What the Work-From-Home Boom Means for Our Future

If you could have a candid conversation with financial advisors who have decades of experience helping professionals, business owners, and families just like yours plan for their financial future, what questions would you ask? I'm Chip Munn, financial advisor, author, host, and CEO of Signature Wealth Group. For decades, my partners and advisory teams have had the opportunity to answer the tough questions for hundreds of our clients. Now we want to do the same for you. On the Signature Life Show, you'll hear answers to your burning and most perplexing finance, investing, and retirement questions from our Chief Investment Officer, Senior Wealth Advisors, Certified Financial Planners, and more. We aren't just financial advisors. We're parents, children, community leaders, and entrepreneurs with a passion for helping empower our clients to live life intentionally, what we call a Signature Life. John Tate, what's up, man?

Chip Munn, happy Friday to you, sir.

In the summertime, Fridays are particularly nice around here, so I'm excited to get the weekend kicked off. How about you?

Yeah, no, we got the air conditioner running full blast, cooling everything down, and we'll probably get outside and do something outside in the hot part later on this weekend. But you know, it's always an exciting time.

Well, speaking of hot, Our guest today is Chuck Forsyth. Chuck is one of the advisors in our Charlotte, North Carolina office. Chuck, welcome to the show.

Chip, John, thank you so much for having me. I'm super excited to be here on the show. Thank you again. It's speaking of hot, as we all know, the weather, it's unbearably oppressive here in downtown Charlotte or uptown, as we like to say in Charlotte.

Well, and I could only imagine I was alluding to the fact that every experience I've ever had, whether it's a Charlotte or a Columbia or anywhere that's bigger than Florence during the summertime, it always all that Cement. It just feels incredibly hot. So I know that you're bearing the brunt of it, but one of the interesting things that brings to mind is location. And that's what we're going to talk about today is some of the trends that have come up post-COVID and how really, as a lot of things have changed, if somebody's too hot in Charlotte, they can move somewhere different. And we've seen a lot of that this time has gone on since COVID Chuck, I know that you've been in Charlotte for a while, but there's a lot of that that's going on. One of the things that John and I have noticed is the work from home habits and the process that people have gone through. It's become pretty ingrained, but I think you see a lot of that, don't you, there in Charlotte?

So Gail, I, my family, we moved here from Atlanta a little over 5 years ago. Kind of long story short, we downsized. I joined another institutional finance company and they, they moved us to Charlotte, we decided to pick this area called the South End. We just saw it as like an up-and-coming area. It's right next to Uptown Charlotte. Like really, it's a block away from Bank of America Stadium of all places. And what you've just seen with COVID is the growth has just exponentially multiplied more than anyone could have thought of in such a short amount of time here. It's just amazing. The national bird of Charlotte or North Carolina is the crane, right? Because there's so many cranes on the horizon, just all these high-rises going up left, right in the center here.

I can only imagine. I'm not a big city guy. So John and I joke that we need to get the big city guys on the podcast so folks will actually listen. I see cranes, but normally it's the other kind. And I think the tallest building in Florence, I think it might be 8 stories and that's the hospital. So it's one of those things that again, changes kind of everywhere, right? Even Florence has changed, but a big part of that, at least of late, seems to be driven by the work from home boom. The last couple of years have really given, particularly the white-collar workforce, plenty of time to really fully integrate. I mean, I record the show from home every week, and it's something that I think really, I hate to say it, or maybe I don't, it's kind of caught on.

Our viewers can't see the video that those of us recording the show can see, but am I the only one that's actually in the office today of the three of us? Did I not get the memo?

I am working from home today.

Working from home, and Chip works from home when he records, and I'm stuck in the office. What did I do wrong? But, you know, I feel like that's probably— 2 out of 3 working from home is pretty close to the experience for white-collar workers in the United States, which is about 2 out of every 3 white-collar workers are still either working exclusively remotely or part-time, according to the last, I think, Gallup poll that came out. When you look at the jobs that are available, when the surveys are done of the people that are still out there actively looking for work, the things that come to the top of the list that are the most important to them our flexibility of schedule, the ability to work from home, the ability to take care of children if they have to, the ability to do things that aren't tying them to an office for a specific period of a number of hours during the day. That's what they want. They want that flexibility. And about half of all remote workers suggest in these surveys that losing these work-from-home options would increase their likelihood of looking elsewhere for employment. So there's a real paradigm shift that we're seeing in the United States and elsewhere that suggest that people are looking more towards where they live and how they work, more importantly than how close they live to the office, which was something that was very important for workers in decades past. But it might be something that is here to stay. I know that some employers are trying to change that. We'll see how much employees fight back over the potential loss of the ability to work remotely. But I mean, I think in our industry, it's easy to do a little bit of both. And you all can correct me if I'm wrong, but as long as we have an internet connection and a computer, we can do 90% of the things from home that we could actually do in the office. The only thing we can't really do from home is meet with clients because that's a little bit sketchy, but that's only if they want to meet face to face, right?

