The Norris Group Real Estate Podcast

Inside the California Housing Market with Jordan Levine | Part 2 #916

• The Norris Group, Craig Evans

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In the second part of our interview, Craig Evans and Jordan Levine explore the Federal Reserve’s approach to inflation, the risk of stagflation, and how rising interest rates are impacting market volatility and unemployment. They also examine the economic effects of tariffs, shifting housing market trends, and the growing burden of insurance costs on home affordability. The conversation highlights concerns from realtors, ongoing policy advocacy efforts, and ends on a hopeful note with a cautiously optimistic outlook for the economy in 2025. 

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


In this episode:

  • Inflation vs. Unemployment: Jordan Levine shares insights on why the Fed may prioritize inflation control over rate cuts, even at the cost of higher unemployment.
  • Market Volatility and Monetary Policy: How shifting Fed policies are influencing stock market trends and investor confidence.
  • Tariffs and the U.S. Economy: Exploring the economic ripple effects of tariffs and trade policy decisions.
  • Housing Market Insights: Current housing trends, buyer behavior shifts, and affordability challenges in a changing economy.
  • Insurance Market Disruptions: Craig Evans and Jordan Levine discuss how soaring insurance premiums are impacting homeowners and housing affordability.
  • Realtor Concerns and Policy Advocacy
  • Looking Ahead to 2025: Reasons for optimism and what to expect from the economy and real estate market in the coming year.



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


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Narrator:

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 guys, good to have you back. Thanks for joining us for the second half of the show with Jordan Levine. Let's get started. Let's talk about a few things. There's you know, and when I say rates, I want to be careful, because a lot of times, if I'm talking about rates, everybody just assumes that I'm talking about interest rates, but I want to talk about Fed rates and short term money. You know, what do you think about where the Fed's at right now, based on what's happening with tariffs, where, you know, we're kind of in a sticky kind of type of inflation type of scenario right now? What's your thought on what the Fed's doing, not doing that type of process?

Jordan Levine:

Yeah, I think the Fed's going to be in a tough spot coming up, you know. I think, you know, Stagflation is like a super nerdy, esoteric term, but, it's one that's, you know, it just means that the Fed's in a hard spot. The way that the economy normally works is like, you know, I guess growth and inflation tend to usually go together, right? So, like, when the economy is really growing gangbusters, that's inflationary because we're consuming all the resources and everybody's full employed, we're having to pay people more and all that kind of stuff. When you get those two things move in an opposite direction. Well, I guess the the reason why that's good is it makes it easy on the Fed, right? It's like you get lots of inflation. It's because the economy is going too strong, great. You you have one weapon, which is the interest rate that you can raise or lower. And you raise the rate, right? And that kills off the economy. It kills off the inflation. Go back to target, you can lower rates again. And that's great, right? But when they're moving in opposite directions, and you have an economy that's maybe in recession because of, you know, these tariffs, or other financial market, you know, declines, or something like that, but you've still got the inflation, then how do you use your one weapon, right? You've got an interest rate, and you can raise it to kill off the inflation, hopefully, but it's not really over consumption driven inflation. It's tariff driven inflation, and so that doesn't work so good. And plus, you're already in a recession, and that just makes the recession even more, you know, even deeper, because now it's more costly to borrow to make my car payment, blah, blah, blah, and so now you've got inflation and a recession with only one weapon that you know you got to pick which thing you're going to cure. And again, that puts them in a tough spot. From where I sit, I think they're going to err on the side of keeping a lid on inflation. They're not going to start cutting rates and get scared off by a little bit of rising unemployment. They really want to see inflation stamped out. I think he has. I think he's eyes wide open, maybe that he won't be around or renominated anyway, so I don't know that he's going to be, you know, cow town, what the policy side wants him to do. And I think he'll stick to his guns on the inflation. To me, that just means that we're not going to get deep and precipitous cuts from the Fed, I think what they've projected, maybe 50, 100 basis points on the extreme outside, I think, is like the best we can hope for. And if you hold that short term rate up against where 10 years at, I don't think that gives 10 years much room to fall honestly.

Craig Evans:

Well, and that's what I was looking at, our our, you know, our 10 year spread, we're fluctuating the spread on the yield. I mean, we're, you know, historically, we're point a quarter point half. I mean, we're fluctuating between 2.3 and 2.6 so even that spread is high. There's so much more room to move. And we were dropping down towards the end of last year to where that spread was tightening. Do you, I'm curious to hear your thoughts. Do you think the the Fed has has ability to to calm the some of the volatility in the market, especially when we're dealing with with bonds, things like that?

