The Ryan Vet Show

Mike Schneider of Acre Homes: The Generational Housing Question, the Broken Affordability Math, and Shared Ownership

• Episode 29

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The affordability math from the 1970s, 80s, and 90s is broken. Mike Schneider, founder of Acre Homes and longtime real estate operator, joins The Ryan Vet Show to walk through what actually happened to home ownership in America, and what comes next.

Mike Schneider has spent the last decade and a half rebuilding the math of home ownership. He co-founded First in 2012, using machine learning and AI to predict who would sell their home, and sold that company. He is now the founder of Acre Homes, a shared appreciation model that lets people own without taking on a $670,000 mortgage. In this conversation with host Ryan Vet, two Durham millennials walk through how home ownership got this expensive, why blaming Wall Street is missing the real story, and what a generation of would-be buyers actually needs.

The episode opens with the conversation that started this episode: Ryan spotted Mike walking down a Durham street wearing wired headphones. Two millennials, both Durham-based, both quietly recalibrating away from the trendy and back to the durable. That instinct, going analog, is showing up in housing too. Mike unpacks the three primary drivers of the affordability crisis (broken income-to-price math, delayed household formation, the disappearing starter home), the data on which generations are actually buying houses (Gen Z is outpacing millennials at age 28), and why the 50 or 60 year mortgage is a political move that does not solve the underlying problem.

Then Mike walks through the shared ownership model. In the United Kingdom, Zillow's equivalent lets you filter for sale, for rent, or shared ownership. In the United States, that third option does not exist. Acre Homes is building it. Five percent down for fifty percent of the appreciation. No transaction costs on the front end. Lower total cost of ownership through what Mike calls the "Costco effect" of bundling debt, insurance, and operations across thousands of homes. Mike explains why two-thirds of Acre's customers are not first-time buyers (as expected) but previous homeowners who have lived the pain of buying and selling under the current model.

The conversation closes on the data Mike thinks gets buried under the doom headlines. American home ownership is at 65 to 66 percent, higher than the 1980s. Eighty-three percent of Americans still prefer to own rather than rent (Lending Tree, October 2024). The country is between 1.5 and 5 million homes short on inventory. The American Dream is not dead. The math just needs new models.

In this episode:

  • Why the housing affordability math from the 1970s, 80s, and 90s is broken (the income-to-price multiple has gone from 2x to 6x or higher)
  • The three primary drivers of the modern affordability crisis: broken math, delayed household formation, the disappearing starter home
  • Why Gen Z at age 28 is outpacing millennials in home ownership (38 percent vs 36.8 percent), and what that says about the great financial crisis effect
  • Why blaming Wall Street is missing the real story (institutional investors bought less than 1.6 percent of homes)
  • Why the 40, 50, and 60 year mortgage proposals are political moves, not solutions
  • How shared ownership works in the UK and why the United States is behind on the model
  • The Acre Homes model: 5 percent down, 50 percent of appreciation, no transaction costs on the front, lower total cost of ownership
  • Why two-thirds of Acre's customers are previous homeowners, not first-time buyers
  • The transaction costs nobody talks about: why you walk across the threshold of your new $500,000 home already underwater until it appreciates 6 to 8 percent
  • The starter home problem: why we have built bigger homes and where the entry point disappeared
  • The data buried under the doom headlines: 65 to 66 percent home ownership rate, 83 percent of Americans prefer to own (Lending Tree, October 2024)

Referenced in this episode:

  • Acre Homes: acrehomes.com
  • Aziz Sundirji, economist focused on housing and household formation
  • Charlie Munger's line: "The renter never washes the rental car"
  • David Ogilvy on marketing: "Comfort the afflicted or afflict the comfortable"
  • Abundance by Ezra Klein and Derek Thompson
  • Lending Tree study, October 2024: 83 percent of Americans prefer to own over rent

Connect with Mike Schneider:

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Ryan Vet is a USA TODAY bestselling author, futurist, and international keynote speaker whose insights on generations, culture, and the future of work have been featured in Forbes, Financial Times, ABC, NBC, and CBS. His research helps leaders understand emerging generational patterns and anticipate societal shifts before they fully unfold.

