On today’s episode, Editor in Chief Sarah Wheeler talks with two guests: Lead Analyst Logan Mohtashami and Josh Romney, president and CEO of the Romney Group as well as Chairman and CEO of Intercap Lending. The three discuss the economic factors driving the housing sector, including lending, building and development.
Related to this episode:
Will higher inflation and mortgage rates create a recession? | HousingWire
HousingWire | YouTube
More info about HousingWire
Related to this episode:
Will higher inflation and mortgage rates create a recession? | HousingWire
HousingWire | YouTube
More info about HousingWire
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NewsTranscript
00:00Welcome, everyone, to a special episode today where I have two guests.
00:10Our lead analyst, Logan Motoshami, and also Josh Romney.
00:14Josh is the president and CEO of The Romney Group, which owns and operates multifamily
00:19office and industrial properties throughout the U.S., and he's also the chairman and
00:23CEO of InterCap Lending, which is licensed in 43 states and is headquartered in Utah.
00:29I recently moderated a discussion between Logan and Josh at the InterCap Lending event,
00:35and it was so much fun we wanted to bring Josh on here to give our wider audience a
00:39chance to hear them together.
00:40So Logan, Josh, welcome.
00:44It's great to be here.
00:45It's wonderful to be here.
00:46The hair game has some competition today.
00:49Listen, I am always outclassed on the hair game, but today, you know, it's just doubled,
00:55so I agree with that.
00:57So Josh, let me start with you.
00:58You come from a family with a long history of government service and specifically housing,
01:03so of course your dad was governor of Massachusetts, he was the senator from Utah, he was a presidential
01:09candidate, and your grandfather, George Romney, was HUD secretary under Nixon.
01:13So like you, it's kind of like having housing royalty right here.
01:17It's so fun to have you on.
01:18I appreciate it.
01:19Yeah, we go way back, and my grandfather and Nixon didn't always see eye to eye, and they
01:25had their battles over the years.
01:26It's kind of fun.
01:27No, it's really fun.
01:28One of the reasons I wanted to have you on is because I just really, you have such a
01:33broad perspective.
01:34Right?
01:35So you're a developer, you're an investor, you're a lender, you're kind of seeing it
01:38single family, multifamily.
01:40So we'd love to kind of start out this conversation by saying, you know what, we've had a lot
01:45of things happen over the last couple weeks since the new administration has come in.
01:49What, from a business standpoint, has been helpful there, and what has been challenging?
01:54I think a lot of us came in with this new administration hoping that there'd be some
02:00clarity about what the plans were.
02:02I think as we've seen things progress over the last month or so, I think the real challenge
02:10is the uncertainty of what's going to happen over the next four years.
02:15And so we kind of, Trump will say one thing, and we're not sure if that's actually what
02:21he means and what's going to happen.
02:22And so it's created a lot of uncertainty for a lot of our potential clients and for
02:27us as to what the next four years is really going to bring.
02:31We are obviously very interested in having rates lowered.
02:33That helps in every business I'm in is having lower rates.
02:36And so we're kind of watching closely to see what's going to happen, what the administration
02:40can do, what signals they'll provide, both in terms of tariffs and other things that
02:46would potentially impact rates.
02:48And so we're kind of watching that closely.
02:50And as a real estate developer, we really are interested in obviously onshoring and
02:57seeing those things happen.
02:58And I think there's some people that are excited that tariffs might create that.
03:01But tariffs over the short run really don't do anything in terms of onshoring.
03:05And I think a lot of what we're seeing, a lot of the rhetoric is really just a negotiation
03:10tactic and not necessarily aimed at bringing businesses back to the United States.
03:14Well, Logan, I know that that echoes some things that you've been saying on this podcast,
03:18how you feel like this really isn't, you know, he's not really looking for long-term
03:23tariffs.
03:24Do you want to jump in on that?
03:26Well, the same game plan in 2016 to 2020 that we incorporated, that we've talked about
03:33here, if somebody really wanted to put tariffs as a principal policy, they would literally
03:39just sit there, put the tariff on and let many, many years go by and adjust things to
03:46how the new normal will be.
03:49And just this morning, there was supposed to be an announcement on reciprocal tariffs
03:54given and he's, President Trump moved that away to May or April.
04:00This is just how he operates.
