The Norris Group Real Estate Podcast

Inside the California Housing Market with Jordan Levine | Part 1 #915

• The Norris Group, Craig Evans

Share episode

On this week's show, host Craig Evans is back and he sits down with Jordan Levine, Senior Vice President and Chief Economist at the California Association of REALTORS®. They discuss California’s 2025 housing market outlook, the impact of rising interest rates, and how affordability challenges are shaping buyer behavior. Jordan also highlights key trends, the importance of policy in addressing housing supply, and what investors should be watching in the months ahead.

Jordan Levine is the SVP and Chief Economist at C.A.R., where he leads housing market research, economic analysis, and policy insights for over 190,000 real estate professionals. With a strong background in both public and private sectors, Jordan is known for translating complex data into practical insights. His work supports informed decisions across California’s evolving real estate landscape.


In this episode:

  • Craig welcomes Jordan Levine, SVP & Chief Economist at  California Association of REALTORS® 
  • Impact of interest rates on sales and affordability
  • Current housing market performance & key trends
  • Affordability index insights for buyers and investors
  • Ongoing housing challenges and policy solutions
  • Growth of ADUs and housing supply updates
  • What to expect next in California real estate 



The Norris Group originates and services loans in California and Florida under California DRE License 01219911, Florida Mortgage Lender License 1577, and NMLS License 1623669.  For more information on hard money lending, go www.thenorrisgroup.com and click the Hard Money tab.


Video Link

Radio Show

Narrator:

Welcome to The Norris Group real estate podcast, a show committed to bringing you insights from thought leaders shaping the real estate industry. In each episode, we'll dive into conversations with industry experts and local insiders, all aimed at helping you thrive in an ever-changing real estate market. continuing the legacy that Bruce Norris created, sharing valuable knowledge, and empowering you on your real estate journey. Whether you're a seasoned pro or a newcomer, this is your go-to source for insider tips, market trends and success strategies. Here's your host, Craig Evans.

Craig Evans:

Hey everybody. It is so exciting to be back. I know I have been off for a few weeks, but I am really excited today. We have Jordan Levine with us today. He is the SVP and Chief Economist with CAR, the California Association of Realtors, a statewide trade organization of real estate professionals with more than 190,000 members. Jordan helps to oversee all housing market research at CAR, including market statistics, survey research industry trends and policy analysis for CAR's, legislative and governmental affair efforts. One critical characteristic that sets Jordan apart from other number crunchers is his ability to communicate complex economic concepts and ideas in a clear and effective style. Jordan has a Bachelor's degree in economics from UC Santa Barbara and a Master's degree with Merit in International Economics from the University of Sussex. Jordan, I can't thank you enough for being on today, my friend. The last, last conversation I had anybody from CAR was actually with John Sebree. Used to be the CEO there. He and I got to know each other very well, and really enjoyed conversations with him. I know you had a lot of interaction with The Norris Group over the years, and so I appreciate you coming on and pouring into our listeners today and spending time with us, so .

Jordan Levine:

No, thank you so much for having me. I always love talking real estate, and you guys are actually kind of a different angle from my realtor members that I'm mostly talking to, I would say 70, 80% of the time. So this is fun for me. I appreciate it.

Craig Evans:

Good, good, good, good. Well, listen, you know, we all know there's a lot going on right now in the world of real estate, economics, finance, everything. So let's just jump right in, right? So I know at the end of 2024 you know, lots of people in the real estate industry were very optimistic. Looking back at the fourth quarter presentation that you did on the 2025 outlook. What do you think made everyone so optimistic?

