What the Media Isn’t Telling You About a “Housing Crash”

David Greene:
This is the BiggerPockets podcast show, 604.

Rick Shargra:
There’s really no indicator that we’re sitting in a bubble, although it’s understandable people think that because we’ve had, I believe, 122 consecutive months now where home prices were higher than they were the prior year, which ism I believe the longest run in history. So I do think market corrections could happen across the country in certain markets and certain price tiers. Do I think we’re going to have a bubble bursting? No, but the truth of the matter is nobody really knows we’re in a bubble until it bursts.

David Greene:
What’s going on, everyone? I am David Greene, your host of the BiggerPockets Real Estate podcast, the best real estate podcast in the world. Here at BiggerPockets, we are committed to helping you find financial freedom through real estate. We do that in a number of ways, one of which is on this podcast, bringing in people who have found that freedom, people who have made mistakes as well as industry experts that can help you on that journey. Today’s guest is fantastic. We have Rick Shargra. Rick is the executive vice president of market intelligence for ATTOM, a market leading provider of real estate and property data, including tax, mortgage, deed, foreclosure, natural hazard, environmental risk and neighborhood data. Rick has over to 20 years of experience in the real estate and mortgage industries, and is one of the country’s most frequently quoted sources on real estate, mortgage and foreclosure trends. He joins us today to talk about what the heck is going on in this crazy market. I am joined today by my counterpart, the always fun, always intelligent, and always aware, Mr. Dave Meyer. Dave, how are you today?

Dave Meyer:
I’m doing great. Congratulations on 600, man. It’s the first-time I’ve been here since you hit the milestone.

David Greene:
Yeah, we stepped up production quite a bit. 600 happened pretty quickly after 500.

Dave Meyer:
Seriously, it felt like it went really quickly, but the shows have still been amazing. Even with the increased production, amazing how you and Rob and everyone else just bringing value to the listeners every single week or several times a week.

David Greene:
Well, thank you. We’re trying to. Speaking of additional shows that we’re making, BiggerPockets is creating a ton of new content and that leads us to today’s quick tip. Dave, what do you have for us for today’s quick tip?

Dave Meyer:
Well, my quick tip to check out BiggerPockets newest podcast called On The Market, which is hosted by yours truly. We’ve been doing this show for, what is it, six or eight months now? BiggerNews, trying to bring you all of the recent trends and data and news that really impacts the lives and strategies of real estate investors, and we want to scale that. So once a week, now you can find it on Spotify or Apple, or we have a whole YouTube channel as well. You can get the information that helps you formulate your strategy for 2022, helps you get an advantage in any type of market, and we keep it fun. We keep it light. It’s not this dense news show, so definitely come check it out if you want to stay on top of everything that impacts the real estate investing world. I think you’re really going to like it.

David Greene:
Yeah. At BiggerPockets, we are creating an entire family full of smart people to help you build your wealth, so do check out that show and make sure you check out more of these shows. Every time you finish a video, hopefully, you have time to watch another one, because we’re putting out more and more content. A quick public service announcement from us at BiggerPockets. There’s a lot of scamming going on. We will never, any of us on this platform, will never message you and try to sell you on cryptocurrency on Forex. We don’t have a WhatsApp.

David Greene:
We are not asking for you to give us your money via social media or online portals, so please, if anyone reaches out, they’ve copied our pictures, they’ve made a screen name that looks like us, but it’s not us. Don’t send them any money. The same goes for any of us individually at BiggerPockets, as well as the company, BiggerPockets as a whole. Before you consider sending anybody money, make sure that you’ve absolutely verified who you’re talking to is the right person. All right. Without wasting any more time, we are going to get into today’s show. It should start off a little fun and then we’ll be bringing in the guest. Dave, anything else you want to add before we get into it?

Dave Meyer:
No. I’m really looking forward to this show. Rick has been someone I’ve followed for actually quite a long time, because as he’s a leading voice on real estate data, and I think you’re going to learn a lot from the show.

David Greene:
All right. Let’s do it.

Dave Meyer:
All right, David. As we just mentioned, we are going to play a quick game. It’s just called “quick takes” and I want to get your quick reactions to three different headlines I am going to read you.

David Greene:
Did you say quick three times in a row, because I am known for being long-winded.

Dave Meyer:
No, but maybe I subliminally was trying to get you to go quicker, because I know Eric will come on and tell us we’re being too slow if we don’t do this block in five to 10 minutes, but quickly give me your reaction to this. According to Redfin, the amount of market competition actually went down from February to March, and anyone who’s listening to this, a lot of this market data comes a month in arrears, so we’re talking about March data, even though we’re just ended April. It went down from 67% of all homes facing stiff competition. Multiple offers in February dropped just slightly to 65% in March. Do you think this is the beginning of a trend, or is this something you think is just a blip or an anomaly?

David Greene:
Not the beginning of a trend, it is a blip, not an anomaly. I will quickly explain this happens all the time, and that’s because of what I call “flock of bird syndrome.” Most people when they’re investing in anything, when they’re doing something scary, they like to move with the crowd. So what we find is the psychology of buyers in real estate and have often said, “Buyers drive markets. “The psychology of buyers plays a very big role in how things work out. So when people see a lot of other people making money somewhere, they tend to think, “Oh, I should go do that too. It feels safer.” It’s like crossing the river with all the other gazelles so the crocodile doesn’t get you. The problem is often by the time you see other people making money, sometimes the money’s already made. So the way it works is, well, there’s been Gazelle’s in the rivers for a long time. All the crocodile’s are now there waiting for you, so that’s the worst time, time to go in.

David Greene:
I’ve seen this phenomena happen several times in the past, every time there is a significant change in the norm. So in 2017, 2018, I can’t remember where it was, but we saw rates go up three quarters of a percent, 1%, out of nowhere, and Tara Yarbrough was telling me a lot of flippers lost money during that time because buyers froze. They were just like, “I don’t know what’s going on. I don’t want to move,” and then a couple of months go by, everybody, “Oh, I guess that’s the new normal.” They all start buying at the same time the flock of birds goes that way. We saw this happen with the shelter in place. Everyone froze, “Not going to buy real estate. I don’t know what’s going to happen.” At a certain point, they’re like, “Well, I still need a house. Nothing’s changing. I better jump in.” This is too totally expected. I told everyone on my team expect to slow down for a month or two as buyers are like, “Wow, rates went up. This is a shock. Let’s freeze and think.” When people are like, “Well I guess that’s what rates are,” they’re all going to start buying again.

