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MARKET INTELLIGENCE WEBINAR: AUGUST, 2022
Watch the replay of our August Market Intelligence Webinar. Ali Wolf joins Cyndie Roche, Matt Lufkin, Jeff Rettig, Bret Dewy, and Mike Farmer to bring the latest data on the housing market, such as the latest home sales data and projections for the near future.
Abridged Webinar Transcript
Mike Farmer, President, Commercial Operations, BFS: Welcome to our August market intelligence webinar. This is our investment to help provide relevant and real-time information on what's going on in the market here on a monthly basis. I'd like to thank our builder, remodeling and manufacturer partners for joining us today. We have a great lineup and we'd like to provide some detailed information and answer any questions that come through the presentation.
First up we will have Cyndie Roche, who's our paradigm VP of digital solutions and architectural design, followed by Matt Lakin, who is our director of structural panels. Then Jeff Rettig, who's our vice president of supply chain, and then Bret Dewy, our VP of millwork and specialty products.
And finally, Ali Wolf is on as chief economist. So up next, I'd like to turn it over to Cyndie
Cyndie Roche, VP, Digital Sales & Architectural Design, BFS: Thank you, Mike. Guys, I'm so excited to be able to show just a couple slides to you today on what we're doing with BFS’s partnership with Paradigm. We are very excited to be able to show you some of the projects that we have currently going.
This slide represents just a few of the documents that are needed in order to construct a home. There are so many people’s designs that that are incorporated into the field without consideration or collaboration for each other. We believe that digital transformation begins when communication and collaboration are prioritized.
The left side of this screen indicates some documents that we consider to be drivers of a coordinated, unified model. And by taking those documents, putting them together in a 3D world and wrapping that 3D model with a BIM coordination effort, we're able then to produce documentation that's very considerate and collaborative with each other.
This process may seem complicated, so let me simplify this in just one quick visual. We take a 2D documentation set that you work with today. We create very quickly a 3D model, incorporate any number of the MEP systems that you would want to have incorporated into that model, and then produce clash detection reporting and be able to resolve those clash detections, but prior to building that house.
So, what you end up with are marketing materials all the way through truss designs that are coordinated to prevent actual construction problems. This next quick video will show you how it all comes together.
Thank you for your time. And Matt, I will turn it over to you.
Matt Lufkin, Director, Structural Panels, BFS: Perfect. Thanks, Cyndie. Good afternoon, everyone. I'm going to take a few minutes in supply chain to talk about the current state of the market, the general headwinds still providing some challenges, and both the current and future footprint of manufacturing capabilities in the industry.
In regard to labor, a continued low employment rate has continued to provide a lot of challenges for the industry. Everything from workers at the plants, truck drivers, laborers in the field, all continue to provide, quite frankly, a roadblock in driving down the deliverable cost deliverable costs of goods and decreasing building cycle times.
Couple other factors. When we talk about transportation; transportation issues remain a challenge for all the industries, but specifically for the forest products industry. The services and supplies used to get forest product are not the same. Those are not getting the amount of rail cars they need to keep up with the production in full capacity. If demand where to shoot up again, logistics wouldn't be able to really keep up with it as a whole, especially when we're heading into the winter months. When you get into the manufacturing side of things, most mills are finally starting to take the late maintenance that they've been needing to take for quite a while. With elevated prices over the past several years, the mills in general, were run extremely hard. We have started to see and will continue to see both scheduled and unscheduled downtime over the next several months. I’ll return to that in a moment.
Looking at the chart on my right, you can still see the demand that's in the marketplace. On a positive note, the multifamily segment is still showing a lot of signs of strength. This will ultimately create a change in the product mix that we need for the job, so we'll continue to keep an eye on what we need to do with our inventory.
You’ll now see a chart that we shared on the last webinar. Most of the data and factors remain the same with more production, eager to support housing demand if we were to stay at 1.4 million units. When we speak to the commodities in general, there's some present in regards to production moving.
If you look at panels, we do have a mill conversion of OSB to siding coming out in Q4. Short term, this could have an impact primarily in the North Central, but there is more capacity coming online in 2023. If these new greenfield projects come online, once completed the actual production and the market will be more than there is now.
Previously, I mentioned scheduled and unscheduled downtime. This is basically what we call market downtime, which is typical. Due to the mills hitting the cash cost point of indifference, where shutting down is the same as running the material, we foresee this potentially happening throughout the remainder of the year, and it can be challenging, to provide this with longer order files once they decide to do this downtime.
