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Economic Update with Dr. Lawrence Yun

We’re excited to announce a mini-series of our Podcast, a live recording from our TNsights event in Chattanooga! We’re kicking off this 4-part series with an in-depth presentation from NAR’s Chief Economist, Dr. Lawrence Yun. In his Economic Update presentation, he discusses mortgage rates, unemployment rates, the housing market, and how Tennessee compares to the rest of the country. This podcast episode is unique in that it’s a more complete presentation if you can watch it rather than just listen to it. Additionally, the slides from his presentation are available HERE. We hope you enjoy!

Transcript
      • Welcome to the Realty Podcast, brought to you by Tennessee Realtors. I’m your host, Angela Shields. This podcast is created for Tennessee Realtors to get the T on all things real estate in Tennessee. We’ll bring you engaging conversations with esteemed guest in the real estate industry and cover a wide array of topics including current events, governmental affairs, education, and legal updates.
      • 00:00:29:13 – 00:00:57:17
      • Angela
      • Today’s guest is Doctor Lawrence Yun Na’s chief economist, who joins us to share an in-depth economic update. If you’ve never heard Doctor Yun speak. You’re in for a treat. If you have. You’ll know he uses a lot of insightful graphs and charts. While many of our podcasts are great to listen to in the car on your commute, to get the full impact of this presentation, I recommend watching this video when you’re not behind the wheel.
      • 00:00:57:22 – 00:01:00:17
      • Angela
      • Enjoy!
      • 00:01:00:19 – 00:01:26:28
      • Dr. Yun
      • But let me first start with the mortgage rates. So this is a long term chart on the mortgage rates. Some people who have been in the industry forever will remember that there was one time when mortgage rate was 18% or younger. Agent was certainly here of the story of 18% mortgage rates. So I put it on that red box when we hit the 18% mortgage rate.
      • 00:01:26:29 – 00:01:54:19
      • Dr. Yun
      • So how do we get there? And thank goodness. We’re not at those 18% mortgage rate, but it’s worth looking at the reasoning behind it. It was from the OPEC oil embargo in the 1970s. So back in the early 1970s, OPEC countries, essentially the Middle Eastern countries said, look, we don’t like America. We’re not going to sell oil to America or Americans brand in Europe and in Japan and Korea and such.
      • 00:01:54:20 – 00:02:26:23
      • Dr. Yun
      • So prices shot higher. That led to a decade, 1970s stagflation. People had misery index about how bad the economy was. So when Ronald Reagan came into office, he spoke with fed chair at that time, Paul Volcker, who was appointed by President Jimmy Carter. And they said, look, let’s bite the bullet. Let’s take a short term pain, economic recession so we would have a decade of economic prosperity.
      • 00:02:26:24 – 00:02:58:27
      • Dr. Yun
      • So essentially, what the Federal Reserve did at that time was drastically raise interest rates, kill off the inflation so that it would set the condition. As you can see, mortgage rate falling from 18%, 14%, 10%, 8%, 7%, 6%. To say that we have to take the short term medicine in order to have a long term prosperity. I show you this graph because we also have all price challenge today, but we are not facing 18% mortgage rate.
      • 00:02:58:27 – 00:03:20:11
      • Dr. Yun
      • We’re not even facing 10% mortgage rate because something else is happening in the economy. But you look at the recent situation related to the fed policy was that at the beginning of the year, at the beginning of the year, there was expectation of about 2 or 3 rate cut, including my opinion that I thought there would be a 2 or 3 rate cut.
      • 00:03:20:13 – 00:03:52:00
      • Dr. Yun
      • Blue line is what the Federal Reserve would control. Red line is what you care about. The mortgage rate is not a 1 to 1 relationship, but it’s still moves kind of together. So if the blue line was to decline, surely the red line would decline with that, even though not in a 1 to 1 relationship, but that little circle that you see is all price shock that came from Iran putting a essentially a blockade of the Persian Gulf to say no tanker will be leaving there.
