March Membership Luncheon: Real Estate and Economic Outlook

A housing market can feel frozen without actually falling apart and that is the puzzle we unpack with Dr. Lawrence Young, Chief Economist and SVP of Research at the National Association of Realtors. We talk through what the last three years really did to buyers and sellers: the mortgage rate lock-in created by 3 to 4 percent loans, the sudden jump toward 7 to 8 percent rates, and why inventory and foot traffic only start to thaw when the market flirts with the low 6s.

We follow the chain reaction that most headlines skip. Oil prices and geopolitics can reignite inflation fears and push mortgage rates higher even when the Federal Reserve wants to support growth. We also dig into how the stock market’s AI-driven winners prop up luxury real estate, while many households feel squeezed by rising delinquencies in credit cards and student debt. That split shows up in spending, in politics, and in the way confidence can look recessionary even when mortgages are still being paid.

On the ground, Arizona becomes a practical case study. Strong job growth since pre-COVID hints at serious pent-up housing demand, but transactions lag because affordability and supply are still misaligned. We close with real estate policy that could change the math fast: protecting 1031 exchange rules, raising the primary-residence capital gains tax exemption to unlock downsizing and listings, and why builders bounce back sooner thanks to inventory and mortgage rate buydowns. If you care about the 30-year fixed mortgage, the future of Fannie Mae and Freddie Mac, and what it takes to restart home sales without triggering chaos, this one is for you.

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Transcript

Welcome And Guest Introduction

SPEAKER_03 0:08

It's a privilege for me today also introduce our guest speaker, a really snow introduction today. Um, Dr. Lawrence Young, Chief Economist, and Senior Vice President of Research for the National Association of Rules. Thank you for being here. We'll be able towards your festival.