One other factor, more on the lumber side, is log supply. This is more relevant in Western Canada. This production has to be reduced due to timber supply. Log pricing, availability and overall costs have caused some mills to curtail production. In a most recent announcement, 150 million board feet permanently. Although we've seen this primarily in Western Canada, it is causing mills to rationalize production and move it elsewhere, either at an underutilized facility or more capacity in a new greenfield plant in the pond segment Pretty much concludes the commodity portion.
And with that, I will pass it over to Jeff.
Jeff Rettig, VP, Supply Chain, BFS: Well, thanks Matt. As you said, we have some headwinds, and we have some optimistic, and some good news. So, some capacity has come on. So, in the decking industry Trex and TimberTech have both brought on additional manufacturing over the last year. So, manufactured decking is quite a bit more readily available. Hardie and LP have both brought on additional manufacturing as well. LP, as Matt mentioned, is converting one of their OSB mills over to produce SmartSide. And that should help with a more readily available product in Q4 [of 22] and Q1 of 23.
But unfortunately, as was mentioned, we still have some issues out there, and the chemical industry is still reeling pretty hard from a year and a half ago. And that's unfortunately affecting subfloor adhesive, roofing, gypsum and fiberglass shaftliner, and insulation, as well as the EWP industry, especially LVL is still gonna be challenged probably through the end of the year.
We'll continue to give you updates as more products become readily available. Bret. I'll turn it over to mill.
Bret Dewy, VP, Millwork & Specialty Products, BFS: For millwork category, we all know that the last 24 months has been a huge challenge. Particularly for vinyl windows, as well as moldings and jams, MDF and fiberglass doors. The good news is there is significant capacity of vinyl windows being made across the United States.
The vinyl window challenge has been solved for this year. We're seeing lead times that had expanded the past 30 weeks Now, we're seeing down between 6 to 12 weeks and we fully expect that trend to continue. The only risk on the windows is there's still some pressure on glass supply. For the time being the market is stable in that regard, but the capacity has been added.
Mouldings and jambs, we all know that that has been very difficult. That has improved in large measure because of reduced lead times. We went from a lead time of 6 months for containers of product, come in, come around the world, and now we've seen a lead time of three and a half months. So, there's a log jam of inventory at distribution at our locations of that products.
The good news is the market's strong and it's moving through the inventory quickly. But for the most part, mouldings and jambs are in a very good situation. However, for the challenges we expect to see, MDF is still tight. There is new capacity coming on stream. It'll be probably a 2- year timeframe before that is added once somebody even announces it, so we expect MDF to continue to be a challenge. Currently it’s in good lead times and be able to service, but that's because the inventory levels are still high.
Fiberglass doors have gotten significantly better. Lead times are down. But they are still on the most part on allocation. My recommendation regarding fiberglass doors is: stay away from the textured product stick with the commodity products. They are more readily available and try to avoid specifying a specific brand. Trust us to be able to fill that opening with what we can find available so that you can close up your homes.
That's it on the millwork category, we'll turn it over to Ali Wolf, the Zonda chief economist.
Ali Wolf, Chief Economist, Zonda: Thank you, Bret. And we have four sections to get through. The first is just starting with the shifting market, acknowledging what's happening on the ground. We'll talk about inventory trends. What are we seeing today? What are we expecting to see in the future? We'll discuss how buyers are responding to today's market and how that really depends on who the buyer is. And finally, we'll finish with our final thoughts and provide some considerations to think about as we look over the next handful of years.
So, let's start with the market. And I think the first thing we need to acknowledge is that we are in a very dynamic place when it comes to mortgage rates. When I was doing presentations just 6 weeks ago, we were talking about the 30-year fixed rate mortgage, basically getting to 7%. We know there was 6.8, 6.9 for a short period of time.
Consumers responded the way you would imagine; you saw demand pull back pretty notably. But where we are today, we have interest rates that have come back down. So remember, it's a little bit counterintuitive when you hear that the federal reserve is raising short-term interest rates, and yet mortgage rates are going down, that ties into the relationship with the 10-year treasury yield. We've seen the 10-year treasury yield come down, we've seen mortgage rates come down as well.