      • 00:03:52:07 – 00:04:16:09
      • Dr. Yun
      • And consequently we had a price shock. And you see the mortgage rate going up. So right before the Iran conflict, mortgage rate touched down at 6%, average rate 6% average rate 6%. Average rate would have been the lowest mortgage rate in four years. In fact, that was my forecast on mortgage rates for this year. So I was feeling pretty good at 6% mortgage rate.
      • 00:04:16:11 – 00:04:38:10
      • Dr. Yun
      • But that good feeling lasted only for a day. Very next day. You know, the old price shock occur and now you see the mortgage rate going up. And it looks like this week we may actually hit 6.7%. Average will be essentially matching the highs in the past 12 months. So oil price shock is not good. But nonetheless it is not.
      • 00:04:38:10 – 00:04:58:22
      • Dr. Yun
      • An 18% mortgage rate or 10% mortgage rate is just going up modestly. Nothing alarming, but it is going up. And I’m not sure if the fed will be cutting rates this year because of the price shock that occurred. So you see the oil price shock. It came down. Now it’s going back up. You know what? I know what’s going to happen next week.
      • 00:04:58:25 – 00:05:27:09
      • Dr. Yun
      • But we do see some price shot. And the reason why we are not seeing a dramatic increase in any mortgage rate environment or Stefflon Don condition of 1970s is this America is energy independent. In fact, we produce more oil today so that we actually export. Now companies have right to export to whoever is paying the highest price. So if Singapore is paying higher price, they’re going to export to Singapore as such.
      • 00:05:27:10 – 00:05:52:21
      • Dr. Yun
      • So that’s why gasoline prices have come up, even though America is energy independent condition. So this has mitigated that rise in interest rate environment. We don’t see 18%. We only see mortgage rate going from 6 to 6.5%. I would also comment that the green energy technology has also helped because we are not using as much or as before.
      • 00:05:52:21 – 00:06:19:29
      • Dr. Yun
      • So combination of massive production and reduction in consumption means we have all left over to sell to other countries and hence the energy price shock has been less impactful. Let me just go into this now. As related to the economy, we are not in an economic recession. So GDP number, which captures everything we produce in the country is still positive.
      • 00:06:19:29 – 00:06:49:25
      • Dr. Yun
      • In the middle is a little artificial fluctuation Covid lockdown, reopening the economy so suddenly, collapsing, the economy, reopening boost. But right now the economy is not in a recession. So the national income is still rising, but it’s been currently driven by really by the AI technology. So you see the red line, how much business spending, activity related to data center, computer chip making, anything related to intelligence.
      • 00:06:49:26 – 00:07:14:01
      • Dr. Yun
      • Blue line for reference, how much spending related to the residential housing, whether it is mortgage origination, homebuilders building. So you can see sort of flat line or you see little hump. That was the lower interest rate environment but not really gaining. But you see the GDP is really being held up by the data center. Now data center has become controversial.
      • 00:07:14:03 – 00:07:31:05
      • Dr. Yun
      • It has become a front page news with some states like Mississippi’s and bring on the data center. We need job. We need the tax revenue. While other places like State of New York is saying, no, no, we’re not going to do that. Or Illinois governor, three years ago, he did a ribbon cutting to say there will be data center here.
      • 00:07:31:05 – 00:07:52:09
      • Dr. Yun
      • But in the past month he said no data center. So he changed his mind. So he has become front page news and people will debate that issue. Some states saying yes, other states saying no. But I think increasingly you will see that more companies begin to say, look, let us put the data center in your community. We’re going to boost local teacher salary.
      • 00:07:52:11 – 00:08:15:01
      • Dr. Yun
      • Maybe we will help expand some of the hospital facilities to. So I think there will be a lot of incentive to entice local community to say yes to it. But data center will be built for the simple reason. If America does not build, China will lead in the artificial intelligence, including the military technology and the next World War three.
