Will home prices continue to rise at this furious pace, or will they plummet back to earth like they did during the housing meltdown? Or maybe something in the middle? In this episode, we’ll hear from an expert on the housing market, the impact of the pandemic on buyer demand, home prices and migration patterns, and what the data shows us about the future.

Dr. Frank Nothaft is the chief economist for CoreLogic and leads an economics team that’s responsible for analysis, commentary and forecasting for the global real estate, insurance, and mortgage markets. The Southern California-based company tracks, gathers, and analyzes massive amounts of property, financial, and consumer data and provides reports for the real estate and mortgage industry along with customized business intelligence reports for clients.

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Transcript:

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Speaker 1: You're listening to the Real Wealth Show with Kathy Fettke, the real estate investors' resource.

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Kathy: Will home prices continue to rise at this furious pace, or do we have a housing crash in our future or just a slowdown in price growth? Our guest today has got a lot of information on that so I'm excited to share it with you. I'm Kathy Fettke and welcome to the Real Wealth Show. Frank Nothaft holds the position of executive, chief economist for CoreLogic. He leads the office of the chief economist and is responsible for analysis, commentary, and forecasting trends in global real estate insurance and mortgage markets. He's here with us today on the Real Wealth Show. Frank, welcome to the Real Wealth Show.

I've been really looking forward to this interview. I can't believe that I almost had to do it out of a salon when we had a rolling blackout, [laughs] but here we are. Thanks for your patience.

Frank: Oh, absolutely. Thanks for having me today, Kathy.

Kathy: So honored really, truly so honored to have you here. A lot of people are extremely confused about what's going on and even more confused about what they should do. Should they buy? Should they sell? Should they buy investment property, apartments, single-family? Our listeners are mainly investors in one to four-unit buildings nationwide. Are we looking at a continuation of what we've been seeing with home prices going up with no end in sight? What's happening?

Frank: Kathy, this summer has been hot. It's not just the temperatures, it's the housing market as well. As you know, when I look around the country, there are a number of markets where, of course, they have triple-digit temperatures, but they got double-digit home price growth and double-digit rent growth. The market is just exceptional right now. Of course, partly that's fueled by the very low [00:02:00] record low level of mortgage rates that's really driving demand. It's also fueled by a shortage of inventory for sale on the marketplace. Between both those forces, one driving up demand one curtailing supply, we've got just a crazy amount of home price growth.

Now, it's not just home price growth. As I mentioned, we see some real pickup in rents, rents on single-family homes. I think that's an artifact of this change in need for space as a result of the pandemic because what we've seen is that so many families, they're looking for more space inside their home, and also more space outside their home. The corollary of this pandemic is that it's severed the need of many workers to be co-located or located near where their employer is, they can work remotely. That's enabled many of them to pick up and maybe move a little further out, or move a lot further out, and be able to afford more space, more house, more shelter to either buy or to rent.

Kathy: They don't have to try to find something in a major city or just on the outskirts of a major city where everybody else wants to live and it's been difficult to get in and very expensive, they can go anywhere. That's amazing. We've understood this concept at Real Wealth for 10 years, we've been a remote company, and we wanted our employees to be happy and live anywhere they want and be able to own property. We understand the power of that. What I found is that I was more effective, because as a CEO, how many times do people come into your office and want something?

If I wanted to communicate even if the person was in the office next door, I'd send an email or a text. I wasn't necessarily going in there. We [00:04:00] discovered that without the interruptions and with more focus, we were far more productive working remotely. Do you think more companies have learned that and will continue to stay remote?

Frank: I think some definitely have and that's really the million-dollar question, how many of the workers who had previously been working in an office environment, working with their employer, how many now will be working remotely, either remotely full time, or some type of hybrid model where maybe they're working remotely, whatever, two days, three days, maybe four days a week, or something like that? I'll tell you a really interesting study that the McKinsey Global Institute put out earlier this year. They surveyed a whole bunch of occupations in different industries, actually in different countries too.

What they concluded was that here in the US, their estimate was that as many as 20 to 25% of US workers who previously had worked in an office environment, could longer-term work remotely, three to five days a week.

Wow, that's going to be a big sea change if that does come into play. Again, that's the big question; how many of those jobs that have moved remotely over the last year, how many will remain remotely? How many might switch to a hybrid model? Of course, how many will be back in the office five days a week? That's the big question.

I do think we're going to see that there'll be some jobs that do remain remote permanent and/or follow a hybrid model, allowing workers to work remotely, maybe three days a week, maybe more.

Kathy: What I've been telling people and again, it's such an honor to have you on the show, because, my dawg, data is so powerful. [00:06:00] I imagine you were already seeing these trends and these demographic shifts of people in high-priced markets moving to more affordable markets where they could have bigger homes and a better lifestyle, that was already happening. Would you say that the pandemic has sped that up or is it just on track with what's already been going on?

Frank: Oh, that's such a great question, Kathy. Absolutely, it's accelerated these trends. We have seen these shifts more gradual prior to the pandemic but the pandemic really changes the rules of the game. I'll give you a really good example. For example, what we saw is that in a lot of the really big cities, which tend to be densely populated, high-cost markets, we've seen some movement out of them over the years for people who are looking to buy just for affordability. That really accelerated during the course of the pandemic, accelerated in places like Manhattan, but also in the Los Angeles Metro area.

Downtown Los Angeles, you do have some high rises, you got greater population density, consumers revealed a preference to move out of buildings and properties like that, and move further out. With the ability to work remotely, someone who had been working for an office in downtown LA, they could pick up a move to Riverside, San Bernardino, and maybe further out. There, the cost of shelter is so much lower than it is in downtown LA. That's really provided that opportunity for many families that just pick up and move further out, obtain more space, more shelter, but also shelter that's at a lower cost.

Now, they didn't just stop at Riverside and San Bernardino. If you believe you can work remotely [00:08:00] longer-term permanently, maybe pick up and move to Las Vegas, or move to Phoenix or Tucson or maybe up to Boise. Boise has been booming over