May 2, 2025 • 23 mins
In the second part of our interview, Craig Evans and Jordan Levine explore the Federal Reserve’s approach to inflation, the risk of stagflation, and how rising interest rates are impacting market volatility and unemployment. They also examine the economic effects of tariffs, shifting housing market trends, and the growing burden of insurance costs on home affordability. The conversation highlights concerns from realtors, ongoing policy advocacy efforts, and ends on a hopeful note with a cautiously optimistic outlook for the economy in 2025.
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:
- Inflation vs. Unemployment: Jordan Levine shares insights on why the Fed may prioritize inflation control over rate cuts, even at the cost of higher unemployment.
- Market Volatility and Monetary Policy: How shifting Fed policies are influencing stock market trends and investor confidence.
- Tariffs and the U.S. Economy: Exploring the economic ripple effects of tariffs and trade policy decisions.
- Housing Market Insights: Current housing trends, buyer behavior shifts, and affordability challenges in a changing economy.
- Insurance Market Disruptions: Craig Evans and Jordan Levine discuss how soaring insurance premiums are impacting homeowners and housing affordability.
- Realtor Concerns and Policy Advocacy
- Looking Ahead to 2025: Reasons for optimism and what to expect from the economy and real estate market in the coming year.
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 (00:43):
Hey guys, good to have you back. Thanks for
joining us for the second halfof the show with Jordan Levine.
Let's get started. Let's talkabout a few things. There's you
know, and when I say rates, Iwant to be careful, because a
lot of times, if I'm talkingabout rates, everybody just
assumes that I'm talking aboutinterest rates, but I want to
talk about Fed rates and shortterm money. You know, what do
(01:07):
you think about where the Fed'sat right now, based on what's
happening with tariffs, where,you know, we're kind of in a
sticky kind of type of inflationtype of scenario right now?
What's your thought on what theFed's doing, not doing that type
of process?
Jordan Levine (01:23):
Yeah, I think the Fed's going to be in a tough
spot coming up, you know. Ithink, you know, Stagflation is
like a super nerdy, esotericterm, but, it's one that's, you
know, it just means that theFed's in a hard spot. The way
that the economy normally worksis like, you know, I guess
(01:45):
growth and inflation tend tousually go together, right? So,
like, when the economy is reallygrowing gangbusters, that's
inflationary because we'reconsuming all the resources and
everybody's full employed, we'rehaving to pay people more and
all that kind of stuff. When youget those two things move in an
opposite direction. Well, Iguess the the reason why that's
good is it makes it easy on theFed, right? It's like you get
(02:06):
lots of inflation. It's becausethe economy is going too strong,
great. You you have one weapon,which is the interest rate that
you can raise or lower. And youraise the rate, right? And that
kills off the economy. It killsoff the inflation. Go back to
target, you can lower ratesagain. And that's great, right?
But when they're moving inopposite directions, and you
have an economy that's maybe inrecession because of, you know,
(02:28):
these tariffs, or otherfinancial market, you know,
declines, or something likethat, but you've still got the
inflation, then how do you useyour one weapon, right? You've
got an interest rate, and youcan raise it to kill off the
inflation, hopefully, but it'snot really over consumption
driven inflation. It's tariffdriven inflation, and so that
(02:50):
doesn't work so good. And plus,you're already in a recession,
and that just makes therecession even more, you know,
even deeper, because now it'smore costly to borrow to make my
car payment, blah, blah, blah,and so now you've got inflation
and a recession with only oneweapon that you know you got to
pick which thing you're going tocure. And again, that puts them
(03:11):
in a tough spot. From where Isit, I think they're going to
err on the side of keeping a lidon inflation. They're not going
to start cutting rates and getscared off by a little bit of
rising unemployment. They reallywant to see inflation stamped
out. I think he has. I thinkhe's eyes wide open, maybe that
he won't be around orrenominated anyway, so I don't
know that he's going to be, youknow, cow town, what the policy
(03:34):
side wants him to do. And Ithink he'll stick to his guns on
the inflation. To me, that justmeans that we're not going to
get deep and precipitous cutsfrom the Fed, I think what
they've projected, maybe 50, 100basis points on the extreme
outside, I think, is like thebest we can hope for. And if you
hold that short term rate upagainst where 10 years at, I
don't think that gives 10 yearsmuch room to fall honestly.
Craig Evans (03:56):
Well, and that's what I was looking at, our our,
you know, our 10 year spread,we're fluctuating the spread on
the yield. I mean, we're, youknow, historically, we're point
a quarter point half. I mean,we're fluctuating between 2.3
and 2.6 so even that spread ishigh. There's so much more room
to move. And we were droppingdown towards the end of last
(04:17):
year to where that spread wastightening. Do you, I'm curious
to hear your thoughts. Do youthink the the Fed has has
ability to to calm the some ofthe volatility in the market,
especially when we're dealingwith with bonds, things like
(04:37):
that?
Jordan Levine (04:41):
I think there's a limit to what we can expect out
of the Fed in terms of justkeeping the lid on things only,
you know, I think the best thingthey can do is kind of be
predictable, right? And notthrow any more curveballs and
kind of stick to the glide pathand all of that stuff. But I
think, you know, the two yearsmoving around based on the news,
right? And so every time there'sa new thing, whatever that thing
(05:04):
of the day is, you know, that'sgonna send that the two year up
and down and all over the map.