Dave Meyer:
All right. We need some gazelles to cross the river. I don’t know how I feel about this. I personally get it. I think it is interesting to see what’s going to happen with rates and what’s going to see, so I’m not surprised to hear you think that people are just freezing. I have to say, man, I hope you’re wrong though, I would love to see the market get a little less competitive.

David Greene:
Oh, me too. [crosstalk 00:07:31]

Dave Meyer:
I think it’s really-

David Greene:
Yes.

Dave Meyer:
… unhealthy where we’re at. I totally respect your opinion, but I hope you are incorrect about this.

David Greene:
I hope I’m incorrect too. I would love to see the market slow down. When you’re listing a house, the way it used to work is you look at the comparable sales. You find the highest you could possibly get and you find an average one and you would try to convince your client to sell somewhere between the maximum they could possibly receive, the highest comparable and an average one. Well, now you take the highest comparable there is, you throw tens and tens of thousands of dollars on top of it. You throw another couple 10,000 as a cherry on top, and that’s what the seller wants for their house. So everything getting listed is always the new neighborhood record. What I think may happen is instead of us listing for way more than what the comps show, maybe we get back to listing at what the comps actually show and have some reason to come back into the way home prices are valued.

Dave Meyer:
All right, great, and we’re on time. Second question for you. We all know that housing inventory is extremely low. We’re going to talk about this with Rick in the next section as well. One of the main things you constantly hear about as a potential solution is upzoning, allowing people to build an ADU or to build a duplex or second home on their property. Zillow actually did a recent survey to see if home buyers were actually interested in this, because there’s this whole, “Not in my backyard,” NIMBY syndrome where people say they want it, but they don’t actually want it. But a clear majority of homeowners surveyed, 73% voice support for at least one or more modest densification options, so almost or three quarters of Americans believe in this, you can’t get three quarters of Americans to believe in and agree on anything. Do you think this will actually make a difference, and do you think we will start to see more upzoning in the next few years?

David Greene:
I think yes, if this continues, you’ll start to see it happening more often, but I think the pendulum will swing back the other way when that’s over. So you’ll start to see that more people do this and then more investors make money, and then the NIMBYs get jealous that they’re not the ones making money, and then that some new tax will be created, the ADU tax, or if you have something on your home, like a house hacking tax, that’s what I’m afraid of that may come. But in the short term, yes, I do think more local municipalities will create zoning, less restrictions and more easing of use so that people can start putting more ways for people to live in their own property.

Dave Meyer:
Excellent. That was very quick. Well done. Okay. For our last story, Fannie Mae just released a big economic survey and there was all this information in there about mortgage rates, borrowers’ appetite. You should check it out if you’re interested in this kind of stuff, but the thing that really stood out to me is that they are now forecasting a recession in 2023. Do you think we’re heading for a recession?

David Greene:
No. I think it’s more likely that we could be in a recession and we won’t feel it because prices of everything keep going up, so I think the economy in general is functioning like carbon monoxide. You don’t know you’re getting sick until it hits very, very hard. So I’ve said this before wages are not increasing as fast as the price of food and gasoline and things that we need to get by. So in that sense, it will function like a recession, even though the price of assets keeps going up. Even if you’re getting three, four, 5% raises at work, you think you’re getting a raise. You’re not, if inflation’s at eight, nine, 10%. Even at 7%, you’re still losing money, so I think what we have to accept with creating all the extra currency that’s circulating throughout our economy is you can be in a recession and not feel it’s much more like carbon monoxide, which is why you have to be listening to podcasts like this one where you’re getting this information, because it’s not like smoke that you can’t miss when there’s a fire. It’s much more silent scary.

Dave Meyer:
Yeah. I hope we’re not heading for a recession, but I’ve read and talked to a few people recently that talk about the Fed’s interest raising interest rates and they’re going to do it aggressively. Two people, both the chief economics correspondent for The Wall Street Journal, who I interviewed on On The Market and Janet Yellen, both used the words, “Getting lucky for the fed, being able to successfully engineer this soft landing that they’re hoping to do.” So I hope we get lucky, but the world’s not feeling very lucky these days to me, so I’m not feeling optimistic.

Dave Meyer:
But I just want to caution people that when you do read these things as well, like when we hear recession, the most recent real recession was the biggest recession in U.S. history. It was the biggest economic downturn since the depression, really. So even if there is a recession just to be out there, it doesn’t necessarily mean it’s going to be years long. It doesn’t necessarily going to have to be really bad. It could be two quarters of half-a-percent GDP drop. We just don’t know, but I think it’s really interesting that a lot of economists are starting to see that. Those are all the questions I got for you. I think we made it under the allotted time.

David Greene:
Yeah? It’s a new year, a new me. Right? All right. Well thank you for that, Dave. Let’s grab Rick, bring him in here and see what he thinks about the real estate market and economy as a whole. Rick, Shargra welcome to the BiggerPockets podcast.

Rick Shargra:
Great to be here. Thanks for having me.

Dave Meyer:
Rick, thanks for joining us, really appreciate it. Could we start by having you just explain to our listeners what your position is? It sounds really cool. I really like your job title, and what you do on a day-to-day basis.

Rick Shargra:
Yeah. I’m the Executive Vice President of Market Intelligence for ATTOM, a data solutions company. It’s the first-time in my career that my name and the word intelligence have been linked together, so I’m very happy about that. But my job is mostly to be out talking about these real estate market housing market trends, leveraging our data to do that. I get to go out and speak at industry events, do these kind of podcasts, meet with the press. Also, I talk to some of our customers and prospects about their data needs, their use cases, how they’re leveraging this to run their businesses, so it’s a little bit business development, but a whole lot of applied data analytics in housing and commercial real estate trends. It’s the culmination of a 20-year accidental voyage into the real estate and mortgage industries that I never set out to do, but have been fortunate and blessed to have been able to experience.

Dave Meyer:
I’m sure no one ever asked you this in all of your media appearances, but could you just tell us what is going on in the housing market and what your read is of all of the information and data that you are privileged to take a look at every single day?