      • 00:08:15:03 – 00:08:36:08
      • Dr. Yun
      • If it was ever happened with China leading in out of intelligence, I mean, that would be a total disaster for America. So just for that reason, data center will be built. The question is where or whether the government will have to use the eminent domain process to acquire land in order to build data centers. But the economy has been boosted by the data centers.
      • 00:08:36:08 – 00:09:02:12
      • Dr. Yun
      • And what we are finding, at least so far, is that it’s not hurting residential values. So some people are concerned, oh, data center, come in. People don’t want to buy a home near the area, but so far we are not seeing that yet. Maybe it will change in the future from changes in perception, but one of the big data center community is in fact in Northern Virginia, one of the most expensive real estate areas.
      • 00:09:02:19 – 00:09:34:13
      • Dr. Yun
      • So large data center real estate value very, very high in the Northern Virginia now, stock market has also been boosted essentially by the companies exposed to the data centers, essentially the tech titans, computer chip makers. But stock market is indicating that also economy is not in a recession. But this is a very interesting chart. Consumer sentiment, how people feel about it, how they are expressing their belief about the economy.
      • 00:09:34:16 – 00:09:58:27
      • Dr. Yun
      • We are not in a recession stock market. Today’s little wobbly, but compared to one two years ago, it is substantially higher. And of course, we don’t have foreclosure crisis like what happened 15 years ago. If you look in the middle of the graph, the middle of the graph is actually 15 years ago when we did have a recession and the foreclosure crisis.
      • 00:09:59:00 – 00:10:38:03
      • Dr. Yun
      • We don’t have a recession, we don’t have foreclosure crisis. Yet people are expressing as if we are in that situation. And some people who will be considered very radical or declaring themselves openly as socialists are getting elected with this low sentiment about the economy. So very interesting development where you have economy that is not in a recession yet consumer sentiment is showing very, very weak figures and student debt situation is very, very high.
      • 00:10:38:07 – 00:11:07:05
      • Dr. Yun
      • One thing I like about the state of Tennessee is that if somehow a company shuts down, those workers can get free education at community colleges to learn some trade skills, whether being electricians, construction and others free skills so that jobs will be readily available. So I think I will mention this in this context. Maybe there are too many Americans going into four year colleges and not going to trade skills because they are saying there’s not enough job for the world.
      • 00:11:07:08 – 00:11:29:05
      • Dr. Yun
      • I mean, not enough welders to fill all the positions, not enough construction workers. So one wonders whether people should come into Tennessee, get those free education technical trade skills, and the job will be readily available because some people are going to for your colleges, they’re coming out with huge amount of student debt. Now, the mortgage debt is performing very, very well.
      • 00:11:29:08 – 00:11:53:25
      • Dr. Yun
      • So even though some credit may be deteriorating, including in the commercial real estate, especially anyone who lent for office buildings, we are seeing increased default rate. But on the residential side, very little default to say healthy conditions. But let me turn to the job market because this is where I can focus the difference between the United States and Tennessee.
      • 00:11:53:25 – 00:12:23:19
      • Dr. Yun
      • And you will see that Tennessee is a solid example for the rest of the country. So first national job picture, national job picture how many salary, how many people are receiving salaries in America right before Covid. Then you see the Covid lockdown and as me reopen more job, more jobs such that today we have a record high number of people receiving steady income.
      • 00:12:23:22 – 00:12:50:17
      • Dr. Yun
      • I emphasize steady income, W-2 statement salary. I know you are not on W-2 statement. Your income fluctuates, but among people who are receiving W-2 statement, record high number of people receiving it. But if I put these same data, same job figures, slightly differently, rather than the total number of paycheck, how many new paycheck are we adding to the economy?
      • 00:12:50:17 – 00:13:16:01
      • Dr. Yun
      • So not the total, but how many new ones each month. And the figure shows a little softness, but it is positive from the beginning of the year is more than half a million, but it is clearly softer now than before. But it is solved because we are in a two unique factors in this economic cycle that we never encounter in past economic other cycles.