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SPEAKER_02

On this episode of the Ryan Vett Show. The affordability math is broken right now. Let's take the 70s. The average home cost 1.9 times the average household income. Today, the average home versus the average household income is 5.5 to 6.5 times in the average market. We're between 1.5 and 5 million homes short. It is not Wall Street's fault. We just didn't build enough homes.

SPEAKER_01

Welcome to another episode of the Ryan Vett Show. I am excited to interview a good friend and someone I've known for many years who has been really instrumental in revolutionizing real estate in different facets. Uh, Mike Schneider. Mike, welcome to the show. Thanks, Ryan. Excited to be here. Now, before we get into talking about housing prices and the market and how different generations have bought houses, I have to tell a story. We both are in Durham, North Carolina. And a couple months ago, I saw you walking down the street and you had headphones with uh cords in your ears and not AirPods, not anything trendy. And I I taught you a text and we we started talking about how we are going back to traditional ways, uh, even as millennials such as ourselves, we're trying to go back, and you even mentioned a family member moving to the that home phone and dumb phone model. So I love that. So you got your your foot anchored in the past and in realistic, but you're also trying to figure out how to make homes more affordable to different generations that aren't necessarily buying homes today. Could you tell me a little bit about your journey from first figuring out who might want to sell homes in some of your early ventures and to where you are today? And then we'll get into uh really what's going on in our economy from a housing market in the United States.

SPEAKER_02

Yeah, happy to uh and excited to be on. I love that you're shining a light on some of the differences across generations. You know, we uh my story from a housing perspective does start uh with the last company that I co-founded called First, where we were kind of in that first wave of machine learning and AI, and we were predicting who was going to sell their home. So we could identify, we're tracking every homeowner, every family member within those homes, and what led them to sell uh their homes. And we we got had a very accurate model around that, and it was fascinating. Um, it was the primary product was for real estate agents, right? And we'd get a lot of stories of people reaching out to someone who had just bought a home, you know, two years, three years, four years prior that was selling. And it's because most of what leads people to sell after they buy is is life event driven. And so that's what our model could identify and pick up. Um and so I I loved uh leveraging AI to do things that we previously could not have done just with, you know, our calculators and logistic regression. And now AI obviously has taken off. This was back in in 2012 when we were building uh that company. And uh ended up growing that and selling it and uh really felt that there was a huge gap we had identified where 30% of people, when they did sell their home, last year it was 28%, so it's a little bit lower than previous years. But 28% of people last year when they sold their home had lived in it for less than five years. Wow. And if you look at younger generations, 40 and below, it's closer to 40 or 50 percent, will sell within the first five years. And so I just felt there was a huge gap between renting and not building any wealth, or having to go take a six hundred and seventy thousand dollar loan and really get hammered on the six, eight, ten percent transaction costs when you're only gonna be there for four or five years. It's just not a great deal. And so that's part of what our company now does is we've created a model where you can still have the benefits of homeownership, which I'm sure we'll talk about, and build wealth without having to take on a loan or all the transaction costs and have more flexibility. So that's kind of what we see as a big gap in the market right now.

SPEAKER_01

That's great, Mike. And I I love that uh you referenced you were using AI in 2012. Uh and it's always a good reminder for the listeners, AI didn't come out in 2022, November, when ChatGPT became free. It's been something that has powered a lot of technology for a long time. And you were on the forefront of some of that in the the real estate uh area, which I think is great. But what got me into generations back in 2009 was the idea that a real estate group approached me and said, why aren't millennials buying houses? And they wanted me to come speak on that because I had a certain number of Twitter followers at the time that made me seem impressive enough to and authoritative enough, which uh I still have the same number or a couple less. But the the reality is that has always been a question for every new generation that comes onto the scene. And I think we're asking it about Gen Z now, and partly prematurely because not all Gen Z is old enough to buy houses. They're not getting an income and able to do that. But we're also in a unique time where affordability is more challenging than ever. So could we walk back in history a little bit, uh back to the 50s and talk about some major shifts that happened then that allowed people to buy houses and then how affordability of homes has changed and inventory has changed, and now homeownership is just a beast in and of itself. So can we uh can you walk us, Mike, a little bit through the history of mortgages and homeownership?

