2M homeowners aren’t paying their mortgage⁈ Get the latest data and insights from housing expert Ivy Zelman


Land grabs, labor costs, supply chain troubles, eviction moratoriums...there is a lot to keep track of in the housing industry right now. No one is more up-to-date than Ivy Zelman, CEO and Co-Founder of the foremost housing research firm in the nation, Zelman & Associates. Watch the latest webcast for Ivy's take on the current state of the single-family, single-family rental, and multifamily markets and her predictions for the future.


In this Walker Webcast, Willy interviews Ivy Zelman, CEO and Co Founder of Zelman Associates. Willy begins the episode by asking Ivy to discuss her favorite aspects of working in the housing sector. Within the Zelman ecosystem, they are seeing the most opportunity in the improvement market. The combination of inflation and limited supply of homes on the market have driven up costs considerably. Ivy reveals that prices reflect specific areas, markets and lifestyles. Since January, the new home market has decelerated 23% on a seasonal basis.

The new home market reflects a definite affordability challenge for the average American. We are already beginning to see builders reckoning with the moderation of the market, and Ivy predicts this will only get worse. She explains how builders are currently reacting to these trends and gives insights into the challenges that come alongside the profession. The current land grab could likely lead to impairments down the road. Additionally, the construction labor shortage is another great challenge for builders today. Sourcing of materials is challenging all across the board right now, especially for those sourcing from Asia. This is also deterring people from doing any upgrades in their homes for the time being. 

Then, they discuss the BFR (Build for Rent) and SFR (Single Family Rental) markets. Ivy stresses the building for rent has the same challenges as building for sale, including land and labor issues. Theoretically, however, having a business model involving a cash flowing asset is more attractive through cycles than the traditional home buying space. As real estate is very much a local business, such claims are very dependent on area and markets. The percentage of single-family home renters is up considerably, Zelman’s research proving to be at near-record levels. 

Currently, there are about 2 million single-family mortgages which remain in eviction forbearance. When forbearance was first announced, there was significant concern of moral hazard, and now the number of those struggling has reduced by at least half. The good news is that those who can’t meet their monthly payments have a good standing in a housing market starving for inventory. Assuming the forbearance expires in September, it will still take some time to get the plumbing running again to make foreclosures a possibility. For this reason, Ivy doesn’t predict a flood of foreclosures appearing on the market any time soon. 

Willy and Ivy then pivoted to a discussion on technology. In prior generations, technology was more heavily invested in helping business owners with their services. In this cycle, technology has pivoted towards helping the consumer. Companies such as Zillow are creating what is referred to as the flywheel, where they utilize eye buying. Looking at the brokerage industry prior to Zillow, builders, brokers and single-family operators have been forced to up their game. Their benefits, she predicts, will continue to drive secular growth for those service-oriented companies. Eliminating consumer friction is certainly another advantage they will continue to reap the benefits from.   

Ivy transitions to the troubles in increase the stock of affordable housing. There isn't a governor in the country right now who isn’t focused on more affordable and manufactured housing communities. The challenge here lies with the fact that people don’t want these communities in their neighborhoods. Local zoning committees face huge issues in trying to get these approved. While Fanny has done a lot to try to provide backing, local jurisdictions simply won’t approve the lots. The federal government has very little say in local governments, so Ivy sees no resolution in sight for the issue. 

As the episode draws to a close, they discuss the projected rate increases and the bond buying program. So much of the country right now is dependent on these low rates. Roughly 60% of those in the country with a mortgage have a rate below 4%. Ivy worries that if rates do in fact rise, lots of Americans will suffer tremendously. 


Learn more about Zelman Associations
Connect with Ivy Zelman on LinkedIn and Twitter.  

Key Ideas:

05:31 - Willy introduces the episode and the guests. 
06:15 - Ivy reveals what she likes most about the housing sector. 
08:25 - Ivy provides analysis on current market prices and predictions for the future. 
13:25 - Affordability issue faced by home buyers. 
15:30 - How are homebuilders reacting to the current market? 
17:55 - How are builders dealing with lumber cost increases and labor shortfalls? 
21:55 - Are these inflationary measures here to stay?
27:25 - Is it more profitable to build for sale or build for rent? 
31:20 - What does the influx of single family home renters reveal? 
36:15 - Where is the current mortgage forbearance headed? 
42:30 - Where is the best place to invest right now? 
51:05 - Moves toward affordable manufactured housing communities. 
57:00 - Closing words. 

Webcast Transcript:

Willy Walker: Thanks Susan and good morning everyone and welcome to another Walker Webcast. It's a glorious morning in Denver, and I hope everyone is having a great day.  I did the last Walker Webcast from San Diego, California where I was attending the National Multifamily Housing Conference Annual Meeting.  As I mentioned, from San Diego, NMHC was allowed to have 2,500 people at the conference and there were 2,500 people in San Diego at the Conference.  I traveled back to our Bethesda headquarters, this week, and both of my flights, both to and from DC were packed, and we had a good number of Walker & Dunlop employees back in the office when I was back there just yesterday. It's really great to see the world coming back to get back online. 

Before I get into my conversation with Ivy, there was some significant news this morning. The Supreme Court ruled on its case that it heard in early December on a number of issues related to the GSEs. The first is that the shareholder lawsuits have been dismissed and as a result of that many of you may have seen that Fannie and Freddie stocks are down precipitously this morning. Shouldn't surprise anybody that with the shareholder lawsuits tossed out the chance that Fannie and Freddie get out of conservatorship anytime soon, and that the equity of Fannie and Freddie is worth something, has just gone down significantly. Last I checked; they were down about 30%.  

The other thing that the Supreme Court ruled on was that it is unconstitutional for the President of the United States not to be able to pick his or her FHFA Director who is the Director of the regulator of Fannie and Freddie, so we will likely see a change at FHFA imminently and that will bring about a couple things. First Dr. Mark Calabria, who will leave FHFA did a lot to raise additional capital at Fannie and Freddie rather than have them continue to send dividend payments across to the U.S. Treasury.  Building capital reserves at Fannie and Freddie is not only prudent but very helpful in getting them both better capitalized but also providing the federal government with options about what to do with Fannie and Freddie.  The second thing is that Dr. Calabria was probably one of the most aggressive regulators we've ever seen at a regulatory agency, not just FHFA but the SEC or any other regulator over the private sector. While I give Dr. Calabria and the FHFA great credit for raising capital standards at Fannie and Freddie, they also were in the day-to-day operations of Fannie and Freddie to the degree that we've likely never seen before from a regulator and that had significant impact on not only the operations of Fannie and Freddie but also the morale at Fannie and Freddie.  And we saw some significant exits from the agencies over the past year due to both comments and actions by FHFA, and so I would just say that, as we get a new interim and permanent director at FHFA it is our expectation that the morale and overall operations of Fannie and Freddie can run more smoothly and that will be net beneficial to not only us but to the overall market as it relates to the flow of capital into the single family, as well as the multifamily space.  