04:03And there's a lot of confusion.
04:04I think how I try to get people to think is in 2018 and 19, even with the corporate tax
04:12cuts in place, business investment went to zero.
04:17And that was not part of the game plan.
04:20But if companies don't know what the rules are, then, you know, you're going to pull
04:26the strings back just to make sure that you're not spending where you shouldn't be spending.
04:33And the confusion that Josh is talking about is going to be prevalent until we get clarity.
04:39If you're going to do tariffs, just do it and then let the chips fall where they may.
04:44I just think it's very difficult for us to be an exporting economy with a dollar so strong.
04:52But we do have advantages over, you know, countries like Canada and Mexico that so much
04:57of their economy is exporting stuff to us.
04:59So if you want to use the tariff as a negotiation tactic, that's one thing.
05:04But I think still the confusion is a lot of people just don't know what the rules are
05:09or what's going to be.
05:10And this is just the environment we're going to have to be in.
05:13And since November 7th, we did that podcast, Sarah.
05:17Everything kind of looks right to me with a lot of back and forth and not a lot of clarity.
05:23But we'll see how this goes.
05:25Every day is going to be interesting.
05:27And this is how it's going to be for the next four years.
05:31Josh, when you look at like you mentioned mortgage rates or interest rates, maybe not
05:36just mortgage rates, how do you plan for that over across all these businesses when, you
05:42know, I feel like over the last year, you know, we all thought rates were going to come
05:46down when they didn't.
05:48We all thought, you know, things might change differently.
05:51It feels like 2025 is a lot more like 2024 than maybe we were all hoping.
05:56What's your view on that?
05:58Yeah, I think we always planned rates would be longer or higher, longer than we expected.
06:05I don't think anyone expected to stay high all the way through 2025.
06:10But at this point, we are planning 2025 to look a lot like 2024.
06:13We're not really seeing rates come down, I think, with the markets priced in one quarter
06:18point decrease from the Fed in 2025, which is really not going to move the needle very
06:24much on rates.
06:25I think until we really start to see the economy falter or sputter in some way, we're just
06:30going to have consistently high rates.
06:34You know, the economy with the brakes on the way they are, I mean, J-PAL has done higher
06:41and faster rates than he's ever done in history, than the Fed's ever done in history.
06:44And the fact that he's done that and the economy is still booming.
06:47We still have persistent inflation.
06:49We still have low unemployment, stock market all time high, gold at all time high, all
06:54these things happening. The economy should be, you know, in a traditional sense, the
06:58economy should start to be falling apart.
07:00We should be looking at recession, all that stuff.
07:02And I don't think anybody's predicting that.
07:04And, you know, the economy is just really strong.
07:07And so we're anticipating longer, a longer period of high rates.
07:10And we're just, we're planning the business around it.
07:15We are built to, you know, our company is built to succeed with higher rates for a long
07:20time. And but we're just we're gearing up for it.
07:24Logan, jump in there.
07:26Well, there's a lot of discussion lately about how do we get rates lower?
07:32Right. And one of the things that are being talked about, I know a lot of people, the
07:36mortgage and real estate people are sending me, well, what if we just fire all the federal
07:40workers and cut the budget down and bond yields and interest rates will go down?
07:44That is the marketing game plan for something like this.
07:48I would caution people, 65 to 75 percent of where mortgage rates or rates go in general
07:54is Fed policy.
07:56And that's how it's been, you know, since the Peloponnesian War.
08:00Here, what we're talking about is what the president or the head of the White House
08:06counsel, if we create more labor supply and lower aggregate demand, bond yields and
08:13rates should go lower.
08:15That's the game plan.
08:17It's the same thing that Jerome Powell kind of talked about, about lowering aggregate
08:22demand and creating higher labor supply.
08:24While the unemployment rate is four percent, job openings have come down, quits
08:29percentage have come down, wage growth that the Federal Reserve tracks on the Atlanta
08:33Fed is back to pre-COVID levels.
08:37The one glimmer of hope that I would say for 2025 that is different than the past two
08:44years is that because the Fed started the rate cut cycle, if they can get one more
08:53percent rate cuts into the system, even if the economy wasn't breaking, you can get
09:00rates lower to the point to where the housing market builders, everyone performs a
09:05little bit better. We've all seen this six percent mortgage rates.
