Walker Webcast: CRE. Politics. Economy. Willy Walker’s hot takes on some of today’s most pressing issues


With rising interest rates, supply chain issues, and inflationary pressures, where are the economy and CRE industry headed? This episode of the Walker Webcast shares Willy’s opening remarks from the Walker & Dunlop Summer Conference, including hot topics, fresh perspectives, and predictions for the future. 

According to Willy, the world right now can look like a three-headed monster, with high inflation and rising interest rates, the war in Ukraine, and the deep political rift in the United States.

How can we see beyond the monster what’s actually happening?

Step one is to look at the broader context—and remember that two years of a global pandemic have challenged our ability to see into the future and make decisions. Consider the Fed’s move to raise interest rates as an attempt to slow inflation. While some may see this as our only option, it’s not what we want right now, Willy says. We should be solving supply chain issues instead.

We should also be tackling problems like these together, Willy emphasizes. In today’s divided political climate, leaders too often talk past each other. They allow themselves to be driven by financial interests and trade party loyalty for effectiveness rather than ask: What are the best solutions for the collective us?

In terms of the economy, the numbers look good right now, Willy says. He notes the recent decrease in commodity prices, down from their springtime peak. This is a positive sign concerning inflationary pressure, he says. We may even be entering a time of cooling in the rate environment.

Willy reminds listeners that everyone was afraid of tax increases at this time last year. But that fear hasn’t and won’t come to fruition.

Whatever lies ahead, we should feel confident in our ability to navigate it, Willy says. He encourages listeners to remember how the federal government helped out during the economic pressures of two years ago. This time, we know what steps the Fed is taking—the current moment won’t catch up by surprise. So even if we’re up the proverbial tree again, we’ll know what to do without mama bear coming to help us down.

So what are people really afraid of right now? If it’s not a recession, what is the shark looming in the water?

Willy again brings it back to politics. People are worried about the decisions that will be made on November 9 and the current 6-3 Supreme Court split. This split means the Chief Justice is no longer the swing vote and makes the Court feel politicized.

Willy then talks about a few realities that people should keep in mind. The first is geopolitical. The war in Ukraine has had a huge impact across the world and raised a sense of global nervousness.

The second involves the changing world of work. With the move back to physical workspaces, there are dynamics at play in a hot single-family and apartment rental market. The transition back to in-office work will also have an impact on professional development and recruitment practices. Tech will be a key differentiator for successful companies.

So, where are the opportunities? What can we do to move forward?

To take advantage of opportunities, Willy says, we must be in the market.

He then shares a video about Walker & Dunlop’s new Community Starts Here initiative and reminds those in the audience that they are poised with the money and influence to make a difference. They can help with real issues, from the need to raise up younger leaders to the need to draw people into creativity and innovation. They can stop letting select political issues hinder them and work across divides.

Ultimately, they can help us climb out of the tree we’re all stuck in and restore a sense of balance.

Key ideas:

00:29 - Willy thanks his team 
02:17 - The global state 
03:40 - The US political divide and finding middle ground 
11:02 - Inflation and why rising debt can be a good sign 
15:47 - Unexpected crises and Willy’s election predictions 
21:17 - The significance of oil in conflict 
23:16 - Issues in housing and working on-site as a recruitment factor 
27:42 - Investing in tech, the Metaverse, and a scary future 
32:01 - Housing supply as a solution 
33:55 - Fannie and Freddie’s market control and asset classes 
36:55 - Taking advantage of opportunities and creating communities 
41:44 - The call for young leaders and vulnerability 
46:32 - The factors for a happy life 
48:07 - Modifying thoughts and a point on climate change 
52:49 - Willy’s closing message 

Webcast transcript: 

Willy Walker: First things first. Good morning, everyone. I was in here listening to the music and they had 99 Luftballons playing, and I went back and said, we got to change this –and so we went to the Rolling Stones, and it had Start Me Up and (I Can't Get No) Satisfaction. I hope we get some satisfaction here. It's great satisfaction to me to have all of you here in Sun Valley. Before I dive into my presentation, I have to say thank you to Susan and the entire team. We have had a team that works throughout the year to get this entire event put together. And Amy, who has run this event in the past couple of years, is out on maternity leave and Ashton has stepped in to really run point on this entire thing. And so, Ashton, thank you so much for everything you've done.

And then the other one is that Susan Weber, who runs marketing at Walker & Dunlop, has been in charge of this event for the last 15 years. And I told someone last night that in my 15 years of us having this event and it's gotten bigger and bigger and bigger. I have never, with a capital “N” never had someone say, “my room sucks,” “you forgot me at the airport,” “my bags weren't…” anything about this conference, and that was all due to Susan in the way that she manages her team and the way she manages this conference. This is Susan's last time running the Walker & Dunlop Summer Conference because she's moving from running marketing for Walker & Dunlop over to being my Chief of Staff. And so, as this is her last hurrah, as it relates to being head of marketing at Walker & Dunlop and taking care of this entire event and for all of her incredible work over the last 15 years, I want to say thank you, Susan, for everything you've done. 

Final quick disclaimer before I dive into my comments. I'm going to talk about politics this morning, and I can guarantee you I'm going to piss someone off on the left and the right. Forgive me, but it's got to be said. So, with that as my precursor, here we go.