I think, John, you know, you hit on a couple of points where just think of 5 years ago, our clients, just from a monetary standpoint and fiduciary trust standpoint, they wanted to have that face-to-face in-person meeting and meet us. And then COVID changed all that because now clients are more apt to trust us through a Zoom call or through a video call, even a conference call, because they've lived through the last 2 years of working from home and doing these calls. And I think that's helped them with their lives. It's also helped many businesses, not just ours, with trying to be more streamlined and profitable and productive use of everyone's time.

Yeah, it— well, you had to, right? It's a little bit like the first people who had a phone or a fax machine. If the other person on the other line that you wanted to be able to call or send something to, if they didn't have one, you were out of luck. It didn't do you any good to have it. Uh, Zoom is something that I was introduced to, given kind of our multiple office structure, 6 or 7 years ago. But the problem was nobody else used it. So the fact that I knew that Zoom existed, it wasn't universally adopted. Until you need to be able to see your kids or grandkids and you can't go anywhere, it made for really widespread adoption. I'm surprised still, Chuck, and completely cool with it because this environment suits me pretty well most of the time. But I'm shocked at how many of our clients in Florence, it's not a traffic thing, it's a, I like to control my time thing. Maybe kind of John talking about those workers who want flexibility and time is, hey, it suits me just to jump on a Zoom for a strategy meeting. And I can stay at home. And when I'm done, I'm still at home. And you know, I'm surprised. I felt like it would be a really big thing in larger places, California, for example, where traffic may be really bad or some of the big cities. But again, it just has become another convenience item that folks like to take advantage of. And I think it's been a big part of how we've all talked about, either with clients or on this show, about all the things going on in the housing market. And I think that, again, the work from home and the ability to do things from different places has really been a game changer for that. Chuck, I know that you, having moved to Charlotte pre all of this stuff and now being in a really popular area, what's it been like? Are you seeing a lot of folks moving into town? I'm curious if that's true and Maybe why, what are some of the reasons that you hear out in the real world, not from articles or media, about why people are making changes?

I think if you look at just Charlotte from an epicenter, and we can include Raleigh and some of the other cities like Nashville also, but you're seeing a trend of residents and workers, especially now that they can be hybrid, they can move to places that are much more affordable. The weather's a lot nicer down here. So you're looking at, you know, Charlotte, Raleigh, Nashville, some of the fastest growing cities in the country and normally in the top 10. And I just saw Just some of the stats, like the South End in Charlotte, where I live, is only one of two areas in the United States, Chicago, an area in Chicago being the other, I think it's Chicago Fulton Market, which basically increased their commercial space 100% in the last year. So think of it, only two areas in the entire country where commercial space was increased by over 100% in the last year, Chicago Fulton Market and the South End Charlotte, because you just see corporations moving down here, moving into here. We can name them all because I see them all around here. And then the other thing, just this whole dynamic age shift, the millennials are now starting to hit age 30, right? We're starting to see the millennials, one of the largest generational populations in our history, now hit 30. They're now moving out of the house. And guess what? In Charlotte, in uptown, the average age is 29 years old. In the South End, the average age is 28 years old. So you're just seeing just this growth in this activity. It's exciting to be around. We absolutely just love it.