SPEAKER_02

Yeah, I think, and uh you may have covered this great on stage there too, but I think there's really three primary drivers. Affordability being the biggest white hot one right now. The affordability math from the 50s, 70s, 80s, even 90s is broken right now for a lot of folks. And we can walk through how we got there. The other is that homership is really being delayed. Uh uh an economist I've gotten to know who really focuses on housing, Aziz, Sindergy, he's does a lot of phenomenal analysis and he really showed how the uh household formation is really what is the primary driver of buying homes. And so millennials are actually, once they get married and are, you know, forming households, are buying at the same rates as previous generations, but that's being delayed. So it's a very interesting, you know, kind of there's there's demographic kind of behavioral shifts in terms of household formation. Affordability math is really broken. And we'll talk, I'm sure, a lot about that. And then lastly, we've also changed what we're building. The starter home has really been disappearing. We've continued to build larger and larger and larger homes. And so those starter homes just have not been built over the last 20 years. We were underbuilt to the country in general, but those homes have not been built. The things that make that actually worse is now downsizers are also competing for those smaller homes.

SPEAKER_01

Interesting.

SPEAKER_02

So if you compound all three of those think, uh it it makes it really, really hard to get started. Um, but to your answer to your question on the affordability, I do think that's the biggest problem facing households today. I'll give you a quick a couple quick numbers. Let's take the 70s, where the average home cost 1.9 times the average household income, right? Um so yes, you're taking out a loan and paying transaction costs, but it was really it was under two times your your household income to buy the average home. Uh, you know, depending on the market, it could be two and a half times, et cetera. But today the average home versus the average household income is five and a half to six and a half times in the average market, right? If we talk about San Francisco, New York, et cetera, it it could be 10, 8, 10 times. Wow. Um, and so we're just it's a very different proposition when you are going to lever your family up that much with debt, right? Um, same mortgage structure, same 15 year, same 30 year. We're actually back at more normal interest rates right now. But it's just so much more debt because home prices growth has outstripped income growth that much. So we're asking families to take, you know, two, three times the the debt load um that we did back in the 70s, and that's just a much more risky proposition. Um the other thing that's really driving that affordability challenge is that uh it's not just home prices, it's all the additional homeownership costs which have scaled up with housing too. So your transaction costs here in the US are a percentage of the home and you can pay six, eight, ten percent, you know, on the front end and the back end if you're buying and selling a home. And so, you know, if home prices aren't growing three, five, eight percent a year, um, you can actually end up in a situation where, you know, you buy that home and four or five years later you're you're flat or you're behind uh if home prices aren't really skyrocketing. So the those transaction people are now seeing insurance costs really going up. So the total cost of ownership and affordability is just in a completely different place than it was in the 70s or even the 90s, uh early 2000s.

SPEAKER_01

Well, you covered so many good things there, and I I want to try to uh dive into a couple of them. One of the first things uh that you said earlier in um what you just shared was the idea of millennials uh kind of the slow life model, right? They're they're later to get married. We're seeing the same thing with Gen Z. Um and I would love to know a little bit when you see that, we we see some of the there's seven main factors that drive any generational movement in in marriage and family dynamics is obviously one of the big seven factors. When you're seeing that, it cohabitation is up significantly within the millennial generation. Are you seeing people who are cohabitating together uh but maybe not married in the traditional sense? Are they also buying houses and is it is that accelerating, or are they still standing kind of off to the side, maybe renting, doing doing something else?

SPEAKER_02

They're definitely more frequently renters. Okay. Um, but I also think that's part of when we talked about you know new models. I think there are new models that will be better fit, right? That's easier if you then end up going different directions, figuring out what to do rather than having uh you know being both on up on a deed. So yeah, they're definitely more likely renters. But just to give those names, and you you have all this data too, but in the in the 80s, you know, the median age of first marriage was right around 23, and now that's over 30. So we it you know, it it very much tracks kind of with this delay of purchasing homes seven to ten years later.