09:08Everything does get better.
09:10We've been staying at around seven percent and the data doesn't get that good.
09:15But really, it is either you get economic weakness or the Fed cuts rates one percent
09:22and the labor market still stays intact.
09:24That would be the best case for 2025.
09:27But I think there was a lot of confusion when Kevin Hassett talked about, well, we need
09:31aggregate demand to go lower and create more labor supply.
09:35So there's all this discussion about how much money the government's going to save.
09:40Well, if the bond market really thought that is going to be like a big deal, 10-year
09:45yield would already be lower than what it is currently today.
09:49Of course, it's inflation week.
09:51We've had a whiplash while the CPI inflation was hotter, 10-year yield went up.
09:57The PPI inflation data was cooler in the sense of what filters itself to the PCE
10:03inflation. 10-year yield went down.
10:05But we're basically here.
10:07We're still elevated before any of the CPI reports.
10:11And a lot of that has to do still with Fed policy, quantitative tightening, the economic
10:17data, GDP still running at three percent.
10:19We still have a lot of deficit spending in the economy.
10:23So it'll be interesting to see for the rest of this year that does the bond market
10:30actually take bond yields lower if they believe that if you're taking money out of the
10:35economy through less government spending, is that enough to push bond yields down?
10:39Time will tell on that.
10:41And we'll see how the Fed reacts to anything on the negative side.
10:46If the White House counsel does get what they want, higher labor supply and lower
10:51aggregate demand.
10:52And my concern on that is, you know, we're bringing in the federal government brings in
10:56about five trillion a year and spends seven trillion right now.
11:01And, you know, five trillion of that seven trillion is nondescriptionary.
11:06They have to spend it. And so they're kind of dealing with the two trillion dollar budget
11:10that they're trying to cut essentially to make it, you know, to get back to break even.
11:14We have to cut 100 percent of federal spending, which is just not going to happen.
11:18And I just I'm not convinced that the changes they're going to make are really going to
11:22have a significant enough impact to really affect the 10 year.
11:25But but we'll see how that we'll see how it plays out.
11:28You know, so much of the government budget is mandatory payouts, you know, Medicare,
11:33Medicaid, Social Security, net interest payments.
11:37Everything else is kind of on the margin, even if you include defense spending into
11:42that. We are an older country.
11:46I always like to show these elderly dependency ratios.
11:48We have a lot of people ages 65 and on.
11:51So the mandatory payouts are going to be a higher for the rest of the century out
11:56here. So it will be interesting to see the final budget, because I'm just
12:02assuming that whatever budget is created is actually going to have lower
12:07fed funds rates. So they're going to have lower interest payments to pay out.
12:12We'll get that document soon enough.
12:15But this is the first time that we're actually seeing an attempt to reduce government
12:22spending in any kind of way that might be able to stick with congressional
12:28power. So it'll be interesting for me to see how the bond market reacts to something like
12:33that. But again, to Josh's point, majority of our budget is mandatory payouts that has
12:38to be given out revenue just to give everyone I know a lot of people think that we can
12:43just do tariffs and that'll replace income taxes.
12:46I think just off of paper napkin math, you have to have tariffs at 73 percent on
12:53everything to match the income tax revenue just to do a one to one base.
12:58So that's obviously probably not going to be the case here.
13:02So we'll see what the tax policy is, especially if President Trump wants to keep his
13:08tax cuts permanent.
13:10But this will be the first time we'll see this.
13:14But always remember, wait till you see the final paperwork and see if it gets executed
13:19and then take a look at what the market reaction to that is.
13:22Yeah. And I think the one thing that potentially would move the needle is if the
13:26administration signaled that they were willing to tackle entitlement at some level, even
13:30on the periphery, just to say, well, you know, we'll raise the retirement age over the
13:34next 20 years by a year or whatever that is.
13:38I mean, if they even hit it on the periphery, I think that that might start to move the
13:42needle a little bit. But but that's where the real money is being spent is in
13:45entitlement. Yeah, I think Social Security and Medicare are, you know, are kind of
13:50going to be off the table. Medicaid, you know, that could be work.
13:54But again, it's all speculation at this point.
13:58And we're just going to have to see what the final paperwork is.
