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Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast.

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Speaker 1: I'm Joe Wysenthal and I'm Tracy Alloway Tracy Housing. I

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Speaker 1: feel like we'll never get away. I mean, it's so

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Speaker 1: we'll never get away from this topic. Ever, it doesn't matter,

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Speaker 1: boom buzz, We're going to be talking about this forever.

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Speaker 2: Well, I mean, everyone lives somewhere right Like you're either

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Speaker 2: in an apartment, probably hoping one day to own a house,

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Speaker 2: or you're already in a house and you're very, very

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Speaker 2: conscious of whatever is happening to the price of your

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Speaker 2: most important financial asset. So I feel like this is

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Speaker 2: on everyone's minds. Obviously there's been a lot of talk

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Speaker 2: about it because rates have gone up, yeah, so much.

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Speaker 2: And at the same time, I think we wrote about

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Speaker 2: this late last year. It's been a really weird housing

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Speaker 2: market in many ways.

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Speaker 1: Well, and you know, we had that conversation of course

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Speaker 1: with James Egan of Morgan Stanley and at the time

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Speaker 1: he sort of made the bold prediction and he said,

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Speaker 1: you know, even with the mortgage rate shock, it's like,

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Speaker 1: I don't think prices are going to come down. And

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Speaker 1: I think that's been pretty validated. The one thing that

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Speaker 1: did come down in a meaningful way was housing starts

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Speaker 1: in home builder activity, and you see all the lines

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Speaker 1: sharply moving lower at the end, you know, throughout basically

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Speaker 1: the second half of twenty twenty two, and yet here

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Speaker 1: we are in you know, spring twenty twenty three, home

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Speaker 1: builders docks are basically back near the tops, and housing

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Speaker 1: starts picked up again, and it's not like rates have

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Speaker 1: really come down. So even even the one category that

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Speaker 1: was like affected by rates was not affected by rates.

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Speaker 2: Well, it's sort of like a great microcosm of the

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Speaker 2: soft versus hard data debate, which is the hard data

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Speaker 2: is still coming in relatively active and strong, but the

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Speaker 2: soft data is quite weak at the moment. And you

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Speaker 2: see that in the home builders as well. So there's activity,

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Speaker 2: but if you look at, for instance, the confidence survey

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Speaker 2: of home builders, that's gone down quite a bit, although

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Speaker 2: it is starting to pick up again, No it is.

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Speaker 3: And you know, like I was reading through D. R.

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Speaker 1: Horton's recent earnings report and they're like expressing some optimism.

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Speaker 1: They said, some of the supply chain issues are behind us,

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Speaker 1: but still like there's sort of like deep structural like underhousing,

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Speaker 1: and I have like two questions sort of related to

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Speaker 1: this that I'm thinking about. It is like still like

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Speaker 1: the problems of like the post grade financial crisis period,

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Speaker 1: And we talked there's like a big Odd Lots theme

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Speaker 1: like how much did that scar the homebuilders?

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Speaker 2: Right?

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Speaker 3: And then this sort of like mini.

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Speaker 1: Home builder recession that we got the second in the

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Speaker 1: second half of twenty twenty two, is that like that

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Speaker 1: all over again where the homebuilders were like, well, you

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Speaker 1: just pulled the rugout from.

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Speaker 3: Us once again.

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Speaker 1: And if the whole point of rate hikes it's like

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Speaker 1: easy supply, and Jerome Powell specifically talked about that as

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Speaker 1: like one of the goals, like have we accomplished anything

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Speaker 1: from these rate hikes so far?

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Speaker 2: Definitely a lot to talk about.

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Speaker 1: All Right, Well, I'm very excited about today's guest, the

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Speaker 1: perfect guest. We've had her on before. We talked to

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Speaker 1: her about the homebuilders during the absolute peak of the mania,

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Speaker 1: and here we are again with Allie Wolf, chief economist

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Speaker 1: at Zonda. So Ellie, thank you so much for coming

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Speaker 1: back on Odd Lots.

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Speaker 4: Hi, Joe, Hi, Tracy, thanks for having.

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Speaker 3: Me, absolutely, thank you so much for coming back.

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Speaker 1: So how is this that we had this huge rate

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Speaker 1: shock like the one of the fascist hiking cycles ever,

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Speaker 1: and we couldn't even like slow down like the.

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Speaker 3: New construction market.

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Speaker 1: It's like picking back up again, home building stocked, shooting

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Speaker 1: up like we had a lot like a three month

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Speaker 1: housing recession out of it.

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Speaker 5: Yeah, So I think the important thing is to go

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Speaker 5: back to the beginning of last year. So we had

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Speaker 5: rates in the threes, and almost overnight it felt like

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Speaker 5: rates went to the sixes yea, and there was just

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Speaker 5: this huge fear that, Okay, no one's gonna want to

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Speaker 5: buy anymore, when in fact we actually saw sales continue

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Speaker 5: to be strong once rates got to six and there

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Speaker 5: was this big question mark, this is kind of spring

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Speaker 5: selling season last year.

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Speaker 4: How is this happening.

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Speaker 5: This kind of defies logic, This defies what's happened to

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Speaker 5: the monthly payment change. And it was because there are

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Speaker 5: a lot of people that were saying, oh gosh, if

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Speaker 5: they've already gone up, are they going to continue to

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Speaker 5: go more?

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Speaker 4: I don't want to miss my opportunity to buy a home.

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Speaker 5: That spurred some activity until about the middle of last year,

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Speaker 5: and then you saw exactly what you thought would happen,

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Speaker 5: which is consumers were like, whoa, never mind, housing's expensive,

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Speaker 5: there may be a recession, I may lose my job,

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Speaker 5: I don't want to buy a home. So demand froze

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Speaker 5: up until we start to see the supply or the

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Speaker 5: sellers adjust.

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Speaker 4: And I think that's a really big.

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Speaker 5: Part of what happened last year and how that's evolved

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Speaker 5: this year.

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Speaker 2: Well, talk to us about the sellers then, because I

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Speaker 2: remember this was a big component of Jim Egan's argument

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Speaker 2: at Morgan Stanley as well, this idea that with rates

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Speaker 2: this high, you just don't why would you sell your house.

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Speaker 2: It's going to be harder to get a mortgage at

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Speaker 2: a low rate, and there's the possibility that you're selling

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Speaker 2: your house maybe for less than what you bought it at.

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Speaker 2: So what are sellers doing in this environment?

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Speaker 5: Well, so last year we did see a little bit

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Speaker 5: of an uptick towards the end of the year of

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Speaker 5: resale supply, but I think it was a lot of

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Speaker 5: the sellers thinking, oh, shoot, if I don't sell now,

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Speaker 5: I don't want to sell for less. So that drove

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Speaker 5: a little bit of an increase on the resale supply.

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Speaker 5: But the real story came from the homebuilders. So homebuilders,

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Speaker 5: as we talked about last time we met, we're dealing

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Speaker 5: with the issue of not being able to get homes

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Speaker 5: built quickly. They didn't know how much it would cost

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Speaker 5: them to get those homes built, so then they started

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Speaker 5: to build Speck homes. Speck Holmes was going back to

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Speaker 5: scars of last cycle. A lot of builders weren't going

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Speaker 5: speck heavy, meaning building a home without a buyer attached,

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Speaker 5: because last cycle, when you build a home without a buyer,

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Speaker 5: those became the most risky because the music stopped and

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Speaker 5: then you had a whole bunch of standing inventory, and

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Speaker 5: what were you going to do with those homes? This

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Speaker 5: time around, builders started to do specs because they said,

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Speaker 5: I can control for how expensive it is to get

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Speaker 5: this home built, and I don't have a customer who's

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Speaker 5: mad that it took fourteen months to get this home

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Speaker 5: built instead of eight. So they built these homes, and

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Speaker 5: all of these homes hit the market at the end

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Speaker 5: of last year at just about the same time the

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Speaker 5: demand fell off a cliff, and that's where you started

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Speaker 5: to see and hear about fire sales that happened from

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Speaker 5: the builder side. So they were really the sellers, Tracy,

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Speaker 5: to your question, they were the sellers that were influencing

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Speaker 5: the market the most at the end of last year.

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Speaker 2: So the sort of like marginal supplier of houses.

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Speaker 4: I guess that's exactly it.

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Speaker 5: So they had standing inventory and they said, we don't

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Speaker 5: want this, and if consumers don't want it at this price,

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Speaker 5: what are they willing to buy this home for?

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Speaker 1: Okay, but what now? Because now we're back here in

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Speaker 1: spring of twenty twenty three, and I assume that it

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Speaker 1: feels like that fire sale is over and we see

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Speaker 1: housing starts picking up again. So that was like a

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Speaker 1: one time shop where we had this like brief supply

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Speaker 1: of I don't know, introduction of new supply onto the market,

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Speaker 1: and now we're just back into tightness again.

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Speaker 4: Yep. So what happened is inventory build up.

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Speaker 5: Builders offered those discounts, builders offered incentives, consumers showed.

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Speaker 4: Up, the inventory rolled over.

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Speaker 5: So if you look at the chart, you have this

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Speaker 5: rapid increase and now you have inventory coming down at

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Speaker 5: the same time that you have sales going back up

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Speaker 5: because those homes are being sold through. You then also

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Speaker 5: have builders that are raising prices again. So instead of

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Speaker 5: lowering prices like last year, you have builders raising prices

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Speaker 5: and because demand is stronger, that is contributing to more

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Speaker 5: builders feeling more confident to start more homes.

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Speaker 1: But I get so here and I sort of brought

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Speaker 1: this up at the intro, which to me is the

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Speaker 1: big question. It's like, we did get this big raid shock,

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Speaker 1: Like are we going to see scars of the last

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Speaker 1: six months or the FEDS ongoing inclination whatever it is

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Speaker 1: like tamp down this economy. Will it contribute to some Okay, yes,

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Speaker 1: builders may be more confident than they were six months ago,

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Speaker 1: but is there scars of it? Is there going to

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Speaker 1: be a residual caution that once again sort of impairs

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Speaker 1: the upward trajectory of new home supply.

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Speaker 4: In a way.

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Speaker 5: So I was on a call with a builder yesterday

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Speaker 5: and as we were talking, they were saying a lot

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Speaker 5: of this feels too good to be true. This feels

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Speaker 5: like we shouldn't be having as much success as we are.

