2442: The Job Market and a Housing Shortage of 4 Million | NAR Chief Economist, Lawrence Yun

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Hi, uh, Sep Pakom from Orange County, California. I thought the Empowered Investor event was amazing. Uh, this is actually my second time attending. Uh, last one was about 14, 15 years ago. It's a great event. Awesome speakers talk about everything from investing to property management to finding great teams. Tax, legal, strategy, and all types of like creative software solutions to help make investors successful investing out of state where the numbers make sense. Just a great opportunity, great networking, and just great conversations here from the speakers at the front of the stage and also during the breaks and during the lunch hours and the networking receptions afterwards. Welcome to the Creating Wealth Show with Jason Hartman. You're about to learn a new slant on investing, some exciting techniques, and fresh fresh new approaches to the world's most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self-made multimillionaire who's actually been there and done it. He's a successful investor, lender, developer, and entrepreneur who's owned properties in 11 states, had hundreds of tenants, and been involved in thousands of real estate transactions. This program will help you follow in Jason's footsteps on the road to your Financial Independence Day. You really can do it. And now here's your host, Jason Hartman, with the complete solution for real estate investors. Good day, empowered investors, and welcome to episode 2442. We have a treat for you today, a returning guest, none other than the chief economist for the National Association of Realtors is back with us on the show. I think this is the 4th time he's been on, and it is none other than Lawrence Yun. Some people say that he is too optimistic, but I actually disagree. I don't think he's being too optimistic. He's just telling you the facts. And, you know, so far, granted, you never know, things can change. Everything is subject to change. The optimists have won the game hands down. I mean, they have just won the game over and over again. And the purveyors of doom and gloom have lost over and over again. Really throughout my entire career, since I was 19 years old, I've been hearing these people saying,— and I was at dinner with one of them recently who owns a bunch of real estate, who for some reason has got himself thinking— there was a small group of us— and he's got himself thinking that, oh, you know, the market's going to crash in a year or two. Why? What data do you have? I don't know. He just thinks that. I mean, it's just— it's amazing to me how wrong these people have been and how they just have these unfounded beliefs. Like they just think this for no real reason. It's crazy. It is crazy. So be very careful who you listen to and follow the data. Okay, the data. That's what's really, really important. All right, so we're going to get to that interview in just a moment. And by the way, I will just mention this because I just posted it on social media. I kind of want to see what people say. I have a feeling some people are going to get hot and bothered, almost like you're discussing politics, although this is not really a political statement. And I just did this this morning. I have some Bitcoin miners and I turned them off. I turned them off. Like I've always said, the one thing you can count on from me is that I am consistent to a fault. I am so consistent, it's just boring how consistent I am. If you listen to my shows from 21 years go, you're basically going to hear the same general philosophy you hear today, 21 years later. So what did I say about Bitcoin when I first found out about it, right? I said that I would love to see it be the next big thing, but I had my doubts. And you know what? I believe the exact same thing today. It doesn't produce income. It's code. It's not real. It doesn't really have much utility except being a store of wealth. And I found myself, and I had to kind of catch myself, being a little bit addicted to the Bitcoin story. Now, I invest in pretty much everything, but I've made the vast majority of my wealth through income property, the most historically proven asset class in the entire world. And, you know, at my stage of the game, I'm diversifying more. Okay. Now, what I've always said is that you must remember that if you want to create wealth, you must focus, you must concentrate. Think of it like being out in the sun and having a magnifying glass. When I was a kid, I used to do this all the time, right? You'd have some leaves there on the ground, right? Kind of dried out leaves. You'd have that magnifying glass and you would focus the sun's energy those photons on that leaf and it would start to burn. But it will not burn just being there in the sun without focus, without concentration of that light energy. And so the same is true of wealth creation. So many people make the mistake of over-diversifying. If you are in the wealth creation stage, which I have a feeling most of you are, you must focus. Like Andrew Carnegie said, put all your eggs in one basket and watch that basket. So I'm just telling you some of the things I'm up to that are not in alignment with necessarily what you should be doing. But anyway, back to the— this is a little bit of a tangent alert. So I found myself listening to all these Michael Saylor videos. I read his book years ago, had nothing to do with Bitcoin. He hadn't discovered it yet. Then he became a Bitcoin addict. And, you know, they would start feeding— the algorithm on YouTube feeds me kind of what I've been looking at, right? Because of course Google is evil and they're just watching everything we do, right? Big tech surveillance society. And so it kept feeding me all these Bitcoin videos and I had to just tell the algorithm to stop feeding those to me. Because I found myself becoming kind of addicted. Now, what you should be addicted to is income property. It's the most historically proven asset class in the world. But anyway, I digress again. So I had some Bitcoin miners and they were mining Bitcoin and I'm losing money on it because the electric bill and the cost of the miners is basically a tax write-off, right? It's more expensive than the Bitcoin being produced. I think, I think my dog is down there having a dream. I wonder, are you— is it rabbit season? Are you chasing a rabbit right now in your dream? Oh, these animals are so great. I love animals. They're so awesome. Cats, dogs, anything. I see a lot of cute animals on YouTube, different kinds of animals, but we won't get into that because I have another tangent alert. So anyway, I stopped watching the Bitcoin videos. I bought a few miners, you know, I turned them off. Just today because they were just sucking up money and they weren't producing as much as they cost. Now in the beginning they were profitable, but they've since become unprofitable due to the low price of Bitcoin. So anyway, look, you know, I'd love to hear your comments, right? If you're watching on YouTube, comment below and tell me, did I make a mistake? Should I switch them back on or should I just leave them off? Now the other thing I considered is selling the miners, the— these computers that are just dedicated computers for Bitcoin mining, and they don't sell for anything right now. It's awful. I looked at the marketplace where people buy and sell these miners, and they're just trash. They're almost worthless compared to what I paid for them because the price of Bitcoin is so low. Of course, electronics depreciate, but they're much more sensitive to it because of what they do. They're dedicated machines to do only one thing, and that one thing is unprofitable. So people basically will pay almost nothing for them now. So I just turned them off, right? You know, I didn't sell them, I didn't do anything, just flip the switch to off so I don't have to pay for the electricity. So we'll see. Comment below, tell me what you think. And I know at this stage of the game I invest in pretty much everything. I own pretty much every asset class. But I want to tell you, if you want to create wealth, you got to focus. Do put all your eggs in one basket and watch that basket, but take that basket and diversify it geographically because all real estate is local. And that's one of the beautiful opportunities we have with income property. Okay, enough said on that. Let me talk to you about a couple more upgrades. We're pushing code all the time on Property Tracker, making upgrades all the time. So one thing, if you're watching on the screen, I'm just going to blow this page up for you. We added minimum suggested cash reserves, and what are those? You know, occasionally people ask me about this, even though I've, I've already told you, I've already told you the answer. The answer is 4% of your portfolio value. So on a million-dollar portfolio, maybe that's got, you know, 4 properties in it, $40,000 cash reserves. On a $10 million portfolio, $400,000 cash reserves, 4% of the value of the portfolio. But what we did is we put that number, we calculated it for you and put it right on the pro forma. So