WEBVTT - Jonathan Miller on Real Estate After the Coronavirus 0:00:02.200 --> 0:00:06.800 This is Masters in Business with Barry Ridholts on Boomberg Radio. 0:00:07.240 --> 0:00:10.960 My special guest today is Jonathan Miller. He is president 0:00:11.039 --> 0:00:14.240 and CEO of Miller Samuel. The firm is best known 0:00:14.320 --> 0:00:17.440 for supplying data and analytics to the real estate industry. 0:00:17.800 --> 0:00:20.200 Anytime you see a report from one of the major 0:00:20.440 --> 0:00:24.160 real estate brokers showing houses that are on the market 0:00:24.200 --> 0:00:26.320 for how long, what the state of the market is, 0:00:26.680 --> 0:00:29.080 the odds are that Jonathan is the man behind that. 0:00:29.560 --> 0:00:33.800 Jonathan Miller, Welcome to our Shelter in Place version of 0:00:33.920 --> 0:00:37.360 Masters in Business. Very glad to be here and getting 0:00:37.360 --> 0:00:41.240 a break from the self quarantine. Talking to another human 0:00:41.240 --> 0:00:44.440 being is always nice. So let's talk a little bit 0:00:44.479 --> 0:00:48.520 about what's going on. We're recording this the last week 0:00:48.600 --> 0:00:52.720 in March. Uh. Normally this is the time of year 0:00:52.880 --> 0:00:56.360 when we would see a ton of new real estate 0:00:56.400 --> 0:01:00.920 listings and open houses and really the kickoff of the 0:01:01.000 --> 0:01:06.840 spring selling season. How's the real estate market? Yeah, it's uh, 0:01:06.880 --> 0:01:11.400 you know, it's interesting. The fact is there's very little 0:01:11.760 --> 0:01:14.760 data to test the water, so to speak. Really the 0:01:14.800 --> 0:01:18.000 only thing we're seeing right now that is in real 0:01:18.040 --> 0:01:22.800 time because real estate generally is a much slower moving 0:01:23.319 --> 0:01:27.399 type of asset class is the change in patterns of 0:01:27.520 --> 0:01:33.959 listing inventory. So, for example, in Manhattan, for basically since 0:01:34.000 --> 0:01:38.679 the beginning of time, inventory arises from year end of 0:01:38.720 --> 0:01:41.200 any given year, whether it's a weak or strong market, 0:01:41.440 --> 0:01:45.480 through the end of March, and over the last five 0:01:45.600 --> 0:01:51.120 years it's averaged about a ten percent increase plus or 0:01:51.120 --> 0:01:54.120 minus a couple percent every year, and this year it's 0:01:54.200 --> 0:01:58.880 down nine. So we're not seeing people put properties on 0:01:58.920 --> 0:02:01.520 the market, and that literally is one of the only 0:02:01.600 --> 0:02:04.280 valid data points right now in the housing market, at 0:02:04.360 --> 0:02:10.120 least in New York. We're seeing stories about contract activity, 0:02:10.240 --> 0:02:15.760 but that's actually misleading because contracts typically, I think when 0:02:15.840 --> 0:02:18.959 people think of a contract, they think of you know 0:02:18.960 --> 0:02:21.760 when Byron sellers sort of shake hands and you know, 0:02:21.960 --> 0:02:25.800 boom um, that's the that's the contract. But the reality 0:02:25.960 --> 0:02:29.799 is the contract data that we're seeing now represents two 0:02:29.800 --> 0:02:32.760 to three weeks ago. An offer is made, it's accept 0:02:32.800 --> 0:02:38.400 by the seller, and then you have um or vice versa, 0:02:38.880 --> 0:02:40.800 and then it goes to the attorneys and takes a 0:02:40.840 --> 0:02:43.679 couple of weeks. So I really think next week or 0:02:43.680 --> 0:02:45.760 the week after is where we're going to start seeing 0:02:46.160 --> 0:02:51.640 the real slowdown in activity. So real estate on a 0:02:51.680 --> 0:02:55.200 big lag. Well last week I saw a really amusing 0:02:56.000 --> 0:02:59.880 article on Bloomberg News. People are still putting their mansion 0:03:00.120 --> 0:03:03.720 on the market, And is that really going on or 0:03:03.840 --> 0:03:06.600 is that still part of the leg that might have 0:03:06.639 --> 0:03:09.760 been happening in February and the beginning of March. But 0:03:09.919 --> 0:03:14.239 it's listenings have dropped off, the things have dropped off, 0:03:14.280 --> 0:03:17.360 at