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Speaker 5: But we're still going to go through with our land

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Speaker 5: acquisition because as it stands right now, we think that

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Speaker 5: there is a demand for more homes and we want

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Speaker 5: to be backfilling that Now.

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Speaker 4: You have to have enough confidence to do that.

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Speaker 5: You have to have an equity partner that's willing to

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Speaker 5: support that, and you also have to feel good.

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Speaker 4: There was so much talk.

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Speaker 5: On that call about, Yeah, we think we're going to

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Speaker 5: go through with land acquisition, but we also think of

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Speaker 5: recessions probably around the corner, and how are we trying

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Speaker 5: to plan for a recession where maybe demands down and

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Speaker 5: then we're actually increasing starts at again the wrong time

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Speaker 5: of the market. What are you.

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Speaker 2: Seeing in terms of product segmentation, because I think this

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Speaker 2: is one way that a lot of different companies deal

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Speaker 2: with the future economic uncertainty. Is the sort of tailor

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Speaker 2: they're offering to maybe a level of person who is

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Speaker 2: more price inelastic or less price sensitive. Is that what

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Speaker 2: we're seeing in the housing market as well.

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Speaker 5: Yeah, and we should talk about the different buyers because

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Speaker 5: I think that's where the story gets interesting. But probably

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Speaker 5: the most important trend is if you think about work

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Speaker 5: from home. There was this discussion a couple of years

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Speaker 5: ago that you just build a bigger home because people

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Speaker 5: are going to move further out and they want more space,

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Speaker 5: and so home size is going to go up. And

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Speaker 5: in fact, if you look at what's happening with home size,

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Speaker 5: it's not just about a certain buyer that's going to

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Speaker 5: continue to purchase, because in a lot of cases, those

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Speaker 5: were the buyers that were the most active over the

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Speaker 5: past few years. The biggest pool of buyers that have

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Speaker 5: been untapped are those that haven't been able to purchase

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Speaker 5: because of what's happened with home prices and because of

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Speaker 5: how competitive.

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Speaker 4: The market was.

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Speaker 5: So we're actually seeing that builders are reversing home size,

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Speaker 5: so they're trying to make the home smaller to be

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Speaker 5: able to account for the quantifiable demand pool that wants

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Speaker 5: to purchase a home but just can't figure out how

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Speaker 5: to make the math work.

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Speaker 1: This is really interesting to me, and I do feel

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Speaker 1: like in most of the housing discussions, and probably including

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Speaker 1: the ones that we've had, this is a dynamic that

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Speaker 1: strikes me is under discussed, which is that in twenty

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Speaker 1: twenty or twenty twenty one, a bunch of people maybe

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Speaker 1: like sort of woke up to the fact that on

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Speaker 1: maybe the future of work is going to be hybrid

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Speaker 1: or I'm going to work from home, and so where

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Speaker 1: I move, I wanted to have space, but regardless of

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Speaker 1: the macro situation, I would sort of assume that sort

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Speaker 1: of like a one time readjustment. So It is the

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Speaker 1: implication to some extent that the people who really feel

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Speaker 1: they need work from home space like that is done.

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Speaker 1: Like they got their house, whether it's a rental or

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Speaker 1: they bought it, and at that point, like that kink

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Speaker 1: is out.

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Speaker 3: Of the market.

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Speaker 4: If you look at sales, it backs that argument.

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Speaker 5: So basically, if you think back to again last cycle,

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Speaker 5: there was the drive to you qualify, so builders were

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Speaker 5: going further and further away from the central business district

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Speaker 5: because of affordability. That proved to be a poor investment

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Speaker 5: when the market slowed because those were some of the

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Speaker 5: buyers that had to move that far out that got

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Speaker 5: hit the hardest during the Great Financial Crisis, and builders

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Speaker 5: had the land that was out there and the homes

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Speaker 5: that were out there at a price that people couldn't support,

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Speaker 5: and those became kind of the ground zero for the

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Speaker 5: price correction. So going back to scars, builders then didn't

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Speaker 5: want to go to those areas really from the Great

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Speaker 5: Financial Crisis up until twenty twenty, and then what happened

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Speaker 5: is twenty twenty hits and all of a sudden, people say,

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Speaker 5: you know what, I don't care about living an hour

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Speaker 5: from the central business district because that means an hour away,

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Speaker 5: I'm going to get a twenty percent discount in price

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Speaker 5: and a thirty percent bump in square footage. So that

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Speaker 5: basically said to builders, go go back to where you

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Speaker 5: wouldn't touch before because that's where the demand is. Problem is,

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Speaker 5: it takes a long time for that lot to become

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Speaker 5: available for a builder to go vertical on, and over

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Speaker 5: that period of time, more people are returning to the office,

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Speaker 5: more people are doing a hybrid schedule, and that demand

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Speaker 5: that thought was to be this huge pool of buyers

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Speaker 5: has dwindled down. And so now when you think about

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Speaker 5: the risk again, it goes back to the proofrey. It

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Speaker 5: goes back to the same location that was the highest

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Speaker 5: risk last time too.

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Speaker 2: Can you talk to us about how that's playing out,

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Speaker 2: you know, if you widen the geographic net a little

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Speaker 2: bit more. What we have seen over the past couple

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Speaker 2: of years is this idea of people moving, you know,

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Speaker 2: away from maybe the biggest cities in the US, moving

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Speaker 2: out to the sun Belt states, places like I mean,

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Speaker 2: Austin was a big one. Is that like, is that

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Speaker 2: just played out at the moment or what are you

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Speaker 2: seeing in those markets?

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Speaker 4: So when we look at the rate of migration.

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Speaker 5: Luckily, Census just put out their data recently where you

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Speaker 5: can look through the middle of last year you can

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Speaker 5: see the higher rate of migration was happening the prior year.

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Speaker 5: We're still seeing that there's some migration, but it's trending

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Speaker 5: down in terms of new people that are moving. You

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Speaker 5: don't have to Joe's point that one time kind of.

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Speaker 4: Rush of people.

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Speaker 5: There's still some people that are trickling out, that are moving,

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Speaker 5: that still have work from home and maybe they feel

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Speaker 5: more comfortable with where the market is. But I think

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Speaker 5: you also have to take those markets separately because there's

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Speaker 5: been this big discussion of Okay, everyone's leaving big cities,

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Speaker 5: and so what this is doing is killing the Los

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Speaker 5: Angeles housing market, or the San Francisco housing market, or

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Speaker 5: the New York housing market, when in reality those markets

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Speaker 5: became so expensive because.

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Speaker 4: There wasn't enough building.

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Speaker 5: And even if you subtract out however many people have left,

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Speaker 5: they're still under supplied.

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Speaker 4: So it's a tricky environment.

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Speaker 5: Where then you go to the Southeast, which has been

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Speaker 5: that kind of top market for migration. Southeast doesn't have

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Speaker 5: all of the infrastructure in place, so we're hearing traffics

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Speaker 5: getting more frustrating. Home prices in those areas relative themselves

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Speaker 5: are going up, but they're also pipeline markets. There are

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Speaker 5: markets that over time builders will likely be able to

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Speaker 5: match demand with supply, but it's going to take time

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Speaker 5: to get there.

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Speaker 1: Now, there are a few markets and in the aggregate

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Speaker 1: we sort of know that basically prices really have held

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Speaker 1: up nationally or much better than maybe some people would

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Speaker 1: have expected, et cetera. There are some markets that have

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Speaker 1: seen price decreases. Is there like a common thread or

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Speaker 1: sort of is it the ultra boom towns of the

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Speaker 1: zoom tallengs of twenty twenty one? Is there a common

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Speaker 1: thread of where it's like, actually, we kind of see

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Speaker 1: a slowdown that's real.

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Speaker 5: I would say there's a couple there's a couple of

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Speaker 5: ways to cut that. Joe and Tracy. I think this

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Speaker 5: is the most interesting part of the housing market from

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Speaker 5: my opinion, is there was a discussion that home prices

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Speaker 5: can't go down if the unemployment is at record lows

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Speaker 5: and if resale inventory is at record lows. In reality,

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Speaker 5: there are markets that it's not an oversupply issue or

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Speaker 5: a credit issue like last cycle, but it's a fundamentals

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Speaker 5: do not align issue where we found in some markets

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Speaker 5: that home prices are so out of whack with incomes

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Speaker 5: that sure, there's a certain pooll of buyers that have

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Speaker 5: been able to buy homes, and maybe.

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Speaker 4: We'll continue to buy homes.

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Speaker 5: But if you're trying to cater to the Austin market,

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Speaker 5: for example, not everyone is a transplant from San Francisco

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Speaker 5: that can tap equity from California that has a high

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Speaker 5: wage that can really going back to the price in elasticity,

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Speaker 5: they don't care what the home is priced.

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Speaker 4: That's only a certain subset of the market.

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Speaker 5: So areas like Austin, Salt Lake City, Denver, Phoenix, these

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Speaker 5: were areas that, oh, these are going to do fine

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Speaker 5: because everyone wants to move there, But because everyone wanted to.

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Speaker 4: Move there, they start to hit that price sealing.

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Speaker 5: So part of it is the boom cities, and then

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Speaker 5: part of it is some of the coastal Western cities

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Speaker 5: that just inherently are more expensive, more interest rates sensitive.

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Speaker 5: Despite having higher wealth individuals, they have a higher base price,

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Speaker 5: and they did see that the prices were already.

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Speaker 4: High going into the pandemic, and now they've.

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Speaker 2: Only gone higher wait, so this is really interesting because

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Speaker 2: unemployment was supposed to be the sort of wildcard in

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Speaker 2: the housing market. As long as unemployment stays low, you

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Speaker 2: won't get this wave of force selling that has contributed

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Speaker 2: to previous crashes, I mean, notably the two thousand and

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Speaker 2: eight financial crisis and housing bust. But you're saying we

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Speaker 2: have seen some price decreases even in markets where unemployment

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Speaker 2: is still relatively low.

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Speaker 4: Yep, that's exactly it.

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Speaker 5: Because I think what people say is, well, someone has

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Speaker 5: to rent or own.

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Speaker 4: Yeah, but they have a third option.

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Speaker 5: They can move in with friends, they can move in

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Speaker 5: with family, they can move in with roommates.

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Speaker 4: And we didn't see that during the pandemic.

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Speaker 5: During the pandemic was leaving family and leaving friends and

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Speaker 5: leaving roommates. When inflation gets too high, when home prices

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Speaker 5: get too high, people have a third option. And that

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Speaker 5: third option is I don't want to play in this market.