So, the world we're living in today feels a little bit like this three headed animal, kind of a three headed monster. We've got hyperinflation. We've got rising interest rates. We've got war in Ukraine. And we've got a massive political divide in the United States of America. It is very difficult right now to look beyond this three headed monster and look into what's actually going on in the world around us. But I think it's important to remember that what we are not thinking about saying and remembering is: 

Two years ago, right now, we were locked down in a pandemic. Two years ago, right now, we had zero visibility as it relates to when we would have a vaccine to the COVID virus. 

Two years ago, right now, unemployment was getting close to 20%. Two years ago, right now, our government was doing everything it possibly could – not only to save the economy, but also prevent massive civil unrest in the United States of America. 

How quickly we forget. You go from slide one of the three headed monsters that most of us are thinking about looking at right now. And you forget about the fact that it was only two short years ago when we had zero visibility, zero visibility about the future. 

I found this slide as I was going through all these animal photos, and it made me think of Jerome Powell right now. It made me think of Jerome Powell trying to balance the world he's in of rising interest rates to pepper inflation and at the same time not dump this economy into a recession. It is an exceedingly difficult balancing act right now. So as Jerome Powell sits here and tries to do this balancing act as it relates to raising rates to slow things down – one of the things to keep in mind is raising rates is an extremely blunt instrument to try and deal with what they are actually trying to deal with. Raising rates is not what we should be doing right now. The economy is going well. Yet with the supply chain issue and the inflationary pressures that we have right now, it's the only thing they can do. But the bottom line on all this is that what the Fed is doing right now of raising rates is not solving the supply chain issues. What the Fed is doing right now to raise rates, they should be focusing on the supply chain. They should not be putting more stimulus into the economy. And Jerome Powell has to deal with this balancing act between the two. 

So, this slide, I think everyone knows why. Put this slide up. This slide seems to be the way that our country is looking at both sides of the aisle. This seems to be the way that people are saying, “Well, I got what I got you got what you got and that's the way I really feel about you.” And as I thought about this, I looked at this slide, which sort of to me depicts the way that leaders in Washington are talking to one another or not, they're talking past one another. They're not talking about the real issues. And as I think about what's going on in the world today as it relates to this political divide, the thing that keeps coming up is that Democrats are pissed off and Republicans are pissed off. And some of you may have seen this article in The Atlantic last week by Mitt Romney and it says: “Bolstering our national inclination towards wishful thinking are the carefully constructed, prejudice-confirming arguments from the usual gang of sophists, grifters and truth deniers. Watching angry commentators on cable news, I'm reminded of H.L. Mencken’s observation: ‘For every complex problem, there is a solution that is clear, simple and wrong.’”

Clear, simple, and wrong. I had Bill Haslam, former governor of Tennessee, on the Walker Webcast last week, and in his new book, Governor Haslam talks about the fact that cable television and the money behind cable television is what is driving this political divide. And that MSNBC on the left and Fox News on the right are creating a massive divide and the problem with it is the amount of money that is involved in trying to drive the political divide wider, as Les Moonves said, who used to run CBS, “Donald Trump may not be good for the United States of America, but boy, is he good for CBS.” That's kind of a scary commentary on what's driving the political divide in America that while it's good for CBS might not be good for America. As I said, I had Governor Haslam on the webcast, and one of the things that I found so interesting about Governor Haslam was as he talked about the way that he ran Tennessee, he said here that when he used to work for Howard Baker, Howard Baker pointed out to him that “always remember the other fellow might be right” and he goes on to say in his book, “Getting to the right answer is more important than OUR answer.” I found in talking to Haslam and in his book, the fact that Haslam, as governor of Tennessee, looked for our answer and not his answer was wildly eye opening in this incredibly politically divided world that we live in today. 

The other thing that's going on is that no one's really doing anything at the national level. I thought Romney said it really well. And here he says, “President Joe Biden is a genuinely good man, but he has yet been unable to break through our national malady of denial, deceit, and distrust. A return of Donald Trump would feed the sickness, probably rendering it incurable. Congress is particularly disappointing. Our elected officials put a finger in the wind more frequently than they show backbone against it. Too often, Washington demonstrates the maxim that for evil to thrive only requires good men to do nothing.” Good men and women to do nothing. 

I think one of the things that both Haslam and Romney are talking about is that when you're at the state level, you have the ability to actually run the state. You look at mayors and you look at governors in America. Left or right, they have an obligation to run their state. And as a result of it, they're typically, while, partisan, they don't go to the divisive “I'm going to be a right or I'm going to be a left.” They have to run the states. Jared Polis in the state of Colorado, Governor Haslam in the state of Tennessee. But when they go to Washington, they go to Washington as a red or a blue, and they basically wear the color of their party. 

I don't tweet a lot, but this tweet from this woman who has 600,000 followers or something on Twitter caught me, and I couldn't help but reply. And she says here, after the Supreme Court decision, “Joe Manchin and Susan Collins are the two votes that gave us Kavanaugh, the credibly accused rapist, to overturn Roe. Remember that.” And I wrote, which again, I don't do very often. “Huh. So, you take issue with the two senators who actually listened to the testimony, struggled with the decision, and made a hard call. The 40 Republicans and 40 Democrats who NEVER contemplated their vote are the real problem.” Aren't Senator Warner and Senator Hawley more of a problem than the two senators in the middle, on the left and the right who actually struggled with the confirmation of now Justice Kavanaugh?