Rick Shargra:
Yeah. Yeah. It’s a really different conversation than we might have had a few months ago. I’m of the opinion at this point that while we still have strong demand, we are beginning to see a bit of a softening in the housing market. Prices continue to go up, but we’ve now had nine consecutive months of existing home sales that are lower than they were the prior year. We’ve had a similar number of months where pending home sales, another metric we track, are down on a year-over-year basis purchase loan applications that the Mortgage Bankers Association tracks our lagging behind both 2020 and 2021, and we’re seeing consumer confidence at the lowest level it’s been in decades. Now that’s been affected partly by COVID and every time there’s the rumor of a new wave, we see a hit to consumer confidence, but it’s also being affected by an inflation.

Rick Shargra:
It’s being affected by the war in Ukraine, so consumers need to feel confident about entering into a long term financial commitment. They need to buy a house. Oh, by the way, with home prices going up 17% year-over-year and interest rates now being double what they were a year ago, the average monthly payment for somebody buying a house is about 26, 27% more than it was for the same property a year ago. So all of that stuff is conspiring, we believe, to start slowing demand down a little bit. Realtors I talk to joke about it somewhat. They say, “Now we’re not getting 30 bids on a house we’re only getting 20,” but you can see inventory levels starting to tick up a little bit from historic lows. You can see days on market starting to extend a little bit, so it really does look like the market is going to normalize a little bit as we move throughout the rest of 2022.

David Greene:
Yeah. I want to ask you your opinion on something. This is the stance I’ve always taken, because I’m a real estate broker myself and we sell houses. In certain markets when there’s not a ton of demand, I do think rising interest rates and other economic factors could have an impact on prices as well as availability, but in others like where I am in the California, San Francisco Bay Area, other hot markets, it’s not unusual for us to see 10 to 12 offers on a decent house, not even the very best house, even the stuff priced at the high end.

David Greene:
So if something happened that affected interest rates to where half of the buyers got knocked out of the market, we might see just half of those offers, like five to six instead of 10 to 12, which is still plenty of competition to bid way over asking price and force someone to come in really heavy to get that house, and you to have 80% of the people looking are losers every time they write an offer. Is that the perspective that you’re taking on this as well? Do people need to understand that the lack of inventory and the amount of demand is so hot that something as small as interest rate hike isn’t going to lead to the drop in prices they’re expecting?

Rick Shargra:
Yeah. Great point, and there’s a couple of things to talk about here. One is that you’re absolutely right, real estate is ultimately a local game. So what you see in the Bay Area is different than what you’re going to see in Des Moines, Iowa. It’s different than what you’re going to see in Richmond, Virginia. The second thing to point out is that the market you are talking about is not the market or the tier of pricing within that market where those interest rates are going to be particularly material. If you’re looking at the Bay Area where the median price of a home is, I don’t know, 1.2, 1.3 million, excuse me, at the high end of that market, you’re typically not dealing with somebody who’s going to be all that worked up over a point or two on a mortgage, so local conditions will dictate this. You’re also right in that five or six people bidding instead of 10 or 12 still pretty much guarantees you a good price at the end of the day as a seller, so that’s the dichotomy we’re seeing.

Rick Shargra:
We are seeing signs that demand is slowing down, but there’s still enough demand that prices continue to go up, and that’ll be the case until we start to see enough inventory coming back to the market where you don’t have to be one of those five or six or 10 or 12 bidders on an individual property. So I believe we’re not in a housing bubble, I believe we’re not likely to see a market crash, not at all likely to see a market crash, but I wouldn’t be surprised if over the course of the year, we might not see some individual market corrections and your area, particularly at the high end of the market could be one. Pacific Northwest could be one. Markets like Austin, Boise, which had price increases that were unprecedented last year, we could see a little bit of a price correction in some of those markets. But everybody has to look at this in terms of what’s happening in their local market, as opposed to the kind of national numbers that we often talk about.

Dave Meyer:
Rick, I’m not much of a crash guy either. I haven’t believed that, but could you share with our audience some of the reasons and some of the fundamentals that support your opinion about the fact that you don’t see a crash coming?

Rick Shargra:
Yeah. A lot of people really try and equate what’s going on today in terms of prices and demand to what we saw, the mid-2000s, 2006, ’07 leading up to the crash in 2008, market conditions could not be any more different if you wrote them up on purpose. In 2008, we had an oversupply of homes available for sale. We had a 12-month supply of homes On The Market. The builders never got the memo, they just kept building after the market condition changed. That was followed by a flood of foreclosures entering the market, which added even more inventory, and now the builders were competing against their own properties from a year prior that were twice as big and half as expensive. It was a nightmare, really hard to get a loan back then because the lenders had basically shut down.

Rick Shargra:
The people who were going into foreclosure we people that were not only buying overpriced houses, but they were doing it on speculation. A very high percentage of them had adjustable rate mortgages. The only way they could afford the house was with a teaser rate. As soon as that rate adjusted their interest payments doubled and suddenly they couldn’t afford those properties anymore. It was a real nightmare. There was a story in our local paper here in Orange County, California about a cleaning lady who was making about $40,000 a year and had eight properties in Santa Ana, and all eight of them, amazingly enough, were in foreclosure. You wondered what the loan officer on the seventh or eighth loan must have been thinking before they approved that loan. Anyway, market conditions, fast forward to where we are today, we have a about a one-and-a-half to two-month supply of properties available for sale. That’s about a third of what we would normally have in a healthy market.

Rick Shargra:
The builders have not been building for a decade, so they’re trying to catch up. They’re having trouble building new inventory because of supply chain disruption. They can’t get appliances, roofing materials, windows, and so it’s taking them longer to bring properties to market. We have demand that’s demographically based, so this is not false demand. The biggest cohort of millennials who are the biggest generation in U.S. history are between the ages of 29 and 32. The average age of a first-time home buyer is 33. Even with interest rates being at 5%, they’re still lower than the six, seven and 8% loans that we saw back in 2008. The other thing to keep in mind is that first-time home buyer percentage is actually fairly low this time, and that’s your riskiest loan. During the build up to The Great Recession, first-time home buyer rates were in the high 40s, 45, 46, 47%. The most recent numbers I’ve seen on first-time home buyers in today’s market is about 26%.

Rick Shargra:
That means most of the sales are in the move up market, and people are tapping into the huge amount of equity they’ve built up to make fairly large down payments on their next property, which is keeping their monthly mortgage payments lower. That’s one of the metrics you look at to determine bubble is, what’s going on with mortgage payments as people are buying new homes? Another is the spread between rental prices and mortgage payments and rental prices have been going up as fast as home prices have. Again, none of the predictors that we would’ve looked at leading up to 2008 seem to be in place. Market dynamics are all different. The quality of the borrowers is extraordinary. In fact, the delinquency rates are the lowest they’ve been since the mortgage banker started tracking those numbers in the 1970s, and the economy is supporting it too.

