Walker & Dunlop, Inc. (WD) Earnings Call Transcript & Summary

[Audio Gap] Live walker webcast or it's actually not live or recording it, and we'll play it next week. And welcome to, hopefully, a really good engaging conversation with Sean Dobson on where the markets are, single-family, SFR, multifamily from someone who has, a, timed markets impeccably in the past, has an incredible mind as it relates to both the financing line housing and then actually the building and management of housing. And I would say, finally, Sean, just an incredible perspective as it relates to trading in these markets. I thought a lot about where to start this morning.

You kind of set this up here with. Expectations. It's a little too high.

Yes. No. It's great. I would start here. Fed raised by 25 basis points yesterday other than the fact that the cost of capital just went up. What's your take on that raise and what that does either from a price stability standpoint, if you listen to Fed share wash or a a broader view, as I just said, on CNBC, which is after raising by 0.25 point I didn't see the memo come in from the Iranians that the Strait of Hormuz is now open oil is going to drop by $25 a barrel. Diesel doesn't get cut in half over -- so I'm sort of like what are we trying to accomplish here by using by 25 basis points.

Yes. Well, thank you guys for having me. I'm a big I sold it in. So congratulations on your affiliation with Ivy she's fantastic. As far as interest rates, you might have a little bit to understand our business. We're -- we're an investment manager coinvestor kind of merchant investor and most of our investment programs are 10-, 15-, 20-year program. So the next month and next week to next year is always so hard for anyone to forecast. I don't think we have any special expertise that anyone else doesn't have in terms of the sort termite I think that in terms of the overall economy and what the Fed is trying to do. We think they're late and they've been late for about 7 or 8 years. We think they were very late in taking away the subsidies post the financial crisis by a long time. So they kept rates too low for too long. And then when COVID came around, they kind of had a chance to let things settle back in and didn't and then they over eased and kept them really at a level that is never seen before in terms of interest rates relative to economic activity. And when you do that housing and what we're all talking about today takes the brunt of those mistakes in both monetary policy and fiscal policy. So I think that raising rates today is fighting inflation that was caused a couple of years ago, and we don't need to keep inflating it. I think the bigger that you mentioned, cost of capital, I think the -- what I'd like to say is kind of the yellow blinking check engine light that we're all kind of whistling past every day is that if you take a look at the return on tips, it's way too high. And that just means that Americas cost of capital has gone up about 100 to 150 basis points, which is a lot. So as a nation, our cost of capital is now at a level that's going to hurt growth in the economy and raising the nominal rate is not going to help us.

Right. So you made a lot of money and a lot of good bets around the GFC. Anything you're [indiscernible]

I can keep it still you're working.

Yes, it's all good, Sean. Anything you're seeing today that is a similar setup to the big bet you made on the GFC?

