owned land is very tiny, about 2%, less than 2%. And plexus are almost non existent in terms of the sales market. So I guess the question is each one of these is a housing type that traditionally has been a first time home buyer type of house.

Eric Maribojoc [00:11:44]:
There are barriers right now to a lot of them being built, new ones being built, some are zoning, some are financing, a lot of it is industry. We don't have the same stock of small builders that we used to have also that are doing these projects which tend to Be smaller. But if you look at the next slide, also from dorify data, those are the types that actually have more affordability. So if you look at the median sales price or the sales per square foot or the affordability index of each one of these property types, you know, that's where right now you see a lot of the affordability. Even in today's market, townhomes, condominiums and manufactured homes are much more affordable for our area than single family residential. So, you know, I think that's a topic that we continue to look at here at unc. And I think Roberto will talk a little bit more about, you know, some prospects for this type of development going forward.

Andrea Siracuse [00:12:47]:
Well, these numbers are really interesting because I think that looking at all of this and comparing it, we really have affordability issue, limited supply, just so many things up against a lot of these variables. And to see it all together is very interesting. And the affordability index I think is the most interesting to look at because I would not suspect that single family would be as low as it is.

Eric Maribojoc [00:13:22]:
Yeah. And you know, we always view new construction as the future supply that's available for people to buy. So, you know, today's new construction is tomorrow's affordable housing. So I think trying to find ways to build at lower cost today is very challenging.

Andrea Siracuse [00:13:45]:
Yes.

Eric Maribojoc [00:13:45]:
You know, we don't allow in our area as much small size lots. We don't allow, you know, plexus in many places. We don't allow a lot of things that can be more affordable to build or we make them very expensive for developers to get permission to do. Right. So those are some ways that we can look at to see whether we can diversify what we build, especially in terms of size, land size, as well as unit size, and see whether, you know, there's a market out there. The national statistics and survey seem to show that there is a market for it. It'd be interesting to move that down into the North Carolina market or the Triangle Market and find out if that same kind of desire to buy new, cheaper and smaller exists. And I suspect that there is, but we just don't make it easy nowadays for builders to try and do that.

Andrea Siracuse [00:14:45]:
We actually have a question. Currently there is an economist blaming most of the housing shortage on regulation. Would you comment on how much you would attribute to regulation? Just curious your thought on that?

Eric Maribojoc [00:15:00]:
Well, I think regulation, and we're probably talking about zoning when we talk about regulation. I think regulation plays a big part of it because zoning kind of dictates a lot of what can be built and how many can be built and how expensively in some cases how things can be built. And so again, I kind of mentioned there have been places in the US that have tried to address this and I mentioned Houston as an example. Houston did a amendment of their zoning in the late 90s and they shifted from like, kind of like we are today, 5, 6, 7,000 square foot minimum lot sizes for new construction. And inside the inner city they allowed as low as 1500 square foot lots. And in the greater Houston area, including the suburbs, they allowed 3,500 square foot lots. And 20 years later, there's thousands and thousands of small houses, townhomes and more affordable. And I think that's made Houston by a lot of measures a more affordable city than many U.S.

Eric Maribojoc [00:16:16]:
cities. And we have the luxury of seeing sort of the outcome of that 20 years later. And that's what you normally would need to see from a zoning reform is like what is the outcome 10 years later, 20 years later. So we know that it worked for Houston and other cities when you sort of remove or make the regulation more open to more types of housing. And so yes, I think relaxing regulations or putting in regulations to allow more housing, more types of housing, smaller types of housing, and making sure that the developers know that and then know that that's something they're going to be able to do, I think is important.

Roberto Quercia [00:17:08]:
If I may add to Eric's point, I think obviously zoning matters and that adds impact the cost of land for development. But there are also a lot of other things that do matter, like red tape, how long it takes to get approvals. Most developers have to borrow money to start development and you have to keep on cutting on that. There is no money coming until you kind of build and sell or lease up. There is environmental regulations President Biden proposed and I think was enacted in many jurisdictions, building codes that are much more restricted sector environmental issues. In many places like the Bay Area, you have environmental impact statements on and on and on. I think research shows that about 25% of the Cotto housing is added with all these extra regulations as opposed to having an approval by right, as opposed to have to go through all these things. I assume that in jurisdictions will be different whether zoning restrictive zoning adds more to the cost than all this other stuff or all this other stuff more cost than restricted zoning.

