[David] Odeta, so good to have you with us. I appreciate you taking time out and again, be sure to say hi to Mark. I’m appreciative of Mark lending you over to us. I’m a big fan of him and you. I want to give an opportunity for our audience to get to know you because I think you’re well known. You’re a national television that we talked about earlier. but there are some that are listening to our podcast that are in school or new to the industry, and they don’t know who Odeta is. So let’s get an introduction for their for that audience, segment of our audience. Tell us a little bit about yourself and your journey to where you’re at.
[Odeta] Sure. Well, it’s it’s a pleasure to be here. I am the deputy chief economist at First American Financial Corporation based out of, I’m based out of DC. I’ve been here for a decade now, and I basically lead the development of analysis and commentary and forecasts on trends in the real estate and mortgage market. So, I focus on everything from every factor impacting real estate. So demographic shifts have been a big part of my research, affordability, supply trends, and so I monitor and analyze all of the data that’s related to the housing industry. And that’s pretty much been the gig for about a decade.
[David] Yeah, and you got your let’s see, a master’s degree from Northeastern University, if I recall the story correctly,
[Odeta] Yeah, in Boston.
[David] In Boston, and it’s in economics. I think I’d like to share a little bit about what caused you to take this professional track because we have enough people in the industry that are in school listening to this, and I think it’s also insightful for them. How did she get to where she’s at? Tell us that part of your story.
[Odeta] It’s an interesting one, I think. you know, I work I work for a title insurance company. We are the private property protectors, as I like to call it. And in in graduate school, I was very interested in the drivers of economic growth. And I focused pretty narrowly on privatizations as a means for economic growth in Eastern European countries. That was part of my research at the time. And so really just fascinated in what drives economic growth across different countries. And that was pretty macro. It’s funny I ended up being as micro as I am in real estate, but but when you think about you know, real estate, it’s at the intersection of the economy and people’s everyday lives, right? And housing is also where interest rates, demographics, labor markets, wealth creation, household formation, all of these things intersect. it’s in real estate, you actually see all these different forces in the macroeconomy show up in a very in very tangible decisions, whether someone moves, buys their first home, downsizes, refines and we also know that housing is such a big part of household wealth and the in the broader economy. So there’s always something new to understand in this space.
[David] There is so much. And we should give a shout out to St. John Fisher College, where you got your graduate degraduate, undergraduate degree, graduating sumacum laude, very impressive about that. And you’re the process of finalizing getting your PhD in economics from
[Odeta] That’s right.
[David] George Mason. Great university, way to go. I I think it’s just awesome to see your academic achievements and also 10 years at a great company working alongside of one of the people I enjoy so much, and that’s of course Mark. What’s your outlook for housing market in the second half of this year? A lot of us are scratching our heads. Are we gonna what’s what’s happening?
[Odeta] You know, we we started the year feeling cautiously optimistic about twenty twenty six. We had a a good start to the year. We had a five handle on mortgage rates, which everyone was very excited about. we were still forecasting for rates to remain above six percent throughout twenty twenty six. So that that story is still very much the same, though I would say that currently our forecast is probably on the higher end of what we were anticipating at the beginning of the year. So slow, steady improvements in the housing market is what we were expecting this year. We were not expecting a rebound back to normal or pre-pandemic norms as we like to define it, but some progress, steady increase in sales activity, modest price growth, and still some regional divergences happening across the country. And these are these are things we’re still very much seeing. And we can dig into any one of those factors, but I think slow and steady improvement, not a return to normal.
[David] What are the hottest markets and what are the ones that are seen to be legally laggers in this recovery, housing recovery?
[Odeta] So, what we’re seeing in the regional divide is Northeast and Midwest markets are really outperforming in terms of price growth. So I look to, you know, my I went to St. John Fisher College, St. John Fisher University rather, and that’s in Rochester, New York. And that’s that’s where I grew up. And that’s actually a pretty hot market. You know, we’re still seeing upward pressure on prices. We see that in in other Northeast and some Midwest markets as well. Conversely, in in our Sunbelt markets, some of our pandemic darling markets, you’re still seeing. Downward pressure on markets, on prices, rather. And when we look at why that is, it’s really just inventory. It’s an inventory story. In the Northeast and Midwest, there hasn’t been as much of a supply response as there has been in the salt, Sunbelt markets, where we saw a lot of building over the pandemic and so inventory constraints are contributing to some of the upward pressure on prices, and it’s contributing to this regional divide.