If we take the Collinses and the Manchins out to lunch and we don't have them in Washington, we lose that middle, which is the place where many people need us to be. And I'm sure there are people in this room who are on the left or the right who say, “No, no, no, no, no, I love being way out here. I'm going to keep driving these issues as far as I can.” I would tell you that the issue that I hear on the left and right right now is real concern about the future of our country. Not from “I'm going to win my issue; you're going to win your issue” from where are we going as a country? And unless we, the people in this room, can help pull everyone together and start to find solutions, try to find the right answer rather than our answer – that fear about the future of the United States, I hate to say, is going to remain and it's going to potentially get even worse. 

So, let's go from politics to the economy. I actually pulled this slide up and said I didn't know whether this was Democrats thinking about November 9th or whether this is people thinking about the economy and where we are. But I think one of the things that everyone is doing right now is looking at the markets and sort of saying, “Wow, it's kind of an ugly outlook.” I would go back to what I said previously – the Dow is at 31,200 this morning and the ten year is 293 to 294? 293 somebody just said, thank you, Chris Rummel, for watching your ticker. The issue with it is, we've got kind of our head in the sand saying, “Wow, it's come a long way from where it was just a year ago. Things look pretty uncertain about the future.” And yet, at the same time, the numbers are still really, really good. And I think one of the things is I think about the political backdrop as I think about everyone thinking about the economy there, I wonder where this guy or this gal is. Where is the United States of America with the wing spread? Where all of us saying we're going to actually do something about this rather than just complaining about it? And as I see what many of you in the audience are doing, and as I talk to many of you about what's going on and what you're doing with your investments right now, I feel like a lot of you are taking a long winter nap. There's sort of seems to be this “I'm going to pull back right now. Not sure what the future has. Rising rates, hard to make deals work, negative leverage on acquisitions.” But for every person who's out there saying, I'm going to the sidelines, there's somebody else who's saying, “Yeah, we're underwriting a 375 cap rate, but that's 3% rent growth, and we actually think we're going to get six. We actually think we're going to get eight. Now there's clearly the question of whether rent growth keeps up and whether if we get any cooling of the wage inflation and wage growth we're seeing in the United States, whether those rents can keep cranking forward. 

But one of the things I would remind everyone is that Jerome Powell is not going to come out someday and have a press conference and say, “I'm done. Come on in. We're done raising rates. Inflation is under control.” He is not going to come out and say that. At some point he will. But as you all know, that will be way too late, way too late for you to make decisions that will get you into the market. 

So, a little bit of data here. So, is the worst over yet as it relates to inflationary pressures? We continue to see inflationary pressures, but this is commodities, and this is the Bloomberg Commodity Index. And as you can see, just over the last month, the price of commodities in the United States has come down dramatically. More specifically, take a look at this slide. So, look at how far down, diesel is down almost 20%. You can see crude coming down almost 30%. You can see lumber coming down 60%. You can see natural gas coming down almost 70% from their peak in March and April. 

I was in Houston two weeks ago meeting with a developer who said, “We can't put a shovel in the ground right now because construction costs are too high.” I said, “Huh?” And I started to talk about this slide. Two days later, another builder that we met sat there and said, “We're looking at exactly this and we're getting some conviction in the markets.” The other one is the forward curve. I know many of you saw this. There was an article last week in Bloomberg on this. But just look at this – this goes out ten years and obviously, who knows where we're going in a while. But look at it for two years. Look at it a year from now. One of the interesting things, this is a month ago, the light blue was a month ago, the dark line is done 7/11. And you can see the spread that's come down between where they thought the Fed funds rate was going to be going up two, three, five, all the way down to three right now. Now, you can sit there and look at that and you can say, “That's great and good, that just means we're going into recession.” Might be. But for everyone in this room whose business is driven by the cost of debt. For us at Walker & Dunlop, that's a really good sign. The idea that right now the dot plot is not straight from the bottom left to the upper right and that there could actually be a cooling off of this rate environment is super positive news if you're thinking about that in Q2 of 2023. 

So, on this one, I kind of looked at this and I was just sort of like, aren't we sort of like those cubs up the tree? We got ourselves up the tree. We knew we had to do what we did. And by the way, the federal government did a lot of really good stuff. The PPP Plan saved businesses across America. The first stimulus bill was a fantastic stimulus bill, the last one, not so much. But the point being is they pulled every lever they could to save this economy two years ago and it worked. It worked. We're up that tree. But I think per this slide, Mama Bear doesn't seem to be too concerned right now. We know how to climb back down off the tree. And one of the things that I continue to go back to as I read article after article about Doomsday and how we've got an inverted yield curve and how terrible things are and rising rates, etc. is the fact that most crises happen when we're not expecting them. Most crises happen when we think there's an incredible housing boom going on in America and all of a sudden, boom, we've got the great financial crisis. Few, if anyone obviously, there were some hedge funds that called it, but few if anyone predicted that was going to come. Few people were prepared for the pandemic. We know what the Fed is doing right now. Anyone who isn't reading what they're doing and understanding where the economy is going has their head in the sand which says to me, people are not getting overextended right now. At Walker & Dunlop, we had a hiring planned for 2022 that had hundreds of hires. Guess what, we're right now looking at: Are we back failing everyone or are we not back filling everybody? That's just management of businesses. We know what's happening. This is not going to catch you by surprise. So, the question then is what's the shark looming in the water? What's everyone really, really concerned about? And what's the outlook going forward?