Why Sales Froze After 3 Percent

Oil Prices And Inflation Fears

Stock Market Wealth And Luxury Homes

Consumer Anxiety And Election Pressure

Why The Fed May Cut Rates

What Really Moves Mortgage Rates

Job Market Softness Behind The Numbers

Which States Look Recessionary

Arizona Growth And Long Run Demand

Northern Arizona Sales And Pricing

Push To Raise Capital Gains Exemption

Builders Win With Rate Buydowns

Defaults Stay Low And Demand Builds

SPEAKER_00 0:30

Uh good afternoon, every Mark. Uh so it is uh a beautiful uh play on the weather transmission. Uh I'm from the Washington, DC area. Uh we had an extreme cold, uh, which is opposite of what you experienced this winter. Uh, we had a uh dump of snow uh that came uh once and then it just stayed on the ground for the whole uh month as the temperature did not go above freezing for each length the whole uh month. So we would get to uh sort of tea falls here and it'll be zone up. But I drove up from uh the United States and I have to go back to finish to get five later in the afternoon, but uh thinking that is a little too much. But thank you uh very much for coming out. Uh and uh thank you, uh President uh Christina that you know for the leadership here at the local association and the state association president uh Lisa. I have known Lisa many, many years. Uh, because she has been not only very active at the state level, I'm sure she has you know dedicated her time here locally, but at the national level, uh she has been very able to involve uh to ensure that the real estate vision is well represented. Uh every uh this is a real term election. Every election aside law, uh you have some new members of Congress, and if it is an existing uh member of Congress, they have new congressional staff. And often they don't know real estate issues. I mean, just for example, 10-31 exchange. I know that uh 40% of you in the audience have real estate investment properties. Uh in 10-31 exchange, no know what that is in Washington. So if they don't know what that is, they say, okay, put it on the shopping block, we're gonna save a few dollars. Now, of course, we have to constantly explain how important it is for real estate and for the mobile inquiry uh in the process. So that's always since we are protected. So thank you for your participation for uh those who are invested in the uh you call it weight facts, I mean, you call it art pack at the national level, uh, but the state of Arizona, um, you know, that you are doing your amazing uh contribution uh in that regard. Well, I'm here to uh sort of give you how I see market condition developed. I know the past three years, it's been difficult, and it's best what I see in these statistics, statistics uh indicating that the home sales market uh simply has not been moving uh as it is accustomed to. Now, of course, we did experience uh right after the COVID frenzy period, the lock in it baggage of 3%, 4% mortgage rate, homeowners too good to give up. Uh, so they're essentially locked in, lack of inventory. And then we had mortgage rate going up from 3% to suddenly 8% on the Federal Reserve raised interest rate, and that completely fled the market, going from Vency Motor 12 to sort of buyers disappearing, sellers disappearing because of the lock in the back. Uh, but now as you are beginning to see more inventory on the non-term market, homes stay on the market a little longer than before, which is indicating that you have to price the home correctly uh because very lengthy uh days on the market means automatically fast cut, uh, you know, the veil done, so you can get back fired. And also the mortgage rate was one month ago, um touched 5.99%. The lowest in three years is not the three percent mortgage rate or four percent, but the lowest in three years is in finding that after the consumers have witnessed 8%, 7%, 6.5%, to go to 5.99%. Well, those are beginning to generate excitement, a little more foot traffic. Well, today we are not at 5.99%, and mortgage rate has jumped up up to 6.4%, uh, possibly due to the oil prices just suddenly styled up today. So let me uh give you uh how uh the sort of the big question of whether or not we are headed towards economic recession is at least for the house end, it seemed like we were in a recession in terms of transaction uh being so low, with this year being a little hopeful, falling mortgage rate. Uh, but the geopolitical uh events in the higher oil prices uh may uh prevent the recovery from happening unless somehow this issue is resolved very quickly. Uh, whether you know Iran's politics out quickly, uh, and then uh we have the normal shifting of the oil coming out of the gulf, the oil prices retreat, so more is reposed back down. So let's see how that happens. But as I put the deal protocol new debts, uh the stock market uh is down, uh partly because of the high oil prices. But even before these oil prices, there was a lot of concern about whether or not uh there was an overvaluation of the stock market or whether the stock market was due for some uh correction. The other part is housing, well, uh, is are still at a break or high, but I have much less concern regarding the support on the housing prices in parental stock prices. Stock prices could be a little wobbly, but it looks like the real estate prices are on very firm ground. Maybe in some neighborhoods you see some prices come 5%, 10%. But I would consider, at least you see on my chart, very impact that those prices are coming down 10%. It may be a golden opportunity, uh, especially for people who are priced down the manera, though, uh, to reconsider the long-term prospect is just super good uh in the state of Arizona in our Source Blackstadt. Job market is clearly weakening. Uh, the consumers are beginning to express unhappiness, uh, and consumers are beginning to default on some borrowed money. They're not defaulting on mortgages or paying mortgages on time for the most part, but other borrowed money people are beginning to uh default. So let's go into some of this in a little more detail. Oil prices. So oil prices, uh the first bit that you see is the uh invasion of Russia uh into uh invasion of Ukraine by Russia that had great uncertainty that it well prices began to uh decline. Now we see the second uh big run-up in oil prices. Now, back in the 1970s, because I see some of you who may have uh experienced the 1970s, there was a oil price shock. And from the oil price shock, there was a niggering high inflation for almost a decade, 10% inflation, and I don't know if it was a nationwide policy or state-to-state level policy. If you went to the gas station, get the gas station owners say, you know, you're not supposed to be here today because your license tag has an odd number ending because today is an even number. Only the even number on that license tag can come and get the gas, or you have to come back tomorrow. So there was oil price shock, high inflation, and eventually leading to 18% mortgage rate. 18% mortgage rate would have completely killed off all wanted today. It's not gonna happen for two reasons. First, we have a very robust oil production in America today, much, much more than what they have been. And also, I was in Louisiana. Louisiana realtors are super excited about these high oil prices because they are one of the producers of oil and natural gas. Uh, so some states actually benefit from high oil prices. Louisiana, North Dakota, Texas, Alaska, but