[David] Yeah, I yeah, I get it. One of the things everyone’s looking at talking about is housing affordability. How do you measure that?
[Odeta] There that’s I love that question because you know, usually price to income ratios is something that’s very well known but we have two key ways that we like to think about housing affordability. The first is what we call our real house price index, where we don’t just look at prices and income, we also look at mortgage rates because most people you know finance their home purchase with a mortgage. So what we do is we adjust nominal house prices by the impacts of mortgage rates and income. And I think that gives a more accurate picture of affordability. And what we see is that in the latest data, affordability has been improving and it’s been a function of mortgage rates being lower than year-ago levels, income growth outpacing house price growth. House price growth has actually been quite anemic, below 1% nationally. and those factors have have been resulting in in a about a six percent year-over-year improvement in in affordability. Now we’re getting a little bit more fragile in the affordability space because mortgage rates have since gone higher and above year ago levels for the first time this year. but but the story for most of the year has been affordability improvements. The other way we sort of look at it is actually by just looking at renter’s income and trying to understand the renter, right? Which is when we talk about affordability, we’re really thinking about the potential first-time home buyer and so we segment the income piece by just looking at renter’s income and we say, you know, can you afford what share of homes for sale can you afford in your in your given market? and is it 50%? Can the median renter afford 50% of homes for sale or less than that? And in most of our markets, it’s less than that. So that’s sort of the two ways that we like to think about affordability.
[David] There’s other co other economists are producing similar reports. There’s been some out there that were I was talking to recently says, economists are all just one big echo chamber. And that is not the case with you and Mark. And I don’t know that that’s really the situation. It’s not fair to say that. You guys come, you’re all looking at, I’m assuming, the same data or similar data, but it’s how you look at it and the conclusions you arrive at. Talk a little bit about how you and Mark and your team are looking at the data that might be different than others.
[Odeta] So, I think when we go back to the real house price index, that was actually born out of a conversation in the morning over a cup of coffee where Mark and I were looking at some of these standard affordability measures and getting frustrated that you know affordability is different in a 7% mortgage rate environment than it is in a 3% mortgage rate environment. We certainly, you know, found that out over the pandemic and so we wanted to come up with a measure that we thought more accurately reflected affordability, and that that’s really How we got the real house price index. House prices are typically reported nominally, so without adjusting for any inflation. But just like any other good and service, the price of a house today is not comparable to the price of that same house 30 years ago because of you know the long run influence of inflation in the economy. So the real house price index helps to provide sort of an alternative view of the change of over time of house prices while adjusting for mortgage rates and household income. So I think that that’s sort of how we like what does affordability really mean to someone trying to buy a house? and that’s how we also came up with this renter affordability concept is oftentimes we see incomes being reported in these affordability measures, but what we see in the data is that a homeowner’s income is about twice as high as a renter’s income on average. So when we’re measuring affordability through their lens of overall income, it’s not truly reflecting what it’s like out there for a potential first-time home buyer. And so these are sort of how we come up with some of these ideas is trying to think about what do people really care about and what’s really the reality of what we’re trying to measure.
[David] Why do you think it is that when you’re looking at these head kind of head scratching data disparities that I want to refer to as ha lo when you look at that, what are you what are you give attributing that to?
[Odeta] Some of the housing affordability disparities that we’re seeing.
[David] Yeah, yeah.
[Odeta] I always come back to the fundamentals. It’s supply and demand fundamentals. It’s underbuilding for over a decade in this country relative to household formation and then it comes back to household formation and where we’re seeing more or less of it, where we’re seeing population growth shift across the country. It’s really these tried and true sort of fundamental factors that I think are driving these variations throughout the country.
[David] Yeah, well when we look at the housing shortages, which is a big contributing factor, or oversupply in some cases, undersupply. do we really have any oversupply anywhere in any markets? I know I’ve lived moved out of Texas and it’s taken me over a year to sell my home and because an abundance of homes, but also I think just the market is the buyers in that particular market are just looking at all the homes there are to pick from, and it’s really interesting.