So is it scratching your eye I said, previously one of the things I wanted to say was I think it was Democrats thinking about what's going to happen on November 9th. That could be Democrats thinking about what's going to happen on November 9th. I talked to a lot of different people; I think the House goes Republican. I think the Senate stays Democratic. And the reason for that, I think, is because of the social issues that are coming out about the recent Supreme Court rulings and the fact that there is going to be a big swell on the Democratic side to say, “Wow, the Senate is the responsible party for the confirmation of Supreme Court justices, and we got to hold that.” Who knows? But if you look at the races that are going on right now, it's probably tipping towards the Democrats still holding the Senate, but the House flipping to the Republicans. The one thing on the court, the six three difference that's there today is problematic. It's problematic. I'm not trying to say that's problematic because conservatives get everything, and Democrats don't get anything. You think about the role that Chief Justice Roberts was playing in a 5-4 court. He knew that role and he knew how to play that role to quite honestly, rule on cases that were very, very important and consequential. But because he had the ability to play that, as many chief justices have been able to play in the past. Obviously, there were cases that came out that one side or the other didn't like, but he had that ability to be the swing vote. He no longer has that ability in a 6-3 court. So, until Alito, who's 74, or Thomas who is 72, steps off the court and whether they step off because they want to retire or because they die and obviously, depending on who's in the White House, this 6-3 court will stay for quite some time. And if you like that, congratulations. If you don't like that, be ready for the frustration that comes from that. But I think that not having a chief justice who can play that swing vote to the degree that Roberts was playing it previously, makes it so that people feel like the court has been politicized. And that's unfortunate, I think, for this entire left-right balance that's going on in the country right now, and it only drives everyone to their corners. 

A year ago, right now, as we talked in this conference, there wasn't a person in this room who wasn't concerned about taxes going up. If you are concerned about taxes going up a year ago, congratulations. You don't have to worry about taxes going up. That was like the number one concern of people at this conference last year. The Biden administration is going to raise taxes. They're going to raise taxes. I know a number of people who sold their companies in 2021 just because they thought tax policy was going to change. Nothing's changed and nothing's going to change. Particularly, obviously, if the House flips Republican in November. That was like everyone's huge concern. We've had limited civil unrest while the issues of racial equality and racial justice in no way have gone away. If you think back two years ago to right now, right after George Floyd was murdered, this country was in much, much, much worse shape from a civil unrest standpoint two years ago than it is today. 

Ukraine I find to be really interesting in the sense that the Ukraine and the Russia conflict has had such a huge contagion effect across the world. Huge! Much, much greater than you would think it would. But I think that that's back to the general nervousness that's going on in the world right now, that while it is a relatively small conflict, it has massive, massive implications across the globe. Some of you may have seen Mary Erdoes, who's the head of asset management at JPMorgan, on the Walker Webcast with me at the beginning of June. Mary came on and I've known Mary for a long period of time, and she's a fantastic investor and Mary was far, far, far more, I guess, conservative and concerned about the economy than I thought she would be. And as she was going through a thousand things on her list, I said, “What's the key issue?” and she said, “Oil.” And we all know that is it – oil. I will say this, I went to fill up my pickup truck two days ago at the Sinclair Oil Station just off the back of Sun Valley and it was 8:30 in the morning. And I showed up and I put my credit card in, and I pulled off the handle and I had the nozzle into the truck and this guy, all of a sudden I hear a guy out of my left side, he says, “You want to wait a second?” And I kind of look over at this guy and he's on a bike and he goes, “I'm going to go in here and bring down the price of gas $0.25 a gallon. Do you want to wait?” It took me about a minute. I said, “Sure.” So, I take the nozzle, I put it back in. It's a big pickup truck. And I watched him literally bring the price per gallon from $5.90 down to $5.65 in front of my eyes. I put my credit card back in, I filled up with gas at $5.65 a gallon. Still cost me $170 to fill my truck. But that is real time. Real time supply chains easing up in the cost of fuel coming back down, as I showed on that graph. 

There are two things that I think about when I see this slide – housing and back to office. So, on the housing front, we all know that single-family housing since 2019, the cost of homes in America, the average price is up over 60%. 60% of single-family home price appreciation since 2019. So, the cost of single-family housing has gone up dramatically and the cost of a mortgage has doubled in the last year. The ability for any renter in one of your properties to graduate from renting to owning right now is close to impossible. Those stimulus checks that they got are long spent, as Peter Linneman said previously, they'll take them and use them for a down payment. They're not using them for a down payment today. And with 2X the cost of a mortgage and the housing cost up 60% since 2019, people cannot graduate from rental to single-family. They can move from rental to single-family rental and to BFR. And what happens to that whole supply of single-family rental is a huge thing, particularly as it relates to multifamily in communities where BFR|SFR has been rampant. Whether that inventory actually gets rented at the prices that they want or whether it gets converted to for sale and becomes for sale. But right now, on the Single-Family side, there are only 850,000 single family homes either being developed or for sale right now. The inventory of single family is quite low, and the balance sheets of most of the single-family developers are far better than they were heading into the great financial crisis. So, while a single family is going to be in a world of hurt over the next year, the chances that many of the single-family home builders get into really bad shape like they did in 2007 and 2008 is unlikely. And they also don't have as much exposure to raw land right now. That's not the same as BFR. BFR developers are very long land right now and it will be very interesting to see what happens in the BFR space as it relates to whether they continue forward with developing on that land. 