least in you know what we're seeing when you 0:03:17.400 --> 0:03:20.600 look at January and February this year after at least 0:03:20.600 --> 0:03:23.120 in New York Metro. It's been a it's been a 0:03:23.160 --> 0:03:26.880 tough couple of years with the onslaught of new taxes 0:03:26.960 --> 0:03:32.240 beginning with the two thousand eight eighteen and then into nineteen, 0:03:32.320 --> 0:03:35.720 all kinds of headwinds for housing. And then there was 0:03:35.800 --> 0:03:39.840 someone referring to the change in the salt deductions salt tax. 0:03:40.280 --> 0:03:45.080 We had the rent law, which punished you know, landlords, 0:03:45.120 --> 0:03:48.640 which is primarily what investors are. We also saw an 0:03:48.680 --> 0:03:52.520 increase in the mansion tax transfer tax. So there's a 0:03:52.520 --> 0:03:56.680 lot of headwinds, you know, to use that phrase, our word, 0:03:56.880 --> 0:04:02.480 and now um we have this we saw an upticking sentiment. Um, 0:04:02.520 --> 0:04:05.440 a lot more offers are being made and all that 0:04:05.600 --> 0:04:08.840 is sort of out the window because we have a 0:04:08.960 --> 0:04:12.720 new sort of milestone to grapple with in the market, 0:04:12.760 --> 0:04:16.839 and that's the uncertainty of the virus. You know. It's interesting, Um, 0:04:16.880 --> 0:04:20.360 A lot of comparisons have been made to other seminal 0:04:20.400 --> 0:04:25.000 events in real estate, like the UH nine eleven moment um, 0:04:25.040 --> 0:04:28.159 like the Lehman moment, and they're all very different in 0:04:28.360 --> 0:04:31.479 scale and you know, and what actually occurred. But what's 0:04:31.520 --> 0:04:35.000 a little different this time is that in those prior 0:04:35.080 --> 0:04:39.800 to moments UH, there was actually another a new day, 0:04:40.279 --> 0:04:43.000 And the further you got away from that moment, you 0:04:43.080 --> 0:04:47.200 could you could sort of process it the tragedy and 0:04:47.320 --> 0:04:51.160 start thinking about the future. Right now, we don't know 0:04:51.279 --> 0:04:55.160 other than anything other than it's got further to go, 0:04:55.279 --> 0:04:57.080 and we don't know how much further it has to go. 0:04:57.200 --> 0:05:02.240 So there's there's definitely a grain at to the outlook. 0:05:02.560 --> 0:05:06.280 So one little ray of sunshine amongst all this negativity. 0:05:06.440 --> 0:05:10.000 The FED took rates down to zero. That has to 0:05:10.040 --> 0:05:13.159 be good for mortgage rates or not. Tell us what's 0:05:13.160 --> 0:05:17.040 going on with mortgages. Well, if you look at Freddie 0:05:17.080 --> 0:05:22.760 Mac's thirty over the last thirty days, fixed UH mortgage 0:05:22.839 --> 0:05:25.800 rates actually are a little bit higher now than they 0:05:25.800 --> 0:05:28.680 were at the end of February. And and one of 0:05:28.680 --> 0:05:34.560 the reasons is just capacity. That many lenders UM laid 0:05:34.600 --> 0:05:38.120 off a large amount of processing staff six or nine 0:05:38.120 --> 0:05:41.200 months ago when there wasn't much action going on in 0:05:41.480 --> 0:05:44.440 UM you know, changes in rates and there's some stability. 0:05:45.200 --> 0:05:49.320 In addition, especially on the in the refi world, there's 0:05:49.360 --> 0:05:53.640 a tremendous concern about liquidity. In other words, you know, 0:05:53.720 --> 0:05:59.960 when you have escalating layoffs, rising unemployment and people will say, 0:06:00.040 --> 0:06:02.400 you know, in the middle of their application and lose 0:06:02.440 --> 0:06:07.240 their job, that is a much different risk profile than 0:06:07.400 --> 0:06:10.040 if we were in the conditions we were, you know, 0:06:10.320 --> 0:06:14.080 a couple months ago. So UM the low rates in 0:06:14.160 --> 0:06:17.279 many ways have fallen on deaf ears in the housing market. 