Ivy, Steven DeFrancis, Dallas Tanner, Ryan Marshall Webcast
Like mortgage rate volatility has tons to do with what happens in the housing market. We all know that, but you have to actually believe it. So when you think about Ryan's business, these guys have done a wonderful job buoying up housing prices over the last three to five years by buying down mortgage rates. The percentage of new home sales as in total aggregate of all home sales is abnormally high right now and has been for the last two to three years. So you sit there and you say, well, what's going on? It's like looking at a pool of water, like it's really stagnant. You have about 4 million sales a year right now happening, 4.1, 4.2, that's a million units light.
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Good morning, everyone. And a pleasure to be here. I'm Ivy Zelman and run research and investment banking at Walker & Dunlop. And I'm excited to have such a prestigious panel with myself. Steven DeFrancis with Cortland is going to be our multifamily expert. Ryan Marshall with Pulte Homes, CEO, will talk about single family and Dallas Tanner who runs Invitation Homes will talk about single family rental. So Willy talked about a lot of things today. I'm going to hit on some of them, but I want to kick it off with a discussion about demographics. We're just about to publish an updated version of a report we did back in 2021 that was pretty unpopular called Cradle to Grave. And really probably the reason it was unpopular, it was pretty troubling to look at the demographics of this country's future. And I want to revisit that because right now with immigration being predominantly shut off, we do have a very troubling outlook. We have an aging population. I politely say many of those people are aging out. And currently our fertility rate is below replacement level. So when we look at future population growth, which drives household growth, it doesn't look very good and it's going to only get worse unless something changes around immigration. Because I don't think young adults today, predominantly women are that interested in having children. I can tell you my 25-year-old tells me she doesn't want children, which breaks my heart, but a lot of them are saying they're one and done or frankly don't want them at all from many reasons, political ideology to can't afford it. But with that said, I'd like to kick it to first each of the gentlemen to talk. I should have done this, I apologize. Why don't you just walk through your footprint and give people some perspective on your operations. Dallas, do you want to start?
Yeah, sure. Great to be with everybody. Ivy, thanks for hosting us. Dallas Tanner, CEO of Invitation Homes. We're a publicly traded single family rental business. We basically cover the West Coast, Southwest and Southeast. We have about 110,000 homes that we own and operate. Average customer is sort of 38, 39 years old. They have a combined household income of, call it $150,000 and they stay with us about five years. And so we have a lot of obviously interesting information on what that sort of consumer's up to.
Good morning, Ivy. Thanks for having us. The view this way is spectacular. Hopefully, it's probably not nearly as good looking this way, but it's really nice to be here in Sun Valley. So, Willy, thanks to you and Ivy and the W&D team for hosting us. I'm Ryan Marshall, I'm the CEO of Pulte Homes. We're headquartered in Atlanta, Georgia. We're a national home builder. Most of what we do is all for sale. We do a little bit of single family rental with partners like Dallas. We're in almost every single made top 50 housing market and many of the top 75 housing markets. Last year, we built about 30,000 single family for sale homes, most of those being single family. We do a little bit of condo, a little bit of townhome in a few markets. The majority of our business is in the Southeast, Florida, Texas, Southwest. We've got a fairly decent Midwest business, including Ivy's hometown of Cleveland, which we love building in, and we don't want anybody else to go there because it's quite lucrative for us right now. We do a little bit of a business in the Northeast as well, Boston, D.C., New Jersey, New York. Average price point for us is $560,000, and we serve everything from the entry level to the move up luxury, and we have a big active adult business as well.
Great, Steven? Good morning, Steven DeFrancis. I'm the CEO of Cortland. We're based in Atlanta. We're a vertically integrated multi-family investment manager, meaning we buy, build, develop, renovate, and operate multi-family communities. We have about 80,000 units today, and the markets we focus on are the, we consider the growth markets of the U.S., so think naturally the Sunbelt, Mountain West, Mid-Atlantic, and in the middle of the country, the breadbasket of the country. So we're most places that aren't the Northeast or the West Coast.