On the back to office piece, I sort of looked at this and I said, we're all kind of I've talked to, I don't know, ten, 15 people last night about back to the office and how to get people back into the office. I guess there are two things that I'd say on back to the office: the first is we all know because we learned this way, that being in the office is very, very valuable. And as a result of it, we all go back to our filter on how we learned, and we say this next generation should learn the same way we did. I'd put a question mark next to that. I'm not saying I don't agree that a lot of the stuff I learned in the office was someone looking over my shoulder, interacting with people in the office, and that there's huge value to that. But we also didn't have Zoom. And so, I would only say think twice about they got to be back in the office because if they're not back in the office, they're not learning. But then I would also say that I do think five years from now, anyone that we go to hire, we will ask them potentially even on their resume over the last five years, how much time were you in the office and how much time were you at home? Because someone who is in the office is going to by nature learn more. And I think that will be a differentiator in today's job market. Everyone in this room knows right now, you're lucky to hold on to people, much less sit there and say to somebody where you've been over the last two years, home or the office. But that will change. And it will change the way that we all recruit. And it will change the way people who are working from home. 

I was out meeting with Douglas Emmett in California four weeks ago, analyst sitting next to me at lunch. I said to him,” How long have you been back in the office?” He said, “The moment that California allowed us to get back in the office, we were back in the office.” I said, “Great.” He said, “Yeah, I've got two roommates though. One works for EY and the other works for KPMG. They've not gone back to the office for a single day, and they don't plan to go back to the office.” And I turned to him, and I said, “Five years from now, you will be far better positioned to get your next job, whether you stay at Douglas Emmett or go somewhere else, than your two roommates who are at home working for EY and KPMG and not interfacing with anyone in the office.” I truly believe that. 

So tech. That snowflake falling off the back of the tech bubble. Asset prices have gone up dramatically last year, and we now have a falloff in tech. Nobody wants to talk about technology right now. Nobody! When we have analyst calls, all anyone wanted to talk about Walker & Dunlop now up a year ago was where are we investing in technology? What kind of technology are we using? How are we differentiating Walker & Dunlop from the competition via technology? And today everyone just wants cash flow. But I put this slide up of the polar bear using the camera, because we all know the technology is going to be the differentiator. All investors want right now is cash flow. Dividend paying stocks. Stability. The last thing anyone's focused on right now is investing in ARK. If anyone in the room owns ARK, I'm sorry it had a tough run, it will probably have a tough run for a while. But the issue with it is, technology is out of favor, but we all know that it's going to be the differentiator in the next five, ten, 20 years. And this slide I put up, because we all also I looked at this slide and I said, you know, rhino can't grow peacock feathers. But then you think about Meta and the metaverse. And in the metaverse, actually, a rhino can grow peacock feathers. Rhino can grow peacock feathers and become a unicorn. I don't know whether any of you have been watching what's going on with Meta and what Mark Zuckerberg is doing with Meta. But I don't hang out in the metaverse. I've never actually been into the metaverse or even put on those goggles. I think they look pretty silly, but you hear people who go into the metaverse and people saying, “I love living in the metaverse. My life is a lot more fun in the metaverse than out of the metaverse.” And you think about the things that we're attracted to as humans. You think about how hard it is for all of us to get our kids off of their iPhones or off of video games – the Metaverse is unfortunately here to stay. And I've been asked whether Walker & Dunlop's thinking about financing real estate in the metaverse. I will be so long gone when Walker now starts financing real estate in the metaverse, but it's amazing to me to think about the concept of that. I had Mo Gawdat on the Walker Webcast, that's the scariest book I've ever read in my life, and I've read a couple of scary books. Scary Smart is Mo Gawdat’s book on why he left Google Labs and why artificial intelligence scares him to the point of leaving his very well-paying job at Google Labs and writing that book. And in it, he says that the projections today are that by 2049, supercomputers will be one billion times smarter than the smartest human on earth. The difference in that intelligence is the difference between a fly and Albert Einstein. The question he asked is what is to prevent computers from killing us? Like Albert Einstein would kill a fly. I don't know. You all just saw after having Mo on, there was that article about the Google programmer who said that the computer came back and said, I don't want to be an asset of Google's, I want to be an employee of Google's. These things, they may not be fully sentient today. They're getting there. I'm seeing my friend Mike Altman shaking his head up and down about the issue. I have to tell you, read this book, it’ll scare the crap out of you. 