Roberto Quercia [00:18:26]:
But there's no question that the two of these things play a role. You might recall from one of the many executive orders President Trump signed last week telling agency to try to cap price increases and deal with the issue of inflation in dealing with housing, he actually stated that all these regulations and burdens on red tape, so what, 25% to the cost of housing, so whatever the number is, is certainly significant.

Eric Maribojoc [00:18:55]:
Yeah, I definitely agree with that. I think the speakers that we've had also on campus sort of reiterated that, that the way you reform regulation is very important. There have been, as Roberto pointed out, there have been regulations in jurisdictions that have not been very effective because there's something else blocking the supply. You know, whether you pass zoning reform but don't have parking reform or a review of environmental regulations or a review of the process of getting a permit or getting a zoning variance, there definitely is, you know, when we say, you know, regulation, looking at regulation, a comprehensive look at regulation, because you might reform one part of regulation or remove one part of regulation, but other, as Roberto rightly pointed out, other parts of the regulatory environment might still be there to restrict what you can build. So I think whatever we do, and there's a lot to be done, it has to be comprehensive, thoughtful look at what is blocking housing supply and making sure that, you know, all of it or most of it is addressed and not just one portion.

Andrea Siracuse [00:20:12]:
So how would we advise a local policymaker regarding these rules?

Eric Maribojoc [00:20:19]:
Well, I think you start off with talking to developers. You know, what is it that they encounter that is either making them produce more expensive housing than they think they can or less housing that they think they can. And I think a thoughtful, honest, open dialogue would be the first basis for reviewing that and then finding out where we can move the needle very quickly. Right. Not very easy, because a lot of times there are conflicting stakeholders, conflicting interests. But I think that's where we have to start, is we have to identify specific bottom. And each market is different. Each market is going to be different.

Eric Maribojoc [00:21:06]:
There is no sweeping set of rules that's going to apply for every market. But I think especially the markets that have a more acute affordability problem. Yeah. Are moving. And you can see some jurisdictions are waiting until it's really, really bad in terms of affordability before they act. Right. And even then, sometimes the reform is initiated outside of the community, like the state steps in to offer rules. And I hope we don't get to that level, because by the time you get to that level, the problem is really bad, that it really has severe impacts on families on the ground.

Eric Maribojoc [00:21:50]:
So I think it moves us. I mean, North Carolina actually is fairly good on a national level about building houses. I think as a portion of our housing stock, we're in the top five or six in the country of building houses compared to how many houses we have currently. I think we can do better and certainly we need to do better so we don't slip into more unaffordability given our strong population growth, which a lot of states don't have.

Andrea Siracuse [00:22:20]:
Jacob, I know you had your hand up.

Jacob Sagi [00:22:22]:
Yeah, I just wanted to throw a little grenade here. I feel also part of the problem is us, the incumbent homeowners, in the sense that for a lot of the most affordable types of units out there, people don't want them in their backyards, they don't want them in adjacent lots.

Eric Maribojoc [00:22:40]:
And.

Jacob Sagi [00:22:40]:
And they will lobby. They will lobby their politicians or policymakers. They will lobby them to push them out. So I think we also have to recognize that although from a distance we all love affordable housing, there are many of us who will not. Will fight against that if it's going to be situated right next door. And that's a cultural issue. It's not something that we need to throw at our politicians or our policymaker. It's not something that someone else is going to solve.

Jacob Sagi [00:23:11]:
It's something that. That in some way we have to come to terms with in the culture.

Andrea Siracuse [00:23:18]:
That's a very good point that's not talked about probably enough, if I may.

Roberto Quercia [00:23:22]:
Add to what Eric and Jacob said. I think also in addition to those issues, important part of it is the way we implement rules and policy. As you probably all know, we do this in silos. So we want clean air and clean water, and so we put in place environmental rules that we all want. But that has impact on other areas that are not taken into account when we put those together. So reviewing the impact of regulation for policymakers would probably be worthwhile to look at the combination of factors of all these working together as opposed to individually. I don't think that the home builder is one bad environment or polluted water. We all look at this in silos.