Rick Shargra:
We’re creating jobs. Unemployment rates are very low, and usually that’s what I would look at as a trigger. If we see unemployment rates go up, typically, your delinquency rates go up. If your delinquency rates go up, your foreclosure rates go up. We’re still dealing with historically low rates of foreclosure, so there’s really no indicator that we’re sitting in a bubble, although it’s understandable people think that because we’ve had, I believe, 122 consecutive months now where home prices were higher than they were the prior year, which is I believe the longest run in history. So I do think market corrections could happen across the country in certain markets at certain price tiers. Do I think we’re going to have a bubble bursting? No, but the truth of the matter is, nobody really knows we’re in a bubble until it bursts.

David Greene:
Yeah. I love the point you made that this looks like how it looked in 2009, 2010, or maybe actually say the run up to that, so 2000 through 2005 or ’06, but the fundamentals are vastly different. For those on the outside looking in who just see the symptoms, you’re like, “Oh, that looks like the same symptoms as when I had a cold.” But for those of us that live in this world where we’re doctors, we’re like, “This is not the same virus. This is not the same kind of cold, even though the symptoms are the same,” and I get a lot of almost anger when we say, “Yeah, the market is still fundamentally strong.

David Greene:
People are getting 30-year fixed rate loans that they can afford. Their job is very secure. Rents are going up. There’s a lot of money flowing into real estate that makes it a desirable asset,” and they just don’t want to hear that. What they want to hear is there’s a crash. So I’m always trying to figure out how do you connect with those people who want to believe we’re going to have a crash, while at the same time recognizing, who knows? It could be. One thing that I’ve not heard spoken of wanting, oh, go ahead. I’ll let you say that. I’ll ask you my question next.

Rick Shargra:
No, just, I couldn’t agree with you more. I actually get really frustrated and my encouragement to anybody who’s watching or listening to this conversation is, anybody who’s selling you a guarantee of a crash is doing that because they’re trying to sell you something. I spent 24 minutes of my life that I will never get back watching a video that a colleague sent me as proof that there was a crash coming, and I wanted reach into the computer and ring the guy’s neck because he was-

David Greene:
I know feeling.

Rick Shargra:
He was misrepresenting the data. He was coming to false conclusions. Every forecast he was making, I could have refuted very, very easily, but there’s a lot of this misinformation out there, and people really have to be careful what they sign up for. There was a guy who was predicting millions and millions of foreclosures a year ago, and I had people sending me that because yeah, since the beginning of the pandemic, I’ve been out saying we’re not going to see another tsunami of foreclosures. People just knit together really lose math, and it ought to be criminal because they’re charging thousands of dollars for courseware and training programs that are really going to just suck people drive of their money without returning any potential benefits. So it’s a pet peeve of mine and the press gets caught up in it to predicting millions of foreclosures, tens of millions of evictions, and now we’re going to have a housing crash-

David Greene:
Mm-hmm (affirmative).

Rick Shargra:
I guess you never go broke with a negative headline, but I’m sorry, it’s a pet peeve.

David Greene:
That’s my point. That’s what I want everyone listening to this to understand. Think about the last time you got angry at someone that said, “Don’t buy, a crash is coming.” The people that said that four years ago, five years ago, are you mad at them now that you lost out on five years of … ? No, it never happens. But if one person says you should buy and the market drops, you hate them with the fury of a thousand suns. It’s always the safe bet to go for the person who says, “There’s a crash that’s coming, you should wait,” and so that’s why so many of them do that, and they play into the fear. You said it, the media, every article, “Interest rates rise, is a recession looming? Tons of inventory will be flooding in the market.” Everyone likes to see that, and so that’s why media prints it. They’re not printing it because they believe it, they’re printing it because you will click on that, because that’s what people want to hear.

David Greene:
So we have to think about where we’re getting our information from that’s, and Rick, what I love is you’re giving data to support your opinion. It’s not, “Well, I’m just angry the housing prices would go up, so I’m going to find some way to vent that anger and say that they’re going to be going down.” Your theory on foreclosures is the same thing that I’ve been telling people for so long. To be honest with you, I’m going to let you share it. But when I would share it with someone and they would act surprised, I often thought, “How did you not see this?” It’s not hidden, it’s that they wanted to believe foreclosures were coming. So the obvious answer that’s right in front of them that no one’s going into foreclosure got tons of equity in their home, when market’s this hot, you’re getting equity while you’re in escrow. Even if you couldn’t make your payment, you’re going to make a whole bunch of money selling your house, because how fast it’s rising. Like “How did you not recognize that?”

David Greene:
But it’s this blinders that we put on where we want to believe there’s a crash coming, because it is hard to get a deal. It is frustrating. There is a ton of in the real estate space right now. Before we get into the foreclosure thing, I wanted to get your opinion on a question I haven’t heard asked very often. I remember in the last bubble, much of the wealth being created that was flooding into the real estate market was from the real estate market. It was home flippers. It was real estate agents that were crushed it, it was loan officers that were making ridiculous amounts of money, giving away all these loans. It was people that worked in the real estate space, making a ton of money and then they would invest it back into real estate, or they would go buy a boat, an RV. There were all these HELOCs where you could pull money out of stuff.

David Greene:
So it was this house of cards that the minute you couldn’t make money, when homes lost their value, the people making money by selling homes lost their money and the whole thing imploded on itself. But now what I see is more money coming out of tech, more money coming out of entrepreneur ventures like crypto investing and the NFT craze that we’re seeing. There’s people that are literally being millionaires because they bought the right cryptocurrency, and it’s a silly way to be making money. It’s not sustainable, but it is happening. Then you see money flowing from the overall wealth of the economy, the stimulus that we’ve created, where it’s just made so many people wealthy without them having to earn it the old fashioned way.

David Greene:
You got to find a place to park that money that feels safe, and smart people recognize real estate is a better long-term bet than buying some NFT that you’re hoping goes somewhere, or investing in a cryptocurrency that you hope becomes something better. What I’m getting at is it seems like where the money is coming from that’s going into real estate is coming from more sustainable places. You’ve got institutional capital, you’ve got hedge funds, you’ve got smart people parking their money into these areas where people are migrating to. Do you think that is another sign that the fundamentals are stronger, or do you think there’s something I’m missing there?