SPEAKER_01

That's great. And one of the things that I think is so important when we're using labels, because labels are risky with generations, you have to look at at the moment in history we're in and the age. And so you just call that a really clear moment differentiator. Once they get married, even though that's seven years delayed, are you seeing similar patterns with younger generations buying houses? It seems like you are.

SPEAKER_02

Almost identical rates of buying homes once at household formation. And Aziz Sunderji's really called this out from his deep analysis. Um, so that is one of the interesting kind of alternative perspectives is we've been saying not buying, not buying, not buying. But when you then look at the actual household formation, buying at almost the same rates as boomers.

SPEAKER_01

That's fascinating. So let's talk about boomers who 50% of millennial parents are boomers, 50% of millennial parents are Gen X, the first generation where we had that unique crossover because boomers delayed childbirth uh so much. So one interesting thing, and now let's depart from data and theorize a little bit here. One of the interesting things that I think boomers generally expect of their children, and I use the word expect on purpose, is that they have a certain house and a certain level of um sophistication. They they always wanted their kids to have more material things, which was a characteristic trait of many boomer parents. Do you find that when you're talking about the starter home disappearing? Do you find that some uh younger generations, millennials or Gen Z might be afraid to even purchase a starter home because of disapproval from their parents? And do you have any um I know there's not a lot of data on that, that's more anecdotal, but any theories on that? You know, I think that's an it's really interesting.

SPEAKER_02

Is there less another way of saying is there less demand for a starter home because our expectation is we're gonna buy a home like the one we grew up in, kind of been parents' second or third home, right? Right, not the starter home. Yeah, I think it's really interesting. You know, we see some of both. We definitely see people buying that townhouse and getting started and you know, and then you know, hoping to move up. Um, so I don't I don't have good data. I think my instinct is that there definitely is something there, right? That people are staying with their parents longer to build up more or getting even, you know, there's one maybe one data point that is interesting in that regard is how many homes were purchased with parental assistance. That has been going up significantly over the last five years. So people, younger generations who are buying homes are getting a lot of that down payment or other assistance from the bank of mom and dad. Interesting. Yeah, I think that that could be another way of of looking at this, is that maybe that's the the leg up that they can get a little bit better house than they otherwise would have.

SPEAKER_01

Okay. Do you see any correlation? And I I've not run the numbers on this question. I don't know if you have, but any correlation on if a a child um who's an adult now comes from a household that owned a home, are they more likely to own a home in in the future? Do you know? Is there any correlation there?

SPEAKER_02

Yeah, yeah, maybe that's I I think there is a strong correlation. I think what's interesting um from just at the probably should have started here at the top of the podcast, is that I truly believe homeownership is actually very, very good for our country and and there is a strong drive to own. So even there was a study in October of last year that Lending Tree did in terms of people's aspirations to own versus rent. And 83% of people in that study across you know generations, but they're primarily focusing on younger generations, aspired to own rather than just rent. And so I think there's a really powerful drive to own. And I think it's a great uh it's a great instinct. We have there's a lot of study on how ownership increases, you know, participation, civic participation, you have better educational outcomes, you have so many different benefits. And I think it's partly because we're participating in the wealth creation. We're bought into the neighborhoods we call home. Yeah. Uh or as Charlie Munger put the opposite, the renter never washes the rental car. Right. So, you know, I think that there is something really valuable now in in being owners, whether that's full owners or part owners, I think is one of the things we should start debating, right? Because I don't think ownership has to equal taking out a full $670,000 you know mortgage, right? Which may not even make sense for how long you're going to be there. But I want more and more people to have real participation and ownership in their communities because I think that really changes the mentality of how we live and how we treat our home and steward that and how, you know, and and that definitely there's lots of studies on how that ripples through, you know, our communities.

