California’s Economic Outlook and Housing Market Forecast 2022 with Jordan Levine | Part 1


VP and Chief Economist at the California Association of Realtors

Jordan Levine is VP and Chief Economist for the California Association of Realtors where he is responsible for the housing market and economic trends and analysis, policy analysis, and data work in a variety of contexts.

Additionally, He manages an EB-5 Immigrant Investor Visa practice, helping to establish regional centers with I-924 economic impact reports across California and the U.S. region, and has provided I-526 impact and job creation analyses for many more individual projects across the nation. Past projects have included call centers, residential real estate developments, mixed-use developments, hotels, retail businesses, high-tech manufacturing, biotechnology, ambulatory health care facilities, assisted living facilities, agricultural enterprises, movie studios, and grocery stores, among others. Well versed in critical issues related to USCIS approval of I-526 and I-924 EB5 applications like construction jobs, tenant occupancy, and establishing a causal nexus.

One critical characteristic that sets Jordan apart from other number crunchers is his ability to communicate complex economic concepts and ideas in a clear and effective style. He has spoken to a variety of groups, ranging in size from small groups of 5-10 to over 800, including industry groups like the California Bankers Association (CBA) and the California State Municipal Finance Officers (CSMFO), elected officials such as the California State Controller’s Office, various local government bodies like County Boards of Supervisors. In addition, he regularly contributes to radio and newspaper articles.

Jordan has a bachelor’s degree in economics from the University of California, Santa Barbara and a master’s degree with Merit in International Economics from the University of Sussex. Prior to joining C.A.R., Jordan worked in consulting as an economist and director of economic research where he oversaw all research and economic analysis on California’s economy and housing market and regularly spoke to trade groups, public officials, businesses, and the media.

Episode Notes:

Narrator  This is The Norris Group’s real estate investor radio show the award-winning show dedicated to thought leaders shaping the real estate industry and local experts revealing their insider tips to succeed in an ever -changing real estate market hosted by author, investor, and hard money lender, Bruce Norris.

Bruce Norris  Hi, thanks for joining us. My name is Bruce Norris. And once again we have as our special guest Jordan Levine. Jordan is Vice President and Chief Economist for the California Association of Realtors, where he’s responsible for the housing market and economic trends and analysis, policy analysis and data work in a variety of contexts. One critical characteristic that sets Jordan apart from other number crunchers is his ability to communicate complex economic concepts and ideas in a clear and effective style. He has spoken to a variety of groups ranging in size from small groups of 5 to 10 to over 800, including industry groups like the California Brokers Association, and the California State Municipal Financial officers, elected officials such as California State Controller’s office, various local government bodies like county Boards of Supervisors. In addition, he regularly contributes to radio and newspaper articles. Jordan has a Bachelor’s degree in economics from the University of California in Santa Barbara, and a Master’s degree with merit in international economics from University of Sussex. Prior to joining CAR, Jordan worked as in consulting as an economist and Director of Economic Research where he oversaw all regular and economic analysis on California’s economy and housing market, and regularly spoke to trade groups, public officials, businesses, and the media. Jordan, welcome back.

Jordan Levine  Thank you so much for having me. I appreciate it.

Bruce Norris  I’m sorry, we have to have such boring times for to discuss.

Jordan Levine  Yeah, really. We’re just kicking back here at the office every day, so.

Bruce Norris  I gotta tell you, you know, I’ve always enjoyed hearing you speak. I usually before I interview, I watch a presentation of yours. And I just want to tell you, your passion comes through. And that’s, that’s a lot of fun to see, really is.

Jordan Levine  Thank you so much. Now, yeah, it’s a family business going back to the late 70s. My dad was a realtor. And then he, you know, started developing real estate, I always thought that was the direction I was gonna go with my career. And then I realized I was more of a spreadsheet guy than a people person. But it feels good. And I believe in homeownership and all that stuff. So, it’s, yeah, it’s a great job to have and I’m glad that we can add some value.

Bruce Norris  Yeah, one of the, one of the things you mentioned in one of your presentations was just the the net worth effect of owning something in real estate. And, and just to touch base on that I, this was sort of accidental, when I saw the latest median price, it hit me and I thought I wonder if it’s true. So between 74 and 80, they median pricing in California was 34, grand went to 102. A 300% increase?