Great, well, thank you. So let's get back to my demographic discussion. Ryan, I'll start with you as it relates to discussions in the boardroom, recognizing after COVID or during COVID, we had massive migration to the Sunbelt, and yet home prices surged, and we all are now dealing with a lot of affordability issues and overbuilding. So do you discuss re-contemplating where to go strategically, and do you still want to be in the Sunbelt given that we're seeing migration reverse outside of the Sunbelt?
To your question, Ivy, about the boardroom, we talk about it a lot, and the report you mentioned, Cradle to Grave, was not one of my favorite reports. I read it multiple times and tried to find all the reasons I didn't agree with it, but there's a lot I did agree with, and there are a lot of things in there that could potentially be problematic for both for sale and multifamily developers because we need population growth ultimately to continue to grow our businesses. So we pay attention to it a lot. We really focus on where population growth is going, and we also talk maybe more importantly where the job's going because ultimately population follows the jobs. The post-COVID environment was certainly a very beneficial one for us because all the land that we had bought pre-COVID, we got a real nice lift in gross margins as prices went crazy. I think we're dealing with some of the fallout of the post-COVID environment in markets like Austin and Denver, a little bit in Phoenix where things maybe went too high too fast, there was too much population growth followed by rapid price increases, and you're seeing some of that reset. And then you mix in all the things that we've seen with interest rates, and I'm sure we'll touch on that at some point in time. But to get back to the question that you asked, do we focus on it in the boardroom? 100%. And one of the things that we've tried to do as a company is to own less land and have more optionality, more flexibility so that we're not stuck in a owned land position forever. There was a point in time when we were, and we learned some of those hard lessons in the great financial crisis.
But you have expanded more than other public builders into the Midwest, and that strategy seems to be really serving you well right now.
Yeah, rather than expanding there, that's where our company started. We were founded in Detroit, and we expanded into Denver, Chicago, Washington, D.C., and Atlanta. We're the first four cities that our company expanded into 75 years ago. And we've continued to grow a Midwest business. We often, on our investor marketing information, we tout that we're the most geographically diverse home builder. And the reason that we can say that is because of our Midwest business. And it's Indianapolis, Columbus, Minneapolis, Cleveland, Chicago. Those are all markets that aren't the sexiest, highest growth markets, but there's a lot of people that wanna be there. They're more affordable. They've got good jobs. They're very stable. And because there's arguably less competition there, they've been great markets for us.
Steven, your thoughts? Yeah, so we talk about it a lot. It's, you know, like Ryan, our focus is on, you know, where the jobs are going, and then the population follows the job. So, you know, a lot of those markets have been, from a multifamily standpoint, have been struggling over the last few years because of oversupply. But that's still where the population growth is going. And yes, population growth is down overall, which I think makes it that much more important to be mindful of where there is population growth. You know, right now, the coastal major markets are doing well relatively in the multifamily space. However, in most of those places, they're, you know, if they don't have immigration, they're losing population. You know, so they are net negative until people immigrate into those places, which,you know, long-term is obviously very tough to run a housing business. So we are focused on, you know, where is population going, and where is the growth going? Really, where is the job growth going?
But at this point, you're not changing the footprint or expanding and exiting, you're kind of staying packed.
So we're sort of always looking. You know, we were very close to moving into Boston a few years ago. Then, like right before COVID, we had a portfolio we were chasing, then COVID happened, so we blacked off. And then, you know, once we got ready to move back in, because we liked the market, then the regulatory environment up there really started to shift, and so we've held off. So we're not, you know, there's no red lines on markets. You know, we're just always watching what's going on with the population growth.
Yeah, I wanna come back to you on immigration in a moment. So Dallas, have you made any decisions to expand into new markets or exit markets, given changing dynamics and population growth?