many other parts of the country, such as Arizona, where I live, Washington, DC, uh, we suffer up because we're getting higher at the gas pump, and uh it leads to higher mortgage rate. Now, I don't think we're gonna hit to 80% mortgage rate or even 7% mortgage rate. I think the mortgage rate, which was 6% before the oil price shock, may go up to 7% of a maximum. But hopefully it doesn't even occur at that level because again, we have large oil production. That's good. And second, we have a great energy efficiency. Uh, you know, automobile can go much lower distance now than in the 1970s vehicle, and more green energy uh in place uh as an alternative source. So the oil price shot uh is not good in the short term. Combination of URG ID rotors drive much more frequently than average Americans, higher business operating costs, but I think more importantly, higher mortgage rate because you need to get the home sales and higher mortgage rate uh does not uh help on their home sales effectivity. So this is the oil production in America, and as you can see, uh yeah has lately wrapped up. So combination of energy efficiency, green energy, but also uh requiring carboning of energy production to assure that America is independent uh in regards to oil uh and energy in use. Stock market. This is before the wobble of the past month. Stock market all-time hot, which may explain why the luxury free market has done very, very well. So, luxury market has done very well because the upper segment of the population uh has really enjoyed this stock market game. This is standard and more 500th largest company in America. But if you look at the details of the figure, it is not 500 companies that's writing up the figures. It is just 10 companies or 12 companies who have exposure to artificial intelligence technology. The usual tech contents, Microsoft, Google, uh, Facebook, Amazon, along with some of the computer chipmakers, uh, NVIDIA uh and such. Uh in the Phoenix region, I mean they are massively introducing computer chips in the costly building and building because they are saying in the future we need more chips to uh do all this artificial uh intelligence uh technology. Artificial intelligence technology, you are already using it, it will continue to improve and it will be with us. But related to the stock market is the following Are the companies going to turn massive profit in the future? This is the reason why the Wall Street is pouring money. Uh so if somehow artificial intelligence, we know the technology will continue to improve, but the key question is can they turn up massive profit in the future? And if they cannot, there could be a stock market correction. Only those 10 companies turned down, means this whole index turned down. So a lot of questions about whether this is an overvaluation. Uh interesting sentiment among the Wall Street downless is the following no one knows whether this is a bubble. And it's been down because of oil prices or just the artificial intelligence, but no one knows if it's a bubble. But if it was to correct, meaning some degree of stock market decline, no one would be surprised among Wall Street equalists. So that's the mindset they had uh that they don't know if this is a bubble, but if it was to crash, no one will be surprised uh that ego units sort of corrected because uh they are expecting huge profit in artificial intelligence future, but will it turn it that way? Consumers are beginning to express unhappiness. This is a midterm election there, and it could have a big consequence of the midterm election results. Uh, and in the political consultancy world, they use the phrase it's the economic stupid uh to deply that focus on the economy. During the election night, they both their pocketbook. Whatever the cultural issues, whatever other issues, really is the economy that drives the election result. Uh, and right now, at least on the consumers, they're saying they're not happy. What is really interesting about this chart is the following. Look at the middle of the graph. Middle of the graph is 2008-2010. Foreclosure prices when those funny quick mortgages blew up and we had a foreclosure crisis. 8 million job losses in the country today. We don't have foreclosure crisis. We don't have massive job losses. We're not generating them any jobs, but we don't have job losses. We're not in a recession. Yeah, the consumers are expressing as if we are similar to that foreclosure crisis. So interesting uh situation. And the obvious delinquency uh rates are rising along with the credit card delinquency rates. And the student debt for a couple of years, it was zero because the government said you don't have to repay, and all the people say, yo, we don't have to repay. Uh so tentatively and lingually, it was zero default rate. Now they have to repay, and may are saying, nope, I don't have the money to repay. So you see some economic distress. That is midjoy election again this year. But last year was odd year, and there was still some election occurring last year, including the election of New York City. Now, Mayor Mandali is somebody who NAR would never get all the Bulang Manhattan because Manhattan, the real estate agents that now filters uh in Manhattan uh condition. Uh, but uh we would not support uh Mandali, the CB, he makes them rent control. Somehow he thinks property ownership is bad and all that other stuff. No, this is completely percent. Uh, we're not interested. Yet he won the election quite easily uh by large margin, even as then Fulman declares socialist. You look at the socialist uh economic outcomes, Cuba, Venezuela, they all have high hopes. Oh, the Cuban revolution of whatever 60, 70 years ago, they had a huge high hopes about how the economy was developed for the better, but it's collapsing. Safe in Venezuela, uh in any other countries that threw into the socialism. But the New York City voters apparently were saying from the chart that we saw, rising default rate, local customer confidence to say, I don't care about the label of socialism, I want to try something different because whatever is happening in space is not working. So maybe this is why uh Banghani was using the election uh condition. So uh we see some economic distress that's happening in the economy, and consequently, Federal Reserve from last year, seeing this economic distress, along with some softness in the job market, started cutting interest rates three times last year, September, October, December. President Trump, when it deeper cuts, faster cuts. And yesterday, Federal Reserve said because of oil prices, great uncertainty, or potential high inflation, they cannot do the rate cut. And it upset President Trump's condition. But look at the blue arrow. I put down blue arrow to indicate I think there will be some rate cuts this year, even though they did not do the rate cut uh yesterday. And the reasoning is for a couple of reasons. There's economic reasons as to why the rates should be cut. For example, many of the local community banks, uh, they are owning large commercial real estate loans. And commercial real estate loans are not 30-year mortgages, those are short-term breaks, three year, five year, and they have to refinance. They borrow the money at 3%, now they have to refinance at eight years. That's very difficult. So many uh local banks are under some stress. So to minimize that, we have to cut interest rate. The other part is uh when