Jordan Levine  Yeah.

Bruce Norris  In 1996, it kind of went down to another number 180 and went to 540. In 2007, it tripled from there. And then we went down to 280 in 09, and now we’re at 840, which is 300%. We’ve done it three times.

Jordan Levine  Yeah, exactly. Hey, you know, we’ve got a really strong economy too. And you know, that’s one of California’s biggest strengths as we continue even after this pandemic, and all the shutdowns and things like that we’ve started growing faster than the rest of the United States again, and that’s something we’ve done pretty consistently. And it sure creates a lot of demand for housing when you’ve got a really strong economy. And that’s why, you know, even though we’ve had cyclical fluctuations, it’s you know, over the long term, it always makes sense to own home from the standpoint of accumulating equity. And, look, it’s one of the ways regular people can actually make a leveraged investment too and I think that’s one of the things that people forget about is you can get in with only 20% of your own money or less, right, and the bank doesn’t come and want to split that equity with you on the back end. And if you asked him for all, you know, 500 or $840,000 loan to go buy some Bitcoin or something like that, A. it’s not going to happen and B. you can be sure that you’d have a much bigger pound of flesh at the end of it. So

Bruce Norris  One of the problems for California is its prices up there. So, what percentage of homeowners, what percentage of families own a home in California?

Jordan Levine  We’re right about 56%. I think it might go down a little bit in the coming quarters just because prices being what they are and affordability, what it is and you know, it’s more than half but we’re, we’re running a pretty big gap with the rest of the United States. And I think that’s a big challenge for the economy moving forward too, not just for the housing market or for realtors, you know, we’re gonna have trouble continuing to be that outperforming number five or whatever economy in the nation if, if we can, you know, get enough workers here to fill those open jobs.

Bruce Norris  Well, that’s what’s one of the things that it’s interesting. I, when I watched your presentation recently, I didn’t realize that we hadn’t caught up on our jobs.

Jordan Levine  Yeah.

Bruce Norris  We actually lost more than we have come back. And I didn’t know that because the unemployment so low. How could that be?

Jordan Levine  Yeah. And the unemployment is a tricky one, because it’s a ratio. But I think, you know, if you go back to the onset of the pandemic, we lost about 2.8 million jobs, and some change there abouts. And I think we’ve now added back about 2.3 million and change maybe a little bit more, I think it’s like 2.5 million after the most recent release. So, we still got about 300, to go to get back towards full recovery. But when you look at the unemployment rate, it’s a function, not just of the number of jobs that we’re reporting, but it’s also you know, the denominator there is how many people are actually looking for work. And that’s one of the things that we really miss the boat on. You know, I think that we kind of assume that once the expanded unemployment benefits and the pandemic unemployment for independent contractors and things like that went away, but you’d see more folks, you know, reenter the labor force, and the labor force participation rate is still depressed as well. And I think that’s, you know, both why we maybe haven’t kind of shot back to that pre crisis level in terms of the nonfarm jobs number. I also think it’s one of the big factors that’s driving the inflation that we’re seeing, you know, because…

Bruce Norris  Yeah, we’ve tried to, tried to track people off the couch.

Jordan Levine  Yeah, exactly. I mean, you know, for the first time, and I think a long time workers feel like they’re kind of in the driver’s seat and negotiations and things like that. And you see that even as the kind of pandemic related sources of inflation, the supply chain stuff is starting to ease, right, we’re starting to get more cars on car lots and things like that. And the lumber prices aren’t as heinous, we’ve got the gas stuff obviously been a big part is the housing piece, and the wage inflation, which has been going up and kind of replacing some of those more transitory sources of inflation. And that’s why I think you’re gonna see the Fed continue to be aggressive too is, you know, it’s not, that’s not something that’s gonna go away overnight, those folks are gonna have to, you know, either max out credit cards or realize that they’re, you know, struggling to pay bills or what have you. And I think it’s going to be some months before you see that really start to bounce back, because the pandemic, I think, really did change the way that people look at, you know, work and life and where they live and all of that stuff. And I think that that’s why there has been this kind of more lasting effect than what we originally expected. Some of it might be housing too, right? Some of these folks might have cashed in on some equity and are kind of re revisiting their life choices.