And I think that's still gonnabe a roller coaster ride. And I
think that's why you talkedabout the yield curve kind of
getting a little bit wider.
That's mostly because the twoyear freaked out, right? And so,
yeah, so I think you're going tocontinue to see a lot of
volatility in the short run,unless things calm down, you
(05:27):
know, and there's not any crazynews stories happening. But I
think the short run rates arevery current event driven, and
to that extent, I think you canjust keep that seat back and
trade table and all that stuff.
Craig Evans (05:39):
It's been interesting to watch, you know,
the two year, the 10 year, overthe last month, month a half,
and really even in the last twoto three weeks. And the amount
of volatility within a one dayspan on the amount of bips that
that thing moves, is crazy. It'sbeen mind blowing to see
(06:02):
something that is typically slowmoving and steady, that is
moving four and five dips withina matter of of hours, you know?
Jordan Levine (06:12):
Yeah, when you go to school for finance and
economics, that's why nobodywants to go be a bond trader.
That's like, supposed to be theboring thing, right? It's like,
I want to do equities. Let's goand, like, where all the action
is. No, not anymore. Are yougoing to be at PIMCO now or
something?
Craig Evans (06:25):
Oh, well, listen, let's, let's talk some about
tariffs, inflation, some thingslike that. What do you believe
will be some of the impacts thatwe'll see on tariffs? And are
you guys in California alreadyseeing any of the impacts on the
tariffs, from the tariffs?
Jordan Levine (06:41):
Yeah, I think it just, you know, ultimately, from
my standpoint, it exacerbates,like, the challenges that
California is already facing. Wetalked about permit fees and all
the, you know, challenges thatwe have, getting new inventory
online. And one of my friends,who's a economist, or she was an
economist down in San Diego, dida study, I think she's showed
(07:01):
average cost is like, over 200grand before we even stick a
shovel in the dirt. And then wewonder why we can't have
$250,000 homes and that kind ofstuff. But I think looking
through this policy, throughthat kind of a lens, you know,
it, you know, we get a lot ofour lumber from overseas. We get
a lot of our drywall and stufffrom Mexico, right? And so we
(07:22):
have all these, you know, costs,and I think this exacerbates the
cost stuff. I think, you know,there's a labor force angle to
this as well, right? Not justwith the tariffs, but if we're,
you know, cracking down on, youknow, non citizen labor and
things like that, then it just,you know, not only are we paying
more for the raw materials now,it's tougher to find trades
(07:44):
people and, you know, all ofthat stuff, and I think it all
adds up to higher costs. Ithink, you know, there's also
the buy side, like consumerzeitgeist, piece of it, right?
And all the uncertainty, where,even though rates haven't really
gone up or down much, andthere's more inventory moving
towards the inflation targetlike you still got all these
buyers sitting on the sidelines,freaked out now. So I think
(08:07):
ultimately, it just kind ofkicks the can down the road and
on when the housing market canfully recover back to what we
used to think was normal. We hadto downgrade our sales forecast
to about 5, 6% this year, fromabout nine and a half. We still
think, think things are going togo forward, but there's been a
deceleration. We're stillexpanding, but only by 2, 3, 4%
(08:31):
over the last couple of months,compared to the 10, 15% the
transactions were bouncing backby at the end of last year. So
yeah, I think it, it makes thesupply challenges harder. I
think it makes the brother-inlaweffect more real for the buyers.
And yeah, I think it just meansthe transactions will be slower
to recover.
Craig Evans (08:50):
It's interesting.
One of the things that I've beenlooking at in the market,
especially since the tarifflanguage has really been being
communicated, and it's starting,it's not starting. It's 14%,
it's 104%, one of the thingsI've been looking at is, how is
it not only just affecting themarket, but what is it doing in
different pricing sectors of themarket.
Jordan Levine (09:12):
Yeah.
Craig Evans (09:12):
And interestingly, in the state of Florida, where
we're seeing that in a couple ofthe Sun Belt states, is actually
in a mid price point, you know.
So for us, we've got a low pricepoint of 350, 400,000 you know,
we got a mid price of 550, to750, you know, once you're at
900 to 2 million, you know, thelow stuff is moving. You get
(09:35):
over a million dollars. It'sgoing to move in a day and a
half, and at that middle pricepoint, that 550, to 700, 800,000
those are the ones that's takingtime. And that's what's been
interesting to see, that slowdown, and how it's affecting
different pricing markets areyou seeing the same thing in
California and other markets?
(09:57):
And I mean, what's your thoughton that as an economist?
Jordan Levine (10:00):
Yeah, I think, you know, you've kind of hit on
on just that, the idea of peoplethat are really reliant on
financing, one of the things yousee up above 2 million is that
they're just way less reliant onmortgage rates. And the other
thing, I think, at the top endof the market is it cuts both
ways, right, like there's, it's,they're a lot more dependent on
the stock market too. And upuntil very recently, the stock
(10:23):
market was still, you know, theDow was 44,000 a couple weeks
ago. So people were stillfeeling rich. And you would
think, you know, turbulence inthe stock market would tend to
cut against luxury home sales tonow, not as rich when the stock
market is corrected, but at thesame time, if you think the
stock market's going to keepcorrecting or be very volatile.