14:01But I know that at least for the last five to 10 days, I've just been bombarded by,
14:06well, Doge is going to make sure that government spending is less and that will help
14:11with the bond market and the Fed funds rate.
14:14But time will tell on that because, again, Fed policies, majority of where mortgage
14:20rates and interest rates and the 10 year yield is.
14:22So we had a lot big deficits and back during COVID, we're spending a lot of money, but
14:29the rates were a lot lower. So now with quantitative tightening and the Fed still
14:34believing they are restrictive, whether you and I believe the Fed is restrictive or not,
14:38that does not matter. They still see it as restrictive.
14:41If they can get one percent more rate cuts into the system, the whole curve becomes a
14:48little bit lower. It makes six percent mortgage rates a little bit more plausible
14:52staying down there a little bit longer than what we've seen in the past few years.
14:56So in all of this talk about economics, what we know for sure is that at least in the last
15:00administration, housing was not part of the equation.
15:03I mean, they were they were looking, you know, what could they do in the overall economy
15:08and whatever happened to housing happened to housing.
15:10We have seen a change in this administration, really, you know, focusing more on housing.
15:14We've you know, President Trump has talked specifically about rates for both of you,
15:19though, like as they're making some of these cuts, you know, housing is so weird because
15:23like if the economy is going great, we're so glad for that.
15:26Right. Yes. All these all these engines running, but that keeps rates high to get rates
15:31lower. I mean, something has to kind of happen bad in the economy.
15:34Correct. For housing. So how do you square that, Josh?
15:38Yeah, it's an unfortunate reality of real estate is we kind of root against we root
15:43against employment and we're kind of rooting for for some weakness.
15:46But I do think there's a balance. And Logan's made the point that six percent really gets
15:49us there. And our company, at least when when rates hit six percent, we saw we saw
15:55refinance activity really pick up.
15:58We saw new originations really picking up.
16:00So I don't think it has to break.
16:02And I don't think anybody in the business really wants rates at four percent right now
16:06or even lower. I don't I don't know if they'll ever go lower than that.
16:09But that would be kind of we'd be back in that cycle of escalating home prices beyond
16:16what most Americans can afford.
16:18But housing, it's going to it will, especially as you look state to state, there are
16:23certain states that are becoming completely unaffordable that aren't building any
16:26affordable housing. I think that's going to really start to be an economic drag for
16:29certain states that can't that cannot provide adequate, affordable housing for a
16:35younger workforce or for people starting in their careers.
16:38And so I think every administration is going to have to take a real serious look at it
16:42and what they what has to be done on the federal level to create more affordable
16:46housing. And it's it's going to be a real economic drag, I think, if we don't if we
16:49don't figure that out.
16:53When we think about housing and economic cycles, when you keep rates higher or longer,
17:01it eventually goes against what you're trying to do.
17:04The best way to deal with inflation is supply.
17:07And of course, it was the most aggressive rate hike cycle ever in history.
17:13The builders have had the ability to pay down rates.
17:17If it wasn't the case, new home sales would have gone lower.
17:20But apartment construction, multifamily construction permits are at kind of COVID-19
17:25recession levels already.
17:27So there has to be some kind of balancing act out there.
17:31And I know, Sarah and I, you and I wrote that article in June of 2021 saying that I
17:37know a lot of people think there was going to be this big construction boom.
17:40But as soon as rates go up, things pull back.
17:43Right. Builders aren't the March of Dimes.
17:45I'm just hoping that this is something that gets discussed more and more as the year goes
17:51on, that it's not a healthy thing to have housing production this low for an economy
17:57that needs affordable housing.
17:59You have to build it.
18:00And rates are just simply too restrictive to get any kind of growth out there.
18:05And it'll be a benefit not only just for the American public, but also for the Federal
18:09Reserve's mandate, because if you're going to fight inflation, more housing supply,
18:14right, supply is the best way.
18:15And I'm waiting for the time where they bring that up, that they just come out and say,
18:22listen, obviously the housing market has been depressed with existing home sales and
18:28inventory in terms of construction is not growing.
18:32We like to be in a more facility.
18:34And you don't need three.
18:35You don't need four.
18:36You don't need five percent rates.
18:39But we get to that next level, right?
18:41Six, just just getting down to like five point seven, five to six and a quarter changes
18:46the changes, the ballgame out there.
