2020 Real Estate Forecast Summit

Please welcome National Association of REALTORS® 2021 President Charlie Oppler.

Good morning and welcome to our second annual forecast summit with some of the top economists in the country. I'm Charlie Oppler, president in 2021 of the National Association of REALTORS®.

If you have told me that last year in 2019 we would finish the way we did and that 2020 the housing market could finish ahead of where we were in 2019, I would have been surprised to think about what's happened with a pandemic in 2020. I'm shocked and after this year I think our shock thresholds have all been reset. Much of the success REALTORS® have had in 2020, and I know in 2021 come from some of the insights that we get from our economic research and analysis so today the National Association of REALTORS® brings together some of the country's top economists who are experts in housing commercial and the general real estate market.

This event is the place to be for anyone who wants up-to-the-minute information on the housing industry that drives one-fifth of our economy, you'll get insights and predictions in the real estate market that you can't get anywhere else. Here are a few of the highlights that we'll accomplish today we'll look back at 2020 and conduct a year-end review of the real estate market performance. We'll look forward to 2021 and beyond and hear educated, really substantial forecasts of today's real estate market and expectations.

We'll hear from our guests on the many challenges and opportunities facing the real estate industry. We’ll address both the residential and the commercial markets as well and of course we'll discuss the impact of public policy on all of these issues.

We know 2021 is right around the corner, so we'll talk about how the election results might, will, and I'm sure they will affect our industry, our communities, and our clients.

Our original keynote speaker and guest, Dr. Jared Bernstein, sends his regrets and promises to address our membership in the future. This is particularly hectic time during the transition in Washington, DC, and as you know, Dr. Bernstein has been nominated to be on the economic team in the Biden administration, But I'm delighted today to share that we have Jim Parrott, who served in the Obama administration, advising the White House on housing issues. I look forward to hearing his thoughts about homeownership the new administration and more.

Our other distinguished guests will participate in several panel discussions each devoted to a critical aspect of our industry: the overall economy, the residential market, the commercial market, and demographics. NAR will record today's session for our 1.4 million members to provide a value-added resource, so that you can have this great economic summit to discuss and strategize with your clients. Registrants will receive priority access to the recordings. You may have questions. Please put them in the Q&A box for most of the sessions today. Keep in mind they are not anonymous. We encourage you to spread the word today about today's event in social media by sharing insights you learn with the hashtag #NARforecastsummit.

I'd also like to thank many talented members of the NAR staff for putting together this event, particularly Dr. Lawrence Yun, our chief economist and senior vice president of research. Lawrence is one of the country's top economic forecasters. His predictions are followed, analyzed, studied, and praised throughout the corridors of Washington, DC. Among many of his accomplishments you may not be aware of, Lawrence taught the importance of private property rights and the workings of a free market system in Russia during the critical transition years after the collapse of the Soviet Union. Thank you to Lawrence and his research team. NAR will continue to lead the nation on analyzing the latest housing and real estate trends, the economic data, and translating it into useful thoughts for all of our members to use. And now I'd like to turn it over to Lawrence, who will provide the big picture, including a consensus forecast based on a new survey of 30 economists, including many of our guests today. Thank you all for being here, and thank you for attending the second annual summit. Welcome, Lawrence.

Thank you, President Oppler, for introducing and organizing this summit. It is a critical time, as Charlie mentioned. When the pandemic began, tremendous amount of uncertainty, large scale, knowing that we encounter the foreclosure crisis 10 years ago, so what was going to happen with so many people losing jobs? And to our surprise, the housing market not only recovered but then then some, roaring past the pre-pandemic activity levels, strong activity.

So what we want to do today in the whole session is cover various aspects of real estate: residential, commercial, demographic factors of many areas, and to not only assess how NAR is viewing the market but we want other perspectives as well to see whether there are areas of agreements areas of disagreements and why, so to explain what has occurred and what is possibly likely to occur in the future.

Let me put the screen onto this slide, so hold one second as I share the screen onto the presentation. All right there we go.

So let's first turn to the economy. We hit a recession, lost 20 million jobs in April. To put it in perspective, before the pandemic America experienced the longest economic expansion ever – 10 straight years of job creation. You can say President Obama, President Trump, 10 straight years of job creation. That was 20 million jobs, but in a single month, we lost all the 10 years of gain in a single month in April, with job losses, but as you can see in recent months, jobs are coming around. However if we look at the monthly job additions, it is beginning to diminish.

So we saw a burst of activity in May and June and beginning to fizzle out, which is implying that the initial stimulus package has helped many people, but now the savings are becoming depleted. Right now in Washington today, they are trying to negotiate what the next stimulus package will be, because without the next stimulus package, we could possibly go into a slight modest recession again, but stimulus will certainly keep the economy on a positive path until we get the vaccine distribution and there will be a home run once we get the vaccine distribution to get us back to the normal life. Now unemployment rate, after having shot up, is steadily declining and one can say is actually making much better progress than what many economists anticipated back in, say, April, May. Some people were talking about even 20% unemployment rate throughout 2020, so thankfully at least unemployment rate is going down, but compared to the pre-pandemic levels, it is not acceptable.

We still have large work to do regarding the broader economy. All 50 states have lost jobs, and compared to one year before, you see the number for various states. So for example in, say, Michigan, they are down 8.6% from one year ago in terms of jobs, while, say, in Idaho, or in fact, I would say Idaho is the only state to hold on to employment now compared to one year ago, so no change, but all 49 states are experiencing a decline with the critical senate races in Georgia.

I don't know whether it will make any impact in current polarized division in the country, but the job market in Georgia they're down three percent, which will be a little better than national average. Nationwide it is down about six percent from one year ago. If we look at the consumer confidence, the data from the conference board is showing that right now it is very close to the number 100. Number 100 would be associated with fairly neutral, about half of the country saying things are improving, other half of the country saying things are not improving. So this is somewhat surprising given that we are in a recession, high unemployment,pandemic concerns.

So why are people fairly being neutral on average? One reason could be that the wealth of the housing market is contributing sizeable financial comfort for homeowners, so for homeowners, you see that green line, home valuation is hitting regular high, yet the mortgage outstanding balance is not rising proportionally, so the gap is the housing. Well, and there's a sizable, a typical home buyer, one year ago, they would have accumulated $24,000 in housing wealth. That is quite sizable, but we also know at the same time, the high unemployment people are depleting savings. But those with exposure to the stock market are also doing well, so we have a very diverse economy.

Some people not really feeling the impact of the recession because the wealth from the stock market and housing sector is rising. Those renters with very little exposure to the stock market, I mean, they are in a very precarious condition about, you know, what will happen one month from now or two months from now.

Now let's turn to the remarkable housing sector. Two charts. One is monthly data, and the other is the annual figures. So on monthly data before the pandemic there's slight movements up and down, and it really went down during the lockdown. Then, when the economy reopened, you see these sales surge, really began to burst out and breaking out much higher.

Now, if we look at the annual chart, annual figures, interestingly, have been stuck at five- to five-and-a-half million for the past five years, and this year will be no different, because even though sales are surging in the second half of the year, we have to remember we missed a critical home buying season in the spring, so for the annual figure, it would be only modestly higher compared to 2019.

Looking at the home builders, new home sales, very similar story. Second half, monthly tally really rising, and also for 2020, the home builders will actually exceed their 2019 figure by a comfortable margin, indicating that whatever the builders build, they can easily make the transactions.

So going forward, if we look at the leading indicator about the housing market, pending contracts up 20% from one year ago in October, implying that the winter months of this season could be one of the best home sales for winter season ever. Mortgage purchase applications, not the refinance, but to buy a home, up 27% from one year ago. We also look at NAR's SentriLock, those lock boxes to obtain the key to open the houses, up 21% from one year ago. Buyer traffic. We took a survey of REALTOR® members – how is the buyer traffic? Up 32%, and the mortgage rate hitting low, low, low, and I think it will stabilize but it's still trending down.

Conditions as to the mortgage rate, so very good, but one constraining factor is that lack of inventory is the reason why home prices are rising so strongly. At some point, if the home prices continue to outpace people's income growth, then we will run into affordability challenges, especially if the mortgage rate no longer declines.

So let's look at the office market. [alarm sounding] That's my marker to hurry on my presentation.

If we look at the commercial real estate market, the office and retails have turned negative in terms of leasing activity. Everyone knows that this is the condition, but this is quantifying those effects, but one sector that is holding on in commercial real estate is the industrial spaces.

So let's go into the consensus forecast of 30 economists. So this is not my forecast, but I am included among the 30 people who participated in the forecast. So 2020, we hit a recession, and these are estimates as the data are still being collected for November and December, but as we go into 2021, consensus believe that we are going to turn positive. Surely the vaccine will help in that process, but also in 2022, still rising at 3%, and therefore unemployment rate certainly trending down to 5% two years from now. Inflation really not a concern – slight uptake, but these are nothing alarming from the Federal Reserve perspective, and therefore the mortgage rate to hang around at near 3% for the next couple of years, so no longer declining, but at least stabilizing at roughly 3% range.

The Fed funds rate is implying that Federal Reserve is likely to raise interest rate at some time in 2022, just one modest quarter-point. Rate increase of home prices positive, no danger of any price decline. We just want price increases to moderate so that affordability is there for the renters who want to buy a home, and we need more home building at least. The consensus is implying that home building just may not come through in 2021. Lumber prices are high, the construction workers, the new construction workers, some are, uh, don't have the skill set. It requires training, but by 2022 we will get more inventory and the supply.

Work from home percentage has really risen in 2020 to 21%, but now expected to steadily decline. This is 100% working from home, but I think the flexible schedule two days a week, three days a week, coming to office, that is unknown. We will see how everything plays out, so this is the consensus view related to work from home situation. Before the pandemic it was only 6% working from home.

Now let's go into commercial real estate. Office vacancy rates rising in 2020, was beginning to decline, with the vaccine in 2021, the industrial and multifamily really not impacted all that much, but the consensus believe it is the retail sector that will really begin to see a continuing rise in the vacancy rate, and also this is NAR research, not the consensus.

So we tried to identify which 10 markets are coming out of the COVID or even during the COVID. The momentum is so strong and other factors, factors such as small business opening by metro market, the mobility rate, you know, near recreation as people are working from home. Net migration, the local current economic conditions, the work from home possibility, so we consider many factors and we have identified these top ten cities

as likely to outperform. So it includes three midwestern cities because they're very, very affordable, and we anticipate maybe the coastal, western cities, you will see migration away from the western cities, coastal cities, maybe they go to inland California or even to Phoenix, Provo, or Boise City, Spokane helping in those markets, and when we asked the 30 other economists what they thought, well, they ranked Phoenix as the top market. Austin, Charlotte, Atlanta come coming in at the top tier level, so as you can see, people have divergent opinions about which markets would do well, but, overall, this work from home flexibility, along with where the job growth is occurring faster, I think that would be a determining factor in 2021 and we have the list of the panelists who participated.

So thank you for listening, and now I will turn it over to our director of media communication, Troy.

All right. Thank you Lawrence. We'll now take a few questions from reporters only at this time. Please submit your question by using the Q&A function at the bottom of the screen and include your full name and news outlet, and Lawrence, I'll start with the first question. Let's think back to the second half of March. It's the early days of the pandemic-related strict lockdowns. How concerned were you about the market? Did you think that another foreclosure crisis, you know, was looming or to what degree, if any, were you confident in the market resiliency?

Well, Troy, you know, if we remember those times you got a lot of media calls which you handed over to me, the number one question was about foreclosures given that 10 years ago, we had the foreclosure crisis, and one thing that I felt more confident about was we will not see price declines. We will see stable prices because we didn't have those bad mortgages subprime mortgages that overstretch people's budget adjusting and, quickly, so there was not going to be any implosion on the mortgage market, furthermore 10 years ago, builders went wild. They built over 2 million homes way, too much in relation to the population growth, this time around we have an inventory shortage, housing shortage. I thought the prices would hold on, so that was my expectation, but the surprise is just surge of home buyers and then prices just rising at double-digit rate of appreciation.

All right. Lawrence, we have a question from Lanny Rosales at the American Genius, and Lanny asks, "What role is political uncertainty expected to play on the 2021 housing market?"

So I think the Georgia election will really determine, because as one knows, you know, whether the Senate is retained by the Republicans and where people view that as more of a compromise activity or whether the Senate will flip and go into the Democratic party, where there's now more possibility of pushing more aggressive agenda so, you know, without going into the politics part, I think this is why everyone is focused on Georgia. I'm glad I am not living in Georgia because I think the television has just flooded every single day about how bad the other person is. But I would say for the housing market what we find is that independent of the political makeup, it’s all about the pocketbook issues. Are the mortgage rates favorable, and the consensus is indicating yes. What about job creation, and with the vaccine, that's a game-changer, and vaccine will lead us to more normalizing of life activity and job creation, so combining low interest rates with job creation, 2021 should do well independent of how the election results happen in Georgia.

All right. Lawrence, we have a question from Elise Glink from Tribune Media, and she asked, "What do you see happening with mom and pop landlords? Do you believe that enough renters are not fully paying their rent to cause problems for them?"

So the eviction moratorium, now we don't want people to lose housing in this difficult pandemic period, but the way Washington designed it earlier, it was just a quick but I believe in misdirected way, because people have to understand the people who are renting, they are people who have invested their money, sometimes it could be their life savings to earn some rents, so what is better would be to provide rental subsidies to the renters so the renters can stay in the housing and they are able to pay the rent, so the small investors can get some rate of return on what they thought the reason, why they purchase rental property, is to get some rate of return, and I think currently the stimulus measure they're discussing they're talking a rental component, rental subsidy, is included hopefully that gets passed, because we want to ensure that until the vaccine is discovered, we need this little bridge time and we want to assure that people stay in their homes, but also the small real estate investors are able to earn what they invested in.

All right. Lawrence, we have time for one final question, and this one is, "As you look far beyond the pandemic, let's say five years from now, what opportunities and challenges do you foresee?"

You know, that is really, uh, to look that far ahead, but I would say that work from home flexibility will become quite normal, and when I say that, it does not mean that, you know, working from home forever as some technology companies are offering their employees, but more of the case that [people] come to the office three days a week when there's a lot of meetings, but the other two days we're going to give you quiet time to work from home because workers, American workers, office workers, have clearly demonstrated throughout the pandemic that [they] could be equally productive working from home, and therefore I think there will be increased flexibility, which means it may favor outlying suburbs or even small-town communities where homes are more affordable, because people do not have to commute to downtown every single day and they can feel more comfortable going farther away where homes are more affordable.

All right. Thank you, Lawrence, and that concludes our question and answer session. For reporters with questions that we did not get to, please email me Troy Green at t green, that's t-g-r-e-e-n at n-a-r dot realtor or Mantill Williams at mwilliams at nar.realtor and we'll get back to you. Thank you.

Please welcome National Association of REALTORS® 2021 President-Elect Leslie Rouda Smith.

Good morning everyone, hi. I am Leslie Rouda Smith, your 2021 National Association of REALTORS® president-elect, and I am coming to you from Plano, Texas. The housing market has been one of the few happy surprises this year, making sharp rebounds thanks to low mortgage rates and the fiscal stimulus. In my own Dallas area market, I'm seeing many instances of multiple offers as I'm sure many of you are around the country as well. While the economy has come out of the recession and some jobs have been restored, there are still several million people that remain unemployed. Commercial real estate is still reeling from the pandemic. The economy must continue to grow on a sustainable path, creating jobs, new businesses, and raising income levels for everyone. Our economic panel will discuss the challenges and opportunities facing our United States economy in 2021 and beyond. Will interest rates remain low? Will taxes go up because of fiscal spending? Will global trade and investment increase?

We are pleased to host three well-respected economists who will help us answer those questions: David Berson chief economist of Nationwide Mutual; Dana Peterson, chief economist of the Conference Board of Think Tank; and Nela Richardson, senior vice president and chief economist at ADP, which provides companies with HR payroll tax and benefits administration. Our moderator is Natalie Campisi, senior mortgage and housing reporter for Forbes Advisor. Previously, she was Senior Mortgage Reporter and Analyst for Bankrate. Her work has appeared in such publications as CNBC, The Chicago Tribune, and MSN. You can read more about our guests and their expertise in their bios that are available on the economic forecast summit website. I'm excited to hear your insights, so with that, I'll turn it over to you, Natalie.

Sorry about that, I think I was muted. Thank you so much for having me. I'm so pleased to be here. As we quickly approach 2021, there are a lot of what-ifs around the economy. The vaccines are sort of in sight, luckily, and we still don't know who will control Congress, so there are a lot of moving parts here, but I'd like to start by asking, without stimulus and with the COVID cases on the rise, are we looking at a double-dip recession?

Sure, I'm happy to weigh in on that. Technically, the NBER doesn't have, doesn't count double-dip recessions. They would just say that it's just two weak points in a larger recession, but I think the major question is are we looking at a soft spot, or further weakness over the next quarter, and indeed our own forecast anticipates that, certainly for the winter quarter, that we're probably going to see growth that's less than 1%. I know some forecasters even have a negative print and certainly incoming data that we've seen from labor markets suggests that yes, they're slowing heading into the end of this year, and certainly if we do have these fiscal cliffs in terms of people, forbearances on paying mortgages and rent, if those go away, and also if there's no material fiscal stimulus package passed, that we could see even a greater weakness than we're even projecting over the first quarter and potentially into the second quarter of next year.

Natalie I'd agree with what Dana said. It doesn't look as if we'll be in what would be considered another recession. We could have a soft patch, and I think passing more fiscal stimulus is important to get us through that, but given that the vaccines are coming, that soft patch probably would not last very long, so we're looking for 1% to 2% growth in the first quarter.