I mean, I tell people that the problem with finding something as big as the mispricing and mortgage credit was when we founded in 2004, 2005 is that you spend the rest of your career looking through another one. And it may have been an accident that we found it in the first place and they may never be another one. I would say that if you simplify the ingredients to what happened in the GFC, the primary cause of home price is getting out of control was Greenspan lowering interest rates into a growing economy. And so this was lowering interest rates because of the dot com bust, which was way more contained than they thought it was going to be, while PCE and consumer spending and the unemployment rate stages fine on a macro basis. So what happens in the United States is when consumers are making generally more money every year in [ novel ] dollars and you crash down long-term interest rates, their buying power for housing goes up quickly, and it goes up way faster than the rest of us can respond to create houses for those buyers who now have incremental more buying power because mortgage rates dropped so fast. Now if mortgage rates are dropping at the same time the economy is shrinking, then you don't get this explosion you get when you lower mortgage rates into an increasing economy. So that's what's happened post COVID is that we dropped interest rates into a growing economy. When the economist -- when it's finally okay to criticize the government for their response to coat the economist, I think will conclude that the monetary spot response was ridiculously too large and the fiscal response was ridiculously too large. And we did them at the same time, which means that the government printed and literally gave away money at the same time that long-term incest rates were held at 2%, 3% for a very long time when those things happen, what happens is the buying power for housing goes way up and the economy tries to react the system tries to react to more supply, it really just drives up prices. So when you have that big of a stimulus or demand, you just drive prices up -- but it sounds like on the GFC, you only had the fiscal side that caused the problem on this 1 you got both the fiscal and the monetary -- why is this not a bigger trend recon on the metric -- the model that told us to short the housing market in 2005. I think that the home prices are more expensive today than they were in 2005, 2006. So relative to -- and your homebuilders talk about the low end is hard to supply a tube. It's not because there aren't a lot of people that make $80,000 a year that would like to buy a nice home. It's because people that make $80,000 a year can't get a mortgage big enough to buy a nice home. So on a pure affordability perspective, you would say that today is the best time ever to short the housing market. The problem is that the problem with that theory and the reason we're not recommending that a matter of fact, we're going to recommend the opposite, is that you have to keep up with the supply demand and you have to keep up with this float of housing versus stock of housing issue. What was unique about the financial crisis wasn't some month at home prices that overrun fair value. What was unique is they were all temporarily financed. So there was a catalyst to a glut of supply. The catalyst was just that the teaser payment was going to expire. The adjustable rate mortgage was going to reset the Remember, we had the pay option mortgage where you didn't even have to pay the interest. So all the tricks to get the monthly payment to be small relative to long balance had temporary features to them. And so you could just forecast when the music was going to stop. Now it took a long time. Like we were short in 2005, 2006, if you said we're going to happen. You don't have that catalyst day. You're going to have a third catalyst of 3 million, 4 million, 5 million new for sale homes in the market. As a matter of fact, you have the opposite. So we kept -- when I talk about the mistakes, and it's easy to say, I've never -- will be fed governor. But what I like to think about is in retrospect, COVID was never going to be a 30-year problem, right? It was never going to be a 10-year property. It's either going to be the Spanish flu in which case 30%, 35% of the population is going to die in a matter of 18 to 24 months or it was going to be what it was, [indiscernible] We took long-term interest rates to 3%. We took mortgage rates to 3% on 30-year fixed rate mortgages. When we did that, not only do we create more buying power per unit of monthly payment that manifests itself into asset price inflation we took those homes off the market for a long time. It's tent, I'd say it's tantamount to burning them down. So we talk about the supply of housing. Are there 4 million underbuilt or 3 million under built -- and yes, they're under built. But the real issue is not so much how many homes there are, it's how many homes are tradeable. Like what's not the stock of number of homes out there, but the float of homes that are fully tradeable and freely tradeable means a couple of things. It means that the mortgage is less than the value, so there's equity. And it means that the cost for the seller to transfer to a new home isn't prohibitively expensive. And so we talk about the lock-in effect, and we've been writing about it for 5 years. And the IV has been right about it for a long time since restates went up. But I think that it's -- you can't almost overstate the impact it has on keeping home prices unsustainably high. So we think housing is in a technical short. How home prices are high for technical reasons, not because of fundamental reasons. The technical price squeezes break because of a catalyst, and we don't think that catalyst is going to happen.

So I want to come back to that in a moment, but I want to dive in for a moment we have that short on back in 6 and 7. What a, you just talked about a number of different data points that got you to put that position on. There wasn't one yellow blinking light that said, that's the one piece to it. But once you put it on, to maintain the conviction to see it out. There had to have been almost daily moments where you said, why do we have this thing on, and this isn't going to actually happen.