Then again, that kind of safehaven aspect of real estate
(10:45):
seems attractive. And so I thinkthat's, you know, keeping demand
strong despite some correctionand in the stock market at the
high end. And then again, onlyyou know, I think it's only 60%
or even less, of folks, about 2million, that get a mortgage,
40% pay all cash. Even whenpeople do, I think that number
might even be higher slightly,actually. But even when they do
(11:07):
get a mortgage, they're putting30, 40, 50% down on these, you
know, three, five, ten millionhomes, and so they're just less
sensitive to that stuff, too.
But you know, the people whohave no option but to go out and
get a mortgage. And I thinkFlorida, like California, also
has the insurance challenges onyou know, it's not just the
rates are almost 7% andactually, I kind of neglected to
(11:27):
mention that when we weretalking about the affordability
index, we're putting on, like,historic estimates of what
insurance cost. I think we addon like 1.38% for your property
taxes in your insurance. Thoseare probably hyper conservative
at this point in time because ofof how much insurance is has
gone up too. But I think whenyou bake all that in there,
(11:49):
yeah, it's really tough for thatkind of retail owner occupant
that even that move up buyer whoalready had one entry level
home, it's tough.
Craig Evans (12:00):
You said that you guys have already kind of
downgraded your outlook for theyear a little bit and kind of
slowed the growth of it. Let'ssay the feds come back in on
short term. They lower the rate,right? Because it always amazes
me how many people think thatthe Fed lowers the rate my
mortgage are gonna be expensive.
All of a sudden the economystarts booming, right? So it
(12:20):
doesn't touch, it really doesn'ttouch that rate, you know, but
still in that aspect, if the Fedcomes in, Does, does that the
bond market stables evenslightly, right? If we just get
rid of some of the volatility,what do you think that economic
outlook looks like for you guys?
I mean, do you think you'restill downgraded. Or do you do
(12:42):
you see potential levers beingpulled that then can say, you
know, Jordan and his team goesback and says, Hey guys, let's
revisit this. I mean, I think q4could see an uptick again.
What's your thought? Or do youthink there's levers that could
be at that point?
Jordan Levine (12:58):
Yeah. I mean, I think that would help. I think
rates coming down wouldcertainly help get more buyers
off the fence. And I think ifthings calm down and people
weren't feeling as frantic, thenyou know, we already have, like
I said, we're at fullemployment. California has got
like 5% unemployment rate rightnow, 18.3 million people working
on payrolls. So the demand isthere. And I think if rates came
(13:18):
down, that's what a lot of thesebuyers are waiting around for,
and I think that could help, butI think there's just an upper
bound to how quickly we can getback to, you know, I think that
original forecast of 10% isprobably still about the best
case scenario, only because evenif we get lower rates and all of
that, we still got thoseaffordability challenges, and
(13:40):
even though there's moreinventory than there has been
over the last five years, it's,you know, if we would have went
from stopped looking in 2019like this, would have still been
a terrible year. It's justbetter than it was when it was
hyper depressed at 3% interestrates. So there's, you know,
there's a ceiling, I think, tohow much we can recover, even if
everything goes right,.
Craig Evans (14:00):
Yeah, it's interesting. You know, a lot of
times when we're on here, mostof what we talk about is from an
investor or a financeperspective, things like that.
But obviously, we've got you onhere. You're with CAR. You
represent the realtors, right?
You're Go Team realtor.
Jordan Levine (14:16):
Yeah.
Craig Evans (14:16):
So, so, you know, as we're kind of starting to
wrap up some of the stuff. Ijust want to get kind of an idea
of some of the things thatyou're hearing right from So,
from the realtor perspective andfrom CAR, what are you hearing
the agents are saying that theclimate's like, what's their
biggest concerns?
Jordan Levine (14:33):
Yeah, I think they're on track with interest
rate stuff, news cycle stuffthey you know, it's funny, if
you look at Investor activity,they're selling a lot of homes
to investors. You know, a lot ofthe buyers right now investors
aren't scared off by 7% interestrates, right? They're looking at
long term price appreciation,cash flowing on these rentals
because, you know, housing soconstrained and all that. You
know, meanwhile, you got allthese buyers sitting on the
(14:55):
sidelines. But the people whoare looking long term realize
that like 900,000 is going toseem cheap 20 years from now, in
California, and they're stillbuying but I think that only
exacerbates stuff, right?
Because then we just get moreand more of our housing stock,
especially under 750 that's nowsingle family rental and all of
that stuff. So I think that, youknow, they're hearing that. I
(15:17):
think the big change over thelast six months, though, has
been on the insurance and justhow much there's the potential
for that to kind of lock peopleout of home ownership. You know,
you think about these people arewith affordability how it is,
and they've managed to save upsome money to go out and
actually find a house that isfor sale at a price point that
(15:39):
they can qualify on a mortgagefor, and all that stuff. And
then they get into thetransaction and they get a 12,
15, $20,000 homeowners insurancepremium that now means they, you
know, that deal doesn't pencilfor them anymore, and so we've
heard that it's just creating aton of headaches. It's like,
actually costing people homeownership and in some cases, and
(16:02):
it's actually seems like it'sonly going to get more
expensive. And so I think that'sone of the new wild cards that
we're going to be continuing tograpple with. And again, even if
stuff goes right, insurance isstill going to be expensive, so.