I think in the second quarter we're probably going to be back to 4% to 5% growth and then very strong growth in the second half of the year, so it's really a soft patch that we just have to get through of a few months, and then I think the economy is going to grow pretty well and it's going to be another pretty good year for housing.

Now, Natalie, if you have time for one more comment on this, I think the, to add on to the great comments that have been made already, I don't think the risk as well as a double depth recession as so much a K-shaped recovery. That is critically important because in some sense, all recessions are K-shaped but this one is particularly peculiar because of the fact that there have been winners and losers in the economy that has been so extreme, so housing definitely a winner, at least in the second half of the year.

Tech services a winner.

If you look at the stock market, it's so apparent that those big five tech companies have been driving growth, but there are losers too. Low-income workers are seeing, you know, four times the rate of unemployment. As higher income workers, we are all going through the pandemic, but people are experiencing it very differently, and ADP research has shown that younger workers and older workers have seen the biggest hit from the pandemic when it comes to employment.

So what does that mean for real estate? It means that we may still see some long-term effects from first-time buyers who were hit hard just like we saw after the great financial recession that were hit hardest by this pandemic. They may be slower to regain their footing, get those jobs back, and buy homes over the longer run. Absolutely. I think that that's such a great point because, you know, we have homeowners who are seeing record levels of equity, and at the same time, first-time buyers are sort of locked out of the market in most areas. Even with the low interest rates, it's really not offsetting the high cost of housing for a lot of a lot of people, especially first-time buyers.

And then we have you know people that are, you know, in these industries that are hardest hit, like travel and leisure.

You know, kind of shifting over to those folks who have been hardest hit, you know, job openings were around 2.4% in October, which is a hopeful sign that, you know, there's some recovery there, but how is permanent job loss affecting the economy and, you know, how is that going to affect those folks? What does the recovery look like for some of those people?

Well, I'll take this one even though I just spoke because we've been tracking this quite a bit at ADP. So let's just do a little history lesson. I promise it won't take long. You know, in February we were at a 50-year low when it comes to the unemployment rate, right, and so what we've seen so far is such a sharp reversal, and the hope was that these jobs, these layoffs would be temporary, and because of stimulus and PPP, we found that in June, at the height of the job gains, 4.7 million plus jobs gained. PPP-eligible firms were actually able to increase employment by 2.3 million from the low, so stimulus played a huge role in bringing those workers back. Now with these programs set to expire in December, the key question that you ask is so critical: Will these temporary losses stay temporary, or will they become permanent?

As the hardest hit of service sectors like leisure and hospitality come back up and we get the vaccine and all the wonderful things that Dana and David had talked about, expected in the second half of the year, hopefully we'll get these workers back, but we also see that firms are adjusting. They're making changes to how they do business. In fact, you know, a majority of firms ADP surveyed said that they are doing something different in their business plan, and the question is are these changes permanent or temporary, and will they lead to those job gains? I think that's still unclear at the moment.

If you look at every economic cycle in the post-war period long-term unemployment has peaked after the recession ended. Now we think the recession probably ended in the spring, given the strong growth we had in the third quarter, but that suggests if we're going to follow the previous path, and there's no reason not to expect that the long-term unemployed won't peak as a share of total unemployed until some months afterwards, and given the slowdown that we're we're probably going to see, December, hopefully not past March, that's going to go up again, so we should expect that the long-term unemployment problem is going to get worse for some months even with strong growth next year, now that the long-term unemployed as a share of total unemployment will come down over the course of 2021, but it's going to be a problem, as it is in every early in every expansion, every recovery that we've seen.

I'll just weigh in. Our our thoughts are that you're going to have differentiation in terms of who's heavily impacted and you have to look at demographics, so, for example, women have been very negatively impacted by the pandemic, as well as many minority groups, and that's because of labor market segmentation, especially with regards to minority groups where they found themselves in sectors that were highly vulnerable to layoffs mid-COVID, and those sectors are going to take longer to recover. I call them work-versus-play sectors, or leisure, and those leisure sectors including many that Neil already mentioned: travel and tourism, hotels and restaurants, the gig economy, very highly discretionary types of services.

Many of these people find themselves in those places, and with respect to women, many women have been very challenged by the child care crisis, right, so schools have been closed or intermittent and there isn't adequate access to child care, so many women have pulled out of the labor market, and indeed as many older workers have permanently left in terms of retirement, and so you are going to see this labor market scarring, and also I would add in younger workers. Many of them, and just younger people, many of them have had their educations interrupted and they're having difficulty finding that first job or they're in their first job but they're working remotely, they're very isolated, that's going to have implications for the quality of labor going forward, so I think that there definitely will be some labor market scarring and hysteresis as David mentioned, with respect to the labor market, and that we're not going to see the unemployment rate go back to the roughly 3.4% that we saw pre-pandemic, but probably level out around 5%.

Now, you know, in a normal environment, 5% would be great, but, you know, certainly in relation to how far we've gotten in terms of lowering unemployment rates on to that mid-three percent range, that's still quite elevated, absolutely.

And how is this impacting consumer spending, with these higher levels of unemployment and, you said, women getting out of the labor markets, and how is that impacting the economy, and how is that tracking into 2021?

Sure I guess I can – oh sorry, go ahead. No, David, please. Consumer spending's actually been very strong, you know. Nela mentioned the K-shaped recovery. Well, for those in the upper part of the K, things are actually pretty good, so spending's been good there, but on the down part of the K, those households have been helped significantly by transfer payments. Well, unfortunately, those transfer payments have, to a large extent, come to an end or are about to come to an end, making additional fiscal stimulus very important.

So if you look at consumer spending, it's actually held up really well because of a combination of good jobs for those in the upper part of the K and government assistance for those in the bottom part of the K. We've already started to see it slow because government assistance is fading out. It will slow still more if government assistance goes away altogether, and I would just add to David's comments with respect to the K-shaped recovery – it also applies to industries, and certainly the types of things that households are buying, we've noticed that spending on goods, durable goods, has been extremely strong, while spending on services has been quite weak.

Indeed, even when we look at goods, people are buying things like cars and patio furniture and those types of things and, you know, that's really not sustainable, so there could potentially be somewhat of a lull over in the first quarter of next year, but we're anticipating that there'll be widespread availability of vaccines by the middle of next year and that should result in a transition in spending away from durables or at least, you know, less in terms of goods, but more in terms of services, and so our own forecasts, we've got like 6% growth in the third quarter of next year for the U.S., and then like 4.5% for the fourth quarter in anticipation of this kind of swapping out but, again, I agree. You know, consumer spending has been strong, but when you look at the details under the hood, it's been very bifurcated between goods versus services, right, and kind of looking at another bright spot, the stock market.

I know this is, a lot of people said the stock market is not the economy, but is that an indicator the S&P, the Dow, of, you know, a smooth road ahead?

I’ll jump in again, sorry, I mean, when I look at the stock market, I see it as a reflection again of the K-shaped recovery that Nela talked about and that David also talked about where when we look beneath the surface it's been tech stocks that have outperformed. Also consumer discretionary as well as healthcare stocks and pharmaceuticals and financial services, I mean, these are the industries that have actually done well. Why? Because you can affect work from home, or you can automate, or with respect to technology and pharmaceuticals, these are the things that people need during the pandemic, and so those stocks have been outperforming and have been driving the massive appreciation that we've seen in the stock market since, you know, the collapse back in March, but when you look at the rest of the other indices, they've been quite weak, and reflection of the bottom portion of that K in terms of industries that have been suffering, you know, looking at airlines, cruise ships, hotels, restaurants, you know, certain types of retail, you know, we know that online retailers and warehouse stores have been doing very well, but it's the brick and mortar stores and those stores that don't have access to the internet or don't have that presence, and so I would say that the stock market is a reflection of certainly that K-shaped recovery, but it's not necessarily a signal that everything is all good or that everything is going to be great.

Indeed the stock market reflects expectations, so expectation that there's going to be monetary or fiscal policy or vaccines but not necessarily what's going on on the ground in the real economy, you know. The stock market is a great compass, but it's not a great map for where we are now, to be honest. I mean, if you, if we're really realistic about the stock market, it was two bad weeks in March, and I guess ever since then, we've seen a steady climb, and that climb has really been based on near-zero interest rates from the Fed stimulus and a bipartisan stimulus that we saw earlier this year and the expectation around a vaccine and optimism about that, and that's just kept momentum going higher and higher, but it doesn't reflect where the economy is now.

The stock market is a forward-looking discount mechanism, so the stock market is saying to all of us, “Yes, in a year things are going to go back to normal,” and here I think that's where the optimism may be stretched.

Typically, in a recession it takes earnings, which are the key driver of stock markets over time, it takes earnings about three years to recover from a trough and right now if you look at analyst surveys, they're expecting a rebound next year, so even as we've seen stocks climb steadily higher, I think you can't dismiss the volatility to come, especially as these numbers worsen in the near term as we're in the height of the pandemic and before the economy is more sure-footed than it is now.

Right. You know, if you look at the forecast that Lawrence laid out, the consensus number of 3.5% real GDP growth, and many forecasters are stronger and some are weaker, we think growth will be perhaps a percentage point higher than that, and there are folks on the street that are well above that, but even if we get that 3.5% growth, that suggests that earnings growth next year is going to be pretty good. If you get good earnings growth combined with a Fed policy that remains amazingly easy, and they're not going to tighten anytime soon, that's a combination that suggests that equity prices on average should move up again next year.

Wow, okay. That's some good news there. It's looking at the Fed and what and their role in the economy and, you know, how they kind of pulled it back from a cliff in many respects. Will we see inflation rise in 2021 because of some of the Fed's policies, and how would that impact the economy as a whole?

Well, I think we will see inflation go up, but I don't think it's going to go up at a worrisome pace. Oil prices are up already. If the world economy recovers in 2021 prices, particularly of commodities, that will put some upward pressure on prices, but the things that have caused inflation to be so weak over the last decade – the expansion of information technology into all areas of our lives, the expansion of production to low-cost areas, those things aren't changing and that's going to keep a cap on how high inflation can go up, at least in the near term, so while I think inflation will be higher next year, I, yeah, maybe 2%, well, that's where we were just a year or two ago, so it's not a worrisome level.

I agree with David. We're not terribly concerned that there's going to be this inflationary spiral upwards. Indeed, he's absolutely right. All the factors that were depressing inflation over the last decade are still there, and indeed I think they are going to be some additional factors here with respect to telework and moderate global demand. Just looking at telework, many businesses, we've done some studies, are thinking about lowering wages for employees who move to lower-cost districts, and so that suggests some wage compression and consequently a cap on inflation. If anything, if you are going to see inflation, it's going to be an asset prices and we're already starting to see that, certainly, with the stock market raging despite the fact that, you know, the number of cases of people infected with the coronavirus are elevated in the U.S. and also with respect to real estate prices. So again, getting back to that K recovery, those people who own real estate assets, residential real estate assets, are doing well because their home prices are appreciating, but it also creates inequality in terms of folks who are trying to gain access to homeownership and they can't because they're being priced out, so I think, you know, most of the inflation, I agree, you may have somewhat higher inflation rates, and some of that's going to be basic effects and some of it's just going, but, you know, we're not going to get much above 2% if at all, and a lot of the inflation is going to be in asset prices in our view.

We have a question here from Brian Jessen: What will the effect of the massive federal deficits have on the economy and interest rates over the next five years? The unprecedented debt levels seem to have been ignored.

So that's a common question. I'll let somebody else happen. The analogy is, and I know it may not satisfy the questioner, but you don't worry about the water damage when you're trying to put out the fire, and we've seen the deficit rise, but it's to circumvent what could have been a really, and may still be and, for some folks, a really disastrous downturn in the economy. So we're seeing debt levels relative to GDP about the same as World War II now. During that time, the economy was able to grow its way out of that debt. It's less likely, even with the 3% that David just mentioned, forecast, it's going to be a while before we could see that kind of erasure of debt that we saw in World War II, but the good news is that interest rates are very, very, low, so financing that debt is less burdensome than…economists, when they look at high debt levels, are typically concerned about, so, yes, it's high, unfortunately, no one likes to hear the word taxes, but that's the way you build the revenue to combat debt. But that's not where we are now. Where we are now is trying to get an economy to weather this pandemic, and that's going to require some fiscal stimulus. But it's in the context of a very low interest rate environment that's likely to stay low for much longer than we even expected in January.

Sorry, go ahead, David. No, go ahead. You know I'll go. Okay. Sure, I mean, I agree with Nela, you know, these balances are very high because of the fiscal stimulus, but even before we got here, you had the issue of outsized sovereign debt, and not just the U.S., but globally, and the thing is that I think in the U.S., you're going to, there's very little fiscal discipline going on, and not only will you need to generate revenue, you also have to address entitlement programs, so the spending side, and no one wants to touch that, the political, you know, football that no one wants to address but, you know, at some point markets are going to be less forgiving.

I mean, the reason why markets have been published in the U.S. yet is because, you know, treasuries are seen as a safe haven asset, you know, the U.S. dollar is, you know, more or less an international intermediary for current, for finance. It's a reserve currency, you know, all of our debt is in our own currency, but you can get to the point where the central bank, the Fed, may feel uncomfortable raising rates at some point, not in the next few years because, you know, fiscal austerity right now is probably not a good idea but, you know, three, four years from now and, you know, markets are going to look at that and say well, what is that going to do in terms of, you know, debt service, right?

Debt service is going to take over in terms of the share of GDP, and so at that point, we may see you know the prospects for financial crisis in the U.S. related to debt, and the other thing is that there’s, you know, there's crowding out, right? So if you're an investor, are you gonna go for the risky asset or the safe one, right? So certainly these outsize deficits are not a good thing in terms of investment as well as with respect to ultimately the, in the long run, raising financing costs of the debt, and also, you know, access to future purchases of treasuries, you know.

I agree with almost everything Dana said at this point, though there's no sign that savers in the rest of the world view the U.S. as a risky place, so they're putting their money here. You know, if you look at interest rates, they’re low here, they're lower in most other parts of the world, and I think interest, that interest rate differential is going to persist, even with low interest rates, for longer here. They're still going to be much higher than what we see in Europe what we see in Japan and savers in those areas have a choice: they can invest at negative rates there or small positive rates here so we continue to see this inflow of money from abroad helping to finance the deficit.

Now, I think the good point Dana raised was, or the biggest point Dana raised was, it's not a problem now, but it could be in the future. At some point, foreign investors who, to a large extent are financing our deficit right now, may say, well is the U.S. becoming Argentina? And while I don't think we are, if that concern picks up, not this year, not next year, four years, five years, ten years now, we don't know when, at that point we could see foreign investors becoming more hesitant to put their savings in the U.S. and that would cause interest rates in the U.S. to go up sharply, but we don't know when that's going to occur.

We have a lot of questions around housing, a lot of questions about the housing growth, you know, we have Biden. Biden administration is just around the corner.

Some things that have been holding back housing or, you know, construction, one of the issues is tariffs on things like lumber and steel, and that's kind of driven up the prices a little bit. Will the Biden administration impact housing as far as growth, some tax relief for some buyers, things like that? How do you expect that to help home buyers?

You notice how we all rushed in on that one! I think it's too soon to know what the new Biden administration will do. They've not been very vocal about housing at this point. Taxes, well, we know that the Biden administration, we know that President-Elect Biden has said that he would like to see corporate tax rates go up, personal tax rates perhaps go up on the wealthy, but they haven't talked specifically about housing other than perhaps repealing the state and local tax changes that were put in during the Trump administration.

You know, it's hard to say that that had a significantly negative effect on the overall housing market. I'd say right now, and Lawrence mentioned this, the problem is lack of supply, right, and it's not just with home builders. It is certainly there and, but, most of that is on the local level in getting housing permitting, but the problem on the existing side is getting people to put their homes on the market.

You know, there's a record-low number of existing homes in the market, and that's the bulk of homes, so if we're going to see this supply problem ended it has to be in the existing side. What will cause that hopefully when we're all vaccinated, people will feel good about allowing strangers to come into their homes and look at it, to sell it, and in the second half of next year, we're hopeful that we will see a significant increase in homes in the market once people are vaccinated, but we'll have to see if that actually occurs or not.

I want to, sorry, go ahead, Nela.

David was so brave in his response, I'll just add that housing has been chronically undersupplied for over a decade now. This is not new. It's only gotten worse, and we haven't had a housing plan since the great financial recession. If you go back to the Biden and the Clinton, excuse me, the Bush and Clinton administrations, both of them had articulated housing policies that were executed by Freddie and Fannie. We don't have that national voice in housing currently. We stopped having that voice, and so as David mentioned, and as everyone on this call knows, real estate is location location and location, and that's why it's so critical to have a housing national housing priority, and I've yet to see, surprisingly, an administration fully embrace that cause over the last 10 years, so we'll see what happens next year.

I just want to make a comment about something that David said and then add on to the discussion. David said that, you know, on the existing side, there's been this chronic shortage and people not willing to put their homes up or sale, and a lot of it also has to do with mobility. Until we see healing in the labor market, you're not going to see much mobility among people in that bottom half of the K, right? So people in the upper half of the K who are leaving cities to suburbs, they have money, they're doing fine, but it's the other folks who aren’t, but still may have that housing asset, so until labor markets are healed we're not going to see that mobility, and we're probably going to continue to see constraints on the existing side, and one thing I want to add with respect to the next administration is, I mean, this is going to involve Congress, but certainly there's a focus on infrastructure, greening infrastructure, especially retrofitting homes to be more resistant to climate change and storms and that sort of thing, and also there's a big focus on environmental justice when it comes to low-income persons who more often not find themselves in housing that is in danger whenever there is a storm or flood or those kinds of things, so I think that certainly, on the affordability side, there may be some scope for improvement and as well as, you know, this scope for restoration and retrofitting housing to combat issues around climate change.