Jordan Levine:

I think we were looking at kind of continued improvement in inflation, kind of getting inch by inch closer to that Fed target. And I think that the hope was that that would lead to rate cuts. I think everybody last year was so hyper interest rate focused. That was the entire story. You know, where rates up? Were they down? You had buyers sitting on the sidelines. You had it causing all kinds of, the, you know, challenges in commercial real estate, all these loans are out there, re upping, and multi family and office in particular, having a tough time. And I think folks thought, well, we're going to, we're going to get there on inflation next year. And that means, you know, that brother-in-law effect that folks talk about all the time, where you know that 3 or 4% interest rates always right around the corner. I think people thought this was going to be the the year for that. I think for us, what underlied our forecast of the 10% uptick in transactions was both kind of a marginal improvement in rates. I haven't thought rates were going to change much from where they're at right now for a while, but we did see more supply leading to additional transactions, and we are getting the supply piece but I think the thing that we didn't bake into our forecast was just how turbulent the environment was going to be and how much additional uncertainty was going to be injected in. Because actually, if you look at those inventory numbers, sellers are still selling, and we have more listings coming online, and all of that stuff. But there's a kind of cold foot element to the market right now that's kind of slowed our progress a bit.

Craig Evans:

Well, so out of the this, out of the stuff that you were talking about, you know, through 2024, things like that. And obviously there's a million changes, right? And the turbulence in the bond market and everything that's going on right now, that's especially if we just take of interest rates, right, if we look at fed, if we look at bond markets, the turbulence of all of that. But I'm always curious, you know, when there's people like us that are doing studies on the market and looking at what are we forecasting, right? What do you think the biggest thing that you were forecasting, and you and your team were forecasting that did come to fruition in spite of the turbulence of the market?

Jordan Levine:

Yeah, I think the lock-in effect is easy. You know, one of the biggest problems in the housing market over the last three years. I know not the one on the front page. You know those. That's the interest rate story, obviously. But funny enough, interest rates now are pretty much in line with historical averages. But it you know those, the lock-in effect is easing, because even as people are out there in these 3% rates, and life happens, right? And we've had a lot of years from that initial lock-in, when people are out, you know, getting those three and 2.75s and all that in 2021 you know, four years-ish has happened since then. People get married, people have babies, you know, people get divorced, all that kind of stuff and so the inventory has started to slowly creep onto the market, and just, you know, that's been the limiting factor. And so we thought most of that new supply would get gobbled up. And I think that the uncertainty piece is where we really missed it, but the actual underlying homes to sell are there.

Craig Evans:

Yeah, yeah, that's, it's even interesting. There's a lot I want to go through with you, and I'm trying not to go all over the place, because I've really been looking forward to getting you on to be able to talk with you. But you know, I was reading the other day that California has three of the top hottest markets in the country right now.

Jordan Levine:

Yes.

Craig Evans:

And for years, people have said, 'No, California as a dying dog, as far as the sales volume and stuff' and you guys had your struggles, but I mean, you got three of the hottest markets going?

Jordan Levine:

Yeah, no. And it's interesting, because if you look at the housing market as a whole, and you kind of break it up into segments, then that's where the real story is. We talk geography a lot, and people have been counting California out for ages, right? But when you look at GDP and jobs, we're punching above our weight on all the kind of core economic stuff. I think the transactions are terrible because supply is terrible, right? And we just have never had the homes to sell. But what you know, the segment stuff shows you that it's the top end of the market that was doing it, even when rates were at 3% even today, the growth that we're seeing, the recovery, it's, you know, and for us, that's 2 million, 3 million, 5 million in California, right? But it's that high end of the spectrum that's really crushing it. And I think when you look at the housing market nationwide through the lens of high income earners who are really punching above their weight and all of that stuff, then it kind of starts to make sense why California is doing it. Because we just have a big chunk of those luxury markets.

Craig Evans:

Yeah. Well, listen, because there's some things I want to get into, but before, before I dive deep down, I want to because there's, there's something that you guys put out that I love, before we get into too much 2025 and what's going on? Can you tell people how CAR and you and your team generate the affordability index that you do? You know what all does that incorporate?