you see some construction plane across the country, uh, Denver, uh Phoenix, uh, and you are wondering, where are they building? They are probably building apartments. We have oversupply apartment buildings in the country. What does that mean? The rents are no longer rising. So the rents are turning towards zero growth, and that will help contain consumer prices. So you know the high oil prices, at least the rents subveating uh in a battle that early brought the Federal Reserve current interest rate. Another big reason as to why there will be a rate cut uh later this year, in my view, is President Trump has nominated a new vat chair who will need to go to a center confirmation process. Kevin Walsh, uh, that is his name. And I'm sure during the interview process uh that he indicated to President Trump, look, we need to cut interest rate. And that President Trump said, Oh, you get the job. So but we have to go through the uh in wave process, but uh there's some economic reasoning uh along with the fact that President Trump is pointing his percent uh into the job uh that there will be some uh interest rate cut. So with the Federal Reserve cuts interest rate, some of the newer realtors think that mortgage rate will immediately decline with the Federal Reserve cuts interest rate. And many of the federalized people who have been in the industry for a long time knows on the day when the Federal Reserve cuts interest rate, mortgage rate may actually rise. Because mortgage rates are impacted by many, many factors. Everyone is focused on the first bullet point. First bullet point is the Federal Reserve and mortgage late. That's one impact. But then there are other impacts, for example, federal budget deficit. If government has to borrow, borrow, borrow, they're eating the private capital. Less private capital means less mortgage money out in the marketplace, so the mortgage rate will be a little higher. Uh, Supreme Court uh recently ruled that President Trump went out of balance. He cannot bring tariffs without congressional approval, so he has to get some congressional approval. But just looking at the economic impact, economic impact is that tariff was bringing in a lot of revenue. In Washington language, which is always over a 10-year cycle, in a decade, it was anticipated to bring$3 trillion in revenue. But now that disappears, so which means higher budget deficit uh condition of inflation. If inflation rate is hot, just like say higher oil prices, high gasoline prices, higher inflation, then when lenders they lend the money out, but the money that will be returned back in the future would have lost value. So the lenders would say, darn it, I should have charged higher interest rates compensating for inflation. So right now, higher inflation means higher mortgage rates, uh higher uh uh interest rate development, and there are other factors uh that goes uh along with it without going into detail. But the point that I'm trying to illustrate is sometimes the media, your clients, or some of the younger realtors are focused too much on the first bullet point: Federal Reserve, what's gonna happen to the mortgage rate. But there are so many other things happening uh at the same time. So this is a draft of the Federal Reserve policy, which is the blue line, same blue line I showed you earlier. And the red line is what you care about mortgage rates. It's not a one-one relationship, as you can see. On the day when the Federal Reserve cut interest rate, don't be striped, don't work if it actually goes up. But you step back to say that and you look at the drag and say, you know what, even though it's got a one-to-one relationship, it kind of moved together. So if the blue line was to decline, surely the red line eventually was also declined. And if it declined from what you see here, the red line, we would be reaching three-year low, four-year low on mortgage rate, possibly 5.9% average of the mortgage rate, and ITP consumers will become very excited. And furthermore, even you take away excited by this the financial capacity higher than you had last year, this time last year, they applied for mortgage, they got rejected. 7% mortgage rate one year ago. Same client, try to get today. Uh, assuming oil prices go back down at 6%, maybe they qualify. So, just in terms of financial capacity, it changes. So, lower mortgage rate will be very, very good for the real estate market. And also, if you but remove some of the locking of that power. So, the interest rate differential will not be so brain uh in that regard. Um now let's charge the job market. The job market is also shows a weakness. And according to economic textbook, it's if uh if a job market is weak, Federal Reserve should be cutting interest rate. Uh, but the Federal Reserve also has to contain inflation. So those starting conflicting goals uh they have. Well, President Trump in a State of the Union address somehow it has become a lot of shouting, even during the truth. That should be a very respectful, uh, you know, solemn event when the president speaks and like this. Uh, but now he has become almost like a service in Washington because in truly, in Washington, they can hear you view the same. The other political party is trying to destroy the country. I mean, this is how people really view it. The other political party is trying to destroy the country right now. Uh, but incredibly, thanks to Ray Pact, thanks to our pack, which means that your investment uh in your uh real estate-related political activity. Uh, we have uh Lisa coming into Washington along with other 8,000 uh realtors. Christina, you'll be coming to Washington this uh uh well not this is Julie supposing, but but uh you know, the local association leadership along with state association leadership, 8,000 voters will be coming to Washington every year uh during late spring, early summer period. And members of Congress, White House know this is a real tour. And we share our uh issues with them about what is important. So at a time when there's so much incivility in Washington, other political parties trying to destroy the country, at this uh uh sentiment, House of Representative Caspe build party housing for the 21st century. It has many, many parts. Oh, small, small part, but maybe in the aggregate, it can move the dial, essentially bring more supply, more production, uh lower the regulation so the builders can be debilitable, and almost uh event that bill has by a margin of 390 yes, nine people voting no. How do you get that type of biopolitis and support? Well, because our pack, we give half of the money to Democrats, half of the money to Republicans, or that's how it feeds up in it that way. Uh so every year, uh everyone knows uh the realtors express real estate issue, how it's good by the country. Some of the way in the Senate, I think it was just last week, they passed a bill by a wide margin of 90 yes and nine no vote, or something like that. Uh, it included a measure which some of you may not agree with, or maybe some of you very strongly agree with, and measure that President Trump said it has to be included, or I will not sign it. Uh, and that measure includes removing institutional hedge funds from buying single-family properties determined to rentals. So somehow your organization that owns like uh 500 properties or more are in trouble by single family property, well, we cannot do that, or you have to sell that property within seven