Great. And another thing that people have asked about, you talked about permits and the ability to build, and in a lot of places California is facing a huge housing crunch and one of the reasons is because of the strict zoning laws so multi-family properties or something is something that's important in order to sort of expand housing and give people more options.

We're also seeing a big uptick in properties with ADU units, so do you have any thoughts on that? How that might help with what's going on with the undersupply of housing right now?

I'll take a crack at this. I mean, indeed zoning laws are, you know, a huge issue in terms of how much housing can be built and whether housing can be built – how much and also the type and how much of it's affordable, and I think that, you know, the work-from-home trend that was in place but has been accelerated over the last eight or nine months may help alleviate some of that, right? If you can build, if people are willing to leave highly densely-populated areas and live in a suburb or more rural area or even smaller cities, Lawrence, you mentioned this, in terms of, you know, one of the next hot secondary cities, then that can help alleviate some of the crunch that we're seeing if people can just physically move because they can work from home, but you know there are issues around that because many people, especially when it comes to affordable housing, are working in sectors that require their presence in person, you know, transit or sanitation or supermarket workers or factory workers, and so there's still going to be challenges around this but certainly you know work from home for those workers who can do it can potentially help alleviate some of those issues around zoning and and lack of housing availability, right? And now we're facing, you know, forbearance will end for many homeowners.

Unfortunately many of these folks might not be able to keep their homes because of the, you know, unemployment situation and, you know, how is that going to impact housing? how's that going to impact those folks? Are we going to see more homes on the market, you know, and then what? Will those those folks will have to jump into maybe renting perhaps, or downsizing, and I'd love to hear your thoughts on that.

I would be shocked if the Biden administration did not instruct FHFA to push out the forbearance. I think that we will see forbearance for homeowners who have lost income throughout 2021 and perhaps into 2022. If it's not for that, we would have a significant, I think Nela mentioned this earlier, a significant increase in foreclosures, which would be a real problem for housing. Not as big as what we saw during the housing bust, but it's a problem, not only for housing generally, but certainly for those families.

I think we will see the Biden administration push forbearance farther out, in the hopes that as the job market continues to percolate along and picks up again, once we're all vaccinated, that many of those people who need the forbearance now will get jobs, and those that can’t, which would be a smaller number, will be able to sell their homes. Prices are going up everywhere. People sell their homes not for a loss, but for a profit. Prices are not going down 20%, 30%, they're going up 5%, 10%, 15%, so that's not a bad situation to be in.

And just to add on a little bit, and I think those are all great points, I just want to reflect a little bit on the rental market because there's a lot of homeowners who are renting these properties, and maybe because of the great financial recession were never able to get the equity they wanted out of them, they turned it into a rental that forbearance cuts both ways but, and so hope for homeowners who are renting that are not getting rent is probably going to be a critical part, but I agree wholeheartedly that an eviction moratorium is so important during a health crisis. We don't want people to lose their homes right when the pandemic is surging. That is worse meeting worse at its worst, so I expect and hope that the new administration ushers in some moratorium and help for homeowners as well.

We have a few minutes left. I have a question from someone. We'll just try to get this one answered. Any idea how the outcome pans out when non-eviction ends and the property owner who wasn't able to make their mortgage payment on the homes while the tenant didn't pay?

Okay, so we're talking about landlords, so again I think this sort of goes back to, you know, Biden having a relief plan in place for these folks, right? It's a, you know, it's a gap, you know, we always talk about companies and having cash on hand and liquidity, but most people, most households and consumers don't have that kind of liquidity. That's why it's been so distressing to see the stimulus keep getting kicked further and further back, you know. For the stock market, it's great to get stimulus whenever you get it, but for people who need it, you need it now, and so that's still an open question and there's no good answer yet. We're still waiting for some details. Hopefully we'll find out in the next couple of weeks.

So. Any final thoughts before we wrap up here?

I'll be brief. I think we're we're going through a a soft patch now that will last for a few months, but by the time we get, hopefully, to March, we'll start to see a substantial number of people who are vaccinated and increasing numbers as we go through the year, so I would expect very strong economic growth, particularly in second half of next year, continuing to buoy the housing market.

I think I would leave with this one thought: I've never seen the jobs market and the housing market be at such opposite ends of the spectrum than they are right now, with one booming and one still on its heels, reeling from this crisis, and it's going to be interesting to see how they reconnect again and what the role of remote work we've seen, and if both workers and employers really embrace this work from home economy, and if jobs and housing are indeed decoupled, as Lawrence mentioned in his earlier remarks, what does that mean for real estate? What does it mean for the growth of cities? So there's a lot more to be answered, so I'm just staying tuned. My personal belief is that the death of cities has been widely exaggerated and we'll all want to actually reconnect in high density once there's a vaccine in place. I, we hope so, for sure.

Guess I have the final comment. I think we also are optimistic that, you know, certainly after we get past this rough patch over the next few months, that the U.S. economy is going to take off. Our overall growth rate is around. Still room to room to run for the housing market, and certainly, once vaccines are available and everyone feels more comfortable engaging in in-person activities, that we will see some loosening in terms of housing market tightness, but also potentially those folks who are in the bottom portion of the K-shaped recovery being able to participate in the recovery, and also to participate in the housing market strength that we're anticipating for next year and potentially beyond.

Thank you. Absolutely, yep. Thank you so much. This was wonderful. I really enjoyed talking with all of you. Thank you. Thank you.

Wasn't that fabulous? Our panelists certainly gave us all the information we could ever ask for. It's still early in the program, and I feel like I've already learned many things. One of the things that's pretty interesting, and again, thank you Natalie, Dana, David, and Nela, is that this economy is moving at such an interesting pace, and it's all driven by housing so again thank you to our panelists. I'd like to take a moment to congratulate Dr. Jared Bernstein on joining the White House council of advisers. Originally, Jared had agreed to speak with us before he was tapped for this position, but with many upcoming confirmation hearings on the Biden transition team, it was recommended that he address our membership in the future instead.

In his place, we're thrilled to welcome a good friend and Jared's former colleague, Jim Parrott, who has graciously agreed to let me interview him. Jim is a non-resident fellow at the Urban Institute, which focuses on social and economic policy. He also co-owns Parrot Ryan Advisors. His company provides strategic advice on housing finance issues to financial institutions that are active in the primary and secondary markets. Jim served in the White House Obama administration as a senior advisor to the National Economic Council, where he led the team charged with counseling the cabinet and the president on housing issues. Earlier in the Obama administration, he was counseled to the secretary Sean Donovan at the U.S. Department of Housing and Urban Development. Prior to his time in public policy, Jim was a litigator, first in New York, with Sullivan and Cromwell, and later in North Carolina with Smith and Anderson. Welcome, Jim, and thank you for joining us today.

Thanks. So thanks, Charles, thank you guys for having me. I always appreciate speaking with you folks, although I must admit I wish it were in person this time.

Well, we wish we all could be in person, but one of the benefits, if you will, is you now, instead of talking to maybe a thousand, attendees, we have over ten thousand today joining us, so this virtual world certainly has not limited what we can do. So, again, we appreciate you joining us. Let's get right into it. Homeownership has steadily increased for the last four, five, six, seven, eight years, depending upon which expert we talked to, but now we're facing obviously some pandemic unprecedented challenges, housing challenges. What do you foresee being different between the Biden administration and the current Trump administration, both on housing and the way we address the pandemic?

Yeah, it's a good it's a good question, and I guess at the highest level, it's important to note that these guys, I think, are going to make housing policy a much higher priority than we've seen in some time, and I say that for really two reasons. One, they view housing policy itself, the access to affordable housing, both to own and to rent, as a pretty important housing policy challenge that's worth tackling in and of itself, but secondly, and maybe more importantly, as far as gaming out how they're going to prioritize things, they see housing policy is is pretty intrinsically wrapped up in their broader economic policy challenges, so I'll give you two examples to give you a sense of what I mean.

They they really want to struggle with dealing with the racial wealth gap, particularly the gap between Blacks' and Whites' wealth, and they view the homeownership gap, the racial homeownership gap, as being a sort of core part of that problem, both in the sense that the gap in homeownership has driven the gap in wealth for many years, and in the sense that it may offer an opportunity to help bridge that gap. That is, if you can help bridge the homeownership gap there, you might be able to help bridge the wealth gap. The second example is I think they view the lack of affordable housing near good jobs in metro areas, where a lot of folks want to want to live and work, as their constraint on growth constrained GDP, and so as those two examples sort of show, I think they're in a place where, in order to tackle the sort of big ticket economic policies, policy challenges that they wrestle with, I think they're going to find that they have to tackle a couple of really core housing policy challenges, and I think what that means is you're going to see them fold into their big economic policy pushes, so on stimulus net early next year, on infrastructure probably a little later in the year, you're going to see the full housing policy efforts sort of into that, and if that's right, then my guess is you'll see housing policy elevated to a level of priority on the economic side in a way that we haven't seen in a long time. Maybe that's a little optimistic, but in talking with these guys, including Jared, that's your early sense that I get.

Well, a lot of that sounds great. Obviously, we have a big election January 5th that will affect how things go. We've seen Congress become polarized. Maybe that's the understatement of the year, but if the Democrats don't control the Senate, what do you see in terms of how much can they get done?

Yeah, that's a great question. I think many of us who were helping them think through policy six months ago, a lot of us were thinking in terms of a Democratic Congress, perhaps overly optimistically, at least from my point of view, and so when you're thinking in terms of controlling Congress, it's hard not to be pretty aggressive in the scope of what you're hoping to get done. But if Georgia breaks in a direction where they've got us Mitch McConnell to deal with in the Senate again, then they're going to have to sort of rethink their strategy and and rethink the sort of avenues of opportunities they've got to get stuff done.

I do think that even if they've got a Republican Congress, Republican Senate to contend with, their opening bid will be still bipartisan legislation. That's just how Biden's wired. The guy goes back many years as someone who is more of a political compromiser than an ideologue, so I think his first instinct is going to be to reach across the aisle and see if he can't get something done. I think also his inclination as a career legislator makes him pretty aware of the degree to which, if you want to get really big-ticket stuff done that is more permanent in nature and that has more funding attached to it, you really have to go through Congress. The optionality you've got there is sort of dramatically stronger than what you've got on the administrative side, but they will remember how hard it was to get stuff done with McConnell in the Obama years and I, when Jared and I were there last time around, we found that somewhat to our surprise, and it was perhaps naive in retrospect, that McConnell was less interested in compromise and legislation than I think we had assumed he would be, and so closed the door to getting much done legislatively, clearly.

So I think they will go in eyes wide open and so they'll develop a pretty robust administrative agenda as a Plan B so that they can pivot to that if it turns out the Congress isn't helpful, and so that means hiring with that in mind. That means hiring at agencies with that mind. It means developing strategies at each agency that anticipate a fair amount of administrative policy work. And in housing, how aggressive they can be, how comprehensive they can be administratively may come down to whether or not the GSEs are still in conservatorship. As you guys know, the GSEs have been in government control now for over a decade, and one of the upsides of that is it gives policymakers a bit more leverage and control over the role the GSEs play in supporting the market, providing, you know, borrow relief and a time of stress leaning into affordability, that kind of thing.

If they remain in conservatorship in the next year, I think that'll expand the tools that the Biden administration's got at their disposal to help. If they don’t, that is, if Calabria and company, their current regulators, spin them out as is you know being rumored, they're at least considering, it'll limit the Biden folks fairly considerably and what options they've got to do something if McConnell is not helpful.

You know, I, one of the notes I'd written down for myself was “people and policy,” which I think you just covered most of that. You work with many of them. What's your sense of how they'll operate as a team, number one, and number two, what was it like working with Joe Biden in terms of his business style in delegating and conducting meetings that you touched a little bit but maybe you could just expand a little bit more.

Sure, sure. So the team that they've got on the economic side, at least at the high level in the White House, it's really clear that they, that the Biden folks are trying to put together a team of people that will function really well, quickly, so the team that they put together is a team that knows each other, that has been in different versions of these seats in the past. They've wrestled with very similar issues in a pretty similar sort of economic, you know, time of stress, so Brian Deese, who's been picked to run the National Economic Council, which is where I was, was at the NEC with me back in the day. Cecilia Rouse and Jared Bernstein on the Council of Economic Advisors, the other economic shop in the White House, they were back during the, back there during the day, in fact, all three of those folks were on the deputies team that I ran at the NEC on housing, so we all sat around the table together and wrestled with a really similar set of issues back in the throes of the last crisis, and so the upside of that is these guys know each other, they know the buildings, they know the sort of byzantine policy world that you’ve got to navigate from their seats, and so, while in a normal administration, you know, half the team's just trying to figure where the bathroom is for the first month, much less how to navigate what they'll have to navigate policy-wise.

These guys aren't going to be in that situation. They're going to walk in the door, they know exactly what they're doing, exactly how to manage the sort of tools at their disposal, so it's a pretty well-positioned team to move quickly and aggressively, I think, which under the circumstances is welcome, and Biden himself is, it's an interesting question, because he was involved in the housing policy process back in the Obama years, so when we would go and sit down with the then-President Obama in the Roosevelt Room, Biden was with him and and they were quite different. So, Obama was this very cerebral decision-maker, and he would, you know, wade through big binders of information and listen to these complicated back-and-forths about the secondary mortgage market and, you know, how the NBS market works, and all this complicated stuff, which he was remarkably adept at sorting through, and making sense of quickly. Biden, interestingly, was much more of a cut-to-the-chase sort of decision-maker, that is, he wanted to understand how, you know, whether or not the proposal on the table was going to make it harder for a fireman to take out a 30-year mortgage and if it was gonna make it harder, you know, that's a problem for him. If it was gonna make it easier, he was interested. So he was really good for our team at keeping us moored in what mattered at the end of the day.

It's easy to get caught up in the technicalities of policy and forget why you're there to begin with, and Biden was very good at sort of anchoring you back into what mattered, and at the end of the day, Biden, he cares a lot about housing. For him, you know, housing is part of the American Dream, and it's part of when people say they want to fight their way into the middle class, it's part of the image they've got of what that means to succeed, and when people say they're nervous about falling out of the middle class, you know, housing is part of what they're nervous about, you know, losing hold of, so for him it's not an abstraction. It's a visceral sort of central centerpiece to how he thinks about what it is he's doing as a leader, so I'm pretty optimistic that on this topic, he's the kind of the right guy to have in the seat that he's in at this moment. So my sense is he, more than leaders in the past, connects to housing in a way that a lot of the folks on this call do, which gives me some comfort.

That's great. Unfortunately, we're starting to run out of time a little bit as well, so just a couple quick questions and maybe not quick answers, obviously, but we're looking at almost three and a half million homes in in forbearance right now. During the financial crisis, needless to say, as discussed on the previous panel, a lot of people are suffering on the bottom level of the K. What's your sense of homeowners being in distress, and how is this different than the last housing crisis, and maybe some options for people to get out of this quandary that they're in as well, and what improvements can be made by this incoming administration to help us in that regard?

Yeah so my biggest source of concern on homeownership is probably on the FHA side. Right now you've got about one in 10 FHA borrowers in forbearance and not paying right now on their mortgage, which is a pretty unnervingly high number. I think GSEs are very little less than half that, so a little less distressing. So the big question is, in the absence of an extension of the forbearance timeline, if folks recall that Congress put in place a year option for forbearance that kicked in in March of last year, so folks could take advantage of that as of March, so you're going to begin to see people cycle off of that in the spring of this year.

So the question is, of that 10% that have been taking advantage of that, how many folks are going to be able to get back into a, you know, a healthy paying relationship with their servicer, and how many people fall out? And, you know, if it's only half can get back into a paying position, that's an unnerving number. That's a lot higher than what we're used to. If it's only maybe a third, that gets back to more historical norms and it's something that the system I think can handle. So it's a, you know, the jury's out on where that lands as the folks in the last panel said. I think the Biden folks are almost sure to want to extend that timeline because what you want is the timeline to match up a little better when we're going to see recovery, so as the last panelists mentioned, you know, it feels to me like with the vaccines out and about, we're going to see the economy begin to wait for its slumber in the spring, early summer, so you want the forbearance timeline to sync up. That way, so when folks are coming out from under that protection, they're doing so back into a healthy economy. If if they come out too quickly and a healthy economy is not back up and running, then there's a real risk that a big chunk of that number are in a rough spot, and right now, fortunately, we learned a lot in the last crisis, and the loss mitigation tools that FHA and the GSEs have are pretty well positioned to handle a fair amount of distress.

And then the other difference between the last crisis and this is you don't have dramatic negative equity. That is, most people aren't upside down in their homes, so a lot of the folks though in distress will be able to solve it by, frankly, selling their house and either downsizing or renting for a bit, so it doesn't feel like we're, you know, heading for the sort of cliff we were heading toward in 2009, so I'm mildly optimistic that, you know, that even if a big chunk of that 10% has a hard time paying their bills, it won't be quite as distressing to the economy as it was last time around.

Great. One last question and two minute warning I just received. I didn't get Lawrence's alarm but I, the commercial side of the business, you know, one of the talking points during the campaign was possibly looking at the 1031 like-kind exchange, you know, that's critical to building our local communities and roughly 84% of properties are owned by mom and pop owners in these local communities, and they're struggling collecting rent, number one, but number two, if they lose the ability to trade a property as a 1031, you know, that's going to hurt the commercial market on top of maybe a challenged residential market.

What do you know about the…?