      • 00:13:16:03 – 00:13:41:10
      • Dr. Yun
      • Two unique factors making us solve. First is that in Washington DC, they slash the way government employees part of the reason wasteful government spending, maybe some of the government spending attract people who want to commit fraud. So you have to slash it away to limit fraud condition or something, at least among the views of the administration. Simply don’t do anything in Washington other than collect paychecks.
      • 00:13:41:10 – 00:14:08:27
      • Dr. Yun
      • So let’s slash it away so the job numbers will be little lower just from the fact that government has slashed away. And the other reason as to why the job numbers are little soft is that jobs will go to people in the country and people crossing the country illegally. So this is from the Dallas Federal Reserve, measuring how many people coming into the country without any documentation, essentially southern border crossing.
      • 00:14:08:29 – 00:14:35:27
      • Dr. Yun
      • You see the huge influx that happened during the President Biden time today. The figure is not low, but actually negative. What that means is that not only is the set of water effectively shut, but there are people who are self deporting, going back to their country of origin. And of course, big controversy is the operation of Ice Force deportation, which, you know, the communities are debating over.
      • 00:14:35:27 – 00:15:04:13
      • Dr. Yun
      • But in terms of economic consequences, it just means that job growth cannot be very strong because you are limiting the number of labor supply coming into the country. So some business community which are here, they’re saying I don’t have workers, we have labor shortage, we have a problem. But at the same time, you see, other people are saying, look, now, the American construction workers would not be undercut by foreigners and they can get a higher pay by going into the training.
      • 00:15:04:13 – 00:15:29:26
      • Dr. Yun
      • So there’s a lot of debate, but I’m just giving you the factual data as to why the job number cannot be super strong, because federal government is slashing away fewer jobs, people receiving paycheck. And second, the jobs that are going will be for people in the country and not people who are crossing over from the southern border. And that’s why unemployment rate still remains low.
      • 00:15:29:28 – 00:15:53:00
      • Dr. Yun
      • If you say the job market is solved, you would think that an employment rate would be rising, but it’s not. You walk down Chattanooga main Street. I’m sure there’s some help. One assign. Last night when I arrived in the airport, I think it was midnight. I think that’s just how the airline works in a major cities. Any secondary cities to put them on the last flight.
      • 00:15:53:06 – 00:16:17:11
      • Dr. Yun
      • Know you want to bring everyone to Charlotte, everyone to Atlanta every month to Chicago before sending them off to a mid-sized city. So when I arrived, we were sitting in the airport for a long time because there was no one to receive, the pilot said. So I don’t know whether the labor shortage is even going into the airport, but there is a labor shortage in America, even though the job numbers are solved.
      • 00:16:17:11 – 00:16:41:25
      • Dr. Yun
      • So this is where, again, does the community college to teach some of the training skills to because we are still in a low unemployment environment. If you’re wondering where the jobs are plentiful, it’s in the healthcare industry, and maybe it’s because we’re aging and we need more care, that could be the reason. Or you can say the opposite correlation.
      • 00:16:41:25 – 00:16:57:18
      • Dr. Yun
      • Because we spend so much on healthcare, Americans have are living longer now than before. Average life expectancy of about 77. If you happen to be 77, that’s not that’s does not mean that you’re going to kick the bucket.
      • 00:16:57:21 – 00:17:09:02
      • Dr. Yun
      • Somehow. If you are 77, your life expectancy I think is like six years. You have like six more years on average or something like that. So I don’t know how that all the numbers work.
      • 00:17:09:05 – 00:17:36:15
      • Dr. Yun
      • But let’s look at the state by state comparison. So this is how many jobs creation over the past 12 months. And some states are actually losing jobs. For example, Virginia, where I am from, especially Northern Virginia, where there’s a lot of federal government employees that have been slashed away. So the numbers are negative. Tennessee is showing 0.2% job gain from 12 months ago.
