This Is How the U.S. Ran Out of Homes for Sale

Joe Weisenthal (0:10)

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

Tracy Alloway (0:16)

And I'm Tracy Alloway.

Joe Weisenthal (0:18)

So Tracy, it's been a long time since I've visited you in Hong Kong, but one thing I remember, I know it's too long, and as soon as I can, whether like after the virus or whatever, I gotta make that happen.

Tracy Alloway (0:31)

Yeah, I totally agree. I just, I'm thinking like I haven't left this relatively small area for a year and a half now, and I am-

Joe Weisenthal (0:40)

You're getting stir crazy.

Tracy Alloway (0:41)

Yeah.

Joe Weisenthal (0:41)

But one thing that I remember like about Hong Kong is like people there like are just obsessed with like real estate, right? Like I just remember it just sort of like real estate buying, home buying, speculation, it just seemed to be in the air in Hong Kong.

Tracy Alloway (0:55)

Absolutely. It's sort of almost a way of life here. I guess it's the thing everyone aspires to is eventually owning a house. House prices are absolutely insane. There's a perpetual shortage of housing, although there's a big debate about whether that's in fact true or whether it's because of ill-considered government policy and things like that. But yes, if you walk down the street, almost every other building probably has some sort of real estate office in it.

And everyone just loves to talk about home buying, home prices, speculation.

Joe Weisenthal (1:31)

So I think in the US, it more like goes in waves. Like obviously, 2005, 2006, that was crazy. And then it sort of crashed for a while. But right now, I don't think there's any doubt that sort of like home buying mania, the desire to own a home is absolutely in a full swing in the United States.

Tracy Alloway (1:51)

Yeah, so even me over here in Hong Kong, I have seen some of these crazy news stories about house prices. I saw that one about someone put in an offer for a house and then said they would name their child after the seller if they got the house.

Crazy things like that. These are things that you would normally, well, maybe not normally, but you would find in the Hong Kong market, they seem to have been transferred over to the US where everyone is clamoring for, it seems like limited supply.

Joe Weisenthal (2:24)

Yeah, very much so. Every day, there's stories about someone putting up a home for sale and within five minutes, they get like five offers that are half a million dollars over their ask.

Tracy Alloway (2:35)

All cash.

Joe Weisenthal (2:36)

We are in housing mania here, but we are also basically running out of homes. And in theory, you just build a lot more, but putting that into practice is a lot harder, especially with the lumber shortage and the labor shortage and all the other shortages that we've talked about several times on the show before.

Tracy Alloway (2:53)

Yeah, so I feel like this is going to be another episode where we talk a lot about expectations and how those sort of feed into our existing reality. So, and obviously there's the lumber angle too, lumber being an important component into house prices. So I am looking forward to this one.

Joe Weisenthal (3:11)

I am very excited about this episode. So we're going to be speaking with Ali Wolf. She is the chief economist at Zonda, which is a housing data and consultancy firm. I've talked to her on TV a few times.

She has a fantastic perspective on the sort of nitty gritty level of what's really going on in the housing market. And we're going to ask her how the US ran out of home. So Ali, thank you so much for joining us.

Ali Wolf (3:36)

Hi Joe, hi Tracy. Thanks for having me.

Joe Weisenthal (3:38)

Absolutely excited you're here. So before we talk about, I mean, obviously we're going to get into the details of what's going on now and how the sort of housing market has gone nuts over the last year post COVID.

But I'd love for you to like set the scene a little bit. The housing market pre-COVID, because even before all this, there was a lot of talk about how in the wake of the great financial crisis, the US was already just under housed, that you could just see in the demographics and the volume of houses out there that if people wanted to own a home, there just wasn't enough housing stock out there to absorb it.

Ali Wolf (4:14)

Well, and that's a great place to pick it up is because when we think about the great financial crisis, there are so many people that are scarred from what happened. They remember maybe they lost their home, maybe they lost their job, maybe they saw friends or family. And I think that's often, when we think back to the great financial crisis, it's so much about, okay, how are the individuals dealing with it? Have they been able to get their wealth back after however long it's been since then? What we have to remember too is the builders were really at the forefront of that crisis, and they're scarred as well. And they were scarred, basically, I would say until 2020, there was a lot of fear on the builder side. I would hear stories of teams that would go from 500 to five during the great financial crisis, and there are division presidents that are still around, and they would say it was so hard to live through those periods.