Bruce Norris  Especially since it was tax free gain, it says ‘I’m good’.

Jordan Levine  Yeah, yeah, exactly.

Joey Romero  Jordan, those, of those jobs that haven’t been filled, how many of those are still there, though? I mean, there’s a lot of businesses that kind of close their doors, right?

Jordan Levine  Yeah. So, there’s still a big kind of imbalance between, you know, the kind of shape of labor supply and demand, right, you’ve got a lot of folks in these kinds of lower wage sectors. And I think, especially with health care, or excuse me childcare being as tight as it is right, then it kind of starts to really impact that the cost benefit of some of those lowest paid workers to go back to work. And I think though, the areas that are growing in are the ones that we’ve been growing in the high skill, high tech, and even, you know, logistics and things like that. But those aren’t necessarily ones that we kind of, you know, front desk person at, at a hotel or at a restaurant or what have you can can immediately fill in, I think there is that gap there as well.

Bruce Norris  You know, the pandemic really set off two groups that seemed to have urgency, and it fed any asset boom, so you, I’d seem like there was an urgency to feel like, okay, I’m gonna get on with what I’ve always wanted to do. So, housing was one of those things. But also, yachts, were one of those things. But if you were if you were in the yacht sale business, you sold more yachts in three months than you did in five years.

Jordan Levine  Right.

Bruce Norris  It was completely nuts. So, but the housing of course, that was, that’s always central to, if so if you put off housing, or if you put off expanding a house, you know, all of a sudden it was on counter to that though, there was a group of people that said, Okay, I had my house listed, but now I don’t want anybody coming through it. So, your inventory went down by about 45%. Your demand went up about 35%. And those worlds collided, and haven’t recovered that balance at all.

Jordan Levine  Absolutely, absolutely. And I think you also got to throw 2.65% mortgage rates into the mix. They’re creating that sense of urgency for folks as well. And I think the remote work aspect, right, where folks, like you said, homeownership has always been kind of front and center as part of the American dream, you know, and kind of the thing that when we do our survey research of consumers, they always say, I still believe in the American dream, I, I think it means owning my own home, you know, and, but when you’re when you’re having to commute to a downtown employment corridor, and maybe can’t afford someplace to live, right where you work, that that makes it challenging, and then you have the kind of flexibility piece on top of those low rates and things where, you know, if you don’t have to commute to the office every day, then you know, you can look in places like Sacramento, or if you’re in the Bay Area, or you can look at places like the Inland Empire, you know, if you’re in Southern California, and you saw a lot of that stuff happening, you saw people go even farther afield than those kind of traditional kind of commuter corridors and go into like Tahoe and Big Bear, and especially in 2020, there was a lot of that out, you know, opportunistic out migration of these high skilled, remote workers. And, you know, the fastest growing cities, even though the state as a whole grew. And then, you know, a couple of percent in terms of transactions in 2020, there was markets out there, like those resort markets that are growing by, you know, 40, 50, or 100%, from where they were in 2019. And that was in the middle of a pandemic. And I think you’ve started to see the shape of that demand normalized back to major population centers and things like that, but the passion for homeownership hasn’t, hasn’t gone away. And I think that you know, you just had a really kind of strong cocktail of, or recipe for really strong buyer demand when you have that flexibility, that finally kind of in those low rates that unlock the potential for all these folks who’ve always wanted homeownership, but maybe just couldn’t get it, you know, right off the off the bat where they weren’t so…

Bruce Norris  Well yet. Well, you know, the numbers in 2019. That was a one year I looked at and went ‘Wow’, we got no foreclosures.

Jordan Levine  Yeah.

Bruce Norris  Well, we only have 400,000 in sales, we barely have any price movement.

Jordan Levine  Yeah.

Bruce Norris  And I started thinking, Wow, is this where we end this cycle? Because everything that you wanted to have a positive upside, the employment numbers and all that would normally have created 10 to 15% price increase, and it created almost nothing.

