Conor Sen on the Fed’s 25-year blind spot: housing

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Conor Sen, founder and CEO of Peachtree Creek Investments and former Opinion Columnist for Bloomberg, about how the Federal Reserve should give more weight to signals from the housing market.  Related to this episode:  The Fed’s 25-Year Housing Blind Spot https://conorsen.substack.com/p/the-feds-25-year-housing-blind-spot  HousingWire | YouTube⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q  HousingWire Mortgage Banking Summit – October 1 https://events.housingwire.com/mortgage-banking-summit-2026?utm_source=housingwire&utm_medium=website&utm_campaign=hwd_podcast_0727  More info about HousingWire https://lnk.bio/housingwire  Want more from Sarah? Don’t forget to subscribe!  The HousingWire Daily podcast brings the full picture of the most compelling stories in the housing market reported across HousingWire. Each morning, listen to editor in chief Sarah Wheeler talk to leading industry voices and get a deeper look behind the scenes of the top mortgage and real estate.

Transcript

00:10Welcome, everyone. My guest today is Connor Sen, founder and CEO of Peachtree Creek Investments

00:16and former opinion columnist for Bloomberg, who has just launched his own substack, The Housing

00:21Frame. He's also a city council member in Brookhaven, Georgia, which I'm definitely going

00:26to ask about. But the main part of our conversation will be his contention that the Federal Reserve

00:30should pay more attention to housing. Connor, welcome to the podcast.

00:35Sarah, thanks for having me.

00:36Thank you for being on. Of course, followed you for years of really interesting takes. And,

00:41you know, we're in an interesting time at the Fed. So the first question I have for you is,

00:47what's your opinion of the Fed chair? What's your impression of him?

00:51I think the verdict remains to be seen. We certainly know something about his goals,

00:55where he wants to talk less and have the data and markets sort of do their own thing without

01:01relying on the Fed's handholding, although we're seeing that that's easier said than done. And

01:07Treasury Secretary Scott Besson is maybe trying to influence longer term interest rates and other

01:11members of the Fed continue to talk. So I'm not sure that that's going to work as well as he

01:16hopes,

01:16but that's certainly his intention. And then he's also talked about having these five task forces to

01:20look at everything from the data the Fed uses, to how it communicates, to what AI means for the

01:26economy. So he's really looking to reform the Fed after, say, 15 years of a sort of post-crisis

01:33regime, which meant largely more communication and more forecasting.

01:38So you wrote something recently about sort of the blind spot at the Fed over those years,

01:43and would love to kind of dig in on that, because you say, you know, they were too late on

01:48the economic

01:48weakness in 2008, and then too slow to respond to the inflation that came out of COVID-19.

01:55What did they miss?

01:57I think it's generally just not taking housing market signals seriously enough. And this isn't

02:02about any one Fed chair or being structurally too hawkish or too dovish, because this was two different

02:07Feds making mistakes in opposite directions. And both times, it was just not focusing enough on what was

02:12going on in housing. And in 07, 08, until basically the end of 2007, you still had pretty decent

02:19consumption growth, and job growth, and real income growth, and commodities were booming because of

02:24the brick sort of story at the time with Brazil, Russia, China, and India. And they just thought,

02:31well, housing's contained, subprime's contained. That thing is happening, but it's not the main focus.

02:36And then in 2021, there was still a lot of focus on just the pandemic and the disruptions that was

02:41causing, and ignoring the fact that rents and home prices were surging everywhere, and the way that the

02:47Fed measures shelter inflation lags a lot. And I think both times, the Fed, I don't know if they would

02:53regret not taking housing more seriously, but the ultimate impact is that policy didn't really meet

02:58their objectives, because housing was just doing something that they weren't taking into account

03:03enough. So one of the points that you make in your article on this, which I thought was really

03:09interesting, is that it's the geographical factor of the Fed, right? Because especially when it came

03:15to the pandemic, what happened during the pandemic afterwards? So I'm in Texas. So I had kids in New

03:21York and California. And I can tell you that New York and California and Texas, those are three very

03:26different responses. And the economies responded differently. And it felt totally differently,

03:32especially if you, once we got into 2021, right? Where some things were still very locked down

03:37where they were, and were not locked down at all. I mean, at all where I was. And I think

03:41that that

03:42meant that the housing market was responding really different people were. What do you think about

03:47that? I think it's a big part of it. And I remember in 2020, when sort of most people, regardless

03:53of your

03:53station in life, were just trying to be cautious until vaccines. And you'd be on Twitter and online and just