Rick Shargra:
No, I think that’s very well said. There was a lot of internal momentum, if you will, during, during that build up to the housing bust and the flippers then were not the flippers today. Actually, those flippers were more similar to what we saw with Zillow offers in the last year where it was an arbitrage model, “I’m going to pay full value or even too much for a property and count on increasing market prices to be able to make my margins.” Our data shows that the average gross margin on a flip was right around $60,000 nationally.

Rick Shargra:
Obviously, it’s going to vary market to market. We saw a heightened amount of flipping activity, but these flippers are making their money by going in and repairing a property and then being able to sell at a higher price because they’ve added value. If you’re flipping in an arbitrage model, your risk is much, much higher. Zillow lost $300 million in a quarter by mispricing houses and having to sell them for less than they paid. That was what we saw in the 2005 to 2008 flipping model, so when those profits started to derive, you saw the whole house of cards start to crumble. You’re absolutely right.

David Greene:
Yeah.

Rick Shargra:
A lot more institutional money coming in today. A lot more, I would say, cautious and thoughtful money coming in from individual investors. A lot more focus on longer term investments from people buying these properties. We published the RealtyTrac website, which has foreclosure data on it. Mostly individual investors use it and we surveyed them. Over the last year, we’ve seen the percentage of people doing single family rental investments continue to grow and actually begin to outpace the fix and flip percentages. So something like 60% of the investors we surveyed last time we’re claiming to be rental property owners, as opposed to flippers. To me, that’s a more long-term, conservative approach to investing, and I think we’re seeing a little bit more of that. So again, very different model and there’s a lot more capital being generated in other parts of the economy beyond real estate that had been supporting the real estate growth that we’ve seen.

David Greene:
The last point I want to make before I turn it over to Dave is I think in that 2000 through 2006 crazy, ridiculous rush we had, what people were banking on was speculation. They were speculating that the home would continue to increase in price. They had one extra strategy, which was, “I will buy low and sell high.” They did not understand cash flow. They did not understand the fundamentals of owning, managing, investing in real estate. Like you said, they weren’t improving the property. It was buy a brand new home from a home builder, wait six months and sell it to make $100,000.

Rick Shargra:
Yep.

David Greene:
That concept of speculation got somehow married synonymously to appreciation. So now when people hear the word “appreciation,” they assume that means speculation, right? Like one exit strategy, all your eggs in one basket, if one thing goes wrong, you lose the whole deal, but I’ve never seen it like that. I think appreciation applies to both rents and the value of the home, and you make money in real estate from it appreciating, but that doesn’t mean you do it foolishly. It still needs the cash flow. You still have to have enough money to hold it long term. I just noticed that a lot of the same people they get angry about, “There is a crash coming!” they get angry at the word appreciation. The minute they hear it clicks like, “Oh, that’s speculation. That’s bad.”

David Greene:
I got warned about that a long time ago. Have you seen that as well? At one point, HELOCs were synonymous with bad investment decision. Like a HELOC means you’re losing your house. We’ve finally gotten far enough away from it that people don’t automatically think HELOC means a death sentence to your family’s finances, but it feels like that same idea of buying a house and waiting long term for it to go up in value is getting labeled the same way that speculation was when people were trying to day trade real estate.

Rick Shargra:
Well, actually the last thing you said is probably the most accurate metaphor for what we saw. These were people that were literally trying to day trade real estate and that’s the wrong asset class to do day trading on. You’re just not going to see your values appreciate. Again, a company as big as Zillow, a multi-billion dollar company with multi-billion dollar valuation that’s been in the real estate market, that made its bones with a product called the Zestimate that’s supposed to give you at least an approximation of home value, and they managed to lose 300 million in a quarter by doing that kind of arbitrage, so it’s not a good play. I know a lot of flippers. They’re still very successful at what they do. We’ve seen actually an uptick in flipping activity in our data, but it’s people that know what they’re doing. It’s people that know how to price property. They’re going in and they are buying low and they’re fixing things up and they’re selling high, but again, a lot of the value that they generate is because they’re going in and making huge physical improvements in a property.

Rick Shargra:
They can just do it cost effectively and in a way that pencils out at the end of the day. Again, I think the investors in today’s market are a lot more thoughtful. They’re a lot more educated, I hope, and we’re not seeing lenders take on the reckless risk that we saw lenders take on 10, 15 years ago. That’s been the other big part of the difference is lenders have always been expected to provide the adult supervision at the party, and during that housing boom it was like they went away and left the kids home for the weekend and tossed them the keys to the liquor cabinet right before they left, and then we were all surprised at the outcome, so very different lending market. The CFPBs had a lot to do with that, putting restrictions in place, but even the commercial lenders, the people who specialize in bridge loans and investor loans have really tightened things up. So a lot of the risk that was inherent in those old models just doesn’t exist in today’s lending market.

Dave Meyer:
Rick, I want to get back to something you mentioned earlier. We’ve talked a lot about why the fundamentals are very different from the two thousands and why you don’t believe if there is a crash. You have said, though, that you think there could be market corrections in individual markets. Just for the record, based on our diatribe about people calling crashes a correction and a crash are not the same thing. A correction is a modest decline in prices that is usually part of a norm economic cycle. So can you just tell us a little bit about why you think, counter to what you just said that you don’t think there’s going to be a crash, what are you seeing that suggests that there could be some market corrections out there, and if you’re an investor, what to look out for in those markets, you think there might be corrections in?

Rick Shargra:
The latter question is harder to answer than the former. I’ll be honest with you, this is an arbitrary definition on my part, but I look at a correction as something in the neighborhood of a five to 10% price drop, and it will then recover. You mentioned normal economic cycles. There’s a lot of people involved, or wanting to get involved in real estate today who candidly haven’t been around long enough to see what looks like a normal housing cycle, and those cycles follow a predictable pattern. You see demand increase, as demand increases, you see more sales; as sales increase, you see prices go up, and then at some point prices get to a certain level where people look at it and go, “No, that’s too much money,” and then demand slows down and prices come back down with it, and you have those normal cycles. I believe we’re starting to see a little bit of in certain markets across the country, as we hit, what I call an “affordability wall; the combination of home prices going up, of interest rates going up, there’s a certain borrower.