0:06:17.440 --> 0:06:21.520 Initially got everybody excited that it would help housing run 0:06:21.640 --> 0:06:26.039 through this crisis. But I think it's have It will 0:06:26.120 --> 0:06:30.039 have limited effect, certainly better than not doing it, but 0:06:30.680 --> 0:06:33.720 not not much tangible evidence that it's going to make 0:06:33.760 --> 0:06:37.480 a difference. I was kind of fascinated, Jonathan by something 0:06:37.680 --> 0:06:42.800 I read about on your weekly newsletter, and I was 0:06:42.920 --> 0:06:47.880 very surprised to read that brokers are now hiding the 0:06:47.960 --> 0:06:51.719 number of days that houses have been on the market 0:06:52.200 --> 0:06:57.200 from buyers. What is that about? Why would anyone imagine 0:06:57.839 --> 0:07:02.039 that that is helpful to buyers? And shouldn't we be 0:07:02.160 --> 0:07:06.640 in favor of more transparency in these transactions? Well, Barry, 0:07:06.680 --> 0:07:09.120 you hit it on the head that we should be 0:07:09.200 --> 0:07:14.400 in favor of greater transparency. What the real estate community 0:07:14.440 --> 0:07:18.040 of the brokers have been grappling with um in many 0:07:18.120 --> 0:07:21.840 markets is that things have slowed down before we came 0:07:21.880 --> 0:07:25.720 into this crisis in certain segments in the market, and 0:07:26.200 --> 0:07:29.520 they've been dealing with anxious sellers and then we have 0:07:29.640 --> 0:07:34.480 this crisis, and you know, it's being presented as let's 0:07:34.520 --> 0:07:39.640 give the sellers a break, and let's essentially there's no 0:07:39.680 --> 0:07:42.720 other word for it, but hide the calculation for days 0:07:42.760 --> 0:07:45.720 on market. On some list sites, like in New York, 0:07:45.840 --> 0:07:49.840 Street Easy, which is owned by zillo Is, announced that 0:07:49.880 --> 0:07:53.560 they will be hiding days on market. Same thing with 0:07:53.640 --> 0:07:56.080 the Real Estate Board of New York, which is somewhat 0:07:56.120 --> 0:08:00.960 of our local multiple listing system. And we hear here 0:08:00.960 --> 0:08:03.080 of this in other parts of the country, but other 0:08:03.160 --> 0:08:06.800 parts aren't. The problem is with this is that it 0:08:06.960 --> 0:08:09.520 ignores I mean, last time I checked that there's a 0:08:09.560 --> 0:08:13.240 buyer and a seller in each transaction, and the buyer 0:08:13.560 --> 0:08:17.440 is essentially this data is being hidden from them. The 0:08:17.560 --> 0:08:21.880 problem is, or actually the the you know, what's actually 0:08:21.920 --> 0:08:24.920 happening is the raw data, like the listening dates, things 0:08:24.960 --> 0:08:27.200 like that are not being hidden. But when you open 0:08:27.240 --> 0:08:30.160 and look at a listing, it instead of saying, you know, 0:08:30.400 --> 0:08:32.880 on the market a hundred eight days, it'll just be 0:08:32.960 --> 0:08:37.239 blank or not or hidden. And to me, that breeds 0:08:37.280 --> 0:08:41.440 that will breed future distrust between the consumer and the 0:08:41.480 --> 0:08:44.920 real estate community. And I think that the actual reason 0:08:44.960 --> 0:08:47.920 they're doing it, having talked to many agents about this 0:08:48.400 --> 0:08:50.480 over the last couple of weeks because I've sort of 0:08:50.520 --> 0:08:54.240 been sparring with the community about this specific topic, is 0:08:54.280 --> 0:08:58.240 that the actual motivation is really not to help the seller. 0:08:58.320 --> 0:09:02.239 It's to really help the real estate agent keep the listing. 0:09:02.320 --> 0:09:06.120 In other words, um, you know, consumers don't want to say, hey, 0:09:06.160 --> 0:09:07.840 you know, I'm going to take my home off the 0:09:07.840 --> 0:09:10.000 market because nothing's going to happen for the next two 0:09:10.040 --> 0:09:13.520 or three or four months, and they're uh, and the 0:09:13.600 --> 0:09:16.480 real estate agent is worried that they're going to lose 0:09:16.520 --> 0:09:19.319 the listing when they come back on the market. Somebody 0:09:19.320 --> 0:09:22.400 else might get it, and that's not good for the market. 