People thought we were crazy. We thought we were crazy. There's this crazy bond convention that happens every year in Florida. And it's like a convention that dentists are like I don't know anybody would have in the industry. We're literally different law firms and investment banks set up booths and you walk around, you talk to people, it's a crazy thing you've ever seen. But everyone competes to hand out the best [indiscernible] key change. So in 2005, our little thing that we ended out to people was a hard hat. That's at Amherst on the front. On the back and said beware polyol prices. People we thought we were out of our mines like home prices had been lock limit up really since 1997, 1998. And there was nothing on the horizon. So by the end of 2016, that conference came back around home prices haven't gone down what when you change the [indiscernible] how did you go over next year. But I think that for us to stick with the trade or the 2 things happen. One is it got -- our first trades were terrible. So we got short bonds that were trading $300 over pretty soon we're trading $200. And so we got someone to buy 30%. But I think that what we're really betting on was that this catalyst -- we could see that by 2006, 2007, the consumers in the homes couldn't afford the payment that they already signed up for. So you didn't have to have like some weird thing happening. You just had to have time pass. So really what it when home prices in 2006 underperformed inflation, we tripled everything because the reason we were losing money is because easier credit was supporting higher home prices and the new loan paid off the old dumb loan and so you make a dumber loan and a dumber loan to pay off the previous dumb loan, and it doesn't look like you can make any loan dumb enough they're all geniuses. But when home prices kind of capped out, it meant that there was no cash out refi to pay off the last dumb loan. So that's what it kind of all was over.

It's funny you talk about that new dumb loan to pay off the old dumb loan when they announced the bond buying program going on buying long-dated securities and issuing short-dated securities to do so, reminded me of back in CMBS days when they used to take a B-rated bond and put it with a B-rated bond and miraculously became an A-rated bond and it was sort of like how does this actually work?

Exactly. Exactly. .

So you talked about -- what happens to the stock and like bring it down. One of the reasons you started your single-family rental business was you were looking at the market in 2010, 2011 saying, we've had a kind of a permanent dislocation in the single-family space. There needs to be a new homes for rent. But there's also all this inventory out there that's just sitting there as if it had been burned down, it wasn't being used and wasn't capable of being bought. Talk about that moment and the focus of you and your team, Sean, on how you entered the SFR space.

Well, it was -- it looks better now than it did at the time.

Just one quick side to that. I was with [ Sam Zell ] back in 2011 or 2012, and John Schreiber from Blackstone showed up at this conference that we were both at and Shreiber and the Head of [indiscernible] you're sitting there talking about this single-family rental idea they have. And Sam in typical Sam fashion stands up and goes, that's the stupidest bucking idea I've ever heard. And he looks at everyone in the room and he goes, has anyone in this room ever watched a rental car. And of course, nobody in the room raised their hand and say, you said, that's exactly it. These deals are going to come rent these homes. They're going to drive them into the ground, you're not going to be able to take care of them. The maintenance is going to be a huge cost. That's a terrible idea. And lo and behold John [indiscernible] and Blackstone did pretty well by their plan.

He wasn't totally wrong -- we started out with -- well, how we got into the business was our Amherst customer base are maybe the 300 largest investors in the world. And they -- we work with them on their U.S. residential exposure. And when you're these types of accounts, when you're a sovereign wealth fund or you're a global life company or you're -- what are you take these huge pools of capital there -- they need to move in scale, right? So a 1% position has a lot of zeros. And they need something that's going to last a long time. So these are not pools of capital that are like hedge funds running from this quarter, that quarter. They're very -- they're mostly either not-for-profits or taxpayer money of some kind, and they're invested from 2030 or infinite life cycles. So they mean on us, we lean on them for big things U.S. housing because U.S. housing is the largest private market in the world. It's almost the same scale as the whole S&P of the whole stock market combined, and it's very liquid. So when you get back to housing market crash, you had 7 million homes mortgages in default home prices that a free fall. We looked around. There was a bunch of things to do that were interesting. Now you can buy bonds that have been mispriced. You could -- every mortgage bank was busted. The banks were busted. There was lots of things like junk investment you could do. sorting the BB up with bathwater, but we sat back and said, well, would be something that really shifts our customer base and really is designed around the long term. And what we decided it was Ingenius, right, is a the $2 trillion lost in subprime mortgages was probably going to be a pretty big lesson for lenders, and they were just not going to wade back into giving mortgages to people that had less than pristine credit. And that meant that there was a forever going to be a new customer in the housing market that was going to be renting instead of owning and it was a function of -- and that's happened. There's been almost no subprime origination to speak of in terms of like what it was, say, 2001, 2, 3 before the boom times, it's maybe 1/3 or less of what it was. So that with all of you is that the houses are there, we can probably operate them as commercial real estate the customers are there. And when people look at the rental industry historically, the customer base was sort of the -- it's kind of a 1 minus of the homebuyer customer base. So it was a very hard customer to manage because it was a customer that couldn't give us some prime mortgage. So that was the thesis is that the customer quality was going up, the home price had crashed and the returns were high, and we thought we could operate. And our original strategy was all outsourced operations. We took a lot of lessons from the people that buy default of mortgages and work them out through their vendor network. So the GSEs have big vendor networks, the repair homes and national. And so we have this big idea to go by hundreds of thousands of homes, operate the merits and package them up to investors to the same way that we spent the last 25 years in the mortgage market, providing up a sort of turnkey investment for a large investor that they buy at peer books and everything happens the way of mortage boards.