SPEAKER_01

Well, let's talk about shared ownership for a moment, because I know that's something you're passionate about. And I think for both of us having backgrounds in the startup world, shared ownership is what a lot of the startup economy was built on, uh, stock options and other grants. And and that was a huge part of uh getting people bought in to work those long hours and stay up all night till you hit the deadlines and just a different culture and a different lifestyle. So I think there is absolutely something to shared ownership. And uh, as we were talking uh before we hopped on today, one of the things you're saying is the United States might actually be behind or at least not as innovative in some of the shared models. So, first can we talk about what other what you're seeing in other parts of the world and then uh what you're doing and what's happening here in the United States to potentially introduce uh a third model.

SPEAKER_02

Yeah, so it is very interesting as we started looking across the pond specifically in the UK. You know, if you go search on the equivalent of Zillow in the UK, you'll see you can filter by for sale, for rent, or shared ownership. Right? That's not even a concept here in the US. We've we we assume ownership equals a mortgage. And you there are a lot of companies that are helping people, you know, aspiring to get into home ownership. And generally that means we want to help you either qualify for a mortgage or get enough down payment to get a mortgage. But you and I know this with all the companies we've built. Everyone at all my companies had ownership in the company, right? And the for a lot of people, having a 10% or half of a home would be a huge step forward and in really remove a lot of the friction of them getting started building wealth and participating. So I think that the it is time for us to innovate on that here in the U.S. I think we've been in this either rent or own. And now when we talked about how broken the affordability is, owning is so much more expensive that I think a lot of people are just kind of throwing up their hands or having to wait. And I think that this is going to cause a lot of pressure for new models. Uh either rentals starting to provide some participation or or new structures where people can still get the benefits of ownership without having to take on all of the maintenance and all of the transaction costs and a huge uh mortgage, which we saw in the last financial crisis, you you can be upside down on.

SPEAKER_01

Right. Right. So can you talk about more specifically what what you've done in trying to create um this some alternative options? And I I think people just aren't aware uh of some of the alternative options to get that jump start, to start building wealth in a way that might not be the traditional 30-year or 15-year mortgage.

SPEAKER_02

Yep. So we we created a very simple structure where you can have half of the appreciation while you're in the home without having to pay any transaction costs. So when we talked about you know eight or 10% to buy and sell a home, it just doesn't fit how so many people m live. My wife and I moved four times in in 12 years. And so, you know, if you're buying and selling homes, you're not getting ahead. But it it unlocks a huge amount of the inventory for people where you know either relocating or they're buying their first home. Um, so for us, it's a shared appreciation model. You don't have to take on debt. You do put 5% in, and that by gets you that 50% share of the appreciation, and you have a lower, lower total cost of ownership because you don't have to pay for. I call it the Costco effect because we're doing this with hundreds and eventually thousands of homes. We get cheaper debt, cheaper insurance, all the things that the consumer pays a ton and the prices continue to go up. You know, we're able to bundle that and provide a lower cost of ownership uh and a lower on-ram for people to start building wealth.

SPEAKER_01

That's incredible. And I think you just said something interesting. I want to go back to um some statistics you shared, and I might misquote the statistics, so feel free to correct it. But you said in the 70s it was approximately 1.9 times uh an annual salary uh of cost of home ownership. So yeah, we have to give a range. It was 1.9 to 2.5. Okay. Yeah, but still relatively low. So if we uh I'm sure average salary wasn't $50,000 then, but I can do math with that. So we're talking about a hundred thousand to you know, maybe a hundred and twenty thousand dollars was the average home price. So five percent of that would have been a little less than a month's wage. Is that approximately correct?

SPEAKER_02

Yeah. Yeah, that's that's about right. You could save up your down payment, even if you're doing 10 or 20 percent, you could save that up in in six months, right?

SPEAKER_01

Right. Or a year. And now if you're at six to eight or even ten and twelve times, depending on where you are in the country, um, let's let's use the same numbers because again, easy math. Uh so you know, seven times fifty thousand is three hundred fifty thousand dollars. To save five percent of that, you're at seventeen and a half thousand dollars. So you're looking at sixteen and half, yeah. I mean, you wouldn't even make that in nine months.

