April 25, 2025 • 24 mins
On this week's show, host Craig Evans is back and he sits down with Jordan Levine, Senior Vice President and Chief Economist at the California Association of REALTORS®. They discuss California’s 2025 housing market outlook, the impact of rising interest rates, and how affordability challenges are shaping buyer behavior. Jordan also highlights key trends, the importance of policy in addressing housing supply, and what investors should be watching in the months ahead.
Jordan Levine is the SVP and Chief Economist at C.A.R., where he leads housing market research, economic analysis, and policy insights for over 190,000 real estate professionals. With a strong background in both public and private sectors, Jordan is known for translating complex data into practical insights. His work supports informed decisions across California’s evolving real estate landscape.
In this episode:
- Craig welcomes Jordan Levine, SVP & Chief Economist at California Association of REALTORS®
- Impact of interest rates on sales and affordability
- Current housing market performance & key trends
- Affordability index insights for buyers and investors
- Ongoing housing challenges and policy solutions
- Growth of ADUs and housing supply updates
- What to expect next in California real estate
The Norris Group originates and services loans in California and Florida under California DRE License 01219911, Florida Mortgage Lender License 1577, and NMLS License 1623669. For more information on hard money lending, go www.thenorrisgroup.com and click the Hard Money tab.
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Narrator (00:01):
Welcome to The Norris Group real estate podcast, a
show committed to bringing youinsights from thought leaders
shaping the real estateindustry. In each episode, we'll
dive into conversations withindustry experts and local
insiders, all aimed at helpingyou thrive in an ever-changing
real estate market. continuingthe legacy that Bruce Norris
(00:24):
created, sharing valuableknowledge, and empowering you on
your real estate journey.
Whether you're a seasoned pro ora newcomer, this is your go-to
source for insider tips, markettrends and success strategies.
Here's your host, Craig Evans.
Craig Evans (00:45):
Hey everybody. It is so exciting to be back. I
know I have been off for a fewweeks, but I am really excited
today. We have Jordan Levinewith us today. He is the SVP and
Chief Economist with CAR, theCalifornia Association of
Realtors, a statewide tradeorganization of real estate
professionals with more than190,000 members. Jordan helps to
(01:08):
oversee all housing marketresearch at CAR, including
market statistics, surveyresearch industry trends and
policy analysis for CAR's,legislative and governmental
affair efforts. One criticalcharacteristic that sets Jordan
apart from other numbercrunchers is his ability to
communicate complex economicconcepts and ideas in a clear
(01:33):
and effective style. Jordan hasa Bachelor's degree in economics
from UC Santa Barbara and aMaster's degree with Merit in
International Economics from theUniversity of Sussex. Jordan, I
can't thank you enough for beingon today, my friend. The last,
last conversation I had anybodyfrom CAR was actually with John
(01:55):
Sebree. Used to be the CEOthere. He and I got to know each
other very well, and reallyenjoyed conversations with him.
I know you had a lot ofinteraction with The Norris
Group over the years, and so Iappreciate you coming on and
pouring into our listeners todayand spending time with us, so .
Jordan Levine (02:15):
No, thank you so much for having me. I always
love talking real estate, andyou guys are actually kind of a
different angle from my realtormembers that I'm mostly talking
to, I would say 70, 80% of thetime. So this is fun for me. I
appreciate it.
Craig Evans (02:27):
Good, good, good, good. Well, listen, you know, we
all know there's a lot going onright now in the world of real
estate, economics, finance,everything. So let's just jump
right in, right? So I know atthe end of 2024 you know, lots
of people in the real estateindustry were very optimistic.
Looking back at the fourthquarter presentation that you
(02:48):
did on the 2025 outlook. What doyou think made everyone so
optimistic?
Jordan Levine (02:55):
I think we were looking at kind of continued
improvement in inflation, kindof getting inch by inch closer
to that Fed target. And I thinkthat the hope was that that
would lead to rate cuts. I thinkeverybody last year was so hyper
interest rate focused. That wasthe entire story. You know,
(03:16):
where rates up? Were they down?
You had buyers sitting on thesidelines. You had it causing
all kinds of, the, you know,challenges in commercial real
estate, all these loans are outthere, re upping, and multi
family and office in particular,having a tough time. And I think
folks thought, well, we're goingto, we're going to get there on
inflation next year. And thatmeans, you know, that
brother-in-law effect that folkstalk about all the time, where
(03:37):
you know that 3 or 4% interestrates always right around the
corner. I think people thoughtthis was going to be the the
year for that. I think for us,what underlied our forecast of
the 10% uptick in transactionswas both kind of a marginal
improvement in rates. I haven'tthought rates were going to
change much from where they'reat right now for a while, but we
(03:58):
did see more supply leading toadditional transactions, and we
are getting the supply piece butI think the thing that we didn't
bake into our forecast was justhow turbulent the environment
was going to be and how muchadditional uncertainty was going
to be injected in. Becauseactually, if you look at those
inventory numbers, sellers arestill selling, and we have more
(04:20):
listings coming online, and allof that stuff. But there's a
kind of cold foot element to themarket right now that's kind of
slowed our progress a bit.
Craig Evans (04:32):
Well, so out of the this, out of the stuff that you
were talking about, you know,through 2024, things like that.
And obviously there's a millionchanges, right? And the
turbulence in the bond marketand everything that's going on
right now, that's especially ifwe just take of interest rates,
(04:53):
right, if we look at fed, if welook at bond markets, the
turbulence of all of that. ButI'm always curious, you know,
when there's people like us thatare doing studies on the market
and looking at what are weforecasting, right? What do you
think the biggest thing that youwere forecasting, and you and
your team were forecasting thatdid come to fruition in spite of
(05:14):
the turbulence of the market?