[Odeta] It is, and I think that’s one of the interesting conversations that’s happening in housing right now. Over the last several years, there was pretty clear consensus that, you know, the United States is suffering from a housing shortage. And I still think that’s the case at a national level, but there have been some headlines focusing on some of those Sunbelt markets, you know, Florida, Texas in particular, where inventory is piling up and it’s resulting in price cuts. And so, you know, they’re taking that and saying, well, there’s no more housing shortage. And I think it’s important to make the distinction between short run dynamics and long run dynamics. In the short run, there’s a lot of factors that can contribute to you know a pile up in inventory. In the case of Florida and Texas, you know, you had a lot of building, these are builder friendly markets over the pandemic. That building was in response to quite a bit of net in migration into these places, right? There’s a lot of growth and then when interest rates went up, very, very quickly in 2022. You saw pullback in demand. There was still all that supply coming to the market from builders actively building. And you know, it contributed to perhaps a glut in some markets of inventory. But I think when you zoom out and you really look at, you know, how many homes we’ve been building relative to new household formation, we’re still in this, I would still categorize us as in a housing shortage.
[David] Yeah, when you look at especially in Texas, it seemed like do you guys look at multifamily? Because we are overbuilt,
[Odeta] We do, yes.
[David] Pathetically overbuilt. Anyone like was anyone looking at how many permits were out on multifamily? It just yeah, I’d love to get your perspective on multifamily housing, particularly the rental apartments.
[Odeta] Well, it’s really interesting you mentioned that because we just came out with some research to show that, you know, yes, there was a lot of a lot of building happening in the Sunbelt, but we’re starting to see that that apartment glut is starting to fade. We’re seeing apartment absorption is exceeding new deliveries in some in some heavily supplied Sunbelt markets. So while we might see some soft rent growth this year, eventually recovering rents could put upward pressure or we could see some upward pressure on rents in in 2028 because you know, once builders understood that they had built quite a bit in these markets and rents were about to come down, they pulled back on permits. And so now the market’s sort of readjusting. And so we are seeing more absorption even in those heavily supplied multifamily Sunbelt markets.
[David] Yeah, I was recalling in a recent interview with the president of the National Housing Home Builders Association and listening to him lament about the cost of a regulatory cost in certain communities. San Diego, if I call, saying one of the worst as far as the amount of regulatory costs going into the price of a new home. Do you go you have Mark a look at that and can you give us any insights which markets are the worst and which ones are they’re starting to trend better?
[Odeta] Yeah, the National Association of Home Builders has a great report. I think as you mentioned, it was just updated recently showing just how costly burdensome regulations can be in the home building process. And you know, the last time I looked at this data, it was your typical offenders, your sort of your coastal markets that tend to be more expensive. New York, Boston, you know, certainly California, where it’s costlier and there’s more regulations and more hoops to jump through. And it was the regulatory burden was less so in places like Texas where, you know, they say build baby build, right? That’s sort of what’s happening in Texas. So the regulatory hurdles are less in Texas.
[David] Which contributed to I think to the oversupply and why we’re where we are,
[Odeta] That’s right.
[David] where we’re at. But you look at the inflow, you talked about that into still into Texas, Florida, some of the popular states. how is that I mean, is that abating the problem at all? Is that can seems like a great outflow out of Texas? I mean out of California into Texas specifically and Florida? Is that continuing?
[Odeta] That’s it. A very interesting question. We’re still seeing Florida and Texas as relative winners when we think about population growth. North Carolina is also in that grouping. Idaho is included in these states that are continuing to see population growth. but it’s not as strong as it was at its peak and so that slowdown in you know domestic net in migration and certainly the slowdown recently in international immigration into these markets, I think that’s sort of contributing to the slowdown in demand as well for homes in these markets.
[David] Yeah. That totally makes sense. there’s so much data. I when I’m talking to my clients, I’m saying use business intelligence tools. Do the research on which markets are giving you the greatest opportunity. I’d love to get insights or your opinion on what lenders can do better to look at markets and identify markets.