you know what you should have available in cash for vacancies, maintenance problems, repair issues. You never know what'll come up. Life is uncertain. You know, we just want you to be safe there. Now, should you have higher reserves than that? Well, maybe, maybe, but don't overdo it on the reserves because remember, those reserves are in the bank. They're earmarked as reserves for your portfolio and they are not earning any real interest or any real return on investment. So if you overdo it on the reserves, that's a mistake. If you underdo it on the reserves, that is also a mistake because you don't want to be in a tight position if you need that money to handle something. Okay, so 4%, that's kind of our rule of thumb, and that's the minimum recommended. So that is now on the pro forma. So it's right there for you, and it's right under the approximate cash invested, which includes the down payment and the approximate closing costs. Okay, what else did we do? We now have the actual government number on inflation as an automatically updating feed into the pro forma. So this is beautiful. The current rate as of last month is 4.2% according to the government, the CPI, the Consumer Price Index. And it tells you the month that is calculated on. And so right here you see the inflation. Instead of it being a projection, it is now the actual government number. Now, what do I think of that? Well, you already know what I'm going to say. I believe the CPI is the CP lie. I believe it is understated and manipulated. And virtually anybody who is paying attention agrees with that statement. I mean, all of you will agree that inflation is higher than what the government tells us. First of all, what would be the incentive for the government to do that? Well, two major things. Number one, all of the government entitlement programs and all of the government salaries are indexed to inflation. If they publish a lower than real inflation rate, then they don't have to raise the government employees' wages that much. Now you might be thinking, well, that's not a big deal. Yeah, it's a really big deal. There are so many employees. The government is so massively overstaffed and bloated even after all the great Trump cuts that this is a huge number. And so if you can manipulate that index through weighting, substitution, and hedonic indexing, as I've taught you about for many years, then the government can save money. They can index Social Security and disability and all the other government entitlement payout programs to that lower rate. So that is definitely their incentive. And then the other major incentive the government has is, of course, they want to, they want to make the population believe that inflation is lower than it really is. So we will reelect them and we will not get the pitchforks out and, you know, cause a disturbance, right? That's always what a government wants, is they want things to be placid and calm and they don't want people to be upset. Okay, so, so that's why they do it. But anyway, it's probably understated. Now, if you have a free Property Tracker account, you can just get one at propertytracker.com. You can put in whatever number you want. So if you think inflation is higher or lower, then you can change the number. But our automatic default setting is the government CPI number, the feed of the government inflation. Now, what if you believe, as virtually every aware, sophisticated person does, that inflation is quite a bit higher than the government is telling us? Well, then you will have a better performance of your investment because you will be getting more of my trademark strategy, inflation induced debt destruction. For example, on this property that I'm showing on the screen right now, the loan amount of that property is $165,000. Of course, I'm rounding off by $75. So $165,000 is the loan amount on the property. Property is $220,000 to buy it. And again, this is a brand new home in Oklahoma City, one of our many markets that we have around the country. And That means that you take 4.2% of that loan amount of $165,000, and when you do that, you're going to arrive at the number of basically $6,900 and change. And then you divide that by 12 and you get $577 per month. So that means that your inflation-induced debt destruction contribution to your overall return on investment on this particular property is projected at $577 per month. Now, I don't know about you, but for $577 a month, you can buy a pretty decent new car or lease a pretty decent new car or buy it on maybe a 6-year loan. You can get yourself a nice new Tesla for that or whatever, right? So think about it. If you want a free car, then just buy another property, and only this one, just one of the 8 vectors of return on investment will pay for your car. Pretty good, huh? That's why income property is the most historically proven asset class in the entire world. And there's the easy math calculation. Remember, in the Property Tracker software, all of these items on the pro forma, they have a little I with a circle. And if you just hover your mouse pointer over that I with a circle, it will tell you how each of the numbers is calculated. And I really recommend it's just a good discipline. You know, when I was learning all this stuff, when I was 19 years old, we had this great instructor. I went through many of his classes. He wrote a bunch of the real estate books in California, and he made us do the calculations by hand. Now, when I say by hand, I don't mean really by longhand with a, with a pencil. On a paper, although we did do that sometimes. I meant, I meant with an HP-12C calculator. For those older people listening, you know what that is. And they still actually sell that calculator, which I love those. That was the best calculator ever. But, um, they've got newer, better ones supposedly nowadays, but I'm an, I'm an old soul. So I like the HP-12C and I do actually still use it. Believe it or not, after all these decades. So there you go. Those are two new nice improvements. Now, what difference does the inflation-induced debt destruction make? I'm glad you asked. The return on investment for this particular property is projected at 25% annually. 25% annually. For those of you watching on video, you see my green mouse pointer here pointing at that. But when you add inflation-induced debt destruction, you literally add 10% to that projected return, and now it's at 35% annually. And I know what some of you are thinking. If you are new to this and you do not use Property Tracker and you do not know how to do the math of real estate, which is really simple math, It's very, very simple. These are all very simple equations. And you don't understand the multidimensional nature of income property, then you will say, oh, these returns are crazy. They're ridiculous. No one makes 25% or 35% annually. Oh yeah, they do. Lots of people, literally tens of millions of people make returns like that on real estate. And that's why it is the most historically proven asset class in the entire world. So learn how to do the math and it will make you a great investor. What I recommend you do is you go to PropertyTracker.com, you get yourself a free account, and you use this 1-year performance projection. You put the property data in there, or right from JasonHartman.com, you can import any of those properties. You just click Add to Portfolio and it'll bring it into your own PropertyTracker account, and then you can manipulate all the numbers. And when you do that, you will become an expert because you will see how changing the vacancy rate or changing the maintenance cost or reducing or increasing the rent or changing the financing will affect the bottom line. And you know, you do that several times and you just start to get a feel for it. This is what I did when I discovered Property Tracker software 22 years ago, and I've used it ever since. It's absolutely the best deal evaluator in the marketplace. And if you find something that beats it, please comment below and put a link to the software that you think is better than Property Tracker. No one has ever been able to show me a better software for deal evaluation and tracking. Than this software. It is absolutely the best. And guess what? It's free. So go and get it. All right, let's get to our interview with Lawrence Yun, the chief economist of the National Association of Realtors, right now. But I do want to remind you, join us for our Wednesday masterclasses. They are totally free. We do them once a month, second Wednesday of every month. Register at JasonHartman.com/Wednesday, and we have some great speakers, great education. Sometimes it's just yours truly and our investment counselors teaching you something great every single month about income property and investing in general. All right, here is Lawrence Yun. It is my pleasure to welcome a returning guest back to the show, and that is none other than Lawrence Yun. He is the chief economist for the National Association of Realtors, and he is here to update us on the real estate market and maybe a little bit about the real estate industry too. Those are kind of two different things. Lawrence, it's great to have you back. How are you?