We're going to have, as your commercial lenders know, well, we're going to have a serious amount of distress on the commercial side just because there's a lot of businesses that that are not going to be able to hang on until, you know, April, May, or whenever the the lights come back on in their sectors of the economy, and that stress is going to lead to a fair amount of vacancy, and so I think the Biden folks are going to be sensitive to that and are going to be disinclined to remove incentives that are in place to help convert properties more readily so you don't have a bunch of supply overhanging empty lots in downtown America. So while I, you know, I think they had suggested as part of their broader tax plan, rethinking that incentive, I think the case that folks are going to want to make to them is that, on the downtown America part of their platform, they've got to be very careful easing up on the kind of incentives that you're going to need to get the private market to begin to clean up a lot of the residue of distress that you're going to see come, you know, come May and June, so I'm optimistic that they don't throw things like that overboard too quickly, given how important they are and, you know, as part of the toolkit well.

Jim, I wish we had more time I've got about 10 or so more questions today, and certainly we look forward to having some conversations again with you in the future. So thanks for your time. Next time in person. I appreciate it. Absolutely. Jim I'll look forward to that.

Please welcome National Association of REALTORS® Chief Executive Officer Bob Goldberg.

Well, first, thanks everybody for joining us today, and I especially want to thank Jim for those insightful remarks. You know, this is our second real estate forecast summit, and those of you that have joined us have joined ten thousand other registrants. It gives you an idea of how large this thing has grown because of the type of interest to hear what has occurred in 2020 and the impacts of the pandemic and then certainly what the forecast looks like for 2021.

Deep in the treasure trove of all the research that NAR does, and certainly other economists, and to spotlight the insights of those experts all around the country, we have very different opinions. I'm glad to see that we've settled upon, with most of the economists, a certain direction that they see the economy going, but we thought it would be really an informative opportunity for everybody to learn and be on the same page and have all these people work together, you know. What a year this has been. If you look at what we did last year, the pandemic certainly caused, how we were totally different, for example, if you hear the noise in the background, and many of us are experiencing real-life events, I have a plumber downstairs cutting through drywall trying to fix a broken pipe, so we've all had to learn to adapt to the situation that we've been dealt.

But it all started, as we all know, in March 2020, when the industry shifted, the country shifted, the economy shifted. None of us that are leading organizations, myself and other chief executive officers and leaders of companies, had a guidebook on “How do we deal with a pandemic?” I know when I was interviewing for this position several years ago, not one time did I get asked that question: “How will you lead an organization and an industry in the middle of one of the worst health crises that certainly in our lifetimes?”

But I’m pleased to tell you that at NAR, we moved swiftly, we pivoted like everybody else, and we have continued to deliver on behalf of our members, the REALTORS®, as well as consumers, and in January, even before the pandemic, NAR announced its fair housing action plan. We appropriately called it ACT, and the ACT plan helps to ensure that REALTORS® comply with fair housing laws and embrace business practices that promote inclusive, diverse communities and specifically the ACT initiative, which emphasizes accountability culture change and training to help guarantee that our members are ensuring that all clients have equal access to the home of their choice and the neighborhoods of their choice.

We also introduced a program called the Fairhaven simulation training platform. It's a cutting-edge training program. Agents work against the clock to sell homes in a fictional town called Fairhaven. They confront various scenarios where discrimination can get in the way of closing a deal, and agents make choices about how to handle each of those respective scenarios. We believe Fairhaven is a game-changer for REALTORS® and it's a game-changer for our industry, and I'm very hopeful and optimistic that it will go a long way towards building consistency for a fair and just real estate transaction for all buyers.

Discrimination of any kind within our real estate industry not only violates the law, but it's bad for our businesses, it's bad certainly for our communities, and it's really bad for our economy. So in closing, our members certainly help power the country's economic engine, and it's a role that REALTORS® across this country, 1.4 million of them, take very seriously. So I want to thank again all of you for taking your valuable time and joining us for this wonderful summit, and I'd like to now turn it over to NAR's treasurer, Nancy Lane, to move us to the next presenter.

Thank you. Please welcome National Association of REALTORS® 2021 Treasurer Nancy Lane.

Hello, I'm Nancy Lane, NAR treasurer for 2021. This pandemic has dealt a huge blow to the commercial real estate market. Did you know that 72% of landlords are mom and pops, and they don't want to evict anyone, yet they have mortgages to pay and expenses to cover. Meanwhile, 8,000 retail stores have closed and millions of square feet of office space have been vacated.

Mississippi is no exception. As a commercial practitioner, I'm seeing a huge decline in retail leasing and for office space in our market area, but not every sector is failing. We continue to see strong demand in the industrial and land sectors.

Well, today our commercial real estate panel will discuss what lies ahead for commercial and what federal or state governments can do to help the sector get back on track. Should we expect a wave of foreclosures? Will apartment rents rise or fall? Will we see sustained work from home policies, and what does that mean for the future of office space?

You know, not every state will have an Amazon warehouse, so how will states and metro areas benefit from the drive to e-commerce? Well, to help us with these questions, we're pleased to welcome three outstanding industry minds to our commercial real estate panel: Igor Popov, chief economist of apartmentlists.com, an online marketplace for apartment listings, Jeanette Rice, America's head of multifamily research for CBRE and a real estate economist who conducts high-level capital markets, and property market analysis on the multifamily sector, and Dr. Timothy Savage, professor at New York University Schack Institute of Real Estate and a distinguished fellow with the NAIOP Research Foundation, where he provides industrial and office demand forecasting. Our moderator today is Lisa Brown of the Marketing Lab and a contributing writer for globestreet.com and other publications. I'm looking forward to all of their insights, and without further ado, I'll turn it over to you Lisa.

Thanks so much, Nancy. It's great to be here today at the real estate summit. Thanks so much for having us. I really want to jump right in and you know get started with our panel. They have a lot of good things to tell us today.

So I want to start with you, Tim. From your vantage point, what's been the most surprising aspect of 2020? There have been so many, but what's the biggest “aha” moment you've seen?

I think if we sit one year ago, how unexpected this current year has been for commercial real estate, an industry that was already being transformed by technology, the impacts will only accelerate because of COVID. Amazon will transform, is the most disruptive force in commercial real estate today, whether you're sitting in a large multi-family unit like I am or thinking about retail thinking about industrial. Amazon, historically, we never thought about as a commercial real estate disruptor. It has disrupted everything, and COVID has accelerated that, and then I think, fundamentally, the role of forecasting data analytics and algorithms in our industry, this is something I teach, I feel passionately about at Schack.

If you look at commercial real estate today, it looks like bond trading in the 70s. It is ancient and algorithms and data and analytics will transform all of that and these things will be accelerated by COVID.

Thanks so much for that. Let's go to Igor. What what do you think, what were you seeing that was so surprising to you?

I mean, just taking the bird's eye view 2020 has really just transformed the landscape of the rental market, especially in multifamily, and so if we, you know, looking back to the 2010s, which now seems like a lifetime ago, you know, what were we talking about the key trends were all about gravity and proximity, you know, the places that were, that already had a lot of jobs were the places that were adding lots of jobs.

Renters, and especially higher-income renters, all of a sudden wanted to be in walkable neighborhoods close to the action, close to urban amenities, and enter March 2020 all of a sudden, proximity and being close to the action was, you know, irrelevant at best and dangerous at worst, and then we started to see this massive transition that we've all seen, so as more of our entertainment and work started to go online, place in proximity on the margins started to matter less and we've been seeing this big convergence, essentially, in rental markets, going from a world of hot spots and hubs to a bit more of a level playing field across the markets in the U.S., and so you know I think we all knew when shelter in place guidelines started appearing and things were getting really bad, that rents would fall as rental demand did and as people stopped moving, but I think the “aha” moment has been in the rebound of places that are now really heating up, places like suburbs, places like metros that were near job centers, but that have not really been themselves in the spotlight, you know, I'm thinking of places like inland California or Colorado Springs and Boise or southern Virginia.

I think that, you know, we're not going to see very many articles about the death of the suburbs again for a little while, so I've been surprised by this big convergence. I think whether or not that continues in a post-vaccine world really depends on, number one, small business recovery, especially in urban centers and, number two, this issue of whether remote work will accelerate or decelerate going forward.

Good. Great insight, and we'll touch on some of those a little bit later. So, Jeanette, what was your big "aha" moment?

Well, I totally agree with Igor that the change in, where demand for multi-family, I’ve been through four recessions and we've never seen that before, the urban areas not emptying out, and I will defend the urban areas later, but people moving out, but the two other things, of course, the speed at which we saw the downturn–we've never seen that before, and then the other thing is that real estate is almost like the "K" recovery that we sometimes talk about: the "have nots," where you have retail and hospitality just so hard hit, office hard hit, too, and still lots of question marks about the future of office, but then industrial didn't get the recession email–you know it just it's just booming, and the multi-family has shown quite a bit of resilience, so it's it's been a very different recession.

Right. It sure has. So back to Tim for a minute. What types of these issues will stick around post-COVID, do you think?

Just looking at the perspective from forecasting, it's clear that retail has a very hard road ahead of it. We were well over-retailed in the U.S. before COVID. The advent of e-commerce and Amazon has accelerated that. Industrial will continue to outperform. It remains both the loved and misunderstood element of the commercial real estate market, right? The old joke was industrial is four walls and a roof. That's not true anymore. That's that's been transformed. You walk into an Amazon fulfillment center and that is not four walls and a roof.

Multi-family I think, in particular areas, will continue to perform well, but I say that from my bias, and then Jeannette and I will probably agree at the end of this that we need to differentiate distinguish between the short term and the long term. I don’t, you know, I put me squarely in Larry Silverstein's camp; do not ever count out New York.

Good. That's great. I think we all feel the same. We're all rooting for it.

Yeah, for sure.

So, Igor, same question to you.

Yeah, I think one of the things we should expect to see is just the technology that's been adopted and that's starting to be developed throughout the course of the pandemic, I think will stay and have massive implications throughout the next few years. You know, the whole idea of renting a place sight unseen a few years ago seemed like this sort of weird tech fantasy, right, and then enter the pandemic and then it became fairly common and widespread, you know? We're very confident we'll see a record number of sight unseen moves in the rental market, probably in the for sale market as well, and what that created is, all of a sudden, the industry really started to focus on asking questions like, okay, well, if someone's gonna try, if I'm gonna try to sell this place or try to rent this place or lease this place sight unseen, you know, how could someone get a full picture of the vibe, the amenities the neighborhood, the community through a website or an app, you know, and that became a really central question that technologists started working on that property managers started losing sleep over, but that's not a question that's going to go away with with the vaccine. That's going to continue to be extremely important as a way in which communities continue to present themselves, and so I think that we'll look back on this time and really see that a lot of maybe technology innovation that would have happened otherwise just got really accelerated because everyone started to really focus on, especially some of these issues around automating parts of the process and having more arm’s-length technology-enabled real estate interactions. I think that'll be interesting to see going forward. It's certainly not going away, but I think it got a boost through the pandemic and some of these technologies, you know, we're just starting to sort of develop them fully, and I think we'll see some of the real benefits and transformations over the next few years post-pandemic.

Okay, great.

Jeanette, what about you? What do you think is going to stay with us? Well, I certainly agree with my colleagues here on the call, but add to that, the more flexible workplace will definitely stay with us. I mean, that was happening already. A lot of these trends were happening already, even the virtual technology, but what COVID did was, like, give it a boost.

The three-year evolution and the increase in internet shopping which has been going on forever, we just had, like, three years compressed into eight months, nine months the adoption of virtual technologies, but the flex office environment definitely is with us, and I know we'll come back to that because it's such a key to understanding the office sector.

I do think retail definitely is so hard-hit it will it will never get back to the pre-COVID uh environment, but it will have to reinvent itself, and one area I think that will come back strongly is gonna be the last one, is hospitality. I don't think that our character, our interest in traveling, seeing new places, going to New York, I don’t, that's not fundamentally gone away, that the idea that the millennials like experience, that has not gone away, it's just we're not doing it right now, but obviously, for obvious reasons it will take a while to come back. The hospitality will come back just as urban living will come back, so it's gonna be interesting to watch as we see the recovery of hospitality, leisure obviously, first in business, second.

Okay. Yep, that's true. So let's get into some specifics. Tim, what does the data show you about how real estate pivoted, and what will continue to evolve next year and into the post-COVID situation, environment?

Yeah, Jeanette makes a great point about flexible office space, co-working. It is a model that again was impacting commercial real estate well before COVID set aside WeWork® and that the idea of optionality in space was a critical one in commercial real estate. There is value to both a tenant and a landlord, and the question is, and work I've done with Bill Wheaton, looks at the idea of the value of flexible office space. What the data show currently is not very much. It's very sparse. There is not much price discovery going on. I had our friend Jim Costello give a guest lecture this fall and, you know, they have the access to the best cap rate data in the country, and Jim said, I'm not going to be able to say very much, and that's what our friend Jim said, which is there's not a lot of price discovery going on, there not a lot of transactions going on. The data are very sparse at the moment, but we can see certain things, you know, you can look at tradable REITs that get hit on the hospitality side. Again, like Jeanette, I think they will come back very rapidly.

I think on the office side we will continue to see the value of optionality being recognized in the industry. This is a personal note. I think retail has a really difficult row to hoe at the moment just because of the cost of redeploying the assets, but again, then, we have Amazon. We need an Amazon fulfillment center everywhere, and we have a lot of empty retail space. So the data are sparse, but I think generally the observations that we're all sharing here are really important for the industry.

Yes, absolutely. So, Igor, let's talk a little bit about the work-from-home phenomenon and how it's reshaping communities and investor demand going into 2021.

Yeah. absolutely. This is a critical topic really to help us understand whether, I think especially whether industry hubs and emerging technology hubs are going to continue to drive a lot of the distribution of rent or demand, you know I think, again, agree the short run and the long run are important here. I think in the short run, what we've seen so far and is always worth noting, is the acceleration of remote work has really done a number to inequality in the housing market. You know, I think it's always important to remember that one the ability to take your work online and do it through Zoom and email is a privilege that really only high-earners have, and all high poverty occupations need to essentially require coming into a job site or a face-to-face interaction, so I think, you know, on one hand, we might say if it was COVID-1990, you know, it would have been much worse, and we would have all just been in a rough spot, but with where we are now, work from home is really something afforded to only a part of the economy.

With that said, you know, in the long run, what happens to that part of the economy, especially, you know, high-earning young college-educated knowledge workers who are are the demographic that is being affected most by this remote work acceleration is a critical question for, you know, where investors put their breaths going forward and what happens to the homeownership rate going forward, and this, I think you know, has ended up being a question that's consumed a lot of my year because on one hand, you know, as a researcher I've been trying to read the tea leaves in our data to see what's gonna happen with, you know, what are renters telling us they think is gonna happen? On the other hand, as you know, someone who's a manager and part of the leadership at Apartment List. As a company we've been trying to figure out what do we do with our workforce? Are we happy in a remote environment? Do we go back to some sort of hybrid? Do we call everyone back to the office and try to put the cat in the bag, and I think right now that's really the stage where we're at, is employers all across the country are trying to decide what they're going to do in a post-COVID world, and I think the truth is that the vast majority of them don't know, you know, I think we happen to be pretty bullish on virtual work, but people are going to run the gamut of trying hybrid approaches that offer some flexibility or trying to get everyone back to the office once they're vaccinated or fully embracing remote work, and maybe just bringing people together with more business travel for moments of, that necessitate more collaboration, and things like that.

So I think renters right now, in the multi-family space especially, are really waiting for their employers to make up their minds, you know, and I think, you know, a few signs in the data that are at least consistent with that hypothesis or one, the places that renters are moving to at disproportionate rates relative to where they've been these are places that are kind of the neighbors of the old hot job centers, you know, there's less demand in San Francisco, more in Sacramento, less in Denver, more in Colorado Springs. These, it signals that renters are still staying about a hundred, seventy-five miles away from where the job growth would have been had the office still been open, and number two, one thing that's been surprising the, we've seen a huge surge in demand for short-term leases, so lease lengths between one and six months through our platform, which is not a typical, to be honest, it's not a typical product that you sign onto apartment lists to look for but especially among renters that are leaving places like San Francisco, Boston, Seattle, these expensive knowledge center hubs, a lot of the demand is for one to six-month leases, which again tells me that a lot of renters are really hedging their bets. You know, even if remote work takes off, I can put that New York City will not die, you know, there's more to cities than just offices, obviously, but I do think that to the extent that remote work accelerates it will push, it will push renters towards markets where it's easier to build, and also probably make the geography of jobs across the country a bit more unpredictable relative to where we've been.

But I think really right now it's a bit of a waiting game as employers try to figure out have they been productive? Have they been innovative? And I think investors are going to continue to watch what the big employers do and where the small companies start to grow in a post-COVID world.

Right. Yeah, really interesting things to ponder. Everybody has big decisions to make, coming up next year, I think. So, Jeanette, that really gives us a good transition to a questionthat we've all been talking about. Office space is a big question mark for everyone, and there doesn't seem to be a huge a consensus of what will really be happening. You know, what types of alternatives are you finding in your research to give us some insights about that?

Well, we've been wanting to know ourselves, and access we, CBRE, manage, I don't know how many thousands of buildings, and we have surveyed our corporate clients to see what they think. So, a couple of things: Igor is totally correct—they don't totally know, but there is, there's a kind of consensus coming out of the analysis, out of our surveys, conversations with clients. This survey is about what employees want, so isn't necessarily corporate decisions. So, employees want more flexibility in where they work, but only 28% want to be fully off, remote; 6% want to be fully at the office; so that leaves two-thirds who want some combination of working remotely and working at the office.