Now, I don't want to discount what changes we have seen with interest rates going up to 5%, because that's clearly a shift from where we were just at the beginning of this year, and we are in the industry that is the ultimate interest rate-sensitive industry. When the federal reserve is trying to change policy, we are one of the sectors that unfortunately feels the immediate impact of that policy change. But as we think about it, remember that we slow quicker than the rest of the economy, we also rebound quicker than the rest of the economy.
And as we look at the monthly mortgage payments, this is where we were at the end of last year. It was a market average looking at home prices in each of those respective markets and an interest rate of 3.1%. That was the average we had in December.
When we look at where we are today, I've adjusted this down. I was presenting this at 6% interest rates a few weeks ago. Now we have the current rate at 5% to just capture that quick change, a 30 to 50% change in that monthly payment.
But when we look at the market, many of you know, that we like to look at hard data, but we like to supplement that with our division president surveys. This is talking to home builders across the country and getting some qualitative information from them about how the market is looking. And a question we often like to ask is, “Well, how does the market look relative to your expectation?”. And as you look at this, we have the results for May and we have the results for July. Probably no surprise to anyone that the majority of the responses said demand was slower than expected. You can see that shift to the right from May to July. July is also normally a slower time of the year. So to me, that makes total sense. But as you look at the responses, you can get the feel of it. We have about 30% of builders that said demand is slower than expected and not worrisome. In my mind, that's a “Yeah, the market's different, but this is a very normal, seasonal pattern that we haven't seen that much of over the past couple of years.”
We have 55% of builders though, that are saying demand is slower and it's causing concerns. And to me that gives more questions and answers because my question is “Well, why is it causing concern?”. Is the market normalizing? Is the market softening? Is the market weak? I think there are a lot of things that we need to unpack to be able to answer that question. Most markets across the country fall in 1 of these first 2 categories.
They're normalizing conditions, even though it doesn't feel like it because it's flowed pretty quickly, but you can look at it in terms of context and I'll show a lot of that in today's presentation. Some markets are just softer; they're softer than you would even see this time of year during a, a prior year of something more like 2019. Very, very, very few markets that have actually fallen into that “weak conditions” territory.
So, as we look at this and we try to say, [is the market] normal, soft, weak, what are some of the factors we look at? The first place we want to start is with sales. And if you look at the annual rate of total existing home sales, we're back to 2019 levels. That's matched in our new home pending sales index, but we also know in local markets, there are so many other factors. How much have home prices gone up? How many people have moved there? What is the supply and demand in balance? And it takes us back to looking at these stats on a more local level. As you look at this - Phoenix, Sacramento, Salt Lake City, Vegas, Denver, Austin - these were the staple markets that grew the quickest that had home price appreciation. That basically anyone you talked to said, this is unsustainable, it's happening now. But the market’s really growing fast. I think long term, a lot of these markets have fundamentals that support growth with the positive in migration, with more companies moving there. But because they grew so fast, they also bumped up against that price ceiling quicker than what we've seen in other markets.
On the right-hand side, you see some markets that are just difficult to get more homes built: Philadelphia, LA. So, the homes that are on the market are still selling well. And then you also have a concentration in the Southeast. The idea that some of the factors I said that match the markets on the left. More people moving in, strong household formation, and an existence of investor purchases continues to drive some of the strength across the Southeast.
So, we can track what's happening with sales, and then we want to get a sense of what's happening with consumer confidence. This is data from Redfin, looking at how many existing homes that were under contract fell out of contract. And you can see that our level is above where we were pre-pandemic, but not as high as we were when the pandemic first hit. In some cases, people are just saying, “If I'm going to buy a home and I've gone through inspection, and the inspection's bringing up a lot of things and the seller's not willing to gimme some money towards it, I'm not willing to purchase today.” The buyers have become a little bit more discerning and selective compared to what we've seen over the past couple of years.
Now, as we look at the new home side, we were able to call the inflection point in the market in April. And for us, that was because we basically came from an environment where there were no cancellations on the new home side, or if there was a cancellation, it was celebrated because we could resell the home for more money. But in April, we started to see a little bit more cancellations on the ground, and that share increased hitting its peak, it seemed like in many markets, in July. So June and July, we saw that's where the overall cancellation rate had gotten to the highest point, but a really important follow up question to me is, “Can these homes be resold?”.