The final thing that I would mention after this ruling is with a ruling on the FHFA director, as well as the dismissal of the shareholder lawsuits, the Biden administration now has the opportunity to chart a course for U.S housing policy and to explicitly say to the American people and American taxpayers, who bear the risk behind the loans that Fannie and Freddie are guaranteeing, what Fannie and Freddie should do going forward. And whether that is as part of the federal government, whether that is as utilities, or whether that is as private corporations, now is the opportunity for the new administration, in concert with Congress, to focus on the future of the GSEs and to lay out of course for what they will do and how they will play in the markets.  But we view today's ruling, as it relates to FHFA to be very positive for the operations of Fannie and Freddie going forward and hopefully, we will get from the administration, a very clear policy decision as it relates to housing. 

Finally, I’m going to dive in with Ivy a lot on inflation, rates, overall markets, and I would just say, before turning to Ivy, that we have seen a very, very active market, both on the investment sales side as well as on the debt side.  The 10-year being in the sort of 140 to 150 range and spreads being as tight as they are, we are seeing a lot of capital deployment across the market and with rates, where they are, we're also seeing investors both step in, buy assets, and also refinance assets.  

So, let me turn to my guest today. Joining me today on the webcast is Ivy Zelman CEO and co-founder of Zelman & Associates.  Ivy will share her insights into trends impacting homebuilding, home sales, the multifamily and built-for-rent markets, supply chains, inflation rates, the eviction moratorium, forbearance, and much, much more.  I think Ivy is about as smart on the housing markets as anyone you can find and that's why I’m so excited that Zelman & Associates is becoming part of Walker & Dunlop as soon as we get that transaction approved by the regulators.  She is a friend, she's a wonderful mom, she's a mother of two new puppies, and it's an honor and a pleasure to have her with me today.  

So, Ivy, let me start here, Zelman’s coverage universe is 44 companies up and down the housing ecosystem: suppliers, builders, operators, renters, mortgage companies’, technology providers, and clearly each one of those names and their respective sectors have varying degrees of recent performance, market opportunity, and forward outlook.  But as you think about the housing sector broadly, what do you like? Supplying to the builders, actually building, selling what's being built, renting it, financing it, or creating new technologies to feed into that market?

Ivy Zelman: Well, first, thank you for having me on again and great to be a part of, or soon to be part of, the Walker & Dunlop organization. We're so excited for the next chapter in our journey at Zelman. It's been 14 years and ready for some new opportunities to grow and to join an excellent first-rate company.  

So, just to think about our universe with 44 companies right now I’d say probably within our ecosystem, where we see more opportunity would be on the home improvement side.  When we think about today's consumer who's had so much wealth creation, since the surge or the continued surge and home prices, coupled with the wealth creation on the stock market.  As you think about the risk that rates will eventually move higher, as seemingly if they do, people might be disincentivized to move, and I can get into more detail when we talk about rates. But I think with that wealth creation from home prices and from the stock market more and more people with their aging homes will be putting money back into their homes.  Not as much on the DIY side. We're a little bit more cautious, because the government has pretty much provided significant stimulus and excess unemployment benefits is really driving the DIY market that we think is going to start to and already has starting to moderate. On the technology and the services side, we are more constructive, more long-term basis on those services which we can get into, but we do have a more cautious view on stocks that are in the home building, pretty much new construction across the board, so happy to move forward and get into it.

Willy Walker: Let's dive. So on the existing home inventory and the existing home sales market the average price year-on-year has risen about 20% on existing homes and it's up to $341,000 and there's only 1.16 million homes on the market today, and so this incredible inflation on home prices and then a restricted amount of supply just seems to continue to push prices up.  Do we get to a level Ivy, where that starts to taper, and we start to see existing home sales either peel back significantly or the average price start to taper down?

Ivy Zelman: First, just to think about the data that you're actually pointing to is the National Association of Realtors (NAR) data and, frankly, we rely more on our own data analysis.  Their median home price is skewed based on the fact that you right now are having a lot more of existing homes that are at the high end of the market, so, for example, in the recent print that we saw this week existing home sales saw in the million plus a 245% increase and those that are priced below $250 actually were down, flat to down modestly. So, when you look at their median home price, we actually don't believe that that's the case that the 20% is not reflective of the true market.  We're forecasting for 2021 that home prices at year end will finish slightly below 11% that's a revised up from 7% but averaging through the year about 17%. We utilize our own broker analysis from a broker survey that we do on a monthly basis so we're serving more than 10% of the existing home sale market and we rely more on public record data as compared to the NAR that utilize the samples through the multiple listing service.

Willy Walker: So, if someone's looking at buying an existing home right now, do you say buy it because prices are just going to continue to go up? Or do you say wait because there's going to be more inventory and some relief on price pressure?

Ivy Zelman: It really depends on their situation you know we have to live somewhere, and I think that you know today when you think about owning a home and recognizing that home prices we think are going to continue to rise into 2022 and even 23.  I just think that the rate of appreciation is definitely going to moderate. Because as you pointed out inventory is at an all-time record low, we look at inventory as a percent of households, so we can look back on a trend line basis, over the course of the last, you know 30+ years and we've never seen inventory for single-family new and existing as a percent of households as low as they are.  But keep in mind that inventory can in fact increase pretty quickly and we can see that come from a result of either people taking advantage that the market is strong enough that they feel comfortable to sell into the market.  We also have homeowners that are in forbearance, those roughly two million people that are currently not paying their mortgage and fortunately they have a lot of equity so maybe they can sell.  But there's inventory that could come to market, so if you don't have a reason, like people are right now Willy, think about it, you and your three boys and Sheila right.  If you need more space, you need more space go buy a house don't wait for the right time, if your lifestyle and the milestones you're hitting in your life it's time.  But if you can be patient there might be some opportunities and it very much goes by what market you're in. Like I wouldn't want to be buying a house in Phoenix right now or Austin.  But if I was in a market, you know in Cincinnati or Cleveland I’d probably buy and so it really is somewhat market specific and lifestyle dependent.