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Speaker 5: I don't want to pay more for rent. I don't

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Speaker 5: want to have to pay at today's home prices. And

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Speaker 5: I think that that also contributed. You had enough people

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Speaker 5: step back that even though supplies low, fourth quarter really

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Speaker 5: was the key component. Supply was low but demand got

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Speaker 5: even lower for a while. That's again going back to

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Speaker 5: Joe's point, that's changed this year because now the market's

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Speaker 5: come back to life. But that's what we saw last year.

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Speaker 1: Yeah, I forgot about that, like sort of third element.

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Speaker 1: We talked about the work from a home one time

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Speaker 1: shock and then the household formation boom that we saw

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Speaker 1: as someone dealing with New York City housing right now,

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Speaker 1: and I don't really want to talk about it. I

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Speaker 1: would love a roommate. I want I want a roommate to.

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Speaker 2: Move I'll move in with you. Honestly, this might solve

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Speaker 2: both our problems.

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Speaker 1: We get set up a studio at home, can we

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Speaker 1: do that? Can we like split a house out? Going

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Speaker 1: back to like these themes that I think were very

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Speaker 1: prevalent the last time we talked, you know, I think

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Speaker 1: a year and a half ago we might have been

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Speaker 1: talking about like windows and garage doors and certainly lumber

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Speaker 1: prices and all that labor. Top line we can get

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Speaker 1: there's some specific details I want to get into, but

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Speaker 1: like top line, it does seem like are those healed,

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Speaker 1: Like the is the housing supply chain more or less

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Speaker 1: healed at this point.

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Speaker 4: Let's give numbers so supply chain issues. When we talked to.

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Speaker 5: Builders for over a year, almost one hundred percent of

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Speaker 5: them said supply chain was a massive issue for them.

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Speaker 5: Our data as of April was that thirty five percent

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Speaker 5: of builders are saying it's a massive issue.

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Speaker 4: So I don't want to say it's healed.

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Speaker 5: I want to say it is so significantly better that

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Speaker 5: the issues that we're dealing with today feel like child's

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Speaker 5: pay compared to what we have before.

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Speaker 1: So just to follow up on this though, like I mentioned,

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Speaker 1: I was like this morning, I was like reading the

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Speaker 1: d R Horton earning call and they're like, yeah, we

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Speaker 1: were you know, we're not really seeing many supply chain issues.

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Speaker 1: But could this be the kind of thing where it's

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Speaker 1: like all these individual builders say, yeah, there, our issues

402
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Speaker 1: have gotten a lot better. But if there is this

403
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Speaker 1: sort of sudden like you know, reacceleration, suddenly they all

404
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Speaker 1: start thinking that they have an availability of supply. Meanwhile,

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Speaker 1: that window company like shut down for a while because

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Speaker 1: because of the slow down at the end of twenty

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Speaker 1: twenty two, Like, is there the risk that these issues

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Speaker 1: actually come back in a meaningful way? If this too

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Speaker 1: good to be true? Market is sustained.

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Speaker 4: Absolutely, Yeah, no doubt.

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Speaker 5: I think that's something that that Luckily, though it's not

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Speaker 5: just you that I have that's identified that as a

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Speaker 5: potential risk.

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Speaker 4: Builders have identified that as a potential risk.

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Speaker 5: They're saying, if we all decide to start, we know

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Speaker 5: that our suppliers forecast so that this year was going

417
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Speaker 5: to be down for overall starts. It probably does still

418
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Speaker 5: end up down from overall starts, but if it's way faster.

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Speaker 5: That's what's been the weirdest thing about the market is

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Speaker 5: it's whiplash. It's the market's going so fast, and then

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Speaker 5: the market slowed so and then the market's coming back again,

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Speaker 5: and then you're trying to plan production through all of

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Speaker 5: these swings, and that's hard for builders to get right.

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Speaker 5: That's hard for land developers to get right. That's hard

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Speaker 5: for suppliers to get right.

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Speaker 1: It Tracy listening to that, like it just seems like

427
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Speaker 1: exactly classics.

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Speaker 3: Well and also the.

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Speaker 1: Opposite of what like the FED was hoping to achieve here,

430
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Speaker 1: but they're like, let's just like bring some calm to

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Speaker 1: this market.

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Speaker 2: Well, I definitely want to ask about long term affordability

433
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Speaker 2: trends and also credit availability because that's something that people

434
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Speaker 2: are talking about in the wake of the banking crisis.

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Speaker 2: But just before we do, in terms of how home

436
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Speaker 2: builders are feeling about the outlook, can you maybe walk

437
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Speaker 2: us through what exactly is happening with the survey because

438
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Speaker 2: I think we have seen an improvement over the past

439
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Speaker 2: three months, but if you look at the index, I

440
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Speaker 2: think it's still at something like forty four for March

441
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Speaker 2: something like that, so still below fifty, which would indicate

442
00:20:53,240 --> 00:20:57,160
Speaker 2: like it's still a somewhat negative outlook. So what exactly

443
00:20:57,200 --> 00:20:58,800
Speaker 2: is happening in that survey measure?

444
00:20:59,600 --> 00:21:03,240
Speaker 4: Yep. So let's think about the demand side.

445
00:21:03,320 --> 00:21:07,880
Speaker 5: So builders had the supply, they lowered prices, consumers returned.

446
00:21:08,560 --> 00:21:11,080
Speaker 5: Now when we look at what's happening, we have sixty

447
00:21:11,080 --> 00:21:14,359
Speaker 5: percent of builders that are raising prices again. And so

448
00:21:14,440 --> 00:21:16,560
Speaker 5: this goes back to Joe kind of If you think

449
00:21:16,560 --> 00:21:19,960
Speaker 5: about the policymakers, this is probably the opposite that they want.

450
00:21:19,840 --> 00:21:22,320
Speaker 4: To see, is that prices are going back up.

451
00:21:22,240 --> 00:21:26,080
Speaker 5: And that this is going to continue to stretch overall affordability.

452
00:21:26,760 --> 00:21:31,119
Speaker 5: Builders are seeing this idea that Okay, now we've lowered prices,

453
00:21:31,240 --> 00:21:32,639
Speaker 5: or now we've offered incentive.

454
00:21:32,960 --> 00:21:34,560
Speaker 4: Now consumers have returned.

455
00:21:35,119 --> 00:21:39,080
Speaker 5: We still feel uncomfortable about the market because again going

456
00:21:39,119 --> 00:21:40,720
Speaker 5: back to is there going to be an increase in

457
00:21:40,760 --> 00:21:44,879
Speaker 5: the unemployment rate? Are we operating on a demand pool

458
00:21:45,040 --> 00:21:48,200
Speaker 5: that is pen up from last year? And so because

459
00:21:48,240 --> 00:21:50,000
Speaker 5: so many people didn't buy in the fourth quarter they

460
00:21:50,080 --> 00:21:53,440
Speaker 5: return this year. Is this artificially high or is this

461
00:21:53,480 --> 00:21:56,679
Speaker 5: something sustainable? I think there's a lot of questions around that.

462
00:21:56,880 --> 00:21:59,560
Speaker 5: So I don't think the confidence is fully back yet

463
00:21:59,560 --> 00:22:02,399
Speaker 5: because it's part of the sales have been bought and

464
00:22:02,600 --> 00:22:08,280
Speaker 5: part of the sale trajectory feels uncertain. What we know

465
00:22:08,520 --> 00:22:11,080
Speaker 5: is at the end of last year, seventy five percent

466
00:22:11,080 --> 00:22:14,159
Speaker 5: of builders thought they were going to slow starts this

467
00:22:14,240 --> 00:22:17,440
Speaker 5: year compared to last year. Our data for April shows

468
00:22:17,480 --> 00:22:20,560
Speaker 5: only forty five percent are planning to slow starts this

469
00:22:20,680 --> 00:22:21,760
Speaker 5: year versus last year.

470
00:22:22,320 --> 00:22:24,360
Speaker 4: And think about it, I think this is an important thing.

471
00:22:24,840 --> 00:22:28,800
Speaker 5: The reason builder slowed starts is because they were aligning

472
00:22:28,920 --> 00:22:32,440
Speaker 5: starts with sales. If sales are down, starts are down.

473
00:22:33,040 --> 00:22:36,520
Speaker 5: But that realignment works both directions. If sales are up,

474
00:22:37,119 --> 00:22:38,680
Speaker 5: as long as the land's there, as long as the

475
00:22:38,720 --> 00:22:41,960
Speaker 5: labor's there, the materials there start should be up as well.

476
00:22:42,080 --> 00:22:44,639
Speaker 5: So that's what we're seeing is this new realignment of

477
00:22:44,760 --> 00:22:47,520
Speaker 5: starts coming back up to the fact that sales are

478
00:22:47,560 --> 00:22:48,520
Speaker 5: stronger than expected.

479
00:22:48,640 --> 00:22:50,880
Speaker 1: Well, you mentioned land there, which is a good sag

480
00:22:51,000 --> 00:22:52,960
Speaker 1: to dive deeper into this, and we did. I think

481
00:22:53,000 --> 00:22:56,000
Speaker 1: back in March an episode with Chase Emerson and the

482
00:22:56,080 --> 00:22:59,280
Speaker 1: Arizona market, and he basically made this argument exactly, which

483
00:22:59,359 --> 00:23:02,080
Speaker 1: is like, all these homebuilders walked away or wanted to

484
00:23:02,080 --> 00:23:05,520
Speaker 1: walk away from deals or pause land acquisition, and they're

485
00:23:05,520 --> 00:23:07,760
Speaker 1: going to regret it because they're going to fight. As

486
00:23:07,760 --> 00:23:10,359
Speaker 1: soon as how home building picks up again, they're going

487
00:23:10,400 --> 00:23:11,600
Speaker 1: to be short and they're going to have to come

488
00:23:11,640 --> 00:23:14,119
Speaker 1: back and pay more. So what are you seeing like

489
00:23:14,200 --> 00:23:16,359
Speaker 1: on the land acquisition front right now?