years and all that part. Uh so Senate had to include that, as president essentially said, if that's not included, I'm not gonna decide it. But just to show you that even in an environment where there's a so much heated political uh discussion, back and forth, masculiness, uh, that at least regarding real estate issue, at least this appears to be moving along. I'm gonna talk about one uh big real estate issue, which is not yet in the legislation, but we are pretty trying to push through it uh a little later. But you know, again, it's one of those uh days where we've hoped to get huge profits for this. But during the State of the Union address, President Trump said we are at a record high deployment in America. So he was mentally stating the truth, uh, which is to say how many Americans are receiving paycheck right before COVID, COVID destruction, and then more job, more job, more jobs as economy milden, passage of time, and record high number of jobs. So in this sense, six million more people receive paychecks later pre-COVID, you say economy should be strong. Yet there's so much discussion that the job market is soft. So let me put the same figure slightly differently. Rather than the total number of paychecks, how many new paychecks are we adding to the economy? And as you can see, we are barely adding anything to the economy. We know there are high school graduates, college graduates looking for jobs, but right now we're not really generating any job uh condition. So uh in February, the latest bigger just came after the city of the union address that was actual job decline uh in the Monaco. But the bulk of the decline is due to the fact that Islam must had come to Washington one year ago. And it was Islam must leave their huge amount of wasteable government spent a. So let's uh slash away some of the bureaucracy. So look at the number of federal government employees. Uh, and I clearly see it in the DC region, somebody who has worked in certain agencies for 20 years uh now, uh, you know, they are that they don't want to have a job. Uh slash away uh look, wastebook government spending, slash away the fat. One wonders still whether or not uh how much of the bones and the muscles we are cutting, because we hear from uh realtors in Alatta that Center for Disease Control, their clients who work in the Center for Disease Control, they inlaid off, uh, you know, or was that still a part of the fat, or is it beginning to reach the critical service uh area? You know, another part of the slashing the federal government agency is just to say that anytime uh there is an agency, there's a money faucet that's coming around. So federal money flowing out and that always attracts people who want to commit fraud, people who want to set up big businesses in order to receive that money. So, in order to give little the fraud, you have to essentially shut off those uh money faucet. Come on, but uh slashing away the government uh stating. So when you look at the weakness in the job market, part of the reason is large slashing away the federal government employees. But you also hear in the news many of the private sector companies are laying off workers, or some of the banking industries are saying, oh, this year we're not gonna hire any people. So it is a weakness in the economy, probably speaking, uh, along with the slashing away of the other government uh jobs. Among those people with job, uh, and these are people who are on paycheck, you are on commission income that your income fluctuates, but people who are receiving W2 State Band paycheck, nurses, teachers, uh static paycheck, their standard of living is necessarily improving. Their wage rate, which is 3.8%, at least before the oil price increase, uh the inflation rate was running 2.4. So their standard of living was modestly improving. But in the upcoming months, if the oil prices linger at the high level, maybe this will disappear. So at least some people receiving state paycheck of their standard of living modestly living. So let's look at which state may be in a recession and which state not. So Arizona, compared to relation, you are not in a recession and there's 0.8% more job, 0.8% more job over the past 12 months. You see which state is losing jobs, which state may be in a recession. Last year was not a mid-imelection year, but there were still some states that had elections. Virginia was one. And in Virginia, they were in a recession. Again, the phrase, is the economy stupid? Well, Virginia had a Republican governor, and maybe as part of the uh Elon Musk, Northern Virginia, near Washington, a lot of job cuts in that area. So state of the Virginia was showing recession. So they went from Republican governor to Democratic governor. So again, is that part of the trend? Uh, is the economy stupid? Focus on the economy, you're going through recession. Uh maybe uh especially in a swing state, you may get to uh turn towards the other political party uh condition. But Arizona at positive 0.8%. Well, the housing demand, I'll actually look not at one year, but longer-term job situation. So if you look at the longer-term job situation, uh, I think is a good comparison with pre-COVID. Pre-COVID is the most recently available. Arizona is showing 9.3%. Almost green. Greens are the superstars. So let's see what the superstars: Idaho, Utah, Texas, Carolinas, Florida. They're the superstars in terms of adding jobs. But Arizona almost trained great. You have to be at that 10%. So Arizona at 9.5% almost there. Uh Nevada, 9.8% almost there conditions, super fast job growth. Dark blue will be above national average in essence. Light blue, positive, but a little step slow. Uh they're ending jobs but slept slow. But look at go back to the figure. Arizona, 9.5%, 9.5% more people receiving paycheck in this state. So you would think, well, home ownership is the American dream. So if there are more people working, our wholesale should be 9% higher compared to pre-COVID. But it's not. Home sales are not above 9% compared to pre-COVID. In fact, it is well below pre-COVID because conditions were not like high mortgage rates and at certain period lack of inventory. So conditions were not, right? But you can view the job market as potential housing demand. That's building and building that can be released into the marketplace once the conditions develop for the better. More inventory, more supply, lower mortgage rate. So if the conditions develop, you can say every zora has plenty of pent-up housing demand that could be released into the marketplace. So looking at black steps specifically over the time period, so this is from 1990 onward, there were 40,000 people working in black step in 1990. Today, it is 70%. This is quite impressive growth uh in this 35-year time step. Uh, and you see uh it's not a straight line on the fluctuation, and towards the end, a sharp decline as the COVID lockdown. But you have come back, came out of the COVID lockdown and going up. Let me show you the whole state of Arizona. Yes, you also have some vacation property here in the northern uh Arizona. Certainly, uh the heat wave uh uh started in March, but it's going to be in Phoenix and in June, July, but they are having second home here from so uh it's not only about uh the local job market, but uh given the proximity with a major uh mental market in Phoenix, uh this job condition. So look at this job. So you do have again plenty of particular job pent