Jeff Taylor, Mphasis Digital Risk Co-Founder & Managing Partner, joined Yahoo Finance to discuss the state of housing.
SEANA SMITH: Another big mover to the other side recently has been lumber prices. Lumber prices have soared, hitting new records. And home buyers could potentially be on the hook for this. We want to talk about what this means for the housing sector. And for that, we want to bring in Jeff Taylor. He's a co-founder and managing partner of Mphasis Digital Risk. And Jeff, great to speak with you again. Let's just talk about what we're seeing play out with lumber prices. Because they continue to soar to new records. I guess, how significantly do you expect this to drive up the price of homes in the near future?
JEFF TAYLOR: Well, first, thank you so much for having me back again. Let's put this in perspective. A year ago today, lumber prices are up 340% in one year. Three months ago, the rising lumber prices added $24,000 to a new house. Today, three months later, it's $36,000. This is a significant issue on both sides.
One, from affordability from a buyer's perspective that prices keep actually inching up. But more importantly, if you're a home builder, right? And we all know there's about four million houses that get built today that there's demand for. How do you continuously price a house that's going to be 9, 12 months to be ready for the consumer to actually move in 9, 12 months down the road when you have your largest reading in home prices with this kind of a price escalation? So we've got a challenge on both sides. The good news is, there's no shortage of demand for housing. And you have a very, very strong housing industry.
ADAM SHAPIRO: One of the investment banks put out a note saying that this is not a bubble, what we're watching in the escalation of housing prices. So I mean, you're in South Florida, which knows the ups and downs of real estate. Is they're going to come a point, as you look at the mortgage data that Mphasis actually aggregates, do you see at any point a breather so that people can get in on this?
JEFF TAYLOR: So I definitely don't see a bubble. But right now, there is definitely, I think, a difference in between what something is worth and what somebody is willing to pay. And right now, across the country nationally, we're seeing the latter, which is what people are willing to pay. So whether that comes back in price over the next year or two, people have to be thoughtful about what they're praying paying for.
Here's some really important data points you want to look at. Number one, the loan products that are out there today are very solid since the financial crisis. So the borrowers who are in these homes can afford these homes and have been making payments. Even the borrowers that are in forbearance, 2.6 million of them right now, 92% of those borrowers are current, OK? So we don't-- I don't see a bubble.
But I would caution people looking to jump into the housing market right now, especially the millennials who are either living at home or renting, to be thoughtful about, listen, is what I'm paying a good investment over the long run, or is it maybe 10%, 15% higher than what it was a year ago because of a supply-demand imbalance that we currently have?
SEANA SMITH: Jeff, how would you compare what we're seeing in the higher end, the more luxury homes, the bigger homes, compared to those entry level homes? Because we talked about the fact, at least going back to the start of the pandemic, there was a much larger supply of those larger homes than what we saw at the entry level.
JEFF TAYLOR: Yeah, it's a great question. It goes back to what Adam just asked me, which I didn't answer, which was Miami tends to have the higher price points. I think that they were medium to very hot maybe a year ago. Since January, we have seen bidding wars at every price point, but especially the high end, as you see people coming in from Boston, Chicago, New York. Everywhere is trying to escape sort of the cold weather and what's perceived to be rising tax rates and coming down. So if you're in Florida and Texas, it's across the board the price increases. But I would say since January, you're probably 14% higher in the luxury housing market.
SEANA SMITH: Jeff, always great to have you on the program. Jeff Taylor, co-founder and managing partner of Mphasis Digital Risk.