Jordan Levine  Right.

Bruce Norris  And, and I thought, and maybe this was true that there was just a lackadaisical, I don’t really care if I own now, there was definitely, you know, when I was a young adult, man, that’s all I could think of, I gotta go from renter to owner tomorrow.

Jordan Levine  Right.

Bruce Norris  And my son Aaron, is, you know, in that age group, where his friends are sort of like 35 to 40, you know, a few years ago, and, eh, they didn’t care.

Jordan Levine Yeah. Yeah. And I think, you know, it’s, it’s kind of rekindled that because folks want to be able to just have their own space that you need, you know, we’re asking our homes to just check so many more boxes for us. It started to subside now. But we saw that median square footage on a home that owner occupants were buying jump up by about 120 square feet, which to my mind, that’s, you know, that’s a home office right there, your 10 by 12, room, all of that stuff. And, and so I think that, that is, is really part of it. I also think the cost has not been a picnic. You know, we kind of give folks a hard time in the younger age categories and things like that. But I mean, when you look at the affordability numbers are you talked about, you know, the late 70s, early 80s. In California, when we’re talking about 30 to $40,000 home prices, I always joke, you know, my my dad literally walked around in the early 80s. I remember like bragging about his 12 and a half percent. You know, he was lucky just to get a fixed rate mortgage and one at 12 and a half percent was an absolute steal. I think he later refight it like 10 years down the road to like, you know, 9% or something. And that was like a screaming deal, too. But the thing he wasn’t grappling with those $850,000 median price, which is effectively where we’re at now. So, even though it’s kind of, you know, it’s it’s easy to joke about how low rates are just going from three to 5% people really freak out, you know, through the lens of like my dad’s era, that’s nothing, right. And we the markets done fine with five and 6% rates, even going back to 2005 and six, that wasn’t sabotaging the market, but it does have an outsized impact when you lay it on top of these really extreme price levels, you know, and so that is kind of a, it’s going to be a headwind for housing demand moving forward because even with that flexibility and insatiable appetite, I mean, I went back to East County, San Diego and did a speech the other day in that town I grew up in which was just a solidly blue collar area, you know, it wasn’t a fancy  part of San Diego County it was about 35 minutes to go to the beach for us, you know, but but the median price out there is like 745,000 now and and so you know that not not everybody can absorb these, these rate increases. And I think that eventually that will catch up to the market. We’re still seeing strong numbers now. And I think that urgency is there for folks who are like..

Bruce Norris  Yeah.

Jordan Levine  …let’s get in before it gets to 6%, what have you but yeah, it’s gonna start to go down, I think as we get into the second half.

Bruce Norris  There’s a couple psychological plays that will start to happen, you’ll have people that didn’t get in when it was three or four, do exactly what you just said. But on the other side, you’ve also got people that have the twos and the threes go, and I’m good. And I’m not going anywhere. And that home may not come on the market ever.

Jordan Levine  Yeah, no, I think, you know, it could become the new kind of Prop 13, in a way, right? We’ve gotten the tax portability. Now you can move and you don’t take that property tax hit with you if you want to retire or what have you. But if you’ve got a mortgage outstanding, and you’re sitting on a two and a half percent fixed rate, then that’s a big disincentive to go somewhere else. Even if you’ve got a boatload equity, if you’re taking out any money at all, and it’s twice the borrowing costs, that’s significant. On the other hand, you might get over the short run some folks who, you know, if you’re thinking about moving in the next couple years, that it might make sense to do it sooner than later. So, you get in at a lower rate now before, you know, before they go any, any higher. So, I again, I think that will help over the short run, I think over the long term, it’s going to be a big challenge, I think we got to look on the policy for like assumable loans again, right?

Bruce Norris  There you go, I just was gonna bring that up, we went, we were invited to Washington, DC to meet with the CEO of Fannie Mae. And that was the subject I brought up.

Jordan Levine  Yeah.

