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More on today's mortgage rate data and the state of the housing market. We're bringing in Jim Tobin, CEO of the National Association of Home Builders. Jim, it's great to see you here. Um, you know, a little bit of an uptick in rates here, but still seeing some progress on that front. Um, how are you guys thinking about this and how it plays into demand right now?

Well, they're certainly trending in the right direction. Uh you know, we were it wasn't too long ago that we were uh we were right at about 7%. So any relief in the mortgage uh the mortgage rates are going to be welcome, welcome news. Not only for the existing market which remains locked, uh but also the new home market, is we want we want to see more people and more activity, people willing to come off the sidelines, even even in a in a small, a small uptick this month, but but but still it's good news and we think it it uh it bodes well for the future.

Jim, I was talking to a couple of my friends, they bought a house just before the pandemic and they were telling me and the value on their homes have gone up 40, 50%. So I think they're reaching or they're at a point where they might just want to sell and and maybe get something bigger. But that brings up another question. Do you think 2025 will bring uh, let's say housing supply boom?

I do. I I think we're we're on the cusp of of a really good five or six years in the building industry. Once rates settle into a more predictable uh and and lower and and a lower rate, you know, we think by the end of 2025, uh we are we are certainly touching uh six, if not even lower, and then in 2026, we really think rates are going to settle into that five or five and a half space and that's really going to be the new normal and that's really what it's going to take for those existing home buyers that are sitting in three or four percent mortgages to realize that this probably is is where we're going to be for a while. And that's when the churn really starts. And I will say, you know, we're anticipating as well, perhaps a Fed cut here uh in September, which will be good news for home builders out there because the Fed funds rate really does translate into those borrowing costs that builders take out uh and and have to pay in order to start development. So we think there's some good news on the horizon here at the end of 2024.

Well, and Jim, that's sort of where I was going to go with you because it's great news if these guys are are building more, that they are able to sell, but it's been costing them, right? The stuff that they have been building, not just building the actual thing, not just labor, but also in the incentives that they've been offering to people to get to to move those homes. So at what point in this interest rate cycle do you think that that starts to sort of wane and your members can make better margins on the homes that they're selling?

Well, when when when rates fall and activity is is accelerated and we get more buyers in the marketplace, that that's where you're going to find a reduction in those incentives. You know, right now, and I travel across the country and visit our builders uh all over all over this uh over the US. And what we're seeing right now is a kind of a slow down in the market. Yes, rates have to do with it, but it's also where we headed as an economy. Uh we don't it's we know it's good, we certainly know it's getting better, but it still doesn't feel great, certainly enough to bite the bullet and make one of the largest purchases that most Americans make in their lives. Plus, you've got what has really been a crazy uh election cycle. And in the next administration and their different differing economic plans for how to continue to accelerate growth in this country and create a better recovery. That's really keeping people on the sidelines. So I think it's going to take a couple of things that are going to finally resolve themselves over the next several months, rates, the election, a feeling of the economy getting better, that that's really going to help people get off the sidelines even if rates are still elevated in in my mind, which means, you know, right around that six or six and a half percent.

Jim, which uh potential administration would be better for the housing market?

Oh, that's a that's a that is that is a loaded question. I'll I'll tell you I'll I'll I'll put it this way. I think I think both administrations have the potential uh to help the housing market. Uh with certainly President Trump, based on his first four years with a lower regulatory environment, that's something we welcome. Higher economic growth, that's a tide that lifts all boats. Uh the the the Harris administration, I think is going to be more of what we saw what we've seen from President Biden, which means a tougher regulatory environment, but also a focus on housing, more on the demand side. Uh but what we really need to do is is try to get this administration uh at least in the last several months here to focus on how do we add more supply to the marketplace. That's really what's going to solve this. It's supply. There's plenty of demand out there. Let's build more homes.

Jim Tobin, uh always great to see you. We'll talk to you soon.

Thank you.