490
00:23:17,080 --> 00:23:21,600
Speaker 5: So I think a really important difference between this cycle

491
00:23:21,640 --> 00:23:24,159
Speaker 5: and past cycles too. As I remember when I joined

492
00:23:24,160 --> 00:23:27,520
Speaker 5: the industry, there was just this common statement of land

493
00:23:27,560 --> 00:23:30,360
Speaker 5: acquisition is a great role to be in, but when

494
00:23:30,400 --> 00:23:33,399
Speaker 5: the market slows, you're the first person cut. And that's

495
00:23:33,440 --> 00:23:35,720
Speaker 5: the complete opposite of what we're seeing now. We're actually

496
00:23:35,760 --> 00:23:38,399
Speaker 5: finding that those land acquisition roles are still actually in

497
00:23:38,640 --> 00:23:41,919
Speaker 5: very high demand because builders are thinking about not just

498
00:23:42,000 --> 00:23:44,680
Speaker 5: the near term, but as I'm sure you and Chase

499
00:23:44,920 --> 00:23:45,480
Speaker 5: and I listened.

500
00:23:45,480 --> 00:23:47,560
Speaker 4: It was a great, great podcast you guys talked about

501
00:23:47,600 --> 00:23:48,040
Speaker 4: it takes.

502
00:23:47,920 --> 00:23:52,439
Speaker 5: A long time to take land through horizontal development to

503
00:23:52,480 --> 00:23:54,439
Speaker 5: get it ready for the builders to have access to.

504
00:23:54,960 --> 00:23:57,120
Speaker 5: You need to be thinking way more long term than

505
00:23:57,200 --> 00:23:58,879
Speaker 5: just what next month is going to look like or

506
00:23:58,880 --> 00:24:00,479
Speaker 5: what the next six months is going to look like.

507
00:24:01,160 --> 00:24:05,119
Speaker 5: So we know right now from our builder survey at Zenda,

508
00:24:05,760 --> 00:24:08,080
Speaker 5: ninety percent of builders feel that they have enough land

509
00:24:08,119 --> 00:24:11,440
Speaker 5: for this year, seventy percent feel that they have enough

510
00:24:11,480 --> 00:24:15,080
Speaker 5: land for next year, twenty five percent think they have

511
00:24:15,200 --> 00:24:17,879
Speaker 5: enough land for the following year. So what we're seeing

512
00:24:17,960 --> 00:24:21,840
Speaker 5: is this mad grab of what's available, what can I buy?

513
00:24:22,160 --> 00:24:24,680
Speaker 5: To Chase's point, there were a lot of builders that

514
00:24:24,760 --> 00:24:28,280
Speaker 5: dropped a deal last year or changed their terms, But

515
00:24:28,359 --> 00:24:30,960
Speaker 5: let's focus on the drop drop a deal last year,

516
00:24:31,680 --> 00:24:34,439
Speaker 5: went back to the land sellar this year and said, sorry,

517
00:24:34,840 --> 00:24:36,480
Speaker 5: you know, the market's a lot stronger than I thought

518
00:24:36,480 --> 00:24:39,280
Speaker 5: it was. I want that deal back, And the seller says, great,

519
00:24:39,760 --> 00:24:40,480
Speaker 5: but you got to pay.

520
00:24:40,320 --> 00:24:40,959
Speaker 4: More money for it.

521
00:24:41,320 --> 00:24:43,960
Speaker 5: So that's already happening. That's not even something that might happen.

522
00:24:44,040 --> 00:24:47,199
Speaker 5: That's what's happening right now. But it's also causing a

523
00:24:47,240 --> 00:24:50,439
Speaker 5: gap between who is able to pay that top dollar.

524
00:24:50,720 --> 00:24:52,280
Speaker 4: That's not going to be every builder.

525
00:24:52,440 --> 00:24:55,280
Speaker 5: That's going to be certain builders that have good access

526
00:24:55,320 --> 00:24:57,679
Speaker 5: to capital and has a good long term vision and

527
00:24:57,720 --> 00:25:00,320
Speaker 5: believes that they should be investing to that point.

528
00:25:00,720 --> 00:25:03,040
Speaker 2: So, just on this note, how much of the activity

529
00:25:03,080 --> 00:25:07,200
Speaker 2: that we're seeing, whether it's land acquisition or starts, how

530
00:25:07,280 --> 00:25:10,800
Speaker 2: much of that comes down to the experience of the

531
00:25:10,840 --> 00:25:14,280
Speaker 2: past few years where we did see you know, timeframes

532
00:25:14,520 --> 00:25:18,440
Speaker 2: for getting approvals and actually building things, getting the components

533
00:25:18,480 --> 00:25:21,520
Speaker 2: that you need for a house extend. And I'm also

534
00:25:21,560 --> 00:25:23,800
Speaker 2: thinking about something we saw in the labor market, which

535
00:25:23,840 --> 00:25:27,720
Speaker 2: is this idea of labor hoarding, you know, companies acquiring

536
00:25:27,760 --> 00:25:31,199
Speaker 2: more employees just in case it becomes more difficult in

537
00:25:31,200 --> 00:25:34,080
Speaker 2: the future there's some sort of disruption. Is that basically

538
00:25:34,080 --> 00:25:36,440
Speaker 2: what we're seeing with the home builders now.

539
00:25:36,920 --> 00:25:39,160
Speaker 5: To the labor hoarding, you have some of the builders

540
00:25:39,320 --> 00:25:42,800
Speaker 5: say that specifically is we don't want to going back

541
00:25:42,800 --> 00:25:44,560
Speaker 5: to the whiplash. We don't want to be laying people

542
00:25:44,600 --> 00:25:46,640
Speaker 5: off and then having to chase them back. We want

543
00:25:46,640 --> 00:25:49,960
Speaker 5: to just try to provide steady employment if we can,

544
00:25:50,359 --> 00:25:52,200
Speaker 5: because we want to have We know that there is

545
00:25:52,280 --> 00:25:56,480
Speaker 5: a systemic undersupply in terms of the labor pool, especially

546
00:25:56,520 --> 00:25:58,520
Speaker 5: of people of a certain skill set.

547
00:25:58,920 --> 00:25:59,960
Speaker 4: So yes, that's happened.

548
00:26:00,200 --> 00:26:02,159
Speaker 5: And then in terms of when you look at the

549
00:26:02,240 --> 00:26:06,200
Speaker 5: land side, I think there is such a fundamental belief

550
00:26:06,680 --> 00:26:10,080
Speaker 5: that we need so many more homes built and you

551
00:26:10,160 --> 00:26:14,440
Speaker 5: can't replace land, especially in good locations, So you need

552
00:26:14,480 --> 00:26:17,960
Speaker 5: to be absorbing whatever is available to get yourself in

553
00:26:18,040 --> 00:26:19,400
Speaker 5: a good position in the future.

554
00:26:19,960 --> 00:26:24,119
Speaker 2: So how much could that activity be sort of obscuring

555
00:26:24,680 --> 00:26:27,240
Speaker 2: real demand at the moment? I guess this is the

556
00:26:27,240 --> 00:26:27,800
Speaker 2: big question.

557
00:26:28,800 --> 00:26:32,439
Speaker 4: So in terms of builder demand for land is your question?

558
00:26:32,840 --> 00:26:35,919
Speaker 2: Yeah, or both demand for land and also just construction

559
00:26:36,080 --> 00:26:38,919
Speaker 2: in order to get it out of the way in

560
00:26:39,000 --> 00:26:42,280
Speaker 2: advance of any potential disruptions coming down the pipeline.

561
00:26:42,560 --> 00:26:45,920
Speaker 5: Yeah, I think there's a lot of there's a lot

562
00:26:46,040 --> 00:26:50,240
Speaker 5: of indicators in the housing market, from builders buying land,

563
00:26:50,280 --> 00:26:54,760
Speaker 5: from consumers buying homes. That's looking artificial given the dynamics.

564
00:26:55,160 --> 00:26:57,679
Speaker 5: So in the land side, because at least over the

565
00:26:57,680 --> 00:27:00,320
Speaker 5: past couple of years, there hasn't been enough demand or

566
00:27:00,359 --> 00:27:03,040
Speaker 5: hasn't been enough land, there's been such a rush with

567
00:27:03,160 --> 00:27:03,720
Speaker 5: that demand.

568
00:27:03,880 --> 00:27:06,240
Speaker 4: I think that evolves because what we're.

569
00:27:06,040 --> 00:27:08,879
Speaker 5: Seeing, and I mentioned this to Joe before this call,

570
00:27:09,320 --> 00:27:12,720
Speaker 5: we're finding in some markets because it takes two to

571
00:27:12,760 --> 00:27:18,520
Speaker 5: four years for land to go through the horizontal development side,

572
00:27:18,800 --> 00:27:22,040
Speaker 5: we're now finally seeing that there is some more land

573
00:27:22,160 --> 00:27:24,880
Speaker 5: available after three years.

574
00:27:24,720 --> 00:27:26,720
Speaker 4: Of it being so incredibly tight.

575
00:27:27,040 --> 00:27:29,600
Speaker 5: Now we don't think we've solved the land and lot issue,

576
00:27:29,880 --> 00:27:32,960
Speaker 5: but as starts activities down, even if it's going back up,

577
00:27:33,760 --> 00:27:37,080
Speaker 5: it's down year over year, and that's contributing to an

578
00:27:37,240 --> 00:27:39,880
Speaker 5: increase in overall land and a lot availability right now.

579
00:27:40,600 --> 00:27:44,720
Speaker 1: Speaking of home builder activity, I'm always fascinated by any

580
00:27:44,840 --> 00:27:48,960
Speaker 1: industry in which you have a significant number of public

581
00:27:49,200 --> 00:27:53,200
Speaker 1: players versus up privately owned players and the different signals

582
00:27:53,200 --> 00:27:56,000
Speaker 1: that they get from investors, and maybe public investors are

583
00:27:56,040 --> 00:27:58,360
Speaker 1: rewarding one thing and the private investors could maybe think

584
00:27:58,359 --> 00:28:01,959
Speaker 1: on different timeframes. Seeing with in respect to that. On

585
00:28:02,000 --> 00:28:05,320
Speaker 1: any category, whether it's new construction, whether it's land acquisition,

586
00:28:05,680 --> 00:28:08,520
Speaker 1: are we seeing any different types of behaviors public versus

587
00:28:08,520 --> 00:28:10,080
Speaker 1: private players?

588
00:28:10,119 --> 00:28:10,920
Speaker 4: Crazy difference?