Willy Walker: So, talk about the new supply. The census bureau came out this morning with their print on Supply New Home Sales and Zelman had that number going down by 10% and consensus was that was going to go up by 1%. What did that print look like and what's your sense of the new supply coming on to the market?

Ivy Zelman: Well, new homes, these are homes that have been sold, so, these are you know dwellings, as well as some speculative homes. Overall, it was a disappointing number, but rather than looking at the absolute numbers what we focus on is that really since January, on a seasonally adjusted basis, the new home market is decelerated on a seasonal basis 23%.  So, if you're looking at year-over-year it's misleading because in that you have very easy comparisons. So, we do another, we do a lot of proprietary surveys Willy, we have seven monthly surveys and two quarterly ones.  The proprietary homebuilding survey, which has been aggregating about 15 to 20% of the new home market, we had a year-over-year decline of 26% in May.  And so, that is a combination of builders that had been limiting sales, but also, we are starting to see sales are moderating as it's either a combination of sticker shock as well as affordability because affordability has been challenged. We would expect that is only going to get more negative.  When you look at the new home data that came out it actually showed that new home sales were up 9% year-over-year.  And next month it's going to be negative and it's going to get worse and worse as the year progresses as we're anniversary very tough comparisons.  But we focus on the sequential change and adjusting it for seasonality, rather than just looking at absolute year-over-year growth rates.

Willy Walker: So talk about that affordability issue because there's a lot in the pipeline, home builders are taking down land to build new product and the average mortgage printed by the Mortgage Bankers Association in May was up to $384,000 in the single-family market. Has the market gotten to a point where it's not only pricing people out, but then what's that mean about future deliveries and what home builders, or what price point home builders are building to? Are they building to a price point that is not achievable by the majority of Americans? 

Ivy Zelman: I think that we are definitely seeing affordability challenge. So, when we look at the new home market it's different than existing home market. So, let's first just address the new home market. When we think about sequentially the monthly payment for let's say an entry level buyer is up roughly 10% since the beginning of the year.  And that's the equivalent of mortgage rates going up almost roughly 100 basis points. So, today's buyer is definitely challenged, there's a lot more than just primary buyers in the market. We've got single-family-rental buyers in the market, build-for-rent buyers in the market, fix and flip buyers in the market, we have just people speculating because home prices are so rapid that they want to buy and then maybe flip when the market cools. So with that said, I’d say that the builders are trying to build further out, we continue to reduce the square footage but frankly that they're not going to be able to provide that affordable house price because home prices are up so much. So they're in a bit of a bind and I’ll tell you that's one of the reasons that we've gotten more cautious because I think that you can't continue to push the consumer and push on the gas and continue to raise home prices and double-digit level. In fact, from our survey, for the last call it 12-13 months home prices are up roughly 13%, 14% on annualized basis consecutively and at just some point the consumer, you know, cries uncle and they just can't afford it. So it's going to be a challenging environment and to me it's not a question of if, it's a question of when, and when did the builders start to feel that the market is moderating and we're definitely starting to see it, and I think it's going to get worse.

Willy Walker: Is there anything you're seeing as it relates to home builders either not reacting to what you just said or purchasing land at ridiculous prices that somewhat concerning to you right now?

Ivy Zelman: Yes, yes.  You know I would say that homebuilding is a tough business, you have within their largest asset is land and roughly within their cost of goods sold it's a third land, a third labor, a third materials, everything's inflationary, like hyperinflation.  We do a land development survey on a quarterly basis that aggregates over 15 billion of assets from land sellers.  And lot prices at the end of Q1 were up 24%, we will be coming out with Q2 after the quarter. I would just say that builders are forced to buy land Willy that they don't know, when that gets into their you know theoretical manufacturing machine might be a for a year, two years, three years.  And they have to make assumptions. What will the price be? What will the pace be? And therefore, that's how they come up with their, how they underwrite to get to their required rate of returns. They're going to find, that when they do put that land in to their machines and again somewhat market dependent, because not every markets up 24%, some are up more, some are less.  I think they're going to see that they're not going to hit those returns and that, quite frankly they are chasing, there's a land grab. We look at publicly traded builders, frankly, that are 42% of the new home market.  Interestingly, when I started out in the early 90s, they were roughly 8% so they've done a great job consolidating.  But this is a business where they have to keep buying land, otherwise they won't be able to produce revenue and therefore it's a very tough business model.  Because they're buying land at inflated prices, everything in their business is going up from labor to materials, every cost input, and land and guess what, they're going to keep pushing on the gas to raise prices to the consumer.  And at some point, that is not going to be sustainable. So I think you know Mark Twain, I’ll butcher the quote wrong, but you know, history doesn't repeat itself, but sometimes it sure rhymes and it reminds me back to the days of ‘04 or ’05 when builders were buying land and the private builder just say how can you pay for that land. It is ridiculous what you're paying for that land. They say well if I don’t buy the land, I’m not going to have a job.  So, I don't necessarily say that that is what's happening exactly but there's some similarities of this need to continue to buy land. The land grab which eventually could wind up with having you know profits under pressure and even some impairments down the road.

Willy Walker: So, when you think about those cost inputs land and let's move to the other components. We've all seen the headlines on lumber.  Although lumber is just one of many inputs to building a single-family house. Labor, clearly, we've seen the labor markets have excess capacity but finding labor has become increasingly challenging as we've come out of the pandemic. Inflationary pressures on housing you just mentioned it. How are builders dealing with a.) those cost increases? Do those cost increases concern you and then b.) on the Labor issue, are you seeing big labor shortfalls or are the single-family builders able to get the labor they need to produce the homes that they are building?