That would be an exciting place to live. It would be far younger than I am, born in 1976, but I'm sure it would be a fun place to live. I mean, 2020 coincided with the peak millennial turning age 30. So more Americans were born in 1990 and 1991 than any other years in current population. And so that's the largest slice of the millennial generation. And millennials are usually defined as anybody born between 1981 and 1996. And they're going to far outnumber my generation and the generation that came after mine. But it's fun to see people being able to get to that point where they're taking control of their own lives, they're living where they want to live, they're creating their sense of place in new and different places. Than any generation before them. But I think for the housing market, it represents a significant pent-up demand because a lot of millennials were coming of age and graduating college into the teeth of the Great Recession, the financial crisis, and many of their life events have really been delayed. Maybe they were still living with mom and dad. Maybe they couldn't get the job that they wanted because the unemployment rate was so high for so many years when they got out of college. In 2021, I think I saw this stat the other day, almost 1 in 5 millennials who had already graduated from college were still living with their parents. That was more than any other prior US generation on record. So I think what our Raymond James housing research team is calling it, and I don't know if they coined it, but they were the first people to say it, but what they're coining it as is the big unbundling, which is a lot of those folks that have been living with their parents are starting to move out and create their own households because that's what age they are. They can find a good job. They can live wherever they want. They don't have to go into an office. It kind of opens things up for a wider swath of the population. And last year alone, almost 350,000 US young adults left their parents' household and started their own. I mean, that's a big move in a housing market that is already having supply and demand issues. And so when we think about what the Fed is doing so far this year, in raising interest rates and trying to curb some of that demand and let supply catch up. I think one of their specific targets is the housing market. I'm not blaming it, so to speak, on the millennials, and it might be a second derivative of the COVID crisis and people starting to work remotely as well, but you're starting to see demand far outstrip supply, and that's maybe why we are where we are in the interest rate cycle. As people start to move out of their parents' homes and looking to form their own household?

Well, John, I think you bring up a couple of good points, especially on the housing demand. Again, being in one of the fastest-growing cities in the United States, we've had a lot of supply chain issues. And the church I belong to, we're actually building a house for someone. And when we budgeted to build this house a year and a half ago, just looking at lumber for a small 1,800-square-foot house, just 2 years ago, the cost of lumber was $25 a square foot. And then as we rolled into 2022, that cost of lumber increased almost $60 a square foot. So that cost, just an average home, increases it by $25,000 just in the last year. And when you look at just, again, lumber, just one part of the home, just in the last year has increased by over 180%. So these are inflationary spikes that are unsustainable, right? Lumber's not going to go up by 180% every single year. Price of a house is not going to go up by 25% every single year. So the Fed raising interest rates has done a couple things, starting to soften the housing market, starting to soften that high price of a home. And again, when we look at a 30-year mortgage, literally at the beginning of the year it was 3%, and as of last night, 6+ percent doubled. So just crazy things that are happening right now. From an inflation standpoint.

It's interesting talking about the millennial generation. I think, John, you called it unbundling. It has created a bit of a perfect storm on the housing front in terms of you've got the low supply, but now you've also got young people, we'll call them, and they're now able to, because of wage inflation, they're making more money. Now they're out looking for their own place, or either that or mom and dad are tired of paying for food and gas for them. Um, could also be why it's time to find their own place. But as I recall, I don't remember the exact statistic, but the average age that folks in that generation are getting married is older. And so that commitment of forming a household and doing some of those things, it's really just kind of come at a really interesting time. And I think that one of the ways that people have dealt with it is you've seen the exodus of certain geographies and people beginning to move to different places where things are cheaper. There are things that you can't afford in one city, but you can 100 miles away. Again, there have always been areas, particularly, let's say for example, near the coast or bodies of water, that the prices have held up really well and increased, and you could kind of predict that. But from my hometown of Pamplaco, I talked to somebody yesterday.

Chip, where's Pamplaco?

Pamplaco is about 20 miles from Florence. So in between Florence and Myrtle Beach, we don't have a stoplight. We have a flashing yellow light. And talked to somebody yesterday who was calling and asking a couple of questions. But one of the things they mentioned was that they had broken up a piece of property on a little street in Pamplaco into 3 lots and had sold them all within 90 days for people to put stuff on. And that's again, not a major metropolitan kind of thing. You're just starting to see people decide that they're going to live different places because they can, because Pamplaco, small or not, does have high-speed internet. You can get some of the core infrastructure stuff that you need, but you have the flexibility to move around to fit what you can afford while also maybe trying to get some of the things that you really want. And so I think that's how we're seeing some of the shortfall being dealt with, but I don't see an end to it. I'm not making any kind of prediction as to housing prices and things like that, because there are a lot of things that go into that, but I don't see the demand for housing going down, John, anytime soon.