03:58seeing different people focused on different things. And here in Atlanta, we have a lot of

04:03space. People were out walking on the streets and being careful, but still living life. And then you'd

04:09hear stories about people in New York City where they're just hearing sirens outside their apartment

04:12all the time from ambulances and people with COVID being taken to the hospital. And I can imagine how

04:17traumatic that must have been and how you'd be so focused on the virus. But pretty quickly,

04:22starting in the summer of 2020, and certainly after vaccines here in Brookhaven, which again,

04:27is a pretty affluent, well-educated community that were taking public health seriously, but also

04:32trying to find a middle ground. People were kind of back to, I don't know about normal, but

04:37definitely living their lives and doing things. And yet the Fed in the summer of 21 was still having

04:42their meetings on Zoom. And that's probably the culture of Washington, DC. And I think in that moment

04:46of time, being in DC probably led the Fed to do suboptimal policy just because they were going to

04:52a very different place than much of the country.

04:54I think this just points to what we always talk about, obviously, the very obvious thing that the

04:59housing market is so local. And I mean, even when we do these national numbers about like home prices

05:04or whatever's happening can be so different, even the Northeast, Florida, Texas, California,

05:13and then the Midwest, it's like, these are all very different things. So it's difficult to talk

05:18about the housing market. But I do think, you know, I mean, that's why we have a diversified Fed,

05:22right? We have a Dallas Fed and Atlanta Fed. So what was the disconnect there?

05:27Well, I think people come from different parts of the country, but the structure of the Fed is still

05:32very DC centric, where you have the chairs in DC, the governors are all based in DC. There are 12

05:37regional presidents, but only really Dallas and Atlanta are sort of based in housing country. As I think

05:43about it, you could say maybe Richmond, but Richmond incorporates DC. So maybe it's dragged to DC to

05:47some extent, and only four of the regional presidents vote at any given time. So you really

05:52only have one vote at most coming from sort of a housing based member of the part of the Fed.

05:58And I

05:59just think they focus on other things. They focus on banks and credit and policy and financial markets

06:05and even energy and commodities. And housing is something they look at, but they just don't really

06:09incorporate it very much in how they forecast the economy. So let's talk about that outside of even

06:14those two, you know, big examples of where they missed it. I mean, in 2022, in 2023, being in, you

06:22know, covering mortgage, it's like, you know, we got killed in 2020, you know, in the second part of

06:282022, 23. I mean, housing was in a recession, huge, huge problems. And they were all like, oh, housing's

06:35fine. It's like, well, I'm not sure how you think housing is fine. No one within the industry would

06:39think housing's fine. Right. And certainly they were seeing, well, we have inflation to

06:44deal with. And I totally respect that. But certainly transactions were very low and mortgage

06:51issuance really fell off a cliff. And I think that was a reason to maybe not be quite as

06:58concerned about inflation than some members of the Fed were, because certainly you and Texas

07:02or me and Atlanta, we saw what was happening in housing. And you felt like, well, if residential

07:06construction is going to fall off and home prices and rents are slowing down or going negative in

07:11some parts, that really limits the kind of stagflation or boomflation scenario if the housing

07:17economy has been turned off effectively. And I think we've seen rents and home prices flow through

07:22into their lagging measures of shelter inflation. Those are really cooled off. And I think that was

07:26forecastable by 2023 or certainly 2024. And obviously, the AI boom has introduced a new factor. But

07:32I do think the cooling off of housing should have given the Fed a little more confidence that things

07:38wouldn't get out of control, even if we didn't get all the way back to 2% inflation.

07:41So their dual mandate about employment and inflation, it really leaves out housing. So

07:46where do you think? You had two proposals that you're like, here's two reforms we could do that

07:50really balance the scale more so that housing, which is a huge part of the economy, but also people's

07:57lives and livelihoods would be more part of the equation. So what do you recommend?

08:01So the first one is that the Fed's measure of shelter inflation is largely this thing called

08:06owner's equivalent rent, which takes into account that in the rental market, only if people are

08:12getting one year leases, only one twelfth of people are signing a new lease every month. So that

08:17accurately captures the housing payments that Americans are making. But if you're trying to

08:22forecast inflation and set policy around that, you really care more about market prices, because

08:26ultimately everyone's going to have their rent restruck at market prices, it's just going to

08:31take a year rather than a month. So really more focused on sort of spot prices rather than these

08:36contracted prices for shelter. I think that would lead to sort of more finely tuned forecasting.