Ivy Zelman: Well, I’d say yes, yes and yes, from a lot of the questions, but let me dig in. So, when you think about today's environment, I have a large private builders that say about this time last year Ivy I was outright giddy and now I’m terrified.  And what's happening is you've got a finite level of trade, you know, thanks to e-certification and e-verification on job sites, we had a lot of the illegals leave during the last great bust.  And there's just not enough trades to really meet the demand. So, we're seeing you know large builders, have you known definitely advantage, that those that are the largest, and it really is not just large okay or public.  If you're the largest builder in Cincinnati and your private, you're going to have a better experience in getting your trades to stay with you than if you were the public builder that built half the number of units than the private builder. But large public builders generally, like Lennar and Horton, they would be in many markets the largest builders so they will have an advantage. The trades though, inflation and trades are up anywhere from a market high single digits to up as much as 20% for framers and Phoenix. So, then you look at the actual materials and in our building products survey, which we do monthly, we aggregate north of $100 billion of manufacturers revenues, as well as distributors, retailers and you know we can look across 25-30 categories.  And we're seeing not only robust inflation across the board, with high single to low double digit increases across categories, but you can't even get the categories. The truckers are the biggest problem.  We have a roofing distributor who says there's plenty of shingles in Canada, but we can't get truckers to get it to the US. And then you can't get containers from Asia, because there's not only container shortages, but the cost of containers is up 300 to 400 percent, so it's a nightmare, it really is. For those companies that are trying to get homes closed, whether they're trying to get appliances, insulation, drywall, roofing, you name the component, everything is really, really challenged it's much more challenging if you're sourcing from Asia than if you're sourcing domestically, but it's still very tight here. And manufacturers really don't want to expand. We're seeing some capacity, now announcements that they're going to add capacity, but it takes a long time to get capacity up and running and it's very expensive. So greenfield capacity, do companies really want to invest in capacity. Oh, by the way some capacity, like let's say in roofing, maybe they don't want to invest in a greenfield roofing plant because it's not environmentally you know favorable so they might find technology to do it in a more environmentally safe way.  So, I think there's a lot that really challenged this industry overall and it's, not just for the new construction market because even the home improvement market.  I don't know if you guys have tried to buy anything, but you know think that if you're going to buy, let's say redo your kitchen or redo your bath it's going to be a lot longer than anyone is going to be happy about hearing about. It might even deter people from doing any upgrades in their homes for a while.

Willy Walker: I hear all of that, and you clearly have the data on it, but Chairman Powell went to Congress yesterday and said that these inflationary pressures are transitory.  And he's continued to say that. We did see that the cost of lumber goes from 900 up to 1,700 in February and March and it's now back down; lumbers only up 6% year to date.  And so, we have seen supply coming on and the cost of lumber, that had spiked and almost doubled, come back down to only being up slightly from where it was at the beginning of the year.  Do you think that these inflationary pressures are transitory, or do you think that they're here to stay?

Ivy Zelman: Well, if you look up transitory in the Oxford dictionary, it means not permanent, so how long is transitory you know, is it a quarter, is it three quarters, is it sometime in ‘23.  But lumber obviously has hit every media outlet and has been the focal point, but what we're talking about is you know 25 to 30 categories that I mentioned high single to low double digit with price increases continuing.  A lot of that driven by their input costs so they're getting their raw material costs to force them to raise prices, and then they raise the prices, then consumer gets a price increase, so I think that the Fed is in a very tough bind.  Frankly, I think that they're walking on thin ice, a tightrope, and the minute they taper, which assumingly they will or they've trying to be transparent, and providing some visibility that they could start to taper as it relates to mortgage-backed securities.  And if we see any type of rate increase, I think that we're going to find ourselves, most likely slowing down. Maybe even that inflation we're concerned about we turn back into recession.  And it's really about all the stimulus and incentives that we've been giving people. Disincentivizing people to work and I don't know that this country is going to be okay with volatility. So, I’m definitely concerned, and I don't know how long the inflation will last but right now it's hyperinflation in housing, in my ecosystem. We don't cover anything but housing Willy, so I can't speak to other areas, but I can tell you that housing is clearly bottlenecks, supply problems, and it's a very tough environment, very challenging.

Willy Walker: When I hear you talk about the challenges that the single-family home developers have right now whether it's trying to get land and potentially overpaying for land, the inflationary pressures on their raw materials and goods, trying to find labor and then the entitlement process being a long process once you've taken down the land and then building to a price point that may be high. I say woah, that's some serious headwinds.  But then there was a report from the National Association of Realtors that came out last week that was done by Rosen Consulting Group that said that we're still 5.5 million homes under supplied in the United States. That if you look back to pre-2000 the number of homes built in the United States was some huge number and that since 2000 we have consistently not been supplying enough and that we're still 5.5 million homes under supplied.  Talk me through your take on 5.5 needed homes.

Ivy Zelman: Well, actually the NAR and others are forecasting out there anywhere from 4 to 6 million. Our last publication, we actually believe the deficit is slightly under a million, so we….

Willy Walker: lets pause for a second.  They are at 4 to 5 million, and you all are at a million.

Ivy Zelman: 4 to 6 million are the numbers we've seen and we're, not even a million we're a little bit below million in the latest, last time that we published a number. So, I think that you know, our view is that those numbers are pretty much grossly over exaggerated.

Willy Walker: How can there be such discrepancy, if you will, between I mean... There are plenty of models there. The numbers that they used were that from like the 1960s to turn of the century, there were 1.5 million homes built every year during that period of time, and then subsequent to 2000 we've only been getting about 1.2 million a year, but we also had in there that housing spike and bust that at the peak of it was delivering just over 2 million homes on an annual basis in 2005. So, is it that they've got a lot more obsolescence in their models? Is it that they think that the poll is that much greater than you all do? What's the big difference between those models? Because there's dramatic differences.

Ivy Zelman: Well, I really can't speak to anyone else's specific modeling, but I would just say we're going to be happy to talk about it in more depth, so invite me back for another time and we'll go into more detail.

Willy Walker: Are you publishing on that soon?

Ivy Zelman: I’m definitely working on some stuff right now.

Willy Walker: Okay good, we'll look forward to that when it comes out and we'll look at the disparities between their assumptions and your assumptions.  So, you downgraded a number of homebuilder stocks earlier this month. I think, given a lot of the things that we've talked about here, as far as a lot of these headwinds and building to a demand cycle that may not be there, anything else as it relates to what the cause of those downturn, or what the downgrades was?

Ivy Zelman: Well, I think the only thing I’d add, because I think we covered almost everything, you know, the moderation sales, affordability, land being forced to continue to buy land, and a lot more supply is coming. Community account growth is going to accelerate through the pandemic. Community account was pretty much negative year-over-year because they absorbed so fast more of their number of call it stores that were open, they just couldn't replace them, but now they're ramping.  In fact, the public's, their lot count is up, you know, call it 25% roughly, so we're going to see supply coming. It’s just not yet reflective and number of communities opened today, but really evaluation, when we look at this cycle, the public builder’s evaluation is trading the based on how our analysis, how we look at the analysis for evaluation is in the 95th percentile, so we view them as expensive. So, while we're right now, generally, more on the sidelines, I think the moderation and continue deceleration and that sticker shock and affordability issues, you know, that is going to be the key element of how we view, even if we turn even more cautious. So, we'll have to see how things go, but we're envisioning a pretty challenging second half.