Roberto Quercia [00:24:09]:
And the way to do this is to look at this, as Eric mentioned, more comprehensively.

Andrea Siracuse [00:24:13]:
Completely agree. Well, thank you so much, Eric. That's a great transition to Roberto to talk about starter homes, land costs and upzoning.

Roberto Quercia [00:24:24]:
Thank you, Andrea. Before I begin, the part of my presentation, probably the main driver of my presentation was more like going to the dealer and taking a prospective new car for a spin. I love it in a way. I wanted to see how we could use the dolify and your data to answer and examine an important policy question. As we talk about. We met yesterday in the team and we talk about the slides and stuff and we all have more questions than I have answers. So I assume we always have more questions than I have answered. But my hope is that you will see that you can actually use your data beyond descriptively to try to look at the impact of policy changes on the market and different market segments.

Roberto Quercia [00:25:11]:
So building on what Eric mentioned, obviously there is a lack of starter homes. I was stunned by this statistic that 40% of new homes built in 1982 were startled home 1400 square feet or less and now we are about 9%. So obviously we have a problem in the market. Reasons Eric mentioned restricted zoning. This cost of land has gone up 250% over the last 10 years. It is rising construction costs, labor costs, materials 50%. So it's expensive to build with land and labor and materials. And so builders had to build at the high end.

Roberto Quercia [00:25:53]:
So starter homes, unless you charge $2 million for them, as you probably would in San Jose, people don't build at the low end. They just have to build. The numbers don't work otherwise. In addition, starting with the financial crisis, it has been a consolidation in the home building industry. It tends to need bigger projects, more expensive projects where the margins are greater. Home pricing went up over the last four years since COVID All time low first time home buyers, all time high cash buyers. All this impacts the market. And Eric mentioned the average first time home buyer is now 10 years older than 40 years ago.

Roberto Quercia [00:26:34]:
So there are reasons for this beyond the housing market. People go to school, they have a student debt, they delayed marriage, they don't start families at all sometimes. And so all these kind of the water impetus for home buying now is being delayed or maybe never put in place. So there is probably a reason for that. But the fact is that as Eric mentioned from a policy perspective next, I think we've been arguing that one of the reasons we don't see more starter homes is the problem of zoning or restrictive zoning. So lot sizes decline over time about 20% less than 10 years ago. So somewhat 8,500 square feet. Now this is nationally.

Roberto Quercia [00:27:20]:
At the same time, houses have become larger, about 2,300 square feet in 2022. So we have a combination now of smaller lots, bigger houses. So my concern with these zoning reforms is that older homes typically are less valuable than similarly size new homes. Older homes tend to be smaller because we back then we are big and they tend to be sited in larger lots. So smaller home, older, cheaper in larger lots, which to me suggests really a lot of potential for redevelopment and home building. The problem I have as a affordable housing person is that these older homes that have filtered that have lost value over time and they are excited in larger load typically more affordable. And so they provide what is called naturally occurring affordable housing. And so when you have zone you increase the development potential of a slot which increase this value of that land.

Roberto Quercia [00:28:30]:
So to address the lack of density and starter homes, we Hill Durang rally in our community enacted zoning reforms to allow higher density. So my hope was to look at to use the dorify data to see if we could tease something out of the policy changes. So I look at the I broke it down by Durham, Chapel Hill SMA and the Henderson statistical area and I look at the medium land price, the price per acre and as you can see this came out of your torified website. So as you can see there is a huge variation based on county. And then I going from low up going from below 23,000 in Pearson county to about 272 in Durham County 2000. Then I look at house prices. Now as you can see there is a whole range of prices going from below 224 in buns to a high of 627 in Chatham County. And the square feet footage again differs again without trying to make much of it, you can see often that the prices per square feet of housing are not in terms of from low to high.