Jordan Levine:

I think there's a limit to what we can expect out of the Fed in terms of just keeping the lid on things only, you know, I think the best thing they can do is kind of be predictable, right? And not throw any more curveballs and kind of stick to the glide path and all of that stuff. But I think, you know, the two years moving around based on the news, right? And so every time there's a new thing, whatever that thing of the day is, you know, that's gonna send that the two year up and down and all over the map. And I think that's still gonna be a roller coaster ride. And I think that's why you talked about the yield curve kind of getting a little bit wider. That's mostly because the two year freaked out, right? And so, yeah, so I think you're going to continue to see a lot of volatility in the short run, unless things calm down, you know, and there's not any crazy news stories happening. But I think the short run rates are very current event driven, and to that extent, I think you can just keep that seat back and trade table and all that stuff.

Craig Evans:

It's been interesting to watch, you know, the two year, the 10 year, over the last month, month a half, and really even in the last two to three weeks. And the amount of volatility within a one day span on the amount of bips that that thing moves, is crazy. It's been mind blowing to see something that is typically slow moving and steady, that is moving four and five dips within a matter of of hours, you know?

Jordan Levine:

Yeah, when you go to school for finance and economics, that's why nobody wants to go be a bond trader. That's like, supposed to be the boring thing, right? It's like, I want to do equities. Let's go and, like, where all the action is. No, not anymore. Are you going to be at PIMCO now or something?

Craig Evans:

Oh, well, listen, let's, let's talk some about tariffs, inflation, some things like that. What do you believe will be some of the impacts that we'll see on tariffs? And are you guys in California already seeing any of the impacts on the tariffs, from the tariffs?

Jordan Levine:

Yeah, I think it just, you know, ultimately, from my standpoint, it exacerbates, like, the challenges that California is already facing. We talked about permit fees and all the, you know, challenges that we have, getting new inventory online. And one of my friends, who's a economist, or she was an economist down in San Diego, did a study, I think she's showed average cost is like, over 200 grand before we even stick a shovel in the dirt. And then we wonder why we can't have$250,000 homes and that kind of stuff. But I think looking through this policy, through that kind of a lens, you know, it, you know, we get a lot of our lumber from overseas. We get a lot of our drywall and stuff from Mexico, right? And so we have all these, you know, costs, and I think this exacerbates the cost stuff. I think, you know, there's a labor force angle to this as well, right? Not just with the tariffs, but if we're, you know, cracking down on, you know, non citizen labor and things like that, then it just, you know, not only are we paying more for the raw materials now, it's tougher to find trades people and, you know, all of that stuff, and I think it all adds up to higher costs. I think, you know, there's also the buy side, like consumer zeitgeist, piece of it, right? And all the uncertainty, where, even though rates haven't really gone up or down much, and there's more inventory moving towards the inflation target like you still got all these buyers sitting on the sidelines, freaked out now. So I think ultimately, it just kind of kicks the can down the road and on when the housing market can fully recover back to what we used to think was normal. We had to downgrade our sales forecast to about 5, 6% this year, from about nine and a half. We still think, think things are going to go forward, but there's been a deceleration. We're still expanding, but only by 2, 3, 4% over the last couple of months, compared to the 10, 15% the transactions were bouncing back by at the end of last year. So yeah, I think it, it makes the supply challenges harder. I think it makes the brother-inlaw effect more real for the buyers. And yeah, I think it just means the transactions will be slower to recover.

Craig Evans:

It's interesting. One of the things that I've been looking at in the market, especially since the tariff language has really been being communicated, and it's starting, it's not starting. It's 14%, it's 104%, one of the things I've been looking at is, how is it not only just affecting the market, but what is it doing in different pricing sectors of the market.

Jordan Levine:

Yeah.

Craig Evans:

And interestingly, in the state of Florida, where we're seeing that in a couple of the Sun Belt states, is actually in a mid price point, you know. So for us, we've got a low price point of 350, 400,000 you know, we got a mid price of 550, to 750, you know, once you're at 900 to 2 million, you know, the low stuff is moving. You get over a million dollars. It's going to move in a day and a half, and at that middle price point, that 550, to 700, 800,000 those are the ones that's taking time. And that's what's been interesting to see, that slow down, and how it's affecting different pricing markets are you seeing the same thing in California and other markets? And I mean, what's your thought on that as an economist?