Willy Walker: So, let's turn to BFR|SFR for a moment, because that's another sort of competitive headwind to the homebuilders. Many people saw that Blackstone yesterday purchased Home Partners for $6 billion, after having exited the space in 2018. That's clearly a bullish sign as it relates to the BFR|SFR space.  Would you rather be building for sale or building for rent today?

Ivy Zelman: Well, I think that when you think about this, the cash flow model of being in the rental business that's a pretty attractive business model, to have the ability to have an annuity stream, as opposed to having to rebuild your factory every year. But I do think there's a tremendous amount of capital coming into the space, so really appreciating what market you're in, the competitive landscape, and recognizing that the build-for-rent strategy is going to have the same challenges. They're buying the land from the same land sellers, they're having the same issues with bottlenecks and labor, so I would say that there are challenges there, but theoretically having a business model where you’re having a cash-flowing asset to me is more attractive through cycles, as opposed to just outright, you know, the homebuilding industry which, unfortunately, you have to rebuild that factory. But I think they're going to be challenged and I think there's a lot of institutional capital coming into the space. If you just look at the number of today single-family renters there's roughly 16 million, institutional capital is probably 2%.  You know, you go through into Atlanta it's 12%. You go into Phoenix it's probably high single-digits. So, it really varies by market, and so, I think we have to recognize that real estate is still a local business. So, it's very dependent on where the build-for-rent operators are allocating their capital and acquiring new homes, from builders, right now, which many are doing, especially at the lower price points in the threes, which is why a lot of primary buyers can't buy houses.

Willy Walker: When I think about BFR|SFR versus single-family home development, I think back to the GFC and the fact that that market, the BFR|SFR market didn't even exist, back then. So, there was no if you will optionality there, where there was all this inventory to be able to convert the inventory into for-rent.  How many of the single-family home builders are playing in both markets today where they're building inventory and then making a decision whether it's going to go for sale or for rent?

Ivy Zelman: Well, if I may, respectfully correct you because, in the great financial crisis, there were many builders that were renting out their homes because they had no choice. So, when you actually look at the data, the census bureau actually will break out homes that were sold for rental purposes versus for sale. The numbers were higher in this cycle earlier coming out of it than they are currently. So, and, that being the case was really more of a you know, last resort for many of them. But going to your question about today, you know, I think that builders today, depending on again the market they're in, if we're talking about those in the $300,000 price point, they might be working with a build-for-rent operator or a single-family rental operator and selling 10% of their product sort of on a phase or contractual basis. There's definitely many that are recognizing it's a counter-cyclical opportunity. We have large public companies that are basically creating platforms to partner with institutional capital, whether it be Lennar, Horton, Taylor Morrison, and Toll Brothers. So, there's many that are participating alongside the institutional capital that’s in the 10s and 10s of billions of dollars that have been publicly announced, that have come to the space as they're capitalizing on what they think is a very attractive longer-term opportunity.

Willy Walker: So, I was reading an investor presentation from American Homes 4 Rent and they recently reported occupancy of 97.3% in Q1 and new lease spreads of 10% growth and renewal spreads of 5.1% growth. Is that type of occupancy and leasing growth sustainable in your mind?

Ivy Zelman: Well, American Homes 4 Rent is one of two public companies, Invitation Homes. We actually do a single-family rental survey and what our occupancy levels in our last survey were pretty much near-record levels like 98%. Lease rates for the public companies, I think they just reported from NAREIT which is probably what you were referring to. I think of Invitation Homes on renewals was running close to 6% and American Homes between five and five and a half.  New move-in call it in the 13-14%, which kind of doesn't necessarily matter much because it's the newest, the consumer doesn't have something to compare it to. That's their new rent. But when you look at the renewal rates, I think that just like a for a for-sale builder, at some point you can't just keep raising rents. I think that part of the reason the occupancies are as high as they are is that they're being artificially driven by the fact that there's units that have physical occupancies but they don't have any economic occupancy. So, when you look at delinquency rates, they're running about 150 basis points above where they were in ’19, and when you factor into the fact that they can push rents because they have less occupancy, yes, they have less units to rent that gives them more pricing power.  When, in fact, the eviction moratoriums and all of the things that have been sort of boosting that occupancy are no longer prevalent, I think you might see that lease rates are not as sustainable as we're currently seeing.

Willy Walker: So, as you look at the business models of Invitation Homes and American Homes 4 Rent, the two big ones, back in 2018-2019 American Homes 4 Rent was predominantly buying existing structures and then putting them into their rental inventory. Today their business is 60% development and only 40% act rehab and turning them into rental. Does the fact that they're acting more as developers today versus buyers and converters concern you at all?

Ivy Zelman: I think that they've struck a balance, they're kind of in a unit for development, a few thousand units. I think it's more about the competitive landscape. I think that as a developer you take on more risk. There's no question if you're developing, you're dealing with what I just explained, about the inflation and dealing with pace, and how quickly you absorb those cost increases in terms of turning around and charging your tenants a higher rent. So I think it just increases an overall risk profile to their business model as compared to let's say Invitation Homes, which might be buying, call it, 5-10 percent of the growth in their portfolio from the new home market, but taking development risk is a very different business model than just being a single-family rental operator that is trying to obtain occupancy and increase overall renewal rates and new move in.

Willy Walker: So, if you look at the stock performance of the American Homes 4 Rent or Invitation Homes, up 40% on total shareholder return on American Homes 4 Rent, and 26-30% for Invitation Homes...

Ivy Zelman: That’s since 2020.

Willy Walker: Correct. And if you look at the multifamily, the major multi-family REITs, Avalon Bay, EQR, Essex, they're up in the sort of, well, in two cases, 6% and in the other case 2.6%. So, as you look at BFR|SFR and kind of the run that they have had versus multi and where the multi-market sits today, as it relates to performance in the forward look if someone were to say, “Hey, I really like SFR|BFR” or, “I really like multi,” what's your take of those two, if you will, food groups?