589
00:28:11,320 --> 00:28:13,399
Speaker 5: Yeah, So what we're seeing right now is if you

590
00:28:13,440 --> 00:28:18,600
Speaker 5: look at of total transactions public versus private share publics

591
00:28:18,640 --> 00:28:21,639
Speaker 5: are now almost at fifty percent of overall market share,

592
00:28:22,160 --> 00:28:24,240
Speaker 5: where they were at about thirty.

593
00:28:23,920 --> 00:28:25,600
Speaker 4: Five percent going into the pandemic.

594
00:28:25,600 --> 00:28:29,200
Speaker 5: They were at twenty five percent during the Great Financial Crisis.

595
00:28:29,720 --> 00:28:33,480
Speaker 5: So public private share absolutely skewing towards the publics in

596
00:28:33,560 --> 00:28:36,920
Speaker 5: a lot of cases because they had better economies of scale,

597
00:28:36,960 --> 00:28:40,160
Speaker 5: they had better margins. When the market slowed, they ripped

598
00:28:40,160 --> 00:28:43,719
Speaker 5: the band aid off, they lowered prices way quicker, and

599
00:28:43,760 --> 00:28:47,920
Speaker 5: they helped to stimulate some of that sales activity. They

600
00:28:48,040 --> 00:28:52,720
Speaker 5: also generally have better access to labor. Generally will get

601
00:28:52,760 --> 00:28:55,880
Speaker 5: the phone call first from the landslide, so they have

602
00:28:56,160 --> 00:28:58,960
Speaker 5: a longer lead time, and they have better access to land.

603
00:28:59,360 --> 00:29:03,480
Speaker 5: It's really just allowing the public builders to get bigger,

604
00:29:04,080 --> 00:29:06,400
Speaker 5: and the private builders are having a lot harder of

605
00:29:06,400 --> 00:29:09,200
Speaker 5: a time being competitive in today's market.

606
00:29:26,000 --> 00:29:28,240
Speaker 2: You know, I mentioned unemployment as a sort of wild

607
00:29:28,360 --> 00:29:30,960
Speaker 2: card for the market, and there's another one that people

608
00:29:31,240 --> 00:29:34,080
Speaker 2: talk a lot about, and that's what the baby boomers

609
00:29:34,200 --> 00:29:37,640
Speaker 2: actually do with their own houses as they age and

610
00:29:38,040 --> 00:29:41,480
Speaker 2: start to die. Are we seeing any evidence of that

611
00:29:41,520 --> 00:29:46,160
Speaker 2: sort of generational transfer of home ownership actually happen, Because

612
00:29:46,160 --> 00:29:48,320
Speaker 2: I feel like this is something that people have talked

613
00:29:48,320 --> 00:29:51,640
Speaker 2: about as a possibility for many, many years, and it

614
00:29:51,800 --> 00:29:55,240
Speaker 2: has yet to really materialize. We are seeing some people

615
00:29:55,280 --> 00:29:57,520
Speaker 2: maybe downsize, but we're also seeing a lot of baby

616
00:29:57,560 --> 00:30:01,240
Speaker 2: boomers take advantage of the low rates of twenty twenty

617
00:30:01,240 --> 00:30:03,760
Speaker 2: and twenty twenty one to maybe buy a second home

618
00:30:03,840 --> 00:30:05,320
Speaker 2: for income and things like that.

619
00:30:06,040 --> 00:30:08,600
Speaker 4: Tracy, this question is spot on.

620
00:30:09,160 --> 00:30:12,000
Speaker 5: This is really the kind of the boomers hold the

621
00:30:12,040 --> 00:30:13,160
Speaker 5: cards for what happens.

622
00:30:13,280 --> 00:30:14,920
Speaker 4: I think in terms of the resale supply.

623
00:30:15,600 --> 00:30:18,800
Speaker 5: So what we understand is, and I can't remember it's

624
00:30:18,800 --> 00:30:21,520
Speaker 5: eighty three or eighty six percent, but AARP did a

625
00:30:21,560 --> 00:30:24,600
Speaker 5: survey of boomers and said what do you want to do,

626
00:30:25,200 --> 00:30:27,200
Speaker 5: and either eighty three or eighty six percent of them

627
00:30:27,200 --> 00:30:27,960
Speaker 5: said I want.

628
00:30:27,760 --> 00:30:30,480
Speaker 4: To stay in place. So their intention is I don't

629
00:30:30,480 --> 00:30:31,040
Speaker 4: want to move.

630
00:30:31,480 --> 00:30:34,120
Speaker 5: If they downsize, depending on what great they got and

631
00:30:34,160 --> 00:30:36,720
Speaker 5: depending on if they still have a mortgage, they may

632
00:30:36,840 --> 00:30:40,000
Speaker 5: not have any kind of affordability shock. They're not exhibiting

633
00:30:40,040 --> 00:30:42,720
Speaker 5: the same kind of sticker shock that a normal buyer would.

634
00:30:43,400 --> 00:30:46,000
Speaker 5: In fact, we know from the Census data forty three

635
00:30:46,000 --> 00:30:48,800
Speaker 5: percent of people own their home free and clear, and

636
00:30:48,840 --> 00:30:51,840
Speaker 5: that skewed towards those fifty five plus, So you have

637
00:30:51,880 --> 00:30:54,360
Speaker 5: a lot of boomers that own their home free and clear.

638
00:30:55,000 --> 00:30:58,640
Speaker 5: They are happy because maybe they're families close by. They're

639
00:30:58,680 --> 00:31:01,280
Speaker 5: happy because their doctors are close, they know where their

640
00:31:01,280 --> 00:31:03,440
Speaker 5: pharmacy is, they know where their grocery store is there.

641
00:31:03,560 --> 00:31:07,280
Speaker 5: They're perfectly content where they are. With that being said,

642
00:31:08,080 --> 00:31:11,480
Speaker 5: the National Association of Realtors put out their survey for

643
00:31:11,920 --> 00:31:15,760
Speaker 5: twenty twenty two. They found that boomers are now the

644
00:31:15,880 --> 00:31:19,760
Speaker 5: number one buyer and boomers are the number one seller.

645
00:31:20,280 --> 00:31:22,360
Speaker 5: This group is actually more active than I think we

646
00:31:22,480 --> 00:31:25,000
Speaker 5: believe them to be, because there are a lot that

647
00:31:25,040 --> 00:31:28,520
Speaker 5: are staying put. When you think about why boomers are moving,

648
00:31:28,960 --> 00:31:32,280
Speaker 5: United Band Lines says the third biggest reason people move

649
00:31:32,440 --> 00:31:35,480
Speaker 5: is retirement. Boomers right now, all of them will be

650
00:31:35,480 --> 00:31:38,000
Speaker 5: of retirement age by twenty thirty. So if they're not

651
00:31:38,160 --> 00:31:41,200
Speaker 5: already moving now or changing their lifestyle now, that's likely

652
00:31:41,240 --> 00:31:43,640
Speaker 5: going to happen over the next handful of years.

653
00:31:44,160 --> 00:31:44,680
Speaker 4: And then when you.

654
00:31:44,720 --> 00:31:47,520
Speaker 5: Look at this too, we get Zonda created a baby

655
00:31:47,600 --> 00:31:51,400
Speaker 5: chaser index. It's not just retirement, but it's if your

656
00:31:51,520 --> 00:31:55,080
Speaker 5: children were living. Let's just use California example. You and

657
00:31:55,120 --> 00:31:58,000
Speaker 5: your children live in California, they move to the southeast

658
00:31:58,000 --> 00:32:02,240
Speaker 5: because it's more affordable. They now have grand babies. Oftentimes,

659
00:32:02,240 --> 00:32:04,360
Speaker 5: we find twenty five percent of boomers say they move

660
00:32:04,560 --> 00:32:07,320
Speaker 5: to be close to their grand babies. So there's also

661
00:32:07,480 --> 00:32:09,960
Speaker 5: if millennials move and migrate, that plays into boomers.

662
00:32:10,440 --> 00:32:15,480
Speaker 1: So rather than boomers being this net marginal supply that's

663
00:32:15,520 --> 00:32:18,360
Speaker 1: sort of like eases the market, Boomers are made to

664
00:32:18,440 --> 00:32:22,840
Speaker 1: facto be competing with millennials because those retirement destinations, those

665
00:32:22,840 --> 00:32:25,040
Speaker 1: baby chaser moves, which is a great term. I hadn't

666
00:32:25,040 --> 00:32:27,920
Speaker 1: heard it before, they're essentially going to be going into

667
00:32:27,920 --> 00:32:32,240
Speaker 1: the hot markets, perhaps not really solving any housing supply problems,

668
00:32:32,280 --> 00:32:33,240
Speaker 1: perhaps worsening them.

669
00:32:33,480 --> 00:32:36,280
Speaker 4: Yeah, we've seen that actually for years too, Joe.

670
00:32:36,400 --> 00:32:39,120
Speaker 5: Is that they're looking to downsize, so they're looking for

671
00:32:39,160 --> 00:32:41,840
Speaker 5: a smaller square footage. Entry level buyers are looking for

672
00:32:41,880 --> 00:32:44,240
Speaker 5: smaller square footage because they're trying to adjust for price.

673
00:32:44,600 --> 00:32:46,640
Speaker 4: But then you have an all cash boomer or.

674
00:32:46,560 --> 00:32:49,320
Speaker 5: A millennial with three percent down, and there's one group

675
00:32:49,320 --> 00:32:50,400
Speaker 5: that wins out over the other.

676
00:32:51,480 --> 00:32:54,120
Speaker 2: So one of the things I wanted to ask you

677
00:32:54,320 --> 00:32:56,280
Speaker 2: about as well is, you know, if you think about

678
00:32:56,280 --> 00:32:59,600
Speaker 2: what moves the housing market, you have supply and demand,

679
00:32:59,760 --> 00:33:01,680
Speaker 2: and we've been talking about that, but you also have

680
00:33:01,920 --> 00:33:06,440
Speaker 2: credit availability, and affordability metrics, and those tend to be

681
00:33:06,560 --> 00:33:10,520
Speaker 2: the two things that do actually move quite quickly. You know,

682
00:33:10,560 --> 00:33:13,680
Speaker 2: you can get long running structural changes in supply and demand,

683
00:33:13,760 --> 00:33:17,960
Speaker 2: but credit and affordability do kind of turn on a dime.