Right now, 13% of builders said “easily.” If we go through cancellation, we can easily resell it. 40% are saying “for the most part,” and you have 50% that are saying “no,” but let me add a caveat. Our belief is that 50% of builders saying, “No, we can't EASILY resell it, but we can resell it if we use some incentives.”
And this is one of the benefits of the new home market over resale, which is the fact that 73% of builders have reported an increased use of incentives. There's money that's going towards closing costs. There's money that's going towards interest rates. And what a lot of builders are able to do is tell their sales staff, “Look at each person on an individual basis.” What is their pain points and what can we do to help address that? For a while the rate buy downs were, “Hey, we can buy your rate down to 4.9%. Now we're seeing, you can buy your rate down to 3.9 and I've heard even lower than getting a 30-year fixed in the threes.” And that's important for consumers who we know were still interested in buying homes, but there was this record affordability shock.
We're also seeing some interesting dynamics from a pricing point of view. Now this is data from Redfin that looks at homes that are on the market that have posted a price cut 7.7%, the highest level since 2015. As we look at this, to me, about 8% of the market going through a price cut is not that high. I know it is on a seasonal basis, but that number is still within reason. Doesn't necessarily mean prices have gone negative. It does mean that the days of, “Oh, I can list my home and I can list it for whatever and someone's going to buy it no matter what,” seem to be behind us.
From the new home side, we've been asking questions about base prices for since the beginning of the pandemic. And what we captured in July was 2 record highs. Record high 1 is we had 71% of builders that actually kept prices flat. That's the highest we've seen since the pandemic hit. 20% of builders lowered base price. And as we all know, lowering base prices [is] one of the last things you want to do for backlog reasons. But when we asked the builders why, sometimes it was because their competitor was trying to offload some homes, so they had to respond. Sometimes it was because there's a little bit more QMI (quick-move-in inventory) on the market.
In most cases, as long as the price cut was not 1, 2, 3%, if there was a more notable price cut, it absolutely resulted in a spur in sales. We had one builder say they didn't sell any homes for 6 weeks. They cut prices, they sold 15 homes basically overnight.
So, let's take this discussion over because pricing is really closely linked to inventory, and we want to get a sense of what's happening with inventory levels. Let's start national and then take it to a more local basis.
As we look at overall active listings, remember we thought inventory basically get scooped up real quick during the pandemic. We have finally started to see some improvement in active listings, and this is what we want to see. More inventory means a more healthy, more sustainable market, means less levels of home price appreciation, means people sell their homes and then they gotta move somewhere. And so, it creates a little bit more housing churn as well. As we look at 2022 active listings, you can see where we are; we finally hit bottom. We are above our levels last year. We are still below our levels in 2020, and we're below where we were pre-pandemic.
Depending on the market, I think this has been a really interesting number to track because when you look at the year over year change, you've probably read headlines about listings up 50, 60, 150%, compared to where they were last year. Now, that's true. Absolutely, you see that in the data we came from record lows and we've seen inventory increase. When you look at 2019, a lot of markets still extremely constrained. You can see on this list; Raleigh, Sarasota, those markets down still about 50%. Phoenix, Austin - those are a couple of the markets that we saw that sales had slowed more notably. You are seeing in Phoenix, this is one of the few markets where actual active listings have actually gone above where they were in 2019.
Then we like to look at quick-move-ins. These are homes that can be moved into within 90 days, but we've seen though is that QMI number has increased pretty quickly.
Back to the question. Is it weak? Is it softening? Is it normalizing? We're back to 2019, 2020 levels of overall QMI. So to me, this captures more of a normalizing level. So again, because it happens so quickly, it just feels like a bit of a shock to the system. Look at Riverside up 500% but compared to 2019, up 12%.
So trying to look at the 2019, I think that's a healthy comparison, especially when that's where we're seeing overall sales levels are today as well. We have builders, 87% of them that we're talking to, that say they plan to slow starts in response to the change in the market. And then you also see things like, “Well, we're planning to cut start 50% for two months.” And to me, this ties up very closely with consumers. The builder is saying, “Let me just pause, let me just reassess the market.” And for a lot of consumers, it's yes, affordability, but very heavily consumer confidence related.
But you also want to look a little bit further out. We can look at what are the plans for purchasing lots this year? What is the strategy with land acquisition? What we see is about 60% of the builders that we talked to are still planning to purchase the same amount of lots that they originally forecasted this year. You have a little under 30% of builders that are saying they are planning to slow their lot purchases this year for a few reasons.