Roberto Quercia [00:29:51]:
They do not are not similar to the price per acre from road to high. There is some kind of difference between the cost of land per acre and the square feet cost. I mean so there is something about this worth exploring. Why is it that we see that big differences in the cost of land and the score per square feet of homes because Chapel Hill and Raleigh implemented zoning reforms. I was hoping to see some of the things would be somewhat different. And you can see the cost of landing over Orange county obviously is lower than in chapel hill, about 10 times more the cost per acre within the Chapel Hill School district that we think the houses are also significantly priced differently, although the square per se are not that much different. So and with regard to Wake county, the price per acre is significantly higher in Raleigh than it is in the rest of Wake County. And houses are not that much different.

Roberto Quercia [00:30:55]:
So to me just looking at this number and trying to guess what is happening, I would argue that because of the county, the impact of zoning reforms in the town of Chapel Hill and the city of Raleigh seem to be less because the price of homes is not that they're not that different. So Maybe again, these are new ordinances, new rules it may take time to implement. And so we may have new stock that would make housing cheaper in town versus relative to the city. But again, the numbers suggest that there is something here that was exploring more.

Jacob Sagi [00:31:38]:
Yeah, I just wanted to add a comment, please, which is if we go back to the previous slide there, Andrea, it's hard to tell directly from the data, but one could speculate that the reason, for instance, that in Orange county we're seeing a relatively low dollars per acre land price, but very high dollar per acre price in Chapel Hill specifically. On the other hand, if we look at Durham county and Way county, the dollars per acres are fairly high. So what's going on there? And speculate that in Orange County a lot of the land that's being transacted is sort of in the periphery. It's more potentially rural. And that's why we're seeing those lower per acre prices. Whereas perhaps in Durham a lot of the land that's being bought is perhaps closer to the city limits or even within the city limits. So it's higher dollars per acre because it's just land that from a geographic point is more desirable. And that brings up, I think, a really interesting point.

Jacob Sagi [00:32:39]:
So I want to lean into what Roberta says, which is we would love to understand because there were policies that were enacted, you know, zoning, et cetera, that was enacted in all of these jurisdictions. But somehow that leads to different outcomes. And I think it's important to understand why it is that when we're upzoning in one fashion versus another, we're also going to lead to different outcomes. And to the earlier question was raised about how do we advise a policymaker at some point, the policymakers presumably who are behind the upzoning, they're going to want to see an impact of their policy. And so this data at least eventually, hopefully can help us be more accurate when we're saying it's not enough to Eric's earlier point that you just, for instance, decrease the minimum per unit lot size. You also have to adjust other aspects, things to do maybe with setbacks or parking regulations in front of the property, things of that nature, in order to get the best combination that would lead to, on the ground, improvements in affordability.

Roberto Quercia [00:33:44]:
Yeah, we put our thinking hats on the team and we came up with these takeaways. Obviously there is great variations in land cost and ground prices across triangle counties. So this suggests to me that price till you qualify continues to be the kind of the ruling here. People will can't Find affordable housing if they cannot drive far enough to where they are. Larger homes are more profitable obviously. And the demographics that can afford these larger homes has grown in our Triangle area. A lot of migrants from New York and California and other places where housing costs are quite high. Our prices are a bargain to them.

Roberto Quercia [00:34:26]:
So the higher profitability of building at the high end in some ways have to do with the fixed cost associated with home builders. So these fixed costs make them cheaper in a bigger house where you have 3000 square feet and 1400 square feet. So builders take the greater profit building larger homes. So to me, a combination of these demographic forces and economic forces will probably make capzoning, if it works, maybe work for an unintended segment of the market that is at the high end of the market, not the low end of the market. So it's to me unclear still whether we are going to see a great impact of absonin in our counties without much more. Many more changes like Kerry mentioned in other areas beyond just is zoning change. So we think it will take time. So maybe as you all collect more data we could see these issues over time, see if we can see difference.

Roberto Quercia [00:35:31]:
We can see, just guess that based on the number. There seem to be more activity in the city of Durham than the county of Durham. But in Orange and Wake it kind of reversed. There seem to be more activity in the Orange and county than in the Chapel Hill and Raleigh respectively. Obviously we cannot blame the zoning changes for this. There are two reasons for that. But there's something to continue to explore. So as Jacob mentioned, our hope is that to be able to tease out whether this guided activity within the city of Duran may also reflect more effective land use revisions than those that happen in Chapel Hill and Raleigh.