We have also asked a similar survey, and this is the decision makers, what they're thinking about doing. Now, first of all, they all are thinking about more remote scenarios, more flexibility, in the new normal. Not we, of course, are office workers, are working remote now, and by the way right now in New York it's 11% physically occupied, so 11% of the people normally coming into the office are there. That's tough. Two-thirds are thinking about consolidation, so when we think about future demand, office, it's going to be a, it's going to be a little bit tough. We do think that demand will fall, but 56% are thinking about flexible office spaces, which goes back to what Tim was talking about earlier. We're talking about, in terms of like the WeWork®s of the world, flexibility is really important, and so flex office space is not dead by any means, but here are a couple other things I think you'll find interesting. Only one-third is thinking about hub and spoke model. The idea is, when you come to the office, you come, it's your time to get together with your team to collaborate; when you need me time then you can sit at home. The hub-and-spoke system doesn't necessarily lend itself to that philosophy, and only 3%, this is really important, only 3% are thinking about dispersing from the high-density urban cores, so there's no fundamental change, according to this survey and, you know, conversations I've had and we perhaps all have had, the companies are not thinking about leaving the urban the urban cores, they're just you know going to work to more flexibility so it will be interesting to see how it, how we move the timing of this, too.

We're still sitting on this fence, you know, to Igor's point, that we don’t, decisions haven't been made yet. Everyone's kind of on hold, waiting to see right now. We're waiting to see about the vaccine and waiting to see the recovery that, you know, we heard about earlier.

Okay, yep, good. Yeah, it’s, again, a lot of questions will be hopefully answered next year, but right now we're still waiting on a lot of factors to come into play. Yeah, so, we have some questions from the audience, and I'm going to pose them to you and then, you know, whoever would like to jump in and answer them, that would really be great. The first one I see is a person who says, "I’m seeing landlords intentionally raise rent beyond what long-term tenants can accept, thereby forcing them out. What is their motivation, and will there continue to be vacant space? I am in Florida."

Igor, do you have any insights on that, or Jeanette, in the multi-family space?

Well, I'm glad to take that. First, ironically, we do see in many suburban markets and many Class B and Class C assets, the rents are going up. It’s, I say “ironic” because it's very unusual for a recession and it's a lot of, you know, supply-demand economics, so we know that renters are, many renters are struggling, and when their lease is expired, many move into a different housing situation, but those units, the more affordable units, are backfilled pretty easily, so landlords, because of the tightness of the market, they are able to raise rents. It's sort of the way that the markets have operated forever.

Yeah, I completely agree. I think that what has been really dominating the headlines have been the precipitous rent drops in places like San Francisco, New York. If you're in a Class B property in Boise you have not gotten that memo at all, and so I think this is a really sub-market specific question. There are some landlords that are really negotiating with their current tenants and trying to keep them because they're terrified of the vacancy risk if they lose them because there isn't that backfill, or there isn't that backfill with the screening requirements that they would have liked or been comfortable with a year ago, and in other markets, you know, this has all happened extremely quickly, so none of the supply response has happened yet. It's just all about demand, redistributing,and creating a lot of heat in some sub-markets.

Okay. Good. To me, Lisa, can I add—also, to be fair, I understand the concern. The person asked the question, but the industry has bent over backwards. Not everyone, of course, but I think most landlords have worked really hard to to give a lot of leeway to their residents so they are taking advantage of the supply-demand economics in suburban space or BNC, but it's not the industry as a whole, I think has really gone a long way to help to give a, you know, a lot of maybe rent discounts and different things for renters are having a hard time paying.

Yeah, let me jump in quickly there. When I talk with students, when I talk with colleagues, when I talk with clients, it really is a recognition that this is not the global financial crisis, I have been saying for nine months, trying to refract the current crisis through the lens of the global financial crisis leads us in the wrong direction. This industry has been remarkable. I think in the current crisis, in figuring out ways to share the misery, we know the downturn is one that is the result of a global pandemic. It is one that directly impacts human capital without impacting the physical capital, and if you think about a debt structure or something like that there really has been a recognition in the industry that values have fallen. Those declines are short-run, certainly on-off in the office world, in the leisure world, and that, the pain needs to be shared, and I applaud the industry for coming together in its own way to share that misery. It was going to hit, but I think the industry has been much more resilient in this downturn than it was during the global financial crisis.

Yeah, good insights there. I think that's important to acknowledge, yeah. Let's go to the next question. This person says, "I think this migration is going to stick for a couple of years. Take someone who loved living in New York City and moved to Salt Lake or Boise, they will most likely move back to the states they started. New York, San Francisco, Chicago will become affordable again."

Any thoughts? Jeanette, what do you think about that?

Sure. So many things. It's like the question… Well, first of all you gotta realize before COVID, millennials were getting older, you know, millennials have been the big rental cohort. Millennials today are age 25 to 40. Most of them are in their 30s, they're getting on with life, and if they live in the big urban cores, rents are expensive. So those that have said, okay, now it's time to move back to Indianapolis, or back to where I came from, or to a place within a hundred miles but less expensive, as Igor mentioned, yeah, a lot of them won’t, they'll stay. You know, Salt Lake City is an absolutely fantastic place. Who wouldn't want to stay there, you know, close to the mountains, you know? It's a great city, but on the other hand, there's nothing that suggests that our new renters don't like the cities as much as the older renters, and many will move back, and now the rents are a little bit more affordable. That will help, but there's no question it will take time. I mean, we see the multi-family mark in the U.S. broadly bottoming out in the first half of 2021, but I don't see the urban cores bottoming out till late 2021 or maybe even 2022. So it will take time for them to come back, but they will come back. I totally agree with Tim, and I think Igor on this one.

Mm-hmm. Okay. We're going to have a little shift here because this is a topic that we've talked about a lot before the pandemic started, and now this question is addressing it again. "How do you think driverless cars and electric cars can impact the real estate market, just for a little change of pace from all the doom and gloom?"

Any thoughts there on those two as being relevant right now, or are they on the back burner? Anybody?

I'll step up, and the lover of algorithms should be talking about algorithms. This was, there are easier challenges to address and more difficult challenges to address, and driverless cars is one of those topics that's really difficult to address because it involves local policy as well as the algorithms as well as people's willingness to allow an algorithm to drive a car, right? This is a situation where either if we had the technology, you would simply, you must allow the algorithm to drive the car and everybody must do that, but we don't even have the algorithm. Even, well, I won't highlight some of the news we've seen recently, but there's been some surrender on that front. I, again, when I think about commercial real estate, what I really try to address is the scarcity of data and the ability now to deploy at scale algorithms, because this industry looks like bond trading in the 1970s. It’s, things don't happen on golf courses anymore, and this industry, especially now, in an era of diversity and inclusion, this industry must begin to focus on these key ideas, data algorithms and decision making, because that's a world in which diversity and inclusion can matter.

Great. That's really insightful. I like your input on that. Let's go back to the the usual topic from before. This person is asking, wondering if the conversion of retail and/or officespace to residential is feasible, given the high demand for housing, or if zoning restrictions will stand in the way. Igor, do you have any thoughts on that?

Yeah, I think that has to have a market-specific answer, and I think that, you know, cities are fairly slow to adapt in places where zoning restrictions are more binding and in places where there's more neighborhood control. I'm sitting here in California where, you know, there's a, uh, neighborhood control is a big topic whenever anything gets proposed or built, but there could be other markets that really kind of embrace the need to change quickly and adapt the space, you know, whether it's conversion or whether it's some kind of technology-enabled or marketplace-enabled flexibility, which is another, maybe, kind of hybrid approach that might be even more difficult to figure out how to zone for, so I think that there's probably an opportunity for some of the more innovative quick-moving markets to jump on those opportunities, attract the rental demand if that's what they want, because others will naturally be very slow to move, I think, in terms of zoning and and and building restrictions.

I do think I totally agree with that. I think it will be one of the more interesting aspects of real estate in the next couple years, though it's it'll be pretty small, but I'm fascinated with, there are some examples of hotels being converted to multi-family considered, but even more interesting with some of that suburban office being converted, and it seems hard to do. You know, well, we had a period where we had some of the older downtown office buildings converted. It's very expensive, and that's a hindrance no matter what the economy is, but these urban office conversions, that's really fascinating. We'll have to watch that. Retail often has great locations, so a lot of it gets back to location. Does it work for multi-family?

It might, but then, well, you brought up hotels just now and the next question asks, "How does hospitality come back without assistance in the interim, and I think that, you know, government assistance for some of these other sectors as well may be needed, you know, the small business restaurant owner or store, boutique owner? What are the thoughts on assistance in getting some of these sectors back up and running?"

I'm willing to jump in on this one. When we think about the current crisis we have to reach back to economists with the names of Badgett, Keynes, and Knight. Badgett talked about the lender of last resort, which has been the Fed. Keynes talked about fiscal policy and Knight talked about uncertainty, and the first approximation to uncertainty today is a lack of data. I struggle as an economist to think about assisting particular sectors in real estate. I'd much rather address broader issues the earlier panel talked about—labor force participation were, you know, the conversation there.

It worries me deeply we are seeing labor force participation rates, in particular among women, at levels we saw in the 1970s. Those are I think from a macroeconomic and a macro prudential perspective, more important. Hospitality will come back in some fashion when we have data, but all of this is being driven by a lack of data and I'd rather us not get into picking winners or losers within commercial real estate.

I think the one other thing that I continue to find interesting about hospitality is there's a bit of this irony where, if remote work accelerates, you know, on one hand, it means companies have decided we don't need to have people face-to-face all the time, but that still might create a lot of opportunities to try to bring people together which might be even more meaningful if everyone's off, you know, working in their own bedrooms, to bring people on for off sites to have the leadership strategy sessions be ones that bring everyone together to have more cultural elements or more of company culture built through on sites where everyone flies in for them. So there could be this funny twist where actually remote work accelerates business travel sooner than we would have expected it because all of a sudden gathering will still be important, but not a given in this sort of old office environment and I think it's it's at least compelling to dream about for a lot of business leaders. If we took the office off the balance sheet, imagine the events we can have, right, and I think that will be one way that city space will get used as more of a gathering spot. Potentially, if, again, enough companies make this remote work plunge, I think that's a fascinating thought, and you know, even before COVID, some hotels lobbies are kind of changing to places people could hang out and work, so there's still some of that, you know. Like I said before that we need more flexible office space or we'll come back, I mean that demand has not totally disappeared by any means, so hotels will serve that purpose to some degree, but don't get me wrong—I mean, our hotel economists don't expect that we'll be back to pre-COVID levels until 2024.

There's one thing—leisure is coming back already. The non-gateway cities are doing much better than places like New York, San Francisco, but they will come back.

Yeah, good, but this whole, if just to summarize, what we're talking about here at its core is optionality. The space is built. The question is, can we develop a market in commercial real estate that recognizes the optionality?

That, I think, is a really, really important conversation we need to have.

Yeah, that's a good ending point, Tim. I like that. I clearly, we could hear, we could probably stay here all day and keep chatting, and you all are so fascinating. You're really insightful. I really enjoyed just hanging out with you. We're down to about one minute left, so I just want to say thank you again, and unfortunately we didn't get to all of the questions, but there are many questions that we are ending this year with, so that seems to be staying with the theme of 2020. But thanks again. It was really fun, and I enjoyed getting to know you all a little bit better, and I think we'll be handing this over to our moderator for the next session.

Thank you, Lisa. Thank you so much. Thank you. Great to see you folks. Stay safe. You too. Bye-bye.

Please welcome National Association of REALTORS® 2021 First Vice President Kenny Parcell.

Hello! Thanks for being here. My name is Kenny Parcell, 2021 NAR First Vice President with the National Association of REALTORS®, from Spanish Fork, Utah. Thanks to low mortgage rates and the financial stimulus, we've seen an incredible year for home sales. NAR's chief economist noted earlier the spring market losses have now been fully recovered but we're seeing surging home prices and very low inventory that makes it very, very difficult for the first-time home buyer, so there's a lot to unpack about the residential real estate panel and we have some of the most fine experts to talk to us today. Are prices overheating? Do we expect to slow down? What markets will be the best market for the first-time homebuyer and buyers in general? Do we expect supply to temper the price growth? What policies help increase supply to support the first home time home buyer and what proposed policies, such as first-time homebuyer tax credit, will work to create more homeownership?

To help us answer these questions today we're pleased to welcome three distinguished experts on our residential real estate panel: John Burns, CEO of John Burns Consulting, from Irvine, California. His company helps business executives make informed housing supply investment decisions. Danielle Hale, Chief Economist, realtor.com. Ali Wolf, Chief Economist, Meyers Research, which produces housing market data and trends for real estate development and new home construction. Our moderator is the very talented Nicole Friedman, a Wall Street Journal reporter who covers the U.S. housing market. Welcome. Nicole, take it away!

Hey, Nicole, you're on mute. Sorry about that. Thank you so much. Thanks for joining us, everyone. I'm really excited to discuss the housing market with this great panel let's just jump right in. I think I want to get started with what the market's like right now and how we got here, and then we can look forward a bit.

So, Danielle, let's start with you. This is a seller's market. Homes are selling quickly. Many are getting multiple offers, but the number of homes on the market, the inventory is way lower than usual, so set the scene for us here. Why aren't sellers selling and why aren't there more homes for sale?

Thanks, Nicole. Yeah, I think this is, you know, a question that has plagued the housing market before the pandemic, but in many ways, the pandemic has made it an even bigger question. So, first, the unique nature of this market, people have a strong incentive to stay at home and away from others, you know, in this year. You know, the fact that sales are at a record pace is a testament to sellers' ability to transact safely, but many seem to prefer not to take the risk this year, especially if they're older and may be at greater risk or may have a little bit of flexibility in their timeline.

Second, I think another reason that's driving this lack of sellers in the market right now—most sellers did not expect the housing market to look this way in 2020. In fact, even a lot of experts did not expect the housing market to have this kind of frenzy. You know, the last time we were in recession the housing market behaved very differently, and going into the early part of this year, as it was clear that we were heading into a recession, I think that's what most people expected from 2020. That's what they prepared for—the potential for home price declines, but of course what we have right now is the opposite. We do see that sellers are getting that message, but it's been a little bit slow to get out and they've been a little bit slow to respond to the market strength, so that's another factor that I think is keeping sellers out of the market and keeping the balance tipped in their favor for those sellers that are participating in the market.

And I think the third reason is that sellers are often also buyers, so that unless they're relocating from a really hot real estate market to a cooler real estate market, it means that they face a lot of the challenges of a, you know, a fast sales pace when they're looking for their new home, and limited inventory options when they're looking for their new home, and so solving this inventory challenge is not as simple as getting existing homeowners to sell. We really need to see an increase in construction to really make some headway against this low inventory situation that we have.

Well, yes, jump right in. I think one thing we should acknowledge on this, too, though, is yes, inventory is very low this year, but this is not a new thing that we're facing. Even before we went into the pandemic, we already had inventory on the existing home side—months of supply at 2 or 1.5. I know some markets like Salt Lake City, they had under one month of supply even going into this, so we've seen that get a little bit exaggerated, too, because of the pandemic.

Yeah, so, then, what are we seeing on the new home side of the market, John, if you want to come in here and talk about what's the inventory situation in new construction.

Yeah, everybody wants the builders to build more. It's just not that easy. There's a lot of parallel supplier cycles here going on, though, but one of the things that was really different is this whole expansion—all the job growth was in the urban core, and prior cycles, the jobs would go out to the suburbs and then you could build homes on the outskirts. It just, the outskirts where the land is was just too damn far from where the jobs were, so there really has not been a lot of construction in the outlying areas, frankly because pre-COVID, there was very little demand. COVID has completely changed that the outlying areas are where things are hottest. The home builders are buying land like crazy. One of the CEOs said she approved more land last quarter than she had for, like, five years, so they're getting going, but it's going to take a while for it to go.

The other issue, though, is that, and I know we're, you know, a lot of people on the line, and we're in Washington, DC, we wish some national policy would solve the issue, but it's a really local issue, and it comes down to one simple thing, which is vehicle traffic. I mean, even the home builders fight home building in their neighborhood, so that's the problem, but it's not a problem in these outlying areas. And then the local cities are just hitting them, and it's happening even in places like Houston, where you didn't think regulations were an issue, but, well, now we need the homes in Houston to be higher because of floods and all sorts, there's all sorts of local issues that are causing the problems.

And then finally, I think, and I think this is a parallel to the last to the 2001 recession, if you will, which started with a stock market correction and then we had 911, was that that was 12 years after the S&L debacle, which all the housing capital, mortgages, construction loans, everything were S&Ls, and the industry still had scars and was it was just behaving very disciplined in a very good way. That recession hit, Greenspan dropped interest rates, and housing took off, and I feel like housing was positioned the exact same way. There was nothing stupid going on the mortgage industry. The home builders were really well-capitalized. They were being really conservative. The pandemic hits, Chairman Powell's buying even more mortgage-backed securities to stimulate the housing market, and we're off to the races here, and I'll just not say that the housing market index, which is a good three-question survey, is at an all-time high, so the builders have never been more optimistic. So we're going to see some more construction.

So, Allie, how are the home builders doing right now in terms of sales and how are they responding to the strong demand that we're seeing right now?

Yeah, and so one thing I want to add on—so John started his answer by everyone says to builders just build more homes and it's not that easy. I heard a builder say that finished lots are like the tooth fairy and the unicorn combined—they just can't find the lots to build on right now. Anyway, so he's completely right on that side for the builders. A different quote that I heard yesterday a builder said we're on a runaway train. We are selling homes quicker than we can build them. Again, our costs are going up. We're having supply chain issues and we have to worry about satisfaction. We have people that we're not going to be able to get them homes for maybe a year from now, and we don't want to lose them along the way so I think builders—it was interesting because I was on a call with a couple builders, and you thought the mood would be really positive. You thought they'd be like, hey, sales are up 40% year-over-year and everything's great, and all they kept saying was we're facing issues. We are raising prices, slow demand, they've been thinking that all along and people are still like I don't care, I just want to buy a home. Homes really in tight supply, so I think builders expected this year to be good. They didn't expect it to be this good, and now they're facing some of the issues related to that.