0:09:22.520 --> 0:09:26.400 You can't cherry pick data. So Jonathan, why not a 0:09:26.440 --> 0:09:30.560 more targeted solution than not reporting this? Why not just 0:09:30.800 --> 0:09:34.240 toll days on the market for I don't know, ninety 0:09:34.320 --> 0:09:40.439 days until the coronavirus theoretically passes. Let's say this crisis 0:09:40.520 --> 0:09:43.320 is over in ninety days and then we all go 0:09:43.400 --> 0:09:46.199 out and and you know, start rates a law, and 0:09:46.240 --> 0:09:49.240 we start buying up houses. Um, you know, as a nation. 0:09:49.840 --> 0:09:53.560 The reality is that every house that was on the 0:09:53.600 --> 0:09:57.040 market in this period has an additional ninety days added 0:09:57.080 --> 0:10:01.360 to the days on market. The consumer is not open there. 0:10:01.400 --> 0:10:05.160 They are going to understand that we just came out 0:10:05.200 --> 0:10:08.200 of this. So to me, it's it's a lot about nothing. 0:10:08.360 --> 0:10:11.440 It's not going to help stimulate sales activity, and it 0:10:11.800 --> 0:10:14.559 endangers the idea of people coming back in because they're 0:10:14.559 --> 0:10:17.840 going to say, well, are these numbers real now? Are 0:10:17.880 --> 0:10:21.319 they being tweaked? Um? I just think the whole idea 0:10:21.400 --> 0:10:24.360 is a bad idea. So what's going on in the 0:10:24.440 --> 0:10:29.600 world of appraisals? How are people doing appraisals on either 0:10:29.720 --> 0:10:35.320 refies or new purchases If everybody is socially distancing, right, 0:10:35.760 --> 0:10:40.240 It was quite astounding up until a week ago, prior 0:10:40.280 --> 0:10:44.680 to the last week, when there was an announcement by 0:10:44.720 --> 0:10:48.440 f h f A, which is the regulator over Fannie 0:10:48.440 --> 0:10:52.360 and Freddie UH, and there were some standards being set 0:10:52.480 --> 0:10:57.760 for allowing praisers when mortgages are done, not to physically 0:10:58.000 --> 0:11:02.000 inspect a property if they're in danger, and we were 0:11:02.080 --> 0:11:06.599 getting for a couple of weeks we stopped inspecting interiors 0:11:06.600 --> 0:11:11.280 of properties in New York prior to AMA the Governor's 0:11:11.440 --> 0:11:16.600 um shut down or cars I shut down UH and 0:11:16.760 --> 0:11:21.280 because I I just couldn't put my staff in harm's way. UH. 0:11:21.640 --> 0:11:25.840 We had a couple of close calls, and it seemed crazy, 0:11:26.440 --> 0:11:29.560 especially when it became apparent that you don't have to 0:11:29.679 --> 0:11:32.920 be you don't have to be symptomatic to be a carrier. 0:11:33.040 --> 0:11:36.040 So not only are we putting our staff in a 0:11:36.080 --> 0:11:40.079 harm's way to do an inspection on a mortgage appraisal, 0:11:40.280 --> 0:11:43.360 but we're also putting the homeowner or the occupant of 0:11:43.400 --> 0:11:46.520 the home in danger. So that seemed out of the question. 0:11:46.960 --> 0:11:50.800 So there was a stalemate, and across the agencies and 0:11:50.840 --> 0:11:55.280 the mortgage spectrum, appraisers were rapidly growing numbers pushing back 0:11:55.320 --> 0:11:59.839 on being forced to do appraisals interior inspections, and so 0:12:00.760 --> 0:12:04.280 essentially what is coming out of all this pushback is 0:12:05.040 --> 0:12:08.840 that there are different types of alternatives, something that my 0:12:08.960 --> 0:12:11.560 firm is doing a lot of in New York because 0:12:11.559 --> 0:12:14.800 our risk to our praisers are going on public transportation. 0:12:15.240 --> 0:12:18.520 It's not that they're in a car insulated driving up 0:12:18.559 --> 0:12:21.000 to the curb. You know, that's really not an option 0:12:21.040 --> 0:12:24.000 to New York as it might be in the suburbs. 0:12:24.040 --> 0:12:27.120 So that what's happened is there's been these solutions that 0:12:27.200 --> 0:12:31.760 are evolving and now we're you know, we're doing essentially 0:12:31.840 --> 0:12:34.199 what they're called desktops or you're sitting at your desk 0:12:34.720 --> 0:12:37.680 and it is and we're actually getting photos from the homeowner. 0:12:38.360 --> 0:12:44.800 Um all this is less than a full tear inspection 0:12:44.880 --> 0:12:48.120 by a professional. But but the idea, and I think 0:12:48.200 --> 0:12:52.360 government's thinking is that it helps liquidity, keeps things moving forward. 