684
00:33:18,360 --> 00:33:22,000
Speaker 2: So what are we seeing in terms of those two metrics,

685
00:33:22,000 --> 00:33:25,120
Speaker 2: and especially in the wake of the you know, banking

686
00:33:25,280 --> 00:33:28,640
Speaker 2: drama of March where we did see some banks start

687
00:33:28,640 --> 00:33:31,440
Speaker 2: to report that they were tightening lending standards.

688
00:33:31,960 --> 00:33:35,200
Speaker 5: Yep, so let's do Let's address the credit standards first,

689
00:33:35,240 --> 00:33:38,360
Speaker 5: because affordability is a is a very wide discussion at

690
00:33:38,360 --> 00:33:44,040
Speaker 5: this point. But when we look at credits availability, builders

691
00:33:44,080 --> 00:33:47,760
Speaker 5: are feeling more optimistic that they want to start more homes.

692
00:33:48,000 --> 00:33:49,200
Speaker 4: I shared this down more.

693
00:33:49,040 --> 00:33:51,160
Speaker 5: Builders think that starts will be flat or up this

694
00:33:51,280 --> 00:33:55,239
Speaker 5: year than down. A third of the builders we're talking to, though,

695
00:33:55,280 --> 00:34:00,200
Speaker 5: we're saying, but buyers may be demanding more inventory, we

696
00:34:00,280 --> 00:34:02,680
Speaker 5: may be wanting to build more homes. We may have

697
00:34:02,840 --> 00:34:05,640
Speaker 5: now the supplies, the land, the labor to build it.

698
00:34:06,240 --> 00:34:09,960
Speaker 5: We may not now have the credit component. So it's

699
00:34:10,000 --> 00:34:12,000
Speaker 5: not going to apply. This goes back to Joe's question

700
00:34:12,000 --> 00:34:14,680
Speaker 5: of public versus private. It doesn't apply to all builders equally.

701
00:34:15,200 --> 00:34:17,600
Speaker 5: But we were just at an event in Seattle and

702
00:34:17,760 --> 00:34:21,319
Speaker 5: we had some capital partners say in some cases, some

703
00:34:21,400 --> 00:34:24,520
Speaker 5: capital partners are winning out because other banks or other

704
00:34:24,600 --> 00:34:27,359
Speaker 5: lenders are seizing up, and so they're trying to gain

705
00:34:27,360 --> 00:34:30,040
Speaker 5: market share during that time. But you're hearing it in

706
00:34:30,040 --> 00:34:33,719
Speaker 5: real time that there's a pullback in overall construction financing.

707
00:34:34,200 --> 00:34:36,080
Speaker 5: And I wouldn't say I know enough about this to

708
00:34:36,120 --> 00:34:39,600
Speaker 5: go into detail, but we're also hearing from a consumer

709
00:34:39,680 --> 00:34:42,319
Speaker 5: borrower point of view that there's a little bit of

710
00:34:42,320 --> 00:34:45,640
Speaker 5: tightening on jumbo loan access, and jumbo loans are obviously

711
00:34:45,640 --> 00:34:48,800
Speaker 5: those for the higher price point and usually higher buyers,

712
00:34:49,200 --> 00:34:51,000
Speaker 5: and seeing that come down a little bit, and that's

713
00:34:51,000 --> 00:34:53,560
Speaker 5: been a key driver of housing activity recently as well.

714
00:34:53,719 --> 00:34:56,319
Speaker 1: It does also speak to this question of like, well,

715
00:34:56,360 --> 00:34:58,880
Speaker 1: how effective is interest rate policy at solving any of

716
00:34:58,920 --> 00:35:01,640
Speaker 1: these problems if one effect of it is just going

717
00:35:01,680 --> 00:35:05,120
Speaker 1: to be at least some category of homebuilders, even if

718
00:35:05,160 --> 00:35:07,200
Speaker 1: they have everything else in plays, feel that they do

719
00:35:07,280 --> 00:35:11,040
Speaker 1: not have the financing in plays to continue to expand operations.

720
00:35:11,880 --> 00:35:14,640
Speaker 5: Yeah, and in a way, and I know it sounds

721
00:35:14,640 --> 00:35:17,440
Speaker 5: counterintuitive because we want to get more homes built, but

722
00:35:17,640 --> 00:35:21,279
Speaker 5: because land development takes so much time. Not having as

723
00:35:21,320 --> 00:35:23,880
Speaker 5: much start activity does allow the market to catch up

724
00:35:23,880 --> 00:35:25,799
Speaker 5: a little bit. We were at a point where the

725
00:35:25,800 --> 00:35:28,480
Speaker 5: suppliers couldn't keep up, the land developers couldn't keep up.

726
00:35:28,480 --> 00:35:30,839
Speaker 5: And if you can get those land developers to keep

727
00:35:30,880 --> 00:35:35,120
Speaker 5: moving forward, having more land inventory over time will be

728
00:35:35,200 --> 00:35:36,440
Speaker 5: good to let us come out of.

729
00:35:36,400 --> 00:35:37,759
Speaker 4: This, but it is.

730
00:35:38,640 --> 00:35:42,719
Speaker 5: It's tricky because now you're having financing sees up to

731
00:35:42,719 --> 00:35:47,000
Speaker 5: get new homes built, but you're also having builders raise

732
00:35:47,040 --> 00:35:50,680
Speaker 5: prices again. So the market is operating completely out of

733
00:35:50,719 --> 00:35:53,000
Speaker 5: whack where you should be seeing demand come down and

734
00:35:53,040 --> 00:35:56,759
Speaker 5: prices come down, but now you're seeing prices up but

735
00:35:56,880 --> 00:35:59,640
Speaker 5: inventory potentially going down. Well.

736
00:35:59,680 --> 00:36:03,200
Speaker 2: Online, No talk to us about the affordability aspect of it,

737
00:36:03,280 --> 00:36:07,000
Speaker 2: because it feels like we're still further away than ever

738
00:36:07,239 --> 00:36:10,439
Speaker 2: to building a sort of sustainable market where people are

739
00:36:10,520 --> 00:36:12,839
Speaker 2: able to get a foothold.

740
00:36:13,640 --> 00:36:17,080
Speaker 5: Yeah, this is going to be the hardest issue to

741
00:36:17,160 --> 00:36:20,279
Speaker 5: solve because even if we're saying land availability is a

742
00:36:20,280 --> 00:36:23,480
Speaker 5: little bit better, land prices are still expensive. We're saying

743
00:36:23,760 --> 00:36:28,480
Speaker 5: labor availability is better, it's still expensive. We're saying supply

744
00:36:28,600 --> 00:36:30,920
Speaker 5: chain is better, Okay, good, So now you can get

745
00:36:30,960 --> 00:36:33,080
Speaker 5: the windows, but the windows are still twenty percent more

746
00:36:33,080 --> 00:36:36,200
Speaker 5: expensive than they were going into the pandemic. You're looking

747
00:36:36,200 --> 00:36:39,239
Speaker 5: at government regulation. That's actually the number one issue that

748
00:36:39,280 --> 00:36:41,800
Speaker 5: builders are saying right now that's impacting their ability to

749
00:36:41,840 --> 00:36:42,919
Speaker 5: get more homes.

750
00:36:42,600 --> 00:36:44,960
Speaker 4: Built and to be able to do it quickly.

751
00:36:45,320 --> 00:36:47,520
Speaker 5: Time is money when it comes to home building, and

752
00:36:47,600 --> 00:36:50,720
Speaker 5: again going back to Seattle, it should take three months

753
00:36:51,000 --> 00:36:53,600
Speaker 5: to get a permit issued from the local government in Seattle,

754
00:36:53,640 --> 00:36:56,800
Speaker 5: it's taking eight months. In Florida, it's taking five months.

755
00:36:57,200 --> 00:36:59,960
Speaker 5: So that's stretching out that too. So this is great

756
00:37:00,040 --> 00:37:02,880
Speaker 5: right that all of these problems are not getting worse,

757
00:37:03,360 --> 00:37:04,719
Speaker 5: but if you look at where they are in terms

758
00:37:04,760 --> 00:37:07,560
Speaker 5: of costs, they're still high, which is making it hard

759
00:37:07,640 --> 00:37:10,120
Speaker 5: for builders to be able to.

760
00:37:10,040 --> 00:37:11,960
Speaker 4: Bring a home to the market at a reasonable price point.

761
00:37:12,120 --> 00:37:13,799
Speaker 1: I'm glad you brought that up because I meant to

762
00:37:13,880 --> 00:37:16,440
Speaker 1: ask about that. I remember one of the bottlenecks, and

763
00:37:16,520 --> 00:37:18,800
Speaker 1: there were a few stories where it's like these government

764
00:37:18,960 --> 00:37:23,000
Speaker 1: offices in these places are just completely overwhelmed by like

765
00:37:23,040 --> 00:37:25,680
Speaker 1: the literal paperwork aspect of it. There's always so many

766
00:37:25,680 --> 00:37:28,520
Speaker 1: public sector employees, and we know that homebuilders have had

767
00:37:28,520 --> 00:37:31,520
Speaker 1: a hard time like hiring, but also public sector is

768
00:37:31,719 --> 00:37:34,400
Speaker 1: you know, continues to be in short supply of labor.

769
00:37:34,680 --> 00:37:37,279
Speaker 1: But that's still a constraint. Even after all this time

770
00:37:37,360 --> 00:37:40,120
Speaker 1: that the sort of permitting authorities, the paperwork authorities are

771
00:37:40,120 --> 00:37:41,640
Speaker 1: still they're still overworked.

772
00:37:43,040 --> 00:37:46,320
Speaker 5: Yeah, it's slow processing time, and it applies to permits,

773
00:37:46,360 --> 00:37:49,839
Speaker 5: it applies to inspections, but it also applies to the

774
00:37:50,000 --> 00:37:52,400
Speaker 5: land and lot development. I do want to say one

775
00:37:52,480 --> 00:37:55,000
Speaker 5: thing though, because as we think about the constraints, so yes,

776
00:37:55,239 --> 00:37:59,240
Speaker 5: a huge component is the regulatory component that's slowing.

777
00:37:58,920 --> 00:38:01,680
Speaker 4: Down the ability to get more homes built quickly.

778
00:38:02,080 --> 00:38:04,759
Speaker 5: But another thing, when you talk about supply chain, Yes,

779
00:38:04,920 --> 00:38:08,319
Speaker 5: the cycle times are generally within reason of.