SPEAKER_02

Period. And and the transaction costs have gone up. You're still paying the same six or eight percent to sell. It's still a percentage. So as a to your point, as a percentage of your income, those transaction costs have just skyrocketed as well.

SPEAKER_01

Now, can you talk a little bit more about the transaction costs? You you've alluded to it a lot, you've talked about insurance, selling price, but what are those? Because I think a lot of even homeowners, they they want to build wealth, they know it's the the best next step towards the American dream or whatever it might be. They don't necessarily understand all the implications of those little things that add up on that sheet when you sign your mortgage.

SPEAKER_02

Yeah. It's funny you mentioned that because you know, we started this company thinking this was going to be the way the kind of millennial home buyer was gonna be our prime customer. And two-thirds of our customers are actually previous homeowners who've bought and sold homes. And it's precisely for this reason because they know how painful it is to buy and sell a home at the same time, and how much those transaction costs eat into what you actually walk away with. So I think it was you're a you're a marketing genius. I think it was David Ogilvy who said you there's two ways to market. You can either comfort the afflicted or afflict the comfortable, and you really want to do the former. And so what we found is people who've gone through the pain and suffering of buying a home, you pay, you know, one to two percent up front. Sometimes some of that gets rolled into the mortgage because they're kind of rolling in your origination fee, but you're gonna pay a lot of transaction costs. We're saving our average customer eight or nine thousand dollars at closing up front. But then when you go to sell your home, you're gonna spend you know five and a half to six percent with agents, you're gonna spend staging, you're gonna have to prep the home. There's a bunch of other costs and transaction costs that go into that. So that's where it can really be painful. It's it's usually six to eight percent on the back end to sell your home. Um and so that's the that's really what eats into a lot of the returns. Another way of looking at it is when you you know walk across the threshold of that new $500,000 home you just bought, you're underwater until it appreciates uh you know six, six or eight percent.

SPEAKER_01

That's fascinating. That's a really interesting thought. And you said something there that I you you said staging. And I know um obviously Zillow and realestate.com and all all sorts of other companies have basically you have to be a great marketer and you have to take the best images at the right time of day with the drone shot, and you know they're great images. I sometimes I enjoy just looking at at the photography. Sometimes the photography is less than uh seller, but has that increased over time uh the cost of staging? I don't know if you know anything uh about that, but before I remember, I remember when my parents looked for a house, we would go and drive around a neighborhood with a realtor or without a realtor, and there was uh the little tube on on the for sale sign with flyers in it. Has the cost of trying to stage a house changed? And is that a new added uh cost that didn't exist before? It's a good question.

SPEAKER_02

I think uh you know it depends on agent to agent. Some of them are rolling that into their their commission that they're charging and and and offering that as a service. I I do think this. Standards have r have been raised in terms of you know prepping a home for sale and showing it. And um, you know, it depends on your objectives, but some people are even doing a fair amount of upfit, you know, to get a home ready. Uh a lot of our inventory in the country has is pretty aged now. We've been, you know, behind on building. And so um sometimes you know people are even doing uh, you know, a remodel on the kitchen or whatnot to get max price out of the home on the back end. Um but all those are just our are strategies in terms of maximizing the the you know your net proceeds at the end. And so there's lots of options, but the the bar has definitely been raised. Having a great listing agent and presenting the product really well does outperform. So yeah, I think that's the that's certainly something that you if you're joining the home buyer ranks, you know, you you want to make sure you buy well and you and you sell it well.

SPEAKER_01

Absolutely. Um, you know, we we talked about Gen Z earlier, and and there was a recent study that said um it compared everyone at 28 years old. So it compared Gen Z to Gen X uh to millennials to boomers, and basically found that Gen Zers um at age 28, 38% own a home, which is a higher, higher number than I would have guessed compared to 36.8% of millennials. So that Gen Z is actually outpacing ever so slightly millennials, but then when you compare that at the same age to Boomers and Gen X, they're at uh 42% and 44.4%, respectively. Do you think that has to do with kind of the slow life model and getting married later? Um, and and why do you think Gen Z is outpacing millennials?