Jordan Levine (05:16):
Yeah, I think the lock-in effect is easy. You
know, one of the biggestproblems in the housing market
over the last three years. Iknow not the one on the front
page. You know those. That's theinterest rate story, obviously.
But funny enough, interest ratesnow are pretty much in line with
historical averages. But it youknow those, the lock-in effect
is easing, because even aspeople are out there in these 3%
(05:38):
rates, and life happens, right?
And we've had a lot of yearsfrom that initial lock-in, when
people are out, you know,getting those three and 2.75s
and all that in 2021 you know,four years-ish has happened
since then. People get married,people have babies, you know,
people get divorced, all thatkind of stuff and so the
inventory has started to slowlycreep onto the market, and just,
(06:01):
you know, that's been thelimiting factor. And so we
thought most of that new supplywould get gobbled up. And I
think that the uncertainty pieceis where we really missed it,
but the actual underlying homesto sell are there.
Craig Evans (06:17):
Yeah, yeah, that's, it's even interesting. There's a
lot I want to go through withyou, and I'm trying not to go
all over the place, because I'vereally been looking forward to
getting you on to be able totalk with you. But you know, I
was reading the other day thatCalifornia has three of the top
hottest markets in the countryright now.
Jordan Levine (06:37):
Yes.
Craig Evans (06:37):
And for years, people have said, 'No,
California as a dying dog, asfar as the sales volume and
stuff' and you guys had yourstruggles, but I mean, you got
three of the hottest marketsgoing?
Jordan Levine (06:47):
Yeah, no. And it's interesting, because if you
look at the housing market as awhole, and you kind of break it
up into segments, then that'swhere the real story is. We talk
geography a lot, and people havebeen counting California out for
ages, right? But when you lookat GDP and jobs, we're punching
above our weight on all the kindof core economic stuff. I think
(07:07):
the transactions are terriblebecause supply is terrible,
right? And we just have neverhad the homes to sell. But what
you know, the segment stuffshows you that it's the top end
of the market that was doing it,even when rates were at 3% even
today, the growth that we'reseeing, the recovery, it's, you
know, and for us, that's 2million, 3 million, 5 million in
(07:27):
California, right? But it's thathigh end of the spectrum that's
really crushing it. And I thinkwhen you look at the housing
market nationwide through thelens of high income earners who
are really punching above theirweight and all of that stuff,
then it kind of starts to makesense why California is doing
it. Because we just have a bigchunk of those luxury markets.
Craig Evans (07:45):
Yeah. Well, listen, because there's some things I
want to get into, but before,before I dive deep down, I want
to because there's, there'ssomething that you guys put out
that I love, before we get intotoo much 2025 and what's going
on? Can you tell people how CARand you and your team generate
the affordability index that youdo? You know what all does that
(08:06):
incorporate?
Jordan Levine (08:08):
Yeah, so that's just a kind of metric that we
use to look at trends over time,to see what it's like for the
typical person out there, orwhat the typical home costs. And
so what we do every quarter iswe take the median close sale
price, whatever the homes areactually selling for out there
in the marketplace, closedtransactions, and then we take
(08:29):
that price and look at where thecurrent interest rate is at that
price point, and back out amonthly payment. And then we
look at, you know, what is theright amount of income that you
need to actually afford that,and economists typically use
something like 30 to 35% ofgross pay is what you should
spend on your housing costs forit to truly be affordable,
(08:52):
because you still gotta eat andbuy gas and pay taxes and all
that kind of stuff. So 35% isgenerally the right number, and
so we use that to kind of backinto okay, if you're spending
the right amount, we know whatinterest rates and prices are,
what your income need to be toactually afford that house.
Well, then we go out and look atthe census data and see how many
(09:12):
people in all these countiesactually earn that amount. And
that's where our affordabilityindex comes from, because it
actually is measuring thepercentage of people in that
given county who actually makeenough to afford that payment at
those kind of normal assumptionsof what's affordable. And when
it drops into the teens like wehave now, it's pretty scary,
(09:33):
because it means that 82% ofpeople in California, plus
cannot afford the payment on themedian priced home right now,
and that's how you get, youknow, big gaps in home
ownership, and all the stuffthat you see in California in
terms of bad housing outcomes,overcrowding and all that stuff.
Craig Evans (09:50):
Well. And that was, you know, the first time I met
Bruce. You know, we were talkingabout starting to build together
and things. And we did a bootcamp down in Florida for
investors. And, you know, I'vedone a lot of speaking. Bruce
has been speaking, you know, forforever in a day, right? And,
but I was fascinated as he wasgoing by. And all of a sudden he
(10:10):
started talking about thisaffordability number out of
California. And, I mean, it justsucked me into that world of,
you know, the how that's comingthrough, and how that was being
attained. And then all of asudden, he starts talking about
17%. 'Dude, wait a minute, ' youknow? And so I started looking
at the charts and whereeverything's because I'm a data
nerd. I love, I love data and hestarted, you know, he started
(10:33):
showing this and, and I waslooking like, man, so 17%
historically has been thatnumber where it's like, you
know, danger Will Robinson, youknow, like it's coming, right?
So where are you guys? Now,what's the number in California
look like that?
Jordan Levine (10:48):
It depends on where you are in the state. It
ranges from the single digits,actually, in some parts of the
Bay Area, where we're down inthe eight, 9% range, all the way
up to, I think, you know, evenour most affordable markets in
the Central Valley, Fresno andBakersfield and things like
that, we're still sub 50%sometimes in the 30s and 40s,
even in the places that are, youknow, by our standards, cheap
(11:10):
and it's because it's, you know,really comes back to that the
housing supply issue. But I'mactually that's why I'm kind of
lobbying it at work to changethe name to the housing
unaffordability index, and we'llstart reporting on the 85, 90%
of people that can't affordbecause, you know, the numbers
like getting too small to evenshow up on a chart now, so.
