1 00:00:03,240 --> 00:00:07,600 Speaker 1: This is Masters in Business with Barry Ridholts on Bloomberg Radio. 2 00:00:08,960 --> 00:00:12,319 Speaker 1: This week. On the podcast, We're gonna try something a 3 00:00:12,360 --> 00:00:16,360 Speaker 1: little bit different, and I'll explain exactly what that is. 4 00:00:16,400 --> 00:00:18,599 Speaker 1: I brought in a guest who really is kind of 5 00:00:18,600 --> 00:00:24,040 Speaker 1: a Cheaty's and old friends, so experimenting really isn't I'm 6 00:00:24,040 --> 00:00:26,560 Speaker 1: not out on a high wire without a net. I'm 7 00:00:26,560 --> 00:00:29,960 Speaker 1: working with someone I know really well, so it allows 8 00:00:29,960 --> 00:00:32,879 Speaker 1: me a little freedom to try something different. Look, the 9 00:00:32,880 --> 00:00:36,479 Speaker 1: whole idea behind this show, the whole idea behind Masters 10 00:00:36,520 --> 00:00:40,680 Speaker 1: and in Business is that you're eavesdropping on a conversation 11 00:00:40,800 --> 00:00:45,960 Speaker 1: between at least two reasonably intelligent people having a thoughtful 12 00:00:46,520 --> 00:00:52,280 Speaker 1: conversation about issues that are of significance. Ends. What ends 13 00:00:52,360 --> 00:00:57,279 Speaker 1: up happening, partly through my own paranoia and partly through 14 00:00:57,280 --> 00:01:00,720 Speaker 1: a desire to be thorough and prepared, is that we 15 00:01:00,840 --> 00:01:04,520 Speaker 1: create a run of questions in five different segments, and 16 00:01:04,640 --> 00:01:08,480 Speaker 1: each question leads to a different question, and what's supposed 17 00:01:08,520 --> 00:01:12,640 Speaker 1: to be a conversation really becomes a bit of a 18 00:01:12,720 --> 00:01:15,760 Speaker 1: Q and a There are a small handful of you, 19 00:01:15,959 --> 00:01:18,840 Speaker 1: a very small handful of you that I know, deep 20 00:01:18,880 --> 00:01:21,680 Speaker 1: down inside wish that I would just shut the heck 21 00:01:21,800 --> 00:01:25,640 Speaker 1: up and let the guests uh speak and and that 22 00:01:25,680 --> 00:01:27,840 Speaker 1: would be really boring for me to just sit here 23 00:01:27,840 --> 00:01:30,280 Speaker 1: and read a list of questions. So for those of 24 00:01:30,280 --> 00:01:33,959 Speaker 1: you who are hoping this episode is Barry reading questions 25 00:01:34,040 --> 00:01:37,119 Speaker 1: and shutting up, I'm really sorry to disappoint you. In fact, 26 00:01:38,000 --> 00:01:41,479 Speaker 1: this is the opposite. And instead of writing out um, 27 00:01:41,760 --> 00:01:48,000 Speaker 1: normally we do four, six, five, seven, and twelve questions 28 00:01:48,080 --> 00:01:51,600 Speaker 1: for each of the segments, I just have really really 29 00:01:51,840 --> 00:01:55,360 Speaker 1: broad topics and Jonathan and I are by the way, 30 00:01:55,400 --> 00:01:59,200 Speaker 1: my special guest this week is Jonathan Miller of Miller Samuel. 31 00:01:59,280 --> 00:02:01,600 Speaker 1: I know him from mill of matrix is blog as 32 00:02:01,600 --> 00:02:04,560 Speaker 1: well as his podcast. What was that like eight years ago? 33 00:02:04,640 --> 00:02:08,079 Speaker 1: I started three years ago? It seemed much longer. Um 34 00:02:08,760 --> 00:02:12,079 Speaker 1: that's right. Um. So, so this is gonna be a 35 00:02:12,160 --> 00:02:15,680 Speaker 1: little more informal, a little more conversational, and I'm actually 36 00:02:15,720 --> 00:02:20,480 Speaker 1: recording this intro before we do the show, so who 37 00:02:20,480 --> 00:02:22,600 Speaker 1: knows how this is gonna come out, but I wanted 38 00:02:22,600 --> 00:02:25,160 Speaker 1: to try something a little different and let's see how 39 00:02:25,160 --> 00:02:29,359 Speaker 1: it how it rolls, So, with no further ado, here 40 00:02:29,440 --> 00:02:34,520 Speaker 1: is my conversation, and literally my conversation with Jonathan Miller. 41 00:02:38,560 --> 00:02:42,880 Speaker 1: This is Master's in Business with Barry Ridholts on Bloomberg Radio. 42 00:02:43,440 --> 00:02:46,520 Speaker 1: This week on Masters in Business on Bloomberg Radio, my 43 00:02:46,680 --> 00:02:50,840 Speaker 1: special guest is Jonathan Miller of Miller Samuel. Jonathan is 44 00:02:50,880 --> 00:02:55,840 Speaker 1: probably best known to fans of real estate as a 45 00:02:55,840 --> 00:03:01,440 Speaker 1: appraiser extraordinaire. He now really uh special shalizes not only 46 00:03:01,480 --> 00:03:07,160 Speaker 1: in data crunching and looking at the analytics behind real estate, 47 00:03:07,240 --> 00:03:11,640 Speaker 1: both residential and commercial, but also looking at the high 48 00:03:11,840 --> 00:03:16,040 Speaker 1: ends ultra lux real estate here in Manhattan as well 49 00:03:16,080 --> 00:03:20,280 Speaker 1: as around the country. Jonathan, welcome to Bloomberg. Are great 50 00:03:20,280 --> 00:03:23,080 Speaker 1: to be here, Barry. So those of you who are 51 00:03:23,280 --> 00:03:28,360 Speaker 1: real estate fans are certainly familiar with Jonathan's work. He 52 00:03:28,600 --> 00:03:31,280 Speaker 1: is the engine that powers a number of real estate 53 00:03:31,320 --> 00:03:35,560 Speaker 1: companies and agencies companies own. I shouldn't really call it 54 00:03:35,600 --> 00:03:39,160 Speaker 1: internal data, but you're the driver behind some of the 55 00:03:39,160 --> 00:03:42,560 Speaker 1: biggest names in real estate. The glossy brochures they put 56 00:03:42,560 --> 00:03:44,360 Speaker 1: out with all the all the data. That's well, the 57 00:03:44,440 --> 00:03:48,080 Speaker 1: key word there was glossy, I think, but now I uh. 58 00:03:48,120 --> 00:03:52,080 Speaker 1: For twenty two years, my myself and my firm, Miller Samuel, 59 00:03:52,120 --> 00:03:57,280 Speaker 1: we have published or crunch numbers for the big real 60 00:03:57,400 --> 00:04:01,400 Speaker 1: estate brokerage firm in New York called glas Elman Dugan 61 00:04:01,440 --> 00:04:05,000 Speaker 1: Selman is the fourth largest residential real estate company in 62 00:04:05,040 --> 00:04:10,600 Speaker 1: the country after all the big franchises, the cast of characters, uh, 63 00:04:10,640 --> 00:04:13,600 Speaker 1: and the idea behind it is that I can speak 64 00:04:13,720 --> 00:04:17,120 Speaker 1: independently of them. You know that they know that I 65 00:04:17,200 --> 00:04:20,240 Speaker 1: know what I'm talking about, and it's been a great 66 00:04:20,279 --> 00:04:24,040 Speaker 1: relationship for twenty two years. I basically speak in my 67 00:04:24,080 --> 00:04:26,800 Speaker 1: mind about what's happening in the housing market, and they're 68 00:04:26,839 --> 00:04:29,320 Speaker 1: happy to hear the unvarnished truth and let the chips 69 00:04:29,320 --> 00:04:31,640 Speaker 1: full where they make yes. And you would think that 70 00:04:31,839 --> 00:04:35,080 Speaker 1: more companies would be like that because the whole they're 71 00:04:35,080 --> 00:04:39,160 Speaker 1: a transaction based business. So instead of pulling wool over 72 00:04:39,240 --> 00:04:43,320 Speaker 1: somebody's eyes and saying everything is fantastic, you can help 73 00:04:43,360 --> 00:04:46,320 Speaker 1: your client navigate a market that is I'm sure it's 74 00:04:46,320 --> 00:04:49,640 Speaker 1: a lot like the financial markets in that regard of 75 00:04:49,640 --> 00:04:53,240 Speaker 1: of you know, strategies and thinking, and some people do 76 00:04:53,440 --> 00:04:56,719 Speaker 1: very well in down markets. I spent the better part 77 00:04:56,800 --> 00:05:02,000 Speaker 1: of the mid aughts mercilessly mocking the National Association of Realtors, 78 00:05:02,480 --> 00:05:06,120 Speaker 1: better known as n a R, for there always cheerful 79 00:05:06,240 --> 00:05:09,880 Speaker 1: reports and it was just a constant. It's always a 80 00:05:09,880 --> 00:05:14,080 Speaker 1: great still is it less so? But it's still there's 81 00:05:14,120 --> 00:05:19,040 Speaker 1: still a sunny side as the as the the the 82 00:05:19,080 --> 00:05:26,120 Speaker 1: current chief economists nickname Sonny Sonny June, right, is that 83 00:05:26,200 --> 00:05:31,200 Speaker 1: his name, Lauren June. Yes, I recall the infamous UM 84 00:05:31,360 --> 00:05:33,880 Speaker 1: material they put out cold It's always a great time 85 00:05:34,320 --> 00:05:36,320 Speaker 1: to buy or sell a house. And I think all 86 00:05:36,320 --> 00:05:39,760 Speaker 1: of Wall Street laughed at that, because well, look, it's 87 00:05:39,760 --> 00:05:41,520 Speaker 1: either a good time to buy something or a good 88 00:05:41,520 --> 00:05:43,760 Speaker 1: time to sell something. But it can't be a good 89 00:05:43,760 --> 00:05:46,520 Speaker 1: time to buy or sell something unless you're the guy 90 00:05:46,560 --> 00:05:52,719 Speaker 1: getting the commission. So that was that was their reputation. 