So let's talk about location. There's been—we touched on this a little bit—there's been a lot of talk this year about people moving away from city centers into the suburbs, so Danielle, is the flight to the suburbs real? Are we seeing a permanent shift in where people want to live?

I think this is the question du jour. The popularity of the suburbs is real, but the picture is nuanced, and it might not be a full-fledged flight. What you find is one influenced by how you define server suburbs and which suburbs you're looking at. But here's what we've seen in our research. So real estate is hot everywhere, but the suburbs have bounced back relatively quicker than urban areas on average. Nationwide if you look at views on suburban versus urban properties nationwide on realtor.com, they're up for both types of properties, but the jump has been higher for properties in the suburbs, particularly when we compare suburbs and urban areas of the 10 largest metros, for example. That's when we see a bigger gap, and suburban metros or suburban areas of those largest metros are really outperforming.

The second thing: sellers are lacking everywhere, but the declines are stronger again in the suburbs, and then in urban areas and again, the gap is more pronounced in those 10 largest metro areas. In fact, in some of those 10 largest metro areas, in the urban part of those metro areas, we are seeing some listings growth on a year-over-year basis which is different than what we see in the suburbs, and then on the price side of things, prices are still generally rising faster in urban areas, but when we compare the growth rate before the coronavirus hit with the growth rate now, so if you look at how prices have recovered, they've recovered faster in severe suburban areas, and so we're seeing a greater increase in growth rates in suburban areas, but looking again at those 10 largest metros where we see the pattern more exaggerated, we see that price growth in suburban areas of those largest metros is outpacing the urban areas, and this is especially true in the northeast and the west, which is, you know, where we find many of those 10 largest metros, so yes, people are more interested in the suburbs. Yes, we're seeing suburbs outperform, but I think it's key to note that real estate is doing well almost universally.

Yeah, so to dig into that. I'd love to hear from all of you on this. What are the strongest markets going to be next year and then, alternately, what are some of the markets that are higher risk. Allie, do you want to kick us off?

Yeah, and I want to add to Danielle's research, too, just, if you look, we know that suburbs were popular pre-pandemic, but what we've seen, to her point, about nuanced you've seen in some markets like DC, we actually see the highest sales rate is still closer to the central business district than further away, but in a lot of other markets, what we've seen is that shift has really gone to, once you're more than 25 miles from the central business district, sales are going really strong, and that could be because of who was building out there, too. When you look at some of the builders that are operating, they can hit that lower sales price, which is what some people are looking for, is the best thing for their buck, for the strongest markets.

One of the things I think we should set the tone with on this is that we know going into the pandemic, again, in January and February the housing market was really strong, and that was because we had our demographics and because we had our low mortgage rates and because, even then, we had the fear of missing out, of people wanting to go and buy homes and take advantage, where we then added fuel to the fire with this work-from-home environment and being at home more often and home becoming your focal point, so we're basically eight months through that first part of the pandemic. Now we have this hope of a vaccine, but given the estimates we see, that's going to be maybe another eight months, so then we still have more time to wait, more time for people to spend time at home and want to go out and buy homes.

That fuels not only the interest in homes, but also the ability for people to migrate, because that work from home is the number one reason people say they're buying, so for top markets, to Danielle's point, it almost doesn't matter where you are. So if I don't say your market, it doesn't mean your market's not doing well. It's just not the top top market, but I would say places like Phoenix, Vegas, Salt Lake City, Denver on the west coast, places like Austin, Jacksonville, Tampa, Charlotte, Raleigh on the east coast are the ones that we're seeing the most activity right now, and I can follow on. We have a lot of agreement our top markets are Sacramento, San Jose a bit of a surprise as it’s, you know, a primary tech market, but might be considered secondary to San Francisco. Charlotte. We agree with Boise, Seattle and Phoenix. Those are the areas we expect to see top performance.

Yeah, Boise's been the boom. I would, I mean, essentially, you said the strongest markets first, the highest risk markets. I think it's the exact same thing. So it's the tech markets where people can work from home that were kicking butt before COVID, and now have been super accelerated, so it was Austin and then, you know, the bay area. It’s, people have moved to Sacramento and they're going, there's a city called Lathrop, where they're going to sell 600 homes and a master plan this year. Look that one up on a map. And actually, Austin and Dallas already have more high-income jobs than they did a year ago, so I mean, all these markets are benefiting but I would say you know manufacturing markets and where you have to come to work every day and you can't work from home, those are not going to be the booming markets, and the only real they're probably the most interesting thing we saw in our U-Haul analysis where we priced out renting a 20-foot truck from one city to the next and bringing it back, and migration's flat. It should be about the same.

It is. It is. Boise is seeing an incredible surge from Seattle, Portland, and the bay area and Portland and Seattle used to be in migration markets, and now they're out, so that’s, I would say, only been the only main shift. Everything else has just accelerated what was already going on.

John what are you seeing on the multi-family side, you know, are builders still investing in condominiums apartment buildings, or is it more out in the suburbs these days?

So this is one of the areas we're spending the most time on trying to figure out, and I think it's the hardest question, so thanks for sending that one to me. What there was, so much money raised pre-COVID to build apartments, and we were already at a 40-year high on construction, and all that money is sitting there. And so we've seen a surge in our business into this new product type, which is built for rent or rental subdivisions because we're not oversupplied there, but the apartment market which, it varies by sub-market, is taking it on the chin a little bit more than the others, but I think the main reason is we have a 40-year high of construction dumping into the market. Guys are either saying two things. I'm going to pivot over to build-for-rent or, you know what, I'm not going to get this thing finished for two to three years, so I'm gonna build it anyway. But that being said, we're still seeing, we're actually forecasting construction and multifamily to be down about 36% this year, because you just can't underwrite the deal and the way you could nine months ago.

So I want to talk about first time home buyers who are having the hardest time getting into this market. So, Danielle, what are you seeing among first-time buyers, and how much are they benefiting from low-interest rates versus being hurt by the rising home prices?

Yeah, so home prices are rising rapidly. They have been increasing at a double-digit percent pace for the last several months and since at least August, and that's a challenge for, you know, for all buyers, but especially for first-time homebuyers. Now, you mentioned low rates. So, low rates are helping. Today's mortgage rate is 2.71%, according to Freddie Mac. That's more than a whole percentage point below last year. At this time last year, rates were 3.73%, and if you step back even further, it [inaudible] nearly two percentage points from December of 2018. It seems like a long time ago, but rates back then were 4.63%, so looking at what the typical payment is this year versus last year on a roughly $350,000 house—that's the typical listing price these days—the monthly payment is actually three to four dollars cheaper if you're financing 80% of it, so putting 20% down, if, you know, even though prices are up 12.7% from a year ago, you're actually paying three to four dollars less a month. That's great, but that's not the only part of the story, and, but, for first-time homebuyers, the biggest hurdle is not necessarily the monthly payment but getting in the door in the first place, amassing the funds for a down payment, paying those closing costs, and of course when home prices go up, those costs are higher, so low rates are helping when we think about the monthly payment, but those higher prices are creating a bigge challenge on the down payment side, and, you know, first-time homebuyers don't have the benefit of owning another home by definition, generally speaking, this is their first home purchase, and it's very unlikely that they own real estate, so they're not necessarily building up equity as a result of those price increases, which is why fast-rising prices can be particularly challenging for first-time buyers.

We look at the market and the first-time buyer demand side of things, we still have a large number of young millennials that are approaching what are typically peak first-time home-buying years, the early 30s, is typically when we see first-time homebuyers make their first purchase, courtesy of data provided by the National Association of REALTORS®, so there's a substantial number of potential first-time homebuyers out there, and that's going to keep that end of the market very competitive even though we have high prices. As mortgage rates start to steady, and we don't see them offsetting the benefit of these high prices, that's going to be a bigger challenge for them. Affordability is going to be a key challenge moving into 2021.

Yeah, and what I want to add to that too is, as you look at, we as an industry, we're really good at looking at the monthly payments, and we're saying, okay, we look at the monthly payment, we know that that resets time, and we know that, you know, payments are equivalent to 2015 levels in some markets for consumers, though they still look at that top line number, and that top line number does freak them out, and we've talked to first-time buyers, and first-time buyers say well, I'm not jumping in because I can't afford or because I can't save for a down payment or I have student loans, and sometimes it just comes down to the education. Your down payment doesn't have to be 20%, and you probably can't afford, if you're paying x in rent and you actually look at the rent versus own equation, in some markets that's not always going to make sense.

But one thing that I wanted to mention, too, is this Monday, we launched our new millennial survey which is not looking at active shoppers at all. I just want to talk to millennials sitting on the couch, just someone who sees my ad on Facebook and clicks on it, and an interesting dynamic, which I guess we knew was happening on the broader economic front, the idea that people are saving more money, but we got some hard data on it now, that says 60% of millennials have reported that they saved more money this year in the middle of the pandemic, earlier in the middle of a recession, than they did last year, and when you ask them what are you going to do with that savings, their number one answer is I want to keep it as an emergency fund and I want to keep growing it. Number two answer is look at the stock market, look at all the IPOs, look at all the money you can make. A lot of people are thinking about putting their money in the stock market, but three, they want to use it towards a down payment, so I think that's one thing we already knew—the numbers of the demographic tailwinds, but now affordability is interest rates, is home prices, but then of course, if you throw in the down payment that can help offset some of those challenges as well, so I think that's a really fun change that we saw so far this year.

Yeah, I think that that's been pretty widely reported by J.P. Morgan and a few others. I mean, it's interesting. This recession has been the haves and the have-nots, if you will, so, you know, if you're attached to an industry that is a group gathering where everybody makes minimum wage or a lot of people do—I mean, you're down for the count and you're a have not. You didn't own an asset going into this, but there, you know, that's not who was going to be buying homes this year anyway, and the people who were thinking about buying homes, I mean, J.P. Morgan's been reporting hey, I'm looking into people's checking accounts. They're up dramatically even now. Well, this data is now about six weeks old. They're even higher than they were in February with all the all the stimulus money they got. These are people who kept their jobs, stopped spending, didn't take a vacation, and they're saving it because they're scared, and that's one of the more interesting economic issues right now, is if they come out and start spending it like crazy, we will, we'll see some inflation.

They're also spending it on housing, and just like they're borrowing money and buying stocks with it, there's now tools where you can get into the housing market, and I've seen these investor groups, I'll call them the people who've read "Rich Dad, Poor Dad." There's a big group that catered to these people, and now with these Zoom conferences, I usually don't speak in them, but I have been speaking at these things, and it's the euphoria I'm seeing into buying a $70,000 house in Memphis that I will never see and get rental income, and now Roofstock allows you to buy 10% of a house in Vegas and 20% of a house over here ,and I talked to somebody yesterday who's allowing you to buy part of a house for as little as a hundred bucks, and he's already completely sold six homes that way. They just started up. And then you, there's another element to this that I think is being very under-reported, but the REALTORS® know it, so it's investor activity at the local level. So the REALTORS® are at, we have an all-time high number of REALTORS® which, by the way, is one of our 10 indicators that there's a housing bubble going on, so there there's one, but these professional fix-and-flippers—one of our clients securitizes rental guys. Invitation Homes, American Homes 4 Rent are trying to aggressively grow their business because they're public companies. They're buying a lot of homes and beating each other up.

American Homes, right, just started a home builder and they tell me they're the 40th largest homebuilder in the country already, just buying rental homes and I could just go on and on and on, but it's investor activity on top of all the other fundamental stuff that I think could cause prices to continue going at double-digit rates for quite some time. When you see it like I have, two friends, actually, that have quit their day jobs to go back into the flipping business, right, you are definitely seeing that, right?

Yeah, it, I mean, most of them are under.

Yeah, so let's tease that out a bit, right? This, these indicators may be of a bubble. We're seeing home sales at the same level they were last at in 2006, which was the last boom. So how does this market compare to that market, and, you know, what are the signs of overheating that we should be looking out for?

Yeah, I've got, in 2013, at one of our conferences, we had our clients do this as an exercise: what are the 10 signs of a housing bubble? I mentioned one of them, REALTORS®. Another one would be I'm grading 500 lots when I only need a hundred. We're not quite there yet. I'm going to bid on this land and buy it no matter what I am seeing. That when the lady who's cutting your hair or your cab driver, now it's an Uber driver, is flipping houses or owns three or four homes, I guess we'll just add the one.

Ali, when your friends drop out of work and become home flippers, I think those are all signs not necessarily that we're in a bubble right now, but this could easily create one. And the last one, which I'm going to rely on you, Nicole, so I'm going to stay in touch with you, is when Wall Street gets involved and starts financing this stuff. So when I, when I can borrow money to buy part of a house in Las Vegas, okay? That's not subprime, but it feels a lot like subprime to me, and I and I'm seeing signs of that, so we're watching that carefully.

Well, and this is not actually a bubble indicator, but it's something that, as we were talking about, how much home prices have been coming up. It just hit me about the appraisal issues and—I know on the prep call we talked a little bit about how now builders have been pushing their prices so much—when we say, what issues are raising prices, causing for you guys, they're not saying, it's people can't purchase the homes anymore. They're saying that they're running into not only appraisal issues for the homes but also the appraisal, appraisers are so busy that they can't even get out to go and look at the project, so I think it doesn't matter, really, about the bubble.

To this point, but this point is just, when you look at how crazy the market's gone, you're seeing some breaks in the system as well and not only that you want to think about the affordable, affordability side of things, too, so I talked about how comparing last year to this year. You know, we've seen monthly payments stay about the same, maybe even be a little bit lower, despite the fact that we have, you know, massive home price increases. We look ahead, we expect home prices to rise about, to see happen with mortgage rates, which is steady, and then start to tick up as the economy opens back up, that does start to hit monthly payments and so that may not slow down the investors or the flippers, but for owner occupant buyers, that is going to start to become a challenge.

Yeah, I think that's a really important question, you know, how will the psychology of the home buyer change next year? You know, if they start to see mortgage rates tick up, or if you know that momentum of sales starts to slow, or if there's a vaccine and, you know, what is the psychological impact of that?

Ali, you want to jump in?

Yeah, and so that's been really one of my new fascinations, and I'm trying to get people to interact with me to talk to me about this because I want to know, really, what's going to happen to your, just think about yourself, what's going to happen to your wallet share once we get the vaccine and it's widely distributed and you feel very comfortable going out, like we talked about the beginning part of the reason housing was already doing well, and we know that there are those underlying demographics that are going to be with us just even as you go into the Gen Z group, but we also know that fuel to the fire was that work from home. You're bored, you're at your home, you're spending time there. I think the first six months of the year we should expect that's still there, and we still see bidding wars, and we still see fear of missing out. We still see so much enthusiasm. I don't have the answer, but I wonder what happens once we get to go and live in the service economy again, because our economy was fundamentally more service than goods. It changed this year. It became a goods economy. You heard Dana mention earlier we're going to maybe see people stop spending so much money from the good sector, and we're going to shift back to service, back to the lion's share of our economy. Is housing immune to that? Is housing a good that's still there, or do we start worrying about all these other things that, or enjoying all these other things we didn't get to do for the majority of 2020 and even into 2021?

Well, I think there's clearly going to be a surge in people going out and having fun as soon as they get a permission slip to do so, and going on vacations, but we've done a number of surveys, too. We think there's going to be more than four million more people permanently working from home and another four million more people being given the opportunity to work from home a couple days a week. That's a lot of houses, so even though we do, I think it's going to shift back to more experience-based spending. I still think the housing market is going to be crazy strong.

Do we think that people are going to, so we know that the comps will be easy in the first half of next year, so we've learned, especially in, and people are sensitive to thinking that the market is starting to slow, and if I know John, you said you still think 2021 will be very strong and you still think there'll be a lot of demand.

Do we worry again if we start to get to the second half of next year and the comps are really hard to beat because we had posted 50% year-over-year increases and maybe we don't post another 50%?

Does that start playing into the consumer mindset, that the consumer says, “Is the housing market slowing down? Should I wait for prices to drop? Are things leveling off?” How are you, Danielle and John, how are you thinking about that?

I've never seen that. I mean, I think, you know, those of us that read the Wall Street Journal every day pay attention to that, but really it comes down to my spending pattern. my life. What do we want to do as a couple? Are we having kids? You know, 2018 mortgage rates spiked for a little while. I mean, that wasn't a psychological thing. That was a financial thing, and next half of next year I think it's gonna be really hard to comp up.

I agree with that. D.R. Horton sells 50,000 homes a year and just comped up 81% for the last quarter.

So how are they going to comp up over that? There's no way they're going to get all those homes built and finished. That's the challenge and, you know, and Home Depot was up 23% year-over-year. They're going to comp down, too. I think, too, because all this DIY is going to slow, so for some of your financially-oriented people, some of the comps won't be so great, but I still think this is a pretty damn good stimulus, and if rates rise, which the bond market is, the bond futures say they're going to be flat or even down maybe up from 2.7 to 2.9 is what we're thinking. I think we're still strong if rates go up a lot more than that. I think we slow dramatically so we'll see.

And another question mark for next year is the new presidential administration. A few of the policies that have been discussed is a fifteen thousand dollar tax credit for first-time home buyers or also some amount of student loan forgiveness.

Danielle, do you think either of these policies would be a game-changer for the housing market?

Yeah, I think they absolutely would. So one question I have, though, you know, and I'm an economist, not a political analyst, is what are the odds of these actually making it through? The administration that's incoming has a ton of priorities to tackle, chief among them the health crisis and, you know, the way that it is holding back the broader economy, so I think that's probably going to be their first priority. I do think they made it clear that housing is a priority, and especially access to affordable housing on the ownership side, and on the rental side, and they, you know, they put forward some ideas you mentioned: the first time home buyer tax credit and also some student loan forgiveness. These would be important at helping first-time homebuyers overcome the down payment challenge. So the tax credit is geared to be readily available at the closing table. That would certainly help, you know, down payment forgiveness or debt. I'm sorry—debt forgiveness would help buyers be better prepared to tackle higher monthly payments and, you know, research has shown that these policies do matter and do delay first-time buyers from getting into the market, so they both would address challenges that buyers face, but I'm not sure that they would address the most pressing challenge in the housing market, which right now suffers from a lack of supply rather than a lack of demand. So I think they could help. They would certainly help those buyers that are poised to take advantage, but it's still not going to solve the inventory shortage problem, and that’s, I think, the bigger issue.