      • 00:17:36:17 – 00:18:15:19
      • Dr. Yun
      • Somehow Nevada is really creating jobs, but there are some variation to it. But I don’t like to look at one year situation. One year is too short. I like to look at multiple year situation to see some consistency. What’s happening and pre-COVID is a good reference year. So looking at from March 2020 to the most recent, what you find in Tennessee is I cannot read a figure, but it looks like 7.8% more job, 7.8% more people in Tennessee receiving paycheck home sales, b 7.8% higher today compared to pre-COVID.
      • 00:18:15:27 – 00:18:38:24
      • Dr. Yun
      • But it’s not. Home sales are below pre-COVID. But you may want to sort of mentally visualize well, with so much paycheck that is being received in Tennessee, maybe there’s a lot of people who could enter the housing market if the mortgage rate decline or if, say, more inventory begin to show up on the market. So you can look at it as potential housing demand.
      • 00:18:38:25 – 00:19:06:05
      • Dr. Yun
      • Green colors are the superstars. So you see the Rocky Mountain states, Florida, Carolinas. So they are the superstar with better than 10% employment condition. But Tennessee will be above national average and unemployment rate is very low in Tennessee 3.6%. Again, very tight labor market condition. But if we look at specifically in Chattanooga, Chattanooga is really taking off more recently.
      • 00:19:06:05 – 00:19:42:05
      • Dr. Yun
      • So it’s not a straight line. The little fluctuation I guess some companies shut down there is company expansion. So it’s not a straight line. But say from let me see, I started from 1990. Back in 1990, there were 210,000 people working in the Chattanooga region. Today it is 300,000. So that’s like 90,000 gain condition, almost a stadium full of people now receiving paycheck in Chattanooga today, which did not happen, say back in 1990 a condition Knoxville almost a straight line, much more steady condition.
      • 00:19:42:05 – 00:19:56:19
      • Dr. Yun
      • So huge growth in Knoxville region. And here in the northeast Tennessee you see more fluctuation but still record high employment condition.
      • 00:19:56:21 – 00:20:42:14
      • Dr. Yun
      • Two big cities, or at least there were equal heavyweights back in 1998. Nashville and Memphis were almost same size, same number of jobs. But look how it has. The verge Nashville. You arrive in Nashville year after year. The skyline changes. You arrive in Memphis. It’s almost the same skyline as before, but one wonders whether Memphis today is something like a Tennessee Valley Authority situation 100 years ago, meaning that if you are to buy a property in Kingsport, in Knoxville, in Chattanooga, you would have done very well.
      • 00:20:42:16 – 00:21:02:06
      • Dr. Yun
      • So he’s Knoxville providing an opportunity. Furthermore, say some companies who say, oh, everybody is going to Nashville, maybe I want to go to Nashville. Starbucks. They said, I’m going to get out of Socialist Seattle and we are going to go to Nashville. So we saw those decisions. But you begin to wonder if some companies will begin to say, look, what can I go to Nashville?
      • 00:21:02:07 – 00:21:27:22
      • Dr. Yun
      • Nashville is simply too expensive, but we like Tennessee, so what can we go with then? Tennessee? So maybe they begin to consider Memphis area as a good opportunity that is yet to be discovered. So one wonders whether this could play out or not, but you see how things have really diverged between Memphis and Nashville, at least over the past about 30 years now.
      • 00:21:27:23 – 00:21:58:02
      • Dr. Yun
      • Clarksville, maybe that will become part of the Nashville MSA or not. But in terms of the percentage gain, it has been similar to what has happened in the Nashville region. So the land property is a good place for data centers. So one can look towards Clarksville as a potential where you could really begin to take off. When I speak to some realtors, they will come up to me and say, you know, you should mention Huntsville.