91 00:05:53,320 --> 00:05:56,800 Speaker 1: You're actually telling us that not every real estate agency 92 00:05:56,960 --> 00:05:59,840 Speaker 1: follows that. Yeah, I mean, you know, they are in 93 00:05:59,880 --> 00:06:03,400 Speaker 1: the selling business and are you know, certainly does a 94 00:06:03,400 --> 00:06:06,000 Speaker 1: lot of good things for their members. I'm sure, but 95 00:06:06,120 --> 00:06:08,799 Speaker 1: it is a trade group, you can mention, I'm sure, 96 00:06:08,960 --> 00:06:15,200 Speaker 1: but I can't really know. But estate, this was I'm 97 00:06:15,200 --> 00:06:17,920 Speaker 1: giving you the benefit of the doubt, right, But but 98 00:06:17,920 --> 00:06:23,440 Speaker 1: but you know, I think the whole idea of UM conveying, Look, 99 00:06:23,480 --> 00:06:26,839 Speaker 1: the consumer has everything in their fingertips, so you could 100 00:06:26,839 --> 00:06:29,200 Speaker 1: search for anything you want on Zelo A Trilia you 101 00:06:29,240 --> 00:06:32,560 Speaker 1: can go to all these websites. You can find a mortgage, 102 00:06:32,560 --> 00:06:34,800 Speaker 1: you could find a house, you could do uh, practically 103 00:06:34,800 --> 00:06:37,000 Speaker 1: a fly through of just about any house. I think. 104 00:06:37,200 --> 00:06:40,760 Speaker 1: I think the larger picture is that the role of 105 00:06:40,800 --> 00:06:44,720 Speaker 1: the real estate brokerage company or agent is no longer 106 00:06:44,800 --> 00:06:48,159 Speaker 1: the gatekeeper. And I think that that's that sentiment or 107 00:06:48,160 --> 00:06:52,760 Speaker 1: mentality that still exists in some some firms that you know, 108 00:06:52,880 --> 00:06:55,400 Speaker 1: we don't we don't want to be completely open because 109 00:06:55,400 --> 00:06:58,680 Speaker 1: we want to control the transaction and U Yet the 110 00:06:58,760 --> 00:07:03,479 Speaker 1: consumer now as access to virtually everything, but they still 111 00:07:03,520 --> 00:07:07,640 Speaker 1: need guidance. What's really amazing is during periods where you 112 00:07:07,680 --> 00:07:12,640 Speaker 1: have significant housing demand tight inventory, you see a lot 113 00:07:12,680 --> 00:07:15,640 Speaker 1: of startups that hey, we're going to replace the broker. 114 00:07:16,040 --> 00:07:20,040 Speaker 1: But the second that the market turns, all those companies 115 00:07:20,080 --> 00:07:24,200 Speaker 1: go under and all of a sudden, everybody needs handholding again. 116 00:07:24,360 --> 00:07:27,440 Speaker 1: So we have this sort of up and down psychle 117 00:07:27,480 --> 00:07:30,520 Speaker 1: that we see as markets go up and down. There 118 00:07:30,520 --> 00:07:33,280 Speaker 1: are some really broad and fascinating questions I want to 119 00:07:33,320 --> 00:07:36,200 Speaker 1: get to in a little while, but before we do 120 00:07:36,240 --> 00:07:40,720 Speaker 1: that multiple listing service was at one point in time 121 00:07:41,040 --> 00:07:45,720 Speaker 1: that gatekeeper that actually had all the data, and it 122 00:07:45,760 --> 00:07:49,240 Speaker 1: was unique to them. But once that went online, and 123 00:07:49,280 --> 00:07:52,280 Speaker 1: not only is it MLS dot for US, it's MLS 124 00:07:52,360 --> 00:07:55,240 Speaker 1: dot l I dot com, but it's whatever your local 125 00:07:55,520 --> 00:07:57,840 Speaker 1: region is and they're hundreds of them, right, hundreds of 126 00:07:57,920 --> 00:08:01,200 Speaker 1: versions of it, and everyone from red fin to Zillo 127 00:08:01,320 --> 00:08:04,680 Speaker 1: to Trulia to you name it seems to pull that 128 00:08:04,880 --> 00:08:09,080 Speaker 1: data into their web page. So it all comes pretty 129 00:08:09,160 --> 00:08:12,960 Speaker 1: much from the same database. But still there are things 130 00:08:13,000 --> 00:08:16,080 Speaker 1: that real estate agents know that you can't get from 131 00:08:16,120 --> 00:08:19,440 Speaker 1: that in terms of what are the schools like. I mean, 132 00:08:19,480 --> 00:08:21,400 Speaker 1: you could look at the ranking, but that's not the 133 00:08:21,440 --> 00:08:26,200 Speaker 1: same as actually knowing unenaghble talking to somebody that has 134 00:08:26,240 --> 00:08:29,120 Speaker 1: experienced in the neighbor and it talks to it. What's interesting, though, 135 00:08:29,160 --> 00:08:32,240 Speaker 1: is there's a study that just came out and it 136 00:08:32,280 --> 00:08:35,840 Speaker 1: was forgive me, I don't recall the three markets they tested, 137 00:08:36,320 --> 00:08:39,079 Speaker 1: but it was a study that just came out recently 138 00:08:39,920 --> 00:08:43,920 Speaker 1: that showed that even MLS data, which is supposed to 139 00:08:44,000 --> 00:08:49,559 Speaker 1: be very clean and neutral UH is biased high. The 140 00:08:49,880 --> 00:08:54,960 Speaker 1: pricing is biased high in other based high with the 141 00:08:55,040 --> 00:08:58,760 Speaker 1: listing prices. And and also you know, if it closes, 142 00:08:58,800 --> 00:09:03,480 Speaker 1: the agent will close the the price and report what 143 00:09:03,559 --> 00:09:07,040 Speaker 1: it is, but that number they found in something like 144 00:09:07,120 --> 00:09:10,760 Speaker 1: eight of the cases was a high number was higher 145 00:09:10,800 --> 00:09:14,480 Speaker 1: than what the actual actual price was. You're listening to 146 00:09:14,640 --> 00:09:18,200 Speaker 1: Masters in Business on Bloomberg Radio. My special guest this 147 00:09:18,240 --> 00:09:21,360 Speaker 1: week is Jonathan Miller of Miller Samuel. He is an 148 00:09:21,360 --> 00:09:25,600 Speaker 1: expert in real estate transactions and appraisals, both here in 149 00:09:25,720 --> 00:09:29,560 Speaker 1: Manhattan and around the country. So, Jonathan, let's talk a 150 00:09:29,559 --> 00:09:31,840 Speaker 1: little bit about some of the new rules that have 151 00:09:31,920 --> 00:09:35,040 Speaker 1: come out over the past couple of months that have 152 00:09:35,280 --> 00:09:38,320 Speaker 1: really caused the stir. The two I'm thinking of, in particular, 153 00:09:38,840 --> 00:09:43,120 Speaker 1: the Consumer Financial Protection Board rules about a waiting period 154 00:09:43,120 --> 00:09:46,720 Speaker 1: on a mortgage were introduced last fall, and that caused 155 00:09:46,760 --> 00:09:49,960 Speaker 1: a lot of rucus. And then just recently, the Treasury 156 00:09:49,960 --> 00:09:54,520 Speaker 1: Department came out with new anti money laundering rules even 157 00:09:54,559 --> 00:09:58,120 Speaker 1: for cash transactions of real estate. Let's let's talk about 158 00:09:58,360 --> 00:10:01,360 Speaker 1: why these rules are here and what impact they're having 159 00:10:01,920 --> 00:10:07,000 Speaker 1: on the housing market. Well, the Treasury rule is a 160 00:10:07,200 --> 00:10:10,600 Speaker 1: temporary rule that is starting March first, and it's supposed 161 00:10:10,640 --> 00:10:14,520 Speaker 1: to last six months. And the idea is or it 162 00:10:14,640 --> 00:10:19,040 Speaker 1: came about from a New York Times front page story 163 00:10:19,120 --> 00:10:22,240 Speaker 1: in early two thousand and fifteen called Towers of Secrecy 164 00:10:23,000 --> 00:10:26,280 Speaker 1: and It was a huge, huge article people hiding money 165 00:10:26,520 --> 00:10:31,000 Speaker 1: correct right, Louise story was I believe it was one 166 00:10:31,040 --> 00:10:33,600 Speaker 1: of the authors at the Times. And it was a 167 00:10:33,720 --> 00:10:39,800 Speaker 1: very well written, big piece with lots of lots of 168 00:10:39,880 --> 00:10:42,680 Speaker 1: data but also lots of visuals on the web and all. 169 00:10:42,720 --> 00:10:45,680 Speaker 1: You know. It was very compelling stuff. And and the 170 00:10:45,800 --> 00:10:51,720 Speaker 1: takeaway was they didn't really link. Uh. It said, yes, 171 00:10:51,840 --> 00:10:55,920 Speaker 1: do people do wealthy people that by high end apartments 172 00:10:55,960 --> 00:10:59,440 Speaker 1: for all cash? Are some of them doing something they 173 00:10:59,480 --> 00:11:02,839 Speaker 1: shouldn't do? And I think the inferred answer is yes. 174 00:11:02,920 --> 00:11:05,520 Speaker 1: And I think any reasonable person would assume that right 175 00:11:05,640 --> 00:11:08,439 Speaker 1: when you say doing something they shouldn't do. So, so 176 00:11:08,760 --> 00:11:13,040 Speaker 1: what an evolent dictator raiding rating their treasury at the 177 00:11:13,160 --> 00:11:16,640 Speaker 1: in the home country and buying a twenty million dollar condo, 178 00:11:16,840 --> 00:11:20,280 Speaker 1: parking it there for a rainy day? Uh, you know, 179 00:11:21,280 --> 00:11:25,280 Speaker 1: a drug deal, some anything elicit where you don't you 180 00:11:25,280 --> 00:11:28,800 Speaker 1: don't want to be traced. So that's the logic. Um, 181 00:11:28,840 --> 00:11:32,440 Speaker 1: the problem is, uh, there wasn't. There's no proof that 182 00:11:32,480 --> 00:11:36,120 Speaker 1: this is a widespread problem. I don't have any personal 183 00:11:36,160 --> 00:11:39,480 Speaker 1: knowledge one way or the other, just basically on the street. 