Rick Shargra:
Who’s going to look up and say either, “I no longer qualify.” “I can’t afford that property,” or, “That’s just too much for me to be comfortable with right now. I’m going to take a step back and see what happens, or I’m going to look farther away from that property. I’m going to look at a smaller property and scale back.” Ultimately, that has an impact on demand. Lower demand ultimately has an impact on pricing. If you look back, and I did this, I don’t know I was doing this, but about a week ago, I happened to be looking back at 100 years of home prices. It’s funny when the 30-year fixed rate loan became legal in 1954 for existing homes, most people probably don’t know that before that you couldn’t get a 30-year fixed rate loan, is when we started to see prices take off, because now you could amortize your costs over a much longer period of time. If you look at that, we’ve only ever had one cycle where prices fell significantly in 100 years, and that was during the crash leading up to The Great Recession.

Rick Shargra:
If you remove the drop and the significant increase we had during that period of time, we’re right about where the historic trends say we should be in terms of home prices, but even though prices historically have always gone up, it doesn’t mean they go up consistently. There are going to be times in markets where prices up for a while and then market conditions change and they come back up. Would I be surprised to see parts of the Bay Area where home prices have been off the charts, or parts of the Pacific Northwest, where we’ve had incredible competition for housing over the last few years, or markets like Austin, or some markets in Florida see a little bit of a price decline, particularly at the higher ends where there’s not as much competition? No, I wouldn’t be at all surprised to see that. Do I think it’s the foreboding of a huge crash to follow? Not at all, really, but local investors need to become experts on their local markets.

Rick Shargra:
You want to look for things like population growth or decline. You want to look for things like job growth or decline. You want to look for things like wage increases. Are they keeping pace with, with local prices, with inflation? Inflation is the wild card, by the way. That’s really the X factor here. I believe that persistently high rates of inflation will hit people harder on the margins, so your low end of the market, particularly your FHA borrower is going to have a hard time affording to buy a house because they’re having a hard time affording to buy gas and food. That will have an impact going up the food chain to a certain extent where people are going to have to take a step back and see when they can get their finances in order, because everything is costing them eight, 10, 20% more than it did a year ago. Again, normal cycles, don’t see a crash, but local conditions will vary, but you really have to become the local market expert, much more than I can be a local market expert on 3,140 counties across the country all at once.

David Greene:
I’m so glad you mentioned what you just did, because rates going up will affect the FHA buyers significantly. They probably we’re barely able to afford houses in their area, rates jump a point or two, they can’t buy a house at all.

Rick Shargra:
Yeah.

David Greene:
Rates do not affect a person in my position.

Rick Shargra:
Right.

David Greene:
Right? So the house becomes a little less affordable. The cash flow is a little bit less. Maybe I have to put more money down, it is still vastly superior to anything else that I can invest in-

Rick Shargra:
Yeah.

David Greene:
… so I’m going to keep buying. That’s what I want to come across is that while this may make it harder for the average blue collar, mom-and-pop investor trying to claw their way out of their W2 position, which is our audience, that’s who we’re trying to help, this does not make things harder for Blackstone that can go borrow money at one-and-a-half percent, and has a 10, 20, 30 year horizon. It doesn’t matter to them if they make a little bit less money in years, one or two, and that’s who your competition is now, these iBuyer programs with tons of money flooding into them. I wish that this rate hike would cause a decrease in prices. As an investor, I would welcome that. It’s really hard to find property, but it’s not going to. They can go up a lot. For someone doing a 1031 exchange, they made $800,000 and they got to put it somewhere, okay. So they make less of a return, is that you, Dave, you got 800 grand you’re trying to figure out where to park?

Dave Meyer:
Yeah. Yeah. I am trying to park some 1031 money right now.

David Greene:
That’s been fueling a lot of the run up in prices is, it’s this self-sustaining ecosystem where, we have a city in where I live called Modesto, California, and it’s not the nicest area. It’s like maybe an hour-and-a-half away from the Bay Area. But if someone sold their house in San Jose for $800,000 and they got to park that money, and if they can’t, they’re going to pay 300 grand in taxes, they will gladly pay 50 to a 100,000 more than market value for that fourplex in Modesto. You have all these Modesto investors that are like, “Man, I can’t get a return. What kind of an idiot’s paying that much money?” They don’t see the big picture. They don’t see that idiot is saving $300,000 by buying that property or buying in the nicer areas because they know in five years it’s going to get ahead. I like that you’re mentioning this macroeconomic understanding and inflation-

Rick Shargra:
Yeah, and-

David Greene:
… it’s ripped. Go ahead.

Rick Shargra:
… and cash is king. So I think for investors who do have cash, market can conditions are absolutely tilting in your favor right now. We know that somewhere between 16 and 70% of investor purchases are funded with cash, because you don’t really care if mortgage rates go up a point or two, because you’re not financing.

David Greene:
Yeah.

Rick Shargra:
Even if you’re doing a bridge loan and rates are ticking up a little bit on those, it’s a very short term phenomenon. You can usually built that into your prices and pencil it out. But what you’re also talking about is interesting to me, because it’s one of the reasons home prices have risen as rapidly as they have, because we are seeing people not just invest in properties in Modesto, but we’re seeing people move from high-price markets to low-price markets. I call it the Boise factor.

David Greene:
Mm-hmm (affirmative).

Rick Shargra:
Boise, Idaho had property values on sales go up 45% last year. Now I will guarantee you there’s nothing happening in the Boise economy to organically drive prices up 45%, but somebody sold-

David Greene:
Unless you call Californians moving there organic-

Rick Shargra:
That’s organic, and that’s exactly what’s happening, driving the locals crazy because they’re they can’t afford to buy a house now. I’m scared to death what’s going to happen when the tax assessor gets around to adjusting prices.

David Greene:
Oh, man.

Rick Shargra:
You don’t even think about this.

David Greene:
That’s true [crosstalk 00:46:28].

Rick Shargra:
But what’s driven partly by this work-from-home phenomena that COVID led to. Sorry, David, go ahead.

Dave Meyer:
No, I was going to say actually on our other show, On The Market, we were just talking about this, that Idaho just became the least affordable state in the entire country, surpassing Washington and California for this exact phenomenon. People are going there. It’s not actually leading to an improvement in the local economy to the point where wages are going up for people, but the cost of living is absolutely exploding there.