Ivy Zelman: You know, I think that the multifamily market is seeing a nice rebound coming off of the lows during the pandemic. I think that you know you're looking at acceleration into ’22. We're actually for ’21, in line with where the street is. On ‘22 though we have a slightly less favorable continuation of that acceleration that we're seeing. Part of that is just because the supply in the multifamily market is still at a multi-decade high that's in backlog. Now that's more skewed to urban then suburban, and so, really, once again, it goes back to where are you and where's your portfolio? But I think the valuations on the multifamily names, a lot of them, the multifamily REITs are trading at sort of a trough earnings basis. We look at them off of trough, not future earnings, and they're trading pretty much at the hundredth percentile. So the valuations really reflect the anticipation for the rebound, and I think that, because of the things we discussed on eviction moratoriums and some of the what might be artificial drivers, we would just be preferred to be on the sidelines, right now, because we do think that NOI growth may not be as significant as wall street's anticipating it will be, especially again for those in the urban core. So, we do see acceleration. We're seeing a nice rebound across all price points, across all asset classes, but we would prefer I think right now to be on the sidelines for the multifamily names.

Willy Walker: So, you mentioned the eviction moratorium and in the pre-webcast questions that you and I got from many listeners, there were plenty of questions about forbearance and the single-family market. Let's focus on the forbearance issue on single-family and we'll come back to the eviction moratorium on multi. On the forbearance issue on single-family, I think you said to me yesterday that there are about 2 million single-family mortgages that are still in forbearance. Does that present a risk in your mind as it relates to performance in the single-family world as far as the mortgages on those homes?

Ivy Zelman: I think right now that the consumer has been afforded the ability to not pay their mortgage. We don't know how much of that is moral hazard. Frankly when the forbearance plan was first announced there was very significant concern of a moral hazard and thought that the number of people that would go into forbearance would have been you know 15% of mortgage holders. I think it peaked out at like 8%-9% at the most, and now we're kind of like where we were at 4 million absolute, we're now at 2 million. So, it has really come down substantially. But I think that those people that are struggling, the good news for them is that they have had the benefit of significant equity appreciation, and so, if they get into trouble and they can't make their ability to continue to pay, they could sell into a market that right now is pretty much starving for inventory.  Alternatively, you know, if you were an FHA buyer and you only put down three and a half percent and you have now another year that you have to tack on, a year and a half of mortgage payments to the back end of your mortgage, I don't think that those buyers were buying during the pandemic, frankly. Because the market got very quickly too hot, and they couldn't compete. I also know that when you look at the average of a Fannie or Freddie loan that's in forbearance, the average loan is about five years old, and I think that that would suggest there's a lot of equity appreciation. I don't know for sure FHA, but the delinquencies are higher for FHA-VA than they are for Fannie/Freddie. So overall, I think we would think about the plumbing that it takes to go to foreclosure.  The plumbing stopped, everything stopped, and those people went and found different jobs. So, when the government decides forbearance is over, which you know, call me a cynic, I don't know how quickly that will happen, but everyone says it’s supposed to expire in September. Assuming it does, it's going to take a while to get the plumbing up and running again. And for those of you that remember the great financial crisis, we had what we call “The Pig and the Python” which was the foreclosures took forever to come to market, especially in judicial states. So, if there are people that need to be foreclosed which there probably will be some, it's going to take probably a lot longer than anyone's anticipating. So, I don't see a flood of foreclosures coming to the for-sale market in terms of the existing homes that are currently likely to become for sale that are foreclosing. I think it's going to be very slow and a lot of people that do choose to sell and consolidate their household will be able to do so, and probably pay off their mortgage.

Willy Walker: So, we know that forbearance in the commercial space was a non-issue. At first, it seemed to be something that was wildly concerning to the markets. And many, many stocks got hammered because there was the threat that many, many loans were going to go into forbearance and that servicers like Walker & Dunlop were gonna have to advance payments to bondholders. That ended up not materializing, so that side of the equation hasn't been an issue. We've also had the eviction moratorium in the multifamily space that is still out there. What kind of a drag do you think that has on rents in the multifamily space, as you sit on the sidelines looking at rent rolls?

Ivy Zelman: Well it's very market specific, I think that it also is location specific. Are you in urban, are you in suburbia? I think that, right now, our view would be you're probably talking about with the number of people that are in a multifamily, five, plus unit.  Overall multifamily occupancy they're probably talking about 15 million people and then you have a few hundred thousand that are, call it, 200, 300 that are delinquent. So, it really is somewhat market dependent and it also is, what is that local and state government going to do?  We just saw that Newsome announced that they're going to potentially pay all the back rent for consumers and so assuming they're on more solid footing and there's no moral hazard and start paying again, or will it be a drag on lease rates? It's yet to be determined.

Willy Walker: So, I hear you saying you're on the sidelines on multifamily and I see that as somewhat of a drag on rent collections and bad debt and that's a little bit of a question mark.  You also, in one of your recent research reports, talked about the fact that while there has been rent growth coming out of the pandemic, we're still at rent levels across the market that are still below 2019 average rent levels. So I hear those data points, and I say okay, there's some headwinds and then I look at what we're seeing in the multifamily investment sales market of the bidding wars that are going on to buy multifamily product and seeing CAP rates go from the fours, to the mid threes, to the low threes and I sort of scratch my head and say why is there such fervor around buying multifamily assets? What's your take on the answer to that question?

Ivy Zelman: Well, I think it's a combination of very significant institutional capital that has to be invested. They have to be paying a dividend to their investors and so there's just this free money and capital allocation that needs to go somewhere and so multifamily as an asset class is a very attractive long-term asset class.  So, we have right now evaluations that are very lofty and as you said, demand is very significant with CAP rates that have compressed significantly. And we also have a tremendous amount of merchant building that's going on, despite the fact that backlogs are at all time or multi decade record levels, so we think that it's a combination. Multifamily relative to other commercial real estate asset class looks pretty attractive compared to other types of commercial real estate, but I do think, it goes back to what I call J squared or Janet and Jay, you know their policies creating whether it be a stock market, continued wealth gap, to the amount of institutional capital that is going to continue to have kind of access to free money, they've got to invest somewhere, so why not multifamily I guess.

Willy Walker: So, as you think about demand and you think about future demand in the sort of three food groups as it relates to single-family, built-for-rent, and multifamily and you think about everything from price points, and you've talked about price pressures and single. You've talked about rent increases in build-for-rent and then there's the new supply coming on in multi. Where does one place their bets, where do you invest, given that we are still under supplied in housing? Whether it's your million-dollar number or some number below that, or it's the $5 million number that Rosen in the and the National Association of Realtors came out with. We're still under supplied in housing. So, I guess the question would be what stock is needed? Do you think that this move to the suburbs and single-family continues to grow post COVID or do you think that there's more of a re-entry to the cities and some of this urban multifamily gets filled up and starts to operate quite well?