184 00:11:39,480 --> 00:11:41,960 Speaker 1: It's something. It's not something that people just sort of 185 00:11:41,960 --> 00:11:44,480 Speaker 1: brush aside and say let's ignore it. It just isn't 186 00:11:44,480 --> 00:11:48,079 Speaker 1: something that ever comes up in conversations. And so there's 187 00:11:48,120 --> 00:11:51,800 Speaker 1: all kinds of implications or problems with with going this route. 188 00:11:51,960 --> 00:11:55,400 Speaker 1: Um uh in terms of look, if you're if you're 189 00:11:55,440 --> 00:11:58,400 Speaker 1: a billionaire and you're buying a home in Manhattan, a 190 00:11:58,480 --> 00:12:02,640 Speaker 1: pieditear uh for your family. Uh, first you fill out 191 00:12:02,640 --> 00:12:05,880 Speaker 1: a mortgage applicated, right, so so that individual first of 192 00:12:05,880 --> 00:12:09,280 Speaker 1: all doesn't need a mortgage. Secondly, they don't want the 193 00:12:09,280 --> 00:12:13,000 Speaker 1: hassle of that and just and the third is privacy 194 00:12:13,080 --> 00:12:15,880 Speaker 1: or security. You know that they become a target. This 195 00:12:15,960 --> 00:12:19,560 Speaker 1: is a you know, I'm all for transparency up to 196 00:12:19,559 --> 00:12:22,400 Speaker 1: a certain level. But if I recall correctly, the Time 197 00:12:22,480 --> 00:12:27,600 Speaker 1: story had an thing about a number of corporate entities 198 00:12:27,679 --> 00:12:29,400 Speaker 1: and some are here and some are in the camps, 199 00:12:30,400 --> 00:12:33,520 Speaker 1: and they were essentially set up not to hide income 200 00:12:33,600 --> 00:12:36,000 Speaker 1: from the I R s, but for exactly what you're 201 00:12:36,040 --> 00:12:39,360 Speaker 1: talking about, to hide who the owner is, to prevent 202 00:12:39,640 --> 00:12:43,440 Speaker 1: right safety uh, security and secure and and and and 203 00:12:43,480 --> 00:12:46,200 Speaker 1: also to um you know, one of the you know, 204 00:12:46,240 --> 00:12:50,040 Speaker 1: the llc um has been used quite a bit in 205 00:12:50,040 --> 00:12:52,160 Speaker 1: in In fact, I believe the Times article and some 206 00:12:52,240 --> 00:12:54,240 Speaker 1: other things. I've read that at the high end of 207 00:12:54,240 --> 00:12:58,160 Speaker 1: the market, about half of the transactions are LLC have 208 00:12:58,200 --> 00:13:00,920 Speaker 1: an LLC of some form within me, and I've I've 209 00:13:00,960 --> 00:13:04,719 Speaker 1: seen that in other housing markets as well. At the 210 00:13:04,760 --> 00:13:08,720 Speaker 1: high end of the market. Land sales in the Hampton's 211 00:13:08,760 --> 00:13:13,440 Speaker 1: about a third of those last year were either on 212 00:13:13,480 --> 00:13:15,640 Speaker 1: the bye side of the cell side had an LLC 213 00:13:15,760 --> 00:13:18,640 Speaker 1: associated with them. So so let me ask you a 214 00:13:18,720 --> 00:13:23,200 Speaker 1: related question, because you we referred to benevolent dictators. But 215 00:13:23,200 --> 00:13:27,320 Speaker 1: but sometimes it's not such an affaious situation. I'm in 216 00:13:27,440 --> 00:13:30,720 Speaker 1: Vancouver pretty regularly. I speak at a conference there every year, 217 00:13:30,960 --> 00:13:33,000 Speaker 1: or at least I used to until that conference ended. 218 00:13:33,480 --> 00:13:37,800 Speaker 1: And they have what are called see through uh condos 219 00:13:37,840 --> 00:13:41,000 Speaker 1: and see through towers. There are these residential high rises 220 00:13:41,040 --> 00:13:44,680 Speaker 1: their glass they're completely empty. You look, you could literally 221 00:13:44,720 --> 00:13:46,520 Speaker 1: you're on the highway, you drive by, you see right 222 00:13:46,520 --> 00:13:50,840 Speaker 1: through them. But they're fully sold and unoccupied. And I 223 00:13:50,920 --> 00:13:52,960 Speaker 1: asked a couple of real estate people there and they 224 00:13:52,960 --> 00:13:56,079 Speaker 1: all told me the same thing. These are Chinese people 225 00:13:56,080 --> 00:13:58,640 Speaker 1: who still live in China but need to get some 226 00:13:58,720 --> 00:14:01,120 Speaker 1: money out and kind of cree a life raft in 227 00:14:01,160 --> 00:14:03,880 Speaker 1: case you get a little hairy in China in other 228 00:14:03,920 --> 00:14:07,240 Speaker 1: words of yes, it's the same thing, uh, the same 229 00:14:07,280 --> 00:14:11,120 Speaker 1: application we have here. Uh many of the newer, newer 230 00:14:11,200 --> 00:14:13,480 Speaker 1: projects that are being built, especially at the high end 231 00:14:13,480 --> 00:14:16,720 Speaker 1: of the market, are what we call bank safety deposit boxes. 232 00:14:17,200 --> 00:14:21,040 Speaker 1: You put your valuables in there and then you rarely visit, right, 233 00:14:21,080 --> 00:14:26,200 Speaker 1: and so so it's a it's an interesting I think 234 00:14:26,200 --> 00:14:31,600 Speaker 1: that's for nuclear warhouse. But uh, what what's so there's 235 00:14:31,600 --> 00:14:35,480 Speaker 1: so on one hand, there's no there's no evidence that 236 00:14:35,640 --> 00:14:41,239 Speaker 1: it's um that it's a you know, a widespread problem. 237 00:14:41,320 --> 00:14:44,000 Speaker 1: But on the but there's no evidence that it is, 238 00:14:44,040 --> 00:14:46,200 Speaker 1: you know, one or the other. There isn't The problem 239 00:14:46,240 --> 00:14:48,640 Speaker 1: I have with with this as a as a device 240 00:14:48,800 --> 00:14:52,520 Speaker 1: to capture money laundering is that what you end up 241 00:14:52,560 --> 00:14:57,320 Speaker 1: doing is basically throwing a wet blanket over an entire 242 00:14:57,480 --> 00:15:02,240 Speaker 1: real state asset class for perhaps a few bad actors. 243 00:15:02,560 --> 00:15:05,760 Speaker 1: And we don't know if it's two zero, we don't know, 244 00:15:05,880 --> 00:15:07,760 Speaker 1: we don't we don't know what that is. But the 245 00:15:07,840 --> 00:15:11,520 Speaker 1: but the downside to that is this only applies to 246 00:15:11,640 --> 00:15:14,760 Speaker 1: properties three million and above in New York County, in 247 00:15:14,800 --> 00:15:18,960 Speaker 1: Manhattan and one million dollar properties in Miami. The City 248 00:15:18,960 --> 00:15:22,560 Speaker 1: of Miami that's Itami is understandable because also all Miami 249 00:15:22,680 --> 00:15:25,280 Speaker 1: vice drug dealers that was the eighties, right, that was 250 00:15:25,360 --> 00:15:29,240 Speaker 1: that that was that was sort of cocaine cowboys, that 251 00:15:29,360 --> 00:15:32,440 Speaker 1: the whole movie of So so isn't that a little 252 00:15:32,440 --> 00:15:35,560 Speaker 1: odd that it's just two places in the whole country? Right? 