[Odeta] So I’m all about the data, and so I always think go back to real estate is local, so go back to your local market data. I’m very lucky here at First American that I have access to the First American data and analytics data sets, which you know cover basically every parcel in the United States. So I get a lot of insight into sales activity, mortgage activity, refi, all of that, and can you know pick up very early on when market activity is starting to pick up in in certain parts of the country. But I think it’s equally important to understand leading and lagging indicators in the market, right? There are the purchase applications, obviously, a leading indicator of sales activity in the market. So that’s something I watch very closely. And then outside of housing, I think it’s always important to remember all of the macro factors that play into the success of the housing market. So what’s happening with the labor market data and what that means for housing, what’s happening to inflation and what that means for the Fed and therefore housing. And so those are some sort of the the indicators that I like to pay attention to.
[David] Yeah, which really gets me into my next question is how does broader c economic data affect home prices, sales, and mortgage rates? I think more is the economic data well, yeah, economic data is gonna force affect mortgage rates to a degree, but I’m really interested in where do you weight all those various data points when looking at and making your forecasts?
[Odeta] Well, the labor market I think is one part of the broader economy that is not as talked about when it comes to housing. And it has an indirect, you know, the health of the labor market has a direct impact on the housing market or what people think is direct through mortgage rates. Because when the labor market data comes in weaker than expected, you know, that has implications for what the Fed will and won’t do. But I think there’s something that that we don’t talk about enough, which is in this low hire, low fire labor market environment that we find ourselves in, this sort of frozen labor market where firms are not actively hiring, but they’re also not actively letting go of their workers. They’re sort of hoarding their labor because they worked so hard to get these employees over the pandemic when it was very competitive. There’s a lot of macroeconomic uncertainty, so they’re not really willing to part with their workers, but they’re also not really willing to hire. This sort of frozen labor market has implications for the housing market because one of the biggest reasons that people move is for a job change. And if we’re seeing very limited job changes in the in the labor market, then that means we’re likely to see very limited turnover in the housing market as well. And I think that’s exact that’s exactly what we’re seeing. Not to mention the confidence that comes from a strong labor market. You know, when we know that the labor market’s hot and you can find a better, higher paying job, there’s a higher likelihood that that you’ll move or you’ll form a new household. And so I think that the labor market is very important to watch when considering the outlook for the housing market. The good news there is we’re, you know, we’re not seeing, we didn’t get a great jobs report recently, but the labor market’s been steady, we haven’t seen a lot of the cooling that we saw last year. It’s been a little bit steadier. And I think that that’s at least cautiously good news for the housing market.
[David] I love the Joltz report. That’s one of my favorite indicators. Which is I mean, what are those is that a good one to be paying attention to? I kinda ever since I discovered that one, I’ve been locked onto that. But I’m not what other ones do you look at or your thoughts on the Joltz report?
[Odeta] I very much track the Joltz report. This low hire, low fire that I mentioned, that’s where I’m pulling that data from. And I looked at the hiring rate recently. It’s at the lowest level since 2013, the hiring rate in our economy. 2013 is a time period when the unemployment rate was 7%. So, you know, we’re not doing a ton of hiring in today’s labor market. So I really like that the Jolt’s report. The other measure to look at in Joltz is the quits rate. right now the quits rate is quite low, which
[David] That is an acronym for what again if you give that to us?
[Odeta] so quitting rate. the people quitting their jobs. Yes. Yeah.
[David] The quitting green. I misunderstood you. I thought that was okay, the quitty.
[Odeta] And that’s a really important one because when people are quitting their jobs in high numbers, chances are we’ll start to see upward pressure on wage growth because people are only quitting their jobs if they think there’s a good chance that they’ll find a better, higher paying job. When the quits rate is really low, that means you know we’re feeling a little bit concerned about our prospects of finding new work. Quits rate is very, very low right now. But what that tells me is that there’s not going to be a ton of upward pressure on wage growth, which is actually good news for the Fed, because the Fed’s tracking inflation very, very closely. And one of the biggest sources of upward pressure on inflation, you know, sort of post pandemic, was services inflation, which is very labor intensive. So I think when we see the quits rate remain low, that means we don’t expect a ton of upward pressure on wage growth, which means the Fed can feel a little bit of comfort there that we won’t be seeing a ton of upward pressure in services inflation.
[David] Yeah, I’m gonna start paying attention to the quit.