Jordan Levine:

Yeah, I think, you know, you've kind of hit on on just that, the idea of people that are really reliant on financing, one of the things you see up above 2 million is that they're just way less reliant on mortgage rates. And the other thing, I think, at the top end of the market is it cuts both ways, right, like there's, it's, they're a lot more dependent on the stock market too. And up until very recently, the stock market was still, you know, the Dow was 44,000 a couple weeks ago. So people were still feeling rich. And you would think, you know, turbulence in the stock market would tend to cut against luxury home sales to now, not as rich when the stock market is corrected, but at the same time, if you think the stock market's going to keep correcting or be very volatile. Then again, that kind of safe haven aspect of real estate seems attractive. And so I think that's, you know, keeping demand strong despite some correction and in the stock market at the high end. And then again, only you know, I think it's only 60% or even less, of folks, about 2 million, that get a mortgage, 40% pay all cash. Even when people do, I think that number might even be higher slightly, actually. But even when they do get a mortgage, they're putting 30, 40, 50% down on these, you know, three, five, ten million homes, and so they're just less sensitive to that stuff, too. But you know, the people who have no option but to go out and get a mortgage. And I think Florida, like California, also has the insurance challenges on you know, it's not just the rates are almost 7% and actually, I kind of neglected to mention that when we were talking about the affordability index, we're putting on, like, historic estimates of what insurance cost. I think we add on like 1.38% for your property taxes in your insurance. Those are probably hyper conservative at this point in time because of of how much insurance is has gone up too. But I think when you bake all that in there, yeah, it's really tough for that kind of retail owner occupant that even that move up buyer who already had one entry level home, it's tough.

Craig Evans:

You said that you guys have already kind of downgraded your outlook for the year a little bit and kind of slowed the growth of it. Let's say the feds come back in on short term. They lower the rate, right? Because it always amazes me how many people think that the Fed lowers the rate my mortgage are gonna be expensive. All of a sudden the economy starts booming, right? So it doesn't touch, it really doesn't touch that rate, you know, but still in that aspect, if the Fed comes in, Does, does that the bond market stables even slightly, right? If we just get rid of some of the volatility, what do you think that economic outlook looks like for you guys? I mean, do you think you're still downgraded. Or do you do you see potential levers being pulled that then can say, you know, Jordan and his team goes back and says, Hey guys, let's revisit this. I mean, I think q4 could see an uptick again. What's your thought? Or do you think there's levers that could be at that point?

Jordan Levine:

Yeah. I mean, I think that would help. I think rates coming down would certainly help get more buyers off the fence. And I think if things calm down and people weren't feeling as frantic, then you know, we already have, like I said, we're at full employment. California has got like 5% unemployment rate right now, 18.3 million people working on payrolls. So the demand is there. And I think if rates came down, that's what a lot of these buyers are waiting around for, and I think that could help, but I think there's just an upper bound to how quickly we can get back to, you know, I think that original forecast of 10% is probably still about the best case scenario, only because even if we get lower rates and all of that, we still got those affordability challenges, and even though there's more inventory than there has been over the last five years, it's, you know, if we would have went from stopped looking in 2019 like this, would have still been a terrible year. It's just better than it was when it was hyper depressed at 3% interest rates. So there's, you know, there's a ceiling, I think, to how much we can recover, even if everything goes right,.

Craig Evans:

Yeah, it's interesting. You know, a lot of times when we're on here, most of what we talk about is from an investor or a finance perspective, things like that. But obviously, we've got you on here. You're with CAR. You represent the realtors, right? You're Go Team realtor.

Jordan Levine:

Yeah.

Craig Evans:

So, so, you know, as we're kind of starting to wrap up some of the stuff. I just want to get kind of an idea of some of the things that you're hearing right from So, from the realtor perspective and from CAR, what are you hearing the agents are saying that the climate's like, what's their biggest concerns?

Jordan Levine:

Yeah, I think they're on track with interest rate stuff, news cycle stuff they you know, it's funny, if you look at Investor activity, they're selling a lot of homes to investors. You know, a lot of the buyers right now investors aren't scared off by 7% interest rates, right? They're looking at long term price appreciation, cash flowing on these rentals because, you know, housing so constrained and all that. You know, meanwhile, you got all these buyers sitting on the sidelines. But the people who are looking long term realize that like 900,000 is going to seem cheap 20 years from now, in California, and they're still buying but I think that only exacerbates stuff, right? Because then we just get more and more of our housing stock, especially under 750 that's now single family rental and all of that stuff. So I think that, you know, they're hearing that. I think the big change over the last six months, though, has been on the insurance and just how much there's the potential for that to kind of lock people out of home ownership. You know, you think about these people are with affordability how it is, and they've managed to save up some money to go out and actually find a house that is for sale at a price point that they can qualify on a mortgage for, and all that stuff. And then they get into the transaction and they get a 12, 15, $20,000 homeowners insurance premium that now means they, you know, that deal doesn't pencil for them anymore, and so we've heard that it's just creating a ton of headaches. It's like, actually costing people home ownership and in some cases, and it's actually seems like it's only going to get more expensive. And so I think that's one of the new wild cards that we're going to be continuing to grapple with. And again, even if stuff goes right, insurance is still going to be expensive, so.