up demand, is even a second home of purchase demand that's developing uh once the condition developed for the better. Let's see all I put this bomb timeline, 1950. I don't remember if going, you know, Barry Goldwater was at that time the superstar of the state of Arizona at the time. But look at solely bus compared to what it is today. So back then it was only like 200,000 people living here or to 200,000 people with a job. Uh today, uh being over 3 million people living. So many of you, what this data is saying is you moved in from another state by shorthand. How many of you were born in Arizona? How many of your parents were born in Arizona? And this is actually quite uh interesting. Well, you should have told your parents, buy the horse realistic you are really benefiting uh from this training of every crypto. But then you wondered, project this out. What's gonna happen over the next 50 years? Maybe one or two years there's a little fluctuation, uncertainty, but what's gonna happen over the next 50 years? Will this continue? I know every time, uh, first time I uh flew to Phoenix, I look out the plane window, and I think as I look out the window, uh the what I built was I became immediately thirsty. But not all but in Phoenix, uh there's a lot of uh scientific study and goods like that. So one of the scientists at one of the real estate association made said the following There is hundred years of water supply available of physics. I mean, statement like that, that really boosts confidence about any people like my first impression I became thirsty, you know, would I have a considerable? Well, to say that there's hundred years of guaranteed water supply uh coming into phase, those are very assuring things. And that scientist was actually saying they're trying to study to make a true hundred years of supply border available, even with the future population growth. So those are very confidence uh you know, boosting measures. So even though a first impression for an upsider, you may look like running harder border of that situation. So a very good job market. So potential housing demand is huge, but the actual housing demand has been a bummer. So you see from the first bar that's pre-COVID, and you can say the first borough is normal. Then we have cleansing conditions, low interest rate is multiple offers, then once the Federal Reserve raised interest rate, sales coming down. And for three straight years, bummer of 75% of normal activity. But the potential healthy demand continues to build, build, build the job market condition. And Julie and our team are explaining interrupting the working with the MLS, bringing the data. You can go to the website and you can pull out. So this is uh December of last year. Uh, I purposely put December because it shows 12-month total. I mean, there's a figure called January, February. I think it was a little sluggish, January, February. Uh, you can go to the website and find it. But last year, 12-month total uh showed that uh the dollar volume was up 2.8%. The total transaction actually fell by 3.9%, which means that price growth compensated for the reduction transaction uh condition. So prices not in a bubble, not pressure, prices sterilizing even though model speed. Uh so last year uh you can say that this area, uh the northern Arizona area, outperformed the country. Nationwide, it was zero, no growth in price, no growth in new sales. But here, at least your dollar volume increased by 21%. Luxury market has done quite well. Uh so uh, you know, we have seen the stock market really influencing this. But another reason is in Sedona region,$800,000 property pre-COVID. That same property, same square footage, same address is now$1.1 billion. So it's not a luxury property, but simply the price movement uh that has curved. But nonetheless, we see the both into luxury properties. A lot of data here to illustrate that uh up running, you go like$5 million plus, there was a better percentage growth uh happening. So um, you know, how much of the luxury property uh that you have exposure here in Nola Arizona, or can it become like that? If you look at aspen, aspen say 50 years ago, it was simply a almost a boost town. Mining industry shut down just a hole in the mountains. Before somehow, I don't know whether he was a Hollywood person or somebody, just not type of property, and before you know it, you were starting gathering in that it became as much. But medium bond price, I think they are uh it's like seven million dollars. Uh to just try to illustrate that you know, every area, how it grows over time, we don't know. Uh, but you know, sometimes they're scale catalyst, and before you know it, it becomes quickly, they become a very luxury to small thing. But they also have a huge affordability uh housing problem. Many of the workers working at a hotel cannot live in as night, they have to commute two-hour tribes every single day, each by uh condition. Now let's look at the home places. So 65% growth uh in the Arizona from pre-COVID, so six-year time span, 65% growth. So clients of the realtors are smiling to say, thank you for your help. I purchased the property and now I am becoming financially comfortable as a result. Realtors, 40% of you in our survey have investment property. So even though your commission was actually through your investment income, you have some rental rental income growth, but then you look at the prices. If you were to hypothetically sell it, well, we can sell it at much higher prices. So this is providing a little comfort. So huge growth uh in prices, uh, in quasi-politic real estate uh wealth at an all-time high. And other like the stock market, there's no question about that uh a solid foundation of the real estate wealth condition. Now, this has lost number. Okay, this is uh one top advertising from our perspective that we want to really push through. Homeowners, when they sell their property, the profit they get is theirs. Or guess what we thought? Because$250,000 exemption, half a million dollars, that was very sufficient 30 years ago. So 30 years ago, people sold a home, they didn't have to worry about club and gains tax, or even 25 years ago. But today, more and more homeowners are suddenly realizing if they were to sell their property, government will take some of their profit. And they don't want to go do that. Or say consider a uh very uh and widow, uh, you know, husband and wife, they lived in the home for many, many years, spouse passed away. Now, widow was the downsize, but they don't need a home anymore. And maybe they can use the cash for some other purposes, help out the grandkids, or maybe go on a world on a travel tour, whatever it is. But their accountants say, don't sell the property, don't list it because you're gonna beat it with a capital gains tax. So our number one uh advocacy that we're gonna try to push through uh in Washington is the following. And we are getting more nodding of the heads in Washington is lift the capital gains exemption of 215 to half a million dollars uh for single, for married, half a million to one million dollars. So the homeowners, when they sell the home, they don't have to worry about uh paying that tax. So we have more uh money staying within the local economy. Uh and the spirit of that large exemption 30 years ago was for that exact reason sell your home and you know property stories. That was the spirit of it. Uh, but now more and more people