Bruce Norris  I said, if you do not allow these loans to go forward to a new buyer, you’re going to have a really above bifurcated market, where you’re going to have affordability at one level for the people that are already in, but you got to have a whole different price point, because the payments probably not going to change that they can afford. So, it’ll be a different price level. But you know, so that was really the discussion is, how do you get all this big packet loans to move forward? Because realtors have to make a living too. What was, what was really interesting in 1980 and 81, you know, the volume of sales went down a lot, but 50% of the sales that existed did not need a new loan.

Jordan Levine  Right.

Bruce Norris  That was really unusual.

Jordan Levine  Yeah, and it’s huge. I mean, if you could just take out a second for whatever the overhang is, right? That, that balance that you need, and you do that at at market rates, I mean, you know, it also creates just not just the supply challenge, because, you know, those units don’t, don’t hit the market, but then we’ve got just a totally mismatch allocation of the units, right, where you’ve got people staying in homes that don’t even work for them, right, that they don’t even want all this space and things like that. And so you know, even the housing stock that we that we have, forget about new development, all of that stuff, you know, it’s just it’s so inefficiently allocated, that it creates all these kinds of unintended consequences. So, you got new, you know, families with four kids, and they want that, that house with all the rooms and stuff. And and you know, you got the folks who want to retire and are sick of walking up and down stairs and all of that, but you can’t just kind of more efficiently allocate that, because there’s all these kind of, you know, I was calling policy oriented, you know, kind of structural things that are keeping folks in place when they don’t want it.

Bruce Norris  Yeah, that’d be really interesting to see if they could get to the bottom of that.

Jordan Levine  Yeah.

Bruce Norris  Because you know, somebody in control should really make a decision and say, you know, what, we used to do this, and for right now, we better do it again.

Jordan Levine  Right. And I mean, these are still presumably credit worthy borrowers, right? We’re not talking about our underwriting standards, and doing all of that stuff. I mean, they’re still worthy of carrying those loans and things like that. So to me, it’s just a no, a no brainer to help keep the market moving. And you know, especially when supplies the big challenge for homeownership and stuff you want, you know, what if people want to sell we should be encouraging them to be able to do that you shouldn’t have penalized for, you know, moving to a better property.

Bruce Norris  Right. What percentage of the of the market is first time buyers, in California?

Jordan Levine  We’ve had an elevated percentage, we haven’t done our 2022 annual housing market survey quite yet. But last year number we were still above a third and the year before that it was almost 40% of the market. I think it was 37 and change as a percentage of transactions. And actually, I think that’s why we did see the homeownership rate go up, even in the midst of this pandemic a little bit. We’re still you know, only at 56%. But, you know, we did see a lot of folks finally take that leap into homeownership for the first time, even with a market that hasn’t fully or you know, an economy that hasn’t fully recovered yet things like that, which I think is just a testament to this, this kind of renewed passion for homeownership.

Bruce Norris  Do you see the rate increases, most adversely affecting the new person that will try to get in?

Jordan Levine  Yeah, definitely. I mean, you know, we have an affordability challenge for folks just in terms of the price levels and where incomes are at. And so, you know, there, they were already kind of scrapping their way into the housing market, as it were. And I think this only makes it more difficult to get news, I think, you know, and why we’re not predicting the market’s going to collapse it at five and a half percent or whatever is because we still have a lot of high income earners, right. So, there’s still that kind of lower bound to housing demand, we’ve got a lot of folks that are in great jobs, making multiple six figure incomes, who are the ones who are going to continue to, you know, demand housing, and there’s where that structural imbalance comes from, but at the margins, right, for those folks who are just, you know, really struggling to qualify, and one of the ways I always present it is, is kind of probably the wrong way but you know, if you just take that projected median priced home this year, we’re about 835,000 or so, and, and look at what the payment is on that at 3% and then what the payment is on it, and 5% It’s an $800 difference, more or less per month, right. And so, you know, that’s, that’s real money for California households, even though our median incomes now up to almost $80,000 a year, not everybody can afford, you know, another 10 grand worth of both income and, and so that’s, you know, gonna hit the people who are just right up against it the hardest if you’re making 400 grand a year, you know, but, but the reality is, instead of raising your payment by 800 bucks, because most people can’t afford it, what it means is that you have to look for a home at a lower price point, right by like, 120 grand, and finding affordable inventory is like our number one challenge. And let’s say it and so those are the folks who are probably going to, you know, be up against it.