Craig Evans (16:16):
Yeah, that's, you know, obviously we, we don't
have the fire as you guys havethe earthquakes, things like
that. You know, we gothurricanes right, like Ian and
Milton and Helene, and all thehurricanes that we had seemed
like back to back to back everyyear almost. You know, we had a
big issue with insurance. Youknow, we had, many of the
(16:36):
carriers actually left the stateand just said, 'Yeah, we're
we're done. What's happening?'Yeah, and that caused some real
stresses on the balance sheet ofour state plan. But fortunately
for 24 we had 14 new carrierscome in and start writing again.
Jordan Levine (16:54):
Yeah.
Craig Evans (16:55):
So if we can get another year with with no
storms, then we might startseeing some, some, some rates
coming down, potentially, youknow, you know, I know our
Governor and the legislation isworking on some plans to try to
work with insurance on that. SoI was curious to hear after the
(17:15):
fires out there, obviously, youknow, as such a mainstream news
story, and obviously justbillions lost out of that
process.
Jordan Levine (17:22):
Yeah.
Craig Evans (17:23):
Have you had many companies just leave the state?
Or how is that kind of workingthrough?
Jordan Levine (17:29):
We've had a lot of big carriers that were
already, you know, not writinganymore, in in California and
trying to leave. I think, youknow, there's the state's going
to try and figure something outwith, uh, assessment, I think,
to help shore up potentiallythat will be assessed on
homeowners. And I think that'sultimately where this stuff ends
up, you know, is that homeownersare going to be paying whatever
(17:50):
these, you know, rates that thecarriers want to stay, to stay
in the game. And I think, youknow, it's, we think about it
often in terms of, like thoseretail owner occupant, home
buyers, buying condos, buyinghouses and things like that.
It's also like a huge challengefor multi family, like for the
apartments and even for thecondos, right? Because they're
getting these big increases intheir premiums. And how do you
(18:13):
pass that on, you know, inCalifornia, it's, you know, you
got to have all there's allthese rules about how you raise
HOA dues, right? And how youincrease rents and all of that
stuff. And so it puts these bigmulti family folks in a pinch
too. And even with, you know, 90plus percent occupancy in multi
family still for California,it's like, that's great, but you
(18:37):
know, we've got rent control ina lot of places. And then, you
know, there's limits on how muchof these insurance costs can be
passed on, and so put someone tobind to.
Craig Evans (18:46):
So what is the, what's the biggest goal for CAR
this year that you guys aredoing and supporting realtors
and trying to help them throughthe, you know, the tumultuous
times of what this year lookinglike so far. What are you guys
planning? Will be your numberone program or way to assist
(19:06):
Realtors this year?
Jordan Levine (19:09):
Yeah, so I think you know, number one is just
keeping them in the game and outof trouble. We give a lot of
legal advice and make sure thatthey're doing stuff all you know
the best way, and that they'reeducated on what's going on in
the market and new laws, youknow. Unfortunately, in
California, there's like a newlaw every almost as fast as
there's a new interest rate, itseems like. So doing all that
(19:29):
stuff, but I think more more andmore what we're doing is on the
policy front, right, enablingmore homes to be built,
preventing stuff that restrictstransactions. It's, you know,
it's crazy that in California,where housing supply is like the
Paramount challenge, we do allkinds of stuff, like point of
sales to discourage people fromeven selling in the first place,
(19:52):
or, you know, all of this stuff.
So I think for stuff that thatprohibits or precludes new
supply coming online. They'rebeing built or being resold,
advocating for new constructionand actually affordable, you
know, addressing ouraffordability gap and advocating
for home ownership. I thinkthat's why I love working for
the realtor so much. Is like Iwork for a trade association,
(20:15):
but, you know, we're out thereadvocating for home ownership.
Like, one of the cool thingsabout working for realtors is
that, like my people win when,you know, regular people win,
it's like they get paid whensomebody becomes a homeowner.
And I feel good about that. Andso, you know, as much as we can
increase the amount of peoplethat are able to buy and afford
(20:36):
their own home, then by youknow, by default, our folks are
going to be doing great.
Craig Evans (20:43):
So I'm grateful for your time. But I got one more
question for you, and I knowyou're busy, and I like I say I
appreciate it, but if you couldlook out over 2025, is there a
reason to be optimistic for therest of this year?
Jordan Levine (21:01):
I think there's still a reason to be optimistic.
I know the news is crazy and goteverybody ripping their hair out
and all that stuff, but if you,like, step back and just look at
the fundamental like, right?
This is a question of whether weself sabotage or not, but we're
not in any kind of, like, direcrisis that isn't man made right
now. Again, unemploymentnationwide, like in the 4%
range, we've got, still a laborshortage. We have too many jobs,
(21:25):
not enough people to fill them,like that's a sign of strength.
GDP was at an all time high lastyear. We made $25 trillion worth
of aggregate personal income upuntil a month ago. Stock market
was at an all time high, homeprices at an all time high.
People have never been richer.
Incomes have never been higher.
We've never spent more moneybuying stuff going out. All of
(21:45):
that. This is a question ofwhether we can maintain or
whether we start reversingcourse. So we you know, the
economic data is actuallystrong, and if we can get out of
our own way, I think there'spotential for more growth and
even avoid a modest recession.
