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Speaker 1: Now for more insight on the whole building sector overall,

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Speaker 1: let's bring in Jim Tobin. He is President and CEO

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Speaker 1: of the National Association of Homebuilders. Jim good to speak

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Speaker 1: with you. How representative of the home building sector is told,

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Speaker 1: would you say, well, I think.

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Speaker 2: Toll Brothers is a small portion of the of the

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Speaker 2: home building industry. Obviously they're in the high production portion

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Speaker 2: of the industry.

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Speaker 3: I know the members that NHP represents.

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Speaker 2: They build about eighty percent of the homes in America,

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Speaker 2: build probably fewer than twenty five homes a year on average,

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Speaker 2: and employee less than ten people. So really small businesses

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Speaker 2: that build the bulk of homes across the country.

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Speaker 4: Well, get to the brass tacks here. I think everyone

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Speaker 4: wants to know when we sort of get or if

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Speaker 4: we ever get there for that matter, to some sort

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Speaker 4: of I guess balance the idea that we know that's

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Speaker 4: such a huge shortage, and we know that the home

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Speaker 4: builders are doing whatever they feel they can do, at

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Speaker 4: least in a way that's profitable to them. But do

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Speaker 4: you think that we're any closer to achieving a little

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Speaker 4: bit more balance in terms of supply and demand?

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Speaker 2: I do, actually, well, I feel more comfortable that we're

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Speaker 2: going to start to meet that demand next year. Obviously,

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Speaker 2: coming off a very slow year where we saw our

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Speaker 2: forward looking housing market index really start to crash over

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Speaker 2: the last six months, I expect twenty twenty four to

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Speaker 2: be a much better year for US. I think we

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Speaker 2: are looking at small gains in home construction.

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Speaker 3: A year over year.

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Speaker 2: I expect interest rates, at least from the FED to

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Speaker 2: start to start moderating in the second half of the year.

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Speaker 2: Obviously we see the rally and the ten year treasury market,

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Speaker 2: which is driven those thirty year fixed rate mortgage mortgages down.

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Speaker 3: Where the break even point is I.

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Speaker 2: Don't know, but certainly anything that gets farther away from

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Speaker 2: eight and closer to US six or six and.

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Speaker 3: A half is good for the market.

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Speaker 2: But we still have outsize demand for housing in this country.

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Speaker 2: We still have existing homeowners sitting on the sidelines, locked

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Speaker 2: in their four percent mortgages for the short term, which

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Speaker 2: makes new home construction making up an inordinate amount of

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Speaker 2: the marketplace month to month. In fact, new homes are

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Speaker 2: actually making about thirty percent of the market when they're

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Speaker 2: traditionally more clear and closure to ten or twelve percent,

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Speaker 2: so we're still the best game in town.

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Speaker 4: I'm curious about the efficiency though, in building this from

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Speaker 4: a cost perspective. I asked our previous guests over at

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Speaker 4: Bloomberg Intelligence about whether the costs to build these homes

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Speaker 4: is sort of moderated a certain extent from what we

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Speaker 4: saw during the pandemic. We know that the supplies themselves

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Speaker 4: were more expensive, but so too was the labor. And

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Speaker 4: we know that the labor market is still relatively strong.

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Speaker 3: Labor markets incredibly strong.

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Speaker 2: We face a stilled labor shortage when it comes to

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Speaker 2: home construction. We're about four hundred thousand workers short month

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Speaker 2: after month, and this has been going on year after year,

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Speaker 2: in fact, you know, probably up to a decade at

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Speaker 2: this point. So skilled labor continues to be a drag

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Speaker 2: on our industry. In particular. You're right about supply chains.

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Speaker 2: They certainly have moderated. That's one of the winds we're

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Speaker 2: worried about, as we believe we're going to pick up

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Speaker 2: in home construction over the next three or four years,

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Speaker 2: is whether the supply chains are ready to meet that demand.

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Speaker 2: We saw what happened after COVID, when when the home

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Speaker 2: building sector really took off and kind of defied economic

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Speaker 2: gravity during that time. Are our supply chains ready to

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Speaker 2: meet that demand again?

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Speaker 3: But I am, I am.

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Speaker 2: We do see that that homes the cost to build

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Speaker 2: a new home is down, but it's it's still the

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Speaker 2: interest rates borrowing is still high.

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Speaker 3: And in land as well.

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Speaker 1: Yeah, and speaking of land, one thing that you point

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Speaker 1: out you're worried about is that there's not enough land available,

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Speaker 1: not enough lots. Given that lot development is constrained by

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Speaker 1: higher rates, does that increase the likelihood of teardowns where

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Speaker 1: you buy a home that people you know, it hasn't

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Speaker 1: been upgraded in a long time, and people tear it

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Speaker 1: down to effectively create new construction there.

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Speaker 2: Yeah, that's a trend and obviously you're close in suburbs

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Speaker 2: across the country around the big metros that that trend

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Speaker 2: will continue, so, which means our remodeling sector, while it's

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Speaker 2: flat this year, we expect that to begin to take

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Speaker 2: off in twenty twenty four as well.

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Speaker 3: But then we're also going.

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Speaker 2: To see the ability is its contingent on local governments

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Speaker 2: being part of the housing solution by opening up new land,

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Speaker 2: working with builders and developers to make sure that land

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Speaker 2: is available at an affordable price, so an affordable product

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Speaker 2: can be built for homeowners.

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Speaker 1: There's this new thing called the alternative dwelling units. How

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Speaker 1: big of a deal is that for the homeowners that

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Speaker 1: you represent, It's a big deal.

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Speaker 2: In those markets that are constrained, like you said, in

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Speaker 2: those entering suburbs or in city centers themselves, being able to.

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Speaker 3: Rezone is really really important or.

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Speaker 2: Allowing these ADUs, it's a critical It's one of the

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Speaker 2: big pieces to the housing affordability crisis and the supply crisis.

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Speaker 2: We have to be more creative to get more units

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Speaker 2: in the marketplace so we can drive the costs of

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Speaker 2: down by putting more supply out there.

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Speaker 4: Jim, really preciate you taking time to be with us today.

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Speaker 1: Jim Tobin.

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Speaker 4: He's the president and CEO at the National Association of

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Speaker 4: home Builders.