Yeah, and there's a timing issue, too, so we're talking about a red-hot housing market right now. What happens if you do a fifteen thousand dollar tax credit in a red-hot housing market? You make it even hotter. So we'd have even more price appreciation, so maybe that would increase homeownership, but prices are going to rise even faster. That's why I'm glad I don't set policy for a living.

Well, and and we don't know for sure that it would be done on day one or year one, too, so what I like about this is at least we know that our politicians are realizing that first-time buyers are struggling to get into the housing market, and to John's point if rates do eventually start going up as the economy starts to heat up, you will start to see some of those affordability problems that then they could play that card, so it doesn't have to be played on day one, but I like to know that their mind is in the right place for the housing market and speaking of that strong demand, that super-hot housing market, that we're seeing.

You know, I know we have a demographics panel right after this, but I want to get into, a little bit, the demographics of where is this demand coming, from where is it going to be coming from, so what are you all seeing among buyers, and what demographic trends are you looking at next year?

I'll start with this one because we did a 9,000-hour research project that ended up in a book on this. So we look at the demographics by decade born so you can compare. They're all turning 80, and one of the more interesting things that hasn't been talked about is that nobody is putting their parent in an assisted living facility right now. So there's a lot of homes being held off the market. I have a buddy who runs an in-home care business and his business is way up this year so, you know, if that comes back, which I think it's going to come back very, very slowly, people, you know, that is not a place where you're going to send your parent even when we have a vaccine. I think that's going to keep some homes off the market, so I would watch that. Those born in the 1950s, you know, they're all turning 70. They've been the biggest beneficiaries of this whole thing. This is Bill Gates's generation. This, they own a lot of stock. Stocks way up, they own a house or maybe two, home prices are way up. They do cash out. Re-fis last quarter were the highest we've seen since the prior boom. HELOC issuance is up. I mean these guys are super rich, so I'm kind of I'm watching what that generation is doing. I think they're going to drive a lot of high-end in retirement housing, those born in the, going into this and retirement accounts. I think you're going to see far more demand in Florida.

In fact, there's some interesting trends going on now where people are renting homes in Florida. They figured out, hey, I don't have to buy my second home. I can rent it and leave my stuff there all the time, so we're going to see a lot of that, those born in the 1970s, and I do think this is the right way to look at it rather than group them all. That was kind of a tough-luck generation because they were the baby busters. They got into the housing market right before the last bust they're actually, but they own, they're actually doing great this cycle, so for the first time, I think they're going to make it through a recession really well, and we'll probably, just like my generation, start funding down payments for their kids.

I mean not everybody's going to have that, but a lot will, and then when you get down to the millennials, those born in the 80s and 90s you got to look at them different. I mean, the three founders of Airbnb were born in the 1980s. They just had an okay day, the, you know, the very entrepreneurial, some, they're the sharing economy drivers, they have the most college-educated generation ever until the ones that came after them. They're already homeowners now. Most of them, they're doing very well. I'm being very Pollyanna here, but that and then the 1990s, that group was the one that drove the urban multi-family boom. They're now tending to start families and things and, you know, the shift to the suburbs that Danielle was talking about was already going on. Now it's just been accelerated, so we're going to move to the suburbs sometime. We're moving now, and so I think you're going to see a lot of family formation there so that’s, we're looking at generation-by-generation, but I think that'll help with the clarity of a view on this.

I know I went off, but I did a lot of research on this so, sorry.

That's great. Ali or Danielle, you want to jump in with your thoughts?

Well, and John, I was going to ask you, when you were talking about Bill Gates and all the wealth, I was going to say well what about the bank of Mom and Dad, but then you actually brought that two decades down to say it would be that group that would pass it on, but I think for some people they'll be fortunate enough that they will have the bank of Mom and Dad to help them as affordability continues to be an issue. I think one thing that will be really tricky, and I think there's a lot of REALTORS® on the call that they should think about, is how to keep the customer happy, because in the millennial survey that we just did, we said, what do you want in a home, and millennials said, well, I want a big kitchen, and I want a big yard, and I want a garage, and I want everything. I want new, and it's going to be a waterfall of compromises to get them to a home that they truly want, that they can afford without stretching their income too much, and I think that kind of communication and kind of data to support some of the reasons why people can't have it all will be really helpful when people are home shopping as well.

Yeah, I agree, especially as prices continue to rise that, you know, I talked about the fact that we have a large number of millennials that are entering peak first-time homebuyer years, but millennials are going to be important for the housing market not just because they're first-time buyers, but because many of them are going to be trade-up buyers, maybe expanding their family, taking advantage of the opportunity to work remotely to get some more space, you know, to stay at home now and then enjoy that.

You know, in the years ahead, as their families grow and then, I'm just going to squeeze in one more question from the Q&A here, we got a lot of great questions, but looking at the supply side next year you know are we going to see more supply come online as forbearances on mortgage payments expire? Will we see foreclosures bringing new supply online? And then the other question we got on combining is, as vaccines become more available, will that bring sellers into the market and also alleviate some of the supply concerns?

Well, there's a lot in there. So FHA has its highest delinquency rate ever, forbear, I think 8% of all mortgages now are in some sort of forbearance, but what was different this time around is that FHA and FHFA, which oversee Fannie and Freddie, planned for this and put in the service documents. Hey, the best thing to do is to work with this person and modify the loan, and Calabria, who oversees Fannie and Freddie, has been very vocal about this, is you've missed the payments, we're going to tack them on and make it a 31-year mortgage or something along those lines, as long as you can get your job back, some of those people won't get their job back or will throw in the towel and we will see some foreclosures. But, I'll also just add, the number of loans in the foreclosure process is near an all-time low right now because they've said you're not going to start the foreclosure process on these people, so if this becomes an issue, I don't think it's a 2021 issue, I think it's more of a 2022 issue, and it varies by state because you can get it done really quickly in Arizona and in New York it'll take you years.

Yeah, if you look at the forbearance programs that are in place, a lot of them for Fannie and Freddie loans you have to request forbearance by the end of 2020, but that plan can still run well into 2021, so there's that, you know, whether or not those delinquencies turn into foreclosures depends on, you know, what other options people have. We know that the housing market is very inventory-starved, so perhaps a distressed sale would be a more likely outcome than a foreclosure. You know, the fact that home prices are high means you might not even see people short-selling, but they can just sell and walk away and that would be a better solution.

I think John's point that lenders and borrowers are working together, unlike the last recession, there was sort of this blame game going on of who was responsible for the lack of payment. This time, there's an external threat. We've recognized it, we've put in very proactive policies to deal with it so that people can move forward together in a way that is ultimately better for the whole.

Well, and I think that was what was interesting, too, is when we went into the great financial crisis, we didn't know what a housing collapse was going to do, to, how long would it take for jobs to come back, what would happen to the broader economy, what happens to the consumer psyche, what happens when home prices go down—there were so many things that we learned on the fly during the last cycle that I think a lot of the quick policy action was in response to that, but then, to Danielle's point, if homes do end up having to get a short sale or something, we've heard, and there was that great story about how people are searching obituaries and um and different reports to try to find where they can find a home, so we know that a lot of those homes that maybe won't get in foreclosure but will need to get sold will likely get scooped up in a hot market.

I think that's all we have time for, unfortunately. We could definitely keep the conversation going. Thank you to everyone for tuning in, and thank you to our panelists for sharing your insights. Thanks, Nicole. Thank you.

Please welcome National Association of REALTORS® Chief Economist and Senior Vice President of Research Dr. Lawrence Yun.

Hello everyone again. This is Lawrence Yun, Chief Economist with the National Association of REALTORS®. I hope you are enjoying the program. I understand REALTORS®' schedules are always busy, you know, you have to make a phone call, check on, you know, potential open houses and many things, so these sessions are all recorded, so what you have may have missed, you will be available online.

A lot of good discussion on the economy, the k-shape particularly, with some people being immune throughout this recession while other people are really going week-to-week, paycheck-to-paycheck struggle. We saw the, what's happening on the commercial real estate. Bifurcated. Retail office difficulty, industrials actually booming, and then the residential part which we just discussed, the market being hot, how long would it last, and we always appreciate the media participation to keep all the speakers and panelists with greater scrutiny, you know, keeping people honest.

Our next session looks at the demographics because people say demography is destiny. You tell me how old you are, I can exactly predict what your age will be 10 years from now, so we have all these different generations each year moving into the next aging category, and that certainly drives the housing demand or potentially housing supply. To this end, we have a great panel list.

So let me introduce the panelists. Richard Fry, Dr. Richard Fry is a senior researcher at Pew Research Center. He regularly documents the educational enrollment and other milestones, the economic well-being of the nation's young adults, millennials, and the role of the student debt in financing college education and impact to the rest of the economy.

And also we have Dr. Rodney Harrell, who is Vice President of Family and Home and Community at AARP, who has covered many research on housing preference among the American elderly, neighborhood choices, and he has developed a very interesting index called community livability index. REALTORS® who utilize RPR, you will be able to tap into that livability index information.

And finally, NAR's, our own, my colleague Dr. Jessica Lautz. Everyone has looked at the Home Buyers and Sellers report. Well, the principal author is Dr. Jessica Lautz, so here she will be speaking directly on her latest findings from the report.

And our moderator for the session is Sarah Paynter, who is an award-winning real estate reporter at Yahoo Finance who also writes for The Real Deal, along with the Newsday New York City publications related to real estate.

So welcome all, and Sarah, I will now turn it over to you.

Thank you so much Lawrence. So, I am so excited to ask Richard, Jessica, and Rodney some questions. We're gonna start off by talking about a dip in first time home buyers this year. The share of first time home buyers dipped to 31%, which is the lowest rate since 1987. We usually see at about 40% of home buyers, so with so many millennials approaching homeownership age, I want to know from you guys, how has the coronavirus pandemic and other factors driven down the millennial and first-time home buying this year?

All right, I'll jump in. People are being shy, I think, to start off, so, you know, what I'm seeing in the data what we saw from the Profile of Home Buyers and Sellers that Lawrence talked about that was just released is really that transfer of wealth from parents shrunk considerably this year. So, last year, when we look at the data, what we see is about a third of first-time home buyers actually receive down payment assistance, and this year it shrunk to a quarter, so I think that there could be some family members who aren't able to contribute. That transfer of wealth that the last panel was talking about is so essential for first-time homebuyers to be able to help enter homeownership, especially with home prices rising so steeply, and so without that assistance, I think, that that really does retract, as well as the low inventory and the tightened supply, the rising prices, all of these other headwinds that they're approaching as well as student loan debt, so they have a lot of hurdles, but then without that extra push from Mom and Dad, it's really hard to enter.

Yeah, I'd say on, sort of the millennial homeownership rate, it's clearly lower than what it was today for Gen Xers back in 2000 or the boomers back in the early 80s and the factors bearing on that is, you know, you can look at various aspects of their economic well-being, and if we look at their incomes in 2019, households and millennials, boy, it looks really good, say, compared to the previous peak back in 2000 for the Gen Xers, so it wasn’t, it's not an income generation problem, but there's no doubt that on other aspects of their well-being, millennials are behind. Their wealth is lagging. If you look at this part of that is student debt, if you look at sort of the typical one that has student debt, they still owe out twenty-four thousand dollars outstanding, whereas the Gen Xer back in 2000 owed about 12 grand, so student debt is an issue, and a final thing is that lending standards are still fairly, fairly tight. Not lock drum-tight, but they're fairly, you need a good credit score to qualify, so as Jessica mentioned, they are facing some headwinds.

Yeah, and this probably won't be the first time we mention it in this panel, but, you know, Sarah mentioned the coronavirus, its impact, and it's impacting all kinds of decisions for people all across the age range as this pandemic is making us understand our housing needs in new and different ways, and millennials are no exception to that. We need to reconsider what that new normal is going to be and what that new world is, and it's only natural that would have some impact on purchases.

Thanks, and digging into those generational differences, we have a huge millennial generation that's aging into prime home buying years, but we still have a fairly young populationof baby boomers that previously, before the millennials, was the biggest population, and is still very large generation that owns a lot of the residential real estate in the country.

So what is this going to do to the availability and pricing of housing in the coming years?

Okay, I'll dive in first on this one too. So, we have seen that millennials have been the largest generation of home buyers, and we've seen it for at last at least six years in the data, which is kind of surprising because they do have these headwinds, but we know that they are a large generation. They have a lot of purchase power and their median age as a home buyer is approaching into the 30s, so we do see that there's actually some trade-up buyers, too, among millennials. One of the big things that I think we talked about is this, this growth in multi-generational homes, and I know we're gonna probably dive into that too in this session, but seeing that growth, seeing there's a lot of people doubling up, I think it's slowing the headship rates for a lot of young adults, so probably those younger millennials, even thinking about Gen Zers who are actually living at home right now, too, and I think as we start talking about competition within the housing space, you know, it's not just the availability and pricing overall, but it's the availability pricing of the right type of housing for that household, and so in particular locations we like to talk about livable communities, the places that are close to transit and shopping and the resources that folks need—those are in relatively short supply, not to mention if you're thinking about aging, you might need a home that has some of those features that support people of any age. The supply gets even smaller and smaller, so the idea that, you know, as we look at this competition issue, we need to look at, within the overall numbers, to think about those units that are in the locations and of the types that people need.

Yeah, in this sort of the twin peaks this is actually a tailwind for housing demand in the, based on 2017 population projections. The U.S. population is projected to grow in the 2020s by about 7%. That's the least, the smallest population growth over a decade since the 1930s. Okay. so the U.S. population is not vigorously growing. Furthermore, that was based on numbers. I suspect that the pandemic has markedly brought down immigration, and so those, that seven percent is probably optimistic. Immigration has not been running what it was back in the 80s, 90s, up to about 2005. So the fact that we do have sort of the large millennial generation as well as a still relatively large boomer population active in the housing market that's actually offsetting some of the headwinds facing us in terms of population and household growth, and since you talked about, you know, the proportion within the population of the different groups, we should talk about this overall demographic trend as well, that we're aging as a nation and so, sometime in the 2030s, we're going to have, for the first time, people over the age of 65 outnumber those 18 and under for the first time in U.S. history, and to me that's a fundamental change to our housing market that's impacting communities across the country, and the idea that we need to, again, look across all those age ranges to understand the type of housing that works for folks and also just the complexity of those transfers and which groups' needs are being met. Our vision of communities has to be changed to one that does look at what boomers are thinking about, what millennials are thinking about, and everyone in between, and, you know, and as I say that, I want to make one note that's important to our work at AARP and that's what we found in many of our surveys are that boomers and millennials want the same things, that there are lots of the features and services, that proximity to transportation and parks and all of those great things are things that are constant, but what's different are the barriers that are facing different people in different groups, and so we need to think about some of those barriers that are impacting older adults, for example, in their ability to access some of those housing options they need. So we've got a complex housing market. It will stay complex and it's really shifting in this overall dynamic as well.

Yeah, I if I can jump in there, too, I think this baby bust has some huge implications for home buyers too, and yes, I think the older generation and younger generations are really looking for the same thing, especially as so many people are working at home right now in the pandemic, but we really see this baby bust. It really is pronounced in the data for home buyers looking back at 1985, 58% of them had kids under the age of 18 in the home, and today it's just a third, so we really see that, the change in preferences has changed because schools are going to have be less important to these families who are buying homes with no children and thinking about the amount of space that's needed, maybe you do need a home office now, but you certainly don't need, perhaps, a child's bedroom. So I think there's some big implications there too. And I, the data that I've seen so far, we don't have good data. I don't think in the U.S. right now, it is showing this continual baby bust through the pandemic as people really say I can't think about adding a child into my family, afford it right now or think about daycare moving forward to really seeing that continuation of this trend.

Yeah, but, and to that point, you know are we gonna have the types of housing that people need. Our livability index shows that four out of five neighborhoods across the country have nothing but single-family housing, and so do we have those housing options that allow a single person or a multi-generational family or a couple or a larger family to get what they need and the answer, in short, is no, that in many neighborhoods, that's not possible. So we need to think about producing what some call the “missing middle” housing of those different options—the two flats and triplexes and accessory dwelling units and some of the other things that allow people to have a better chance of finding the option they need, and that actually ties right into our next point about multi-generational housing.

I wanted to talk to you guys about the way we think about senior housing and how that has shifted during the pandemic. There were a lot of scary situations in nursing homes during the first wave and now, as we're experiencing another wave of the coronavirus pandemic, people are looking for different kinds of situations for their parents, and it's actually created a jump in multi-generational housing. Could you guys elaborate for everybody first what is multi-generational housing, what that looks like in a house, but also how this aging population is changing home buying patterns?

I guess to set the base on homebuyers and what we saw last year during the pandemic, we saw it jump from 11% of home buyers pre-pandemic who are purchasing multi-generational homes to one in six, to 15%, so that's a massive jump. The number one reason we saw that jump was for aging adult relatives to move into the home last year. When we looked at the data pre-pandemic, what we saw is it's essentially an even split between aging adults who are moving into a home and then young adults who are boomeranging back, perhaps. So this year really seeing this rise nearly 50% of multi-generational buyers in the pandemic wanting an aging adult relative with them, and I'm sure there's a lot of reasons behind that, perhaps child care factoring in there, but also taking care of this aging adult relative, saving off loneliness as well, isolation if they're living independently. So I think there's a, there's a lot of motivations for families but certainly I don't know if the housing stock is going to be able to support that.