Bruce Norris  The last calculation on the CAR website for affordability, I think was 23.

Jordan Levine  Yeah.

Bruce Norris  But that was before the rate increases. So, I would assume that you’re probably at something like, like 17 or so.

Jordan Levine  Right. And, you know, it’s also because we’re in a seasonal for home prices. So, that’s just our raw median home price. We haven’t seasonally adjusted that. So, when we get into the summer peak price months, and you layer on top, the higher rate, a little bit higher rates, I think it was a 3.97, that we fed into that calculation based on the first quarter rate that includes the like 3% number that we have to start the year. So, when we get into q2, we’re going to both have that kind of price appreciation that’s going to be in that really high seasonal time for prices, and the higher rate that’s closer to 5%. And that will be the one two punch for for the affordability number.

Bruce Norris  You have a comment on your presentation. Affordability, inversely, is inversely proportional to supply. So, what did you mean by that?

Jordan Levine  Yeah, the West supply we have, you know, it’s we’ve functionally kind of commoditize the housing market, right. And so we have housing, that’s just going to the highest bidder. And that’s, that’s because we both have, you know, kind of all that buyer demand that we talked about, there’s just a long standing structural challenge, we’ve gone from, you know, 10 to 15, or 17 million non farm jobs, the population has grown by 15 million people over the last three decades or so. And, and we just have not, we actually build about a third as much as we used to, back in May, we don’t just build, you know, not more or only a little bit more, we actually build a lot less, even with more population and more jobs.

Bruce Norris  Yeah, a lot less.

Jordan Levine  And then you got all these high income people out there, you know, kind of really thirst and after these homes that aren’t available on so that you know, you don’t you anybody who’s gone to a popular concert knows that the more you know, more people that want to get in, and the fewer tickets they have than the higher those ticket prices go. And that’s kind of where we’re at with housing.

Bruce Norris  Do you have a historical perspective of where affordability hits a breaking point?

Jordan Levine  Last time we got into the low teens. So, we were at I think 12% housing affordability at the height of the last housing cycle,.

Bruce Norris  Right.

Jordan Levine  And prices did come down significantly.

Bruce Norris   Yeah.

Jordan Levine  Yeah.

Bruce Norris  Well, that was, that was only reached because you had a fraudulent loan and industry completely.

Jordan Levine  Yeah, we’ve got about you know, if you just look at the raw median price to median income number, it’s 10, though, you know, and so…

Bruce Norris  …it’s always been there since that, that was the peak at ’06.

Jordan Levine  And that was the peak and I was six. Now you got to shave some of that down because rates aren’t 6% the way that they were back then, but they’re getting there. And, and so I think that you know, they’re, even at the end of 2020, you could largely explain that 715, 720 dollar median price by fundamentals, you could look at where rates were you could look at where income was, you could look at just general inflation in the economy over the last couple of decades, and you could get to a number that was pretty close to the number that we actually was seeing. But in 2021, it really accelerated into the double digits and, and really broke away from those fundamentals. And so there’s this kind of excess demand component to the price growth. And it’s not the kind of scary systemic risk kind of demand, right, we’re still underwriting loans to an incredibly high standard FICO rates and things like that. But I am starting to see more, you know, just kind of spam emails, like, get a No Doc loan and things like that. But I think that’s very small Looking back over the last couple of years, but, But still, I think that there has been a decoupling of these prices over the last year from, from fundamentals. And even though we have much more sound fundamentals, and people have skin in the game, and they borrowed, you know, on a kind of healthy level relative to debt to incomes and all that. So, if the financial markets tanked and as we’re recording this, I think we’re in the middle of another sell off to it’s been a bad couple days, when I think we are, you know, even though housing is not going to be ground zero, and we don’t have all this bad lending and things like that, I do think we’re now susceptible to just if if, you know, the economy and bigger external shock, because prices have gotten a bit ahead of themselves.

Bruce Norris  Okay. I view the affordability chart really is an important chart. But we’ve had different outcomes. So, 1980, you’re in 17%, affordability, you’ve got 10% unemployment, you got 22 months of inventory for sale, and you have no price damage in the next three years.