18:48And you can get things working again.
18:50And that's what that's what I'm hoping for at some point this year that gets discussed
18:55because you can't have housing permits at recession levels for the next five or 10
18:59years. Something has to facilitate that kind of growth in housing construction.
19:06Josh, would love to dig in a little bit on that multifamily angle with you.
19:11Right. And one of the things that we've talked about is from a builder perspective, you
19:16have a couple of challenges right now that maybe you didn't have two months ago, a month
19:20ago, which is, you know, the tariffs, which we've already talked about.
19:22We've also talked we've also we have the whole immigration workforce concerns that are
19:30happening. We have not seen wide scale deportations.
19:34In fact, I think we're at a lower level than we saw during the Biden administration.
19:38So that has turned out to be not something that's happening right now.
19:41Is that something that you have had to account for in the last month?
19:45It's something we're worried about, but not something we're really accounting for yet.
19:49We haven't really seen any impact, but it is something we're worried about.
19:52You know, are people worried to show up to work?
19:55They're worried to go to school, that type of thing.
19:57But but so far we haven't seen that.
20:00But having said that, I just think, you know, with rates that, you know, when you're
20:04borrowing from a bank at this point and most banks, to be honest, most of the regional
20:08banks have over lent and have too much allocation towards real estate.
20:13So they're not super motivated to lend on construction and potentially be stuck in a
20:19long term finance situation on more multifamily, even if it's, you know, if the
20:24terms are a little bit better.
20:26So we're just seeing banks not super anxious to lend on multifamily.
20:30And so the projects that started a couple of years ago were getting completed, but
20:34we're not seeing a whole bunch of new projects starting.
20:37We're seeing a lot of land sitting around waiting, a lot of entitled projects for sale,
20:41but no one really with the capacity to pull the trigger because I think most of them need
20:45to be done with all cash.
20:47And, you know, the financing is really working against you right now with cap rates
20:52still being relatively low and interest rates being high.
20:54So I think we're going to see a real lack of inventory coming on multifamily and office
21:00industrial kind of all real estate classes.
21:03And we're going to be undersupplied coming up pretty soon.
21:06And I think that's going to start to drive rates again or or cost and rent rates across
21:13all industries and real estate.
21:14But but for now, the banks are hurting.
21:17They're pretending like they're not hurting.
21:18And the Fed will probably bail them out if they really start hurting.
21:22So I don't think it's a real risk for the economy as a whole.
21:25But but I think banks really are hurting.
21:27They know their balance sheets are kind of out of whack in terms of how much real estate
21:31lending they have on their on their books.
21:33That's underwater right now.
21:36Parts of that, a lot of people for two years now, especially after the Silicon Valley
21:42banking crisis, we're talking about, well, credit is going to get tighter and tighter.
21:46And a lot of these banks, I mean, we're talking big loans are going to come due and
21:51that's going to wipe them out.
21:53Just just for me, generally thinking that the Federal Reserve is going to basically
21:58merge a lot of banks as we could all see what happened in Silicon Valley.
22:02As you saw, something happened over the weekend very fast to prevent contagion from
22:07going out. Nobody wants to see credit get tighter and then impact local
22:12economies, especially regional banks.
22:14So I know a lot of people were thinking, well, that is going to have to break the
22:18economy. There's game plans in place for that.
22:21But that also means a lot of banks are going to go under or get merged.
22:25Of course, to Josh's point, the numbers don't make sense.
22:28Right. When when you build and your cost to build is X and the amounts of rents you
22:36need to take to make it profitable.
22:38If it doesn't make sense, you pull back.
22:40That's what we saw.
22:40We saw a very, very sharp decline in housing permits for apartments.
22:46But it also takes, you know, 21 to 24 months to close an apartment.
22:51That's double all time highs.
22:53And what's occurring right now is the units that are being completed were things that
22:57were started 18 to 24 months ago.
22:59They're starting to get finished now, which means that there's nothing here to work
23:04for. And when you have an elevated level of residential construction workers, that is
23:09the risk to labor.
23:10That's why we talked about twenty twenty five.
23:13The risk to labor falls into the housing sector in terms of construction workers,
23:18because permits have already gone down and the units being completed are finally
23:22coming in. So that's something that I'm keeping an eye on.