Rick Shargra:
You sold a house in Silicon Valley, you walked away with $800,000 and you bought a house twice as big and Boise for 400,000, and you really don’t care that you paid 40% over list because you have the money, right? It’s a phenomenon that doesn’t have a long life expectancy. I do think in some of those markets, that’s one, St. George’s Utah of all places. Phoenix, we saw similar patterns in markets like that and they’re due to settle down. We probably could see some price adjustments in those kind of markets, but people ask me, “What are the next hot markets?” I always ask for a show of hands, “Who had Boise and St. George’s Utah on your bingo cards last year, because you’re the person I want to ask about what the next hot market is.” I had neither of them.

David Greene:
Well, this is why this is a good conversation to have, because if you’re buying a property that will support itself through cash flow, it’s not risky speculation to try to determine, “Where do I think demand is going to go?” So I do think about this. We just bought a property, my co-host of the regular podcast, Rob and I, in Scottsdale, Arizona, and I was very big on that because so many people in California are constantly talking about not liking it here, wanting to go to a place with different demographics, different political bend and different home prices. If you’re wealthy in California, that’s where you want to go. You want to go to Scottsdale. So I can see how like when Boise is too much, well you’re in the desert, so you have to understand that’s a completely different scenario. But in general, the people, like New Yorkers, they don’t want to be in New York right now.

Rick Shargra:
No.

David Greene:
They’re all going to South Beach.

Rick Shargra:
Yep.

David Greene:
Right? There’s probably going to be a trend. The people in New York moving into Florida, that will be their version of Boise because the taxes are better and they can still work from wherever they are. If you’re trying to figure out, “Where’s a market I can get to before everyone else does?” I do think that’s the game you got to play, because if you just want to say, “Oh, let me just go to a city and find a house on Zillow and buy it,” good luck. It’s very, very difficult. So you have to understand the psychology of the people that are moving, figure out where they would want to be and then get there before everyone else does, and hen get a very strong, fundamentally sound deal that you could afford to keep for the long term. It’s definitely made investing a lot more complicated than it was in the good old days-

Rick Shargra:
Oh, yeah.

David Greene:
… when we were like, “Send out some letters. Someone will reply offer to buy their house.” We were all getting hung up on, “Oh, but the roof needs $4,000 of repairs. I don’t want to have to deal with that,” and now we’re looking at it like, “Man, why are we stuck on those details when we see what it’s turned into now?”

Rick Shargra:
You’re happy to find a house you can buy.

David Greene:
Yeah, that’s right. There’s 12 other people that want it. It’s the Hunger Games. You got to hope you’re the one left at the end,

Dave Meyer:
Rick, before we go, I want to come back to something, you, David and I were actually chatting about before the show, but you had some really interesting insights into the foreclosure market and how investors should navigate that. Could you tell us a bit about that?

Rick Shargra:
Yeah. Unfortunately, my foreclosure background goes all the way to my beginnings of my career in the real estate and mortgage industries. I spent 10 years with RealtyTrac, during the foreclosure crisis and we were publishing the largest database of foreclosure information at the time. I can tell you that during that cycle, there were a couple of very unique things going on. One was that 33% of all homeowners across the country had negative equity in their properties, not just foreclosure borrowers, all homeowners, so that’s how far home prices had fallen. Virtually everybody in foreclosure was upside down. Because of that, they couldn’t sell their home unless they got a short sale approved, which was an incredible hassle for people.

Rick Shargra:
Although we did see short sales go up a bit during that cycle, very little was selling at the auctions, because the lenders were trying to get the full amount of debt back on a purchase, and investors simply weren’t biting because prices were too high, so a huge percentage, much, much higher percentage than normal of properties going into foreclosure ultimately, went back to the banks, or went back to the lenders and they became REO assets. So people that were successfully buying and flipping or buying and renting foreclosure properties during that cycle waited for the repossession. They knew the bank was going to be hanging onto these properties for a while. A little known fact is, a lender doesn’t have to take the law loss on a property they foreclosed on until they resell it. So in a lot of cases, the banks were simply hanging onto these properties to defer their losses, because they were under such incredible financial duress during that period, and the best deals were typically found in those REO assets. This market, again, could not possibly be any more different than that market.

Rick Shargra:
There’s a record amount of homeowner equity across the country, $27 trillion of homeowner equity, just a ridiculously high number. To David’s earlier point, I think we’re going to start to see a return of cash out REFIS, and even some HELOCs as people start to tap into that equity, largely for home improvement, because they’re not going to move because they don’t want to buy a more expensive house with a more expensive mortgage. Anyway, this cycle, according to our numbers at ATTOM, about 90% of borrowers in foreclosure have positive equity in their homes. There is no reason for those borrowers to lose a home and lose more of that money to a foreclosure auction when they can sell it in a huge seller’s market. So for any investor who’s looking to participate in the foreclosure market this time, you need to find those borrowers, those homeowners, in the earliest stage of foreclosure possible and reach out directly to them, or work with a realtor who specializes in working with distressed homeowners, and have the realtor reach out to that homeowner and try and execute a deal before that foreclosure auction.

Rick Shargra:
The other thing I will tell you, and I spent five years working for auction.com back in the day is that the auction companies are reporting record sell through rates at the foreclosure auctions. Normally, 30 to 35% of property sells in an auction. Today, that number is between 65 and 70%. So if you think about the fact that most homeowners in distress should be able to sell a house before the auction, 70% of the properties getting to auction or selling at the auction, that doesn’t leave very many properties going back to the lenders. So your strategy as an investor, this cycle has to strike way, way earlier in the food chain in before that REO takes place, before that repossession takes place and there will still be deals out there, but you’re going to have to get to them much, much earlier.

David Greene:
That’s a great point. I’m glad that you shared it. It’s very easy to look at it at a shallow level and say, “Oh, foreclosures are coming. I’m just going to wait.” But in a market like this, it doesn’t go to foreclosure, they sell it, unless they just are ignorant and they don’t understand. Then it goes to the courthouse steps and then a non-ignorant person buys it. You’re not seeing inventory sneak all the way to the very end like before. I looked at it like back then the market was saturated with homes. You said it perfectly, there was too much supply. It was like, imagine soil that is just completely saturated with water. You pour a bucket of water on that, and there’s nowhere for it to go. It just floods over and there’s too much of it. Well now it’s like pouring a bucket of water onto the sand at the beach.

Rick Shargra:
Yeah.

David Greene:
It doesn’t matter what type of water it is. It’s so thirsty. We have such a demand for inventory that it just sucks up right off the bat, and so waiting for that overflow to run to you to get a great deal isn’t the same strategy. Really, the only answer I can see is we need to build more houses. We need to make it easier for builders and developers to create more inventory in the places that people are moving to. Outside of that, it’s difficult to see how real estate is going to stumble for a very, very long time, so we just have to be creative.