      • 00:21:58:03 – 00:22:20:17
      • Dr. Yun
      • We will become the next Nashville. There were people from Kentucky that was say, look, mention Owensboro because we’re going to be the next Nashville. So everyone wants to sort of copy what has happened in the Nashville. But Clarksville very near by automatically gaining that condition. Now, let me turn to the real estate condition. And this is not a pretty chart.
      • 00:22:20:18 – 00:22:43:28
      • Dr. Yun
      • This shows the number of home sales in America. The red bar shows the depressed home sales condition. The first set of Red bar is the foreclosure crisis flood of homes on the market. No one is buying it. Very difficult circumstance. Now in hindsight, if you did buy and you had a long holding period, you would have done very well.
      • 00:22:43:28 – 00:23:11:18
      • Dr. Yun
      • But during that time people did not buy. Look at this. We are today similar low home sales activity. So in terms of home sales, even though you do have a record high number of jobs in Tennessee, easily outperforming many of the rest of the country, yet home sales still remain quite depressed, not really rising. And the monthly figure is also indicating so far this year we have not made any gains.
      • 00:23:11:18 – 00:23:37:01
      • Dr. Yun
      • So it’s not a three year slump, but we are in a fourth year slump condition as related to the transaction activity. How many people are moving home? How many people are exchanging keys? But the prices have really boomed. This is a national picture, but Nashville will be in fact a little better than this. Or many cities. Knoxville. Kingsport will be even better than these figures.
      • 00:23:37:01 – 00:24:08:03
      • Dr. Yun
      • But there is a home price boom. And when I look at the Tennessee Association website, you know, you can go into a look at the figure. Currently, the median price at 385,000. There will be easily, you know, better than 50% growth compared to what it was pre-COVID condition. And if one looks at the price growth comparison between the states from pre-COVID to the most recent Tennessee, 73% price gain.
      • 00:24:08:05 – 00:24:22:10
      • Dr. Yun
      • So you buy a home for 200,000 pre-COVID, and today it will be worth close to 400,000, almost doubling the condition.
      • 00:24:22:12 – 00:24:48:09
      • Dr. Yun
      • And that is why, even though the transaction volume has been in Islam, the dollar volume that realtors will always advertise, oh, I did $2 million in business. So the dollar volume is actually above pre-COVID. So the dollar is only been driven by the price increases, not from the fact that there’s more transactions, but from societal point of view.
      • 00:24:48:10 – 00:25:15:16
      • Dr. Yun
      • We want more transaction because that shows that Americans are moving. And anytime Americans are moving, it is often for better opportunity improving in their lifestyle condition. So we want to see more Americans on the move, but we are not seeing Americans on the move. But the dollar volume is holding up because of the price increases. And we ask realtors, how many of you hold investment properties?
      • 00:25:15:16 – 00:25:38:21
      • Dr. Yun
      • And we are seeing about 40% of the realtors do have that second property. So the transaction commission income maybe a little tough, but people who have that second home investment property, I’m not sure if the rental income covers the mortgage, but the prices has increased. So if they want to sell their property, they can easily make a profit from that sell.
      • 00:25:38:21 – 00:26:00:10
      • Dr. Yun
      • So that provided a little comfort. And in fact, Tennessee is one of the very, very few states. I think there’s only 2 or 3 states in the country where the realtor membership is actually higher now than what it was last year. Good news, bad news. I’m not sure what it is, but it is the factual part. And I think that shows that resiliency of the realtors in the state.
      • 00:26:00:13 – 00:26:29:19
      • Dr. Yun
      • And this is the chart. Maybe for business purposes you want to share with agents or you want to share with your clients, is to show that national paper may indicate there’s a housing market slump, but it is not a slump in prices. It is a slump in unit sales. So even with a small price gain that happens this year, you are still looking at about $16,000 additional wealth game for typical homeowners.
      • 00:26:29:19 – 00:26:55:15
      • Dr. Yun
      • And if you look at the Federal Reserve data, I’m sure you have seen it in some fashion but worth reinforcing. Homeowners have wealth in America, renters or not accumulating wealth. So if you want to be in that solid wealth accumulating part of the society, you have to own property. So despite all the talk in the social media. Oh, don’t buy home this year.