Again, some of our comments: “The economics of deals written six months ago are no longer valid,” or “We've delayed some takedowns but we're still buying this year.” What we're seeing right now is I think a lot of that mentality and, I don't want to say scars, but some of the recent memory of “Maybe we don't want to pass on these deals” is playing into today's market.
We have about 60% of builders that are planning to cautiously move forward on their land acquisition strategy. We have a little under 10% that are saying full steam ahead. And then you can see, we have about 20% saying pausing on deals and 15 saying bidding lower. And some of the comments are “Land prices are higher than I've ever seen. Being diligent in getting the right deals that pencil, even if the market turns downward is key,” or “Being very selective.”
And this is where the market's unique. So, as we're looking at some of the future plans, we also want to have a sense of what kind of lot availability is out there. And many you know, at Zonda we tracked land and lot development. We can track total upcoming lots. And for the second quarter of this year, those numbers are up 28% compared to where they were last year. When you look at the pie chart distribution, this distribution almost always looks like this. It doesn't matter what quarter of data I'm showing you, but you can get a sense of total numbers.
We have 6% of the lots that are under development right now that are coming to the market right now in the third quarter, we have 24% expected in the fourth quarter. And then we have about 70% in that excavation phase. Meaning those lots likely come to the market in the first and second quarter of next year.
Now, excavation is always going to be a larger share of the overall pot because we include some lots that likely won't come to the market in the first or second quarter, they kind of get bundled together. So that number's a little bit higher. Don't have FOMO that maybe you're not as active as some of your competitors, because it's a little bit of a ballooned number, but it can give you a sense of what's going to come soon. What's going to come in a couple quarters, what's going to come in over the next 24.
So, let's go to the discussion then on consumers. We know what's happening on supply here and now it's improving. We know that there's a little bit of caution in the near term. We know that a lot of the land acquisition plans are continuing to move forward with some lots that are in place or under development. And I think the big question is “How does this market progress?”.
I'm going to show you some numbers that you've probably seen before in one of my presentations, but it's the number that I like to look at to put things in perspective. The fact that if someone was able to purchase a $400,000 home at a 3% interest rate, the equivalent at that 5% interest rate is $315,000. This is the environment that we're finding ourselves in. We were in a place where people moved from $400,000 to $280,000, if they wanted to keep the payment the same. And that's where we saw the market really start to shift down. As we look at moving from $400,000 to $315,000, again, I don't want to discount it. That's a severe change in overall purchasing power, but we also know consumers are saying, “Okay, well, what am I willing to give up, and also, how is a builder willing and able to work with me?”.
And another question that we at Zonda have been asking since the beginning of the pandemic is “Who are your most active shoppers?”. And for the past two years, we've had the same top three in this order: number one, move-up; number two, entry level; number three, relocation. And that’s shifted in our most recent data. This is another new response that we had in July, where now we have number one, move-up; number two, relocation; number three, entry level. And I think that's because as you look at the move-up buyers, and you look at the relocation buyers, they still have the ability to tap what I often call the equities and the equity.
They can still tap some of their home equity in particular, if they're going to move from a higher cost area to a lower cost area. The equity markets, when we look at the S&P 500, we often like to use that as our proxy for the stock market. Again, about six weeks ago, we were talking year-to-date S&P 500 being down 30%, last I looked yesterday, we were down 10%.
So, it's still down. It's still a little bit of a wealth impact, but for some of these buyers, they still have enough wealth they can bring to the table either to do a sizable down payment or to do a cash purchase. And what I think is interesting about the cash buyers is so much of my presentation today has revolved around what we've seen in rates, and there's a certain part of the buyer group that does not care about rates because they're not financing the purchase anyway. And we're seeing that cash sales are holding up as a share of the overall market. But what we see is overall investor activity higher than where it was before the pandemic. But as we're looking at this, it's the first-time price tier that is most attractive in general for overall investors.
That's playing into the fact that the share of first-time buyers in the market has decreased notably, but this goes back to the earlier slides. Normalizing, softening, weak. We're at 35 now, we were at 34 right before the pandemic hit. To me, what this is saying is capturing some of that normalizing trend of how this group is shifting down in response to what's happening with higher costs.