are getting ensnared in it. 13 million homeowners today, assumed to keep a scenario on the price bill, it could be 27 million homeowners will face that tax, and we don't want that situation. Uh, so we are explaining generally the profiters would say the moving that the taxes, the spill of stopping there, alarm like that. Even President Trump said, you know, watching the homeowner uh pick tax. From the Democrat side, uh, the argument there is access to more supply because the homeownership is born. First time buyers are sweating to get into the market. We need more supply onto the market, and to get more supply onto the market, we need to move the capital gaze uh tax. So I think we could get some bioquartisan agreement uh regarding this. Uh, but when I asked our VAP uh team, uh, what is the probability? And their answer is we don't want to play any probability, we don't want to give false hopes, but he always moves in the legislation. But while 0% probability suddenly becomes 7% probability. So we want to look to that 100% uh probability. Uh and also it sort of makes sense because the price of everything has risen over the years. So hamburger movie ticket, much more expensive now compared to 30 years ago. The figure 250 half a million, that was set 30 years ago, and that has not changed for 30 years. So if you are to simply index to inflation, just that social security check, every year, little growth in social security check indexed to inflation. If the capital gains exemption or not was indexed, today's to here would be essentially double, roughly double. So uh there's economic argument, philosophical argument, uh to uh look at who's gonna be uh pushing for that okay. Uh new home sales, so home builders. Home builders are much smaller size of the market. Builders are back to their pre-COVID sales activity. Realtors now, realtors you are subpart performance. So why are the builders back up to K COVID while the realtors are still struggling? And the answer is builders have advantages, the realtors do not. One is they can create in Flux More First Housing Shortage, they create it. So now they have an inventory, but the realtors are waiting for their caste clients to list and they're not listing their property. So that's uh what? And the second advantage that builders have is some incentives. In the past, they may say, oh, we got to give you a free refrigerator, or you might give you a free brush store if you buy the property. But now they don't say that as much as to say we have to do more. Buy down. So you know, you pay for the refrigerator, you pay for all this stuff, but we're gonna let the mortgage rate buy down so that your mortgage rate uh would not be say six and a half, but it will be five and a half percent. So that's those are the incentives that the elders are doing, so they are back up to pre-COVID uh sales and activity. I think the chart, especially uh, I think the most powerful to do, especially with the potential first-time buyers, is that own real estate. I'm sure there's a lot of other comments saying about how leaders don't, but the data clearly shows homeowners build well over time. In the first two years, maybe you don't need it over time, we do build both over time. Renters know. You have to own part of America uh if you want to build well. So statistically, the uh proof and evidence uh to say uh you know you have to buy uh real estate. Uh in the rules, they both appear to be on solid ground because uh we are not seeing that much for a default uh rate. We are seeing defaulted credit cards, student debt, but not mortgages. In the loose uh real estate industry media, they may say default rates increase by 40% or something like that. And it's probably true, but it's coming from super low levels. And if you read the flat bells, but I'll probably say even with this increase, it is still low pre-COVID default rates, which means that right now we really don't have default rates. So don't expect large distress, so property, electivity to come out to the market when prices are assorted out. So my final T chart this is application to purchase home, mortgage application to purchase home. Federal law, mortgage companies have to turn in all their data, even those data that is showing mortgage rejection. What you see on the chart is in 2022, huge collapse. Mortgage rate went from 3% to 8%. People said no, and that's gonna apply for mortgages. Then it stayed low. But did you know that from spring of last year, spring of last year, mortgage application to buy a home began to increase. But you did not see an increase in wholesales. Because again, mortgage data does not include mortgage injection. Someone who got rejected last year at 7%, try it again, say at 6%. Maybe they bought a five. Furthermore, their wages are rising 4%. So all that combination, but this graph shows sort of desire to own a home, desire to enter the market. As the rising problem last year, it's just a question of better condition to make it realized. Mortgage rate, right before the oil price increase, three years ago, I got super excited. This is gonna be the year. Well, I hope this oil price situation is temporary, it is speculated conditions because before the oil price shock, before the oil price shock, my forecast was the following. Last year we didn't have any increase in hope sales, but this year I anticipate 14% increase in wholesales. Very good number. Not of which boot damping as are we going through, but that's on the assumption that the load is rate will add which 6% this year. We were already there one month ago. Today is up to 6.4, but maybe we would go back towards 6% or even lower. So, how do I get 42% increase? And out of the statistical modeling. And in fact, when I said this uh to a different group of audience, that group of large fork riches, they said, Oh, yeah, wait, wait, you are being way too optimistic. I wish you were right, but I'm not gonna make my business plan based on this uh hope that you have. So I said, Well, I'd be very statistical model, this is what the same. And they still get the cannabis and they're hesitant to believe. So then I try to get from argument, not statistical argument. And here it is. Real estate is cyclical business. We all know it goes up, it goes down. After a prolonged downturn, downturn for many years, when it begins to recover, you look at the past history, getting a double digital percentage recovery is very common. So it is not abnormal to get a 10% increase or 15% increase after a prolonged downturn. This is very common. And the kids said, Furthermore, remember the job number, potential housing event, way, way up there, right per high. If we get a 14% increase, we are not back to pre-COVID. We need another 17% increase next year just to get us back to pre-COVID. So this is just a recovery. And at least the recovery appears to be very uh decent recovery, 14%. So assuming that oil prices can soon go back down to what it was, mortgage rate can return back to 6%. Jobs are being added, some states little faster than others. I think they could easily get 14% increasing sales. In December, we'll figure out whether how right or how wrong I was. Uh, but definitely you are in a much better state compared to other states in terms of this building popcorn jobs, building potential demand. So I wish you all that you can participate in this build projection that I have. So thank you for coming, and there's your look person.