780
00:38:08,280 --> 00:38:11,640
Speaker 4: Where they were going into the pandemic. But transformers are

781
00:38:11,719 --> 00:38:13,160
Speaker 4: still a massive issue.

782
00:38:13,320 --> 00:38:17,400
Speaker 5: Transformers are holding up the horizontal development to get land ready,

783
00:38:17,640 --> 00:38:19,760
Speaker 5: and then builders are saying that they've started a home

784
00:38:19,960 --> 00:38:21,920
Speaker 5: and then they can't get electricity to the home, and

785
00:38:21,960 --> 00:38:23,640
Speaker 5: then they have to pause on that too. So I

786
00:38:23,640 --> 00:38:27,080
Speaker 5: wouldn't say everything solved. Kind of the flavor of the

787
00:38:27,120 --> 00:38:29,399
Speaker 5: week right now is transformers in the role it's playing

788
00:38:29,440 --> 00:38:29,920
Speaker 5: in the market.

789
00:38:30,480 --> 00:38:32,640
Speaker 2: Yeah, this was why I asked that question about stretch

790
00:38:32,760 --> 00:38:35,800
Speaker 2: time frames. And whether or not that's sort of obscuring

791
00:38:35,840 --> 00:38:39,000
Speaker 2: a lot of the real demand. But Ali, maybe one

792
00:38:39,000 --> 00:38:41,439
Speaker 2: more question from me, but what are you looking at

793
00:38:41,480 --> 00:38:44,360
Speaker 2: in terms of the catalyst for the rest of the

794
00:38:44,440 --> 00:38:48,240
Speaker 2: year and something that could change the way the market

795
00:38:48,360 --> 00:38:51,160
Speaker 2: has so far been functioning, which is, you know, in

796
00:38:51,200 --> 00:38:53,960
Speaker 2: terms of at least house prices and activity, we have

797
00:38:54,120 --> 00:38:56,360
Speaker 2: seen it be relatively resilient.

798
00:38:58,360 --> 00:39:00,200
Speaker 4: Yeah, I think we're tracking.

799
00:39:00,560 --> 00:39:05,080
Speaker 5: What we know is consumer confidence can change instantly, So

800
00:39:05,440 --> 00:39:09,320
Speaker 5: we're tracking what happens with consumer confidence, and it's something

801
00:39:09,360 --> 00:39:12,719
Speaker 5: where it literally can be weekend to weekend or day

802
00:39:12,719 --> 00:39:13,080
Speaker 5: by day.

803
00:39:13,080 --> 00:39:15,560
Speaker 4: A builder will say, oh, this article.

804
00:39:15,239 --> 00:39:17,239
Speaker 5: Came out, the consumers read it and they said, you

805
00:39:17,280 --> 00:39:19,040
Speaker 5: know what, I feel weird about the market. So I

806
00:39:19,040 --> 00:39:22,640
Speaker 5: think there's still headline risk. I think there's still economic risk.

807
00:39:23,000 --> 00:39:26,080
Speaker 5: I think there's still mortgage rate risk. As to how

808
00:39:26,120 --> 00:39:29,040
Speaker 5: the market goes, we didn't talk about investors who are

809
00:39:29,040 --> 00:39:31,200
Speaker 5: not as active today, but if there's any kind of

810
00:39:31,239 --> 00:39:35,080
Speaker 5: financial distress to investors or flippers that may want them

811
00:39:35,120 --> 00:39:38,120
Speaker 5: to offload any of their homes, I don't think it'll

812
00:39:38,120 --> 00:39:41,800
Speaker 5: happen that quick. But we're still watching investors as it

813
00:39:41,840 --> 00:39:45,080
Speaker 5: plays into the market and also, I think tracking that

814
00:39:45,120 --> 00:39:48,600
Speaker 5: pent up demand. How much of this is sustainable demand

815
00:39:48,960 --> 00:39:51,600
Speaker 5: and how much of this is people that didn't buy

816
00:39:51,600 --> 00:39:53,480
Speaker 5: in the third and fourth quarter of last year that

817
00:39:53,520 --> 00:39:56,320
Speaker 5: are accepting the new reality they've returned to the market.

818
00:39:56,520 --> 00:39:58,920
Speaker 4: But it's not that deep of a pool.

819
00:39:59,120 --> 00:40:00,920
Speaker 5: It's only a select pie people that are willing to

820
00:40:00,920 --> 00:40:03,839
Speaker 5: give up their interest rate or are able to buy

821
00:40:03,920 --> 00:40:04,800
Speaker 5: in today's market.

822
00:40:05,360 --> 00:40:07,719
Speaker 1: All right, I have one more question, and it's kind

823
00:40:07,760 --> 00:40:09,879
Speaker 1: of a wild card, and I've never asked a question

824
00:40:10,000 --> 00:40:12,600
Speaker 1: like this before, but I asked this question to chat

825
00:40:12,640 --> 00:40:15,319
Speaker 1: GPT and I was really unimpressed with the answer because

826
00:40:15,320 --> 00:40:17,359
Speaker 1: I said, all right, what's the next Austin, Like, what's

827
00:40:17,360 --> 00:40:18,000
Speaker 1: the next hot Citi?

828
00:40:18,080 --> 00:40:19,760
Speaker 3: And it was like Bozeman, Montana.

829
00:40:19,800 --> 00:40:21,360
Speaker 1: I'm like, yeah, I know, I've read like one hundred

830
00:40:21,440 --> 00:40:24,600
Speaker 1: articles about Bozeman, Montana. What is a market that is

831
00:40:24,719 --> 00:40:28,200
Speaker 1: genuinely under the radar in your view but actually interesting

832
00:40:28,360 --> 00:40:30,000
Speaker 1: in terms of where things are bubbling up?

833
00:40:30,640 --> 00:40:34,200
Speaker 5: So what I will say is under the radar is

834
00:40:34,280 --> 00:40:36,759
Speaker 5: tricky because anything that was under the radar became on

835
00:40:36,840 --> 00:40:39,239
Speaker 5: the radar if it was attractive over the past couple

836
00:40:39,239 --> 00:40:43,200
Speaker 5: of years. So I don't want to say Charleston or

837
00:40:43,480 --> 00:40:47,279
Speaker 5: Greenville or any of the small markets in the southeast,

838
00:40:47,320 --> 00:40:49,320
Speaker 5: because those are not hidden gems anymore.

839
00:40:49,400 --> 00:40:51,840
Speaker 3: Right, right, we know about markets.

840
00:40:51,360 --> 00:40:53,720
Speaker 4: That I think potentially could grow.

841
00:40:54,400 --> 00:40:59,000
Speaker 5: I always want to look at interstate highway connectivity, in airports.

842
00:40:59,480 --> 00:41:02,440
Speaker 5: You want to look at a share of the population

843
00:41:02,800 --> 00:41:07,759
Speaker 5: that's relatively young that maybe still doesn't have the whole

844
00:41:07,760 --> 00:41:10,640
Speaker 5: ownership rate is allowing them to it's low enough that

845
00:41:10,640 --> 00:41:11,760
Speaker 5: it's allowing for mobility.

846
00:41:12,360 --> 00:41:14,680
Speaker 4: You want to see some kind of job stability.

847
00:41:15,200 --> 00:41:18,320
Speaker 5: I am not biased, but I do think Columbus, Ohio

848
00:41:18,600 --> 00:41:21,560
Speaker 5: is still a market that has the potential to grow.

849
00:41:22,080 --> 00:41:25,440
Speaker 5: I think Richmond, Virginia is a market that has a

850
00:41:25,480 --> 00:41:28,520
Speaker 5: lot of the It's close enough to DC, close enough

851
00:41:28,560 --> 00:41:30,799
Speaker 5: to employment center, it has its own employment base, it

852
00:41:30,840 --> 00:41:33,840
Speaker 5: has the interstate highway system. I think that that market

853
00:41:33,960 --> 00:41:38,640
Speaker 5: has some potential. Thinking further out, Portland is not under

854
00:41:38,640 --> 00:41:40,480
Speaker 5: the radar and that you don't know it, but it's

855
00:41:40,480 --> 00:41:42,440
Speaker 5: a market that didn't really boom like some of the

856
00:41:42,440 --> 00:41:43,879
Speaker 5: other areas because there was.

857
00:41:43,880 --> 00:41:45,560
Speaker 3: Some which one which.

858
00:41:45,600 --> 00:41:48,239
Speaker 4: Stigma about living in Portland, Oregon, oh Orgon.

859
00:41:48,320 --> 00:41:51,800
Speaker 5: Yeah, yeah, and so I think that market can still

860
00:41:51,920 --> 00:41:54,520
Speaker 5: see a lot more growth relative to what it has seen.

861
00:41:55,200 --> 00:41:56,120
Speaker 4: But again, I mean.

862
00:41:56,000 --> 00:41:59,959
Speaker 5: Even the Fayettevilles of the world have become on the map,

863
00:42:00,320 --> 00:42:01,359
Speaker 5: so it's really hard to.

864
00:42:01,320 --> 00:42:06,400
Speaker 1: Point and I were there and year ago. Crazy, it

865
00:42:06,400 --> 00:42:09,400
Speaker 1: feels nice, but yeah, definitely not. That answer was so

866
00:42:09,480 --> 00:42:12,840
Speaker 1: much better than the GPT answer. Allie, Well, thank you

867
00:42:12,880 --> 00:42:15,680
Speaker 1: so much for coming back. That was such a helpful conversation.

868
00:42:15,880 --> 00:42:18,000
Speaker 1: I really appreciate you coming back on Odd Loves.

869
00:42:18,200 --> 00:42:19,120
Speaker 4: Thank you for having me.

870
00:42:19,160 --> 00:42:20,520
Speaker 2: Thank so much, Ali, that was great.

871
00:42:20,640 --> 00:42:35,960
Speaker 1: That was really good. I love talking to Ellie so much,

872
00:42:36,040 --> 00:42:39,440
Speaker 1: just so much, like I just find her to be

873
00:42:39,480 --> 00:42:42,239
Speaker 1: really good about big picture like themes, but also knows

874
00:42:42,280 --> 00:42:45,560
Speaker 1: so much manular, granular specific data that I just feel

875
00:42:45,600 --> 00:42:47,080
Speaker 1: like I learned a lot from her.