0:12:52.960 --> 0:12:57.880 What they're not is there not on cash out reef 0:12:57.960 --> 0:13:03.080 finance and they're not waiving the interior inspection requirement, so 0:13:03.160 --> 0:13:07.560 that that makes it all problematic. Um and you know, 0:13:07.600 --> 0:13:11.880 the second this gets out of you know, um, if 0:13:11.920 --> 0:13:16.000 this became mainstream where we could do um no inspections 0:13:16.080 --> 0:13:20.880 for reefs. I can only imagine the fraud and the 0:13:20.080 --> 0:13:24.640 um the predatory lending that would simply explode UM. And 0:13:24.679 --> 0:13:26.719 so I don't think you're going to see as much 0:13:26.760 --> 0:13:29.480 of that in the solution, simply because the emphasis is 0:13:29.480 --> 0:13:32.880 on the sales side, not the reef buy side. Quite fascinating. 0:13:33.240 --> 0:13:36.640 Let's talk a little bit about real estate in the 0:13:36.800 --> 0:13:42.000 time of pandemic. What can we do virtually? Can can 0:13:42.040 --> 0:13:44.960 we use face time to inspect the house? Can you 0:13:45.040 --> 0:13:49.960 do these virtual three D showings? Or is real estate 0:13:50.040 --> 0:13:53.240 one of those things that you literally have to get 0:13:53.280 --> 0:13:56.240 into the space and look around and see what's going 0:13:56.280 --> 0:14:02.640 on yourself. So I think that virtual all is clearly 0:14:02.679 --> 0:14:06.800 growing to be a an option for many during this crisis, 0:14:07.160 --> 0:14:11.240 But I don't think that it goes mainstream. I think 0:14:11.240 --> 0:14:14.880 it's more on the margin, uh, And I think because 0:14:15.240 --> 0:14:17.560 of the human element of you know, the sort of 0:14:17.559 --> 0:14:20.640 the passion around housing, I think it's it's a lot 0:14:20.720 --> 0:14:24.840 harder to convince many people with their largest asset UH 0:14:25.040 --> 0:14:28.000 in play here to just do a sort of an 0:14:28.080 --> 0:14:32.480 all digital. However, that's the thinking now, and uh, you 0:14:32.520 --> 0:14:36.560 know that may change if this goes long enough. Uh, 0:14:36.560 --> 0:14:39.160 this crisis goes long enough. One of the things that 0:14:39.240 --> 0:14:42.880 has been really problematic that I think will will benefit 0:14:43.160 --> 0:14:49.800 from the virtual phenomenon would be actual closings. Uh. You know, 0:14:49.880 --> 0:14:52.840 you can be in a state like Maryland where you 0:14:52.880 --> 0:14:57.560 can do closing almost entirely on a single iPad, and 0:14:58.040 --> 0:15:00.240 you go across the line to save orge in you 0:15:00.480 --> 0:15:05.000 and it's you know, you're signing papers that say you 0:15:05.120 --> 0:15:09.280 signed another paper. You know. The tremendous um you know, 0:15:10.000 --> 0:15:13.120 tremendously inefficient, and I think there's gonna be a lot 0:15:13.120 --> 0:15:15.360 of clean up of that. One of the things we're 0:15:15.360 --> 0:15:19.040 seeing in the appraisal industry or the valuation in general, 0:15:19.640 --> 0:15:24.680 is something that we call curbside appraisals. And the idea 0:15:24.960 --> 0:15:29.080 is that you you know, if you're in the suburbs, 0:15:29.200 --> 0:15:31.320 the appraiser drives up to the front of the house. 0:15:32.040 --> 0:15:36.000 Uh they can, you know, there's nobody around. This social distancing, 0:15:36.080 --> 0:15:38.760 they can kind of walk around the exterior of the property. 0:15:38.920 --> 0:15:42.160 They physically uh you know. And a friend of mine 0:15:42.160 --> 0:15:45.680 actually just wrote about this in California, he's already doing 0:15:45.680 --> 0:15:48.760 it where you call the homeowner on face time and 0:15:48.760 --> 0:15:51.880 then they literally walk you through the house, you point, 0:15:52.440 --> 0:15:55.360 you know, asked him to point in certain directions and 0:15:55.520 --> 0:15:57.720 make sure that you can see things. And then while 0:15:57.720 --> 0:16:01.880 you're doing it, because you can't capture the video with FaceTime, 0:16:01.920 --> 0:16:04.360 and you know, I'm sure there will be alternatives or 0:16:04.400 --> 0:16:08.280 there is an alternative. Um, they're