In this episode, Jason Hartman welcomes Daren Blomquist, Senior VP at ATTOM Data Solutions and the Executive Editor of ATTOM’s award-winning Housing News Report. They discuss what Trump’s presidency means for real estate investors and the US economy, and what might happen if Trump repeals Dodd-Frank. Jason and Daren also talk about ATTOM’s Housing News Report article, which reveals that big banks are leaving the mortgage business and a month-over-month increase in foreclosure activity.
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Jason Hartman 1:03
It’s my pleasure to welcome a returning guest back to the show and that is Darren Bloomquist. He is Senior Vice President at Adam data solutions and that’s att om and executive editor of their housing news report. And Adam data solutions is the parent company for realty Trac. Last time he was on the show, he was probably introduced as realty track person. Darren, welcome back. How are you? I’m doing great. Thank you so much for having us back. Despite the the name change. I’m still getting used to it myself, to be honest, no problem at all. You know, that actually segues right into another big name change we have going on in the world and that is the new president elect Donald Trump. What is that going to mean to real estate investors? What’s it going to mean to the market the economy? Let’s just take it broadly from there because I know you’ve been getting some calls from different media outlets on that and just let’s get your initial thoughts.
Daren Blomquist 1:59
Yeah, I think Generally, you know, it’s it’s probably going to be a positive thing for, for real estate investors and we can dig more into that going forward but in a little bit, but you know, certainly when it comes to when we think of monetary policy we I do, I do see him being more slanted toward him for a few things he hasn’t given a lot of hands but not necessarily wanting to get keep interest rates low as they have been, in fact, he’s been quoted as saying something along the lines of keeping you know, this has kind of been artificially keeping interest rates low which has been, which is that could be creating another bubble. And, and so I would expect and the Fed was already moving in that direction, of course, but I would expect to see interest rates start to go up. Actually, we’ve been expecting this for several years now and the prognosticators have been saying it for several years. But on that front, I would expect to see interest rates rising, going forward into 2017.
Jason Hartman 3:18
Okay, so maybe some real urgency for real estate investors to get off the dime and buy up some properties. Because the interesting thing there is, you know, I’m not saying that Trump is going to be some great bullish factor in the real estate market. Maybe he will be but yeah, you know, he rather hear from you. But all I will say is that in comparison to Hillary, certainly, Trump is the choice of investors of, you know, economists. Well, except for Paul Krugman, probably, but he’s the business guy. He’s on the conservative side. I mean, you know, you saw what the stock market did when it got the news. a Trump administration is generally pretty bullish. I think for the economy and for markets, you know, certainly in comparison to a Clinton administration, but
Daren Blomquist 4:06
yet by a lot, I would agree with that. But
Jason Hartman 4:08
if we, if we go ahead, go ahead and argue with that, okay, but I want to just give you one more piece of fodder if I can. So, so if we see rates go up, in at the same time, we see a strengthening economy, new trade deals, potentially, that are, you know, at least his claim better for the US. If we see jobs come back, if we see the very controversial wall built, you know, I think that’s going to push wages up. I mean, there are some real, very significant things and all of these things are so complex, the way they interplay together, but yeah, what are what are your thoughts?
Daren Blomquist 4:43
Yeah, I mean, just I would say, you know, it cuts both ways. You do have a free market guy coming in. And that generally is, I think, most entrepreneurs, real estate investors thinkers, are going to be in favor of that. That’s that’s the playing field they want to operate on. is one where it’s free market and, and you make your own opportunity. So philosophically yes, I do think because, you know, the point is it cuts both ways. So these, these low interest rates have been really nice for real estate investors just like they have been for, for for many others, and they’ve helped prop up this this housing recovery, I would I would say undoubtedly, so. Part of the free market of letting those interest rates not be artificially held down but rise to the extent that he has the power to do that or the influence to do that. Then that could be you know, could be uncomfortable for those who have gotten used to those those super low interest rates, but and I think that you could say that probably on some other friends as well. Certainly, though, the if, if the wage if the wage problem could be endless Because we’ve seen this recovery really has been largely a wages to recovery and that is causing affordability issues, which is starting to raise concerns that we’re seeing another bubble so if that if he could fix that problem and get wage growth going that would be that would be huge because it would allow the mark the housing market to continue to grow. I mean, we’ve seen our affordability report shows over the last since 2012. When housing home prices bottomed out home prices nationwide have gone up 60% which is crazy. Wow. Wages
Jason Hartman 6:36
truly shocking. It’s amazing
Daren Blomquist 6:38
and it’s even more in some some markets. But wages average weekly wages during the same time period have gone up 10% so they’ve actually gone up which is a good thing but they’ve they’ve been anemic in comparison to home prices and that means you know in order for to support continued great growth in home price and sales. You are getting needs to see a waitress start tip to play catch up. So that could be a huge influence if he’s able to do some of the things that he’s he’s promised on that.