But, you know, it's kind of,there's a lot of choice
variables going into it at thispoint.
Craig Evans (22:07):
Well, I wanted us to be able to end on a high note
of what this year can look like.
So Jordan, I am so grateful toone, to be able to finally get
to actually meet you and spendsome time talking. And I thank
you for taking your time to comeon and spend time with our
listeners today. So again, Iappreciate your time, my friend.
(22:27):
Thank you very much for comingon.
Jordan Levine (22:30):
No. Thank you so much. This was a lot of fun, and
hopefully I didn't screw it uptoo bad, and we can do it again.
Narrator (22:35):
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 (22:54):
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 (00:43):
Hey guys, good to have you back. Thanks for
joining us for the second halfof the show with Jordan Levine.
Let's get started. Let's talkabout a few things. There's you
know, and when I say rates, Iwant to be careful, because a
lot of times, if I'm talkingabout rates, everybody just
assumes that I'm talking aboutinterest rates, but I want to
talk about Fed rates and shortterm money. You know, what do
(01:07):
you think about where the Fed'sat right now, based on what's
happening with tariffs, where,you know, we're kind of in a
sticky kind of type of inflationtype of scenario right now?
What's your thought on what theFed's doing, not doing that type
of process?
Jordan Levine (01:23):
Yeah, I think the Fed's going to be in a tough
spot coming up, you know. Ithink, you know, Stagflation is
like a super nerdy, esotericterm, but, it's one that's, you
know, it just means that theFed's in a hard spot. The way
that the economy normally worksis like, you know, I guess
(01:45):
growth and inflation tend tousually go together, right? So,
like, when the economy is reallygrowing gangbusters, that's
inflationary because we'reconsuming all the resources and
everybody's full employed, we'rehaving to pay people more and
all that kind of stuff. When youget those two things move in an
opposite direction. Well, Iguess the the reason why that's
good is it makes it easy on theFed, right? It's like you get
(02:06):
lots of inflation. It's becausethe economy is going too strong,
great. You you have one weapon,which is the interest rate that
you can raise or lower. And youraise the rate, right? And that
kills off the economy. It killsoff the inflation. Go back to
target, you can lower ratesagain. And that's great, right?
But when they're moving inopposite directions, and you
have an economy that's maybe inrecession because of, you know,
(02:28):
these tariffs, or otherfinancial market, you know,
declines, or something likethat, but you've still got the
inflation, then how do you useyour one weapon, right? You've
got an interest rate, and youcan raise it to kill off the
inflation, hopefully, but it'snot really over consumption
driven inflation. It's tariffdriven inflation, and so that
(02:50):
doesn't work so good. And plus,you're already in a recession,
and that just makes therecession even more, you know,
even deeper, because now it'smore costly to borrow to make my
car payment, blah, blah, blah,and so now you've got inflation
and a recession with only oneweapon that you know you got to
pick which thing you're going tocure. And again, that puts them
(03:11):
in a tough spot. From where Isit, I think they're going to
err on the side of keeping a lidon inflation. They're not going
to start cutting rates and getscared off by a little bit of
rising unemployment. They reallywant to see inflation stamped
out. I think he has. I thinkhe's eyes wide open, maybe that
he won't be around orrenominated anyway, so I don't
know that he's going to be, youknow, cow town, what the policy
(03:34):
side wants him to do. And Ithink he'll stick to his guns on
the inflation. To me, that justmeans that we're not going to
get deep and precipitous cutsfrom the Fed, I think what
they've projected, maybe 50, 100basis points on the extreme
outside, I think, is like thebest we can hope for. And if you
hold that short term rate upagainst where 10 years at, I
don't think that gives 10 yearsmuch room to fall honestly.
Craig Evans (03:56):
Well, and that's what I was looking at, our our,
you know, our 10 year spread,we're fluctuating the spread on
the yield. I mean, we're, youknow, historically, we're point
a quarter point half. I mean,we're fluctuating between 2.3
and 2.6 so even that spread ishigh. There's so much more room
to move. And we were droppingdown towards the end of last
(04:17):
year to where that spread wastightening. Do you, I'm curious
to hear your thoughts. Do youthink the the Fed has has
ability to to calm the some ofthe volatility in the market,
especially when we're dealingwith with bonds, things like
(04:37):
that?
Jordan Levine (04:41):
I think there's a limit to what we can expect out
of the Fed in terms of justkeeping the lid on things only,
you know, I think the best thingthey can do is kind of be
predictable, right? And notthrow any more curveballs and
kind of stick to the glide pathand all of that stuff. But I
think, you know, the two yearsmoving around based on the news,
right? And so every time there'sa new thing, whatever that thing
(05:04):
of the day is, you know, that'sgonna send that the two year up
and down and all over the map.
And I think that's still gonnabe a roller coaster ride. And I
think that's why you talkedabout the yield curve kind of
getting a little bit wider.
That's mostly because the twoyear freaked out, right? And so,
yeah, so I think you're going tocontinue to see a lot of
volatility in the short run,unless things calm down, you
(05:27):
know, and there's not any crazynews stories happening. But I
think the short run rates arevery current event driven, and
to that extent, I think you canjust keep that seat back and
trade table and all that stuff.
