During last Wednesday's Senate Banking Committee hearing, Sen. Bernie Moreno (R-OH) questioned witnesses about the housing market, and past government initiatives to reduce housing costs.
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00:00for having this very important hearing.
00:02Generally speaking, I'll ask some questions,
00:05but I think it's important to say
00:06that if government action and good intentions
00:10lowered housing costs, and you looked
00:12over the last period of time, housing
00:14should be free, given how many initiatives government
00:18has put in place to lower housing costs, not ironically.
00:22Dr. Glazer, you live in Massachusetts.
00:25I lived in Massachusetts for 12 years.
00:28It's more rare to find a Republican at Harvard
00:30than it is to find a Republican writ large in Massachusetts.
00:34And the ranking member talked about how
00:35housing costs for that schoolteacher.
00:37I'm very familiar with that.
00:39I ran a large group of car dealerships
00:41that sold cars to schoolteachers.
00:43And they kept living further and further away from Massachusetts
00:47to the point where a lot of people lived in New Hampshire
00:49that worked in Massachusetts.
00:51And it's interesting, because I think
00:53if you're looking at how do you solve housing problems,
00:56I would headline it as do the opposite of Massachusetts,
01:00which is massive government intervention
01:03in private markets that should be allowed to work.
01:08My question for you, Dr. Glazer, is this.
01:12In 2019, if you made $59,000 a year,
01:17you could afford a home as defined by your income
01:20was less than 30% of your mortgage payment.
01:23Today, that number is almost approaching 110,000.
01:26Just five years.
01:28What happened?
01:32Thank you for your question.
01:34Thank you for your care on this topic.
01:36I want to just first respond to your comment on Massachusetts
01:40land use regulations, which is I have long thought
01:42it's deeply ironic that red state Texas does
01:45such a better job of providing affordable housing
01:47for ordinary people than blue state Massachusetts does.
01:49And I think it is exactly the issue of local land use
01:51regulation, all of which is very well
01:53intentioned, all of which had consequences
01:54that were deeply harmful for ordinary people trying
01:57to buy homes.
02:01The change in affordability reflects two things.
02:03It reflects both the price of housing and the mortgage rates.
02:06And I'm not a banking or a macroeconomist.
02:09I study housing markets.
02:10I study cities and other places.
02:13So I'm not going to run down the litany of mistakes
02:16that my macroeconomist colleagues think
02:18that got us into the point where mortgage rates are currently
02:21what they are.
02:22That's not my business.
02:23But that is a big part of it.
02:25The other part of it that I am happy to talk about
02:27is the fact that housing is so much more expensive
02:29than it should be.
02:30And I think this is an issue in which it
02:33used to be about coastal areas.
02:36And now it is increasingly in sunbelt cities
02:39where the inner ring areas have made it harder and harder
02:41to build.
02:42And you used to see patterns in places like Atlanta
02:45where we built much more in the pricier parts of Atlanta
02:48in the 1970s and 1980s.
02:49Now we don't.
02:50Now we build in the lower density areas
02:53that are away from things.
02:54And so I think this is no longer just a Massachusetts issue.
02:58And that's, in some sense, what scares me about it.
03:00The places that were the escape valves for affordable housing
03:02in the US, the Houstons, the Atlantas, the Miamis,
03:08they're not turning into escape valves anymore.
03:10And that just scares me.
03:12And that's why I think having some national discussion,
03:15even if it is largely symbolic, it's
03:17just really important to recognize
03:19that we are going in the wrong direction as a country
03:21if we want to be a place where outsiders can come and forge
03:24a brighter future.
03:25Yeah, I mean, when you see an 80% increase in an income
03:28requirement over a five-year period of time
03:31to afford a home, you got to look and say,
03:32what happened during that four or five-year period?
03:35Could it be that we let 10 million illegals come
03:38into this country?
03:39Would that incredible surge in demand
03:43with no correlating supply increase,
03:46could that have something to do with it?
03:48Do those 10 million people having
03:50to be housed raise the price of housing generally?
03:55So again, I'm not an expert on immigration policy in any way.
04:01But you know supply and demand 101.
04:02I assume that's a criteria for becoming a Harvard professor.
04:05Indeed, indeed.
04:06I think I'm just going to repeat what I said
04:08in my original testimony, which is we
04:10know things are a demand problem when you see quantities
04:13and prices both up.
04:14You know things are a supply problem when you see prices up
04:16and quantities down.
04:18What we have seen in the US over the last 15 years
04:20is prices are way up and building quantities are way
04:22down.
04:23And that is why I think it is crucial,
04:24like the one fact to take away from this
04:26is this is a supply problem.
04:28It is fundamentally not about housing demand.
04:30Well, again, 10 million people that need to be housed
04:32is a problem.
04:33Mr. Jelinek, on the mortgage world,
04:35because this is also the Banking and Housing Committee,
04:38what are some things that you think
04:40could be done from an innovation perspective
04:43to help alleviate this problem?
04:45Senator, thank you for the question.
04:48It's sort of the mirror image of the discussion
04:50we've been having on housing just applied
04:52to the mortgage side of it.
04:55As long as we are careful with the innovations we implement
04:59and the ways we test them, there are a lot of ways
05:01we can use new technology and big data
05:04to reduce some costs in the process.
05:06So I can go into those if you'd like.
05:08Yep, please.
05:09Certainly.
05:11And some of this was in my testimony,
05:12and these are just some examples.
05:14I guess I'll give about 10 seconds
05:16on the core of our business.
05:17I mean, we exclusively work with independent mortgage brokers
05:20that are small town businesses across all 50 states.
05:23The reason why we are dedicated to serving the Wholesale
05:26Channel and working with mortgage brokers only
05:28is because they are generally the lowest cost way
05:30for a consumer to get a loan.
05:32And they're embedded in their communities.
05:33And whether it's rural, whether it's urban,
05:35they know the market better than anyone else.
05:37So our whole existence is about being a low cost provider.
05:40You can even see that in our public company,
05:42in our margins compared to some of our competitors
05:44that have a different business model.
05:46So everything we do is about technology
05:49and process and efficiency.
05:51So some of the things that we have now available to us,
05:54we have incredible data and analytics tools
05:56in the appraisal realm.
05:58There's more data now that Freddie and Fannie have,
06:01and there's more tools that we have
06:03where we might be able to increase accuracy of appraisals
06:06and reduce costs of appraisals.
06:08And it's a small number relative
06:09to some of the housing supply issues we're talking about,
06:11but these numbers start to add up.
06:13I could say the same thing for the mortgage insurance
06:17or the title space.
06:18And these are all areas where they're very necessary,
06:21but if you start to look at premiums collected
06:24and ultimately when the premiums need to be paid out,
06:27there are opportunities to provide alternatives
06:28where you don't increase the systemic risk,
06:32don't increase lender risk, don't increase consumer risk,
06:34but you're just leveraging modern day technology
06:36and innovation, in some cases even AI,
06:38to just reduce costs out of what is a complicated
06:42and often legacy oriented process, the mortgage process.
06:45All right, thank you.
06:46Thank you, Mr. Chairman.
06:46Oh, he's gone.
06:48Senator Van Hollen.
06:50Thank you, and thank all of you for your.