Yeah, I mean, sometimes we look at our business just based on where we have dislocation from a concentration perspective. And if you think about the way we grew our company, I mean, 90% of our assets came out of the GFC, where we were buying homes one by one, and we did, we basically did 30,000 homes one by one in 18 months. And so we had to go where the puck was in terms of where the discounts were the greatest, where we saw an ability to achieve scale. And then over time, we've sort of fine-tuned our portfolio. So like, for example, today in Florida, we have 26,000 homes in Florida. We love the market, it's high growth, a little bit higher property tax, which sort of hurts our margins, so those things we take into consideration. But you might look at that market and say, okay, we have a lot, and on a relative basis, where else could we invest capital and sort of diversify in a way that would give us better risk-adjusted return? There are markets like Nashville, where we're looking at trying to do more, Salt Lake City, which we're pretty small in, but we see that as high growth. To your point around demographics, people are still having kids in some of these markets. Like, those are the sort of places where we like the opportunity long-term. And then there's, and Ivy was kind of busting my chops on this in the back room, like California. You know, we still own 12, 13,000 homes in California, which we bought really cheap in 2012, and that's a 75% margin business for us, with 6% plus revenue growth year over year. The challenge is, is California. And for all of you that own or operate in California, you're just always dealing with extracurricular noise based on something. So you need to sort of weigh that out. We're not doing a pivot from the Sunbelt to say that we think the growth stopped by any stretch. In fact, I probably have a longer view that I would be more bullish on the Southeast and the Southwest, based on all the different reasons. You know, I think demographics will sort of shift, immigration reform will sort of shift back and forth. And then I think at the end of the day, people want to be where the sun is shining and where, I hate to say, I hate to make it so partisan, but like red states are easier to do business in than blue states.
And there's a lot of red states in the South and the Southwest and the Southeast. And so I just think they're going to be a net winner sort of over the long haul. And I think as an operator, warmer weather's a little easier on your assets and everything else as well.
Ivy, if I can, I'll give you maybe a compare and contrast of two markets that we contemplated going into five or six years ago, Greenville and Boise. We looked at Greenville and saw a big job opportunity, job growth, population growth, affordability, good quality of life. You had a lot of attractive things about Boise with a lot of population growth that was coming from California as people were fleeing California for a variety of reasons in the kind of pre-COVID, post-COVID environment. The thing that we couldn't wrap our head around with Boise is job growth. And while there are jobs there, it didn't seem to be as robust and sustainable as what we saw in Greenville. So we elected to expand into Greenville. We're very happy about it. We elected not to pursue an opportunity in Boise, and I'm pretty happy about that, 2020 being perfect.
Yeah, and Boise certainly had a lot of reversal of that migration when people were called back from working remote. So maybe in hindsight, it's a good decision. One of the things that the demographics also, I think you've capitalized on, Ryan, is the active adult segment. And by the end of 2030, we'll have 20% of the population will be 65 or older. It feels like that's still the where to be, and you've capitalized on that, going into active adult into a somewhat different strategy. Do you wanna elaborate a little bit on that?
Yeah, so we've, about a third of our company is in active adult, which is, we predominantly do with our Del Webb brand. You may be familiar with that. It was a company that we bought in the early 2000s. It was its own standalone publicly traded company that we acquired in 2001. And we've continued to operate that Del Webb brand as a standalone business unit. So our Sun City or our Del Webb communities are, you've gotta be over the age of 55 to live in them. They've been incredibly successful, in large part due to some of the slides that Willy showed about net worth and balance sheets. And so you've got a population that's over the age of 55. They love owning homes. In some cases, they own multiple homes. They've got a lot of wealth tied up in their existing home. They can liquidate that, and they can come and pay cash and downsize into a community that perfectly fits their lifestyle. It's a little bit about the piece of real estate that we're selling. More than anything, it's creating a lifestyle opportunity for these individuals that are either retired or moving towards retirement to be around people that are like them, that are active, that are wearing their whoop strap, and they're kind of living their best version of their retired life. So it's been a very important part of our company. One of the things that we've started to identify and we're moving there now is that as that boomer population continues to get older and older and older, is that a problem for us? Because it's no longer a growing demographic. If anything, it's flatlining. And so we've launched a new brand called Explore by Del Webb, which will be targeted toward the Gen Xers. And I personally right square smack dab in the middle of the Gen X population. I'm not ready to retire. I'm not old enough to be in and over the age of 55 community. But I might wanna start moving toward that at some point in time. And we think there's a whole population of folks that are over the age of 40 that are still working, that would like the benefits of living in a highly amenitized resort style of community. And so that'll be, we think, a big growth opportunity for the company over the next decade.
