On the show today we talk… Housing & Affordability with Economist Matthew Gardner!
Show notes for Housing & Affordability with Economist Matthew Gardner!
The Vantastic Life is…
– is in Valley Center CA!
Born and raised in London then Oxford for undergrad to get an economics degree. I stayed in school far longer than anticipated to get my doctorate.
My first job was a land agency.
I came to the states to analyze the portfolio in the US.
My sister was working for Microsoft and I was visiting her in Seattle, and wondered who analyzed real estate in the area.
Then about 5 years ago Windermere talked me into coming onboard with them.
Today it’s very important for people to have a complete grasp on the real estate economic market.
I’ve been a fan of yours for maybe 20 years. This is like a full circle moment for me today.
I didn’t even write this question down… how has the internet and quick information has changed your job?
Massively! I always had a Thomas guide in my car to get around. Tech has become exponential. Which has been good and bad.
We’ve gone from a knowledge based to an information based society.
I think in terms of real estate it’s been a positive without a doubt. You can now buy houses site unseen due to virtual walk throughs.
The positives do outweigh the negatives.
Agents and investors should be teaching people deeper about real estate. They should all be going deeper.
There’s a group that analyzed psychographics that puts people into buckets. You’re taking 300 million people and trying to put them all into buckets. I don’t think we can do that.
It all came from the car industry, who’s been way ahead in marketing.
The markets that you’re analyzing and providing info on?
OR, WA, CA, MT, UT, Mexico, HI
HI is actually doing in-person schooling. Montana is having people move there right now from CA.
How does your morning work?
I wake up at 4:30am and turn on CNBC.
We all used to wait for the monthly unemployment report, but a month is ancient history.
So, I look at 10 year treasuries on Bloomberg news or Google. What’s going on with the stock market. Other weird things like how many people are flying. How many people are going to restaurants to eat. I don’t think we’ll see much in the way of movement until we get a vaccine that works, AND we will take.
Do you look at drivers license stuff?
Yeah, there’s a ton of weird things you can look at. You can look at daily home showings in the US. I look at mortgage rates and applications. There’s so much rich information that I have to distill down.
Between doing my job and working at the UW I don’t have a lot of time.
King County home prices are way up. How do you think that will play out.
I’ve been harping on about housing affordability for decades. I’m on Governor Ensiley’s advisor board and talked about how we need more affordable housing.
People can move into other states and buy houses that are much more affordable.
But we have massive demand here in Seattle. There’s very little to buy and and lot of demand.
Do you feel like when we had that little drop in 2018 that people were tired of competing…
There’s another layer on that. In 2018 we were knocking on a mortgage rate of 5% for a while. Which was up.
This gave the market a significant pause.
The rate that we’ve seen prices rise and with mortgage rates so low we are breaking records.
We must have a relationship between home prices and income.
There is something interesting about how people can now work from home.
My son just moved from Seattle and bought a house in Oregon for half of what they were paying for their rent in Seattle.
We are also seeing people move out of the Seattle area north or south where things are considerably cheaper.
Home prices are affected by mortgage rates right?
But mortgage rates aren’t going to rise significantly any time soon.
We are living in our homes twice as long as we have in the past. People are living longer and working longer.
The only one way we can slow down price growth is to build more, and it’s what we are not doing.
Land prices, zoning, labor, no one is getting into the labor business and that drives up labor prices. Lumber prices are up. We are taxing lumber coming down from Canada. Finally regulatory fees.
How do you feel about ADU’s?
I think it can have some assistance. But 70% of Seattle is single family. We’ve seen other parts of the country you are able to build 1-4 unit buildings. OR has put this into their zoning system.
We can’t make anymore land, but we need to add onto housing stock. We have huge demographic demand, but renters just can’t buy.
You have all these big landlords down in South Lake Union. There is all this work from home stuff and a lot of development projects that are stalled because of COVID, and landlords that are being effected. Is there a trickle down effect, and will Biden welcome foreign buyers back into the area?
In the apartment world… I seen 3 months free rent on a 12 month lease. We’ve seen an oversupply of apartments. They have been financed at great rates. They’ll be fine. Even though those are going down in price.
The problem is that you can’t get rid of tenants until after the first 3 months of next year.
The smaller landlords are going to pay. The larder ones, I’m not worried about.
Is there going to be enough demand if we are seeing people heading out of the area. On the office side… we have a lot of space. Back in the 1990’s every worker occupied 250 feet of gross area. Today Amazon is down to 90 feet. So people require less space, but what about social distancing…
In fall out, I’m worried about hotels, they are going to be suffering for a long time.
But what about foreign buyers having different reasons?
Yeah, it comes down to asset value. It’s going to come down to what an owner believes their building is worth and what someone will pay for it.
I fear for hotels and main street retail.
What we are seeing in Manhattan is people moving into the city because they can now afford it now.
There are a lot of interesting things happening.
Vaccine news, good news came out. But will everyone take it?
We turned the economic lights off. We are seeing a very slow job recovery, and there are so many people that are waiting for a vaccine that they can get and feel comfortable taking.
I think that will hold back our overall economic recovery.
20% of our workforce is being massively effected… retail and service.
A vaccine usually takes 5-10 years, not 5-10 months.
What about in the interim with a huge amount of people getting infected… you did mention that Ensily will shut us down if need be.
What about if economies have to shut down again?
We are about 100,000 new infections each day. It’s because people are going back to school, and we are more inside. We are doing ok, but other states are not doing so good.
We’ve been on calls with leaders about how we are going to open up the West Coast.
Wherever you are in the country… wear your mask and stop hugging. It could be a scary winter.
Are you adding a line to your spreadsheet for tracking epidemiology?
I’ve been working on an interesting thought. Back in 2018, there was a snapback really quick. We can look at housing as a way of insulating themselves economically.
I think we might see people moving because they don’t want to work in their houses, or the houses that they are in. People also get bored with what they see over and over.
If you aren’t working with millennials… start! They are big now and haven’t peaked yet. For 69% of them, they think that buying a home is the most astute financial decision they will make.
The economy was in very good shape in Feb.
I’m not seeing the negative side, but if there is one it’s affordability.
Will cabinet picks make a difference in the economy? Or the stock market?
The stock market has outperformed when there is a democrat in the White House and the republicans control the house.
Really, it’s too early to say.
Last couple questions. What about the devolution of the dollar potential?
We essentially haven’t seen it happen.
We haven’t seen wage inflation.
With the expansion of the money supply. There’s a massive demand for the dollar in other countries.
What do you think about digital currency?
I trust it as far as I can throw it. I think governments will want to get their hands on it.
I don’t trust anything that’s not backed by anything. It takes a massive amount of energy to make a coin. I want to tough it, feel it, smell it and taste it.
Speaking of trust we trust the info that you’ve given us over the years.
What do you like to do for fun?
I’m an ocean kayaker, and usually go up to Canada once a year.
Where can people follow along with your reports?
Follow me, and get into on Facebook, LinkedIn