253 00:15:35,680 --> 00:15:39,240 Speaker 1: And and so here here you know, the big thing 254 00:15:39,360 --> 00:15:42,200 Speaker 1: that that sort of was a red flag for me 255 00:15:42,280 --> 00:15:45,480 Speaker 1: is that this is only a six month rule. So 256 00:15:45,680 --> 00:15:48,800 Speaker 1: you're encouraging people to not do transactions for six six 257 00:15:48,840 --> 00:15:51,760 Speaker 1: months because all they're gonna do is wait, right, So, 258 00:15:51,880 --> 00:15:54,760 Speaker 1: but you they have the option to renew. If this 259 00:15:54,920 --> 00:15:58,520 Speaker 1: was a widespread, deep problem that the Treasury Department suspected, 260 00:15:58,720 --> 00:16:00,600 Speaker 1: why would it be a six month rule. It would 261 00:16:00,600 --> 00:16:05,360 Speaker 1: be a forever rule. Uh, it's not logical otherwise. So 262 00:16:05,360 --> 00:16:07,880 Speaker 1: so I think because of the sort of political or 263 00:16:07,920 --> 00:16:12,080 Speaker 1: peer pressure um to do something about it. When there 264 00:16:12,120 --> 00:16:14,280 Speaker 1: was this front page New York Time story last year 265 00:16:14,880 --> 00:16:17,360 Speaker 1: and hey, this is low hanging fruit for you know, 266 00:16:17,440 --> 00:16:20,520 Speaker 1: money laundering. Let's you know, let's let's look at this. 267 00:16:21,120 --> 00:16:23,200 Speaker 1: Are you saying this is really in the last minute 268 00:16:23,240 --> 00:16:25,360 Speaker 1: we have in the segment, is this really just an 269 00:16:25,400 --> 00:16:28,880 Speaker 1: optics issue? Looking for a problem or or that's what 270 00:16:28,960 --> 00:16:31,720 Speaker 1: I that's what I believe because of the six month timeline, 271 00:16:31,720 --> 00:16:34,600 Speaker 1: it doesn't make any sense to me. You know, normally, 272 00:16:34,680 --> 00:16:38,600 Speaker 1: my knee jerk reaction isn't to react against regulation. Usually 273 00:16:38,640 --> 00:16:41,720 Speaker 1: when there's regulation, you assume it's there for a good reason. 274 00:16:41,920 --> 00:16:44,880 Speaker 1: You're saying that's not the case. Yeah, that's that's the 275 00:16:44,920 --> 00:16:47,760 Speaker 1: way it looks. And and so what it ends up 276 00:16:47,760 --> 00:16:50,160 Speaker 1: doing is you have a high end housing market that's 277 00:16:50,200 --> 00:16:54,320 Speaker 1: weakening because of overbuilding. Big Bloomberg article last week saying 278 00:16:54,360 --> 00:16:57,560 Speaker 1: that has the uh, the high end luxe market real 279 00:16:57,680 --> 00:17:02,440 Speaker 1: estate peaked, and the article concludes it has I'm Barry Ridhults. 280 00:17:02,600 --> 00:17:06,200 Speaker 1: You're listening to Masters in Business on Bloomberg Radio. My 281 00:17:06,359 --> 00:17:09,479 Speaker 1: special guest this week is Jonathan Miller. He is the 282 00:17:09,520 --> 00:17:13,679 Speaker 1: co founder and CEO of Miller Samuel, a high end 283 00:17:13,800 --> 00:17:18,159 Speaker 1: residential appraisal and data crunching shop. You know, you and 284 00:17:18,200 --> 00:17:20,480 Speaker 1: I have been going back and forth over the years 285 00:17:20,520 --> 00:17:23,720 Speaker 1: about the Case Shiller numbers, which are reported on a 286 00:17:23,720 --> 00:17:26,440 Speaker 1: little bit of a lag, but they're still I think, 287 00:17:26,520 --> 00:17:30,600 Speaker 1: pretty interesting numbers. But they run into the same problem 288 00:17:30,720 --> 00:17:35,199 Speaker 1: that much of residential real estate comes into, which is 289 00:17:36,000 --> 00:17:40,160 Speaker 1: the data ain't all that great. So with Case Schiller, 290 00:17:40,200 --> 00:17:42,680 Speaker 1: it's interesting, Um, I don't know about you, but when 291 00:17:42,680 --> 00:17:45,000 Speaker 1: you get up in the morning, do you take the 292 00:17:45,200 --> 00:17:47,879 Speaker 1: look at the average temperature from six months ago and 293 00:17:47,920 --> 00:17:49,960 Speaker 1: that's what you use as a basis to get dressed. 294 00:17:50,000 --> 00:17:52,119 Speaker 1: I see it was raining six months ago, and then 295 00:17:52,119 --> 00:17:55,000 Speaker 1: I bring an umbrella, right right. So so the problem 296 00:17:55,000 --> 00:17:58,960 Speaker 1: with Case Schiller is it was never designed for consumer consumption. 297 00:17:59,240 --> 00:18:02,159 Speaker 1: It was designed for Wall Street to hedge housing. The 298 00:18:02,240 --> 00:18:04,879 Speaker 1: problem is is that it's a housing is a slow 299 00:18:05,040 --> 00:18:09,720 Speaker 1: moving process. And when you get a number casular number 300 00:18:09,760 --> 00:18:13,240 Speaker 1: released today, the meeting in the minds between buyer and 301 00:18:13,320 --> 00:18:17,679 Speaker 1: seller on that data occurred six months ago, five to 302 00:18:17,760 --> 00:18:20,600 Speaker 1: seven months ago. So let's let's put that into context. 303 00:18:20,960 --> 00:18:25,400 Speaker 1: So data is released on January whatever. So the data 304 00:18:25,480 --> 00:18:30,400 Speaker 1: that came out this month occurred in August before Labor Day. 305 00:18:30,480 --> 00:18:34,320 Speaker 1: So how that's when the transaction took place, which means 306 00:18:34,359 --> 00:18:37,440 Speaker 1: the offer and acceptance and contract was probably a month 307 00:18:37,520 --> 00:18:40,440 Speaker 1: or two before that. So it's really no, no, no, no, 308 00:18:40,640 --> 00:18:44,120 Speaker 1: it's it's that's when the that's when the contract occurred, 309 00:18:44,920 --> 00:18:48,520 Speaker 1: and the transaction was when they would be two months 310 00:18:48,680 --> 00:18:54,320 Speaker 1: three months later. So January we get November data reflecting 311 00:18:54,320 --> 00:18:58,000 Speaker 1: a contract from August something along those lines exactly, except 312 00:18:58,359 --> 00:19:03,000 Speaker 1: that the November data is the average of November, October, 313 00:19:03,119 --> 00:19:06,440 Speaker 1: and September, so it's even more blended. And that's why 314 00:19:06,440 --> 00:19:08,920 Speaker 1: there's really no seasonality that shows up in a Case 315 00:19:08,960 --> 00:19:12,800 Speaker 1: Shiller line to nice Bell curve for the housing crash. 316 00:19:12,880 --> 00:19:16,439 Speaker 1: But that that is sort of one one. It's certainly 317 00:19:16,920 --> 00:19:19,600 Speaker 1: the consumer doesn't understand that as a reason as and 318 00:19:19,960 --> 00:19:23,359 Speaker 1: and I think that the Case Shiller reliance on Case 319 00:19:23,359 --> 00:19:26,920 Speaker 1: Schiller nothing against Robert Chiller, Nobel laureate and all that 320 00:19:27,560 --> 00:19:31,600 Speaker 1: is that it was a reaction to the misinformation or 321 00:19:31,840 --> 00:19:35,119 Speaker 1: spin coming out of U n a R, which was 322 00:19:35,160 --> 00:19:37,840 Speaker 1: sort of the big provider with the existing homesale report 323 00:19:37,840 --> 00:19:39,920 Speaker 1: and all that is still widely published. But it's some 324 00:19:40,119 --> 00:19:42,639 Speaker 1: concerns about that. And by the way, we had Chiller 325 00:19:42,680 --> 00:19:45,119 Speaker 1: on the show and he talked about the thinking behind 326 00:19:45,640 --> 00:19:49,199 Speaker 1: Case Schiller and the report was, hey, how can we 327 00:19:49,240 --> 00:19:51,640 Speaker 1: find a way for people who want to hedge real 328 00:19:51,720 --> 00:19:55,760 Speaker 1: estate exposure to do that? There was no trading, transactionable 329 00:19:56,440 --> 00:19:58,919 Speaker 1: way to do that. The case report and theory was 330 00:19:58,920 --> 00:20:02,200 Speaker 1: supposed to generate that except for you know, these startups 331 00:20:02,200 --> 00:20:05,720 Speaker 1: like Zillo can actually accurately project what the next case 332 00:20:05,720 --> 00:20:07,600 Speaker 1: Shiller number will be within a few tens of a 333 00:20:07,680 --> 00:20:11,320 Speaker 1: point the reverse engineer, so it doesn't matter. The other 334 00:20:11,440 --> 00:20:15,440 Speaker 1: bigger problem I have with Schiller in any price index 335 00:20:16,280 --> 00:20:20,399 Speaker 1: is that, to me, pricing in housing is the is 336 00:20:20,440 --> 00:20:25,960 Speaker 1: the caboose on the transaction train? That is it? What 337 00:20:26,400 --> 00:20:29,040 Speaker 1: matters more? Is it volume? Is it shape? Is it 338 00:20:29,119 --> 00:20:36,040 Speaker 1: amount of cash versus mortgages? It's sales, sales, sales transactions. Uh. 339 00:20:36,440 --> 00:20:39,879 Speaker 1: We found I was with a startup that was going 340 00:20:39,960 --> 00:20:41,879 Speaker 1: to compete with Ki shill Or a while back before 341 00:20:41,920 --> 00:20:46,600 Speaker 1: the stock market crash, and what we found was that 342 00:20:46,320 --> 00:20:49,399 Speaker 1: say that you were, you were an advisor to Radar 343 00:20:49,480 --> 00:20:54,160 Speaker 1: Logic at the time, ended up getting bought by No. Yeah, 344 00:20:54,160 --> 00:20:56,800 Speaker 1: they end up going under. Uh. You were also with 345 00:20:57,080 --> 00:21:01,520 Speaker 1: Truly which on the