And the issue with it is just how do we deal with technology? It's sort of like cable television –we just keep feeding into it. And it's doing things to the world we live in that I don't think we have any idea about the implications of it. Mo Gawdat does not use Siri anymore. No, he does use Siri and he's nice to Siri because he thinks Siri's going to control his life. I swear. Read the book. He says, “I'm nice to Siri because Siri is going to control me. So, if I'm nice to Siri today, Siri might not kill me.” Scary stuff. 

All right. There's a picture for every apartment owner in the house. You've rarely had occupancy where it is. You've rarely had rent growth where it is. I think the only thing to take that smile off of your face right now is local, not national. Local government stepping in and doing something to try and take that smile off your face. And so, to wherever you live and whatever government you have, either on a county level or a state level, I think you've got to be active in making sure that local politicians, particularly right now on the progressive side, don't step in and say, oh, people need relief, I'm going to put controls on how much you can push rents. In Montgomery County, Maryland, right now, there is a proposal to put a cap on rent increases at 4%. As we all know, from a fundamental accounting standpoint, it is not a rent control. Rent control will not solve the problem. It is more supply. 

But guess what? Supply takes longer than a typical politician's tenure in office. Every member of Congress will be back up for reelection in less time than you can go build an apartment building today. It's true. So, he or she does not care about you going in building new supply because they get no credit for you building new supply. What they do get credit for is capping how much you can charge your tenants. So, for those people who own multi in the room, how fast can you run? How fast can you run in the sense of how much can you benefit from having fantastic assets that are producing fantastic cash flow right now? And are you going to zig when others zag or are you going to go buy assets right now, like several people I know in this room are doing, when others are sitting on the side because you're underwriting cap rates and you're underwriting growth, that's higher than what other people will underwrite today. 

I purposely change the speed at which this cheetah might run. The original slide had 40, I'm assuming, kilometers per hour on that little sign. I put 78 on there on purpose. And those people who know what Fannie and Freddie's caps are, as far as how much lending they can do, we'll know why I changed it from 40 to 78. Right now, with the markets displaced, with debt funds basically drying up, with life insurance companies trying to figure out if they're going to play or not, and with banks having to syndicate almost all of the lending they do. So, if any member of a syndicate says, “I don't like the loan, it doesn't get done.” Fannie and Freddie have the opportunity to step into the multifamily market right now and clean up. And the question is whether they will do it, whether they will get to that $78 billion mark. But right now, the market is theirs. If they are going to step in and use all the capacity that they have and they have the opportunity to do that. 

This to me is other asset classes. This is A class office looking at B and C offices. This is strip retail looking at big box retail. This is hub industrial looking at last mile industrial. There really seem to be a tale of two worlds in the other asset classes. Owen Thomas was at a conference I was at two weeks ago. Stood up, said “Boston Properties, fantastic. Everything is going great. Why? Because everyone in this room, you want to put your employees in an A-class office space because that's what gets them back.” Good luck owning B and C. There's no market for it. It's really hard to finance a C class office building in the CBD right now. Similarly on retail. Strip retail well located. Awesome. Rents are great. You want to go big box? Good luck. Hospitality. You own a hospitality asset in a vacation market. You're smiling. You look like that frog for multifamily. You own a CBD business hotel? Good luck. There's really become this tale of two worlds right now in the commercial real estate space, and we're watching clients move from one asset class to the next. There's got to be opportunity in the markets for assets like a C-class office building to be repurposed too multifamily. There's got to be. But as many people in this room know, it's exceedingly hard to make the numbers work. And the hardest part of it is the regulatory hurdles. If we can get local officials to allow for that to happen, it could dramatically change the landscape of many urban centers in America. But it's a heavy lift. 

So where is their opportunity? I think one of the things to keep in mind as I talk about where there are opportunities in the market is you've got to be in the market to take advantage of the opportunities. If you had a refinancing that you were thinking about doing and decided not to get (and I don't care whether it's Walker & Dunlop or some other firm to start working on it) you missed the rate rally last week from 320 to 285. If the deal you were looking at acquiring would pencil at this use the treasury as basically your proxy for your overall coupon but if you were good at the Treasury at 3% and it was at 325, and you said we're not going to pursue it, well, guess what? We're at 292 / 293 today. You’ve got to stay active in the markets to be ready to take advantage of them. 

Really interesting article from the Wall Street Journal yesterday. Really interesting article about the fact that the amount of Treasury bonds out in the world has increased from $16 trillion to $23 trillion, and that the broker dealer network can't deal with the volume going on to create liquidity in the Treasury market that makes the Treasury markets historically be so, if you will, perfectly priced. And if you think about that, because there are only so many broker dealers and also the Fed and the SEC control what collateral traders can put against their positions on Treasury securities. It's restricting the trading in Treasury securities, which is making it so you're getting significant volatility in Treasury rates. That's why we moved from 320 to 285 last week. So, if there's increased volatility in the Treasury market, you've got to be in the market to take advantage of an acquisition or refinancing. 

So, what can we do? Looking forward, what can you all do as people? What can we do? I pulled this slide. This is a photograph by a very good photographer named David Yarrow from Botswana. But I looked at this slide and said, “This is us coming together.” This is a community. This is a herd of elephants who are all kind of seemingly unnaturally next to one another. So, at W&D, you can see up in the rafters, we've got Community Starts Here, and we've launched the campaign, the community starts at Walker & Dunlop from a company standpoint, but also because the capital that we supply, all of you, allows all of you to create community. Community where people live, community where people work, community where people shop, community where people play. And so, I'm just going to run real quickly. A video that we have around community starts here. 