Hello, Jason. Thank you for having me.

And you're coming to us from Washington, D.C., the headquarters of NAR, right?

Yeah. Well, our headquarters in Chicago, but we do have our advocacy team along with economic team here in Washington as We need to share all the numbers with policymakers, congressional staff about, you know, what would happen if they change certain policies. Yeah.

Yeah. Yeah. No, I thought I knew, I knew that NAR was in Chicago. I thought they, I thought they had actually moved and built that big, new, beautiful building in D.C. many years ago, but they didn't actually move the headquarters. I thought that was the move. No.

Yeah. Headquarters is in Chicago, the birth of the NAR.

Okay, fantastic. Fantastic. Well, Lawrence, before we dive in deeply, you've got some great visual aids to share. And by the way, folks, for those listening on audio only on the podcast, I'll try and elaborate and have Lawrence elaborate on any charts and graphs that he shares. But maybe you can just give us the overview first and then we'll take a deeper dive.

Well, the overview is that we have had 3 years of home sales slump, home sales running below pre-COVID. In fact, about 75% of pre-COVID activity. If one wants to say 2019 was normal year, we've been running at 75% of normal for 3 straight years. And now we're in the 4th year or halfway through the 4th year. And it looks like the recovery possibly is happening, but still not definitively.

Uh, and Lawrence, I just, I just want to clarify for people, when you say recovery, of course we all know the market has been quite slow. And I kind of say it's been boring, frankly, the last 3 years. But we do need to always make the distinction between sales volume, which is way down, and sales prices, which are actually up ever so slightly, but, you know, not a lot, but, uh, still, still up overall, uh, depending on which reports you're looking at and so forth. Of course, always. But the sales volume decline, and I want you to tell us about that, Lawrence, but it just makes me think there is some real pent-up demand out there. People that have been putting off big life choices like buying their first home or moving up into another home, or even empty nesters moving down. They've been waiting and waiting and waiting because they can't— well, the ones that own currently can't match the great mortgage deal that they got during the COVID era. But go ahead, and there's enough to bite on there, I know, so I'll let you talk.