advisory board Zello Public and that's 346 00:21:01,520 --> 00:21:04,480 Speaker 1: been a home run exactly. But the but the the 347 00:21:04,520 --> 00:21:07,360 Speaker 1: problem with transact or the problem with pricing as a 348 00:21:07,359 --> 00:21:10,680 Speaker 1: as an indicator, is that we found nationally it lags 349 00:21:11,400 --> 00:21:15,280 Speaker 1: the sales activity by twelve to fifteen months. Here's here's 350 00:21:15,320 --> 00:21:20,120 Speaker 1: a perfect scenario, South Florida two thousand five, housing prices 351 00:21:20,160 --> 00:21:23,080 Speaker 1: are going up and at the greater full full theories 352 00:21:23,119 --> 00:21:27,119 Speaker 1: and full play where sales activity is falling because affordability 353 00:21:27,240 --> 00:21:29,520 Speaker 1: is going through the floor and you have fewer and 354 00:21:29,560 --> 00:21:32,280 Speaker 1: fewer people to buy the next flip. And we saw 355 00:21:32,320 --> 00:21:36,159 Speaker 1: that nationally in oh five oh six. Housing peaked in 356 00:21:36,359 --> 00:21:39,000 Speaker 1: volume of oh five, but it didn't peak in price 357 00:21:39,160 --> 00:21:42,440 Speaker 1: until the summer of oh six. So as sales are falling, 358 00:21:42,920 --> 00:21:46,879 Speaker 1: prices are still rising, right, and they don't fall until 359 00:21:47,160 --> 00:21:49,560 Speaker 1: there's no more buyers left that will are the greater 360 00:21:49,600 --> 00:21:51,960 Speaker 1: full right, there's no buyers left that will pay. So 361 00:21:52,000 --> 00:21:55,280 Speaker 1: I feel like emphasis. I'm not saying that you should 362 00:21:55,280 --> 00:21:59,359 Speaker 1: ignore price trends or indexes. That's what people understand. Watch 363 00:21:59,440 --> 00:22:03,199 Speaker 1: volume US. It's a it's ahead of pricing and and 364 00:22:03,200 --> 00:22:06,119 Speaker 1: and the interaction with inventory. So in the last minute 365 00:22:06,160 --> 00:22:10,040 Speaker 1: we have in this this segment we had mentioned previously 366 00:22:10,119 --> 00:22:13,360 Speaker 1: the MLS data was pretty dirty as well. It wasn't 367 00:22:13,440 --> 00:22:18,399 Speaker 1: updated and sometimes it seemed to be misrepresented by agents. 368 00:22:18,520 --> 00:22:21,800 Speaker 1: How significant is that? And what can a buyer do 369 00:22:22,000 --> 00:22:24,560 Speaker 1: to make themselves more So? I think it's less of 370 00:22:24,600 --> 00:22:28,320 Speaker 1: a problem than it appears because it's a random problem. 371 00:22:28,400 --> 00:22:31,600 Speaker 1: In other words, I don't think it impacts trends. I 372 00:22:31,640 --> 00:22:37,240 Speaker 1: think it's it impacts specific references to properties that that 373 00:22:37,359 --> 00:22:39,920 Speaker 1: and of itself is a problem. But from a trend, 374 00:22:39,960 --> 00:22:42,359 Speaker 1: if you're trying to understand whether market is rising or falling, 375 00:22:42,400 --> 00:22:44,960 Speaker 1: I don't I don't think it is. I'm Barry ri Hults. 376 00:22:44,960 --> 00:22:48,360 Speaker 1: You're listening to Masters in Business on Bloomberg Radio. My 377 00:22:48,480 --> 00:22:51,199 Speaker 1: special guest this week is Jonathan Miller, and we have 378 00:22:51,280 --> 00:22:56,200 Speaker 1: been discussing real estate, both the regulatory side of it 379 00:22:56,280 --> 00:22:59,440 Speaker 1: and some of the data reporting problems. Now let's get 380 00:22:59,440 --> 00:23:05,040 Speaker 1: into the stuff. Let's talk about the crazy expense of houses, apartments, 381 00:23:05,119 --> 00:23:09,679 Speaker 1: and various numbers that are just I popp in. I 382 00:23:09,720 --> 00:23:12,280 Speaker 1: know here in Manhattan, there have been a few hundred 383 00:23:12,280 --> 00:23:14,960 Speaker 1: million dollar units. There's a there's a hundred million dollar 384 00:23:15,119 --> 00:23:18,640 Speaker 1: unit that closed. There's Bill Ackman bought a ninety three 385 00:23:18,680 --> 00:23:21,040 Speaker 1: million dollar but he got a deal. That is a deal. 386 00:23:21,119 --> 00:23:23,399 Speaker 1: He got seven million off the hundred Well, no, no, 387 00:23:23,560 --> 00:23:26,480 Speaker 1: it wasn't that. His price per foot was about three 388 00:23:26,520 --> 00:23:29,720 Speaker 1: thousand of foot less than the hundred million dollars sail 389 00:23:29,880 --> 00:23:32,080 Speaker 1: and he's up on like the ninety three or ninety 390 00:23:32,119 --> 00:23:34,280 Speaker 1: four floor. It's a different kind of unit. Have you 391 00:23:34,320 --> 00:23:36,560 Speaker 1: been in that building, that unit, not that unit now, 392 00:23:36,600 --> 00:23:39,240 Speaker 1: but pretty much been in. You and I have talked 393 00:23:39,240 --> 00:23:43,760 Speaker 1: about time. You've been in just about every major house 394 00:23:43,800 --> 00:23:46,119 Speaker 1: in Manhattan. It's like it's like a it's like a 395 00:23:46,160 --> 00:23:48,280 Speaker 1: work bucket list, Like I want to be in the 396 00:23:48,320 --> 00:23:53,600 Speaker 1: Penthouse of you know, the Sherry Netherlands Hotel, or or 397 00:23:54,200 --> 00:23:57,320 Speaker 1: the eight million dollars Sandy Wild or but other than 398 00:23:57,359 --> 00:24:00,640 Speaker 1: a handful of them, you've pretty much walked your way through. Yeah. Yeah, 399 00:24:00,640 --> 00:24:03,840 Speaker 1: I've been in about eight thousand Manhattan apartments in my career, 400 00:24:04,200 --> 00:24:07,560 Speaker 1: which is probably more than I should admit. Um. But 401 00:24:07,560 --> 00:24:12,360 Speaker 1: but it's interesting because there's actually right now, it's probably 402 00:24:12,400 --> 00:24:14,879 Speaker 1: more than a rumor, but there is a two million 403 00:24:14,920 --> 00:24:19,720 Speaker 1: dollar contract right now at two twenty Central Park South, 404 00:24:19,760 --> 00:24:22,639 Speaker 1: the new development for that Vernado is building right on 405 00:24:22,760 --> 00:24:27,520 Speaker 1: the park. Um. I just read yesterday that there is 406 00:24:27,640 --> 00:24:30,760 Speaker 1: right now a hundred and ten million dollar contract in 407 00:24:30,800 --> 00:24:34,840 Speaker 1: the Hampton's. Uh, it's a flip and it's what do 408 00:24:34,880 --> 00:24:37,000 Speaker 1: you mean a flip? Well, and they went in, they 409 00:24:37,040 --> 00:24:39,720 Speaker 1: painted it, they made it pretty well. Someone someone bought 410 00:24:39,760 --> 00:24:42,400 Speaker 1: it like a couple of years ago for in the nineties, 411 00:24:42,680 --> 00:24:47,639 Speaker 1: and then I guess they decided it wasn't whatever, you 412 00:24:47,760 --> 00:24:51,360 Speaker 1: didn't have enough space. But but it's interesting because um, 413 00:24:51,440 --> 00:24:57,120 Speaker 1: we didn't. And so I actually, as a hobby track 414 00:24:58,320 --> 00:25:03,479 Speaker 1: actual close transaction of all sales in the US fifty 415 00:25:03,520 --> 00:25:06,000 Speaker 1: million or above? How many of those? How many? How 416 00:25:06,000 --> 00:25:09,880 Speaker 1: many actual transactions something in the order of sixty So 417 00:25:09,960 --> 00:25:14,080 Speaker 1: not a lot. This is really a unique one off market. Yeah, 418 00:25:14,080 --> 00:25:16,160 Speaker 1: and a big part of that that it comes out 419 00:25:16,160 --> 00:25:21,080 Speaker 1: of New York and and I and I also play 420 00:25:21,119 --> 00:25:22,960 Speaker 1: around a little bit looking around the world. There was 421 00:25:23,000 --> 00:25:27,920 Speaker 1: just a sale in Paris or three one million, yes, yes, 422 00:25:28,600 --> 00:25:32,360 Speaker 1: so so, So now that we've gone undred and ten, 423 00:25:32,560 --> 00:25:36,400 Speaker 1: three hundred, I have to ask you about this hard 424 00:25:36,520 --> 00:25:39,320 Speaker 1: to fathom. You know where I'm going. There's a spec 425 00:25:39,400 --> 00:25:43,919 Speaker 1: house being built supposedly in l A for five hundred 426 00:25:44,000 --> 00:25:46,480 Speaker 1: million dollars. Now is that a real number of these 427 00:25:46,520 --> 00:25:49,919 Speaker 1: people just making stuff up at this point? You know, 428 00:25:50,080 --> 00:25:53,800 Speaker 1: I think it's so. Yeah, I think they probably feel 429 00:25:53,840 --> 00:25:56,680 Speaker 1: strongly about it. I'm sure it's expensive to build, but 430 00:25:57,560 --> 00:26:00,639 Speaker 1: not half a billions. It's not a it's not a 431 00:26:00,720 --> 00:26:03,760 Speaker 1: hundred stories skyscraper. No, no no, no, it's it's a house. 