Jordan Levine:

Yeah, so that's just a kind of metric that we use to look at trends over time, to see what it's like for the typical person out there, or what the typical home costs. And so what we do every quarter is we take the median close sale price, whatever the homes are actually selling for out there in the marketplace, closed transactions, and then we take that price and look at where the current interest rate is at that price point, and back out a monthly payment. And then we look at, you know, what is the right amount of income that you need to actually afford that, and economists typically use something like 30 to 35% of gross pay is what you should spend on your housing costs for it to truly be affordable, because you still gotta eat and buy gas and pay taxes and all that kind of stuff. So 35% is generally the right number, and so we use that to kind of back into okay, if you're spending the right amount, we know what interest rates and prices are, what your income need to be to actually afford that house. Well, then we go out and look at the census data and see how many people in all these counties actually earn that amount. And that's where our affordability index comes from, because it actually is measuring the percentage of people in that given county who actually make enough to afford that payment at those kind of normal assumptions of what's affordable. And when it drops into the teens like we have now, it's pretty scary, because it means that 82% of people in California, plus cannot afford the payment on the median priced home right now, and that's how you get, you know, big gaps in home ownership, and all the stuff that you see in California in terms of bad housing outcomes, overcrowding and all that stuff.

Craig Evans:

Well. And that was, you know, the first time I met Bruce. You know, we were talking about starting to build together and things. And we did a boot camp down in Florida for investors. And, you know, I've done a lot of speaking. Bruce has been speaking, you know, for forever in a day, right? And, but I was fascinated as he was going by. And all of a sudden he started talking about this affordability number out of California. And, I mean, it just sucked me into that world of, you know, the how that's coming through, and how that was being attained. And then all of a sudden, he starts talking about 17%. 'Dude, wait a minute, ' you know? And so I started looking at the charts and where everything's because I'm a data nerd. I love, I love data and he started, you know, he started showing this and, and I was looking like, man, so 17% historically has been that number where it's like, you know, danger Will Robinson, you know, like it's coming, right? So where are you guys? Now, what's the number in California look like that?

Jordan Levine:

It depends on where you are in the state. It ranges from the single digits, actually, in some parts of the Bay Area, where we're down in the eight, 9% range, all the way up to, I think, you know, even our most affordable markets in the Central Valley, Fresno and Bakersfield and things like that, we're still sub 50% sometimes in the 30s and 40s, even in the places that are, you know, by our standards, cheap and it's because it's, you know, really comes back to that the housing supply issue. But I'm actually that's why I'm kind of lobbying it at work to change the name to the housing unaffordability index, and we'll start reporting on the 85, 90% of people that can't afford because, you know, the numbers like getting too small to even show up on a chart now, so.

Craig Evans:

Well, you know, all right, so I listen. I've got a list of questions a mile long that I won't go through in a month, but I'm gonna probably ask you about six of them. Because as we'll talk, I'll start like, 'Yeah, let's talk about this now, right?'

Jordan Levine:

Go down the tangent, yeah. Let's go down some rabbit holes.

Craig Evans:

Yeah. And that's one of the things I'm thinking, you know, as a builder, as a fund manager, you know affordability, especially in our equity fund, you know, our REIT affordability is the main crisis we're trying to tackle.

Jordan Levine:

Yeah.

Craig Evans:

So in the position you're in with CAR, how are you guys approaching that in California, in a state where it's almost impossible to go pull a permit anymore these days, you know? And yeah, starts out so high, what, other than ADUs,what's, what's the plan?

Jordan Levine:

Yeah, I mean, you know, it's, I'm a big proponent of the all of the above kind of approach to housing, and I think we need, you know, everything from ADUs to multi family to, you know, even more luxury housing and everything in between. We're doing it kind of at the state level with our policy, you know, advocacy agenda that we do where we're lobbying for, you know, stuff on environmental staff, right, trying to get some reasonable reforms on things like CEQA, right, and things like that. I think you gotta address it at the local level too. And so we have actually, like, field reps that go out, and we have local associations that are part of the broader network that are very active at their city councils looking at things like permit fees, like, you know, add ons for bonds and other ways that are trying to undermine Prop 13 and, you know, increase property taxes and things like that. I think we're trying to also work on the hearts and minds piece, which in California, to me, is probably equally as important as tackling the state policy and local permitting rules and process stuff, because oftentimes you find a lot of local resistance to new development too. So, yeah, both, you know, the statewide stuff, I think, ties these developments up for ages and jacks up the cost and litigation, and just sitting on stuff that you can never break ground on, and all that stuff, which is just adds up to less affordability, right? You have the actual hard costs or fees. They're truly soft costs, I guess, from the standpoint of developer, but like the actual fees being imposed by these jurisdictions for water meters and, you know, whatever else stuff they're having on just the permit fees themselves. But even if you addressed all of that, you'd probably still have lines and lines of people showing up the planning commission saying,'We don't want any new construction here. So I think you got to do all three.'