Craig Evans (11:31):
Well, you know, all right, so I listen. I've got a
list of questions a mile longthat I won't go through in a
month, but I'm gonna probablyask you about six of them.
Because as we'll talk, I'llstart like, 'Yeah, let's talk
about this now, right?'
Jordan Levine (11:44):
Go down the tangent, yeah. Let's go down
some rabbit holes.
Craig Evans (11:46):
Yeah. And that's one of the things I'm thinking,
you know, as a builder, as afund manager, you know
affordability, especially in ourequity fund, you know, our REIT
affordability is the main crisiswe're trying to tackle.
Jordan Levine (12:00):
Yeah.
Craig Evans (12:01):
So in the position you're in with CAR, how are you
guys approaching that inCalifornia, in a state where
it's almost impossible to gopull a permit anymore these
days, you know? And yeah, startsout so high, what, other than
ADUs,what's, what's the plan?
Jordan Levine (12:22):
Yeah, I mean, you know, it's, I'm a big proponent
of the all of the above kind ofapproach to housing, and I think
we need, you know, everythingfrom ADUs to multi family to,
you know, even more luxuryhousing and everything in
between. We're doing it kind ofat the state level with our
(12:42):
policy, you know, advocacyagenda that we do where we're
lobbying for, you know, stuff onenvironmental staff, right,
trying to get some reasonablereforms on things like CEQA,
right, and things like that. Ithink you gotta address it at
the local level too. And so wehave actually, like, field reps
that go out, and we have localassociations that are part of
(13:04):
the broader network that arevery active at their city
councils looking at things likepermit fees, like, you know, add
ons for bonds and other waysthat are trying to undermine
Prop 13 and, you know, increaseproperty taxes and things like
that. I think we're trying toalso work on the hearts and
(13:25):
minds piece, which inCalifornia, to me, is probably
equally as important as tacklingthe state policy and local
permitting rules and processstuff, because oftentimes you
find a lot of local resistanceto new development too. So,
yeah, both, you know, thestatewide stuff, I think, ties
these developments up for agesand jacks up the cost and
(13:47):
litigation, and just sitting onstuff that you can never break
ground on, and all that stuff,which is just adds up to less
affordability, right? You havethe actual hard costs or fees.
They're truly soft costs, Iguess, from the standpoint of
developer, but like the actualfees being imposed by these
jurisdictions for water metersand, you know, whatever else
stuff they're having on just thepermit fees themselves. But even
(14:10):
if you addressed all of that,you'd probably still have lines
and lines of people showing upthe planning commission saying,
'We don't want any newconstruction here. So I think
you got to do all three.'
Craig Evans (14:20):
Yeah, yeah. So, so with interest rates being what
they are, right, it's a hugefactor for buyers and sellers.
That makes it huge for realtors,right? Current monthly payment,
from what I'm reading, onaverage in California is little,
(14:41):
just shy of $5,300, a month?
Jordan Levine (14:44):
Yeah, yeah.
Craig Evans (14:46):
What do you what have you seen this year that
that's doing to the sales volumewithin California?
Jordan Levine (14:57):
Yes. I mean, you know, the affordability is
certainly the thing that reallyholds back the entry level of
the market, there's no doubtwe're also so inventory
constrained, though, that as youknow, those listings come
online, we're still more or lessselling them, because there's so
many high income folks out thereneeding places to live, and
(15:18):
rents still are, are no picnichere in in California, and so
they, you know, the although wewould see sales rebounding even
faster, right? But for ouraffordability crisis, I think
we're actually still moving inthe right direction, albeit at a
relatively tepid clip. So, youknow, it's really kind of
(15:41):
slowing the pace of growth, butit's not canceling it out, just
because there's still so muchpent up demand here in
California, which is actuallywhy you see prices still going
up too.
Craig Evans (15:50):
Yeah, well, because that's what. And Bruce and I've
talked about this a lot, and Iwas thinking about that actually
havinga conversation earliertoday with a group of people.
And we were literally talkingabout this, this aspect of you
know that if some of thesecomponents don't get fixed in
certain markets, like, let's sayCalifornia, you know that starts
(16:11):
to bring about challenges towhere, all of a sudden you've
got gaps in income possibilitiesfor certain components, like
realtors, right? If there's notenough homes to sell, all of a
sudden, regardless of the costof the homes, if you're pulling
volume out that can be 2030,whatever that percentage is, all
(16:31):
of a sudden, that's a cut in payto the realtors, because there's
just not enough volume there tosell, right? So that was as I
was working through that, I wasthinking about, that while,
yeah, interest rates plays a bigrole, but affordability and just
amount of volume of it, if thetransactions aren't there, you
(16:52):
know, because thing, whetherit's can't be built, can get out
of permitting. You know, we'vegot a, a somebody that works
with us through The Norris Groupthat had a property in
permitting, trying to get readyto go horizontal for 19 years.
Yeah, when you go through that,you're like, well, and how do we
get past this as a state, to beable to bring product to the,
(17:16):
you know, to the market. And theinteresting thing was, in
talking with him, the originaldesign on that was to be
affordable.
Jordan Levine (17:24):
Yeah.
Craig Evans (17:25):
After 19 years of cost, his basis had changed so
much, right? It's an interestingkind of you want to call it
dilemma that California is inof, how do we put that? How do
we fix that? You know.