432 00:26:04,600 --> 00:26:08,199 Speaker 1: It's a house on a hill. Uh So, so you know, 433 00:26:08,240 --> 00:26:11,159 Speaker 1: I think that'll end up probably being you know, like 434 00:26:11,200 --> 00:26:14,600 Speaker 1: a corporate retreat or something outside of a single family residence. 435 00:26:15,520 --> 00:26:19,919 Speaker 1: But but but I think it begs the question is 436 00:26:19,960 --> 00:26:23,520 Speaker 1: there a real market, say north of a hundred million dollars? 437 00:26:23,880 --> 00:26:26,719 Speaker 1: Is this a because that's been you know, you certainly 438 00:26:26,720 --> 00:26:29,320 Speaker 1: read in the news. There's the last couple of years 439 00:26:29,760 --> 00:26:32,720 Speaker 1: across the US, there have been these press releases. Hey, 440 00:26:32,720 --> 00:26:35,840 Speaker 1: I'm putting my market on Jeff Green, the hedge funder 441 00:26:35,840 --> 00:26:38,760 Speaker 1: that bet right on the market. Um, you know the 442 00:26:39,080 --> 00:26:43,359 Speaker 1: last down cycle. Uh, he built a house in Los 443 00:26:43,359 --> 00:26:46,960 Speaker 1: Angeles that is on was on the market for it's 444 00:26:46,960 --> 00:26:50,960 Speaker 1: sat for eighteen months, reduced, he dropped it to a 445 00:26:51,080 --> 00:26:55,080 Speaker 1: much more reasonable hundred forty million, and he said this 446 00:26:55,119 --> 00:26:57,320 Speaker 1: time now I'm serious, and then he took it off 447 00:26:57,359 --> 00:27:01,560 Speaker 1: the market. So so the question is does this market 448 00:27:01,640 --> 00:27:05,160 Speaker 1: actually exists? And my theory is that the market actually 449 00:27:05,240 --> 00:27:09,000 Speaker 1: was triggered by this the eight eight eight million dollar 450 00:27:09,359 --> 00:27:13,320 Speaker 1: sail in two thousand and twelve by Sandy while where 451 00:27:13,359 --> 00:27:17,399 Speaker 1: he arbitrary his he bought it for forty one he 452 00:27:18,040 --> 00:27:21,040 Speaker 1: you know a couple of years now, well you know, 453 00:27:21,119 --> 00:27:25,000 Speaker 1: he fixed and then he put it on for eight 454 00:27:25,200 --> 00:27:29,360 Speaker 1: eight and then a Russian oligarch came in and I'll 455 00:27:29,400 --> 00:27:32,320 Speaker 1: take that. But as it turned out, he was going 456 00:27:32,359 --> 00:27:34,760 Speaker 1: through a divorce and he was buying property and hiding. 457 00:27:36,160 --> 00:27:40,560 Speaker 1: He just was moving right, But that became a symbolic price, 458 00:27:40,840 --> 00:27:43,840 Speaker 1: and so shortly after that and it really was like 459 00:27:43,840 --> 00:27:46,760 Speaker 1: a three year window twelve thirteen, fourteen where we started 460 00:27:46,760 --> 00:27:50,199 Speaker 1: to see all these press releases from you know, high end, 461 00:27:50,240 --> 00:27:53,520 Speaker 1: and we're seeing, uh, Manhattan, all these penthouses priced a 462 00:27:53,600 --> 00:27:57,160 Speaker 1: hundred above. Look, I'm not saying these Manhattan prices. Penthouses 463 00:27:57,200 --> 00:28:00,200 Speaker 1: won't get these numbers, but I think that this market 464 00:28:00,400 --> 00:28:04,719 Speaker 1: was really there was a misperception of whether it was 465 00:28:04,800 --> 00:28:09,480 Speaker 1: actually a market and not just random one off transactions. 466 00:28:09,880 --> 00:28:11,840 Speaker 1: It's so funny you say that. I've spent the better 467 00:28:11,880 --> 00:28:15,160 Speaker 1: part of the past five years arguing with people who 468 00:28:15,240 --> 00:28:19,439 Speaker 1: have been consistently calling a market top. Look, it's a 469 00:28:19,480 --> 00:28:23,400 Speaker 1: bubble in name your one off, it's a bubble in art, 470 00:28:23,520 --> 00:28:26,399 Speaker 1: Therefore the market has to roll over. It's a bubble. 471 00:28:26,440 --> 00:28:30,920 Speaker 1: And vintage collectible ferraris, therefore the market has to roll over. 472 00:28:30,960 --> 00:28:33,600 Speaker 1: And the answer to these things are how many people 473 00:28:33,640 --> 00:28:37,000 Speaker 1: are buying a Jacome Eddie or a Picasso or name 474 00:28:37,040 --> 00:28:39,960 Speaker 1: your artist for a hundred million dollars, how many people 475 00:28:40,000 --> 00:28:44,720 Speaker 1: are looking for this specific Lamon's race to seventy five 476 00:28:44,800 --> 00:28:50,640 Speaker 1: Ferrari GTB from one or sixty two. That's a unique creature. 477 00:28:50,720 --> 00:28:52,400 Speaker 1: And someone who has more money than they know what 478 00:28:52,440 --> 00:28:55,200 Speaker 1: to do with says, I'll pay thirty million dollars for that, 479 00:28:55,280 --> 00:28:58,600 Speaker 1: even though it's barely worth a million or two. It's 480 00:28:58,640 --> 00:29:01,920 Speaker 1: a one off. And Drew, are you saying real estate? 481 00:29:02,240 --> 00:29:05,560 Speaker 1: I'm saying, I'm saying when you get to that extreme, 482 00:29:06,200 --> 00:29:08,560 Speaker 1: that that's what it seems to be. It's not that 483 00:29:08,600 --> 00:29:12,160 Speaker 1: you won't have those transactions going forward. We absolutely will 484 00:29:12,240 --> 00:29:14,960 Speaker 1: and there will be, you know, a steady procession of them. 485 00:29:15,280 --> 00:29:17,640 Speaker 1: But I don't at least we saw on the spec 486 00:29:17,680 --> 00:29:20,080 Speaker 1: houses built across the country. I'd like to say the 487 00:29:20,120 --> 00:29:23,880 Speaker 1: plural of anecdotal is not data. So but what the 488 00:29:23,880 --> 00:29:27,360 Speaker 1: these developers that are building these houses are saying is, look, 489 00:29:27,400 --> 00:29:30,600 Speaker 1: they're they're asking this price, and there's twenty people asking 490 00:29:30,640 --> 00:29:33,000 Speaker 1: this price. It must be worth it. Yet none of 491 00:29:33,040 --> 00:29:35,760 Speaker 1: them ever sell well that that what it does is 492 00:29:35,880 --> 00:29:38,680 Speaker 1: creates an anchor. And when you hear seventy and eighty 493 00:29:38,720 --> 00:29:41,920 Speaker 1: and a hundred often enough. You know, if it's million dollars, 494 00:29:41,920 --> 00:29:44,360 Speaker 1: this looks pretty reasonable. Maybe maybe that's what the net 495 00:29:44,360 --> 00:29:47,360 Speaker 1: effect is. Then in the lower end of the high market, 496 00:29:48,040 --> 00:29:50,720 Speaker 1: you know, all things considered, twenty six million dollars, it's 497 00:29:50,760 --> 00:29:53,400 Speaker 1: a deal for all right, it's a So now let's 498 00:29:53,400 --> 00:29:56,320 Speaker 1: go to the opposite ends and talk a little bit. 499 00:29:56,720 --> 00:30:01,040 Speaker 1: You brought to my attention the mark micro apartments are 500 00:30:01,080 --> 00:30:05,240 Speaker 1: being proposed as a way to combat the affordability problem 501 00:30:05,560 --> 00:30:10,320 Speaker 1: cities like New York. What is that about? So so 502 00:30:10,400 --> 00:30:13,800 Speaker 1: much is made in the city. Uh, certainly. Uh, I'm 503 00:30:13,800 --> 00:30:16,239 Speaker 1: a user of the terminology price for square foot and 504 00:30:17,120 --> 00:30:20,120 Speaker 1: but ultimately, when you get to a small apartment like 505 00:30:20,480 --> 00:30:24,920 Speaker 1: in Manhattan, say a studio or in Boston studio feet, 506 00:30:25,000 --> 00:30:29,560 Speaker 1: the average the average studio Manhattan's four fifty square feet. Uh. 507 00:30:29,560 --> 00:30:32,200 Speaker 1: My parents have a piano tear in the city that's 508 00:30:32,200 --> 00:30:34,720 Speaker 1: three d square feet on a good day. And in 509 00:30:35,120 --> 00:30:38,320 Speaker 1: the today it's a kitchen, bathroom, and a bedroom. Right, 510 00:30:38,480 --> 00:30:40,720 Speaker 1: My sister and I call it the kitchen because it's 511 00:30:40,880 --> 00:30:43,960 Speaker 1: mostly a kitchen with a couch on the side. But 512 00:30:43,960 --> 00:30:49,040 Speaker 1: but there are thousands of those units already in existence, 513 00:30:49,080 --> 00:30:53,160 Speaker 1: so it isn't about whether the market will accept micro units, 514 00:30:53,200 --> 00:30:58,480 Speaker 1: which are about usually about three square feet. Um uh. 515 00:30:58,520 --> 00:31:00,600 Speaker 1: It isn't whether there will be a sceptance because you 516 00:31:00,600 --> 00:31:03,240 Speaker 1: already have a long, storied history of people living in 517 00:31:03,280 --> 