Oh, well, you know, yeah, you are absolutely right. The slump word is on home sales unit, you know, how many homes, how many keys are being exchanged. Home prices are at a record high. Home prices are up around 53%. I mean, this is for homeowners, real estate investors, so people who are owning property, it has been a tremendous run-up since pre-COVID to today. I mean, this is a huge wealth accumulation for property owners. So you are right to distinguish the slump as being home sales activity while we are at a record high in home prices. So often when I speak with realtors out there, they say, you know, commission income has been a little challenging, but good thing that I have an investment property because my investment property has done very well. So again, property owners have been doing very well, or even as a consumer, homeowners, they have seen sizable gain in housing wealth. So you are right. So the chart, you know, for the listeners, I guess, you know, to explain it is we have not had this low home sales activity until about 15 years ago during the foreclosure crisis that America encountered. Those fake mortgages with fake income documentation blew up. Today, thank goodness, we don't have those, uh, shoddy mortgages. Mortgages are well-written, so we don't have foreclosure crisis. In fact, the distressed sale currently is at only 1% of all transactions. I mean, these are historically low levels. During the foreclosure crisis 15 years ago, 40% of the transactions were distressed or requiring a short sales, short sale bank approval condition. So it's much, much different condition. So just focusing on the unit sale, again, distinguishing what we are finding on a monthly basis, you know, a little bounce here and there. So we are slightly up through the month of May, we are tabulating the month of June data. But maybe we are turning the corner. Consumers have become accustomed to the new normal of, say, 6 to 7% as the normal mortgage rate. So I think that consumers are just looking for that inventory. Inventory shows up there within the price budget and life-changing events. I think the transaction pent-up demand is there to be released.

Lawrence, I just want to go back to something you said that is truly amazing. You say many amazing things, but this one is mind-blowing, and I'm not sure if people really caught it. During the Great Recession or the global financial crisis, whatever you want to call it, starting in 2007, 2008, at the peak of the distressed sales volume, 40— that's 4-0%— of sales were considered distressed sales. And by comparison, today only 1% are distressed sales. I mean, if that doesn't make the doomers who have been predicting the sky is falling for so long just wrong, wrong, wrong, I don't know what does. By any standard you look at it, mortgages, like you said, are very well underwritten. The people that have them have high credit scores. They have massive equity cushions. Loan-to-value ratios are at record lows. 40% or so of the country has no mortgage at all. No distress, right? I mean, wow.

Anyone who is predicting home price crash, well, they will be waiting a long time. In fact, many of the realtor friends have been sharing some social media about this gloom and doom. What are you think about it, those type of thing. And as I thought about it, first, home prices are on solid ground. There are no distressed home sellers. Again, when you own 1% of the transaction. So what I did recently was to say, home prices will be rising, maybe not tremendously in the next couple of years, but it will be rising just because the Federal Reserve will need to possibly print money for for the Social Security to be made whole in about 10 years. There will be inflationary pressure, and there's still housing shortage condition. So I sort of extrapolated, did a little sort of fun, simple exercise, assuming prices rise roughly 4% or 5% a year in the upcoming years, when would the median home price reach $1 million? So currently, it's about $400,000. And in about 25 years, so in one generation, median home price in America would be $1 million. Back in 1990, you know, again, one generation ago, median home price were barely touching $100,000. And in San Francisco, it was $250,000, and people were screaming, "San Francisco, so expensive, $250,000, home prices will crash." Well, anyone who's anticipating home price crash today, they will be waiting and waiting, and before you know what, it may reach a $1 million mark.

Well, that's really interesting, Lawrence, because of course, as Yogi Berra said, the future ain't what it used to be, right? I've read many reports on this, and there seems to be a widely held belief, and nobody really knows, of course, that based on all of the factors—current housing stock, new housing stock being built, population growth, decline, or just break even, everything considered. The so-called experts, at least some of them, are saying that the housing market has a very severe shortage right now but will reach a potential equilibrium where it's not an oversupply, it's not an undersupply, it's just a balanced market in about 2032. I'd really be curious to have you weigh in on that.

Uh, you know, uh, population growth, uh, yeah, certainly, uh, slowed down a bit, uh, you People are having fewer kids. People are having their first child at a later age. And also there's a more stricter immigration. I mean, certainly the southern border has completely shut down, but the legal immigration, I think many Americans are welcoming legal immigration. Even the legal immigration number has tapered off somewhat. So the housing demand, potential housing demand in the future is much, I would say, softer growth in the future, So let's look at the baseline. Baseline currently is we estimated, we've been sharing the numbers with people in Washington, congressional staff, White House, and other key housing agency to say roughly there's about 4 million housing units short as of 2026. So how do we get past the shortage? So it's going to take some years to get past the shortage part. Wonders whether or not there's still additional home building to relieve some of the population growth that would happen, even though slowly, but there will be nonetheless expanding population and people need someplace to live. Absolutely.

So I guess you're saying that the NAR estimate is that we're about 4 million units short. It sounds like some surveys, though, you know, maybe it's Fannie Mae or Freddie Mac, I can't remember which one, Zillow even does one. They say we're up to 7 million housing units short. So NAR is actually not on the high side of that, it sounds like.