Jason Hartman 7:08
Yeah. So So here’s the combination. That’s interesting. You know, if you get in an environment where usually that’s a trade right if you see higher interest rates, you see softening real estate prices, and the the, the rule of thumb there is every 1% in interest rate is equal in either direction is equal to about 10% in purchase price, you know, it being a wash, right? So if rates go up by 1%, which, depending on what rate you’re looking at, is really maybe a 20% increase or so, depends what rate you’re looking at, obviously, then what base you’re coming from, but if they go up 1% then you need to see prices come down by 10% to make that be a wash that equation, but if you see rates come up And you see the the borrowing costs get a little more expensive as it should be. I mean it, you know, like you said, and Trump has said it’s artificial, we all know this. But then you see it at the same time where you see wages strengthen, you could see just an overall boom in the market, interestingly, in a rising rate environment,
Daren Blomquist 8:18
yeah, yeah. If those if those levers go there, go the right way. And you know, certainly that could happen. And yeah, I think it is a very interest rate sensitive market though. So without the wage piece, you’re not going to have your you’re more likely we’re going to see that first scenario where home prices soften or even go down. Until you see that later. They may we I was looking back just yesterday. That not even at sales prices, but its sales volume. The year over year change in sales volume we were seeing from the end of 2011 through Early 2013 consistent year over year growth and sales volume, when we saw interest rates, I don’t know if you probably remember this, you know, back in late 2013, early 2014. We did see interest rates, they had been going down, and then they’d gone below you know, well below 4%. And then they spiked back up at the end of 2013 above 4%, which is, of course still very low. But we saw almost an immediate impact, sales and sales volume and demand through the end of basically the end of 2013. Through most most, most of it as in 14. We saw sales volume down on a year over year basis. And when interest rates finally got back below that 4% in early late 2014, early Tez 15. We have now since then seen consistent rises in sales. Volume. And that tells me and that’s just nationwide. I think if you looked at some high priced markets, you would see interest rates having a big impact on demand for for property. So that is a big deal. But I’m of the opinion that it is better to, to let those interest rates float up. Because at this point, I do see early signs of a bubble, not that we’re in a bubble forming. And they’re somewhat artificially supported by those those rock bottom interest rates.
Jason Hartman 10:34
Okay, so just explain that a little bit like, in other words, low rates create a bubble because they’re artificial. Everybody rushes in to borrow the cheap money, of course, and basically the market becomes if you will oversubscribed, right? Yeah. And then and then rates start to float up to where they should be in reality when they’re not artificially suppressed. And then you See that demand taper off? Now, of course, we’re only talking about prices. We haven’t discussed the other side of the equation, which is rents. So yes, you know, these, these are always out. This is the great thing about income properties a multi dimensional asset class, and we’re not hopefully we’re not investing based on appreciation, because everybody that does that eventually loses. You know, yeah. So, you know, we’re doing the combination of the outlook for prices and, and cash flow, of course, but what are your thoughts about that?