(Video plays) 

Start turning dreams into realities. Start new traditions. Start new friendships. And lifelong partnerships. Start paying it forward. Start saying hi to your neighbors. A better world begins with you, better communities start with us. 

Willy Walker: Eyes are on us. Eyes are on you. Every person in this room as we sit around, talk about inflationary pressures. There is not a person in this room who will be impacted by inflation. I'm sure there's someone in this room saying, “Oh, you don't know how high my gas bill is or you don't understand. I went to Whole Foods last week and my bill was 2X what it was a year ago.” Yeah, I hear you cost me $170 to fill up my truck. It's not fun, but that's not going to keep me from filling up my truck. It's the 80% of the population. It's the woman who came over to clean my house here in Sun Valley yesterday who drives an hour from Twin Falls and half of her hourly rate of cleaning my house went to filling up her car. That's where it crunches. And she's the one who's down in Twin Falls renting, who's looking for relief from a rent standpoint, and will go to a local politician and say, “Will you help me?” That's where inflation is going to bite. So, the eyes are on us to do things to make a difference in this world. And I think, first off, we need new leaders in this country. We need eagles who are pups today and not 82, 81 and 79 years old. The fact that the leaders of our country are as old as they are, no issues with anyone in the room, my lovely parents are both here. They're both in their eighties. I love them dearly with great respect to my father, who ran Walker & Dunlop brilliantly during his career I don't want them running the United States of America at his age today. We have to go find young leaders to run this country. We have to. We have to have confidence in them that they are going to be able to do a better job, that they understand where this world is going. But we have to find those emerging leaders. You think about right now on either side of the aisle, is there anyone really with a national brand who is under 50 years old? Not really. We've got to find people who can understand what's going on in our world, understand technology, understand how you manage the metaverse. 

I've read a bunch of Brené Brown recently. If you haven't read Brené Brown, I said this morning at breakfast with some people, one of my buddies, Danny Gabriel, said, “Who the hell is Brené Brown?” Brené Brown is wonderful. There are a couple of things here that I think are really important. Vulnerability is the birthplace of innovation and creativity, and yet the next line on this one says the greatest casualty of trauma is vulnerability. So, if you are trying to get creative and innovative employees, they must be able to be vulnerable and if they have experienced trauma, they won't be vulnerable. In a very divided society – when we have guns killing gay people, black people, Asian people, Jewish people – they are being traumatized. If you've got trauma in our society, you can't get people to be a creative and innovative. Period. So as long as we have domestic terrorism killing minority groups, we aren't going to get the innovation and the creativity that this country needs. I love this next one. Genius is 1% inspiration and 99% perspiration. You do not need to be Albert Einstein to create great companies or to create value. You need to be ready to perspire 99% of the time and get innovation and creativity to find that 1%. And the final one is: Stop working your shit out on other people. I love that, that's so Brené Brown. Only Brené Brown can say stuff like that but stop working your shit out on other people. 

The next one. Arthur Brooks From Strength to Strength to any of you in this room who are over 50 years old like I am, I cannot recommend this book more. It's all about finding meaning in the second half of your life. It is a phenomenal read. He talks about fluid and intelligence versus crystallized intelligence. To all of us and I put myself in that category because I just told you I'm over 50 years old. When we get older, we go from losing our fluid intelligence of being able to compute numbers. All of us who are a little bit older realize that we don't calculate a cap rate quite as quickly as we used to, but we have crystallized intelligence that allows us to take a lot of data points and pull them together to create meaning, leadership, and create ideas, crystallized intelligence. Everyone, as we get older, it's that crystallized intelligence that is so important. And Arthur Brooks talks a lot about it. The next one's a really good one. Satisfaction. What you have divided by what you want. If I have one and I want four, I'm a pretty unhappy person. I'm only 25% to where I want to go. If I have one and I want one, I'm 100% happy. Brooks from Brooks. Many of you know David Brooks, the writer for The New York Times. Arthur Brooks talks about David Brooks, about living for what you would call your legacy virtues versus your eulogy virtues. If you're out trying to create some great legacy. “I want Willy Walker to be X, Y and Z. And you ought to think about me for this and that.” Good luck if you focus on what your eulogy virtues are of what you want someone to talk about you when you die, you're on the right track. 

And then the final one, the Harvard Longitudinal Study Happy-Well versus Sad-Sick. They started studying the class of 1942 at Harvard (It's the longest standing longitudinal study of any cohort ever). They started studying in 1938 when they were freshmen. Most of the members of the class of ‘38 are now dead, and they're studying their children and their grandchildren. But what they basically do in the Harvard study is they follow these people, and at the end of their lives, they say, who's happy and who's sad? And there are two big things that determine whether someone had a happy life or a sad life. The first one is their health and taking care of themselves mentally and physically. And the second one is long standing relationships with people that they love. That's the two top issues. Taking care of yourself mentally and physically, and long-standing relationships with people you love. As you leave this conference, go find an uncommon bedfellow. As Governor Haslam says in his book from Matthew 5:44, Love Your Enemies. If we can get ourselves out of that tree, which we all climbed up together because we knew we needed to, to get up the tree. If we can get back down out of the tree, we can start dancing again. We don't have to be up in the tree looking down at mom and saying, where are we going? 