Yeah, I was surprised to see the stats for the number of second home owners predominantly are in their 40s, which I thought was, I would have thought it would have been older. But as we think about the aging population, maybe Steven, you can start with, is there an opportunity to provide rental communities for active adults or people in that 40 age cohort, 40 plus?
Well, first I have to say, my perspective has changed recently is as of a couple months ago, I became 55 plus eligible.
We'll sell you a home, Steven. We'll give you a discount, friends and family discount.
No, so we actually, in about 2014 or 15, after looking at the demographics and the demand growth, got into that business and started a sub-brand called Attiva. And we did about, I don't know, around a dozen deals, bought some and did value add and then built some. And frankly, we got out of that business several years later, because while they were all working, we were frankly, had to be honest with ourselves and recognize that they were working because everything was working in the market at that time, not because the idea, at the end of the day, what we learned was the profile that we were serving in our 55 plus communities, A, you could have gone to all of ours and never found a whoop strap. So it was a much older demographic. And what we found was the demographic we were serving was extremely thin. So if you were below that, you couldn't afford to live there. And largely, their biggest concern was outliving their money. And so they would prefer to go in a traditional multifamily deal, get more value out of that, instead of paying a premium to be in a senior specific development. But most of them, frankly, would rather be in your product where they, or even an invitation home where they could rent a home and still be in a house. And so really what we found was it was largely an older demographic that was being pushed to do it by their adult children. And most of them were actually being subsidized by their adult children. So we felt like that was really too thin of a demographic to commit to for projects. So we stopped doing it. We got lucky because of the timing. But we are seeing that the population of folks 55 and older in our traditional multifamily is going up. It's in the high teens today as a percentage of overall population. And so we are serving more and more of those folks in our traditional multifamily.
Got it. And Dallas, we spoke about it, but with respect to the SFR invitation strategy, any reason to try to capitalize on that aging population and have age-restricted communities?
The BTR stuff is sort of along the same lines as Ryan talked about. From a segment perspective, you can highly amenitize some things. I've spent a bunch of time recently understanding that Margaritaville concept, which I think is really cool. If you haven't been to one, go check it out. It'll totally expand the way you think about highly amenitized sort of senior experiences. It's when seniors become teenagers. 100%, maybe worse than. Yeah, it's worse than they're teenagers. Look, there's gonna be a lot of opportunity. I do think private capital can play a meaningful role. I like where Ryan went, that the mobility to your point around second homes, this thing in terms of how flexible our lives have become because of the cell phone. There's obviously ways that people want to explore living differently. I think there's going to be many opportunities for private capital to step in, create new experiences. Some will be gimmicky and won't work. I think some could have like a sticky factor like a Margaritaville. And I certainly think that there's a way to create operating companies around those very specific segments. I mean, you just think about the way we travel. We travel so much differently than we did 30 or 40 years ago. Some people want to river cruise through Europe and that's all they want to do. And there's segments that are available for that now that didn't exist 40 years ago. I think living can be the same way. I think it'll just, there'll be a lot of ebbs and flows and some of it will work and some of it won't.
Ivy, you know, one of the failures that we had trying to do rental in, and I had this idea because we'd had so much success working with companies like Dallas's company doing single family rental where we would take part of the community. We would build it. We would sell it to Dallas. They would rent it out. And you'd have owners living next to renters and you couldn't tell the difference. In some cases, Dallas's homes look better than the ones that we sold to an individual because he actually cuts his grass. It was nice. And so we said, well, why can't we do that in a Del Webb community where we build a bunch of homes and we sell them to Dallas and he rents them out to people that want to live in a Del Webb community, but maybe they don't want to make the commitment of buying. And Dallas and some of his competitors, they said, nah, it won't work. It won't work. I said, that's ridiculous. They absolutely will work and we're going to do it. So we built about 10 homes in one of our communities in Phoenix. We put them on the rental market and guess what happened? Nobody rented them. And I'm like, how is this possible? We must not be marketing it well enough. And so I dove into the marketing strategy. And what we found out was there are owners that we sold homes to, and they're renting their homes at significantly below market rate because they're not living there for that period of time. And so a home that should be renting for 4,500 bucks a month, they were putting on the market for 2,500 bucks a month. And so, you know, guys like Dallas, they're not successful, you know, by accident. They couldn't make money and they couldn't make a return. So we learned it the hard way. We didn't rent any homes. The homes that we built, we sold. And I'm going to chalk that up to a fail.