Jordan Levine (17:39):
Yeah, no, and it's a quandary, and, and even
more depressing is that it'sreally, it's self inflicted,
too, and I would even go onefarther than what you did, which
is, you know, yeah, it's goingto be bad for realtors if we
can't generate transactions,obviously. But I think it's
bigger than even just realestate. You know, this is a
economic challenge, because ifyou look at at employers, right,
(18:00):
they can't pay their peopleenough to give them a good
quality of life, right? Even ifyou're maxing out your budget
for whatever that position is,that equates to this person
having to share an apartmentwith a buddy or something, or
not be able to buy a home andstay renting, even though you're
married and have a couple ofkids now and then those jobs in
Phoenix and Austin and stuffstart looking more attractive,
(18:24):
because, you know, when youcompare the wage and that,
again, just why theaffordability piece is so
important is because it takesthe cost and compares it to what
people actually make. You dothose calculations and other
states, and you don't have asbig of a problem. So I think
even more so than just for realestate, like, how are we going
to be able to grow our economywhen, you know, workers can't
(18:46):
have a solid quality of lifebecause they can't afford to
live anywhere, or they got tolive in subpar conditions with a
bunch of people, are overcrowdedand all of that kind of stuff.
So, yeah, I think you're evenhearing that, you know,
employers are starting to makenoise. There's, I did a event up
in the Monterey Peninsula area.
And there was a group from the,like, farm cooperative there,
and also a group from the techsector up just like slightly
(19:10):
north of that, both coming totalk about how they're building
employee housing. And I waslike, man. I was like, housing
is like the one thing that couldbring together, you know what I
mean, like leafy green farmersand the tech industry. And it's
like, you know, that wouldn't bethat's a symptom, I think, of
this affordability stuff we'retalkingabout.
Craig Evans (19:31):
So do you see any positive movement within the
state of things, through stategovernment, local governments,
starting to make moves, and Iguess even more so, are there
any local governments andmunicipalities that are starting
to make moves, trying to putthings, to bring stuff into
their local municipalities?
Jordan Levine (19:49):
Yeah, I think, you know, the ADU thing has been
pretty good, and although it'slimited, just because there's
not really great financingmechanisms out there for ADU
loans, there's not really a. Adatabase of like, here's what an
ADU rents for, so that you couldcount rental income towards, you
know, construction costs andstuff like that. There's all
kinds of weird stuff happening,but they're more palatable, I
(20:12):
think, to just the public atlarge, and it gives the locals a
bit of cover to approve more ofthat stuff without getting
yelled at, right and getting anearful from the citizenry. And
I've seen several cities acrossthe state that are doing like,
over the counter, you know, preapproved kind of ADU plans,
where you can go in and it'slike, one day and you pay the
fee and whatever, and you'relike, pretty much can get going
(20:35):
on that kind of stuff. So we'relong term homeowners, which
California, we got a ton ofpeople who have never moved and
sitting on a boatload of equitythose and we're also seeing that
kind of pair up with this multigenerational trend where you've
either got, like, adult kidsthat are bringing the parents
home to live with them, or, youknow, the older adult parents
with us. You know, young adultkid that's coming back after
(20:58):
college to start career, andall, all of that stuff kind of
dovetails in with these kind ofexpedited approvals on ADUs. And
actually, all of the growth,almost all the growth, I want to
say, like 95% of the uptick in"single family permitting" that
you see in California over thelast three years has been from
ADUs. So I think that's a stepin the right direction. The
other thing that has me somewhatoptimistic is just that people
(21:21):
start to get it. When I wasdoing this 10, 15, years ago,
you know, you'd say, oh, housingsupply is an issue. We don't
have enough units. And they'relike, What are you talking
about? There's a crane, youknow, down the street building
this giant apartment. But likewhen you looked at the numbers,
they were pitiful, still. Peopleare getting it now, when I talk
supply, they go, yeah, no, I getit. We have a supply crisis. And
(21:44):
I go, great. So can we buildsome housing here? And they go,
No, we still want you to buildit like, you know, down the
street, but at least we're kindof coming to some common ground
of what the problem is. And Ithink that's progress, at least.
Craig Evans (21:58):
What is the current rate in and you know, if you
don't know this off top of yourhead, I know I'm kind of
spitballing. It's just gettingme thinking about things that
are interesting now. But in,say, your top one or two markets
there in California, what's yourincoming versus outgoing, rate
of flow of inventory right nowper month?
Jordan Levine (22:22):
Well, I can tell you, like, where I live, I just
looked this morning for theweekly data. And, you know, I
live in a relatively smallcounty, in San Luis, Obispo, but
they're still churning. Likeit's still like a net deficit to
inventory. We're starting to eatinto it. So, like in my area, I
think we had like 15 closedtransactions per day, and we had
about 12 come online as newlistings and so we're eroding
(22:46):
it. But the other piece is thependings, like some of that's
just not showing up because wehad about an equal amount of
pending as what actually closed.
So we're starting to, I think,get into a net deficit on
supply, and those big doubledigit increases are going to
start tapering off as we getinto the spring home buying
season.
Craig Evans (23:04):
Yeah, you know the, I don't know what you guys are
seeing in that market. I mean,you know, typically we're seeing
27 to 30, 32% of those pendingsfall out. The rest of that hold
through and go through aclosing. Is that about what you
guys see in your local marketsthere?
Jordan Levine (23:24):
Yeah. And actually, even with all the
shenanigans of late in the stockmarket, we haven't seen a big
uptick yet and stuff fallingout. So, you know, people are,
you know, I think real estatetends to be a hedge too. So even
though there's uncertainty outthere, I think both with the
cost of rentals and all of thatstuff. And maybe, you know,
parking your stuff and in realestate makes sense. And why some
(23:45):
folks are trying to get it whileit's good.