Daren Blomquist 11:27
Yeah, that’s a good point. And it’s, you know, it’s artificial is such a loaded word. But, you know, I mean, the interest rates have been supporting rises in home prices, that are unsustainable. And so there’s only so much interest rates can do to continue growth. Really, the key is that the key is wages here and we’ve talked about that. But, but keeping interest rates low is is really there’s no, there’s not a lot more that that can do for that. As a market, I think, going going forward and then, but I think you strike on an interesting topic there that I guess doesn’t necessarily have to do with Trump. But this, his attitude toward homeownership is going to be interesting, because homeownership rates, despite these low interest rates have not moved the needle on homeownership rates. And so they’re very, they’re pretty much at 50 year lows still. And
Daren Blomquist 12:30
you know, and so that’s actually good for investors.
Daren Blomquist 12:34
The interest rates are good for maybe if you’re a flipper, and looking to, to sell to someone who wants to get into a home at a low interest rate. But for the income properties, you kind of are getting it good on both sides. You’re getting the low interest rates on the acquisition side, but you’re also getting it you know, a lot of demand for rentals, and there just seems to be a panic. paradigm shift in the country where, where the the younger buyers are not moving into homeownership is quickly and so that is going to be good. Now whether he tries to address that that’s not something I think he’s talked too much about other than criticizing the fact that we’re at a 50, low 50 year low in homeownership rates. But that could, that would, that could be an impact on investors. But right now the it’s time to be a landlord.
Jason Hartman 13:29
Yeah. And by the way, I don’t know what you meant by that statement, Darren, but I say it could be a very positive impact because you know, that just means more rental demand. The total, you know, Maverick in this statement, I’m about to share. Everybody in my industry wants to hate me for this one. But I think the homeownership rate should be around 55%. It should be lower. You know, I don’t think I don’t think it should be high. You know, I don’t think high homeownership I haven’t subscribed to that idea, that it’s just good for everything. And I don’t I think it’s, it’s that great. I think I think this younger generation, the millennial generation, they want to be able to move to where the jobs are. Mobility is key. for them. That’s the best thing you can have on a resume, as I always say is mobility. homeownership in the concept of the sharing economy. And, you know, people that have massive student loan debt, they have a they have a home without a mortgage, or they have a mortgage without a home attached to it. Right, basically, with their college loans. And you know, that mobility can be a good thing. So, you know, I don’t know, I just kind of don’t buy into the theory. Maybe you don’t either, but most people disagree with me. Yeah.
Daren Blomquist 14:33
No, I don’t necessarily I don’t think that there should. I don’t think we should try to push homeownership rates higher I let the let the market decide is my opinion on that and, you know, investor investors are in a great position if it continues to stay low, because that’s gonna just continue to put upward pressure on demand for rent. And I think single, you know, also Single Family rentals, especially the given that, that these millennials still will, I think, will eventually hit points where they’re, they’re hitting milestones where they’ll want more of the house as opposed to the apartment situation. Even if they’re not buying that property.
Jason Hartman 15:19
Yeah, very interesting. Well, what else would you like to say? I mean, what Haven’t I asked you or what what didn’t we dive into? And, and you know, if this interview was a few days earlier before the election, what else would we have talked about?
Daren Blomquist 15:34
Yeah, I think you know, one huge piece here that we that that is, you know, a big difference between the two candidates is the regulatory in terms of toward the toward the banks to the consumer, and it all centers around the Consumer Financial Protection Bureau, which I just read last night, he that’s one of the few cabinet posts I’ve seen that’s been floated out. There is is well actually for the Treasury Department. Sorry. But for the Consumer Financial Protection Bureau, the I bring that up because Jeb Hensarling, the the representative from Texas who has been very anti CFPB. And also anti Dodd Frank, which created the CFPB. Which, by the way, I’m
Jason Hartman 16:20
so glad I was gonna ask you about Dodd Frank. I think besides repealing Obamacare, I think one of the best things Trump could do is repeal Dodd Frank.
Daren Blomquist 16:28
And that’s the talk and so that’s something that’s very concrete, and I think we’ll could have a very big impact on the real estate market, you know, because you leverage Yeah, and I server citizen and I actually think, you know, one, one piece of that that will we could see happening is a temporary, at least I think temporary uptick in foreclosure activity as a service. Officers are in an environment that’s more favorable to them and where they feel like okay. I can foreclose, I don’t, you know, I mean, I, the whole Dino federal government is not against me foreclosing on somebody. And so I can move forward with that. And there’s not going to be as much scrutiny on that. And we still believe not in every state. But there are a good number of states where there’s quite a big backlog of foreclosures from the last housing crisis that haven’t even come through the pipeline. And I think we could see related to that CFPB thing that that impact increase in foreclosures, but of course, on the flip side, lending on the origination side, as opposed to the service inside that could certainly have an impact as well and loosen up some of the the very tight lending standards there.
