Mphasis Digital Risk's Jeff Taylor on rising median home prices: 'I don’t see that slowing down anytime soon'
Jeff Taylor, co-Founder & Managing Partner at Mphasis Digital Risk, joined Yahoo Finance Live to discuss his outlook for the real estate sector.
Video Transcript
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ADAM SHAPIRO: Let's bring into this stream, Jeff Taylor. He is the co-founder and managing partner at Mphasis Digital Risk. And we're going to talk about what's happening in the real estate market. We saw prices are escalating. We keep hearing these stories about mass exodus out of big cities in the coasts. You say still shallow. What does that mean?
JEFF TAYLOR: It is so shallow. And thank you so much for having me today. So we are seeing people going from cities in the suburbs all over the country and growing, except the Northeast. But as far as mass exodus, I think people are getting to Texas, are coming to California for maybe tax reasons, for lifestyle reasons.
But we still haven't seen that mass exodus everybody thought was going to happen. But we have definitely seen is people moving into the suburbs, looking for living spaces in a little bit of a different manner than they used to, which is houses that are not just to live in, but it's for their work, it's how they potentially do virtual schooling. It's a whole new view in what a house means to a family than it did 12 months ago.
SEANA SMITH: And Jeff, another thing that we're seeing clearly is the rise of home prices, something that we've been seeing now for quite some time. The pandemic, though, exacerbating that. A lot of that has to do with the supply crunch. I'm curious just how long until you expect this supply-demand imbalance to be corrected.
JEFF TAYLOR: Yeah, it's a great question. So let's look at the key drivers. Last year, a record number of existing home sales-- 5.62 million, 811,000 new home sales. And that demand and supply, there's still a massive imbalance.
A couple of things. One, as far as the supply chain for new home sales, that still, because of COVID, it's little bit slower as far as getting all materials to meet the demand for what the home builders actually have.
So in existing home sales, if people haven't moved already, a lot of people, believe it or not, are waiting for a full vaccination to put their-- COVID vaccination-- to put their homes on the market and potentially look for other places. So I expect to be another year of extremely-- of rising home prices. I think the median home price is going to get to about $360,000, and I don't see that slowing down anytime soon.
Conversely, what you'll start to see is a lot of the exodus from some of the bigger cities-- New York, San Francisco-- where we've seen rental prices drop around 30% over the course of the last year, I do expect kind of that-- go down to that Gen Z, the people will start moving back into the cities as renters. And you'll start to see that stabilize a little more, I think, in the second half of '21.
ADAM SHAPIRO: Jeff, we have about 30 seconds. Any cause to worry that there might be a bubble because of these artificially low interest rates?
JEFF TAYLOR: Yeah. It's a great question. And there's not. Because what caused the bubble back 10 years ago was basically, you know, no money down, 90% leverage, and just sign and sleep, right?
We have a record amount of home equity, $18.7 trillion in these houses right now. So if somebody does have a financial life event, they're going to put that house up for sale. And to our question, back to inventory, there's plenty of buyers for it. So you get a very healthy, steady housing market, and one that I think is going to actually-- is driving the economy's comeback here for this year and for the next couple of years in the future.
ADAM SHAPIRO: Got it. Jeff Taylor is co-founder and managing partner at Mphasis Digital Risk. Thank you for joining us.