Craig Evans (05:39):
It's been interesting to watch, you know,
the two year, the 10 year, overthe last month, month a half,
and really even in the last twoto three weeks. And the amount
of volatility within a one dayspan on the amount of bips that
that thing moves, is crazy. It'sbeen mind blowing to see
(06:02):
something that is typically slowmoving and steady, that is
moving four and five dips withina matter of of hours, you know?
Jordan Levine (06:12):
Yeah, when you go to school for finance and
economics, that's why nobodywants to go be a bond trader.
That's like, supposed to be theboring thing, right? It's like,
I want to do equities. Let's goand, like, where all the action
is. No, not anymore. Are yougoing to be at PIMCO now or
something?
Craig Evans (06:25):
Oh, well, listen, let's, let's talk some about
tariffs, inflation, some thingslike that. What do you believe
will be some of the impacts thatwe'll see on tariffs? And are
you guys in California alreadyseeing any of the impacts on the
tariffs, from the tariffs?
Jordan Levine (06:41):
Yeah, I think it just, you know, ultimately, from
my standpoint, it exacerbates,like, the challenges that
California is already facing. Wetalked about permit fees and all
the, you know, challenges thatwe have, getting new inventory
online. And one of my friends,who's a economist, or she was an
economist down in San Diego, dida study, I think she's showed
(07:01):
average cost is like, over 200grand before we even stick a
shovel in the dirt. And then wewonder why we can't have
$250,000 homes and that kind ofstuff. But I think looking
through this policy, throughthat kind of a lens, you know,
it, you know, we get a lot ofour lumber from overseas. We get
a lot of our drywall and stufffrom Mexico, right? And so we
(07:22):
have all these, you know, costs,and I think this exacerbates the
cost stuff. I think, you know,there's a labor force angle to
this as well, right? Not justwith the tariffs, but if we're,
you know, cracking down on, youknow, non citizen labor and
things like that, then it just,you know, not only are we paying
more for the raw materials now,it's tougher to find trades
(07:44):
people and, you know, all ofthat stuff, and I think it all
adds up to higher costs. Ithink, you know, there's also
the buy side, like consumerzeitgeist, piece of it, right?
And all the uncertainty, where,even though rates haven't really
gone up or down much, andthere's more inventory moving
towards the inflation targetlike you still got all these
buyers sitting on the sidelines,freaked out now. So I think
(08:07):
ultimately, it just kind ofkicks the can down the road and
on when the housing market canfully recover back to what we
used to think was normal. We hadto downgrade our sales forecast
to about 5, 6% this year, fromabout nine and a half. We still
think, think things are going togo forward, but there's been a
deceleration. We're stillexpanding, but only by 2, 3, 4%
(08:31):
over the last couple of months,compared to the 10, 15% the
transactions were bouncing backby at the end of last year. So
yeah, I think it, it makes thesupply challenges harder. I
think it makes the brother-inlaweffect more real for the buyers.
And yeah, I think it just meansthe transactions will be slower
to recover.
Craig Evans (08:50):
It's interesting.
One of the things that I've beenlooking at in the market,
especially since the tarifflanguage has really been being
communicated, and it's starting,it's not starting. It's 14%,
it's 104%, one of the thingsI've been looking at is, how is
it not only just affecting themarket, but what is it doing in
different pricing sectors of themarket.
Jordan Levine (09:12):
Yeah.
Craig Evans (09:12):
And interestingly, in the state of Florida, where
we're seeing that in a couple ofthe Sun Belt states, is actually
in a mid price point, you know.
So for us, we've got a low pricepoint of 350, 400,000 you know,
we got a mid price of 550, to750, you know, once you're at
900 to 2 million, you know, thelow stuff is moving. You get
(09:35):
over a million dollars. It'sgoing to move in a day and a
half, and at that middle pricepoint, that 550, to 700, 800,000
those are the ones that's takingtime. And that's what's been
interesting to see, that slowdown, and how it's affecting
different pricing markets areyou seeing the same thing in
California and other markets?
(09:57):
And I mean, what's your thoughton that as an economist?
Jordan Levine (10:00):
Yeah, I think, you know, you've kind of hit on
on just that, the idea of peoplethat are really reliant on
financing, one of the things yousee up above 2 million is that
they're just way less reliant onmortgage rates. And the other
thing, I think, at the top endof the market is it cuts both
ways, right, like there's, it's,they're a lot more dependent on
the stock market too. And upuntil very recently, the stock
(10:23):
market was still, you know, theDow was 44,000 a couple weeks
ago. So people were stillfeeling rich. And you would
think, you know, turbulence inthe stock market would tend to
cut against luxury home sales tonow, not as rich when the stock
market is corrected, but at thesame time, if you think the
stock market's going to keepcorrecting or be very volatile.
Then again, that kind of safehaven aspect of real estate
(10:45):
seems attractive. And so I thinkthat's, you know, keeping demand
strong despite some correctionand in the stock market at the
high end. And then again, onlyyou know, I think it's only 60%
or even less, of folks, about 2million, that get a mortgage,
40% pay all cash. Even whenpeople do, I think that number
might even be higher slightly,actually. But even when they do
(11:07):
get a mortgage, they're putting30, 40, 50% down on these, you
know, three, five, ten millionhomes, and so they're just less
sensitive to that stuff, too.