Well, back to your bread and butter.
So tried it, but didn't work.
That's right.
So thinking about just the competitive landscape and recognizing whether we're talking about owning or renting, it feels like the housing ecosystem is really intertwined now. So Steven, when you think about the overbuilding that happened post COVID or during COVID, how does the SFR, BFR, for sale impact your multifamily operations?
Was multifamily overbuilt? You know, when things are working close to normally, it doesn't impact it a lot because it's definitely a different segment. When the market got really tough, you know, last year, maybe the year before, it definitely, you know, it's all one pot. A class, B class, C class, you know, for sale, for rent, single family, it all impacted the market. So, you know, we're growing out, or, you know, as Willy said, you saw the demand numbers for this year. And, you know, so we've been growing out of that hole. We look at each market individually and evaluate by market, you know, where we think, you know, each market or really sub-market is gonna get back to a point of stabilization where you can get, you know, normal rent growth. And if you look across all of our markets where we operate, probably 40% of them or maybe 25% are at that point. You probably got, you know, half of the balance are popping along the bottom. They're not gaining, but they're not losing ground. And the other half of the remainder are close to turning. And we think by the, you know, next spring, all of it will have turned. I don't, we don't think it's gonna go, you know, next year is gonna go running off the page with performance, but we think you'll get back to a more normal rent growth type of year. And, you know, starts continue to, you know, thankfully developers continue to struggle to be able to make deals pencil. And, you know, hopefully that'll continue for a few more years to give the market time to cycle.
That is a subject I wanted to talk about the, you know, whether we think of it for the shortage or we're oversupplied right now. And I think one of the interesting things has been that rhetoric hasn't really been discussed lately. I haven't heard a lot of people talking that we have this major housing shortage when we have empty apartments, empty houses and you guys are sitting with competitive forces that are impacting multi because the friction with SFR, BFR is close enough. It impacts you. Thinking about the dynamics of the oversupply, you know, Ryan, we're not, we'll talk about the new legislation from the government, but as it relates to the competitive landscape, you know, Willy showed a slide that showed the monthly payment for an apartment is substantially less than an owner would have to pay to buy the first time buyer 410,000. But you're buying mortgage rates down. So that actually is not really in effect what's happening. That segment of the market, it feels like that segment of the market doesn't have a chance to really drive for affordability. Why even be in that market? Why are you continuing to build starter homes when frankly people can't afford them and you're being forced to crush your margin doing so?
Yeah, it's a fair question. I mean, if you, you know, if you went back to 2013, 2014, the question that we were being asked, and in fact, I think you were the one asking the question, if I'm not mistaken, was why aren't you building more single family entry level? Because that's where all the growth opportunity was. And we, you know, at that point in time, it was probably 25 or 30% of our business. Today it's 37 or 38% of our business. So, you know, like all things, first time move up, active adult, they go through cycles. We're in a cycle right now that's maybe not as ideal for that first time buyer. We've adopted the philosophy and strategically said, we're going to be a significant player in every single consumer group, entry level included. It's not the most attractive, but it's also, it's not bad. And we also tend to play at the higher price point of the entry level buyer. So if we look at our entry level product, it's in the high 300s, low 400s. We're not building very many homes in the kind of high 200s. I'm not sure anybody is in the high 200s, but, you know, if I had a do over or I could do something today to tweak it slightly, I'd bring our entry level business down to kind of 32, 33% of our business. And I would take those four or five points that I'd be giving up and I'd move it into the active adult. I think there's more opportunity there right now, but.
Well, you know, your point of being in flowing, definitely. But as we know, we have a K-shaped economy. And for those that are not familiar with the term, we have, you know, directionally, the wealthy are getting wealthier and the poor are getting poorer. And so when you think about what the administration has been focused on is really more the likelihood that we need more rental product because people can't afford to buy because they have difficulty solving for affordability. And the recent legislation really, Dallas, what do you think? I mean, you got away with still allowing to do BFR, but you can't buy an MLS. And does this really help affordability?