Thinking about the older housing stock with aging adults as well, and to Jessica's point, one of the things we do at the AARP Public Policy Institute is tracking the nursing home deaths in the country, and this morning we had our latest update to that dashboard, and 106,000 people in the country, excuse me, hundred six thousand residents and staff of nursing homes across the country have died due to coronavirus, and so that's a sobering statistic, but what it raises is that's a hundred and six thousand families that are impacted by that and many others that are thinking about those issues, and so anecdotally we've been seeing a lot of people that are interested in accessory dwelling units in this year, building a backyard apartment or the like so that they could either have a family caregiver to help take care of a loved one or to have their loved one in the house for a longer time period, and in the short term there's that whole shared housing and multi-generational housing push that people are finding ways to take care of their loved ones, to make sure that they have the kind of space needed, so there's a short term and a long term that we're looking at here. People are taking those immediate actions that they can now, but longer-term, we need to be thinking about those options, not just about how we can rethink nursing homes in our care sector, but again back to those housing options so that fewer people would have to be at a nursing home or in any housing situation that doesn't work for them.

I'm going to muddy the waters a little bit by pointing out that in our sort of research on multi-generational living, we should not equate it necessarily with senior housing. About 20% of the population lives in a multi-generational household, and which age group is the most likely to live in multi-generational households? It's now 25- to 29-year-olds. About a third of them live in multi-generational households, whereas about a quarter of 85 and above live in a multi-generational household. Back in 1980 about 13% of 25- to 29-year-olds lived in a multi-generational household, so they are the population that’s, you know, growing, that's the growing proportion of the population that's living in a multi-generational household, so let's not necessarily equate the two with senior housing. Having said that, the groups on a racial-ethnic basis that are most likely to live in a multi-generational household are Hispanics and Asian Americans as well as African-Americans. Hispanics and Asians, those are the growing portions of the population, as the population grows more diverse, that we, most demographers, expect it to, over the next few decades, that's sort of giving a sort of a demographic basis why we're likely to see continued growth in the multi-generational living as the population continues to grow more racially and ethically diverse.

I think that's an important muddying of the waters that you've made, Richard, that we're looking at multiple different kinds of sources of this trend, and frankly, as we're talking about those diversity of housing options the diverse groups and their desires for housing that meets their needs is certainly part of the mix as well, and really that multi-generational at least from AARP's standpoint, the idea is that regardless of the generations in the home, the idea is that we're trying to figure out those options that can meet the needs and so it's really important to not just think about, you know, the oldest old and what their needs are, but think about people at any life stage and what types of things can help people as they're aging or at whatever age they may be. I think meeting the needs is such, like, an important aspect there too, because in the data what we're seeing is that one of the main reasons to buy a multi-generational home is actually not just caretaking, but it's also financial resources and I think that's so important when we think about the pandemic having a financial fallback plan.

If someone's hours are cut or if someone's working in the gig economy can someone else really pick up the slack in the household financially, perhaps meeting the utility bills or a portion of the mortgage, and so we're certainly picking that up in the data as well that during the pandemic that was a trend that really accelerated as people support each other in different ways, and I imagine that's even more so in the high-cost parts of the country that we barely be looking for that.

Yeah, I think one aspect there though is that they have to have a bigger home to accommodate everyone, so that the home, it might be more expensive, but it could actually be perhaps in a suburban area where you have more bedrooms to be able to have a room for everyone and perhaps not even in that open space living that everyone used to love but I think now is really retracted in that as well.

One interesting thing that I've seen from Fannie Mae talking about multi-generational houses, is people altering their homes, whether it be widening doorways and adding ramps or something that might cater better to giving independence to a 20-something who is living with their parents, so I think it's going to also be interesting to see how people are adapting the situation they currently have to accommodate more family members especially now with unemployment during the coronavirus pandemic.

You guys mentioned race. That's a very important factor in multi-generational home buying. I was surprised to look at the stats and see that only 17% of home buyers in 2020 were minorities. That went up a little bit during the pandemic, but it feels very low. How does it stack up to historical rates, and what can we expect to see in the future?

Yeah, so we did see that. We saw Hispanic, Latino buyers and we also saw Asian American buyers actually had more buyers during the pandemic. I do think it's good though to try and parse out the home ownership rate versus home buyers and the homeownership rate, unfortunately, is incredibly low and I'm taking 2019 figures and I'm doing that purposefully because census changed the way they do collect data during the pandemic it became unsafe to essentially go door-to-door and that was their old methodology was to go door-to-door and see what the how people are living. Do they own the home? Do they rent the home? Are they doubling up with someone? And so, taking 2019 figures, what we do see is that the, essentially the Black homeownership rate and the White homeownership rate it is as wide as when the Fair Housing Act started taking these 2019 data, and we see it was 73% for White Americans and just 42% for Black Americans and that has some very big implications for wealth for living, for community involvement, and I'm sure that Rodney and Richard want to jump in on that, too, so I'll stop talking here.

Yeah, I would say it's interesting, Jessica, that you and I chose to sort of use the same figures, and with those same 2019 figures, let's expand it a little bit. So Whites are at 73%. Jessica mentions that Blacks are at 42%. Almost a 30-point gap. Hispanic Americans, about 48%. Asian Americans, about 58%, and in terms of sort of the long run, sort of sweep of it, I would say that sort of the gaps between both Hispanic Americans to White and African-Americans to White, I agree with Jessica's characterization that there hasn't been a lot of movement. There was some narrowing back in 2005 but it, they have been pretty persistent.

What I would say as far as the Hispanic homeownership rate, the Hispanic population is changing. It’s becoming less of a foreign-born population. Immigration, again, has sort of tailed off the last 15 years, and there's a large second generation of Hispanic Americans that are U.S. born of immigrant parents. They're large in size, they're pretty young, still coming of age, and I suspect that, given that sort of shift of the Hispanic adult population, less foreign-born, more U.S. born, better educated, higher incomes, I would expect that, compositionally, there's a little bit of to see that that Hispanic to White gap may narrow a little bit as the Hispanic adult population changes a bit. I'll leave it at that. This is important to talk about and think about these gaps, and in terms of their history and their impact.

I mean that, you know, part of the reason why we should be focused on these gaps is that they're also tied to the wealth gap that exists between the different racial groups, and home buying and homeownership is one of the great wealth-building parts of our country, and so there are certain groups that are missing out, and this is one of those things we can miss out when we look at issues as a whole is that there's the hidden impacts on certain groups, and one of my concerns about this post-coronavirus period is that we're, if we're looking at a wave of foreclosures and evictions that that will in particular hurt African-American and Latino communities more than other neighborhoods, much has happened in recessions in the past, that some communities frankly are even still digging out from the 2000, late 2000s recession, and so those impacts don't happen evenly and so we may see even larger uh dips as things move forward and that should be a concern for all of us, frankly.

Yeah, some interesting stats from the National Association of Hispanic Real Estate Professionals. In a recent survey, 40% of Latino renters said they wanted to buy a house in the next five years compared to only 33% of non-White Hispanic or non-Hispanic White households. Is that a reason for hope that, I’m, despite these effects, that people are experiencing now that minorities might have a better future in homeownership, and on top of that, that's the first half of the question.

First time home buyers, there is a higher percentage of minorities, 26% compared to 17% overall, so with that, those stats from Latinos as well as a higher percentage of minorities among first-time homebuyers, does that give any hope for the future of increasing diversity in homeownership?

I guess I'll take the first stab. I think as far as the first-time homebuyers being more diverse, we do see that the younger generation is more diverse, so millennials, I think, were dubbed "the bridge generation" of racial diversity, and so when we look at that, what we see is that increasingly, we should see more diversity among our first-time homebuyers as they do join the home buying market.

That being said, they have a ton of headwinds and so we talked about that low inventory especially for the affordable price points for entry-level buyers, and thinking about the affordability gap that we have there with housing as well, I do think that the American dream of homeownership is very strong. It's very much alive, from all of the survey data that I've seen. If you're not a homeowner, you want to be one in the future, whether that's a short-term or a long-term goal, so I think that's encouraging among all races. I think that being said, being able to enter homeownership is just so difficult for first-time homebuyers today, seeing that rate at a 33-year low and knowing that they have these headwinds out there and the big thing that has been missing, historically, is for Hispanic home buyers and for African-American homebuyers, they're less likely to have family help and so as they enter that proposition, being able to save for that down payment as essentially the goal post is moved on a monthly basis as they see home prices rise, that could just be very, very difficult.

And I'll just add to that again the variety and housing options in the neighborhoods that you may seek to find them again becomes one of those issues that we should be thinking about. We're thinking about the housing for different groups, that if the east side of town doesn't have the kinds of options that a certain community is looking for, that limits their ability to purchase the home that may work for them so we need to to do a lot to make sure that we're expanding options in all communities so that any demographic group should be able to find the housing they need.

As far as the impacts of sort of the pandemic and the recession on minority homeownership, at least so far, I would caution that this recession in 2020 is substantially different than what we saw back in 2007. In the great recession, the great recession really was sort of ground zero, was a fall in house prices and a meltdown in the housing market. I would argue that, at least so far in terms of the pandemic, it's the labor market that's really gotten slammed, in just a certain part of the labor market, today the federal reserve announced that aggregate wealth is at record levels and, you know, we look at housing prices and home sales at least so far, the pandemic, you know, has not been cratered in the housing market. It's actually been surprising. It's been a pretty robust housing market. Now, I need to be careful here when I make this statement. So far up we look at the foreclosure rates, they were much, much lower than they were back in, say, 2010. They have not, as I understand it, increased so much. Part of it is because of the forbearance programs that were put in place by FHFA, but at least in terms of sort of the loss of homeownership due to the pandemic because of the forbearance programs and other proactive measures, I don't think, at least so far, what we see in 2022, down the road, may be a little bit different, but at least so far we haven't seen a significant loss of homeownership among the nation's homeowners.

Yeah, and so, I'm concerned, that being said, I think I'm concerned that we may be kicking the can down the road as, after, you know, the forbearance periods and after these eviction moratoria end, those can have devastating impacts on certain communities, and we also can't ignore the impacts of this economic impact of this virus with the so-called essential workers and who those are, and so we're talking about the labor market. It's not evenly split between racial groups and so then the impact of income and the wealth gains of some are not easily distributed either, and so one thing I'm keeping an eye on as this plays out is that, you know, are there differential impacts of this particular crisis and economic impacts of the, of the virus on certain groups and, you know, from a policy standpoint, we could have used more of a national policy around keeping folks in their homes, keeping renters in their homes, supporting small landlords all of those things that help keep communities whole, and we'll have to see how that turns out. I think we still might be in for some of the impact that we saw a decade or two ago.

One of the last things I want to talk about is the change in unmarried buyers. This shift from what we would expect of a nuclear family several decades ago to now only 62% of buyers are married couples, which is much lower than we've seen historically. During the pandemic that dropped even a little bit more, so who is buying houses now, especially given how the pandemic has changed trends, and what, and additionally, what are we seeing from first time home buyers, that's different from what we've seen in the past? I, so I love talking about single females who are out there, and so certainly we're seeing a lot of singles in the market, especially single females and they truly have been second only to married couples looking back in the data since 1981. Unfortunately, in recent years they've actually shrunk, and I think some of that has to do with housing affordability. It's really hard for a single female, traditionally on a lower income, to be able to save for that down payment and bring that money to the table. That being said, in the pandemic and in recent years what we've seen is a really big rise in unmarried couples and in roommates purchasing homes together. I think it's a fascinating trend, I think. I'm not an attorney but I think there's probably some legal implications there about who owns what portion of that house. Are they earning equal equity in that home? What happens if that relationship dissolves, because they're roommates?

I'm not sure the answer to any of those questions, but we're certainly seeing that, especially among first-time homebuyers and especially in the pandemic, people who I suspect were renting together in city center suddenly saying let's go buy a home. Interest rates are incredibly low right now. We don't have to be wedded to the city center. We can move to the suburbs and we can buy a house together, so I think it's a pretty fascinating trend that we are seeing.

Richard or Rodney do you have any input on that?

Well, I'll just add that it's part of what I like to call the amazing adaptability of the American person that the idea that we take these circumstances and are trying to figure out how we navigate the options that we have and the limitations that are there, and so it's great that people are finding opportunities for housing that meets their needs now and I just hope that we take down some of the barriers that may be preventing some of those options from being built.

Jessica mentioned some of the potential barriers, but there's also zoning barriers to building certain types of shared housing or some of the other options that might work for some of these folks and, secondarily, that we think about those overall impacts that may be longer-term changes in preferences that are coming out of this recession or out of this pandemic. I should say that, you know, there may be differences in what we're looking for in the future, so we should keep an eye on how sticky these preference shifts are.

Nothing to add on that.

Okay, I haven't seen any questions come in from the audience, so I wanted to ask you guys, what are some things that we haven't talked about that you think are the most important things to be watching as we look forward with demographics? What are some of your main takeaways?

I think one of the, oh, go for it.

I'll just say one of the things that we haven't really mentioned that I wanted to mention was the idea that the home features that people need, of any age, that aren't being built. We aren't building housing with what's called universal design or things like no-step entrances and some of the other features that help make that housing stock work across ages and across generations, and my hope is that we start to as we look, think about these demographic changes, the aging shifts, that we get to more of a norm for this that, again, with that zero step entrance, whether you're a younger person with a bicycle trying to get in a home or move a television or an older person who has trouble navigating, you know, and up having an option to be able to get to your home without dealing with steps might be something that helps you out, and so I really hope that we take advantage or take advantage of this understanding of the demographic changes to work for options that work for all.

I'd say in the wake of the pandemic there's a lot of anecdotal evidence on this, and Jessica may have some home buying statistics that'll shed some light, but we certainly hear a lot about dispersion that as a result of the pandemic that there's been a movement out of what I will call the urban core into suburban and smaller metro areas.

I think that that has a lot of implications for, particularly for the central cities, but being sort of an empirical researcher, we don't have a lot of strong data on that yet in terms of we won't get, for example, even July 1, 2020, population estimates until probably next spring, so there's a lag on when we get the data. But there's certainly a lot of anecdotal evidence one hears that there has been this dispersion back out to the suburbs and I'm sort of very interested.

I get asked that a lot. I just don't think that the evidence is in yet on it. I'll send you the report afterward. So we totally have data on this that we just released, too, from the Profile of Home Buyers and Sellers. I will say, the one caveat, though, is that we're really looking at April closings until about mid-summer, so July/August time frame, so that's, I would say, early pandemic. We don't have a closing time on the pandemic yet, but it seems early. We are seeing a big rise in suburban behavior both on the buying and the selling side and the number one reason for sellers to sell right now is for a bigger home, and it used to be in the last year and a half, 18 months that they wanted just to be close to friends and family, but the number one reason now is just more space so they're certainly feeling it during the pandemic just needing more space for that second office, one home office, a zoom room for their kids. I'm not sure, but that's more space. It's definitely up there on the list.

So I'm seeing the questions from the audience now. Maybe the last thing we can talk about here, a lot of people are asking about student debt forgiveness and the Biden administration. What are some potential policies that could help different demographics to achieve homeownership in the coming four years?

You see we're all jumping on that one. Well, that might be one, I think I'm looking forward to things in the the fair housing space that the new administration might look at some of those issues and ensure that everyone has equal opportunity to buy and purchase what they need as well and frankly just looking to do what can be done to help address the issues we've raised. The impact on certain communities, providing a way for people to become whole as or as much as possible from the circumstance we're in, you know.

I'll just note that a lot of the solutions may be at the federal level, may be at the state and local level as well, that, it's certainly an all-encompassing kind of situation we're in and it's all hands-on deck effort to get the solutions that we need to make sure that people end up with the housing choice that they deserve.

All right, and I'll stop us there because we are about out of time but thank you guys all so much.

It was really a pleasure getting to talk to you this afternoon. Thank you. Thank you. Thank you.

Please welcome back National Association of REALTORS® Chief Executive Officer Bob Goldberg.

Well, I think everyone hopefully will agree that today has been extremely insightful. Fabulous speakers, great panelists, and I really want to take the time here to thank those panelists, all of our multi-thousands of participants, certainly NAR President Charlie Oppler, and the entire NAR Leadership Team, and of course our staff which helped organize

and put these panels together and helped us execute relatively a flawless virtual event.

And as we all know these days and age, at this day and time it's sometimes difficult to make sure that always happens, you know. In conclusion, as we talked about, real estate today drives about one-fifth of the U.S. economy, so we all recognize the importance of the impacts that real estate has. Certainly none of us could have imagined what was going to happen with this pandemic and that the, how we were all going to deal effectively, which I think most people have, and what I call are "now normal," not our "new normal." It's the way the world's going to work even after the pandemic ends we'll be in a hybrid situation with virtual and in-person but we also know that for generations, REALTORS® have overcome significant challenges and have led their communities to better and more prosperous times, and I think that's why REALTORS® are the ones, as you've heard today, are the ones that are helping to continue to revive the economy and lead our communities back to prosperity. Why do we say that and why are we doing that? Because in the simple terms, that's who we are.

So, to the questions that were flooding the Q&A online as to whether or not the summit was recorded and we can post get a copy of the slides, it will be made available tomorrow along with Dr. Lawrence Yun's slide deck at nar.realtor slash, my phone's ringing on my computer. Again, nar.realtor slash forecast dash summit. All that information has been posted in the Q&A, so you can just simply go there and get that. Again, on behalf of the National Association of REALTORS®, we thank you. We hope you got great insights, and we will see you a year from now, when we hope to even have better news on the economy and how real estate has helped drive the success of everything that is going on. So thanks, everyone, appreciate your time.