Craig Evans:

Yeah, that's, you know, obviously we, we don't have the fire as you guys have the earthquakes, things like that. You know, we got hurricanes right, like Ian and Milton and Helene, and all the hurricanes that we had seemed like back to back to back every year almost. You know, we had a big issue with insurance. You know, we had, many of the carriers actually left the state and just said, 'Yeah, we're we're done. What's happening?' Yeah, and that caused some real stresses on the balance sheet of our state plan. But fortunately for 24 we had 14 new carriers come in and start writing again.

Jordan Levine:

Yeah.

Craig Evans:

So if we can get another year with with no storms, then we might start seeing some, some, some rates coming down, potentially, you know, you know, I know our Governor and the legislation is working on some plans to try to work with insurance on that. So I was curious to hear after the fires out there, obviously, you know, as such a mainstream news story, and obviously just billions lost out of that process.

Jordan Levine:

Yeah.

Craig Evans:

Have you had many companies just leave the state? Or how is that kind of working through?

Jordan Levine:

We've had a lot of big carriers that were already, you know, not writing anymore, in in California and trying to leave. I think, you know, there's the state's going to try and figure something out with, uh, assessment, I think, to help shore up potentially that will be assessed on homeowners. And I think that's ultimately where this stuff ends up, you know, is that homeowners are going to be paying whatever these, you know, rates that the carriers want to stay, to stay in the game. And I think, you know, it's, we think about it often in terms of, like those retail owner occupant, home buyers, buying condos, buying houses and things like that. It's also like a huge challenge for multi family, like for the apartments and even for the condos, right? Because they're getting these big increases in their premiums. And how do you pass that on, you know, in California, it's, you know, you got to have all there's all these rules about how you raise HOA dues, right? And how you increase rents and all of that stuff. And so it puts these big multi family folks in a pinch too. And even with, you know, 90 plus percent occupancy in multi family still for California, it's like, that's great, but you know, we've got rent control in a lot of places. And then, you know, there's limits on how much of these insurance costs can be passed on, and so put someone to bind to.

Craig Evans:

So what is the, what's the biggest goal for CAR this year that you guys are doing and supporting realtors and trying to help them through the, you know, the tumultuous times of what this year looking like so far. What are you guys planning? Will be your number one program or way to assist Realtors this year?

Jordan Levine:

Yeah, so I think you know, number one is just keeping them in the game and out of trouble. We give a lot of legal advice and make sure that they're doing stuff all you know the best way, and that they're educated on what's going on in the market and new laws, you know. Unfortunately, in California, there's like a new law every almost as fast as there's a new interest rate, it seems like. So doing all that stuff, but I think more more and more what we're doing is on the policy front, right, enabling more homes to be built, preventing stuff that restricts transactions. It's, you know, it's crazy that in California, where housing supply is like the Paramount challenge, we do all kinds of stuff, like point of sales to discourage people from even selling in the first place, or, you know, all of this stuff. So I think for stuff that that prohibits or precludes new supply coming online. They're being built or being resold, advocating for new construction and actually affordable, you know, addressing our affordability gap and advocating for home ownership. I think that's why I love working for the realtor so much. Is like I work for a trade association, but, you know, we're out there advocating for home ownership. Like, one of the cool things about working for realtors is that, like my people win when, you know, regular people win, it's like they get paid when somebody becomes a homeowner. And I feel good about that. And so, you know, as much as we can increase the amount of people that are able to buy and afford their own home, then by you know, by default, our folks are going to be doing great.

Craig Evans:

So I'm grateful for your time. But I got one more question for you, and I know you're busy, and I like I say I appreciate it, but if you could look out over 2025, is there a reason to be optimistic for the rest of this year?

Jordan Levine:

I think there's still a reason to be optimistic. I know the news is crazy and got everybody ripping their hair out and all that stuff, but if you, like, step back and just look at the fundamental like, right? This is a question of whether we self sabotage or not, but we're not in any kind of, like, dire crisis that isn't man made right now. Again, unemployment nationwide, like in the 4% range, we've got, still a labor shortage. We have too many jobs, not enough people to fill them, like that's a sign of strength. GDP was at an all time high last year. We made $25 trillion worth of aggregate personal income up until a month ago. Stock market was at an all time high, home prices at an all time high. People have never been richer. Incomes have never been higher. We've never spent more money buying stuff going out. All of that. This is a question of whether we can maintain or whether we start reversing course. So we you know, the economic data is actually strong, and if we can get out of our own way, I think there's potential for more growth and even avoid a modest recession. But, you know, it's kind of, there's a lot of choice variables going into it at this point.

Craig Evans:

Well, I wanted us to be able to end on a high note of what this year can look like. So Jordan, I am so grateful to one, to be able to finally get to actually meet you and spend some time talking. And I thank you for taking your time to come on and spend time with our listeners today. So again, I appreciate your time, my friend. Thank you very much for coming on.

Jordan Levine:

No. Thank you so much. This was a lot of fun, and hopefully I didn't screw it up too bad, and we can do it again.

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.