Jason Hartman 17:54
Yeah. So So in other words, I mean, I believe that the banks have well, not the Banks even but the government has overcorrected. I think the lenders are still being far, far too conservative. Of course, they were way too liberal before the crash. And you know that part of that caused the Great Recession, obviously. But it you know, it needs to the pendulum needs to swing back a little bit. But at the same time, as you were saying, Darren, we need to give lenders speedy, smooth foreclosures, so that if they have defaults, they can clear those properties. They can get them off the books, they can get their money out, and there can be price discovery that just makes for a much better marketplace, a much better economy overall. You got to have those two things at the same time. But if Dodd Frank is repealed, the lending standards will get a lot looser. I mean, that would be my prediction, at least, maybe maybe even on a higher interest rate environment, the ease of qualifying will be dramatically changed. And the limit on the number of single family homes an investor can finance will be increased. I mean that that that’ll just have major, major impact on the market, as you mentioned.
Daren Blomquist 19:04
Yeah, I think so. And one interesting thing in our last, just to plug our housing news report a little bit our newsletter in the in the October issue we talked, we use our data look at really the big banks are getting out of the mortgage business, because of all these regulations. We looked at the title of the article written by Octavio Nuri, one of our writers here is big banks cede market share to the non banks and what we’re seeing is just an amazing if you look at the market share of Wells Fargo compared to five years ago, it’s down 64%. Bank of America is down 67% j chases down 9% not as much but then you look at someone like Quicken Loans, their market share is at 491% over the same time period. The new one of the new players caliber home loans, I don’t know if you’ve heard of them is up 3,000% Over the last five years, and so it’s really interesting. And I think that’s a lot of a result of Dodd Frank. And it’s decreased competition in the marketplace, these big banks have been getting out. And that could could bring draw them back in if there’s there’s less,
Daren Blomquist 20:17
less regulation. They’re very, very interesting. Now,
Jason Hartman 20:19
you did a recent report about foreclosure activity saying that it had increased pretty significantly. Tell us about that. And then what do you attribute that to?
Daren Blomquist 20:28
Yes, I, we saw a 27% month over month increase in October and we just released this this week in foreclosure activity, and that was it stood out to us because we usually don’t see that much volatility month to month in the foreclosure numbers. And it was the biggest month over month increase we’ve seen since August of 2007. So I think somewhat coincidentally, that ties back to write about when the last housing bubble was was in the process. So Burstein, not i’m not saying that we’re in another one. But that that stood out. And when we dug a little deeper, some of the the other pieces of that were that it wasn’t just these judicial foreclosure states that we’ve known have a big backlog of foreclosures tied up that saw increases in foreclosure activity. It was some some surprising states, places like Arizona, Colorado, Georgia, where we haven’t seen that they’ve mostly cleared out the backlog. And so what we’re dealing with is more, more new loans, loans that have been originated since 2009. That are, are defaulting in greater numbers. Now. They’re not anywhere near the peak of the crisis. But that was a little bit of an eye opener that there is still risk in this marketplace, even with all the tight lending standards and all that. There. There is risk and we’re seeing that some of that come out in October, whether that continues will be interesting. I do Think that we’ll see an increase in the coming months in part because of a decrease scrutiny on on on banks. In part, there’s a specific issue in Florida where the Supreme Court favor rule just at the beginning of November and in favor of lenders and we expect to see more foreclosures there as a result, that kind of will loosen up the logjam in Florida.