You know, anytime there's a housing shortage, first is, you know, from consumers' point of view, that trying to get a bargain is going to be difficult. Now, in some localized areas, because we know all real estate is local, there may be a temporary oversupply. We saw that in Florida. We saw that in Arizona, Nevada, and in Texas, where the home construction has been quite robust in recent past years. So when the mortgage rate increase and the buyers taper off, there was excess supply. But we are finding those were temporary excess supply because with prices retreating down somewhat— when I say retreat, it's like after 50%, 60% price gain, maybe they're giving away 5%. So as prices decline, improving housing affordability, buyers are returning in Florida, buyers are returning in Texas, in Arizona. So in the market currently in the mid-2026, where is a more active transactions is happening in areas where there is combination of improvement in housing affordability and still solid job market condition in the, in the states like, uh, Rocky Mountain time zone states of Nevada, Idaho, Utah, Arizona, along with southern states Texas, Tennessee, Carolinas, and Florida.

Sure. Okay, great. What you do at NAR is, is really incredible. The amount of research and data that you have access to is, is amazing. And of course everybody wants it. Many people pay lots of big fees to subscribe to your data and so forth. Share some of that with us. Whatever you can, you know, feel free to share your screen again and let's go through some of the main points.

Well, you know, for REALTOR® members, much of the data is freely available. I mean, it does require some password protection on some slides, but we also try to show some of the factors that underlies for housing demand. For example, let's look at the job market condition. If we look at the job market, This is how many Americans are receiving paychecks in America right before COVID And for the listening audience, just say during COVID lockdown, the number of jobs was far fewer. People lost jobs. But as the economy reopened, there was more jobs, more jobs. So today we have record-high employment, which should automatically translate into record-high housing demand. But the higher mortgage rate has that sort of prevented that from happening at the moment. But steadily, as people's income began to outpace home price growth, and maybe the mortgage rate will retreat back down, especially if the oil prices begin to go down somewhat, that's going to really open up some of the housing demand. But if we look at some, you know, let's see, the localized job market condition, this is a US map. And for the listening audience, I color-coded it. To indicate that the green color states are the superstars. How much job creation from pre-COVID to the current latest. And there are some states with better than 10% more jobs. That's 10% additional potential housing demand. And those are the Rocky Mountain time zone states, Texas, Carolinas, and Florida. And then there are above average job creating states, which are again, principally in the southern states. But then you have California or say Wisconsin, sort of one step slow. They're not really adding jobs that much. And few areas like Vermont and Washington, D.C., where they're actually fewer jobs. But overall, America has a record high job numbers overall, and it should eventually translate into very robust home buying demand once mortgage rate begins to decline and then the affordability begins to improve, where wage growth begins to outpace home price growth. We have a lot of localized information. I mean, the way I talk with my staff is consider billions of dollars spent by the U.S. government in collecting census information, anything related to housing, anything related to potential homebuyers. Let's slice and dice those data. We put in nice infographics. I don't have it here with me, but you just simply go to the NAR Research. So there will be the key search word NAR Research, and you may want to type in dashboard. And with the realtors, they would have free access, free access information to very localized key metrics related to the housing market in the local area. So, you know, we want to provide value to our members. You know, they're constantly looking at, you know, home sales, you know, why is it difficult today? And we explain the affordability challenges at the local market.

Before you go off this one, on this map of the United States, you mentioned, of course, Texas, Florida, you know, some others. I want to just call out a few. Number one, Arizona, superstar state, Nevada, superstar state. Texas, Florida, of course, but North and South Carolina too. Georgia, not bad, but not as much growth. And it, it's almost like this map, Lawrence, I, I just can't help but make it a little bit political because it's, it's not completely true, but a lot of it skews political, right? The business-friendly states seem to have the growth while the not-so-friendly states don't have as much growth. I'd say on the whole, you know, are exceptions, but any comments or thoughts?

Yeah, I think, you know, people are just generally aware of that, you know, business-friendly environment where companies want to relocate. So say a business in California say, no, you know, they are constantly making operation of business difficult, so I want to move over to Florida. So we see that companies moving from Illinois to Tennessee, I mean, recently Starbucks, Starbucks was born in Seattle where it rains a lot. People want to drink coffee to sort of forget about the rain, but the Starbucks headquarters office are moving away from Seattle to Nashville. And that's not surprising, especially with a new mayor, which is essentially trying to confiscate property. I mean, those are very scary things. So naturally the businesses are looking looking for a more favorable environment to operate.

Money always goes where it's treated best, as the saying goes.

Yeah, and let me see, uh, the other chart. So I have— so Jason, you have been in the business for a long time, so you are clearly aware of the, uh, 18% mortgage rate back in 1981. That's when— the reason why it happened was we had an oil price shock in the 1970s, where the OPEC country essentially said, we're not going to sell oil to America, we're not going to sell to American allies. And oil price shock led to stagflation, bad economy, high inflation for whole 1970s, whole decade. And when Ronald Reagan came into office, he had a conversation with the Federal Reserve chair, Paul Volcker, who was appointed by Jimmy Carter. They said, you know, we have to kill off inflation, which will then set the condition for future prosperity. So short-term pain for long-term gain. They dramatically raised interest rates. So it was painful in the short term, but eventually interest rate declined for the next 30 years, which improved home buying activity condition. But recently, we also had oil price shock because of the Persian Gulf Gulf conflict condition. But difference this time is America is massively producing oil. We are energy independent. So we not seeing 18% mortgage rate. We are not seeing 10% mortgage rate. Mortgage rate barely budge. It went from 6% pre-conflict in Persian Gulf to 6.5%. So that shows how important it is, uh, in terms of having energy independence so that mortgage rates do not get that huge shock factor condition.