SPEAKER_03 49:50

Any questions?

SPEAKER_01 49:55

Um, I'm wondering if you took a slice uh on your graph that showed all the living versus uh income. And uh mentioning lots of different areas working for equals in different ways. Have you segmented out quality of living versus income into different income rabbits to see how that's more evil in any city?

SPEAKER_00 50:25

Well, well, I mean it definitely has been again. You see the mayor's place uh in New York City, it was a middle mayor's race uh in Seattle, which some will say uh the mayor of Seattle is a bit more radical uh because the New York City mayor. Uh in fact, you know, what does not believe in ownership, uh rent control, and furthermore, uh the Seattle mayor, uh, she wants to place huge tax on large corporations. So Amazon announced their moving car to Seattle. They're going across the lake into uh Bellevue, uh, where they will not face that tax. Uh, but I think the Seattle mayors race, New York City Mayor's race, the fact they won is implying that there's a segment of society that's really separate. And if you look at the bigger macro picture without going down, generally speaking, upper uh it's uh upper income bracket has done better, but the mid-level and below has really struggled to. So uh upper income bracket also then needs to be four marks. Full mars and invite situation, healthy well. But the low building club, there tends to be matchers and they're not participating at Healthy Well. Uh, so they go uh squeeze in terms of higher credit card debt, a little bit about that. Furthermore, home ownership appears to be completely out of their reach, a lot of frustration. So uh that that's one that two segment uh comparison up, say the upper end market has done better while the uh lower income bracket has. Really?

SPEAKER_01 51:59

So yeah, what level statics? Like uh 3,000 over 200,000.

SPEAKER_00 52:09

But uh so you know, people who are on the upper income bracket, 200 above, who have exposure now into home ownership at the stock market, okay, they have done uh very well. But the nationwide build income uh level uh is about 70,000. So we can say you know, I need to close 70,000, maybe take stroll through uh people already about, and it depends on the ownership of property uh as well.

SPEAKER_01 52:33

So put that organe, it's volunteer market, earth racket cause we've session eight people, mass Lobarga cycling occupation marriage over In raped and like all the occupation. But that costs that should be.

SPEAKER_00 52:58

Uh yeah, I mean you know, yeah, it's um the recession uh is when uh generally anytime there's a recession, there's cut back in spending at all income level, with with some people uh spending much less compared to other goods. So it's usually the same direction. Uh but right now, uh it's many consumer spending. Uh people say the luxury property has held out much better basically on the discount uh parts say but mid-level, high mid-level say clothing IOPs. Uh that lame is suffering, but because people are downscaling it more uh portable uh uh clothing. But but yeah, right now you can say uh it's a case shape. Maybe this is a better answer. Case shape means that some people are participating in wrong, but other people are participating uh eat. Yes, sir.

SPEAKER_02 53:51

Curious, um, what your take is uh on the IKEO's yes, like how do you pick that one up? That's more between the screen.

SPEAKER_00 54:01

Uh so the Ban Friday uh during the subprime limit days, and in hindsight, everything is clear vision, those were fake carriages, fake income documentation. Banning Fray should never have changed subprime loans, but they did. And consequently, Finland Fray went under uh government took it over. So they are under conservative show. Uh, but uh that means uh you know that they're essentially back uh you know, though they're still turning in profit, actually, they're making profit because mortgages are not a default thing. So they want to bring them out. Uh, and uh some people are saying, well, let's bring them out, let's make them uh level free uh private companies. Um and uh NAR perspective, we have committees set up, you know, uh people review it if we have uh the board of the right to vote on that. And in our position, it's we have to have government guarantee on thinning and ready, however, they come out. Whether they come out as a private institution, whether they come out as a uh utility type of company, is government regulated, however, it comes out because uh other countries like Canada, Britain, uh their mortgage payment does not remain changes based on what the central bank is changing. Uh but in America, these mortgage commitment is the same uh condition. Uh, and when we relate this information again, the thing about bipolar measure, President Trump also said Fanny and Freddie they need to come out of conservative ship. Uh, but President Trump also added uh the caveat. Once they come out, they had to have government guarantee on the mortgages. So uh it appears to me if our policy sense how they come out, uh we gotta have that 30 year fixed rate mortgage. And we need to somehow put it so that Fanny and Freddie uh cannot change those resting mortgages, just stay with the plain uh boring mortgages and get that spike belt. Oh, maybe one more question, yes, sir. Uh before we do the ask the question, uh anyone else.

SPEAKER_01 56:15

But maybe someone said possible.

Q and A On Border And Jobs

SPEAKER_00 56:28

Uh so the Federal Reserve, uh, I think uh they will cut interest rates that are clear sound economies will be falling into the recession much faster uh than what they anticipated uh condition. So there is that scenario, even though there is a little lingering inflation, I think they will say, look, we cannot have uh you know millions of people losing job uh condition. So uh that will be uh the one uh scenario part. Uh in our sort of I also forgot to mention the sluggish in the job world that I mentioned or no job creation in recent months, there's less of act or too bad. I mentioned about the federal government being slashed away. But other thing, which at the impact state of Arizona much more than other states, is the crossing of a southern border. Southern borders are back to be shut down. So what uh so when you look at the employment data, even though we are not adding jobs, unemployment rate is not rising to say that whatever job is coming around, you will be available for Americans and not for people crossing the southern border, so which is the reason why unemployment rate still remains low, even though we're not in general in job uh condition. Uh so uh I know that's a big issue here. I'm sure some of you have a strong opinion uh on those uh about part. Uh, but you look at the job market. Well, job market is not actually adding all that much job, but unemployment rate still remains low. And I would not be surprised if you walk around some store that help one assignment here and there. Uh, and this is about those that will pay with low wage uh the jobs, but maybe a construction site, you know, there's called audit side, and then you go into the professional um occupational website like LinkedIn, you know, there are things accountants, you know, uh the teachers, we're hiring. So uh even though we're not adding jobs in large numbers, unemployment rates still remain spy about. Thank you, everyone.