08:40And then for sort of looking at a dashboard of housing metrics, things like residential construction

08:49and housing employment, mortgage credit, these things that in normal environments, they're just

08:54fine, not a big deal. But if they're really signaling something in one direction or the other,

08:58that's something we should take seriously just because every recession tends to coincide with a

09:02downturn in residential investment and construction jobs and things like that. So if that's all saying

09:07recession, even if the rest of the economy looks OK, that's something we should take seriously,

09:11which is what we learned from 07 and 08. So from your perspective, I mean, they just need to sort

09:16of rebalance this when you think about like, especially when you think about the inflation,

09:20right? And you're talking about rent inflation, then you're thinking about employment. Well, you can

09:23see those residential construction workers lose their job before every recession. So these already tie

09:29into what they're looking at. Right. And I think right now in particular is a really challenging time

09:35for the Fed, because I feel like here in Atlanta, the housing market, to the extent that it was

09:39contracting, it's sort of stabilizing. It's not great, but it's probably not going to get much

09:43worse. Certainly in Texas, it seems that way outside of San Antonio, that the worst is behind us.

09:48And yet we still have inflation that's too high. And I feel like in the Sun Belt, I think over

09:53the

09:53next couple of years, things will get somewhat better. Will it be a very slow recovery or a more

09:57robust one? That remains to be seen. But if you already have inflation too high, when housing has really

10:03been shut off in the Sun Belt for many years, to me, it makes me think that the risk is

10:08more

10:08inflation over the next couple of years, as things do come back, as multifamily construction starts up

10:14again, as the Austin market goes from bust into expansion. And that's something that I think you

10:19can, at least when you're looking at the risks, see more right tail risks, so to speak, in housing

10:24than left tail risk at this point. You talked about how Kevin Warsh has come in with a different

10:31mission. We know that, right? Over the last, since 2025, it has been fascinating to see, you know,

10:37the tug of war and also, you know, getting Powell out and all the things there. When you look at

10:44the

10:45Fed, do you feel like this is an organization that is, is it harder or easier to say with him

10:50there,

10:50like, this is the way it's going? Because what it feels like is, for the first time, we have

10:54a Fed chair who's pretty, you know, maybe on the other side of most of the Fed governors.

11:01How do you then, as a Fed watcher, go, okay, this is what we should expect?

11:06Well, we know he's talking less, so there's sort of less handholding, which creates more uncertainty.

11:11And then I think there are two paths forward, and we're not really sure which one we're going to get.

11:15One is that he's sort of going to try to be dovish, because the president who appointed him

11:21wants interest rate cuts. He's trying to navigate that politically. And then the other is that the

11:26other members of the Fed, because it is a voting body, and it's not like the chair gets the only

11:31vote, they continue to talk, they seem to remain more hawkish, and everybody else overrules the

11:36chair. And that would be something we really haven't seen in certainly my lifetime. And to have a sort of

11:42weak chair Fed, where everybody else is setting policy and giving speeches while the chair stays

11:46quiet and sits back, that seems hard to believe is a structural thing that could last for a while.

11:52But certainly in the first year or so, I think that's something we're trying to test out of,

11:57can the chair really pull back in communications as much as he wants? And who's really in charge

12:01here? And I just don't think we know quite yet, because it's only been two meetings. We do get this

12:05Jackson Hole speech. And I think that'll start to point the way forward in terms of what we're going to

12:09get.

12:10You know, we joked, Logan and I joked on this podcast in the beginning of the year, it's like,

12:15if you're Kevin Marsh, you're like, please do not make me Fed chair right now. Like, especially with

12:20the conflict, like, it's, we have competing priorities in this, even in this administration,

12:26where Trump has been really clear, he wants to bring down gas prices, for instance, and mortgage rates.

12:30But the conflict is, you know, making that really difficult. And so you think the Fed chair job

12:36this year may be harder than some other years? Right. And I think the data is sort of giving

12:42mixed signals right now. Because if you just focus on the sort of spot data, the data we're

12:47getting right now, inflation remains too high, although the past couple months have been a

12:50little more reassuring. We just got a soft month of job growth. And yet you still have this AI boom

12:56and other things going on. So I think that Warsh is trying to get through the midterms end of the

13:02year. I again, I don't, I tend to try to still believe in the institution, even if it's maybe a

13:08little more shaky than it was a couple years ago, that it's really not that politically motivated.

13:13I certainly believe everybody else, the Fed is remains very professional. And maybe they're just

13:18trying to figure out what the different signals in the economy are saying. And then by the end of the

13:22year, we'll sort of know, okay, inflation really, it does remain too high and growth is resilient.