Right. And the high mortgage rates that Volcker implemented were in response to the high inflation that was the hangover from the Carter era. And so that was short-term pain for long-term gain. He really made people feel a lot of pain. That was pretty harsh. But you could almost compare that, I think, a little bit. I mean, not to a lesser degree, of course, to today, you know, for too long Powell said it's transitory, it's transitory, and then it really wasn't transitory. He kept saying the same line for way too long, and now we're, we're suffering, you know. And then we've got, you know, the Iran conflict and so forth, but it seems like we might clear this pretty nicely actually and move into an era where we can have some reasonable rates and really just a better overall economy.

Kevin Walsh, he is the new Federal Reserve Chairman. He's replacing Jay Powell. And in his first meeting, he wants to accomplish several things. He's setting up certain task force, how do we communicate monetary policy and such. But overall, his philosophy is we have to contain inflation. So you can say he's somewhat hawkish, meaning that he's less likely to lower interest rate at the first sign of economic weakness, but nonetheless, he is a big believer in artificial intelligence impact worker productivity. He believed that many companies, as the artificial intelligence technology expands, that worker productivity will improve. And if the productivity improves, what happens? Well, future inflationary pressure declines. Americans produce more, future inflationary pressure decline. And Federal Reserve should never be behind the curve, but should be ahead of the curve. So if the artificial intelligence will lower inflationary pressure in the future, then maybe the Federal Reserve can cut interest rate a little sooner than people anticipate. So let's see what Kevin Walsh does related to trying to convince other voting members of the Federal Reserve on when the interest rate could be cut. But assuming this temporary inflation subsides, especially With the oil prices settling back down to pre-Persian Gulf conflict condition, maybe there's a room for some rate cut. I mean, that was definitely the sentiment at the beginning of the year. But now with oil price shock, people are saying no rate cut this year. But I think that artificial intelligence movement could perhaps bring about interest rate cut in the future.

Two interesting comments on that. Number one, Warsh wants to count inflation differently. He wants to count it in a way that would actually make the rate appear lower. Now, we can argue about that, but it doesn't matter what our arguments are because that's the Fed and they're going to respond to their way of counting, right? So that's, that's one thing. But the other part of it is that he loosened up bank requirements so banks can buy more bonds and put more liquidity into the lending market, which, which is interesting. That sort of seems like an end run around making a direct rate cut where it's lowering mortgage spreads because there's just more money in the market. So it'll be interesting to see how that plays out. It's too early to tell, but if you have any thoughts, feel free to chime in.

Yeah, the bank capital requirement. Banks, they're in the business, they get people's deposit and they want to lend that money out. But how much How much money can they lend out based on those deposits? So if the regulation said you have to keep most of the deposit in the bank and not lend it, well, you know, the money is not circulating. But if one can loosen some of the capital requirement, then more money will go into circulation. Now, of course, we don't want to have a mistake of the subprime loan era, but it's a completely different situation. Back then, I mean, you had those fake income documentation. Writing whatever numbers to get the loan. But today there is a, you know, one has to meet the criteria of the credit scores, people have to stay within their income budget criteria as to how much loan they can get. So we do have those guardrails in place, and maybe the capital requirement, bank capital requirement, was a little too much. So loosening that certainly will bring about more more liquidity to the market, including into mortgage market.

Can we talk about supply a little bit? Maybe you've got a great chart on supply. One thing everybody has to— I just have to remind you of is that different outlets that do these surveys calculate them differently. So NAR calculates supply differently than other sources do. I often quote HousingWire or Altos Research formerly. Can you talk a little bit about the way NAR calculates supply? And let's talk about what supply is by NAR standard?

So, you know, the supply situation is that, you know, we just look, count how many homes are listed for sale. So we can count how many homes are listed for sale, and then we try to get sort of demand metric along with it. So we look at what the home sales are. So based on that, what is the month supply? So month supply would indicate that whether the market is fast fast-moving, whether a price discount is needed. Historically, months' supply of around 6 months would have been considered balanced market. Today, months' supply is more closer to 4, so one can still say that's a seller's market. It certainly feels that way in some markets, and while other markets, it looks like price discount is needed. But I would say that given the prevalence of the internet, you know, consumers are doing more searching on their own before actually visiting homes. So the month supply situation, I think the new normal is more lower number. So rather than 6 months, probably 4 or 5 months is more new normal condition. But one supply area which we are really concentrated on is the following. Now, you know, we have various different metric which we can, you know, share in our website. On our website. So I would ask the audience to go to our website again, NAR Research, just type that into the search engine and it goes into it and you will see a lot of fascinating reports that we have. But one area we want to really look into supply is this capital gains, potential tax hit on a sellable home, especially say elderly household, maybe their spouse passed away. So the capital exemption amount is not $500,000, but now only $250,000. But home prices have risen so much over the years that many homeowners, if they were to sell their home, would be hit with a capital gains tax. Well, what does this mean to the supply? Supply will not be increasing because the people will say, well, I don't want to pay capital gains tax, and how do I not pay the capital pay the capital gains tax, not sell the home. So in a sense, many Americans, especially elderly Americans, are living in a wrong house for their lifestyle, but they are choosing this wrong home because of the tax policy. So if somehow the capital gains exemption level are double, which is the advocacy point that we are making here in Washington, then we would way more supply to come onto the market. I put here on the graph to illustrate how many people are getting ensnared without any policy change. More and more homeowners will get locked in because of the capital gains tax or people's unwillingness to pay the capital gains tax. So only way to loosen up the market, loosen up the inventory, is to lift the capital gains one of our top advocacy priority to say, you know, a $500,000 exemption, that sounds a lot. Well, it sounded a lot 30 years ago when the law was—