23:25And like the charts that we show all the time before a recession happens, this this
23:31sector of the economy always starts to lose job.
23:33Why? Fed keeps policy too tight.
23:36Right. When you keep policy too tight, the future supply of production goes away.
23:41So you don't need that much employment.
23:42And construction productivity has been terrible post-World War Two.
23:46So we need that kind of labor.
23:48We'll see what happens at the rest of the rest of year.
23:50Again, my hope, which I don't really like to hope too much on things, is that
23:54eventually it becomes more and more apparent when the units are being completed that
23:59we just need to get rates a little bit more to get things going again.
24:04This again, not three, not four, not five, but one percent lower in the Fed funds
24:09rate, make it somewhat feasible for more production.
24:12And of course, the builders can can can build more single family homes as they could
24:19sell more single family homes.
24:20And then we get off of this and somehow get the get the production in line by the
24:26time, you know, in about 12 to 18 months when all the units that were in process are
24:32done with, we can get supply going and we don't have to drag housing starts and
24:37permits even lower than what we have currently.
24:40I would just say the one thing that really sets the U.S.
24:42apart from other countries around the world is our regional banking system is robust
24:47and active. I think they do about 70 percent of real estate development projects are
24:51done through regional banks and not kind of the big five.
24:54And that's that's really unique and allows us a really healthy real estate
24:59environment. The other thing that's unique with the United States is the federal
25:03government essentially subsidizes owning homes.
25:06I mean, by by not so secretly backing Fannie and Freddie and guaranteeing those those
25:12agencies that they are subsidizing housing in a way.
25:15And that long term 30 year fixed rate is just not something you see anywhere else in
25:19the world. And so those are assets I think the federal government really wants to
25:25protect. They want to they want to keep a vibrant and solid real estate market in the
25:28United States. And and I think hopefully to Logan's point, they do pay more attention
25:34to what's happening in the short run and the potential risks in the long run, both to
25:37regional banking and and to affordable housing, if you just keep rates a little too
25:42high and prevent builders from from offering supply, because this is I mean, it's a
25:47supply and demand issue.
25:48Demand is down a lot, but some supply is down even more and demand is going to come
25:53back and supply is just not going to be there.
25:56So we've really got to be working on our supply right now in a big, big way.
26:00Josh, do you you know, you were, I assume, working in industry before Fannie and Freddie
26:05were in conservatorship.
26:06And then now all these many years of of them being in conservatorship, the idea that
26:12like there's definitely some some idea about taking them out under this administration.
26:17We haven't seen a ton of momentum yet.
26:19What are your thoughts there?
26:20You know, I think in the long run, maybe that's OK.
26:23The short run really makes me nervous.
26:25You know, I I like the federal guarantee.
26:27It's kind of nice, even though I don't think that goes away.
26:30I just think it creates more uncertainty.
26:31And I think the one thing we're all craving in the mortgage world right now is just
26:35some certainty, some direction and less confusion.
26:40I mean, see the CFPB website down and we don't even know if anyone's working there
26:46and, you know, rules changing and, you know, all these things happening, uncertainty
26:50over tariffs, potential rates going up, rates going down.
26:53I mean, it's it's just creating a lot of confusion.
26:55It makes it hard to invest in a business where you don't really know what the future
26:58is. So I think we could live within the parameters either way if they come out of
27:02conservatorship or stay in.
27:04But just some clarity and not saying, hey, there's a chance they're going to come out
27:06and there's a chance they're not.
27:09You know, I do like the idea of of Fannie and Freddie being a little bit more nimble
27:12and being able to provide products that make market sense and not necessarily have that
27:16driven by by federal policy.
27:18That doesn't always make sense.
27:20I mean, there's times where, you know, if you have a lower FICO score, you're going to
27:23get a better interest rate.
27:25And it's like that that doesn't really make sense on on any level.
27:29And it provides a perverse incentive to to worsen your your FICO score and do different
27:34things. So, you know, I think there's elements like that that would be nice to really
27:37take the reins off Fannie and Freddie, let them operate as for profit businesses.
27:42But I but I really do like that federal guarantee.
27:44And I think, you know, all the downside that comes with it is it's probably worth it.
27:51But the subsidization of housing, right, the credit data just came out again today.