This is a group that when I was doing presentations five years ago, six years ago, we were talking about millennials becoming first-time buyers. And then over that period, we've had a lot of millennials that became move-up buyers. So, we're no longer just talking about this group of a certain cohort that is trying to get into the market. We have a more varied millennial population with us right now. But the group that I care about are the millennials that have not been able to purchase a home, that are losing some of their market share, that are finding affordability is the most difficult. And this matters because whether they buy a new home or an existing home, we want people to become homeowners for the wealth-building effect.
And for us in the new home market, if they don't start their entry home with us, that does increase our pool of potential move-up buyers in the future. And so, we can look to the resale market for this. So, what we wanted to ask the millennials is, “Are you willing to take a refill home that needs some renovations?” and from our research, we found 80% that said “Yes.”
So, some of you may know we had Todd Tomalak. He is our remodeling and building product expert here at Zonda, and when I talked to him about remodeling, he shows this stack, which to me is really amazing. It's looking at the number of single-family homes that are in the primary model years. Those between 20 and 40 years old. And what he likes to point to is look back to the mid-2000’s and look at the share in that primary modeling and look at the forecasted direction. He calls where we are right now the “golden years” for remodeling, where we expect to see some increased activity there with, similar to the for-sale side, a little bit of bumpiness in the near term, but a lot of that strength partly fueled by what we've seen in equity, driving the market forward.
Now what we've seen, we have an expert named Kimberly Byron. She says this rental market is still extremely strong, still very little availability, record high numbers across a lot of different metrics from the renewal rate. So, people that are already in an existing rental unit choosing to stay put.
We're seeing record levels of rent growt, that many of us are very familiar with. The rising rent, as they look today, have tilted the numbers towards rental. So, she's seeing some of that demand in that multi-family space where builders are offering incentives, concessions, which would be the equivalent on the rental side, not really increasing. But the risk force being job losses.So, what Kimberly believes is this market does outperform in terms of starts, in terms of demand for the for-sale market when the for-sale market goes through an affordability shock. But if we see widespread job losses, that's the only time where that starts to shift. And you actually see rentals follow some of the same paths we've seen in for-sale.
Right now, the highest share of responses we have is that buyers are either having qualification issues (again, related to rates) or, what we're seeing with hesitancy from buyers, you can see that's the number one issue where we have 94% of builders saying this is a true problem that they're feeling on the ground.
And I think you don't blame consumers. When you look at the headlines, all you see here is last cycle bubble, scary, scary, scary. So, it makes sense that hesitancy from buyers is our number one concern, but I also think it's incumbent on us to understand and be able to explain how this market is very different than last cycle. And some of those parallels create a lot of fear, but I don't think they're backed by that much in reality. When you look at consumers, those that have been buying - they have skin in the game, there's down payments, they had great credit scores, debt-to-income ratios have been reasonable. And as we look at these numbers, remember 26% of loans originated last cycle had a credit score under 660. Today, it’s 6%. Last cycle, 24% of borrowers had a credit score of 760+, today it’s 70%.
Doesn't mean there won't be adjustments to the market. We already talked about sales going from 2021 levels to 2019 already feels like an adjustment, but we also have to keep thinking forward with the market. The idea that we do know there's this unrelenting demand for the market, but not just builders: builders, developers, consultants, suppliers, all of us. The industry has shifted from taking orders to actually selling. And I've had a lot of conversations of just how do we work with our sales team and our marketing team to go back to the basics, to do what we had to do in 2019, but we haven't had to do over the past couple of years.
And I think an important question is to think a few steps ahead. Think about one of the first things that I started this presentation with. We’re the ultimate interest rate sense industry. We slow fast. We rebound fast as well, typically. Obviously last cycle kind of breaks that mold. But as we look at this, think through, if we do fall into a recession, what's next? How do you plan for that? We're not in an industry where we're like Target, that has to just plan for the next season. We're planning for multiple seasons. We're looking at land development, community development that takes multiple years.
And as we look at the millennials, this is a group that obviously I spent a lot of time studying. I'm not saying that the first-time buyer pool is as high as it was, because demographics told us 2020 should be an awesome year because of demographics, and we had some of those people already convert to be homeowners. But it goes back to, we have a more varied buyer base today. And from our data, what we see is a record level of people that plan to purchase a home.
And maybe they're sitting on the sidelines right now. Maybe they're waiting for affordability to get better. Maybe they're waiting for inventory to increase. But from our data at Zonda, from our annual millennial survey, we had the highest number of millennials that do not already own that plan to own over the next one to three years.