Craig Evans (23:47):
Hey, that's going to do it this week with Jordan
Levine. Make sure and tune backnext week for the second half of
the show.
Narrator (23:53):
For more information on hard money loans, trust deed
investing, and upcoming eventswith The Norris group. Check out
thenorrisgroup.com. For moreinformation on passive investing
through the DBL Capital RealEstate Investment Fund, please
visit dblapital.com.
Joey Romero (24:12):
The Norris Group originates and services loans in
California and Florida underCalifornia DRE license 01219911.
Florida mortgage lender license1577 and NMLS license 1623669.
For more information on hardmoney lending go to
thenorrisgroup.com and click thehard money tab.
Welcome to The Norris Group real estate podcast, a
show committed to bringing youinsights from thought leaders
shaping the real estateindustry. In each episode, we'll
dive into conversations withindustry experts and local
insiders, all aimed at helpingyou thrive in an ever-changing
real estate market. continuingthe legacy that Bruce Norris
(00:24):
created, sharing valuableknowledge, and empowering you on
your real estate journey.
Whether you're a seasoned pro ora newcomer, this is your go-to
source for insider tips, markettrends and success strategies.
Here's your host, Craig Evans.
Craig Evans (00:45):
Hey everybody. It is so exciting to be back. I
know I have been off for a fewweeks, but I am really excited
today. We have Jordan Levinewith us today. He is the SVP and
Chief Economist with CAR, theCalifornia Association of
Realtors, a statewide tradeorganization of real estate
professionals with more than190,000 members. Jordan helps to
(01:08):
oversee all housing marketresearch at CAR, including
market statistics, surveyresearch industry trends and
policy analysis for CAR's,legislative and governmental
affair efforts. One criticalcharacteristic that sets Jordan
apart from other numbercrunchers is his ability to
communicate complex economicconcepts and ideas in a clear
(01:33):
and effective style. Jordan hasa Bachelor's degree in economics
from UC Santa Barbara and aMaster's degree with Merit in
International Economics from theUniversity of Sussex. Jordan, I
can't thank you enough for beingon today, my friend. The last,
last conversation I had anybodyfrom CAR was actually with John
(01:55):
Sebree. Used to be the CEOthere. He and I got to know each
other very well, and reallyenjoyed conversations with him.
I know you had a lot ofinteraction with The Norris
Group over the years, and so Iappreciate you coming on and
pouring into our listeners todayand spending time with us, so .
Jordan Levine (02:15):
No, thank you so much for having me. I always
love talking real estate, andyou guys are actually kind of a
different angle from my realtormembers that I'm mostly talking
to, I would say 70, 80% of thetime. So this is fun for me. I
appreciate it.
Craig Evans (02:27):
Good, good, good, good. Well, listen, you know, we
all know there's a lot going onright now in the world of real
estate, economics, finance,everything. So let's just jump
right in, right? So I know atthe end of 2024 you know, lots
of people in the real estateindustry were very optimistic.
Looking back at the fourthquarter presentation that you
(02:48):
did on the 2025 outlook. What doyou think made everyone so
optimistic?
Jordan Levine (02:55):
I think we were looking at kind of continued
improvement in inflation, kindof getting inch by inch closer
to that Fed target. And I thinkthat the hope was that that
would lead to rate cuts. I thinkeverybody last year was so hyper
interest rate focused. That wasthe entire story. You know,
(03:16):
where rates up? Were they down?
You had buyers sitting on thesidelines. You had it causing
all kinds of, the, you know,challenges in commercial real
estate, all these loans are outthere, re upping, and multi
family and office in particular,having a tough time. And I think
folks thought, well, we're goingto, we're going to get there on
inflation next year. And thatmeans, you know, that
brother-in-law effect that folkstalk about all the time, where
(03:37):
you know that 3 or 4% interestrates always right around the
corner. I think people thoughtthis was going to be the the
year for that. I think for us,what underlied our forecast of
the 10% uptick in transactionswas both kind of a marginal
improvement in rates. I haven'tthought rates were going to
change much from where they'reat right now for a while, but we
(03:58):
did see more supply leading toadditional transactions, and we
are getting the supply piece butI think the thing that we didn't
bake into our forecast was justhow turbulent the environment
was going to be and how muchadditional uncertainty was going
to be injected in. Becauseactually, if you look at those
inventory numbers, sellers arestill selling, and we have more
(04:20):
listings coming online, and allof that stuff. But there's a
kind of cold foot element to themarket right now that's kind of
slowed our progress a bit.
Craig Evans (04:32):
Well, so out of the this, out of the stuff that you
were talking about, you know,through 2024, things like that.
And obviously there's a millionchanges, right? And the
turbulence in the bond marketand everything that's going on
right now, that's especially ifwe just take of interest rates,
(04:53):
right, if we look at fed, if welook at bond markets, the
turbulence of all of that. ButI'm always curious, you know,
when there's people like us thatare doing studies on the market
and looking at what are weforecasting, right? What do you
think the biggest thing that youwere forecasting, and you and
your team were forecasting thatdid come to fruition in spite of
(05:14):
the turbulence of the market?
Jordan Levine (05:16):
Yeah, I think the lock-in effect is easy. You
know, one of the biggestproblems in the housing market
over the last three years. Iknow not the one on the front
page. You know those. That's theinterest rate story, obviously.
But funny enough, interest ratesnow are pretty much in line with
historical averages. But it youknow those, the lock-in effect
is easing, because even aspeople are out there in these 3%
(05:38):
rates, and life happens, right?