But you know, the people whohave no option but to go out and
get a mortgage. And I thinkFlorida, like California, also
has the insurance challenges onyou know, it's not just the
rates are almost 7% andactually, I kind of neglected to
(11:27):
mention that when we weretalking about the affordability
index, we're putting on, like,historic estimates of what
insurance cost. I think we addon like 1.38% for your property
taxes in your insurance. Thoseare probably hyper conservative
at this point in time because ofof how much insurance is has
gone up too. But I think whenyou bake all that in there,
(11:49):
yeah, it's really tough for thatkind of retail owner occupant
that even that move up buyer whoalready had one entry level
home, it's tough.
Craig Evans (12:00):
You said that you guys have already kind of
downgraded your outlook for theyear a little bit and kind of
slowed the growth of it. Let'ssay the feds come back in on
short term. They lower the rate,right? Because it always amazes
me how many people think thatthe Fed lowers the rate my
mortgage are gonna be expensive.
All of a sudden the economystarts booming, right? So it
(12:20):
doesn't touch, it really doesn'ttouch that rate, you know, but
still in that aspect, if the Fedcomes in, Does, does that the
bond market stables evenslightly, right? If we just get
rid of some of the volatility,what do you think that economic
outlook looks like for you guys?
I mean, do you think you'restill downgraded. Or do you do
(12:42):
you see potential levers beingpulled that then can say, you
know, Jordan and his team goesback and says, Hey guys, let's
revisit this. I mean, I think q4could see an uptick again.
What's your thought? Or do youthink there's levers that could
be at that point?
Jordan Levine (12:58):
Yeah. I mean, I think that would help. I think
rates coming down wouldcertainly help get more buyers
off the fence. And I think ifthings calm down and people
weren't feeling as frantic, thenyou know, we already have, like
I said, we're at fullemployment. California has got
like 5% unemployment rate rightnow, 18.3 million people working
on payrolls. So the demand isthere. And I think if rates came
(13:18):
down, that's what a lot of thesebuyers are waiting around for,
and I think that could help, butI think there's just an upper
bound to how quickly we can getback to, you know, I think that
original forecast of 10% isprobably still about the best
case scenario, only because evenif we get lower rates and all of
that, we still got thoseaffordability challenges, and
(13:40):
even though there's moreinventory than there has been
over the last five years, it's,you know, if we would have went
from stopped looking in 2019like this, would have still been
a terrible year. It's justbetter than it was when it was
hyper depressed at 3% interestrates. So there's, you know,
there's a ceiling, I think, tohow much we can recover, even if
everything goes right,.
Craig Evans (14:00):
Yeah, it's interesting. You know, a lot of
times when we're on here, mostof what we talk about is from an
investor or a financeperspective, things like that.
But obviously, we've got you onhere. You're with CAR. You
represent the realtors, right?
You're Go Team realtor.
Jordan Levine (14:16):
Yeah.
Craig Evans (14:16):
So, so, you know, as we're kind of starting to
wrap up some of the stuff. Ijust want to get kind of an idea
of some of the things thatyou're hearing right from So,
from the realtor perspective andfrom CAR, what are you hearing
the agents are saying that theclimate's like, what's their
biggest concerns?
Jordan Levine (14:33):
Yeah, I think they're on track with interest
rate stuff, news cycle stuffthey you know, it's funny, if
you look at Investor activity,they're selling a lot of homes
to investors. You know, a lot ofthe buyers right now investors
aren't scared off by 7% interestrates, right? They're looking at
long term price appreciation,cash flowing on these rentals
because, you know, housing soconstrained and all that. You
know, meanwhile, you got allthese buyers sitting on the
(14:55):
sidelines. But the people whoare looking long term realize
that like 900,000 is going toseem cheap 20 years from now, in
California, and they're stillbuying but I think that only
exacerbates stuff, right?
Because then we just get moreand more of our housing stock,
especially under 750 that's nowsingle family rental and all of
that stuff. So I think that, youknow, they're hearing that. I
(15:17):
think the big change over thelast six months, though, has
been on the insurance and justhow much there's the potential
for that to kind of lock peopleout of home ownership. You know,
you think about these people arewith affordability how it is,
and they've managed to save upsome money to go out and
actually find a house that isfor sale at a price point that
(15:39):
they can qualify on a mortgagefor, and all that stuff. And
then they get into thetransaction and they get a 12,
15, $20,000 homeowners insurancepremium that now means they, you
know, that deal doesn't pencilfor them anymore, and so we've
heard that it's just creating aton of headaches. It's like,
actually costing people homeownership and in some cases, and
(16:02):
it's actually seems like it'sonly going to get more
expensive. And so I think that'sone of the new wild cards that
we're going to be continuing tograpple with. And again, even if
stuff goes right, insurance isstill going to be expensive, so.
Craig Evans (16:16):
Yeah, that's, you know, obviously we, we don't
have the fire as you guys havethe earthquakes, things like
that. You know, we gothurricanes right, like Ian and
Milton and Helene, and all thehurricanes that we had seemed
like back to back to back everyyear almost. You know, we had a
big issue with insurance. Youknow, we had, many of the
(16:36):
carriers actually left the stateand just said, 'Yeah, we're
we're done. What's happening?'Yeah, and that caused some real
stresses on the balance sheet ofour state plan. But fortunately
for 24 we had 14 new carrierscome in and start writing again.