just doing screenshots of 0:16:08.360 --> 0:16:11.680 the video screen that they're they're viewing the house on 0:16:12.160 --> 0:16:14.680 to capture it so that when they deliver the report 0:16:14.720 --> 0:16:17.479 to the client, whether it's a lender or a private individual, 0:16:18.320 --> 0:16:23.280 that there's some digital reference, visual digital reference to the 0:16:23.320 --> 0:16:25.600 interior of the home. And I think this is going 0:16:25.680 --> 0:16:30.560 to play out significantly after this aftermath, in the aftermath 0:16:30.600 --> 0:16:34.400 of all this. So so that makes sense for appraisals, 0:16:34.440 --> 0:16:36.560 and that certainly makes sense to be a little more 0:16:36.680 --> 0:16:41.560 virtual and efficient on closings. But I keep coming back 0:16:41.600 --> 0:16:45.960 to the issue of how every piece of property is unique. 0:16:46.360 --> 0:16:51.640 Photographs don't really capture a neighborhood, the unique view of 0:16:51.680 --> 0:16:55.280 a given property, the feel you get when you walk 0:16:55.320 --> 0:16:59.720 into certain houses. There are certain certain architecture that just 0:17:01.120 --> 0:17:03.960 the right energy, the right vibe, and sometimes you walk 0:17:03.960 --> 0:17:07.800 into a house that looks spectacular online and in your 0:17:08.359 --> 0:17:16.159 immediately recoil is just something off about everything. So the 0:17:16.200 --> 0:17:20.119 smell you know, which you know we can run into 0:17:20.200 --> 0:17:24.280 two or you know your next to um, you know, 0:17:24.359 --> 0:17:27.960 you have a property out the rural area and there's 0:17:28.000 --> 0:17:32.520 a tremendous odor from the farm coming you know, coming 0:17:32.560 --> 0:17:36.040 from your neighbor. I mean, there's all kinds of problems 0:17:36.400 --> 0:17:41.800 with you know, going completely virtual. That's why I'm very skeptical, uh, 0:17:41.960 --> 0:17:46.439 that that it replaces the in person experience. And I 0:17:46.480 --> 0:17:50.720 know the appraisal industry itself is very worried that banking 0:17:51.440 --> 0:17:55.199 will just go all virtual and then worry about the 0:17:55.240 --> 0:18:00.240 consequences later in terms of collateral valuation UM. And you 0:18:00.280 --> 0:18:02.560 know that I'm not that worried about that, but I 0:18:02.600 --> 0:18:05.560 certainly is a concern. And for homeowners, I just have 0:18:05.600 --> 0:18:09.440 a hard time processing. And maybe that's just me of 0:18:09.440 --> 0:18:12.520 of you know, a first time buyer just buying something online. 0:18:12.720 --> 0:18:15.639 You know, that's challenge enough with car doing it the 0:18:15.680 --> 0:18:18.720 first time. UM. But you know, the house, I think 0:18:18.960 --> 0:18:22.760 is is a little bit more. There's more intangible. There 0:18:22.760 --> 0:18:25.760 can be little doubt about that. And we haven't even 0:18:25.760 --> 0:18:30.879 talked about inspections where someone literally has to come and 0:18:31.400 --> 0:18:33.800 look at the foundation, look at the roof, look at 0:18:33.800 --> 0:18:37.760 the plumbing, the electrical system, or all the machinery. How 0:18:37.800 --> 0:18:41.800 can you do possibly do that virtually you can't, or 0:18:43.000 --> 0:18:46.320 anything you do is something less than an inspection. And 0:18:46.480 --> 0:18:50.919 the something less could be a little less or dramatically less. 0:18:51.160 --> 0:18:54.840 And and that's the problem. Um. You know, one of 0:18:54.880 --> 0:18:59.320 the things that if, if, the if, this carries on, Um, 0:18:59.480 --> 0:19:03.280 this cry this carries on longer than anybody thinks. And 0:19:03.320 --> 0:19:07.800 we have a severe economic you know, meltdown or whatever 0:19:07.840 --> 0:19:11.320 you want to call it going forward. Uh, there's gonna 0:19:11.320 --> 0:19:15.720 be a tremendous amount of clean up on the other 0:19:15.800 --> 0:19:20.439 side in terms of foreclosures and workouts, and you know, 0:19:20.520 --> 0:19:23.920 properties that shouldn't have been purchased for what they were 0:19:23.920 --> 0:19:28.440 purchased because the property is not what it appears. You know, 0:19:28.520 --> 0:19:30.680 I think that there's a lot of concern about that. 0:19:31.040 --> 0:19:34.040 I just have to share a funny story with you. 0:19:34.040 --> 0:19:37.760 You've been to my house. I've been here almost six years. 