And we've had a lot of yearsfrom that initial lock-in, when
people are out, you know,getting those three and 2.75s
and all that in 2021 you know,four years-ish has happened
since then. People get married,people have babies, you know,
people get divorced, all thatkind of stuff and so the
inventory has started to slowlycreep onto the market, and just,
(06:01):
you know, that's been thelimiting factor. And so we
thought most of that new supplywould get gobbled up. And I
think that the uncertainty pieceis where we really missed it,
but the actual underlying homesto sell are there.
Craig Evans (06:17):
Yeah, yeah, that's, it's even interesting. There's a
lot I want to go through withyou, and I'm trying not to go
all over the place, because I'vereally been looking forward to
getting you on to be able totalk with you. But you know, I
was reading the other day thatCalifornia has three of the top
hottest markets in the countryright now.
Jordan Levine (06:37):
Yes.
Craig Evans (06:37):
And for years, people have said, 'No,
California as a dying dog, asfar as the sales volume and
stuff' and you guys had yourstruggles, but I mean, you got
three of the hottest marketsgoing?
Jordan Levine (06:47):
Yeah, no. And it's interesting, because if you
look at the housing market as awhole, and you kind of break it
up into segments, then that'swhere the real story is. We talk
geography a lot, and people havebeen counting California out for
ages, right? But when you lookat GDP and jobs, we're punching
above our weight on all the kindof core economic stuff. I think
(07:07):
the transactions are terriblebecause supply is terrible,
right? And we just have neverhad the homes to sell. But what
you know, the segment stuffshows you that it's the top end
of the market that was doing it,even when rates were at 3% even
today, the growth that we'reseeing, the recovery, it's, you
know, and for us, that's 2million, 3 million, 5 million in
(07:27):
California, right? But it's thathigh end of the spectrum that's
really crushing it. And I thinkwhen you look at the housing
market nationwide through thelens of high income earners who
are really punching above theirweight and all of that stuff,
then it kind of starts to makesense why California is doing
it. Because we just have a bigchunk of those luxury markets.
Craig Evans (07:45):
Yeah. Well, listen, because there's some things I
want to get into, but before,before I dive deep down, I want
to because there's, there'ssomething that you guys put out
that I love, before we get intotoo much 2025 and what's going
on? Can you tell people how CARand you and your team generate
the affordability index that youdo? You know what all does that
(08:06):
incorporate?
Jordan Levine (08:08):
Yeah, so that's just a kind of metric that we
use to look at trends over time,to see what it's like for the
typical person out there, orwhat the typical home costs. And
so what we do every quarter iswe take the median close sale
price, whatever the homes areactually selling for out there
in the marketplace, closedtransactions, and then we take
(08:29):
that price and look at where thecurrent interest rate is at that
price point, and back out amonthly payment. And then we
look at, you know, what is theright amount of income that you
need to actually afford that,and economists typically use
something like 30 to 35% ofgross pay is what you should
spend on your housing costs forit to truly be affordable,
(08:52):
because you still gotta eat andbuy gas and pay taxes and all
that kind of stuff. So 35% isgenerally the right number, and
so we use that to kind of backinto okay, if you're spending
the right amount, we know whatinterest rates and prices are,
what your income need to be toactually afford that house.
Well, then we go out and look atthe census data and see how many
(09:12):
people in all these countiesactually earn that amount. And
that's where our affordabilityindex comes from, because it
actually is measuring thepercentage of people in that
given county who actually makeenough to afford that payment at
those kind of normal assumptionsof what's affordable. And when
it drops into the teens like wehave now, it's pretty scary,
(09:33):
because it means that 82% ofpeople in California, plus
cannot afford the payment on themedian priced home right now,
and that's how you get, youknow, big gaps in home
ownership, and all the stuffthat you see in California in
terms of bad housing outcomes,overcrowding and all that stuff.
Craig Evans (09:50):
Well. And that was, you know, the first time I met
Bruce. You know, we were talkingabout starting to build together
and things. And we did a bootcamp down in Florida for
investors. And, you know, I'vedone a lot of speaking. Bruce
has been speaking, you know, forforever in a day, right? And,
but I was fascinated as he wasgoing by. And all of a sudden he
(10:10):
started talking about thisaffordability number out of
California. And, I mean, it justsucked me into that world of,
you know, the how that's comingthrough, and how that was being
attained. And then all of asudden, he starts talking about
17%. 'Dude, wait a minute, ' youknow? And so I started looking
at the charts and whereeverything's because I'm a data
nerd. I love, I love data and hestarted, you know, he started
(10:33):
showing this and, and I waslooking like, man, so 17%
historically has been thatnumber where it's like, you
know, danger Will Robinson, youknow, like it's coming, right?
So where are you guys? Now,what's the number in California
look like that?
Jordan Levine (10:48):
It depends on where you are in the state. It
ranges from the single digits,actually, in some parts of the
Bay Area, where we're down inthe eight, 9% range, all the way
up to, I think, you know, evenour most affordable markets in
the Central Valley, Fresno andBakersfield and things like
that, we're still sub 50%sometimes in the 30s and 40s,
even in the places that are, youknow, by our standards, cheap
(11:10):
and it's because it's, you know,really comes back to that the
housing supply issue. But I'mactually that's why I'm kind of
lobbying it at work to changethe name to the housing
unaffordability index, and we'llstart reporting on the 85, 90%
of people that can't affordbecause, you know, the numbers
like getting too small to evenshow up on a chart now, so.
Craig Evans (11:31):
Well, you know, all right, so I listen. I've got a
list of questions a mile longthat I won't go through in a
month, but I'm gonna probablyask you about six of them.
Because as we'll talk, I'llstart like, 'Yeah, let's talk
about this now, right?'
Jordan Levine (11:44):
Go down the tangent, yeah. Let's go down
some rabbit holes.