But you moved into -- I mean, you basically vertically integrated that business. So you went from really being a trading house and hedge fund to being an actual owner and operator of a vertically integrated SFR business.

Yes. Don't remind me.

Come on, like...

We had to -- we had to. So what happened is you could find a lot of pole don't know this. A lot of the mortgage crisis was fraud. A lot of people bits by now lied about their income. There were -- the most common fraud was really in purpose of the mortgage, they would say they're real there, and they actually were SFR operators. So a huge chunk of the mortgages that defaulted in the financial crisis were speculators who own 15, 20 homes. Those speculators had an ecosystem of real estate agents, leasing agents and property managers that would help them manage their portfolio. So we tried to leverage all that. And what you found is just this -- and you see this today, you guys are talking about a family the single-family or residential housing conference, you break out single-family from multifamily. But multi-game ecosystem is the super professional ecosystem, everything from design to build, to manage, to price, and they think long term, how am I going to put the carpet in that doesn't work out of the turns. Well, single family, and I love these -- the guys have from the builders who've done an amazing job given the factor they have. But those same decisions are not made in any part of the single down ecosystem. Their average hold period for all the 6 months, right? Multi-fill developer is developing for yes. So we ran into that in operations, all the thinking were short term. They could spell [indiscernible] they were not compliant with fair housing. There was all kinds of problems at ecosystem. So we just said this isn't scalable. It's not compliant. It's not fair. It doesn't have the reputational protection that we would require. So we built it from the ground up. And that's why the United States is the greatest economy and you planet because you could build it ground up.

And so today, you have 100,000 homes.

50,000 homes.

50,000.

Which is way underperformed our expectations, right? This is -- if you look at the -- there's 4 million or 5 million missing subprime mortgages post GFC, I think that should have been originated. And that's benchmarks to like way pre-GFC credit standards. The people -- there's been 5 million families that have been told no to buying a home that we think should have been told, yes. Those 5 million families are out there in rentals and we only have 50,000 [indiscernible] The industry has had a very difficult time growing. Why? Cost of capital in the beginning. This asset was priced by investors as if it was way riskier than it really is. It took a long time to get market acceptance over price. Then we just had a series of sort of calamities here. I mean COVID is a big issue. It took a hurt the industry dramatically. And now you have -- and a lot of the pushback from growth was this narrative, this narrative that is a bad thing. Private equity is a bad thing and private equity and housing is a bad thing. And that really limited the industrial base -- this investor base started out. Was sort of adventurous speculator types who would put a very small allocation to see if you could operate the thing. And it took us 5 or 6 or 7 years to answer the question is does the business or is this a trade? Can you operate it? And now you guys are going to hear from Jessica Torch runs our operator. We run as tight a ship as your best multifamily operators so you can't operate. So in that 5 years, growth was slow because the cost of capital is really, really high. As the cost of capital can down, you could expand a little bit more, but then we ran into the interest rate spike and the rate the COVID ran into this interest rate spot. So those 2 things been heavy headwinds against the industry, getting to where it will be eventually, which is part of the housing ecosystem, a solution between the 2-bedroom apartment and the 3-bedroom home you own and it will lay next in the portfolio at next to securitize the structured products and scale. But it's hard to start a new industry.