      • 00:26:55:16 – 00:27:21:09
      • Dr. Yun
      • Wait until the mortgage rate decline. Or some people don’t buy a home because there surely will be price correction of 30%. Wait until prices go down 30% before buying home. You have to show this to essentially say that you have to own property in order to accumulate wealth. And because of some of the social media things that I’ve been seeing again, price decline, 30% price decline, don’t buy home this year.
      • 00:27:21:11 – 00:27:47:26
      • Dr. Yun
      • I decide to sort of counter that argument by saying, okay, what? Don’t have foreclosure crisis? We have minimal mortgage delinquency, a condition which means prices are on solid ground, especially in Tennessee, where so many people are moving in, moving into the region. But I also wanted to do this exercise to say, when will the home reach $1 billion on average, just to change their mindset rather than thinking about 30% price decline?
      • 00:27:47:27 – 00:28:10:12
      • Dr. Yun
      • When will the price which $1 million? And conservatively using some different scenarios? I’m not looking at the big price increases, but it’s a two, three, 4% price increases. I’m finding that in roughly about one generation in about 25 years, median home price in America will be $1 million.
      • 00:28:10:15 – 00:28:32:03
      • Dr. Yun
      • In San Francisco back in 1990, I think in San Francisco, median home price in San Francisco reached 200,000. It was the most expensive part of the market, and people were complaining it’s a bubble. You know, home prices were crashed. And guess what? What the home prices in San Francisco is today, you know, reaching almost close to $2 million.
      • 00:28:32:03 – 00:28:59:25
      • Dr. Yun
      • So million dollar today sounds very, very high. But if you postpone, postpone, postpone before you know it, it can go up to that level. And our stove for the homeowners at least, this is a good retirement savings that will accumulate over the years steadily. So assuming that little fluctuation scenario is I just replicated what would happen to home price if it exactly replicated what happened in the past 25 years.
      • 00:28:59:25 – 00:29:04:28
      • Dr. Yun
      • So you chose that condition. So.
      • 00:29:05:00 – 00:29:25:14
      • Dr. Yun
      • Housing, massive housing for the 21st century bill got past and by large bipartisan support, I think the ratio was 90% of the elected officials saying yes, 10% saying no. I’m sure members of the congressional.
      • 00:29:25:16 – 00:29:45:20
      • Dr. Yun
      • People in Congress from Tennessee are probably in that ratio, 9210. I don’t know, you know, a little more on that. So it was overwhelming, which means that President Trump, even if he was to veto the bill, I mean, first he said he likes the bill, but then he said, I think the day before the headline news was a socialist got elected in New York City.
      • 00:29:45:20 – 00:30:04:07
      • Dr. Yun
      • And maybe he thought that there was a voting problem or something. So he insisted on voting ID attached to it. But I think President Trump also knew the Constitution. He doesn’t sign. And I go to my middle class civics book. If he doesn’t sign after ten days, he does become a law. So it is a law of the land.
      • 00:30:04:07 – 00:30:23:29
      • Dr. Yun
      • But it’s not a huge game changer in a short time period. It’s a game changer. In a longer time period, you reduce regulation so the homebuilders can be a little more active. Some of the permitting process. If this home was already permitted on the right, this homo is already permitted on the left home on the middle vacant property.
      • 00:30:24:00 – 00:30:48:12
      • Dr. Yun
      • You don’t need to get, you know, environmental review. You just say yes immediately. So you fasten the process. Empty commercial buildings incentivize opportunity zones so that maybe it can be converted into residential units, but it will take time. So it’s not a one year impact. It’s a multiple slow impact that will accumulate over time. But what will be a big one year impact is this chart.