[Odeta] Quits rate, yes.
[David] Great. That’s interesting. That’s another one I hadn’t really thought about, but because it wouldn’t give you any case on confidence and about the overall market. You know, I love demographic data. I love looking at trends everywhere since the you know, the great boom ahead, which kind of made me we Harry S. Dent first turned me on that decades ago and started looking at where the demographic trends are shaping all aspects of the economy, but as it comes to demographic data shaping housing supply and demand over the years, what do you see?
[Odeta] It’s the demographics are very interesting because we’re at this period where millennials, which are our largest living generation, they are still well within their prime home buying years. And there was this narrative, if you recall, maybe a decade ago, when everyone was saying millennials are never gonna buy homes, right? This is our forever renter avocado toast generation. You know, they’re spending all their money on avocado toasts and they’re not gonna buy homes. And I think the reason people were saying that is because they were looking at the homeownership rate for this generation and seeing that at the same age it was lagging behind their generational predecessors, the baby boomers and the Gen Xers. And that’s very much true. We can see that in the data. You know, the millennial homeownership rate at the same age of 30 is six percentage points behind the Gen Xers at this when they were 30. But the trick here is that millennials are different from their predecessors. They’re staying in school longer and they’re pushing key lifestyle decisions that are highly correlated with buying a home, like getting married and having kids. They’re pushing those decisions into their early to mid-30s. So when we look at the 42-year-old millennial, their homeownership rate is essentially the same as the 42-year-old Gen Xer. So I think this is evidence of the fact that millennials are buying homes, they’re just doing it later in life than than Gen X and baby boomers. And again, this is a very large generation. So I think we still have some demographic demand from the millennials. They’re still sort of on the sidelines, waiting for affordability to improve, waiting for inventory to improve. But I think the market has a tailwind from this generation. Now, the other generation is the baby boomers.
[David] Yeah, yeah, the baby boomers. I mean those of us that in the in that group, it’s just amazing. When are we gonna start, you know, moving out of the homes and downsizing? I think there’s been a real lag in baby boomers giving up the bigger houses to put those homes on the market to move into, you know, more retirement type facilities.
[Odeta] Yeah. That’s they are baby boomers are aging in place compared to previous generations and that’s a function of a number of different things, including they simply are able to, right? They’re able to continue living in their homes, and so they’re choosing to do so.
[David] Living longer, working longer. Yeah.
[Odeta] Living longer, working longer, and they can have a lot of the things that they need ordered right to their home, right? So there’s been advancements that have allowed them to live in their homes as well. That said, we still do expect baby boomers to age out of homeownership over time. We know that the population of 80-plus-year-old is expected to about double between now and 2040. So there’s this narrative of the silver tsunami. I don’t like that because demographic trends move very slowly. So it’s not like a tsunami, it’s like a glacier, right? Like the silver glacier. And we do expect those homes.
[David] That would be a significant one. That’s a large population moving through that transition. And I think that that could be really profound and significant. How does it how would someone looking at the market say, okay, as we look at the where there’s more gray-haired people living, I mean, and when they start moving on, are there opportunities that are emerging out of the demographic data that have been surprising you?
[Odeta] I think that we’re we are starting to see, you know, the baby boomers move out, add a little bit more supply to the market. I anticipate that will accelerate, certainly over the next decade or so.
[David] Are you seeing more geographic markets that that’s more prevalent in or that’s happening?
[Odeta] The NHB has done some research on this because to your point, you know, it’s not going to happen uniformly across the country. And then the other question is will there be demand to absorb all of that new inventory? So the intersection of a market that will truly benefit from this is a market that has, you know, a high number of baby boomers aging out, but then enough new households coming in to absorb that. and and you know, we know that Florida has a somewhat of a higher concentration of baby boomers. We’ll see more homes enter the market there. And then it’s a question of whether we’ll still be seeing people move in and buying those homes.