00:31:07,520 Speaker 1: three under square foot departments. It's the pricing and so 518 00:31:07,600 --> 00:31:10,520 Speaker 1: what we're seeing what we're starting to see in the 519 00:31:10,560 --> 00:31:14,959 Speaker 1: micro unit phenomenon. Remember land, the lands. The person selling 520 00:31:14,960 --> 00:31:18,320 Speaker 1: the development site doesn't care what they're They're just looking 521 00:31:18,360 --> 00:31:22,160 Speaker 1: at what the maximum um value they can get for 522 00:31:22,200 --> 00:31:25,800 Speaker 1: the land, which usually implies you're gonna build a super 523 00:31:25,880 --> 00:31:28,640 Speaker 1: luxury condo or if you want to max out, you 524 00:31:28,680 --> 00:31:32,200 Speaker 1: want to optimize your return on a dollar invested, at 525 00:31:32,280 --> 00:31:35,640 Speaker 1: least from a business perspective. From a policy perspective, there 526 00:31:35,640 --> 00:31:39,320 Speaker 1: are counter arguments to having a variety of income and 527 00:31:39,440 --> 00:31:42,400 Speaker 1: making keeping housing correct. And one of the biggest problems 528 00:31:42,440 --> 00:31:44,840 Speaker 1: that New York has right now is that we're seeing 529 00:31:44,840 --> 00:31:49,000 Speaker 1: record job growth, the highest number of employees of those 530 00:31:49,040 --> 00:31:52,560 Speaker 1: employed in the city and history, and we have this 531 00:31:52,680 --> 00:31:56,520 Speaker 1: disconnect between what new housing we're building and what we 532 00:31:56,640 --> 00:31:59,280 Speaker 1: actually need. And a lot of that has to do 533 00:31:59,720 --> 00:32:03,640 Speaker 1: with of um the price of land. So in the 534 00:32:03,680 --> 00:32:06,760 Speaker 1: case of micro units, what's really fascinating is and you 535 00:32:06,760 --> 00:32:10,800 Speaker 1: can see this in the regular rental market, traditional rental 536 00:32:10,840 --> 00:32:16,040 Speaker 1: market and the sales market. Is when an apartment gets 537 00:32:16,840 --> 00:32:19,640 Speaker 1: to a certain price, down to a certain price point, 538 00:32:19,640 --> 00:32:22,080 Speaker 1: whether it's a rental or purchase, no matter how much 539 00:32:22,160 --> 00:32:25,440 Speaker 1: smaller it is, it doesn't the price doesn't go down 540 00:32:25,480 --> 00:32:29,160 Speaker 1: anymore because you're paying for common facility areas. And well, 541 00:32:29,160 --> 00:32:31,080 Speaker 1: what you see is the price for script It skew 542 00:32:31,160 --> 00:32:34,800 Speaker 1: up at the bottom because the price won't go below 543 00:32:34,840 --> 00:32:37,800 Speaker 1: a certain number in a certain market. So what's happened? 544 00:32:37,800 --> 00:32:39,800 Speaker 1: Why is that? Is that? Is that common areas? Is 545 00:32:39,840 --> 00:32:43,520 Speaker 1: that taxes? What? What puts the floor? It's it's it's 546 00:32:43,560 --> 00:32:46,080 Speaker 1: it's the seller. What the sellers are willing to sell 547 00:32:46,160 --> 00:32:48,280 Speaker 1: for basically, or what they need to get in order 548 00:32:48,280 --> 00:32:52,120 Speaker 1: to cover their operating costs of the building. What's interesting 549 00:32:52,120 --> 00:32:55,320 Speaker 1: about the micro phenomenon? And uh, a friend of mine 550 00:32:55,360 --> 00:32:58,320 Speaker 1: runs a website that's going to launch called neighborhood X 551 00:32:58,920 --> 00:33:01,800 Speaker 1: and they did study and ball Austin and um and 552 00:33:01,880 --> 00:33:03,880 Speaker 1: I believe the one coming out in New York and 553 00:33:03,960 --> 00:33:06,200 Speaker 1: the price per foot of a micro unit in terms 554 00:33:06,200 --> 00:33:09,920 Speaker 1: of what a consumer will handle, is actually fifty to 555 00:33:10,000 --> 00:33:15,800 Speaker 1: a hundred percent higher than say a traditional sized rental. 556 00:33:15,960 --> 00:33:20,120 Speaker 1: So in other words, the price per foot is significantly higher. 557 00:33:20,160 --> 00:33:22,400 Speaker 1: So say in New York on a studio, say it's 558 00:33:22,440 --> 00:33:26,160 Speaker 1: eight hundred of foot, a micro might go for without 559 00:33:26,160 --> 00:33:29,160 Speaker 1: a problem, but it's you know, it's much smaller. Quite fascinating. 560 00:33:29,480 --> 00:33:32,040 Speaker 1: So if people want to find you, what's the best 561 00:33:32,040 --> 00:33:34,240 Speaker 1: way they can track you down? On Twitter? On the web. 562 00:33:34,360 --> 00:33:36,680 Speaker 1: The two best ways to reach me Twitter Number one, 563 00:33:36,760 --> 00:33:41,440 Speaker 1: which would be Jonathan Miller and it's you know original, 564 00:33:41,480 --> 00:33:44,240 Speaker 1: I was an early adopter. And then the second is 565 00:33:44,240 --> 00:33:46,720 Speaker 1: our website, which is Miller Samuel dot com, which has 566 00:33:46,800 --> 00:33:49,640 Speaker 1: lots of data and information. If you find that you 567 00:33:49,840 --> 00:33:54,200 Speaker 1: enjoy this sort of chat about things finance related, you 568 00:33:54,240 --> 00:33:56,360 Speaker 1: can look up an inch or down an inch on 569 00:33:56,400 --> 00:33:59,920 Speaker 1: iTunes and see the other seventy five or so conversation 570 00:34:00,080 --> 00:34:02,240 Speaker 1: is of the sort that we've had. Be sure and 571 00:34:02,360 --> 00:34:05,640 Speaker 1: follow me on Twitter at rid Halts. Check out my 572 00:34:05,840 --> 00:34:10,640 Speaker 1: daily column on Bloomberg View dot com. I'm Barry rid Halts. 573 00:34:10,760 --> 00:34:14,240 Speaker 1: You've been listening to Masters in Business on Bloomberg Radio. 574 00:34:14,400 --> 00:34:17,560 Speaker 1: Welcome to the podcast. This has been a fun and 575 00:34:17,680 --> 00:34:23,120 Speaker 1: interesting approach. So so you've done both the long winded 576 00:34:24,280 --> 00:34:27,760 Speaker 1: questions written out and this kind of free form version. 577 00:34:29,600 --> 00:34:31,839 Speaker 1: What what? What's my takeaway from doing it this way? 578 00:34:32,400 --> 00:34:34,799 Speaker 1: Free form is the way to go. See. I don't 579 00:34:34,800 --> 00:34:37,040 Speaker 1: know if I could do free form with a guy 580 00:34:37,120 --> 00:34:41,080 Speaker 1: like Howard Marks or Leon Cooperman, who are so fastidious 581 00:34:41,120 --> 00:34:43,719 Speaker 1: and organized, and I think you're just gonna have to 582 00:34:43,760 --> 00:34:46,320 Speaker 1: do it case by case. I guess it's or maybe 583 00:34:46,440 --> 00:34:49,520 Speaker 1: certain segments you win it. In certain segments you have it. 584 00:34:49,640 --> 00:34:52,560 Speaker 1: I'm a big fan of no preparation. Well, it's not 585 00:34:52,640 --> 00:34:55,520 Speaker 1: so much no prep so let me let me qualify this. 586 00:34:56,040 --> 00:35:01,960 Speaker 1: There's a difference between no preparation and and so literally, 587 00:35:02,239 --> 00:35:05,160 Speaker 1: Mike Batnick is my head of research. So just as 588 00:35:05,160 --> 00:35:09,040 Speaker 1: an example, the next podcast after you is Ethan Harris. 589 00:35:09,400 --> 00:35:13,640 Speaker 1: He's the chief economist of Bank America. Mary Lynch. I 590 00:35:13,680 --> 00:35:16,239 Speaker 1: don't think I could sit down with someone like that 591 00:35:16,280 --> 00:35:19,480 Speaker 1: and say, yo, man, what's going on? So what's happening 592 00:35:19,520 --> 00:35:23,239 Speaker 1: in the world of economics? Anything good going on? But 593 00:35:23,360 --> 00:35:26,200 Speaker 1: with you, I know I could say what up with housing? 594 00:35:26,239 --> 00:35:29,160 Speaker 1: And you offen the races? We You and I could 595 00:35:29,200 --> 00:35:31,600 Speaker 1: talk about this stuff we can talk about I'm sure 596 00:35:31,640 --> 00:35:33,759 Speaker 1: your wife says the same thing as my wife. You 597 00:35:33,800 --> 00:35:36,560 Speaker 1: know they are. My kids will say, uh, you know, 598 00:35:36,640 --> 00:35:40,439 Speaker 1: can you stop talking? And my answer is you should hope. 599 00:35:40,440 --> 00:35:43,279 Speaker 1: I don't stop talking. It depends if you want to 600 00:35:43,320 --> 00:35:45,360 Speaker 1: eat tonight. If you want to eat tonight, you're okay. 601 00:35:46,000 --> 00:35:51,480 Speaker 1: So before I forget, I'm gonna set up initializing video stream. 