Jason Hartman 22:22
Right, right. So that it’s good that you bring this up, because I think a lot of people have this faulty perception about this. And whenever you hear statistics, or you read them, you’ve got to, you’ve got to really think about the dynamics of all of the interplays here, and this is not NES. This doesn’t mean necessarily that hey, this is a sign of a downtrend in the market. This is old inventory, that I mean, probably should have been foreclosed on a long time ago, but it was just harder for the lenders to do it back then. And now that it’s easier because of some new legislation. We it’s just clearing old inventory out of the pipeline, right?
Daren Blomquist 23:01
Yeah, that’s right, in most cases. And that’s what we’ve been seeing, we’ve been seeing this kind of very long tail of foreclosure, distressed properties leftover from the last housing crash that have just taken forever to move their way through the pipeline. And that’s not good for the marketplace overall, like you mentioned earlier.
Jason Hartman 23:21
Oh, it’s terrible, you kind of price discovery. Yeah.
Daren Blomquist 23:24
Right. So and actually policymakers, I think are who, who are now realizing some of the unintended consequences of, of cracking down on foreclosures. And there’s good reasons for that. But that has resulted in this somewhat dysfunctional foreclosure process in many states across the country. I think we’re starting to see that shift back and the policymakers are realizing Hey, we need we do need actually a, an efficient foreclosure process to to keep the marketplace. You know, fluid.
Jason Hartman 23:58
Yep, absolutely. Absolutely do. What are your thoughts on any predictions on what’s going to what we can expect over the next year into 2017? I mean, we’ve got it we’ve got a new president, we’ve got a this is gonna be the most interesting presidency ever love him or hate him. It’s just gonna be interesting as hell. I mean, like, I like I posted on my Facebook when, you know, when I found out I said, I’m never gonna be the last for podcast content anymore.
Daren Blomquist 24:25
Right. Yeah. Yeah, one thing I’d like to just add that I think is kind of a, an interesting piece. He even Trump mentioned this in his acceptance speech about rebuilding inner cities and rebuilding infrastructure. And, you know, he won, largely because of the Rust Belt states up there, you know, Pennsylvania, Ohio, but it looks like Michigan, Wisconsin. And what’s really interesting to me is that we’re seeing a lot of real estate investors from Blue States invest in those red states buy rental properties in those red states. And I think this is going to be even it that’s been good business for them already. But if he’s going to be I’m guessing he’s going to be investing when he’s talking about rebuilding inner cities. He’s talking about rebuilding those Rust Belt cities and investing in in those places. And that’s going to be good for for real estate investors who are already there or who are going there and buying property there. That’s only going to I think it’s going to help them going forward.
Jason Hartman 25:32
Sure is very interesting. give out your websites and tell people where they can find out more and get some of your great reports and so forth.
Daren Blomquist 25:39
Yeah, definitely. realty Trac comm is where you can go and and subscribe to get full access to our nationwide property data for 150 million properties nationwide. And of course, the foreclosure date is a piece of that, that that most people know about finding a foreclosure properties out there but also researching enterprise property that you you would want to nationwide. So realty Trac comm that’s what the see at the end. We have, you know, for folks who are interested in creating marketing lists using our data of homeowners to reach out to, we have a great tool for that at marketing lists, dot realty track comm marketing lists you can go in as a self service tool, find homeowners who may be good opportunities for reaching out to for purchase. With there’s 20 different filters there. And then if you’re interested in getting our I didn’t tell you this in advance, Jason, but I did want to offer to your listeners. anybody is interested in getting our housing news report which is our award winning newsletter that goes out every month to two subscribers across the country. It’s usually $99 a year but we’re be happy to give your listeners one free year to try it out and see if they like it. If they want to send an email to marketing at Adam data comm that’s marketing at att om da ta comm we would, we’re happy to set them up with a free one year subscription.
Jason Hartman 27:12
Fantastic. Darren Bloomquist, thank you so much for joining us again, and it’s going to be an interesting year. That is for sure. I think. I think things are pretty bullish for real estate investors. I think the Trump election, even if he can’t stand all Trump if you’re a real estate investors probably gonna be pretty good for you. Thanks for coming on and sharing the first report since the election with us.
Daren Blomquist 27:34
Yes, happy to do it. Thank you, Jason, so much for having me.
Jason Hartman 27:38
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