27:56It happens every quarter again.
27:58Household balance sheets have never looked better because of homeowners.
28:02There's a reason why the world hates us.
28:05It's because we have a 30 year fixed mortgage and they don't they don't have the plumbing
28:09systems that we do.
28:11And I think the concern, you know, with Secretary Treasury Bassett said we're we're,
28:17you know, if this is going to raise mortgage rates, we're not going to do this.
28:20Right. So there is a lot of confusion on.
28:23I mean, there's no there's no reason to do anything right now if that's your goal.
28:28And I think that's the pushback that, you know, the treasury secretary wanted to tell
28:33the marketplace, say, listen, we're not going to touch this.
28:35We have a lot of things on our plate.
28:38And the last thing we need is for mortgage rates to go up.
28:41So I'm not looking for anything to happen anytime soon on that.
28:45And they kind of did the groundworks on this.
28:47And it's always going to need the government's backing.
28:49The treasury has to come out and provide a line of credit.
28:52So this isn't going to be a technical get them out of the government.
28:56Government will always be supporting them because they're so massive.
29:00But there's a reason why America has a 30 year fixed mortgage, why homeowners on paper
29:06write fixed debt costs, rising wages, your wages rise, your debt cost stays the same.
29:10You have more disposable income.
29:12You know, that's why they subsidize housing so much in that regard.
29:16So I don't see them doing anything anytime soon to remotely chance any kind of market
29:23risk. But the reason why they subsidize housing so much is when you look at one of the
29:29reasons why the economy recovered so strong, why the economy is still very strong in the
29:36sense that we've raised interest rates so much, but it didn't break the economy.
29:41Why? Short term rates versus long term rates.
29:43Long term rates are fixed.
29:44So much of the debt in America, not just households, but corporations were fixed already.
29:51And that's the benefit where countries like Canada, Australia, Norway, a lot of those
29:57countries are tied to short term rates.
29:58We always joke about how Canada has to do 90 year loan modifications, not in America.
30:04That's our golden egg.
30:05And it's really helped the recovery, helped the COVID-19 recovery.
30:09And even with rates moving up so fast, you could see this in the credit data, how
30:14homeowners, majority of consumption is middle class and the upper class.
30:19But that class is doing well because their debt profiles are looking good.
30:24Household, young households, renters, not so much.
30:27Right. We see the credit stress into there.
30:31But homeowners on paper look good for a reason.
30:34We've subsidized housing so much to get people into a home.
30:38It's not so much of the home values that go up.
30:41That typically goes up with inflation.
30:43But it's the cost of housing, fixed debt costs, rising wages.
30:47The longer you live in your house, the better disposable income you have.
30:50So that's the benefit of the United States of America over every country in the world.
30:55There's nowhere else you're getting a 30 year fixed loan.
30:58I mean, even the federal government with their balance sheet doesn't have a 30 year
31:02program. So, you know, they've got the 10 year some a lot of people wish they'd done
31:06the 30 year program when rates were at one percent, but they didn't do it.
31:10But, you know, you're as a commercial developer, a real estate owner, you know, you
31:14can get a five, seven or 10 year.
31:16But we wish we could do a 30 year option.
31:18But it's just these this is reserved for the American homeowner.
31:23And really, it is just it's a real special benefit that Americans have to be able to
31:28get into homeownership and have essentially a subsidy from the federal government to do
31:33it. Well, we are out of time already.
31:35That went really fast.
31:37Great episode, Josh.
31:38Thanks so much for joining us.
31:39Logan, as always, thanks for being here.
31:41And we will talk again soon.
31:44Appreciate it. Thank you.
31:45My pleasure. And I still have the Gandalf doll.
31:48Josh and I, when we went on a stage and talked together, he gave me a Gandalf
31:53flying Gandalf doll to represent the 10 year yield bottom call back in 2023.
31:59I will say our company is still talking about that visit.
32:03You did a phenomenal job.
32:04It's it is amazing to have both of you guys come out and speak to us.
32:08And it was just it brought a ton of energy.
32:09It was a lot of fun. So I really appreciate that.
32:11It was so much fun.
32:12And I do think that's one of the best gifts you've ever gotten, Logan, from from fans
32:18or from the podcast.
32:20So thank you guys so much.
32:21And we'll talk again soon.