This is where I roll the grenade in the room. It's been a very interesting six months. I just want to piggyback on something Ryan said. I do think there is a misnomer in terms of like who the average home buyer is today. And I think the unfortunate piece, and it's not all wrong. I want to be fair to like all sides of the argument, but like it's not a 23 or 24 year old trying to buy a house today. I bought my first home when I was, my dad lent me a little bit for the down payment when I was 24, 25. I just got married. That is not, by the way, just to kind of compare and contrast to what you said about your daughter, like probably very different thought process 20 some odd years later, 22 years later. I would say if you go back to LBJ, the homeownership rate in this country has been about 67% continuously, okay? So for the last 50, 60 years, about two thirds of the country owns something and about a third of the country leases something. Willy talked about it earlier in terms of the lock-in effect, like mortgage rate volatility has tons to do with what happens in the housing market. We all know that, but you have to actually like believe it. So when you think about Ryan's business, these guys have done a wonderful job buoying up housing prices over the last three to five years by buying down mortgage rates. The percentage of new home sales as in total aggregate of all home sales is abnormally high right now and has been for the last two to three years. So you sit there and you say, well, what's going on? It's like looking at a pool of water, like it's really stagnant. You have about 4 million sales a year right now happening, 4.1, 4.2, that's a million units light. Is that the pool that got painted blue? It's got reflection pool challenges. But what I would say is like Steve's business benefits, my business benefits, Ryan's business benefits from more transaction volume. So if we have 4 million sales a year in the US, it's probably 20, 25% light. So you have people staying put, you have more disposable income availability as Willy talked about also earlier. So people just aren't as much focused about like, let me burn my awesome three and a half percent mortgage rate and let me go buy a five and three quarter rate and see my payment go up 60% for what at this point in time. And so it's just a little bit of a tricky balance. So to Washington's credit, I think both sides of the aisle are trying to say like, well, how do we stimulate sort of both the politics of a good story around housing growth and everybody deserves the American dream, but also the real practical application, which is we need people, the economy is sort of built on housing to some degree. I think the current, we got caught up as sort of the, when I say we, like our industry. You know, if you look at that housing bill, am I okay to go here?
If you look at that housing bill, it's like 300 some odd pages, the final version came through. The piece about SFR, which got sort of the most attention when the tweet was in January, you know, it's about 20 pages. And you know, where I came encouraged from the process, we obviously spent a lot of time in DC. I came very encouraged that both sides of the aisle were open to healthy discussion. Now it was really clear to me very quickly, both sides of the aisle and I'd say the administration, treasury as well, is that the politics that are interplaying in all this totally dilute the messaging we all hope would be really pure. Makes sense. It's like that around pharmaceuticals. It's around oil and gas. Housing's no different. So our industry got sort of painted as a boogeyman. But I think the one helpful thing through the process for the industry was that, you know, for 10 years, we couldn't get a fair media article written on our industry. We had hundreds between January and June where everyone was like, guys, these aren't the companies that are really creating the issues. By the way, we don't even buy really any homes on the MLS. We haven't since about 2017. So the reality is we're all out building...