0:19:38.320 --> 0:19:41.480 When when we first saw this house online. There's a 0:19:41.480 --> 0:19:44.440 whole long story I'll spare everybody, but I had set 0:19:44.520 --> 0:19:48.640 up a Zillo alert. I want a contemporary house either 0:19:48.760 --> 0:19:51.639 near the water or near the woods, with the master 0:19:51.760 --> 0:19:53.879 bedroom on the ground floor, the laund room on the 0:19:53.880 --> 0:19:56.960 ground floor, and I wanted it to be contemporary. And 0:19:57.000 --> 0:20:00.239 I kept on getting these crazy thirty million all our 0:20:00.320 --> 0:20:03.879 mansions in East Hampton. To find a regular house like 0:20:03.960 --> 0:20:07.400 that was rare. Lo and behold, our house in Locust 0:20:07.440 --> 0:20:10.919 Valley pops up, and we go to see the house, 0:20:11.200 --> 0:20:14.560 and every time we go to visit the house, the 0:20:14.680 --> 0:20:19.920 owner is cooking something. They're frying bacon there, they're they're 0:20:20.040 --> 0:20:24.439 baking muffins or cookies. I mean, we visited the house 0:20:24.800 --> 0:20:28.199 seven or eight times, and no matter what time of 0:20:28.240 --> 0:20:32.720 the night or day, stuff was being cooked. And we 0:20:33.040 --> 0:20:36.879 get the engineers report and it says part of the 0:20:36.960 --> 0:20:39.600 roof has been replaced. It's a contemporary house with a 0:20:39.600 --> 0:20:43.840 flat roof. Of course, flat roofs are big pain in 0:20:43.840 --> 0:20:47.919 the neck. And uh, the engineer says, this was repaired. 0:20:48.080 --> 0:20:50.600 You should and the house is thirty years old, you 0:20:50.640 --> 0:20:53.840 should plan on replacing the roof sooner rather than later, 0:20:54.160 --> 0:20:56.960 because it's gonna be a problem. Lo and behold, we 0:20:57.040 --> 0:20:59.760 moved into the house and within a week you could 0:21:00.000 --> 0:21:02.879 smell the mold. You could smell mold is really the 0:21:02.880 --> 0:21:06.879 wrong word. You could smell the dampness from the leaking roof, 0:21:07.440 --> 0:21:10.800 and fast forward three years later we replaced the entire 0:21:11.520 --> 0:21:15.920 roof of the house. It was not inexpensive. The smell 0:21:16.200 --> 0:21:19.400 was the frying bacon. That was the hint they were 0:21:19.440 --> 0:21:25.520 covering something up. Well. I I had an experience probably 0:21:26.280 --> 0:21:30.200 UH probably ten years ago in a litigation where the 0:21:30.400 --> 0:21:34.919 retail UH store This is a condominium in Manhattan, and 0:21:34.960 --> 0:21:39.080 the retail store at at the street level was a 0:21:39.160 --> 0:21:45.040 Starbucks and they had Landhord had incorrectly vented UH the 0:21:45.480 --> 0:21:48.960 exhaust FM from the store and it was getting It 0:21:49.040 --> 0:21:54.320 was the smell of like Jamaican blue Mountain um Bold 0:21:54.440 --> 0:21:59.399 coffee was of the air in the apartment right above it. 0:21:59.440 --> 0:22:03.360 You could you could hardly think of anything else and 0:22:03.600 --> 0:22:08.240 imagine trying to litigate that virtually, It's it would be impossible. 0:22:08.720 --> 0:22:11.000 I want to talk a little bit about what the 0:22:11.040 --> 0:22:16.160 marketplace is going to look like after UM we get 0:22:16.200 --> 0:22:19.840 through this coronavirus. I'm assuming one day this will pass 0:22:20.320 --> 0:22:23.720 and things will start getting back to normal. What is 0:22:23.760 --> 0:22:27.080 that gonna look like? And how dependent is it on 0:22:27.200 --> 0:22:31.399 how severe and long lasting our lockdown is? So I 0:22:31.440 --> 0:22:35.560 think the future is highly dependent on how long the 0:22:35.680 --> 0:22:39.480 lockdown lasts. You can imagine if the longer that the 0:22:39.520 --> 0:22:43.600 lockdown lasts, the more damage to our economy occurs, even 0:22:43.640 --> 0:22:48.200 with the stimulus money that's you know, coming coming out. 0:22:48.880 --> 0:22:53.880 The problem is that if this runs very long, you're 0:22:53.920 --> 0:22:57.399 going to have a much higher unemployment rate, and in 0:22:58.240 --> 0:23:01.719 theory then that cuts down on potential purchasers for properties. 