Talk Your Book: The Housing Market with Mike Simonsen

Episode Summary

Executive Summary: Mike Simonson of Altos Research explains how real-time housing data has made the market more transparent and efficient, and why today’s housing dynamics are driven by low inventory, high mortgage rates, and homeowner lock-in rather than an imminent price collapse. He argues that rates shape both demand and supply, and that if rates fall, inventory could tighten again and prices may firm rather than fall.

Main Topics: Altos Research’s data model and business (Priority: 5/5): Simonson explains Altos tracks every U.S. home for sale weekly, serving realtors, loan officers, and institutional clients that need granular local housing intelligence. How data changed housing market transparency (Priority: 5/5): The discussion covers how real-time listing data replaced lagged monthly reporting, improving market efficiency and helping buyers, sellers, and agents make better decisions. Rates, inventory, and the key housing rule of thumb (Priority: 5/5): Simonson’s central framework is that higher mortgage rates raise inventory over time while lower rates reduce it, because rates affect both demand and the willingness of owners to sell. Why prices did not crash despite higher rates (Priority: 4/5): He addresses the surprise that home prices held up in 2023, citing equity cushions, investor buying, and the absence of forced selling as stabilizing forces. Buyer composition, lock-in, and the role of demographics (Priority: 4/5): The conversation explores who is buying homes now, including first-time buyers, boomers, and parent-assisted younger buyers, and how low-rate lock-in affects mobility. Regional divergence in housing conditions (Priority: 4/5): They discuss how markets like Florida, Texas, Arizona, and the Midwest are experiencing very different inventory and pricing trends, with former boom markets cooling and some northern markets tightening. Industry stress and technology shifts (Priority: 3/5): The housing transaction slowdown has pressured realtors and mortgage lenders, while automation, AI, and scale are helping some firms adapt.

Key Arguments: Real-time housing data makes the market more efficient by revealing active supply, price cuts, and demand shifts before official monthly reports. Housing inventory is strongly linked to mortgage rates: higher rates tend to raise inventory and lower rates tend to reduce it. The major driver of today’s housing market is not a supply flood but low transaction volume and homeowner reluctance to give up favorable mortgages. Price crashes are less likely when most owners have large equity cushions and cheap fixed-rate mortgages. Institutional landlords are not the main story; most rental and investment ownership is still driven by smaller investors and households. If mortgage rates fall meaningfully, demand will likely increase faster than supply, supporting prices and possibly shrinking inventory again. The housing slowdown has hurt real estate professionals and mortgage lenders by cutting transaction volume, even if consumers have benefited from more clarity. Regional housing trends matter more than national headlines: boom states are slowing while parts of the Midwest and Northeast are relatively tighter.

Data Points: Unsold single-family homes on market: 677,000 - Current inventory level cited for the U.S. housing market Inventory change year over year: 40% more than last year - Current inventory compared with the prior year Pre-pandemic inventory level: nearly 1 million homes for sale - End of July 2019 comparison Tracking coverage: every home for sale in the country every week - Altos Research’s core data collection approach Altos experience: 18 years - How long Simonson says he has been running Altos Research Homes removed from resale environment: 8 million or more - Estimate of homes shifted into second-home or investment-property use over the last decade+ Institutional share of market: 4% - Homes owned by companies with more than 1,000 homes, described as a small part of the market Mortgage rate hiking cycle: 500 basis points in 2022 - Referenced to explain the rapid rise in rates and inventory Housing price performance in 2023: finished the year up 5% - Simonson’s surprise that prices were resilient despite rate increases 2023 forecast range: flat to negative 5% - His prior expectation for national home prices Price-cut peak: November 2022 - Price reductions peaked before the subsequent spring market Mortgage industry employment decline: 40% to 60% fewer people - Rough estimate of staffing reduction in mortgage lending Austin inventory comparison: more homes on the market than since 2011 - Shows how far inventory has risen in a former boom market Insurance cost example in Florida: $500/month to $1,500/month - Illustrates why holding costs are pushing some properties back onto the market

Pivotal Quotes: "I think for sure. ... we could tell you the days on market for houses in San Jose, the day that Lehman brothers broke" — Mike Simonson: Explaining how real-time data revealed housing stress during the financial crisis "Inventory rises when rates rise, inventory falls when rates fall." — Mike Simonson: Core rule of thumb summarizing the housing market’s rate-inventory relationship "There is no signal of any flood of supply." — Mike Simonson: Why he does not expect a major national home price collapse

Implications: Listeners should expect housing to remain highly rate-sensitive and regionally uneven. Unless rates stay elevated for years, inventory may not normalize, and if rates fall, demand could re-accelerate and keep prices firm rather than trigger a crash.