Roberto Quercia [00:36:12]:
Again, my exercise of taking the data for spin can raise more questions than answer that we have at the moment. But I do think that it shows the promise that you can actually do a lot more than the stuff we've been doing it with a data set.

Andrea Siracuse [00:36:26]:
So something positive that I would love to kind of end with. Obviously like we know it's tough to find starter homes, right for that first time homebuyer like due to the perfect storm of so many different factors like you have high demand, low supply, you have rising costs. And then what we've talked about is just zoning regulations and that is going to take. It is going to take some time, right? So it's going to create a big challenge for not just first time home buyers, but they have limited budgets. So what's something I Guess positive that we can give kind of hope for, for those types of people. Like when you know, they're looking or just based on this data and what we're seeing in the market, it's difficult.

Roberto Quercia [00:37:14]:
To know, but without sounding ironic, but the rents, cost of rents have gone down. So if they can buy yet renting, continuing to be renters is cheaper to them. I know that's not a solution to the problem, but.

Andrea Siracuse [00:37:31]:
But that's good to know, right? Yeah, yeah, yeah.

Eric Maribojoc [00:37:36]:
And that's a, that's a really great example of supply working. So we have allowed or we have a lot of apartment units being constructed and delivered in the Triangle area, particularly in Raleigh and say Charlotte is another good example. And when you allow builders to build more supply, the cost to the renters go down because of abundant supply. Now I guess the question is how long can we sustain that? You allow people's incomes to catch up to prices. So in a way, even if that situation kind of tapers off in a few years, at least people's incomes have caught up a little bit to the cost. Right. So that makes it affordable going forward. That by large hasn't happened in the ownership market.

Eric Maribojoc [00:38:38]:
We still aren't building enough for prices to moderate so that people's incomes can catch up, especially first time home buyer income. That's why people are having to wait partly longer and longer because their incomes have to be higher to buy that first home. So yeah, I think, I think generally we need more supply, you know, all sorts of supply. Making it easier for people to do that by. Right. As Roberto mentioned, is probably the best thing. We don't always do a good job of it and in particular for first time home buyers, I think we need to find ways to incentivize or allow the market to build smaller product because they either have to build smaller products that are more affordable or as traditionally has been done in the past, also people have to locate where land prices are very low and commute to where the jobs are. I think that's a less optimal, that's a less optimal strategy.

Eric Maribojoc [00:39:43]:
We used to do it a lot in the 70s and 80s. You drive till you qualify. I think kind of view that as a, as a less optimal solution. But for some people it may be the only solution, but certainly it's not an optimal solution for individuals, families and communities. So yeah, I think that to Roberto's point, if we are going to do reform to allow more supply to be delivered to the market far quickly, I think for policymakers, you know, having a comprehensive look, because things are not going to change unless supply goes up by a lot. If it's only incremental, we're not going to see much change because the demand and the, the whole is so big that only, only things that have a large impact on supply or in combination have a large impact on supply will have a, like a more visible impact.

Andrea Siracuse [00:40:46]:
Jacob?

Jacob Sagi [00:40:48]:
Yeah, I'm going to take a stab at ending on a, on a rosy note, which by the way is very hard to ask from an academic. If you want someone to see the world with rose tinted glasses, talk to a developer. They're, they're optimistic.

Andrea Siracuse [00:41:01]:
Right.

Jacob Sagi [00:41:02]:
So you know, my contribution towards optimism has to do with, with technology. So yes, I do know that we're often sort of pinning our hopes on solving all social and other ills, you know, with technology. But I think there's real potential here. So small homes that are manufactured in supplies facilities are actually becoming sexy. I mean if you do some research on some of these 700 to 1,000 square foot units that you can sort of fold up, you can put on truck and ship it somewhere opens up within a day, you know, as long.

Andrea Siracuse [00:41:37]:
As you homes that you can now order on Amazon.

Jacob Sagi [00:41:40]:
Exactly. And so here's a blast from the past. Between 1908 and sometime in the mid-40s, you could have ordered a home from that you would then build yourself. I think about 75,000 of those things were sold between.

Andrea Siracuse [00:41:56]:
Oh wow.