876
00:42:47,160 --> 00:42:48,799
Speaker 2: No, there were a bunch of things that jumped out

877
00:42:48,800 --> 00:42:50,759
Speaker 2: at me from that episode. One of them was this

878
00:42:50,840 --> 00:42:53,840
Speaker 2: idea of the third option, which we're so used to

879
00:42:53,960 --> 00:42:57,880
Speaker 2: talking about housing in terms of like you have two options,

880
00:42:57,920 --> 00:43:01,640
Speaker 2: two binary options, you either buy house or you rent yea,

881
00:43:01,880 --> 00:43:04,920
Speaker 2: And over the past year or two, because of high inflation,

882
00:43:05,160 --> 00:43:07,640
Speaker 2: there was this argument that like, oh, it's actually a

883
00:43:07,680 --> 00:43:10,440
Speaker 2: way of protecting yourself from higher prices, from higher rent

884
00:43:10,560 --> 00:43:13,480
Speaker 2: if you go out and buy a house, get a mortgage.

885
00:43:13,680 --> 00:43:16,319
Speaker 2: But there is that third option, which is you just

886
00:43:16,400 --> 00:43:19,000
Speaker 2: opt out of the market entirely and say, you know what,

887
00:43:19,120 --> 00:43:22,600
Speaker 2: rent prices are crazy, house prices are crazy. I'm going

888
00:43:22,680 --> 00:43:25,480
Speaker 2: to move in with some roommates or move back with

889
00:43:25,560 --> 00:43:26,080
Speaker 2: my family.

890
00:43:26,440 --> 00:43:27,640
Speaker 1: So should we split a house?

891
00:43:27,760 --> 00:43:28,440
Speaker 3: Should we split?

892
00:43:28,440 --> 00:43:28,760
Speaker 5: Ah?

893
00:43:28,880 --> 00:43:31,480
Speaker 2: Honestly, this would save me a lot of money.

894
00:43:31,640 --> 00:43:31,879
Speaker 3: Same.

895
00:43:32,200 --> 00:43:35,080
Speaker 1: There's another thing that she brought up that is one

896
00:43:35,080 --> 00:43:37,600
Speaker 1: of these things that I've wanted to do an episode

897
00:43:37,680 --> 00:43:40,600
Speaker 1: on for a long time, electrical components. If you go

898
00:43:40,640 --> 00:43:44,319
Speaker 1: to the ISM Manufacturing Survey, there is a section in

899
00:43:44,360 --> 00:43:47,600
Speaker 1: there on commodities and short supply, and there are not

900
00:43:47,719 --> 00:43:49,920
Speaker 1: many left because actually most of the most of the

901
00:43:49,920 --> 00:43:53,640
Speaker 1: supply chain crises have or problems have like eased. But

902
00:43:53,800 --> 00:43:56,000
Speaker 1: the number of consecutive months the commodity that's been in

903
00:43:56,000 --> 00:43:59,399
Speaker 1: short supply, electrical components thirty straight months have been listed

904
00:43:59,440 --> 00:44:03,920
Speaker 1: in short supply. The next most common is electronic components

905
00:44:04,200 --> 00:44:07,000
Speaker 1: twenty eight straight months. So this remains like this huge

906
00:44:07,040 --> 00:44:09,480
Speaker 1: bottleneck to everything. And then when you think like layering

907
00:44:09,560 --> 00:44:12,799
Speaker 1: on the Inflation Reduction Act in right and energy investments, etc.

908
00:44:13,440 --> 00:44:15,560
Speaker 1: This is still just like and I don't think many

909
00:44:15,560 --> 00:44:17,239
Speaker 1: people are talking about it, so I'm really glad that

910
00:44:17,480 --> 00:44:18,319
Speaker 1: Ali brought that up.

911
00:44:18,400 --> 00:44:21,120
Speaker 2: Well, since we're on the subject of bottlenecks, this is

912
00:44:21,160 --> 00:44:23,120
Speaker 2: something else that kind of jumped out at me from

913
00:44:23,160 --> 00:44:26,600
Speaker 2: that conversation. It's the idea of, like, maybe what we

914
00:44:26,719 --> 00:44:30,719
Speaker 2: are seeing is a classic bullwhip effect amongst the home

915
00:44:30,719 --> 00:44:34,000
Speaker 2: builders themselves. Yeah, because they know that time frames to

916
00:44:34,120 --> 00:44:38,160
Speaker 2: complete construction have become much longer. They know that it

917
00:44:38,280 --> 00:44:40,920
Speaker 2: takes a lot longer to get permits and things like that,

918
00:44:41,000 --> 00:44:43,960
Speaker 2: So why not start now and even if the market

919
00:44:44,000 --> 00:44:46,600
Speaker 2: softens a little bit down the road, you'll be better prepared.

920
00:44:46,680 --> 00:44:49,040
Speaker 1: And I just think it was a question of Powell

921
00:44:49,040 --> 00:44:50,720
Speaker 1: at the end of last year, and it was basically

922
00:44:50,760 --> 00:44:52,200
Speaker 1: one of these questions like what do you say to

923
00:44:52,239 --> 00:44:55,040
Speaker 1: the person who wants to buy a house and your

924
00:44:55,120 --> 00:44:57,360
Speaker 1: Jackie up raids and what do you say to that

925
00:44:57,440 --> 00:45:00,359
Speaker 1: first time home buyer? And his answer was something like, yeah,

926
00:45:00,400 --> 00:45:02,680
Speaker 1: it's not great that rates are going up. We acknowledge

927
00:45:02,680 --> 00:45:06,040
Speaker 1: the pain, but this is a necessary step to bring

928
00:45:06,080 --> 00:45:08,200
Speaker 1: basically some level of sanity.

929
00:45:07,800 --> 00:45:08,640
Speaker 3: Back to this market.

930
00:45:09,000 --> 00:45:11,160
Speaker 1: And I see no evidence that that's happened.

931
00:45:11,160 --> 00:45:12,000
Speaker 3: If anything, it just.

932
00:45:11,920 --> 00:45:16,640
Speaker 1: Seems even more greater more bull whipping, more uncertain more

933
00:45:16,719 --> 00:45:19,959
Speaker 1: reasons for homebuilders to not be able to plan these

934
00:45:20,040 --> 00:45:23,000
Speaker 1: different timeframes, as you mentioned, with the sort of like

935
00:45:23,239 --> 00:45:25,600
Speaker 1: you know, the sort of just the longer cycle, the

936
00:45:25,719 --> 00:45:29,279
Speaker 1: multi year cycle for land acquisition. I do not get

937
00:45:29,280 --> 00:45:32,399
Speaker 1: this sentence that the rate hikes, whether good or bad, said,

938
00:45:32,600 --> 00:45:35,360
Speaker 1: have done much to restore something that people would resemble

939
00:45:35,600 --> 00:45:36,560
Speaker 1: a healthy housing market.

940
00:45:36,640 --> 00:45:39,480
Speaker 2: Well, also, if you're talking about inflation and you know,

941
00:45:39,680 --> 00:45:43,360
Speaker 2: consumer power, it seems like there is still a large

942
00:45:43,760 --> 00:45:47,439
Speaker 2: bulk of those that own homes who just like are

943
00:45:47,480 --> 00:45:50,160
Speaker 2: not necessarily feeling any constraints at the moment. They would

944
00:45:50,160 --> 00:45:54,520
Speaker 2: have gotten mortgages at relatively low rates, their home prices

945
00:45:54,600 --> 00:45:57,640
Speaker 2: are still relatively high, and it feels like they have

946
00:45:57,680 --> 00:45:59,000
Speaker 2: a lot of bargaining power still.

947
00:45:59,360 --> 00:46:00,960
Speaker 1: And all the boer are going to move to the

948
00:46:00,960 --> 00:46:03,799
Speaker 1: boomtown that too, the boomberg boomtowns. I was like, Oh,

949
00:46:03,800 --> 00:46:05,720
Speaker 1: they're all going to move to Phoenix and the places

950
00:46:05,719 --> 00:46:06,480
Speaker 1: where their kids are.

951
00:46:06,560 --> 00:46:09,480
Speaker 2: So it always comes back to boomers. We can we

952
00:46:09,480 --> 00:46:12,319
Speaker 2: can end every episode of Odd Lots by blaming baby

953
00:46:12,360 --> 00:46:14,480
Speaker 2: boomers for something. But shall we leave it there?

954
00:46:14,560 --> 00:46:15,640
Speaker 1: Let's leave it there, all right?

955
00:46:15,760 --> 00:46:18,440
Speaker 2: This has been another episode of the Odd Lots podcast.

956
00:46:18,480 --> 00:46:21,120
Speaker 2: I'm Tracy Alloway. You can follow me on Twitter at

957
00:46:21,160 --> 00:46:21,840
Speaker 2: Tracy Alloway.

958
00:46:21,960 --> 00:46:23,120
Speaker 3: And I'm Joe Wisenthal.

959
00:46:23,200 --> 00:46:26,160
Speaker 1: You can follow me on Twitter at the Stalwart, follow

960
00:46:26,200 --> 00:46:30,280
Speaker 1: our producers Carmen Rodriguez at Carmen Arman and Dashel Bennett

961
00:46:30,320 --> 00:46:33,520
Speaker 1: at Dashbot. And check out all of the Bloomberg podcasts

962
00:46:33,560 --> 00:46:37,279
Speaker 1: on Twitter under the handle at podcasts. And for more

963
00:46:37,280 --> 00:46:40,720
Speaker 1: Oddlogs content, go to Bloomberg dot Bloomberg dot com slash

964
00:46:40,760 --> 00:46:43,440
Speaker 1: odd Lots. We post transcripts, we have a blog, we

965
00:46:43,520 --> 00:46:46,880
Speaker 1: have a newsletter that comes out Friday. And for even more,

966
00:46:47,239 --> 00:46:50,960
Speaker 1: check out our discord where listeners and viewers are chatting

967
00:46:51,000 --> 00:46:53,160
Speaker 1: twenty four seven about all of these topics. We have

968
00:46:53,160 --> 00:46:55,120
Speaker 1: a great real estate channel in there, one of the

969
00:46:55,120 --> 00:46:57,880
Speaker 1: most active ones. All kinds of interesting stories getting posted

970
00:46:57,880 --> 00:47:00,319
Speaker 1: from around the country. What's really happening in the real

971
00:47:00,440 --> 00:47:01,080
Speaker 1: estate market.

972
00:47:01,400 --> 00:47:03,920
Speaker 3: Go there and check it out. Thanks for listening.