I know it's been $250,000 for 3 decades at least.

I mean, it's crazy. So now with home price growth, many homeowners are hitting that number. And as a result, they're just simply saying, I'm not going to sell my home. And that's not making American dynamic. American dynamism means people are constantly on the move to a better lifestyle, better homes, and they're selecting for what fits their life.

And, you know, Lawrence, for those who are working, the best thing you can have on a resume, as I always say, is mobility, to move to where the jobs are, where the opportunities are. It's just better for the economy in general. Now, some might interpret that saying that, well, if that changes, that would cause a lot of inventory to hit the market. And I think they are right about that because more people would sell, but those people would mostly be rebuying something else. So, you know, the net effect may be nominal, but it also has massive economic stimulus effect because whenever a real estate transaction happens, people buy new furniture, new stuff, new appliances. I mean, you know, that it's just unbelievable how important this asset class is to the entire economy because of the ripple effect of hiring painters and handymen and everything else under the sun. The real estate people earn commissions, the real estate companies get richer, they spend that into the economy. The mortgage people, the settlement companies, the escrow companies, the title companies, it's just a huge stimulus. Oh yeah, I mean, the moving truck guys, you know, don't forget the movers.

Yeah, but, and then there's a secondary economic impact because people receive money and they go to the restaurant, local restaurant, and they have to hire more people. So there's so much impact to it. Uh, so the argument that we are making in Washington is that this capital gains exemption amount, which is insufficient, uh, that is freezing people. And when people are frozen, Washington is They're not collecting any tax from that. I agree. Furthermore, they're preventing economic activity. So, you know, by loosening up the capital gains exemption, that will certainly lead to more economic activity. And I think nearly every American would say more economic activity is good for America. Furthermore, it also means more tax revenue coming into Washington from economic activity, not from, say, higher tax rate or government trying to extract a little more, but just because people are getting more involved in economic activity.

You're absolutely right. And the same is true, really, and we don't have to go into it, but rent control, it does the same thing. It causes everything to be stagnant because nobody wants to give up that rent-controlled apartment, just like nobody wants to give up that COVID-era mortgage at 2.9%. Same exact principle on the demand side. You know, I've seen these studies and I don't know if NAR even does one, but it's measuring the difference between the number of sellers in the marketplace and the number of buyers in the marketplace. And I never felt that that was very reliable. It's sort of easy to know what the supply is, but it's very fluffy and unreliable in my opinion to know what the demand is until they actually buy something. You know, they do it by home searches. And, you know, a lot of people search for homes as a hobby. Okay. You know, they just, they're not really looking. They just, they just dream by going on Zillow and so forth. What are your thoughts about those? And does NAR publish a survey like that?

You know, you can take a survey about what is your intention of buying a home. And we generally find that those are not as reliable. I agree. You know, people can say one thing and they do something else. But what is more reliable is really about the job market and mortgage rates. So jobs, naturally you have to have job unless one is a retiree, is wealthy retiree that can make some transactions. But one has to have a job. Improvement in job leads to more home sales in the local community. And the mortgage rate, mortgage rate is really the magical formula where we find You find that, say, a mortgage rate of 7%, which was the case last year in 2025 for the most of the time. Well, this year, if the mortgage rate was to go down to 6%, which was the case early part of this year before the oil price shock, based on our analysis, it would lead to around half a million additional housing demand. You know, we did some econometric testing, statistical analysis. But very simply, people who would have qualified to get a mortgage at 6%, how many are there versus 7%? And we find that roughly there are about 5 million people who would suddenly qualify this year compared to last year. But not every 5 million people buy a home. It's generally only about 10% of those people actually respond to lower interest rate, and 10% is half a million. And half a million is a sizable increase compared to the 4 million home sales we saw last year.

Absolutely. But you add to that, Lawrence, a couple of things. The pent-up demand from the last 3 years of all the people who didn't buy because housing has been so unaffordable. And, you know, that deficit is maybe 2 million people a year or 2 million transactions a year. Right. And then You add to that all of the people who are, you know, maybe 38 years old living at home with their parents, you know, failure to launch syndrome, right, who come into the housing market. They represent shadow demand. The people who didn't buy the last 3 years represent shadow demand. And then you make qualifying easier and affordability better by adjusting only one dial, mortgage rates. And I think we're into bidding wars again. I mean, am I wrong?