Jordan Levine  Yeah.

Bruce Norris  And then you go to, like 2007 and 2009, you get to 12% affordability, and you have much less inventory and you get crushed. So, what what saved the 80s from not having a downturn because of that, that’s really a head scratcher.

Jordan Levine  Yeah, well, I think, you know, there’s, there’s kind of, not every recession leads in just in general, not even in the 80s. But to price declines, right, we had like dot-com bubble that popped in early 2002. And we didn’t see a lot of movement, downward in prices there, either. I think the 80s is unique, because it’s, you know, kind of a high inflation time and and, you know, that’s that’s kind of one of the things I think real estate still has gone in, in times of inflation, right? Owning dirt, having something solid and tangible, like real estate is attractive, right? That’s why you want gold bars, and you’re safe downstairs, and all, all that stuff in times of inflation. So, I think there’s that component to it, right? Where, where, you know, it is kind of a safe haven for, for inflation. I also think that, you know, again, we’ve got a big if you look at the later ones, especially the 2001. And, you know, even the 90s prices went down a bit that was a huge structural change to our, our economy, right, where we, you know, the Cold War ended, and we had the loss of aerospace and defense, and we just weren’t building a lot of that military stuff. And that was a fundamental knock. And that’s why you did get some because it was a restructuring of the economy. I would argue the same thing in 2005, six, this, you know, and that’s why I said, it’s still a long term, a great time to own a home, because even if we do get cyclical changes are a big shock to the economy, there’s still that fundamental, you know, 15 million extra people that live here now, with not enough housing units for them. That means that, you know, the kind of medium term outlook for prices in California has always for them to be higher.

Bruce Norris  What’s interesting, you know, now we have inflation for the first time since the 70s. So, the 70s, 74 to 80 prices and real estate tripled when interest rates doubled. So, you know, that just saying that sentence? I hear, I usually hear a lot of I’ve debated some economists that say, Well, of course, when interest rates go up, prices go down, and you go, Well, you know, you got to look at a chart because that’s, that isn’t always true. But I will, but I will say that right now, let’s say that we’re at five and a quarter percent interest rate and we’re at 17%. We’re actually matching the affordability we got to an ad and 89.

Jordan Levine  Yeah.

Bruce Norris  So, how do you think this plays out for other charts? So, affordability to me tips over other charts in a negative way?

Jordan Levine  Yeah.

Bruce Norris  We make. Okay.

Jordan Levine  Me, I think, you know, it’s gonna show up in the sales numbers first, I think the first place you’ll see it, though, is in the competitiveness right of the market right now. We’re seeing about still I think even through last week, I haven’t updated the stuff through the weekend yet, but last week, we’re still seeing it 70% of closed transactions close above asking price they’re still going pending in you know, about 10-11 days on average across the state and I think that’s where you’ll see it first right is that you won’t have like some people will get priced out of the margin and at the margins and so those folks who are still in it won’t have to you know go as high above asking they might start asking for concessions again right you you might see more inventory come onto the market and homes are gonna stay on the market a little bit longer and as that happens, right and as as people aren’t as kind of having to scramble tooth and nail to get their offer accepted because there’s, there’s just less people submitting offers and I think you’ll see hopefully price growth you know, slow without going negative that for me, you know, you want that proverbial soft landing where prices go up by a couple of percent a year right but we go both time for incomes to catch up and start to close that gap on, on affordability want incomes to kind of outpace prices for a number of years and, and I think that’s the kind of best case scenario that we could hope for.

Joey Romero  Hey, that’s gonna do it for this week’s episode of the Norris group real estate radio show and podcast. Please be sure to catch us next week for part two of our interview with California Association of Realtors Chief Economist Jordan Levine.

Narrator  For more information on hard money, loans and upcoming events with The Norris Group, check out For information on passive investing with trust deeds, visit

Aaron Norris  The Norris Group originates and services loans in California and Florida under California DRE License 01219911, Florida Mortgage Lender License 1577, and NMLS License 1623669.  For more information on hard money lending, go and click the Hard Money tab.



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