SPEAKER_02

My gut is that millennials sought the great financial crisis that was housing driven and saw homes crash and uh people upside down and lots of foreclosures. And so I think they probably had a little bit more hesitation there, is my guess. Okay.

SPEAKER_01

Um, but we're speculating. Right, right. And that's that's fine. Always trying to figure out why we are where we are. Um there's a great book by Ezra Klein and Derek Thompson called Abundance, and uh it's a a book on the economy, and they they touch on uh while it's not their their main thesis, they touch on inventory being a significant issue to many of the economic concerns within the United States. And I think you talked to a little bit Americans as a whole, the American dream build wealth by the house, you know, white picket fence. Could you talk a little bit about the inventory situation that we're in? We talked about starter homes disappearing, but what's the inventory situation we're in and what will change that? It's not good.

SPEAKER_02

Uh right now it is it is uh politically popular to blame Wall Street for our housing affordability challenges. It is not Wall Street's fault. We've bought less than you know one 1.6% of homes. Okay. Um what has really driven home prices is this difference in you know price growth and now uh interest rates. For a long time, the difference in home price growth and income growth was mass because interest rates were coming down, right, for so long. And so uh now that now interest rates are candidly back at a more normal level, but now we see what's been happening with home prices, uh with transaction prices, with all that uh going up. But the big driver is also in inventory. We're we're depending on which economist and study you look at, we're between one and a half and five million homes short. Wow. And we're not building enough to make up for that that lack of of inventory. Um and so I think one of the drivers there too was in the great financial crisis. Banks got bailed out, but builders did not. And so builders have always been very, very cautious since then to make sure that they are going to have all their homes absorbed and they're not gonna get uh they're not gonna outbuild, you know, what what the demand is. Uh but that certainly is a huge driver. We especially as millennials and much you know, a big cohort of people get in have gotten into home buying age. We just didn't build enough homes. And so that definitely drove up prices as well.

SPEAKER_01

So one and a half to five million homes short, that's a significant. I mean, those are percentage points of our population. So that's that's significant.

SPEAKER_02

It's it's significant enough that it's gonna take and and it's exacerbated, obviously, in areas where there's population growth, the southeast where people have been moving. Um and so yeah, we've got we've got a lot of a lot of building to do. I think there have some been some good bills in the House bill, particularly trying to remove some regulation and and make it easier for folks to uh to build more homes, which I think would help.

SPEAKER_01

That's great. And you you mentioned uh a lot of media right now is blaming Wall Street and blaming BlackRock for buying up all these houses and renting them and causing all sorts of pressure on renters. Uh so that's that's one thing that we're seeing from a media landscape or um call it a sort of macro landscape. The other conversation that's uh hit headlines a lot is are we going to get a 40, 50, 60 year mortgage? And what are the implications of that? Obviously, mortgages, I believe, prior to the 50s were five a year or so, five or 10 years, if I remember correctly, they were very short, and you had to put something like 50% down. Uh, then we introduced the 30 year, 15 and 30 year mortgages, which were a huge improvement. Now, fast forward, you know, we're 70 years past that, and they're entertaining 40, 50, 60 year mortgages. What are your thoughts on that? Is that going to solve the problem, exacerbate the problem, or just you know, another way to another political move? Primarily a political move.

SPEAKER_02

That one died on the vine pretty quick from what I saw because I it just it doesn't really solve the problems very much because you're you're only lowering the payment very, very little. And what it does is any amount that you're lowering it, you're also going to increase the demand uh and so the prices by that much. So, you know, if you are only gonna lower my payment by $200 for me taking a $50 instead of a 30-year mortgage, but I'm gonna pay hundreds of thousands of dollars more interest and build so much less wealth in the earlier years, but it's probably also gonna drive prices up because then you'll bring more demand back into the market because we have a little bit more affordability. It just doesn't solve the problem. It doesn't solve the broader problem. So yeah, I I I'm not a big fan of 50-year mortgages. I think part of what has made homeownership a great mainstay in this country is that it is a forced savings. We as Americans at the federal level and at the household level are good at spending, you know, a dollar and thirty cents for every dollar we make. And so having, you know, a mortgage that you're paying down where you're actually building, you know, building some wealth and and and kind of consistently uh paying that down, I think is a really is is a really helpful structure. And if you stretch it out to 50, you just you get so much less of that kind of feature of homeownership where people are actually kind of have a consistent savings that they're paying into.