I think one way the Fed expects to reduce demand is by raising interest rates so that if somebody is thinking about buying a home, having to borrow at 6.25%, which by historic standards is still reasonable, it's just double what we have paid to borrow money in the past 5 years. I think they're trying to discourage that. One of the reasons they're trying to discourage demand is because structurally, the way we build houses, we don't have enough qualified skilled workers in the United States to build all of the homes that are demanded by buyers on an annual basis. Right now, buyers are demanding about 1.9 million homes per year, and we can only build 1.3. So structurally, there's about a 600,000-unit shortfall every single year in supply versus demand, just on its own. Then you look at the period of time following the Great Recession, where nobody wanted to buy a home because nobody could borrow money because everybody had maybe overspent and done things financially that they shouldn't have done leading up to the great financial crisis, but home builders underbuilt over that period of time. By about 2 million homes, just because they could not find the money to borrow to build the homes that they needed. So we already started out with a deficit, and then we're adding to that deficit just based on supply and demand every single year. So that leaves us in a little bit of a pinch. So I agree with you that the Fed can do what it can try to do to stifle demand, but just from a structural standpoint, unless a lot of the empty skilled worker positions are filled in the home building industry, It's unlikely that we're going to be able to structurally meet the demand of the home buyer in the industry itself. And so it's going to leave us in an odd position for a few years, I think, before we figure that out.

Chip Munn, I absolutely agree with you. I think from a housing price standpoint, it's tough to make calls on that, especially when you've got individuals today with more cash than they've ever had in their entire lives. Their FICO scores are way better than they've ever been in their entire lives. And then also on the corporate side, corporate balance sheets, I was just, you know, pulling down some numbers because corporations have been putting away cash in droves over the last couple of years. In fact, when we look at just US corporations in the United States, back in 2000, US corporations had roughly about $1.6 trillion sitting in cash on their balance sheets. At the end of last year, that number had ballooned to $5.8 trillion. So all this money sitting on the sidelines in cash, and then just the S&P 500, just, it hit record highs of cash. In the pandemic, almost $2 trillion of S&P 500 companies' cash on the balance sheets. That number's come down a little bit this year, as of April, 1.9%, but you still have all this cash with individuals, corporations, and then, like we all mentioned, this demand that we need for these houses. And then I guess last but not least, if the houses aren't there, rental units are coming. Because when we see rental units here in Charlotte, just in the South End last year, They built 860+ rental units in uptown, another 800, and they're on pace this year just in the South End to put up another 900 rental units. So renters are coming in and that helps with that demographic of age 28 too, to have places for people to stay.

Well, it certainly is a process. All of these things kind of work themselves out over time. It's interesting, Chuck, you mentioned the liquidity levels and If you had to go into an inflationary environment, going into it when things are going to cost more at a time when at least the average consumer has more money than historically they have had. If you're looking for silver linings, there certainly are some. The other thing you talked about, all the cash on balance sheets, those are the companies that most of our clients invest in. COVID, times like these where costs are going up, they're hard times for small businesses, but as investors, most of the companies that we're investing in, whether it's in your retirement account, your 401, or an individual investment account, are large companies that have had some of this balance sheet buildup to withstand some of these things. And I think that it's important to understand that, that a lot of these companies, especially over the last 18 months coming out of COVID through first quarter of this year, have had margins to be able to build up some reserves to be able to weather storms like these. So I do think that there's some help, but— is a very fluid situation in terms of not only the markets, but also again, where people choose to live. There's a lot of geographical shifting going on. Chuck, any final thoughts before we wrap up?

First and foremost, again, thanks for having me on today. I really appreciate you taking the time to let me join in your podcast today. And just when we're thinking about this work from home, I think the one thing I took from it is just the ability to spend much more time with family. It's been so great to be at home. We have a daughter who's going into the 6th grade and just to be there for her activities, it's been a blessing to us. And I don't think the work from home environment will ever go away again where we're all 100% going back to the office because once you let that genie out of the bottle, it's never getting back. I think so many of us have found what, hey, life's really important besides just working all the time. And it's been a blessing. So thank you guys.

Yeah, absolutely. We love to have you on and get some different opinions on here, kind of livens things up. Kind of refreshes the attitude. It keeps Chip and I from just talking back and forth all the time, which sometimes I think people listen to, other times maybe not.

Well, and thank you, Chuck. And it's interesting because with all the moving that kind of has gone on, everybody knows somebody who is new to town because of whatever reason, because they found a better job, because they downsized from a more expensive environment. And there are a lot of things that go into moving that relate to finances. So If you're listening and that's you, or if you know somebody that is new to your town, check out one of our websites. It's called movingandmoney.com. You can get a checklist of some of the things that you may want to be aware of when you move. So I encourage you to check that out. Also know that as a listener, we're always available. Our advisors are always available, whether it's you, a friend, family, colleague, or coworker. If we can be of help, 30 minutes of our time, any of our time, no questions asked, no obligations. We look forward to being able to help you. Chuck, thanks for being here.

Thanks, Chip.

Thanks, John. John, let's do it again next week.

Until next time.

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