Jacob Sagi [00:41:56]:
Yeah. And so I think technology is going to make it feasible for this. And because earlier Eric was mentioning that there's a kind of a cultural barrier to buying and living in a manufactured home, I think that this is, has a very good chance of changing. We are seeing also some very large investors and developers, you know, for instance, Graystar investing in large scale facilities to produce modular type units for, for, for, you know, like assembling multifamily almost like Lego blocks. And this type of thing has taken a foothold in Europe. So in Europe they're already ahead of the curve when it comes to that sort of thing and we're playing catch up as far as that's concerned. So yes, there's a little bit of a cultural hang up to get over, but I think this is happening and as I said before, there are a lot of these miniature micro or sometimes 7 to 700 to 1,000 square feet, not so micro, but again, manufactured homes that are very high quality and are actually targeting a demographic that doesn't mind living a little bit more, you know. So you know, Marie Konda would Be proud of them.

Jacob Sagi [00:43:04]:
But in any case, I do think that's something to be hopeful about.

Andrea Siracuse [00:43:08]:
And that's such a good point. You know, I always forget about tiny homes and I feel like it was kind of this trend that started a couple years. Well, to your data point, I guess it's been a thing. But for me, I was like, oh, is this the new wave where especially when Covid happened, people wanted to be more flexible and travel around? And I was like, is this going to be, you know, the mobile home experience where you can just literally take your home and pick up and move wherever you want to go? So I hadn't even thought about that, but that's a great point.

Roberto Quercia [00:43:39]:
Jacob Roberto yeah, I second my colleagues in here. I think we are, if we look at the next six to 12 months that there is. I took your question to refer to that period and not the long term manufacturing modular world of Star Trek or Star Wars. I do believe that we are going to be a period of high uncertainty. So I don't see any really real change on these issues over the next year. Yeah, I think there is issues of agencies reviewing what they do, how they do it. At the federal level. There are issues of privatizing Fannie and Freddie.

Roberto Quercia [00:44:21]:
What would that do to the footprint of FHA lending? There are issues we still don't know what. How will we do this afternoon with interest rate and what interest rate will do throughout the year. Tariffs, deportation that will impact labor costs. To me, if I had to look at my crystal ball, I would think that the market will be market players will be in a holding period for the next six months to a year. I think it's too risky, too uncertain to invest in anything long term without knowing how things, the chips are going to fall.

Andrea Siracuse [00:45:00]:
And I always just want to be optimistic and give hope because sometimes when we're looking at all of this, especially with zoning and regulations and policymakers, when you policymakers, when you throw some of these huge things in, you just can feel very hopeless, especially when people are trying to buy a home for the first time. So I really appreciate you all digging in and presenting this data. This has been a great discussion. And again, any final thoughts? Jacob, Roberto or Eric?

Eric Maribojoc [00:45:39]:
Well, I think for me the, you know, ending on an optimistic note is I think the issue of housing, how to build more of it, how more people can afford more of it, has come to a forefront like it hasn't been before. And especially with local politics and state politics, the topic has sort of risen to the top of mind of both the electorate and public officials in many jurisdictions. So I think that's, that's hopeful. I think, I think the air of something has to change, I think is there in a way that it hasn't been before, in my opinion. And so I think we're going to continue to see as we have proposals, ideas, state legislatures and local legislatures to try to do something about it. So I think that's not going to stop. I don't think even in the last assembly session with huge amounts of interest from legislators to find policy recommendations to change at the state level, I think that's not going to change and that's hopeful because that means that it's top of mind and some things are going to change. They're not going to change as fast as we hope.

Eric Maribojoc [00:46:55]:
Maybe, maybe they will. But I think that that's a big difference. That's a big positive difference is that there is now the environment for local and even state level change. And I agree with Berta, we have a lot of uncertainty at the federal level and national level. But I think, you know, housing is a very local issue and hopefully policy, local housing policy change will continue. Very hopeful that.

Andrea Siracuse [00:47:21]:
Well, thank you so much, Eric, for that and with that we will close it out. Appreciate your time and thanks for being on Dorify MLS's podcast.

Eric Maribojoc [00:47:32]:
Thank you.

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