Jim Egan on the Mortgage Gap That's Dividing America

SPEAKER_2 (0:02)

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Tracy Alloway (0:18)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (0:22)

And I'm Joe Weisenthal.

Tracy Alloway (0:23)

Joe, there's been this very long running now, it feels, conversation about the health of the American consumer. You've seen all that commentary, right? So you see these headlines that are like, consumer debt at a record high, and you see some of the sentiment surveys, which have, for the past two years, been coming in pretty bad. They started to look kind of bad when all the tariffs were announced. Again, they've improved a bit since then. And yet, consumers seem to pretty much keep doing what they've been doing for a long time, which is spending, buying houses, things like that.

Joe Weisenthal (0:57)

Well, they're spending for sure. But this is the thing, there's all this dismal sentiment data everywhere you look, and yet by and large, you read like CEOs, you look at the retail data, et cetera. It's not like that terrible companies seem to be doing fine, but there are pockets of the economy clearly that are softening. There is rising inventory of homes. This is like one of the huge stories in the economy. So there are clear areas where high rates and stuff are having an effect. But to your point, like it has not been some sort of linear story of people are depressed and the economy is falling.

SPEAKER_2 (1:30)

But you're right.

Tracy Alloway (1:31)

We have seen some signs of softening. And so, you know, we have to ask, is it gonna be different this time? Is it the start of some sort of real deterioration in the health of the US consumer? I have also seen some very interesting stats recently, specifically about consumer lending and mortgages and things like that. I've seen, for instance, that existing home sales are down 1.9% year to date and have recorded the lowest volumes by count at this point in the year since 2009 And when you hear those, you know, since 2009 dates, you start to get a little worried, right?

Joe Weisenthal (2:09)

This is definitely the case. I saw something, I think it was from Redfin. They said there was a record gap between sellers and buyers in the housing market right now. Look, this is one area where the high rates environment, like, there's clearly something going on. We haven't gotten, like, big, you know, when rates shot up in, like, 20, late 2021 or whatever that was. Do you know what, by the way, 20, this occurred to me last night. 2021 is kind of a long time ago.

Like, I was thinking about this last night because it's sort of a cliche to point out that the pandemic 2020 was a long time ago. But some of those really pivotal years where we got the surge of the rate hikes, we got the surge in inflation, even that's starting to fade into history a little bit. I don't know. Maybe just last night I was thinking about getting old.

Tracy Alloway (2:54)

And Joe, time is a flat circle. That's all I'm gonna say.

Joe Weisenthal (2:56)

But there's something like, you know, house prices didn't fall off a cliff when rates were hiked dramatically, which was a surprise to some. Like some people thought, OK, they're hiking rates dramatically. The housing market is going to be affected. The housing market is the US economy. Therefore, the US economy will fall off a cliff. That did not happen. But there has been this slowdown. And lately we've been seeing like, OK, like rates are still high. Even with talk of rate cuts, et cetera, they're still high. And there's clearly this sort of accumulation of household inventory, these imbalances that are emerging. I don't know. Maybe we will get price declines. What's going to happen?

Tracy Alloway (3:30)

Well, I'm glad you brought that up because we actually do have the perfect guest. We're going to be speaking with someone who was very, very correct in calling that we wouldn't see a massive house price.

Joe Weisenthal (3:39)

I thought he was wrong. I didn't say it at the time, but he came on the podcast, like, we're not going to say. And I was like, there's no way. I'm glad I didn't say this. Why I never get anything wrong because I don't state predictions.

Tracy Alloway (3:48)

Because you don't have opinions.

Joe Weisenthal (3:49)

But as a matter of professional accountability, when we were interviewing him in my head, I was skeptical.

Tracy Alloway (3:54)

All right, well, that's a big mea culpa from Joe. Okay, without further ado, then, we are going to be speaking with Morgan Stanley housing strategist, Jim Egan. He's been on the show quite a few times before. And here's where I produce my disclaimer, which is that stat that I just quoted about existing home sales actually came from one of his recent notes. So Jim, welcome back to the show.