Craig Evans (11:46):
Yeah. And that's one of the things I'm thinking,
you know, as a builder, as afund manager, you know
affordability, especially in ourequity fund, you know, our REIT
affordability is the main crisiswe're trying to tackle.
Jordan Levine (12:00):
Yeah.
Craig Evans (12:01):
So in the position you're in with CAR, how are you
guys approaching that inCalifornia, in a state where
it's almost impossible to gopull a permit anymore these
days, you know? And yeah, startsout so high, what, other than
ADUs,what's, what's the plan?
Jordan Levine (12:22):
Yeah, I mean, you know, it's, I'm a big proponent
of the all of the above kind ofapproach to housing, and I think
we need, you know, everythingfrom ADUs to multi family to,
you know, even more luxuryhousing and everything in
between. We're doing it kind ofat the state level with our
(12:42):
policy, you know, advocacyagenda that we do where we're
lobbying for, you know, stuff onenvironmental staff, right,
trying to get some reasonablereforms on things like CEQA,
right, and things like that. Ithink you gotta address it at
the local level too. And so wehave actually, like, field reps
that go out, and we have localassociations that are part of
(13:04):
the broader network that arevery active at their city
councils looking at things likepermit fees, like, you know, add
ons for bonds and other waysthat are trying to undermine
Prop 13 and, you know, increaseproperty taxes and things like
that. I think we're trying toalso work on the hearts and
(13:25):
minds piece, which inCalifornia, to me, is probably
equally as important as tacklingthe state policy and local
permitting rules and processstuff, because oftentimes you
find a lot of local resistanceto new development too. So,
yeah, both, you know, thestatewide stuff, I think, ties
these developments up for agesand jacks up the cost and
(13:47):
litigation, and just sitting onstuff that you can never break
ground on, and all that stuff,which is just adds up to less
affordability, right? You havethe actual hard costs or fees.
They're truly soft costs, Iguess, from the standpoint of
developer, but like the actualfees being imposed by these
jurisdictions for water metersand, you know, whatever else
stuff they're having on just thepermit fees themselves. But even
(14:10):
if you addressed all of that,you'd probably still have lines
and lines of people showing upthe planning commission saying,
'We don't want any newconstruction here. So I think
you got to do all three.'
Craig Evans (14:20):
Yeah, yeah. So, so with interest rates being what
they are, right, it's a hugefactor for buyers and sellers.
That makes it huge for realtors,right? Current monthly payment,
from what I'm reading, onaverage in California is little,
(14:41):
just shy of $5,300, a month?
Jordan Levine (14:44):
Yeah, yeah.
Craig Evans (14:46):
What do you what have you seen this year that
that's doing to the sales volumewithin California?
Jordan Levine (14:57):
Yes. I mean, you know, the affordability is
certainly the thing that reallyholds back the entry level of
the market, there's no doubtwe're also so inventory
constrained, though, that as youknow, those listings come
online, we're still more or lessselling them, because there's so
many high income folks out thereneeding places to live, and
(15:18):
rents still are, are no picnichere in in California, and so
they, you know, the although wewould see sales rebounding even
faster, right? But for ouraffordability crisis, I think
we're actually still moving inthe right direction, albeit at a
relatively tepid clip. So, youknow, it's really kind of
(15:41):
slowing the pace of growth, butit's not canceling it out, just
because there's still so muchpent up demand here in
California, which is actuallywhy you see prices still going
up too.
Craig Evans (15:50):
Yeah, well, because that's what. And Bruce and I've
talked about this a lot, and Iwas thinking about that actually
havinga conversation earliertoday with a group of people.
And we were literally talkingabout this, this aspect of you
know that if some of thesecomponents don't get fixed in
certain markets, like, let's sayCalifornia, you know that starts
(16:11):
to bring about challenges towhere, all of a sudden you've
got gaps in income possibilitiesfor certain components, like
realtors, right? If there's notenough homes to sell, all of a
sudden, regardless of the costof the homes, if you're pulling
volume out that can be 2030,whatever that percentage is, all
(16:31):
of a sudden, that's a cut in payto the realtors, because there's
just not enough volume there tosell, right? So that was as I
was working through that, I wasthinking about, that while,
yeah, interest rates plays a bigrole, but affordability and just
amount of volume of it, if thetransactions aren't there, you
(16:52):
know, because thing, whetherit's can't be built, can get out
of permitting. You know, we'vegot a, a somebody that works
with us through The Norris Groupthat had a property in
permitting, trying to get readyto go horizontal for 19 years.
Yeah, when you go through that,you're like, well, and how do we
get past this as a state, to beable to bring product to the,
(17:16):
you know, to the market. And theinteresting thing was, in
talking with him, the originaldesign on that was to be
affordable.
Jordan Levine (17:24):
Yeah.
Craig Evans (17:25):
After 19 years of cost, his basis had changed so
much, right? It's an interestingkind of you want to call it
dilemma that California is inof, how do we put that? How do
we fix that? You know.
Jordan Levine (17:39):
Yeah, no, and it's a quandary, and, and even
more depressing is that it'sreally, it's self inflicted,
too, and I would even go onefarther than what you did, which
is, you know, yeah, it's goingto be bad for realtors if we
can't generate transactions,obviously. But I think it's
bigger than even just realestate. You know, this is a
economic challenge, because ifyou look at at employers, right,
(18:00):
they can't pay their peopleenough to give them a good
quality of life, right? Even ifyou're maxing out your budget
for whatever that position is,that equates to this person
having to share an apartmentwith a buddy or something, or
not be able to buy a home andstay renting, even though you're
married and have a couple ofkids now and then those jobs in
Phoenix and Austin and stuffstart looking more attractive,
(18:24):
because, you know, when youcompare the wage and that,
again, just why theaffordability piece is so
important is because it takesthe cost and compares it to what
people actually make. You dothose calculations and other
states, and you don't have asbig of a problem. So I think
even more so than just for realestate, like, how are we going
to be able to grow our economywhen, you know, workers can't
(18:46):
have a solid quality of lifebecause they can't afford to
live anywhere, or they got tolive in subpar conditions with a
bunch of people, are overcrowdedand all of that kind of stuff.