I walked in to meet with some treasury officials yesterday. And as I was walking into the conference room, they said, do you want to talk about the road, the Housing Act and I said, we can talk about that, but I'm like not here to actually like talk about that specifically and they were like late because if you are, we've got to like bring in a whole another team of people. And so as we were going through the meeting, I sat there and said, so what's your take? I'm asking them the question -- what's your take as it relates to the qualified institution as it relates to the sale and purchase of SFR communities. And I said to them, my friend, Dallas Tanner, who runs Invitation Homes, says it's all up to the rule-making and literally, all 3 people I was meaning we're smiling go. Did he pay you to say that I said no, you didn't made me to say that. But what's your take on the Road housing Act and what either headwinds that presents for you all as it relates to growing the portfolio or the value of your existing portfolio given the potential constraints from a rule-making standpoint.

It's interesting. So this has been the last 6 months of my life has been part-time lobbyist.

I think everyone in your industry has become a part-time lobbyist.

Yes, we've all been and we're all very fatigued from the whole mess.

Do you think that -- I mean, at the end of the day, the Senate Bill was a train wreck the house bill worked out the [indiscernible] Senate Bill, obviously, it's going to come down the role making, but are you okay with the legislation...

I think everyone, including French Hill and other senior grown-ups in D.C., and there are some growing up left in D.C. realized that a bunch of people were about to lose housing. They're about to lose our opportunity for housing. And [indiscernible] you'll really save the day. Obviously, if you had to put an 1 person said was [indiscernible] never met [indiscernible] I know I'm quite well. These exceptional leader of The House Financial Services Committee. Like the guys that I know there is vintage and his demeanor [indiscernible] from D.C. So it's kind of -- it's upsetting. But anyway, I think it landed in a fine place. It's -- given a choice of road, I'd rather have no road Act, given the choice of the thing that the Senate was trying -- that the original bill was ridiculous. This one has meaningful exceptions that allow us to serve those 5 million families that the mortgage market won't serve. That's just $5 million since the GFC. We can still buy or renovate -- obviously, you can build do BTR, which we have some of that business, you can renovate at home. It just means that you have to make sure that you're really eliminating homes, you're not just competing on MLS for the ready-to-go home the consumers love when I can buy. There's exceptions for all that are operated with real path to ownership programs in place, which we're implementing -- so I think it's fine. I think if there's a silver lining around it, it's that it does create a standard that didn't exist before. So the industry has something to point to that says the government has looked at this, they determined what they liked and didn't like and they've given us a way that they approved us to do business before we were kind of operating in kind of a vacuum. So I think that's the best spend component. The exceptions are well written and well structured. And yes, the rulemaking will clarify some vague portions of the exceptions, but it can't change them. So the way the law is structured, if you own an existing pool of homes, you're carved in as a permanent exception and those hold your card in as an exception. So there's an argument that the existing SFR portfolios are kind of a bit coin a little flavor to them because it's really hard to create a scale portfolio.

So it's a little bit of regulatory capture.

Maybe. We'll see. But because the exceptions are some of the exceptions are going to allow you to grow. I honestly don't think kind of wrong thing is we weren't buying homes anyway because post co-end home prices got so high return expectations kind of got below our targets. So they banned us or doing something that normally do anyway. But the exceptions may be broad enough that it's not regulatory capture that you can still grow.

And so as it relates to that, how big a portfolio -- I mean is there anything here that is super beneficial to you as it relates to gaining scale I mean in other words, given that you've got that exception, you and others

Yes. Well, this exception we're talking about carbs in the homes that you own pre the law path right? So that's just about 550,000 doors that will carry this sort of unique identifier. But there are other ways to get homes to add to that pool. They're pretty -- they're not super hard, and they're pretty consistent with how we did business anyway. So I think that when investors go to look at their risk tolerance to regulatory risk dollars, they're going to say, some of the investors are going to say, I read that exception, but if I read it wrong, it's a $1 million fine every time I read it wrong. I don't want to rely on that exception, the 1 about existing inventory is easy. So there's almost no risk to that exception. So some investors will put a big premium on that, but it's hard to say how much.

So you started building this portfolio back in and -- we're now in; 26. So it's been 15 years. During that period of time, given trading on the single-family side, opportunities in the multifamily side, you decided to stay in the SFR space why no additional debts on the single-family side or on the multifamily side?