Craig Evans:

Yeah, yeah. So, so with interest rates being what they are, right, it's a huge factor for buyers and sellers. That makes it huge for realtors, right? Current monthly payment, from what I'm reading, on average in California is little, just shy of $5,300, a month?

Jordan Levine:

Yeah, yeah.

Craig Evans:

What do you what have you seen this year that that's doing to the sales volume within California?

Jordan Levine:

Yes. I mean, you know, the affordability is certainly the thing that really holds back the entry level of the market, there's no doubt we're also so inventory constrained, though, that as you know, those listings come online, we're still more or less selling them, because there's so many high income folks out there needing places to live, and rents still are, are no picnic here in in California, and so they, you know, the although we would see sales rebounding even faster, right? But for our affordability crisis, I think we're actually still moving in the right direction, albeit at a relatively tepid clip. So, you know, it's really kind of slowing the pace of growth, but it's not canceling it out, just because there's still so much pent up demand here in California, which is actually why you see prices still going up too.

Craig Evans:

Yeah, well, because that's what. And Bruce and I've talked about this a lot, and I was thinking about that actually havinga conversation earlier today with a group of people. And we were literally talking about this, this aspect of you know that if some of these components don't get fixed in certain markets, like, let's say California, you know that starts to bring about challenges to where, all of a sudden you've got gaps in income possibilities for certain components, like realtors, right? If there's not enough homes to sell, all of a sudden, regardless of the cost of the homes, if you're pulling volume out that can be 2030, whatever that percentage is, all of a sudden, that's a cut in pay to the realtors, because there's just not enough volume there to sell, right? So that was as I was working through that, I was thinking about, that while, yeah, interest rates plays a big role, but affordability and just amount of volume of it, if the transactions aren't there, you know, because thing, whether it's can't be built, can get out of permitting. You know, we've got a, a somebody that works with us through The Norris Group that had a property in permitting, trying to get ready to go horizontal for 19 years. Yeah, when you go through that, you're like, well, and how do we get past this as a state, to be able to bring product to the, you know, to the market. And the interesting thing was, in talking with him, the original design on that was to be affordable.

Jordan Levine:

Yeah.

Craig Evans:

After 19 years of cost, his basis had changed so much, right? It's an interesting kind of you want to call it dilemma that California is in of, how do we put that? How do we fix that? You know.

Jordan Levine:

Yeah, no, and it's a quandary, and, and even more depressing is that it's really, it's self inflicted, too, and I would even go one farther than what you did, which is, you know, yeah, it's going to be bad for realtors if we can't generate transactions, obviously. But I think it's bigger than even just real estate. You know, this is a economic challenge, because if you look at at employers, right, they can't pay their people enough to give them a good quality of life, right? Even if you're maxing out your budget for whatever that position is, that equates to this person having to share an apartment with a buddy or something, or not be able to buy a home and stay renting, even though you're married and have a couple of kids now and then those jobs in Phoenix and Austin and stuff start looking more attractive, because, you know, when you compare the wage and that, again, just why the affordability piece is so important is because it takes the cost and compares it to what people actually make. You do those calculations and other states, and you don't have as big of a problem. So I think even more so than just for real estate, like, how are we going to be able to grow our economy when, you know, workers can't have a solid quality of life because they can't afford to live anywhere, or they got to live in subpar conditions with a bunch of people, are overcrowded and all of that kind of stuff. So, yeah, I think you're even hearing that, you know, employers are starting to make noise. There's, I did a event up in the Monterey Peninsula area. And there was a group from the, like, farm cooperative there, and also a group from the tech sector up just like slightly north of that, both coming to talk about how they're building employee housing. And I was like, man. I was like, housing is like the one thing that could bring together, you know what I mean, like leafy green farmers and the tech industry. And it's like, you know, that wouldn't be that's a symptom, I think, of this affordability stuff we're talkingabout.