SPEAKER_01

That's good. I love the uh force savings uh idea. I think that's so important. And it is true. You you have to pay your mortgage, otherwise you lose your house. But at the end of the day, there you have accumulated wealth, even though that's not complete liquidity. Uh it's not that hard, uh, especially if there's an inventory shortage, uh, you know, you you can get that back usually in some way or another. Now let's look to the future real quick as we wrap up. What what are your thoughts on the future of of home buying in America? What is it going to look like? What's it going to take to change? Um, what are your thoughts? If we could just kind of open it up and look forward, what what do you see on the horizon?

SPEAKER_02

So, you know, we we focused on a lot of the challenges people are facing right now. But I would say despite those things, I really think the American dream is both great for our country and it's still pretty strong, right? Like I said, 83% of Americans would rather own than rent, even in today's market. And you know, we're we're still at about 65 to 66% home ownership rate, which is higher than a lot of the other periods we've glossed over through this call, all right, than the the 80s and others. So we actually have very high home ownership rates right now.

SPEAKER_01

That's great.

SPEAKER_02

So I think it's a great I think it's a a really strong part of our economy. I think it's great for people to be owners. I think that's one of the other things that we're we're really elevating the public discourse is I think it's great for people to be, you know, owners in our homes, in our communities, in stocks, and be participating in the economy. I think that's one of the pieces I uh why I've dedicated building a couple companies to help more people participate in and really focus in on the homeownership side of the equation. I think it's a it's a great the the reason we call it the American Dream is that that is a really stabilizing great thing for you to be able to plant yourself in a community and be participating in that. Uh I think that America is continuing to grow and we're underbuilt, and so home prices are going to keep going up. Unfortunately, that's not going, we're not going to see home prices come down. I don't see rates coming down dramatically anytime soon, even if uh because of especially some of the broader macro challenges. And so for me, that means we've got this period where affordability has gotten out of out of control. And so we have a lot of people stuck, unfortunately, trying to figure out what to do. And I think that's where we I just saw the need for new models. So we went to go build one.

SPEAKER_01

I love that. And I think you said something really important. It feels like headlines and conversations and a lot of writing is on uh we're doomed, people aren't going to be able to afford houses. But you brought up an interesting point that we're at one of the highest owned home ownership rates that we've ever been in in this country. And that's not changing that much either. It seems like it's actually trending in a positive direction. So despite the headlines, there's actually some really good undercurrents going on. Doesn't mean it's affordable for everybody yet, but there are good undercurrents and there's good backbone. So I love that. And you're you're part of that. How can people find out uh some of the things that that you offer and how they might be able to figure out a way that a home could be more uh affordable when they might have previously thought it was out of reach?

SPEAKER_02

Yeah, if people are looking for a more flexible option, you know, we've got everything from first-time home buyers to downsizers that want to look close to the grandkids uh and aren't sure they're gonna be there for more than five, seven, ten years, which you need to be sure if you're getting a mortgage, um, you can go to acrehomes.com. That's where we uh have opened up in a handful of markets in the southeast. And we're gonna be expanding here uh more broadly. But yeah, we're we're excited to be pioneering this space of kind of shared appreciation, a new new ownership model, and we hope there's five, ten, fifteen more companies that servicing different parts of the country and and with with additional models uh that aren't just a big a big mortgage.

SPEAKER_01

That's fantastic, Mike, and I appreciate all you've done over the last decade and a half or so to help uh homeowners and that you're continuing to do. And I appreciate your insights today. And I want to thank everyone for listening to this episode of the Ryan Vet Show. Until next time.

SPEAKER_00

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