So, yeah, I think you're evenhearing that, you know,
employers are starting to makenoise. There's, I did a event up
in the Monterey Peninsula area.
And there was a group from the,like, farm cooperative there,
and also a group from the techsector up just like slightly
(19:10):
north of that, both coming totalk about how they're building
employee housing. And I waslike, man. I was like, housing
is like the one thing that couldbring together, you know what I
mean, like leafy green farmersand the tech industry. And it's
like, you know, that wouldn't bethat's a symptom, I think, of
this affordability stuff we'retalkingabout.
Craig Evans (19:31):
So do you see any positive movement within the
state of things, through stategovernment, local governments,
starting to make moves, and Iguess even more so, are there
any local governments andmunicipalities that are starting
to make moves, trying to putthings, to bring stuff into
their local municipalities?
Jordan Levine (19:49):
Yeah, I think, you know, the ADU thing has been
pretty good, and although it'slimited, just because there's
not really great financingmechanisms out there for ADU
loans, there's not really a. Adatabase of like, here's what an
ADU rents for, so that you couldcount rental income towards, you
know, construction costs andstuff like that. There's all
kinds of weird stuff happening,but they're more palatable, I
(20:12):
think, to just the public atlarge, and it gives the locals a
bit of cover to approve more ofthat stuff without getting
yelled at, right and getting anearful from the citizenry. And
I've seen several cities acrossthe state that are doing like,
over the counter, you know, preapproved kind of ADU plans,
where you can go in and it'slike, one day and you pay the
fee and whatever, and you'relike, pretty much can get going
(20:35):
on that kind of stuff. So we'relong term homeowners, which
California, we got a ton ofpeople who have never moved and
sitting on a boatload of equitythose and we're also seeing that
kind of pair up with this multigenerational trend where you've
either got, like, adult kidsthat are bringing the parents
home to live with them, or, youknow, the older adult parents
with us. You know, young adultkid that's coming back after
(20:58):
college to start career, andall, all of that stuff kind of
dovetails in with these kind ofexpedited approvals on ADUs. And
actually, all of the growth,almost all the growth, I want to
say, like 95% of the uptick in"single family permitting" that
you see in California over thelast three years has been from
ADUs. So I think that's a stepin the right direction. The
other thing that has me somewhatoptimistic is just that people
(21:21):
start to get it. When I wasdoing this 10, 15, years ago,
you know, you'd say, oh, housingsupply is an issue. We don't
have enough units. And they'relike, What are you talking
about? There's a crane, youknow, down the street building
this giant apartment. But likewhen you looked at the numbers,
they were pitiful, still. Peopleare getting it now, when I talk
supply, they go, yeah, no, I getit. We have a supply crisis. And
(21:44):
I go, great. So can we buildsome housing here? And they go,
No, we still want you to buildit like, you know, down the
street, but at least we're kindof coming to some common ground
of what the problem is. And Ithink that's progress, at least.
Craig Evans (21:58):
What is the current rate in and you know, if you
don't know this off top of yourhead, I know I'm kind of
spitballing. It's just gettingme thinking about things that
are interesting now. But in,say, your top one or two markets
there in California, what's yourincoming versus outgoing, rate
of flow of inventory right nowper month?
Jordan Levine (22:22):
Well, I can tell you, like, where I live, I just
looked this morning for theweekly data. And, you know, I
live in a relatively smallcounty, in San Luis, Obispo, but
they're still churning. Likeit's still like a net deficit to
inventory. We're starting to eatinto it. So, like in my area, I
think we had like 15 closedtransactions per day, and we had
about 12 come online as newlistings and so we're eroding
(22:46):
it. But the other piece is thependings, like some of that's
just not showing up because wehad about an equal amount of
pending as what actually closed.
So we're starting to, I think,get into a net deficit on
supply, and those big doubledigit increases are going to
start tapering off as we getinto the spring home buying
season.
Craig Evans (23:04):
Yeah, you know the, I don't know what you guys are
seeing in that market. I mean,you know, typically we're seeing
27 to 30, 32% of those pendingsfall out. The rest of that hold
through and go through aclosing. Is that about what you
guys see in your local marketsthere?
Jordan Levine (23:24):
Yeah. And actually, even with all the
shenanigans of late in the stockmarket, we haven't seen a big
uptick yet and stuff fallingout. So, you know, people are,
you know, I think real estatetends to be a hedge too. So even
though there's uncertainty outthere, I think both with the
cost of rentals and all of thatstuff. And maybe, you know,
parking your stuff and in realestate makes sense. And why some
(23:45):
folks are trying to get it whileit's good.
Craig Evans (23:47):
Hey, that's going to do it this week with Jordan
Levine. Make sure and tune backnext week for the second half of
the show.
Narrator (23:53):
For more information on hard money loans, trust deed
investing, and upcoming eventswith The Norris group. Check out
thenorrisgroup.com. For moreinformation on passive investing
through the DBL Capital RealEstate Investment Fund, please
visit dblapital.com.
Joey Romero (24:12):
The Norris Group originates and services loans in
California and Florida underCalifornia DRE license 01219911.
Florida mortgage lender license1577 and NMLS license 1623669.
For more information on hardmoney lending go to
thenorrisgroup.com and click thehard money tab.
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