We're trying to create new supply. I think the government, from a federal perspective, wants to create a narrative where supply can be more easily induced into the market. I do think there's some good things in the bill that sort of incentivize local municipalities to deregulate, to do some things that are smart. I think, unfortunately, a lot of the energy and the momentum around that bill was caught up in sort of the false narrative around supply being taken or this, that, and the other, which isn't true. The challenge for the federal government is that they just can't have the impact that the local and the states have. We all know that in this room. And so the waterfall effect is, hopefully, local and states sort of gravitate to the good things in that bill, which will help open up better pathways for developers and operators and institutional or private capital to play more of a meaningful role. Now, that being said, and I know all three of us would answer this the same, if we can't see the demand, we're certainly probably not gonna take the risk. And so you have to be incentivized in some of these parts of the country where maybe a Midwest market, take, for example, wants more housing units. There's gotta be sort of a risk-reward trade-off if we're not sure what those absorption statistics are gonna say or do. And I think that's the tricky part because when you get down to the brass tacks, even with the politicians, and I would say, look, to be fair, I was very impressed with a few people on both sides of the aisle that are truly trying to tackle this. And I'd give fair credit to the administration as well. Legislative Affairs Office, the back office that was really trying to strike the right balance, everyone was collaborative. I think the challenge is the noise around housing. And it's a very easy pinata to put out there to say, do you want something cheaper? I do. I don't know about anybody else in the room. But the reality is like the markets, what moves that? So to Willy's last point around, stand up for capitalism, you also have to stand up for free markets. Because when markets dislocate, that's when usually the opportunity either comes or the wiping of the bad decision-making occurs, and then the market can kind of course correct. And so I think the challenge is as a consumer, and I'm speaking about myself now, we've all been so stuck on hot money in housing for so long, that sort of the overhang effect isn't that fun. Steve, like we talked about the last couple of years. But we have to pay the piper at some point.
Right, and with respect to the oversupply that we're now dealing with, in reality, Ryan, really the way that the market will adjust is if we have capitulation by land sellers. And that's not happening.
That hasn't happened yet.
So really, how does the government get involved in creating affordability? I don't think they really can, unless they start using a big stick to governors and saying, you need to figure out at the local level how to bring more housing. But I guess, Steven, on our prep call, we talked about, do we even need more housing? I mean, you mentioned the multifamily starts. They're running still at 400,000 roughly annually. And arguably, if you go back historically, that's still slightly above a trend line. So tell me what you think as it relates to supply. Do we need more supply?
I would say no to all of you developers in the room.
Well, we'll just be going for a hike this afternoon, Steven. Exactly.
We need more single family for sale. Ivy, to your point, starts have not gone down nearly as much as everybody would have assumed they would have, given the fact that we're in probably the fourth year of softer declining fundamentals in areas which cover probably more than half of the population of the country. I think there's a, it's become a political narrative that we don't have enough housing in the U.S. and we truly do not have it. You talked about the K-shaped recovery. At the bottom leg of the K, we truly do not have enough affordable housing. I don't know that we can solve that. Telling developers to develop more at numbers where that housing is needed by and large, you could build that deal for free and still not cover the operating expenses. So I don't know the solution, but it's not get the developers to just build more housing. I don't know of any industry that is as efficient at overbuilding the market it serves as, definitely the apartment market, if not the whole housing market. And you see this, I think we're all good at overbuilding. Yeah, we're all really good at it and all pro. And you've seen that in the last few years where in most of the markets where we operate, wages have continued to grow and rents have been soft. I do want to give one plug since we're here in Sun Valley to Boise, because we did go and it's been a great, it's been interesting to watch. It's been a proxy for us because it's the smallest market we're in. You're happy with it. Well, to your point, it went down. So it was the first one to struggle, but it was also the first one to come out. And it's, our rents today are probably over 10% year over year. And so we're hopeful if we can get all of them there, but it's been a good market. It's small, so it's a lot of volatility as you can imagine.
But we don't need more housing today in most of the markets in the U.S. And one of the things about the multifamily industry that I find fascinating, back in 09, I started researching multifamily and having only done single family, the turnover was call it 55 to 60% per annum. And now it's like 35 to 40%. So people just don't want to move because there's too much friction in moving. As a result, bringing so much more supply, you just don't have that competitive pressure that you would have hoped that people would want to move up from a class B to class A. So the dynamics of the food chain don't seem to be working as fluently as they have.
Yeah, I think there's a couple things driving that. Well, one is the most obvious and hopefully short-term one is that because people can't buy houses, they're just not moving. We don't have nearly the numbers of folks move out to buy.
That we would have? Do you have any stats on that? Because it used to be like in the teens and now it's in the single digits.
Yes. I mean, so if you compound that over several years, it's a big impact to that renewal number. And the other thing is, multifamily rentals are serving a much higher demographic than we have historically. And so our average residents probably make $95,000 a household and paying around $2,000 a month for rent. And these are people who have invested in that as their home.