0:23:02.040 --> 0:23:04.879 You know, one of the if it's a short window 0:23:05.040 --> 0:23:07.800 and you know, there's a greater probability that you know, 0:23:08.040 --> 0:23:12.520 the market recovers quickly, but we have no way of knowing, 0:23:12.760 --> 0:23:18.240 and they're literally at this moment, there is virtually no 0:23:18.720 --> 0:23:22.040 data that reflects you know, in a in a large 0:23:22.440 --> 0:23:27.080 you know, something that's available and clean and speaks to 0:23:27.119 --> 0:23:31.000 the whole market. So longer the crisis the damage, the 0:23:31.080 --> 0:23:34.240 bigger the hit to the housing market. Let's let's take 0:23:34.280 --> 0:23:39.199 a reasonable scenario. Let's say the lockdown is two months 0:23:39.800 --> 0:23:43.840 and sometime by the middle of May, we start crawling 0:23:43.880 --> 0:23:48.560 out from our shelter in place and social distancing and 0:23:48.680 --> 0:23:53.000 things get back to normal more or less. What sort 0:23:53.040 --> 0:23:55.760 of real estate market are we looking at? Then? Do 0:23:55.880 --> 0:23:59.920 we resume the spring selling season or do we lose 0:24:00.080 --> 0:24:04.639 half the season? What? What happens. Then I think then 0:24:04.760 --> 0:24:09.040 at that point the spring selling season has essentially passed 0:24:09.119 --> 0:24:12.760 us by, because I don't think it's the market is 0:24:12.760 --> 0:24:16.080 going to snap up like you know, flipping a switch. Um. 0:24:16.240 --> 0:24:20.960 What you might see is the market being pushed to 0:24:21.119 --> 0:24:25.080 the fall. You know. I think of an annual housing market. 0:24:25.119 --> 0:24:27.800 I always describe it as a two hump camel spring 0:24:27.800 --> 0:24:31.280 and fall, and the spring humping much larger than the 0:24:31.320 --> 0:24:35.760 fall hump. We could very well see a big fall 0:24:35.880 --> 0:24:38.760 of you know, a large release of pent up demand 0:24:39.480 --> 0:24:44.520 if unemployment doesn't surge out of control. I mean, that's 0:24:44.520 --> 0:24:48.040 really you know, the the liquidity of being able to 0:24:48.040 --> 0:24:51.480 make payments on mortgages and all that is really kind 0:24:51.480 --> 0:24:54.680 of determines that. Um. The other thing is, I think, 0:24:54.720 --> 0:24:59.320 what this what is maybe a silver lining in the 0:24:59.359 --> 0:25:03.760 sense that in markets that have been deteriorating over the 0:25:03.840 --> 0:25:06.520 last couple of years, and that's certainly excuse to the 0:25:06.640 --> 0:25:10.600 higher end, higher end markets and not uh sort of 0:25:10.640 --> 0:25:16.160 lower priced or mid range type markets, um, higher end markets. 0:25:16.200 --> 0:25:18.399 You the problem has been is that sellers have been 0:25:18.440 --> 0:25:23.040 anchored to you know, the market conditions several years ago. Uh, 0:25:23.080 --> 0:25:27.760 And this, in my view would clearly accelerate their their 0:25:27.840 --> 0:25:32.560 ability to see the market as it is as opposed 0:25:32.560 --> 0:25:35.000 to the way it was. And the reason I see 0:25:35.040 --> 0:25:38.440 that is, um. You know, anytime you have an economic 0:25:38.560 --> 0:25:42.320 van of milestone, UM, the consumer starts to you know, 0:25:42.359 --> 0:25:46.880 you're unable to look before the milestone occurred at some 0:25:46.960 --> 0:25:50.000 sort of basis of rationale for you know, what you 0:25:50.000 --> 0:25:52.760 think your home is today? Um. And I think there's 0:25:52.760 --> 0:25:55.439 gonna be a lot of that going on. UM. And 0:25:55.480 --> 0:25:58.720 I think, my gut if we're talking about May, and 0:25:58.880 --> 0:26:03.400 that feels incredibly optimistic, just in the context of the 0:26:03.520 --> 0:26:06.399 virus and how it will spread. It seems like the 0:26:06.560 --> 0:26:09.480