Craig Evans:

So do you see any positive movement within the state of things, through state government, local governments, starting to make moves, and I guess even more so, are there any local governments and municipalities that are starting to make moves, trying to put things, to bring stuff into their local municipalities?

Jordan Levine:

Yeah, I think, you know, the ADU thing has been pretty good, and although it's limited, just because there's not really great financing mechanisms out there for ADU loans, there's not really a. A database of like, here's what an ADU rents for, so that you could count rental income towards, you know, construction costs and stuff like that. There's all kinds of weird stuff happening, but they're more palatable, I think, to just the public at large, and it gives the locals a bit of cover to approve more of that stuff without getting yelled at, right and getting an earful from the citizenry. And I've seen several cities across the state that are doing like, over the counter, you know, pre approved kind of ADU plans, where you can go in and it's like, one day and you pay the fee and whatever, and you're like, pretty much can get going on that kind of stuff. So we're long term homeowners, which California, we got a ton of people who have never moved and sitting on a boatload of equity those and we're also seeing that kind of pair up with this multi generational trend where you've either got, like, adult kids that are bringing the parents home to live with them, or, you know, the older adult parents with us. You know, young adult kid that's coming back after college to start career, and all, all of that stuff kind of dovetails in with these kind of expedited approvals on ADUs. And actually, all of the growth, almost all the growth, I want to say, like 95% of the uptick in"single family permitting" that you see in California over the last three years has been from ADUs. So I think that's a step in the right direction. The other thing that has me somewhat optimistic is just that people start to get it. When I was doing this 10, 15, years ago, you know, you'd say, oh, housing supply is an issue. We don't have enough units. And they're like, What are you talking about? There's a crane, you know, down the street building this giant apartment. But like when you looked at the numbers, they were pitiful, still. People are getting it now, when I talk supply, they go, yeah, no, I get it. We have a supply crisis. And I go, great. So can we build some housing here? And they go, No, we still want you to build it like, you know, down the street, but at least we're kind of coming to some common ground of what the problem is. And I think that's progress, at least.

Craig Evans:

What is the current rate in and you know, if you don't know this off top of your head, I know I'm kind of spitballing. It's just getting me thinking about things that are interesting now. But in, say, your top one or two markets there in California, what's your incoming versus outgoing, rate of flow of inventory right now per month?

Jordan Levine:

Well, I can tell you, like, where I live, I just looked this morning for the weekly data. And, you know, I live in a relatively small county, in San Luis, Obispo, but they're still churning. Like it's still like a net deficit to inventory. We're starting to eat into it. So, like in my area, I think we had like 15 closed transactions per day, and we had about 12 come online as new listings and so we're eroding it. But the other piece is the pendings, like some of that's just not showing up because we had about an equal amount of pending as what actually closed. So we're starting to, I think, get into a net deficit on supply, and those big double digit increases are going to start tapering off as we get into the spring home buying season.

Craig Evans:

Yeah, you know the, I don't know what you guys are seeing in that market. I mean, you know, typically we're seeing 27 to 30, 32% of those pendings fall out. The rest of that hold through and go through a closing. Is that about what you guys see in your local markets there?

Jordan Levine:

Yeah. And actually, even with all the shenanigans of late in the stock market, we haven't seen a big uptick yet and stuff falling out. So, you know, people are, you know, I think real estate tends to be a hedge too. So even though there's uncertainty out there, I think both with the cost of rentals and all of that stuff. And maybe, you know, parking your stuff and in real estate makes sense. And why some folks are trying to get it while it's good.

Craig Evans:

Hey, that's going to do it this week with Jordan Levine. Make sure and tune back next week for the second half of the show.

Narrator:

For more information on hard money loans, trust deed investing, and upcoming events with The Norris group. Check out thenorrisgroup.com. For more information on passive investing through the DBL Capital Real Estate Investment Fund, please visit dblapital.com.

Joey Romero:

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 to thenorrisgroup.com and click the hard money tab.