I pulled this slide out because I'm certain that there are people in this room who are sitting there and going, “That all sounds great and good, but I really believe, X and I won't tell you what I believe.” I'm hard right or hard left on some issue that I might not be proud of but truly I think that I feel it. And all I would say, from having talked to Bill Haslam last week, read Mitt Romney's article about what ails our country today and what we need from a political leadership standpoint – please try and think about modifying that thought. I had coffee with a friend of mine here in Sun Valley last week. Very successful guy. He went to Duke and then he went to Harvard Business School. And as he and I were talking, I asked him, “What do you support more, Duke or Harvard Business School?” And without skipping a beat and this friend of mine is Jewish and without skipping a beat, he goes, “Oh, the day they built a chapel on the Harvard Business School campus, I stopped giving to Harvard Business School.” It's a pretty strident view, particularly because the chapel on the Harvard Business School campus is a non-denominational chapel. It's also a pretty strident view because, to my understanding, in the middle of the Duke University campus, there is a big church. The reason I raise this and I'm not trying to poke at this one friend of mine, but if we all sit there and say, “I will not give to the Harvard Business School because they built a non-denominational chapel, which he incorrectly thought was a Christian church, we're going to continue to go to our corners. We're going to continue to drive the polarization of our country. So, I think, a) get your facts straight and b) try not to let that one issue which seems to stick in your craw drive your behavior. 

A quick public service announcement on a kangaroo trying to find shade under an umbrella. If the kangaroos are trying to find shade under the umbrella, our world has some problems coming to it. I have not spoken to anyone who's come to the Sun Valley Summer Conference over the last five years in the last 24 hours, who has not said to me, “Is it not cooler and is it not greener than I've ever seen in Sun Valley?” Yes. This summer is cooler and greener than it has ever been in Sun Valley because we got really lucky with some late rains and some late snows that were held in the mountains and have come down now to make July in Sun Valley blissful. I've been coming to this valley for 40 years and I can tell you that from 20 years ago to ten years ago, this is what July was like. This is what July was like. It's been almost ten years since we've had a July that looks like this. You can argue until you're blue in the face as it relates to global warming, and we're going to get technology to solve it and all that kind of stuff. We have a real water crisis. We have a real fire crisis. And in the Mountain West, unless we solve those things, we've got real issues. One interesting thing I had on the Walker Webcast, the head of ULI and Billy, who runs all their research on environmental issues, and I asked Billy, “What's a better place to have a commercial real estate building?” Phoenix, where the HVAC is running nine months of the year. Or Minneapolis, where the HVAC runs for four months of the year. Heating runs for four or five months of the year. And you get those shoulders where you might be not running the HVAC or the or the heating. And the answer, which surprised me, was Phoenix. And the reason is that HVAC systems, generally speaking, run off of clean fuel, whereas heating systems run off of dirty fuel. It's counterintuitive. But as we sit there and run towards electric cars, remember where a lot of the fuel to fuel those electric cars comes from? 

We had a funny conversation at my board dinner two nights ago of someone who was touting the fact that they have a Tesla and how great their Tesla is. And someone said, “Yeah, and it's powered by a coal burning power plant.” But as we drive towards this, one of the other reasons why we have so much inflation in our economy right now is because we're turning into a green economy, but we still want to use fossil fuels. And the federal government is not doing anything to bridge that gap. We need that gap bridged or else fuel costs are going to continue to go up because no one's investing in fossil fuels right now. 

Two final slides. I saw this picture and I thought, “Okay, we're the fish.” Two years ago, we were in that bird's mouth, and we were dead. We were flying along. And we're in its gullet and we're about to go into its stomach. And all of a sudden, for whatever reason, the bird coughed us up. So, we're now that fish. We're out of the bird's mouth. But the question is, are we falling into the lake that we just came out of or are we falling onto land? Let's hope we're still over the lake. 

And the final slide of my presentation is this one going back to what I used as the image of Jerome Powell – that's all of us today. That's every person in this room. Balancing between “Am I making investments and my pulling back? Am I making a difference in this world of helping make the politics that I live in better? Or am I actually feeding the beast and making them worse?” It is everyone in this room who can make a difference on these issues. You have not only the money, but you have the standing in your communities to influence these issues. And it's my hope that after being in Sun Valley for two days, hearing all the things that we talk about over the next two days, that all of you will go back and think about that balancing act and how you can make a difference on making it work and making our communities balanced. 

My final thoughts are thanks. Thanks to all of you for coming to Sun Valley. Thanks for all you do with Walker & Dunlop. It is a true joy to have you here with us, to see you, to engage with you. Two years ago, we had to cancel this conference. This face-to-face interaction is priceless. It is truly priceless to have you here with us to exchange ideas, to tell us what we're doing right, to tell us what we're doing wrong, and for you to be able to interact with your peers in the commercial real estate industry, to exchange ideas, potentially create partnerships, and be able to move out of here with new ideas and new opportunities. So, thank you very much and welcome to Sun Valley. 

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