13:26We need to hike interest rates or inflation continues to cool. We can wait for a while.

13:31Maybe by the end of the year, we'll know that. But right now it just seems we are in the

13:34middle of

13:34a sort of Fed transition. And also the data is giving mixed signals. So I understand why

13:39there's a lot of uncertainty right now. A lot of uncertainty. And let's just talk about the Fed

13:43members. Even last year, I think one of the most shocking things to me was when we had really low

13:49job growth. And that seemed to be completely fine, right? Like that, that was a big shift.

13:53And we see that continuing this year. What do you think that magic number is that gets them to move?

14:00I think they're waiting for some sort of smoking gun that we haven't gotten yet. And

14:04the unemployment rate has fallen this year. So to me, the labor market risks have diminished,

14:09even though job growth does remain fairly low. Although a lot of that, like the private sector job

14:14growth has picked up and there's been weakness in government and healthcare employment, which is

14:18not as cyclical. So I think the sort of private sector employment trend is more robust than it was.

14:23And I also look at housing where, yes, residential construction has been weak for four years,

14:28but it also seems like we could be around a bottom. And again, it doesn't mean it's going to pick

14:32up

14:32very quickly, but home builder margins are stabilizing. Apartment rent operators are saying

14:37occupancy is up. Austin is showing a lot of sort of second derivative of momentum of prices are still

14:43a little weak and rents are still a little weak, but certainly not as weak as they were. And they're

14:48hopeful that 2027 is finally the turn that we've been looking for. So I think if the housing data were

14:53to sort of shift from mildly negative to more positive, that could sort of turn the tides in what people

14:58think about the economy going forward. I think for people in the housing industry, you have to just be

15:03thankful. I mean, of course, we'd love to see it go higher, but thankful that given all of the craziness

15:08of this year, I mean, it's been pretty steady. There hasn't been like any giant moves one way or

15:13the other rates haven't gone above 7%. And as a result, we have, you know, like, yeah, we're in

15:19the same range as we've been in, say, last year. So not anything booming, but we're also not seeing

15:25any kind of crash. I feel like the main reasons for optimism, if you're in the housing industry right

15:30now, is you look at certainly San Francisco, and you can say, we finally have markets that are

15:35breaking out and not just stagnating the way that they were the past few years. And I do think that

15:39strength will broaden out, whether it's to just the East Bay, or maybe to sort of migration markets

15:44like Austin remains to be seen. But sort of San Francisco is strong, the high end of the market

15:49is growing again. And the weakness that we have is really sort of more entry level people who need

15:53mortgages, who are concerned about affordability. So we do have that bifurcation still. And then again,

15:58on the apartment side, occupancy in these Sunbelt markets that have been absorbing all the supply

16:03is finally picking up. You're seeing operators saying we finally see the light at the end of

16:07the tunnel. So I do think there's reason to believe that three or six months from now, we're really in

16:12expansion again, even if it's a pretty modest expansion, just more signs that it's not just

16:16stuck and more of the same. What's your prediction for a Fed rate hike in September?

16:23I'm going to say we don't get one just because there's nothing that's super clear cut. And if they

16:27didn't go the last two meetings, it's hard to know what would get them to go three weeks from now.

16:32But I do think the next move is going to be a hike, just a question of, is it toward

16:36the end

16:36of this year? Or do we get a series of hikes in 2027? Again, just because AI spending seems to

16:41remain robust. And I think in housing, the next 12 months look better than the past 12. And so

16:45strong AI, somewhat better housing to me would imply hikes.

16:49So I read AI news constantly, right? We just had our AI summit. Our whole industry is in the midst

16:57of

16:58of really adopting AI and putting in the workflows and seeing all these things. We see layoffs as a

17:03result, we see efficiencies as a result. But I cannot figure out and I don't think I'm alone in

17:08this is like, is there a boom bust cycle to this? Like, so, you know, today, just today, we had

17:15Microsoft founder Bill Gates, right? He was like, he was really worried. He was like, hey, this is a

17:20this is a signal, we should all be worried about it. We, you know, different people are talking

17:25about like, the AI companies, we're going to see a correction there. What does that mean for

17:30everyone downstream? What do you think about like, AI has been definitely one of the wild cards this

17:35year. And it's hard to know what to think about that for the rest of the year.