Ivy Zelman: It's a tough one. I think that what I would say is that today all of the asset classes with respect to shelter, as you said, we need more. The problem is where we need more of it is true workforce housing.  And so, I don't know that that really will hit the required rate returns that needs to be built. But if you're operating a portfolio with single-family rental tenants, and you have a portfolio, and that portfolio is performing, that's a pretty attractive business as opposed to trying to bring a new supply, with all the cost inflation, whether it be land, labor, or trades, as it relates to future continued rate increases or rent increases, I think there might be hitting a wall. But I kind of like the existing portfolio, as opposed to thinking about continuing you being a merchant builder and taking that development risk. If I had to say within the rental asset class, I like the existing portfolio.

Willy Walker: You all also cover a number of mortgage finance and technology companies, the likes of Rocket and Black Knight and Zillow.  As you see technology's impact on the single-family or more broadly on the general housing market, what's jumping out at you, as it relates to what's changing the markets? They're very distinct business models, Rocket has become the largest single-family mortgage origination platform in the country based off of a new technology platform that took them from being a small player to being the largest player.  Black Knights introduced technology and focused on it and Zillow obviously is transforming the way that the single-family brokerage market is done. Where are you seeing dollars going as it relates to technology coming into the housing market?

Ivy Zelman: Well, you know technology had been in prior generations pretty much more invested into sort of helping business owners with their services, whether Black Knights helping mortgage originators. I think what we're seeing in this cycle is more of the technology being invested to really support consumer and reduce consumer friction.  And so, when you think about long term and the secular growth really the companies like Zillow that has you know the most eyeballs of any consumer out there.  What they've done they're not actually just intimidating the agent as much as they still have a very significant profitability and stream of business that come from agents, but they are creating through iBuying and other initiatives really what all technology companies referred to as the flywheel, where they want to have attachment rates, so if they have the eyeballs and they can get the consumer to use them for mortgage, they can get them for use for title, they can get them to do the iBuying, there's lots of different ways. And similarly Rocket, over the long term from their market share growth through the technology advantages that they have in their direct line to the consumer, for majority of their business, they can continue again on that flywheel approach. So, I think it's a healthy thing. It ups the game for everybody. If you look at the brokerage industry prior to Zillow, as much as many of the brokers don't like Zillow for various reasons, everybody's been forced to really up their game as it relates to the technology offering, including builders and multifamily operators. Whether it be through technology for virtual tours or various lock technologies that are out there and cloud-based systems. It’s all a good thing for the consumer at the end of the day and I think that it's going to continue to drive long term secular growth for those companies that are more service oriented to the consumer and getting rid of that consumer friction is definitely an advantage that they'll continue to, I think, reap the benefits from.

Willy Walker: Your comments there Ivy are super interesting as it relates to consumer technology. When I had Brandon Wallace on the webcast from Fifth Wall, a couple months ago, as I look through Fifth Walls prop tech investments, what jumped out at me was it wasn't really property technology, it was more consumer technology and focusing on consumers in the built environment. And so, in other words it's an app that's going to help you be a more effective renter. Or it's an app that makes you a more effective single-family homeowner, but not necessarily prop technology of changing the way that the property is either built or operated.  Would you share that similar view of things, or are you seeing it really as property technology and the changing in the way that the built environment is either being built or operated? Or is it really consumer technology inside the built environment?

Ivy Zelman: I think the latter, but I do think you're seeing some on the property side. You see 3D printed homes; I just don't know how big it will become.  We did see unfortunately, Katerra that attempted through a lot of capital investment to try to be building complete factory-built entities or every kind of asset class, multifamily predominantly. They didn't really get into single family, but I think that they were unfortunately spending sort of like drunken sailors, no offense to those at Katerra, but it just it just looked like it was never going to work to us. But will there truly ever be a factory-built home?  I think the challenge for the industry to sort of give up the trades that they use today and be all their eggs in one basket, as well as the fact that it's a big fixed cost investment and this is a cyclical industry.  So, I think that unless maybe bullish on the long term benefits with maybe some relatively niche players, like the 3D builder, 3D printers that are coming and popping up here and there, but I do think it's more on the customer side that you pointed out to earlier to make that experience better.

Willy Walker: Your comments on Katerra, Michael Marks who ran Katerra, came and spoke at our Conference, I think it was three years ago and I think everybody in the room was sitting there kind of with their jaws on the ground saying this guy is going to revolutionize the construction industry, and here we are three years later and they're now bankrupt.  Is it fair to say Ivy, that, I mean, they had so much capital that went into that, and Michael from having run Flextronics and understanding kind of standardization of products for the consumer electronics space, he was trying to take that same model to the building space.  Is it fair to say that with that amount of capital and that type of vision, that getting to that modular market won't happen for a very, very long period of time because it's just too capital intensive and it's too hard to move the built product around the country?

Ivy Zelman: You know, I think that there's a lot of obstacles. We used to back in my early days of Solomon Brothers, I used to follow the manufactured housing industry. And sort of realizing that, that industry is more of an assembly line and there's a lot of advantages that it has but it really gets to the point where, you know, to put them on the lots and have the zoning approved, and I think that, where I go back to and always thinking about factory built and efficiencies is the trying to do a lot of the various pieces of the puzzle.  And you really need to be good at one thing, if you are manufacturing roof trusses, if you're manufacturing drywall, but to try to sort of have everything come together on the job site, it's hard enough to get those pieces of puzzle together. I think Katerra was trying to do it all. They were telling me they were going to manufacture appliances, I’m like what? They were manufacturing cabinets. They were manufacturing flooring. If somebody's really more of an assembler within the plant, as opposed to trying to do with Katerra tried to do, maybe there's going to be more success there, but then really does it cost more? Is it a better return on equity? A lot of trade organizations host events where the builders come in and they feel like, you know, the FOMO of their hearing that other people are going to use factory built homes and they sit around tables and they're really very concerned that they would be giving up sort of the trades or the relationships and it's going to cost more, but then they're going to get a better return.  And then, because it's a velocity and they're going to actually have faster turning, they're working capital will not be as significant and they don't like that. They think of absolutes, they don't think about return as an industry and maybe that will change because the public companies think about returns now. Again 42% of the market, so anyway we'll see, we'll be analyzing it Willy, for sure.