Weve had a decent business on the credit side for a while. We wound down a bunch of those positions. The single-family thing, it is a belief, and we could be wrong, but it's a belief that this is a new sector that will be larger than almost all of commercials they can buy. A single-family guys kind of look at the CRE space as quite right? So when I sold my investment bank to Banco Santander. And we're just a little investment bank you never heard of, and we were buying and selling about $50 billion a month worth of real estate debt. So the resi space is there's $9 trillion of UPB outstanding in first mortgages, it's I think it's $55 trillion in market cap for single-family homes. So like we think that having the ecosystem that allows a large investor to responsibly deploy capital in scale into an asset class that big is a remarkable thing to have. And there's really only 4 or 5 of these things that exist in terms of acquisition development, property management financing. -- portfolio optimization. So we made the bet that single-family homes will be more rented in the future than they were in the past. And we built the entire ecosystem that the multifamily housing sector has across multiple umbrellas. And when I say this sector, I mean, think about everything from someone that develops land, right, to a securitization issuer to a fund manager, right? That whole ecosystem we have for a single family, we have all of that. So we're buying raw and turning it into build to rent. On one side, we're out doing the glamorous things of fixing air conditioners and talents all in and handling our own -- we internalize 65% or 70% of the service calls on our portfolio on that end. On the other hand, we issue our own securitization, we generate our own funds, run our own funds, and we're launching a new big vehicle that will be even more flexible larger. So it's kind of cool to think that you're at the beginning of something that in 10 or 15 years will just be out. There's the office space there's a multi-family space, but then there's this giant sector out here that really represents a core inflation protective position that's very -- that's -- I'm -- I'm not saying it clearly, but the U.S. consumer, their largest expense is housing, as you know, the largest chunk of that is in single family. So it's not like partly any other thing in the economy.

So double click on a moment there about your inflation protected investment -- we're -- I was with somebody yesterday. Who's trying to raise a fund a multifamily fund, and they're taking off for a trip to Asia next week. And they said, it was hard enough to try and get investment to U.S. commercial real estate before we add rates go to where they are. And now that we've got rates where they are super difficult for us to go raise capital to come in and invest in a $1.5 billion multifamily investment fund. But you just hit on a point that I think is super important from an overall return standpoint.

Yes, if real estate gets hard to sell to traditional real estate investors when the cap rate gets below the financing cost. It's like that investor base is the people say they want their cake needed to, right? So they want to have a high ROE, assuming no revenue growth and then they want the revenue growth. So it's good work if you can get it -- but most of the time, when that cap rate is that far above your financing costs. The fair bet is that your revenue is going down, not up in the future, right? So today, when you have cap rates thus far below or equal to or this far below financing cost, you have to wonder is it a fair bet that your revenue growth is going to make up for that deficit and we believe it's kind of a very easy bet on the rental side that the revenue growth will well outpace inflation from here. And it's a lot of the dynamics we just talked about. There's -- rental growth has been not great, but steady for the last 3 years. During a point in time when all the build drink stuff came on the market, all the multifamily stuff hit the market. You have all this migration going on. And now that whole supply glut is drying up, and it's going to really drive up now that be sold fuel is $6 a gallon and interest rates are this high. So the demand for rental will be high. But on our -- remember, these programs are maybe 10, 15 years or 20 years, if you study the revenue side of residential real estate for the last 50, 60 years, we did the study is kind of fun. We're like, what other things can you buy instead of housing that produces the same risk-adjusted revenue? And the only sectors in the SV5 that come close are tobacco, alcohol and cafe. They're the only people that have the pricing power. So Coca-Cola tobacco companies, the beer companies and of course, the alcohol guys are in trouble now. But over time, recession growth and -- if you go look at those revenue streams, you look at housing revenue streams, they're very, very similar in terms of durability and ability to reprice when inflation goes up. The difference is that our housing portfolio is multifamily and single-family, you run at 66% margins. Those other companies run on 15%, 20%, 30% margins, which means that as you have inflation, their revenue inflates but so do their expenses. For us, our expenses go up, but they're such a small share of our revenue that you can really turbocharge the inflation in the investment itself. So good news is that the lower going-in yields are not really an issue because they compare very favorably to other things that are as inflation protected. The kind of the bad news for single family is that it's not risky enough. So when it lies in the private equity allocation of a pension fund that is late over there to 15% or something. Housing has the price risk of like a 5-year treasury. So it's really like a 5-year tip is really why you think about. I mean, home prices moved 4% or 5%, it makes the news, right? So you can't have an asset with a 5% price ball and a 15% return. I mean that would be amazing, but it's not that case. We think -- we think you can easily underwrite single-pay rental to be inflation plus 6 year in, year out over decades. The house we build is more durable than the house that the homebuilders build the house that we renovate is renovated to look more like multifamily than single family. We run it like multifamily. And we think that , over time, people will start to figure out that there's almost no reason to own a bond if you can own a big diversified portfolio of residents real estate at going in yields that are anywhere close to where bonds are yielding because one, you get the yield plus inflation, one, you get the yield minus inflation. And the long term that is that our government is not going to become less oriented to create inflation.