Jordan Levine (16:54):
Yeah.
Craig Evans (16:55):
So if we can get another year with with no
storms, then we might startseeing some, some, some rates
coming down, potentially, youknow, you know, I know our
Governor and the legislation isworking on some plans to try to
work with insurance on that. SoI was curious to hear after the
(17:15):
fires out there, obviously, youknow, as such a mainstream news
story, and obviously justbillions lost out of that
process.
Jordan Levine (17:22):
Yeah.
Craig Evans (17:23):
Have you had many companies just leave the state?
Or how is that kind of workingthrough?
Jordan Levine (17:29):
We've had a lot of big carriers that were
already, you know, not writinganymore, in in California and
trying to leave. I think, youknow, there's the state's going
to try and figure something outwith, uh, assessment, I think,
to help shore up potentiallythat will be assessed on
homeowners. And I think that'sultimately where this stuff ends
up, you know, is that homeownersare going to be paying whatever
(17:50):
these, you know, rates that thecarriers want to stay, to stay
in the game. And I think, youknow, it's, we think about it
often in terms of, like thoseretail owner occupant, home
buyers, buying condos, buyinghouses and things like that.
It's also like a huge challengefor multi family, like for the
apartments and even for thecondos, right? Because they're
getting these big increases intheir premiums. And how do you
(18:13):
pass that on, you know, inCalifornia, it's, you know, you
got to have all there's allthese rules about how you raise
HOA dues, right? And how youincrease rents and all of that
stuff. And so it puts these bigmulti family folks in a pinch
too. And even with, you know, 90plus percent occupancy in multi
family still for California,it's like, that's great, but you
(18:37):
know, we've got rent control ina lot of places. And then, you
know, there's limits on how muchof these insurance costs can be
passed on, and so put someone tobind to.
Craig Evans (18:46):
So what is the, what's the biggest goal for CAR
this year that you guys aredoing and supporting realtors
and trying to help them throughthe, you know, the tumultuous
times of what this year lookinglike so far. What are you guys
planning? Will be your numberone program or way to assist
(19:06):
Realtors this year?
Jordan Levine (19:09):
Yeah, so I think you know, number one is just
keeping them in the game and outof trouble. We give a lot of
legal advice and make sure thatthey're doing stuff all you know
the best way, and that they'reeducated on what's going on in
the market and new laws, youknow. Unfortunately, in
California, there's like a newlaw every almost as fast as
there's a new interest rate, itseems like. So doing all that
(19:29):
stuff, but I think more more andmore what we're doing is on the
policy front, right, enablingmore homes to be built,
preventing stuff that restrictstransactions. It's, you know,
it's crazy that in California,where housing supply is like the
Paramount challenge, we do allkinds of stuff, like point of
sales to discourage people fromeven selling in the first place,
(19:52):
or, you know, all of this stuff.
So I think for stuff that thatprohibits or precludes new
supply coming online. They'rebeing built or being resold,
advocating for new constructionand actually affordable, you
know, addressing ouraffordability gap and advocating
for home ownership. I thinkthat's why I love working for
the realtor so much. Is like Iwork for a trade association,
(20:15):
but, you know, we're out thereadvocating for home ownership.
Like, one of the cool thingsabout working for realtors is
that, like my people win when,you know, regular people win,
it's like they get paid whensomebody becomes a homeowner.
And I feel good about that. Andso, you know, as much as we can
increase the amount of peoplethat are able to buy and afford
(20:36):
their own home, then by youknow, by default, our folks are
going to be doing great.
Craig Evans (20:43):
So I'm grateful for your time. But I got one more
question for you, and I knowyou're busy, and I like I say I
appreciate it, but if you couldlook out over 2025, is there a
reason to be optimistic for therest of this year?
Jordan Levine (21:01):
I think there's still a reason to be optimistic.
I know the news is crazy and goteverybody ripping their hair out
and all that stuff, but if you,like, step back and just look at
the fundamental like, right?
This is a question of whether weself sabotage or not, but we're
not in any kind of, like, direcrisis that isn't man made right
now. Again, unemploymentnationwide, like in the 4%
range, we've got, still a laborshortage. We have too many jobs,
(21:25):
not enough people to fill them,like that's a sign of strength.
GDP was at an all time high lastyear. We made $25 trillion worth
of aggregate personal income upuntil a month ago. Stock market
was at an all time high, homeprices at an all time high.
People have never been richer.
Incomes have never been higher.
We've never spent more moneybuying stuff going out. All of
(21:45):
that. This is a question ofwhether we can maintain or
whether we start reversingcourse. So we you know, the
economic data is actuallystrong, and if we can get out of
our own way, I think there'spotential for more growth and
even avoid a modest recession.
But, you know, it's kind of,there's a lot of choice
variables going into it at thispoint.
Craig Evans (22:07):
Well, I wanted us to be able to end on a high note
of what this year can look like.
So Jordan, I am so grateful toone, to be able to finally get
to actually meet you and spendsome time talking. And I thank
you for taking your time to comeon and spend time with our
listeners today. So again, Iappreciate your time, my friend.
(22:27):
Thank you very much for comingon.
Jordan Levine (22:30):
No. Thank you so much. This was a lot of fun, and
hopefully I didn't screw it uptoo bad, and we can do it again.
Narrator (22:35):
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 (22:54):
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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