David Greene:
As people listening to shows like this that are getting the inside scoop on what they can do to be successful, Rick, I really appreciate you being here to share some of this information with us because it’s the facts that matter. It doesn’t matter how angry you are or you want to believe there’s a recession coming, or somebody on YouTube is ranting about the next time, and if you don’t know what you’re listening to, you hear that you’re like, “Yeah, I’m going to wait,” and four years go by and prices are twice what they are right now. It just seems incredible, and you’ve lost a lot of money. Like we said, nobody gets angry at that person.

Rick Shargra:
That’s the person they should be the angriest at. Now the numbers are the numbers, and there’s an old cliche in real estate, which you’ve probably heard before, which is that the best time to buy a house was 15 years ago, and the second best time is today.

David Greene:
Mm-hmm (affirmative).

Rick Shargra:
If you have a long enough outlook on this, or if you’re not looking to do that arbitrage model and buy today and sell tomorrow and hope for the best, typically, for most people real estate’s a pretty good investment, if you know what you’re doing.

David Greene:
There you go. Dave, any last words?

Dave Meyer:
No. Thank you so much, Rick. We’re definitely going to have to have you back either on BiggerNews once a month or on our other show, On The Market. You’re a wealth of knowledge and appreciate your really analytical and data-focused approach to helping everyone understand the housing market.

Rick Shargra:
I appreciate it. I enjoyed the conversation and yeah, let’s do it again soon.

David Greene:
Thank you very much, Rick. This was awesome. All right, and that was our show with Rick. Man, that guy is just a gem. What a wealth of knowledge and insight. What did you think, Dave?

Dave Meyer:
I loved it. I think he provides a really well-reasoned, sober analysis of the housing market, because there’s so much going on, and it’s understandable, really to who be confused about what’s going on, but that’s why we do these shows, to bring on people who are experts and who have the data and the experience to help us interpret it. I learned a lot from Rick. I think he has a very good read, similar to how I see the housing market personally. I hope everyone got a lot out of it. What do you think?

David Greene:
Yeah. I feel like it’s so hard to know who to believe, especially, so you’ve got the increase in social media, the increase in content being made on platforms like YouTube and TikTok. You’ve got a lot of thirsty gurus that are out there trying to get attention and they’ll say whatever it is, it grabs your attention. It is very common to hear some people say, “Buy other rails that you can,” and others to say, “Don’t touch it. You’re headed to a crash.” It’s in absolute polar opposites, and you don’t know what’s to believe. So in an environment where you have all of this confusion, my advice is you ground yourself in facts. numbers can’t lie to you. Numbers are not sensational. They don’t scream and say, “Watch me, click me, follow me.” They don’t ask for your money, and so that’s what I trust. When you find a person like Rick, who based their information off of numbers, I feel much more comfortable, and that’s why we wanted to bring him in front of the audience today.

Dave Meyer:
Absolutely, and that is exactly what On The Market our new podcast is all about. It’s about presenting you this information in an unbiased, logical way so you can understand what is going on without all of the sensationalism out there. I like that you called them thirsty gurus. I think that is a very funny way to refer to gurus because they’re a thirsty bunch.

David Greene:
I just made it up right now, actually, so sometimes my own-

Dave Meyer:
I like it.

David Greene:
… genius only comes out in a spontaneous creative moment. This happens when they make sure the green M&Ms are not in my bowl.

Dave Meyer:
This is why, the green M&Ms slow you down?

David Greene:
Well, there’s an old theory about it, there was a group like Van Halen or something where they were considered divas because they didn’t want green M&Ms in their bowl. I was pretending like I was a diva there.

Dave Meyer:
Oh, oh no, not a diva. You’re a man of the people.

David Greene:
Thank you for that. So are you, and if the people want to fall more of you, the man, where can they find you?

Dave Meyer:
I am most active on Instagram where I am @thedatadeli. I know it’s an absurd handle, but I really like data and I like sandwiches, so I’m sticking with it.

David Greene:
You’ve married two beautiful things together, and you threw alliteration in there. It’s incredibly profound how you’re able to do that.

Dave Meyer:
Yeah. Well, do you know Kaylee who works on the publishing team at BiggerPockets?

David Greene:
Mm-hmm (affirmative).

Dave Meyer:
She came up with it. She came up with it in two seconds. She was like, “You love data, and you love sandwiches, datadeli, obviously.”

David Greene:
Man, at BiggerPockets we got a bench deeper than the Golden State Warriors. The talent just oozes from everywhere. If anybody wants to follow me, hear more about what I’m thinking, maybe you’re like, “Man, I really wish David Greene could have talked more, but Dave Meyer forced him to give very short answers and I wish he could expand,” well one-

Dave Meyer:
Yeah, blame it on me. It was always my fault.

David Greene:
It’s our producer trying to make sure you guys have a good show because you complain when we go too long, so it makes sense. But if you wanted to hear more, go to the comments on YouTube and say, “I wish you guys would’ve expanded on this point,” or, “I wish I could have heard more of this,” or, “I wish you would’ve asked this question,” and I will do my very best to get you the information that you’re looking for. You could follow me online everywhere on social media at DavidGreene24, there E at the end of Greene. You can also message me on BiggerPockets, or you can find me on YouTube at David Greene Real Estate.

David Greene:
The point is we want to give you all the information we possibly can at BiggerPockets. We want to flood you with value, and if we can’t do it on this hour to hour-and-a-half podcast, there’s other mediums where we can still get you what you need. So give us a follow, let us know what you thought and make sure you’re also BiggerPockets. Please share this podcast with anybody that you love. Subscribe to it when you hear when a new episode comes out and keep following us because we just get better with age. All right, I’ll get us out of here. This is David Greene, for Dave, not the thirsty guru, Meyer signing off.

Dave Meyer:
I need to get something that attaches to my chest so when I move, the mic moves with me-

David Greene:
Oh, yeah. Like a gimbal for yourself.

Dave Meyer:
Yeah. I move around a lot. [crosstalk 01:01:10]

David Greene:
You’re like Axle Rose from Guns ‘N Roses doing this snake when you’re recording.

Dave Meyer:
Yeah.

Dave Meyer:
(singing)

David Greene:
Yeah. That’s really good, actually.