So you just said we can -- it's not risky enough. You can make it riskier.

So you can leverage it. But it's like that's all just going to be like time functions you can make it riskier for a 4- or 5-year function. So you can. And I don't think that's a problem the industry is going to have actually is that our securitization terms are 5 years and they should be 15 years. So there's a bunch of this debt that's going to roll and people are going to have to figure out how to how to deal with that with the much higher interest rates.

Does that maturity wall concern you, Sean?

I mean I think everyone's looking at it. I doubt many people. We're pretty hedged against -- but yes, I mean, the debt markets have been incredible. We issued a securitization right before the rockets before became law and after it was published at our tightest nominal spreads that we issued to date at our highest advance rate -- so the debt markets have been just incredible. They're incredibly flexible on allowing us to issue securities at a discount when the pay rate needs to come down, so effectively prepay the interest. So I'm not too worried about it. I would way prefer longer-term mortgages because it's such a low vol long-dated asset.

And as it relates to spreads, given the pending wall of maturities, and that much paper coming on the market, you've got to expect that spreads you're going to gap out?

I don't know. It's like spreads...

I thought you were going to say yes definitively there. So no, I mean that. So why?

No. Well, if you look at the issuance of fixed income, like where the money -- where the issuers are coming from. And if you run a big book, right, there's only so much data center exposure you can take. There's only so much U.S. auto exposure you can take. Remember, those 5 million families that were told not to buy a home, that's 5 million mortgages that investors didn't get to invest in. So there's an enormous hole out there in the debt capital markets for this asset class that is under allocated to. So I don't think this particular asset class looks particularly tight or relative value basis. I think if anything, high-grade fixed income is a little bit wide relative to inflation. That's the biggest issue. Like I'm just saying is that treasury yields are sort of inflation plus 2.5%. That used to be inflation plus warn during COVID, there were inflation minus 1. So like that 100 to 150 basis points of tax that every bond as in it is the problem. I think that like overall spreads don't look like crazy tight, given how strong the economy is. Now $6 a gallon diesel fuel, et have the Fed raising rates fighting inflation from 2 years ago, they can mess this up. And the U.S. economy is very fragile. So it can be best of the key number that we -- there's a bunch of numbers look at. So we watch our rent collections every month like crazy. It's like unemployment Friday every first of the month to see how our customers are behaving. And knocking on wood. They've proven incredibly resilient -- our intent ratios are in the low 20s. And our velocity in rents is -- our velocity of homes is -- Jessica's team puts 2,000 or 3,000 homes up to rent every month and they rent 40% of them in the first 30 days, 50% way different than [indiscernible] So we don't think the underlying economy deserves a higher credit spread is the short answer. The quantum of capital that's being borrowed may move nominal rates in the direction you don't want them but the credit risk in the U.S. economy is not that great.

But with that as the backdrop, Sean, then we've got plenty of debt capital. We've got a 5 million previous subprime homeowners who need to live in a single-family rental. All the backdrop sounds like that's perfect. Why not go another -- go buy another 50,000 homes. And if the capital was out there for, I mean, in other words, if this is low leverage.