[David] Yeah. Is there anything are we at a tipping point where we could see that that the supply is going to over outstrip the demand
[Odeta] There’s some concern there in particular markets. I wouldn’t necessarily expect that to be the case nationwide. But I do think that there are probably some markets where there’s a high concentration of older people that will be selling their homes and not enough demand to absorb it. And the other thing to keep in mind is that these homes will need some work, right? A lot of these homes are older homes, they will need renew significant renovation to, you know, to be enticing to that next generation of buyers and we know that you know a lot of folks have been bullish on the remodeling sector. I’m certainly one of them and I think one of the reasons for that is this this silver glacier if you will. One of the things that’s been really interesting, and we’ve put out several pieces of research on this, is young adults living with their parents for significantly longer than in the past. And that delays both renting and eventual homeownership. So this is household formation that hasn’t occurred yet. So we’re calling these shadow homeowners. These shadow homeowners are increasingly concentrated among adults in their early 30s. And the way we like to classify them is we look at this population of people who have the jobs, incomes, and family ties that often come before buying a home, but they haven’t, you know, left the nest yet. And so this we’re seeing this as sort of potential shadow demand in the housing market.
[David] I just love what
[Odeta] yeah. Very interesting stuff.
[David] you and Mark are doing. I just applaud you guys for the work, the continued research that you’re doing. You reference your reports, you publish reports, talk a little bit how we can, the industry can access those. So it’s an opportunity for you to sell your data, sister.
[Odeta] Well, thank you. Firstam.com/economics is where we publish all of our research. And you can subscribe to that to get all of the research sent directly to your inbox. And then our our chief economist, you mentioned Mark a couple times. He’s the best in the business. He’s we co-host a very quick bi-weekly podcast called Reconomy, where we just talk about whatever’s happening in the housing market that week, a lot of our research.
[David] I love the dynamic between the two of you. There’s a good yin and yang between the two of you. You guys obviously respect each other and get along really well. You have a wonderful podcast. I would we’ll put a link to that listeners in our show notes. I strongly recommend you listen to it. It’s one of the ones I go back and listen to regularly because I just love the way you guys seem to think you’re in step with the industry, other economists, but there’s some things that you bring out in a way that you discussed it on your podcast that are just really thought provoking and excellent.
[Odeta] Thank you so much. Yeah, we like to try and make things as accessible as possible. And you know, what you’re hear what you’ll hear in that podcast is a lot of 80s references for Mark and 90s
[David] Yes.
[Odeta] and 2000s reference it’s it’s a bit of generational warfare on these podcasts.
[David] Yeah.
[Odeta] And he usually wins, but I’m I’m trying my best here.
[David] Yeah, yeah. thank you so much for being here. I really appreciate it. Good luck on your PhD. May you finish that
[Odeta] Thank you.
[David] up and wrap that up and have that. So next time we’re back to you, we can talk to you, Dr. Kushi here.
[Odeta] Thank you so much. It’s a pleasure being here. Thank you for having me.
[David] You bet. It’s a joy. Thank you.
Important Links:
Odeta Kushi is the deputy chief economist at First American Financial Corporation, a premier provider of title, settlement, and risk solutions for real estate transactions and the leader in the digital transformation of its industry. In this role, Kushi leads the development of analysis, commentary, and forecasts on trends in the real estate and mortgage markets. Kushi’s research focuses on economic trends impacting real estate, including demographic shifts, affordability, and housing supply, as well as monitoring and analyzing quarterly surveys and economic data related to the housing industry.
Highly regarded as an industry expert, Kushi regularly delivers keynote presentations at national and international events. Kushi is also a frequent guest on top national and international television and radio programs, including Marketplace, CNBC, Yahoo! Finance, and Reuters TV, offering insights and perspectives on the forces shaping the housing industry. Her research has been published in leading business and industry trade publications, including The Wall Street Journal, U.S. News & World Report, Business Insider, HousingWire, and Inman News.
She publishes research and analysis on First American’s Economic Center and co-hosts The REconomy Podcast™ with Chief Economist Mark Fleming. In recognition of her contributions to the industry, Kushi was named a GlobeSt. 2024 Woman of Influence, a HousingWire 2023 Woman of Influence, and a 2023 leading woman in homebuilding by Builder & Developer magazine, among other honors.
Kushi graduated from Northeastern University with a master’s degree in economics, specializing in applied econometric methods, and she earned a bachelor’s degree in economics from St. John Fisher College, graduating Summa Cum Laude. She is completing her Ph.D. in economics from George Mason University. Originally from Albania, she now lives and works in Washington, D.C.