Copyright Fast Company
“Home prices we think would be lower if there are more sellers, obviously. But there’s good reason there aren’t more sellers, right? So many people got such low interest rate mortgages that at a time when the demand would naturally fall from rising interest rates, rising interest rates also caused the [new listings] supply to fall.” “I think the overall message is that we’re on the lookout for something that changes the velocity of this whole thing and [we] can’t find it. We spent a lot of time on the Airbnb guys. I thought those guys might be the weak hands, because it’s like, who has to sell? And we have a pretty good model on how supply affects home prices. But even when you just radically change supply, it moves home prices [down] in single digits… we think you’re looking at a decade of difficulties for people to get into buying a home.” “That’s why we think we’re talking about really a next decade of a lot of demand for rental, because it’s the choice of, ‘how do I get the size, how do I get the features that come with that home, like the school location’? And that’s how long we think it’s going to take for what we would see as sort of long-term depth of some of the standards for affordability to be recaptured, because we think it has to come from income growth. And that’s staring in the face of all this business and AI, which [some] people are arguing might be driving [real incomes] down [in the future].” “We get consulted by governors, by senior people in the federal government. Everyone kind of wants the playbook: ‘Tell me what to do and I’ll fix it.’ And we tell them [to] make more subprime mortgages. And they tend to fold up their notebooks and head on… People are frustrated, right? People are super frustrated because you have this expectation that: ‘I did all these things, and now I should be able to buy a house, and I can’t.’ You want to blame somebody, right? And if you see me [Amherst] buying it, well, you’re like, well, it must be his fault, so I get it—I think it [that thinking] is dangerous.” “They [homebuilders] don’t have demand [from that lower credit score homebuyers like they used to], and they don’t have demand because their customers don’t have financing. And they [some sidelined buyers] don’t have financing because the mortgage market doesn’t take credit risk like [it used to]… So what we [Amherst] provide is a solution today.” “I sat with Chairman Bernanke, I sat with Yellen, and I begged them to try to get in the way of Dodd-Frank, because I knew what was going to happen, and we lost that. I said, ‘Okay, well, we’re going to get these families in these houses some way, and we have a lease and we have financing, we can operate the real estate. So let’s get the people in the homes and get their kids in the schools, and then let all the wizards figure out, like, what’s the better solution?’ Because today, there isn’t one until someone with a 625 FICO can go borrow money at about the same rate that you and I can borrow at, there isn’t a better solution. And so that’s, you know, if you want to blame somebody, it’s the knee jerk, explainable, but too long in place reaction to the subprime mortgage crisis.” “The common theme amongst the markets that are retracing? So Austin, you mentioned Jacksonville, which is not quite as bad Western Florida—the Tampa Bay area, Cape Coral has been really, been really tough. I would say the common theme is those are places [where] it’s pretty easy to build, and as home prices moved above, kind of their construction costs, they naturally kind of tend back down. And so those places, the market did what the market is supposed to do, right? Prices were rising and rising quickly, and homebuilders came in and they built a lot of supply, even in a place like Dallas. So we [Amherst] tend to spend [time looking at local data]—because we’re like you [ResiClub], we’re in the housing market [data] all day, every day. So we don’t really do that much work on like the ‘U.S. housing market’. We do work on much smaller micro footprints. But if you take a place like Dallas—Dallas overall [in aggregate], seems like it’s okay, healthy, not great, [but] not weak. But if you bifurcate the homes by vintage year, and look at their price movements, then Dallas looks a lot like Cape Coral [in certain areas]. The new home construction market [areas] in Dallas looks a lot like Cape Coral. So builders came out—they did, you know, getting land permitted, getting lots of them platted, getting horizontals in all takes time. So there’s always a lag between when the housing market really wants to buy the homes and when builders can deliver them. And that oftentimes [it] creates too much supply [at once] trying to squeeze through a channel that [also has] waning demand.” “We really think the answer to that question comes in this investor adoption question, right? Will state pension funds allocate and scale to single-family rental?” “The time that we’ve had to operate the [single-family] real estate has also made that core investor group aware that you can collect rents [from single-family rentals], you can provide good service, you can operate this as a piece of real estate. That track record is helpful, but the next wave of investing won’t come from the same sources of capital [private equity]. It’ll come from those core investors [like pension funds] finally saying, ‘You know what, a 5% or 6% cash on cash return that outpaces inflation by 50 plus percent every year has a spot in my portfolio and scale.’”