17:40I think coming into the year and earlier in this year, there was fear that these quad code type

17:45tools could just rapidly displace knowledge workers, and maybe do it in a fairly capital

17:50efficient manner of, we can just use a little compute and all of a sudden lay off millions

17:54of people and that would be terrible. And now it seems like the whole AI industry is really supply

17:59constrained and sort of every which way from chips to memory, data centers, electricity. And there's

18:05just this wall of demand that I think will keep the spending going for a while. And at the same

18:10time,

18:10the sort of white collar hiring has not gotten worse, maybe gotten somewhat better year to date.

18:15So if you're worried about that doom job scenario, that seems a ways off in the future.

18:20And these tools keep getting better and better. We keep spending more and more on them. And yet,

18:24we're not really seeing those layoffs. So again, I think who knows where this all goes two, three,

18:30five years from now. But over the next nine to 12 months, anyway, I think if you're a knowledge

18:35worker, you should rest easy that AI is not going to take your job.

18:38Well, that's good news. Yeah, I feel like it bounces back between like, they're about to annihilate us,

18:43and it's going to make our lives much better. And it just depends on what you read and what

18:48their maybe their biases. And it's hard because even the leaders of tech companies like Bill Gates,

18:53like, you know, Dalio, like, like all these different people have have a different take.

18:57Well, yeah, OpenAI CEO Sam Altman just said, I think it was this week that just the real economy

19:03moves a lot slower than he thought a couple years ago. And this whole transition will take longer

19:08than previously thought, which I think is good news for everybody. But it also does raise

19:13questions for these companies of do these things? Does this transition need to happen a lot faster

19:17to make the valuations make sense? And that's a question for OpenAI investors. But I think for

19:22the broader economy and for workers, that's a good sign that this won't be a rapid 12 to 18 month

19:27thing

19:27where we all have to figure out what we're going to do that this is going to take quite a

19:30while.

19:31Yeah, I agree with you. Like it could be good for to give us all an opportunity to understand what

19:36the what the guardrail should be and how it's going to affect people good and bad. I mean,

19:40like I said, I feel like there's so much good happening in our industry with people who are

19:45adopting AI. So we will see. Well, before I let you go, I definitely wanted to ask about you being

19:52on your local government having a seat there. So a couple cycles ago, I did an article about who is

19:59coming into Congress in the midterms, and looking at the overall makeup of the Congress and like how

20:05many housing focused people are in there, right? Because these are people who are doing tons of

20:09decision making policy making about housing, how many of those people could we classify

20:14as being in housing? It's difficult because like, okay, there's real estate, there's obvious ones.

20:19And then there's like financial services, which a lot of people in Congress are, is that housing?

20:23Is it not? At that very local level? How do you think being somebody who who looks at housing,

20:29a housing analyst, how does that impact what you do locally? Well, my district is really small,

20:35and it's a part time job. So it's my district is 15,000 people, part time city council, we meet

20:40once or twice a month. So it was something that I could still do while keeping my full time job.

20:45And

20:45we're in a pretty interesting part of metro Atlanta, because we have sort of an older housing stock

20:50that's rapidly being turned over into newer, pretty higher end homes. And on the southern side of the

20:56city, there's this immigrant corridor, with a lot of Asian and Hispanic immigrants and older,

21:01both multifamily and commercial buildings. And so there's belief that at some point,

21:07that will be up for redevelopment. And so one of the reasons I said yes, was just want to be

21:11a part

21:12of that and hopefully doing something positive for the city, making sure that we can sort of improve

21:18the quality of the built environment down there while also protecting residents and trying to manage

21:23that balance. And I'm hopeful that my housing experience can lead to some interesting possibilities.

21:28Although, again, being very new to government, it'll be a learning process. So I'm excited to see

21:32how it goes. I'm excited, too. We're going to watch that for you, because I would encourage anyone

21:37here listening, like if you are in housing, if you have a stake in this, this is where so many

21:41of the

21:41decisions get made. We know that like you say, oh, this is small district. Yeah, well, that small

21:46district, what you just described, that's that's huge. So kudos to you for for taking the time.

21:50It's not like anyone's gonna, you know, make a lot of money being serving part time on their city

21:55council, but I can see some good things coming out of it. Yeah, we'll have to I'll have to let

22:01you

22:01know in a few years that my term is through the end of 2029. So I've got plenty of time

22:05to figure it

22:05out. Okay, we will check back with you, Connor. It's been a great conversation. Thanks for being on.

22:11Thanks for having me, Sarah.

22:20Thanks for having me, Caroline.

22:21Thank you for having me, David.

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