Well, I hope not because that just means a society is getting divided between haves and have-nots, bidding war, pushing up the prices for the property owners, but that could happen. So I wish we had more supply, more supply so that bidding war does not happen, but it's 'cause certainly if the demand is released without the supply, supply, then independent of what one wish for, the actual reality is bidding war. Bidding war returns and the home prices begins to rise. So do one wants to be already an owner before those bidding war takes place or not? But so, you know, we are constantly trying to push for more supply so that any home price increases are very manageable, nothing shocking for any first-time buyers. So that we have more equilibrium type of market growth going into the future.

I'm glad you raised that, and maybe we'll start wrapping it up on this. But the new bill Trump will sign, I'm sure, but it may take a while because of course he's using it as leverage, which I think is actually what he has to do. So, you know, everybody can argue about that if they want. But do you think that will really make any serious difference limiting the institutional landlords and what they can do, reducing regulation. I mean, I think this stuff will help, but honestly, Lawrence, my opinion is we're nipping around the edges. It's not going to be anything big. Maybe you disagree, but what do you think?

Well, any one item, I think it's just working through the edges, you know, reducing regulation for the homebuilders to build more, trying to convert some empty commercial commercial building into residential units, opportunity zones, trying to provide more rural expansion. So there are all these small elements. So it's not going to be very visible within the first year. It is a cumulative impact. So cumulative impact of these 50 different items, I think in the aggregate could make some positive impact in terms of the supply condition. President Trump, he said he wanted to sign it, but I think what happened was the day before New York City had a congressional election and they elected, at least for the Democratic candidate who will automatically win the November election, a socialist who said open the border. I think as soon as President Trump heard that this person won the election of open the border, well, he wants to make sure that the voter ID was passed before more people who want to open the border gets elected.

Who knows? Absolutely. Absolutely. We'll see. I'm sure it will happen and Trump will eventually sign it. But even when that becomes law, I just don't see it making much of a difference, honestly. I mean, I read a lot of it and there's some things here and there. It may relieve a little bit of pressure on the housing supply problem, but I just don't think it's going to be very significant.

I think in Texas they are very good in terms of responding to supply from the market condition. So they said there are buyers, they should produce more. But in the Northeast region, there's a huge delay due to regulation and others, and try to overcome this issue, say, in New Jersey or Massachusetts. And this legislation will help these states to provide more housing supply, which America, again, 4 million housing units short. So anything to bring about more supply over time. So it's not a quick 1-month phenomenon or even 1-year phenomenon, but slowly over cumulative over many years, all this legislation, you know, certainly Opportunity Zone will make impacts in some of the economically depressed urban areas where you have many housing units, but not habitable, but let's convert it into habitable units so that we have more housing units.

Yeah, we shall see, we shall see. Lawrence, wrap it up with just anything maybe a question I didn't ask you, whatever you want people to hear, and any resources you want to share.

Okay, let me put my one slide up, which is my forecast slide, and just quickly run over that. So let's hold one second, and let me see if I can— okay, here's my forecast slide. So I don't see economic recession. There's a massive business spending, so no economic recession, but the job growth will be be a little slower than in past years. You know, we do have a little on the edges, but home sales, which I think people in the real estate profession are most interested, I think we're going to see a recovery this year. It's going to be a mild recovery of only 4%. This is a revised forecast from what I said about 6 months ago, back in October, November of last year. I thought we would see about 14 18% unit sales gain. But that was on the assumption that the mortgage rate will be at 6% this year. But with oil price shock, I don't think we will have 6% mortgage rate. We are not going to have 18% mortgage rate or 10% mortgage rate, but we are going to have a little bit higher mortgage rate of about 6.5%. And that reduced some of the strength, the pool of eligible buyers. And that's why We will see some recovery, but not a robust recovery in home sales. But let's keep in mind, housing is cyclical, and once it begins to turn, it is a multi-year phenomenon. So one can say 2026 is roughly the first year of multiple-year recovery condition. And by the way, don't put too much seriousness into the numbers. I think the bigger picture is the reality maybe 2% or even 10%. We will wait until the year end. But I think this will definitely show that it is the first year of multiple-year recovery that will take place. So job market, unemployment rate remaining low. And I think, you know, no recession. I know that consumer sentiment data is indicating we are in economic recession, but the hard data, actual income growth, how many jobs We are not in economic recession, and home sales finally beginning to rise this year.

That consumer sentiment survey from Michigan, I don't know if it's valid anymore. I mean, retail sales are good. Everything debunks it. It just doesn't seem to make much sense. But consumers are complaining, but they're not doing what they're saying they're doing. They're still outspending. So it's really interesting. Lawrence Yun, it's always great to have you on the show. I think this is the 4th time you've been on, and it's always great to have you join us. Do you want to give out a website or anything?

The website is very specifically, uh, is a nar.realtor. So that will be the broader National Association of Realtors website. But for the research information, especially specialized local information, just Google the word NAR Research And then I think from there, one can find many resources.

Excellent. Lawrence Yun, National Association of Realtors Chief Economist, thank you so much for joining us. Thank you. Thank you so much for listening. Please be sure to subscribe so that you don't miss any episodes. Be sure to check out the show's specific website and our general website, hartmanmedia.com, for appropriate disclaimers and terms Terms of Service. Remember that guests' opinions are their own, and if you require specific legal or tax advice or advice in any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you're using and write a review for the show. We would very much appreciate that. And be sure to make Make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.