Amherst’s Post

Transcript

A conversation about affordable housing and the potential here to maybe increase the housing supply in this nation. We had that conversation with one of the investors in that space. His name is Sean Dobson. He runs a company called Amherst, and he shared his take on the health of the housing market. Take a listen. So in most of the markets were involved in the supply of homes for in is actually above where it was pre COVID, which is very different than the first sale market, which we still see down about 2530%. Now the for sale market has grown quite a bit. We're up about a third from the bottom. And these are big moves for such a big asset class to have supply fall by 40% and then now rise by about 25 or 30% in the last 6 to 8 months. So we're seeing a little bit of what we would call a normal market where the pace of sales is about what it was pre COVID of the supply is coming not restored. Coming back up and then we're seeing in the rental market that rent growth is normalizing to rent growth is is sort of steadily around the 3% range in the metrics that we watch are sort of the live markets. And I know that the Fed is watching the sort of the real lives rents which are lagging even more. But what we're seeing over on housing is I would just say a big decrease in volatility and the big wave of volatility getting further behind us. So when we talk about housing and affordability, I know each presidential candidate has their own proposal to solve that. Specifically by addressing the supply shortage, whether it's to buy or to rent, when demand really is not in question here, right? Doesn't make sense to come up with A1 size fits all federal response. Housing doesn't hasn't gotten the attention that it needs to get. We're 15 years post financial crisis and I spent a lot of time in Washington trying to trying to prevent exactly what's happened, which is there's a trapdoor in the United States around housing. If you miss a couple of credit card payments, if you miss a medical bill payment, if you miss a student loan payment, if you miss a rent payment, a car payment. Two or three of those missed payments, your credit score plummets. And Americans don't really know the formula for how that's all correlated. But the United States post post financial crisis, we shut down what was called the subprime mortgage market and we basically just shut the door on home ownership for 10s of millions of Americans. The reason that we built our single family rental platform was to serve exactly those families that were left out of the mortgage market. So the one-size-fits-all of like, let's build more homes. It will help some people. Let's give a $25,000 down payment. It will help some people, but it won't create really any change in the housing market. These are very small subsets of people. Imagine that $25,000 down payment. The group of, of, of would be homeowners that are only missing the $25, 000 is a very small subset. That means they have the free cash flow, they have the the credit score, they have the income, but they just haven't saved that $25,000 yet. That's going to help some people and I'm all for it, but it's not going to, it's not going to move the needle. Building more homes is also not going to move the needle. If you add another million, a million and a half units, where you're going to build those homes is out in the periphery of these of these cities. So putting homes out there that are another, you know, thirty, 4550 minutes from jobs isn't going to make isn't going to make a difference. What will make the difference is lowering the bar of access to credit, giving that that second chance mortgage to someone who has a credit score. That's not perfect, but the average American has a 700 FICO score and they're locked up. How do you do that without running into the same pitfalls that led us to the housing crisis? Because I remember the Bush administration and really. It's kind of an outgrowth of the Clinton administration. This was their gigantic plan. The idea was you lower the bar just a little bit, you get people in the door. Right. And of course, to a certain extent, that backfire. Yeah. Well, how you do it is you go back to what subprime was in in 199819992000, which was a collection of borrowers who paid a little bit higher interest rate than the average rate to compensate for the credit risk of that pool of borrowers. And even in the worst of times, 2/3 to 80% of those loans work done. But what happened in 2000? And, you know, we were on the front lines of the two. 1009 crisis because we were out, you know, waving the flag that something was broken in 2006. But that special case had a lot more to do with fraud on behalf of the mortgage lenders and the mortgage borrowers than it did, which is someone who has a lower credit score and has a slightly higher probability of risk. But our solution works for these families. And I think when I hear, when I hear Vice President Harris or I hear the vice president kind of the other side talk about housing, I get excited that we're finally going to get some reform. And it's gonna have to be mortgage reform, nothing else. Work. Thanks again to Sean Dobson. He is CEO, Chairman and CEO of Amerson or discussion on housing.