      • 00:30:48:16 – 00:31:14:03
      • Dr. Yun
      • How many Americans could potentially be hit with a capital gains tax if they were to sell their home? For most Americans, you sell your home profit is yours. But because prices have risen so much, you are now beginning to see some people getting ensnared in this capital gains tax, especially the elderly homeowners. Just think of a elderly couple.
      • 00:31:14:06 – 00:31:37:05
      • Dr. Yun
      • Their spouse passed away, now is a widow and the home is too large. So they want to downsize. And maybe they want to use some of the leftover profit to share with their grandkids and so forth, or travel around the world. But their accountants are saying if you sell your home, you have exceeded the $250,000 capital gains exemption and you will be paying capital gains tax.
      • 00:31:37:07 – 00:32:04:16
      • Dr. Yun
      • That is a bummer. That leaves a very bad taste in people’s mouth. So Na is trying to push for lifting the capital gains exemption. Some people are saying there should be no capital gains exemption. All the people homeowners. But we are looking for right Legislative Avenue and our advocacy team. I spoke with Shannon McCann. You know, some of you who are very involved with and they are she’s the top person ever in Congress.
      • 00:32:04:21 – 00:32:39:04
      • Dr. Yun
      • She is indicating that in some reconciliation bill, because reconciliation only requires 50 votes in the Senate, not the 60 to see what or not that this could be included into that. So we have to wait and see. I hope it’s this year because it will be so. My final chart is the following. Home sales forecast I downgraded. So last year, November of last year, I indicated that there would be about 14% boost in home sales.
      • 00:32:39:06 – 00:33:00:23
      • Dr. Yun
      • Expect some excitement like this year. It looks like we’re not going to get that excitement, but that was based on the middle graph. You look at the mortgage rate I based on my mortgage rate to be at 6% this year, and we had it again just for one day before the oil price shock. Now we have a price shock.
      • 00:33:00:23 – 00:33:21:08
      • Dr. Yun
      • And furthermore, then there is more news publication about the national debt picture. Or the Social Security will go out of money and there will be 30% reduction in Social Security check ten years from now. So if you’re looking for Social Security check ten years from now, according to the current law, your paycheck, your Social Security check will be reduced by 30%.
      • 00:33:21:09 – 00:33:46:11
      • Dr. Yun
      • That will never happen because it’s impossible politically, so they will make it full. But only way to make it forward is to print money in the future. So considering all this condition, don’t expect mortgage rate to go down to 3%, 4%, or now even 6% appears to be a little more difficult. But assuming mortgage rate is six and a half, my statistical modeling is saying that is going to be a still slight gain that occurred.
      • 00:33:46:12 – 00:34:21:01
      • Dr. Yun
      • I’m sure Tennessee will be in that positive territory this year. Housing after a multiple years of downturn. When it begins to recover, it is never a one year phenomenon. It is a multiple year phenomenon. So just looking at the past housing cycle, after assuming four years of sluggish activity, when it begins to recover, you are looking at maybe ten, 11, 12 years of much more robust activity, you know, 14%, 20% above the slump levels.
      • 00:34:21:01 – 00:34:52:22
      • Dr. Yun
      • So this year we’re not going to get that. But maybe this year is just the first year of recovery that set the condition for much better. Ten years of much better sales activity from 2027. So a whole my forecast comes out reasonably correct so you can participate in this growth. Thank you very much for having me. And thank you very much.
      • 00:34:52:24 – 00:35:19:18
      • Angela
      • I hope you enjoyed today’s podcast production of Doctor Lawrence Young’s economic update from our TNSights event. The slides from his presentation are available to our Tennessee Realtor members on our TNSights web page, linked in today’s show notes. Feeling FOMO from missing out on TNSights? That’s okay. We have three more sessions in our special podcast series from TNSights coming to the podcast soon.
      • 00:35:19:22 – 00:35:30:26
      • Angela
      • Subscribe to the Realty podcast and make sure that you share for next year’s TNSights. Watch for the dates to come soon. Thanks for listening.