Lecture Notes: Discussion with Ivy Zelman on the Housing Market

Introduction

• Introduction of Ivy Zelman, a prominent figure in the real estate industry.
• Ivy runs Zelman Associates, a Walker & Dunlop company.
• Over 30 years of experience on Wall Street and a highly followed analyst in the real estate space.

Current Housing Market Overview

• Discussion of the unprecedented events in the housing market over the last four years.
• Two of the biggest record years in mortgage space (2020, 2021) followed by three challenging years.
• Over 100,000 mortgage originators have left the industry due to constraints.

2025 Housing Market Outlook

• Initial expectations were for a rebound in existing home sales by 11% in 2025.
• Inventory levels national basis initially expected to rise 20-25% but recently reported at 18% increase.
• Expectations adjusted down due to higher rates and potential inflation.
• Market characterized as a "slow grind" mainly due to affordability challenges.
• Divergence in the market: high-end market performing well due to cash buyers and wealth effect.

Builders and New Home Market

• Builders using mortgage rate buy downs to stimulate sales despite rising interest rates.
• Expected slow growth in the new construction market and pricing expected to stabilize or decrease slightly.
• Home prices in some regions, like Cleveland, showing an 8% increase due to limited inventory.

Impact of Institutional Investors

• Discussion on the impact of private equity groups buying homes, which supports prices but limits supply.
• Risk of policy changes under the current administration affecting investors in the single-family rental market.

Affordability Concerns

• Strain on first-time homebuyers due to rising costs and stretched affordability.
• Increase in mortgage originations with high debt-to-income ratios, raising concerns about potential delinquencies.
• Rental market challenges with significant rent inflation.

Demographics and Housing Demand

• Millennials and Gen Z facing affordability challenges.
• Builders adapting by building smaller homes and offering multigenerational living options.
• Dual income households vital for maintaining housing affordability.

Economic Challenges

• Discussion on rising costs such as homeowners insurance impacting affordability.
• Migration patterns during COVID affecting regional housing markets.

Recommendations for Mortgage Originators

• Emphasis on building relationships with builders and targeting higher-end consumers.
• Focus on efficiency and expanding market presence to navigate potential headwinds.

Closing Remarks

• Potential risks to the housing market include tariffs and deportation policies affecting labor and costs.
• Importance of scaling and maintaining lean operations in anticipation of continued market challenges.