Willy Walker: You mentioned manufactured housing there, and you also previously mentioned the need for more affordable housing and there's not a governor in the country who isn't focused on trying to create new supply of affordable housing and many are struggling mightily to do so.  And my thought has gone to changing regulation as it relates to entitlement of land for manufactured housing communities. Have you seen anything across the country of moves to try and make it so that manufactured housing communities can be developed and constructed quicker than they have in the past? Because getting entitlement for manufactured housing communities in the past has been super difficult.

Ivy Zelman: You know, we wrote a large thematic report that is available on our website, but I would just say that the challenge lies with the fact that no one wants it in their neighborhood. So, the local zoning committees cannot get these approved; it's just the restrictions and ability to get these communities is the huge bottleneck. As much as they say they want it, their constituents don't want it so it's kind of this circular reference that we have yet to see that mitigated. And while Fannie is actually done a lot to try to provide the type of backing that you'd get with For Sale under the same type of guarantee that you would for manufacturing housing, they can't get the lots through the local jurisdiction to approve it. So, it's just this constant battle and I don't know what really the federal government or anyone can do at the local level.  Because the local legislators are contingent on you and I to vote for them and they know that, so they don't want it in their backyards and that's been the same issue forever and I guess I’m skeptical that anything's going to change that.

Willy Walker: So, let's finish on rates because with inflationary pressures coming in everyone's watching every dot plot from the Fed. Everyone's watching what Jerome Powell said yesterday from Congress.  What's your take as it relates to, nobody's projecting that we're going to see a rate increase in 2022, although many of them then moved up their projections on 2023 rate increases.  Do you think we can get through 2021 without the Fed having to take action here or do you think that we might be surprised by the Fed having to at least…? He said in his testimony, I think it was, some time to come before they focus on tapering on the bond purchase program.  I was surprised at that. I thought he would have started to say that we're going to start looking at the bond buying programs sooner rather than later, and he said nope that's ways off.  What’s your interpretation of where we stand, given the “hyperinflation” that you said previously, you're seeing in the housing market?

Ivy Zelman: You know I wouldn't want to be in J. Powell’s seat right now. I think it's a really tough place to be.  I respect him, but I would say that, for the most part, you know not really appreciating how much of the country right now is so dependent upon these low rates. You know, I make the joke respectfully, but you know, J. Powell is like the bartender serving a raging party where everyone's already really way over served. So at some point whether the taper comes in, you know late ‘22 or even earlier in the MBS market, I think that what really worries me is that if rates in fact do rise I think I alluded to it earlier, you know mortgage rates, the backlash of a refi boom that this country has enjoyed is that too many people now are locked in at low rates. So, if you look at those homeowners in the United States that have a mortgage, roughly 60% have a mortgage rate, not at 4%, below 4%. So, think about people today that are not your top 1% that can move from New York to Miami or leave California and go to anywhere in the West.  A lot of people in the United States that have to stay where there current neighborhood is, or within this vicinity of their kids school districts, they're not going to move if mortgage rates go up from here, we're kind of hovering around 3%, 30 year fixed.  You know if rates were to go as little as three and three quarters, I think the music would really slow substantially, so I think the Fed is in a very tough bind.  And I don't know if they start tapering mortgage backed securities but originations are rolling over both refi’s and purchase, that's the supply that basically might come down, while they're buying comes down and maybe rates don't go so up so much. On the other hand, typically if you're providing incremental demand buying MBS prices are going to continue to rise and yields are going to say low. If you're now buying less, that means prices are going to go down, because your supply, assumingly the same, yields will go higher. So, it's really tough to understand and navigate what will happen, but our premise is in every analysis that we do, is not forecasting rates. And so, if rates were to go up you know our cautious stance on For Sale would accelerate, extremely accelerate if rates were to move up. And again, in that magnitude, you know call it 50 to you know 75 basis points could really slow the music, if not stop on a dime. And back in ‘18, I remember like, how can the housing market be so weak at a 5%, 30-year fixed rate?  And that's when we really started looking at understanding mobility and the delineation of the number of people that had a mortgage rate locked in well below 5%. So, ‘18 was a prime example that while you still had theoretical favorable, of what I call affordability, that you still had the market slow substantially. And the move up market is still call it, two thirds of housing.  So even if the entry level buyer could afford it, and then the question is, can they really afford it? Do they have the wealth creation for down payment? Do they have too much debt? So, there's a lot of challenges that come with rates moving higher. And again, I wouldn't want to be Jay or Janet because their policy decisions and moving forward, to reduce volatility is really what we've been seeing and what happens from here? You know, as an observer, and I’m not a Fed watcher, I talk to a lot of incredible Fed watchers and listen to podcasts obsessively about it. But you know, I’m just a little housing analyst, I’m not an expert on inflation.

Willy Walker: Just a little housing analyst, right. Well I’m super happy to have this little housing analyst on our team.  The one thing I’d say before we close on that point is just this, I think that the strength in the tenure that we've seen recently, there's been a lot of talk about it being foreign buyers and the strength of the dollar.  And then, also the head start the U.S. economy has getting out of the pandemic vis-a-vis Asia and Europe is putting a lot… I talked to a South Korean investor yesterday, who said that they're looking at getting into the single-family mortgage market in the United States. I said oh no this is this is sounding way too much like 2005 again to have a South Korean investor looking at potentially getting into the U.S. single-family mortgage market.  But the point being is that I do think that we, to your point about the bartender, everyone's over served, careful when you got to turn it off.  I do think, from a capital allocation standpoint on a global basis, what we are also seeing right now is the extension of this cycle by foreign buyer saying I got nothing in my backyard to buy I’m going to the US.

Ivy Zelman: Willy, you're absolutely right and that's well beyond my expertise, but I think that we also think about foreign buyers for the residential real estate market. They are not yet really coming back, but we are starting to hear that they are coming back. Which could also prop up just separately, not just what's going on and keeping interest rates low. So, I agree with you again beyond my expertise but certainly watching the bond market and the disparity between hyperinflation, yet yields continue to move lower kind of really forcing us to take a bigger look and the globalization of the market, obviously, is a huge factor and so you're right.

Willy Walker: Well, we didn't say new normal, so we're disciplined enough not to say new normal.  Ivy, as always, a real pleasure. And I would just like to reiterate what an incredible pleasure it is to have you and your team coming on to the W&D team and so thanks for taking the time today, love all your insights in the housing market. 

Thanks everyone for joining us today, we'll be back next week with another Walker Webcast and I hope everyone has a great one take care.

Ivy Zelman: Take care, thanks guys.


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