A mortgage with a sub-3% rate feels like the proverbial golden handcuffs these days. Join Chief U.S. Economist Lara Rhame and Executive Director Andrew Korz as they examine what investors need to know about the latest trends driving the housing market.
They discuss the structural and cyclical issues affecting housing supply, the impact of potential Fed policy changes on financing and where sectors like multifamily may offer opportunities for investors and allocators.
Transcript excerpt
[00:00:06] Lara Rhame: Welcome back to FireSide, a podcast from FS Investments. I’m Lara Rhame, Chief U.S. Economist here at FS. And today we are diving into a hot topic, the housing market. I’m joined by Andrew Korz, an Executive Director on our research team and my partner in macro and podcasting.
And he also has special insights into this because he just bought a house. You haven’t closed yet, right?
[00:00:31] Andrew Korz: I have not closed. So, please, don’t jinx it.
[00:00:33] Lara Rhame: All right. Oh, we’re going to, we’re going to talk about it. Housing is this fascinating piece of the economy that sits at the center of inflation, consumer sentiment, Fed policy.
We need to talk about renting, you know, because apartment and apartment construction availability is a huge piece of this story. So we want to dive into all of this, but I can’t think of a topic that is just coming up all of the time with advisors. You know, their clients…their children can’t buy homes.
Even if you have the money, you feel like you can’t buy one. So, Andrew, you’re under contract, haven’t closed yet. Without getting too personal, what was your mortgage rate?
[00:01:20] Andrew Korz: So, I did just get some good news yesterday. My initial mortgage rate that I locked in about a month ago was about 7.1%.
[00:01:28] Lara Rhame: And time stamp, this is July 12.
[00:01:30] Andrew Korz: This is July 12.
[00:01:30] Lara Rhame: So, yeah.
[00:01:31] Andrew Korz: I got a call yesterday that I was able to exercise a float-down option. So my new mortgage rate is 6.625%, so I’m happy about that.
[00:01:40] Lara Rhame: So it’s great, but it’s still well above the sub-3% bragging rights.
[00:01:46] Andrew Korz: Yeah.
[00:01:46] Lara Rhame: People now have tattoos with their mortgage rates.
[00:01:49] Andrew Korz: I think they call them the golden handcuffs.
[00:01:51] Lara Rhame: Yes, the golden handcuffs, right. And it sounds amazing. Okay. So I want to emphasize to everybody that there are multiple prongs to the problem of the housing market today. And one of them is secular, like a structural problem. The other one is cyclical.
So Andrew, I’m going to ask you this question twice. How did we get here? Structural problem.
[00:02:22] Andrew Korz: Yeah. So this is such a unique market we’re sitting in right now, because there seems to be a lot of things happening that don’t necessarily, you wouldn’t think go together, right. You’ve got right poor affordability, and you’ve got low transaction activity, but you’ve still got high prices, right.