602 00:35:51,920 --> 00:35:54,640 Speaker 1: I'm gonna just do a quick Uh. I'm just gonna 603 00:35:54,680 --> 00:35:58,440 Speaker 1: do a quick Paris Curt Jonathan Miller uh. And we're 604 00:35:58,480 --> 00:36:02,200 Speaker 1: talking about real estate so um and this will run 605 00:36:02,239 --> 00:36:06,000 Speaker 1: this weekend, which will be exciting. So we we covered 606 00:36:06,040 --> 00:36:10,200 Speaker 1: four really interesting subjects during the show. So the new 607 00:36:10,280 --> 00:36:14,560 Speaker 1: Treasury rules about three million dollar apartments in New York 608 00:36:14,560 --> 00:36:18,800 Speaker 1: and a million in Miami. UM, their anti money laundering rules. 609 00:36:18,800 --> 00:36:21,720 Speaker 1: We talked about white case shilla data is so problematic. 610 00:36:22,239 --> 00:36:26,880 Speaker 1: We talked about the ultra lux um hundred million dollars 611 00:36:26,880 --> 00:36:31,560 Speaker 1: in up market, and then we talked about the micro apartments. 612 00:36:31,600 --> 00:36:34,760 Speaker 1: But by the way, you mentioned the three hundred million 613 00:36:34,800 --> 00:36:39,759 Speaker 1: dollar apartment or unit in in Paris outside was that 614 00:36:39,840 --> 00:36:46,080 Speaker 1: before or after the terrorist attacks? I think it was after. 615 00:36:46,440 --> 00:36:49,399 Speaker 1: I think it closed. That's an interesting votic. I think 616 00:36:49,440 --> 00:36:52,760 Speaker 1: it closed in December. And what is a three hundred 617 00:36:52,800 --> 00:36:55,799 Speaker 1: million dollars it looks like a palace like Versailles. It's 618 00:36:55,840 --> 00:36:59,160 Speaker 1: it's that sort of Actually that's the architecture. Oh really yeah, 619 00:36:59,200 --> 00:37:03,000 Speaker 1: it's meant to And it was interesting because I thought 620 00:37:03,000 --> 00:37:07,720 Speaker 1: there would be this insane world interest on it, but 621 00:37:08,320 --> 00:37:11,200 Speaker 1: there really wasn't. And you would think Europe is far 622 00:37:11,360 --> 00:37:15,719 Speaker 1: more concerned with income inequality and and and a level plan. 623 00:37:15,880 --> 00:37:19,160 Speaker 1: Was a Middle Eastern buyer and a Middle Eastern developer. 624 00:37:19,600 --> 00:37:22,279 Speaker 1: Really yeah, wait, so this is a new development. This 625 00:37:22,320 --> 00:37:24,480 Speaker 1: isn't like it's a new world cast. No, no, no, 626 00:37:24,560 --> 00:37:27,680 Speaker 1: this is a new I believe it's all newly constructed. 627 00:37:28,360 --> 00:37:33,960 Speaker 1: But it looks like a castle. So so how many 628 00:37:34,000 --> 00:37:36,360 Speaker 1: acres is this and how many square foot feet is 629 00:37:36,400 --> 00:37:40,760 Speaker 1: the I don't I want to say a hundred thousand 630 00:37:40,800 --> 00:37:46,640 Speaker 1: square feet and fifty acres, but I'm guessing. But it's substantial. 631 00:37:46,680 --> 00:37:49,280 Speaker 1: There's a lot of lands. So that's three thousand dollars 632 00:37:49,280 --> 00:37:51,799 Speaker 1: a square foot. That's pretty prices. Yeah. Actually, when you 633 00:37:51,800 --> 00:37:53,920 Speaker 1: look at the very high end of the market, no 634 00:37:53,920 --> 00:37:58,040 Speaker 1: matter what the land amount is, they tend to they 635 00:37:58,080 --> 00:38:03,280 Speaker 1: tend to fall within like the two to four thousand 636 00:38:03,360 --> 00:38:06,920 Speaker 1: a foot. The variation is the size of the land. Right, 637 00:38:07,360 --> 00:38:09,920 Speaker 1: So now so let's let's keep talking a little bit 638 00:38:09,960 --> 00:38:12,799 Speaker 1: about the luxe end of the market, because it's so 639 00:38:13,040 --> 00:38:19,160 Speaker 1: to me, it's so lux or mega ultra super. So, 640 00:38:19,160 --> 00:38:22,919 Speaker 1: so here's what I find fascinating. And in my let's 641 00:38:22,960 --> 00:38:25,680 Speaker 1: start from the bottom up, because that's how most humans 642 00:38:25,760 --> 00:38:28,960 Speaker 1: interact with real estate. So when you think about real estate, 643 00:38:29,160 --> 00:38:31,959 Speaker 1: I think about and everything tends to be a chain 644 00:38:32,000 --> 00:38:34,279 Speaker 1: because you have to sell this house to buy that house, 645 00:38:34,320 --> 00:38:38,000 Speaker 1: and I believe it's an average of seven transactions that 646 00:38:38,080 --> 00:38:42,080 Speaker 1: are linked in one home sale. So so down in 647 00:38:42,120 --> 00:38:45,399 Speaker 1: the United States, we'll start with the starter home, right, 648 00:38:45,440 --> 00:38:47,320 Speaker 1: So you buy a start at home, which used to 649 00:38:47,360 --> 00:38:50,319 Speaker 1: be to fifty or so depending on where you are 650 00:38:50,360 --> 00:38:52,800 Speaker 1: in the country, not in the US, not in here 651 00:38:52,840 --> 00:38:55,800 Speaker 1: in this area, but in the US, I mean the averages. 652 00:38:57,640 --> 00:39:01,200 Speaker 1: So a start of home is more in that range. 653 00:39:02,200 --> 00:39:04,600 Speaker 1: Around here. A starter home is if you can find 654 00:39:04,600 --> 00:39:09,160 Speaker 1: a place for three four that's a relatively inexpensive home 655 00:39:09,480 --> 00:39:12,719 Speaker 1: in the New York area. But the person selling that 656 00:39:12,800 --> 00:39:16,919 Speaker 1: house is trading up to something. Maybe it's they're going 657 00:39:16,960 --> 00:39:19,680 Speaker 1: from a two or three bedroom to a four bedroom 658 00:39:19,719 --> 00:39:22,400 Speaker 1: with a couple extra baths. So now we're in the 659 00:39:22,480 --> 00:39:24,800 Speaker 1: half a million to seven hundred thousands, or they're just 660 00:39:24,840 --> 00:39:28,759 Speaker 1: trading up to a better location, better same size, and 661 00:39:28,840 --> 00:39:31,359 Speaker 1: every better school district. But I'm trying to come up 662 00:39:31,360 --> 00:39:37,719 Speaker 1: with a different stratus. So so assuming variables like location, water, view, etcetera. 663 00:39:38,480 --> 00:39:40,920 Speaker 1: Aren't a key consideration, although I imagine somewhere in the 664 00:39:41,000 --> 00:39:46,040 Speaker 1: chain that probably isn't the case. Those do become key issues. 665 00:39:46,440 --> 00:39:49,720 Speaker 1: But so you go from starter home to little bigger 666 00:39:49,840 --> 00:39:53,319 Speaker 1: three bedroom to bath or four bedroom to bath, and 667 00:39:53,400 --> 00:39:57,080 Speaker 1: around here that's five, six, seven, and then from seven 668 00:39:57,239 --> 00:40:01,680 Speaker 1: to nine you're talking out of four or five bedroom house. 669 00:40:01,760 --> 00:40:05,960 Speaker 1: Maybe you're on a half acre of lands um, probably 670 00:40:06,000 --> 00:40:09,040 Speaker 1: a better school district, maybe an easier commute. That's the 671 00:40:09,040 --> 00:40:11,879 Speaker 1: other thing I noticed. Obviously, the closer you are two 672 00:40:11,880 --> 00:40:15,799 Speaker 1: major sources of employment, the more expensive it is. And 673 00:40:15,840 --> 00:40:19,200 Speaker 1: also commuter lines, you know, are are a big factor. 674 00:40:19,520 --> 00:40:21,960 Speaker 1: Just as a side. And I'm dating myself, but I 675 00:40:22,040 --> 00:40:23,880 Speaker 1: moved out of the city, my wife and I in 676 00:40:25,680 --> 00:40:29,319 Speaker 1: and we moved to Fairfield County, Connecticut, And there's an 677 00:40:29,320 --> 00:40:34,759 Speaker 1: express stop on the commuter train in Stanford, Connecticut. After Stanford, 678 00:40:34,760 --> 00:40:37,480 Speaker 1: moving away from the city, every ten minutes on the 679 00:40:37,520 --> 00:40:41,560 Speaker 1: commuter train. Housing prices dropped a hundred thousand dollars. Really, 680 00:40:41,600 --> 00:40:45,240 Speaker 1: that's amazing comparable houses. Yes, yes, because we were actually 681 00:40:45,280 --> 00:40:48,239 Speaker 1: looking at the time when we first moved out there, 682 00:40:48,320 --> 00:40:51,200 Speaker 1: and it was unbelievable. And that's still true today. That's 683 00:40:51,239 --> 00:40:55,520 Speaker 1: that ratio the progression is but the numbers are much higher. 684 00:40:55,880 --> 00:40:58,080 Speaker 1: But but it was about a hundred thousand every ten minutes, 685 00:40:58,120 --> 00:41:00,799 Speaker 1: so you know, so I'm out on Long Island. When 686 00:41:00,840 --> 00:41:04,239 Speaker 1: you look at the major train lines, the most desirable 687 00:41:04,280 --> 00:41:08,279 Speaker 1: train line is the Port Washington line, which really is 688 00:41:08,760 --> 00:41:11,320 Speaker 1: that the north shore of Long Island is a series 689 00:41:11,360 --> 00:41:15,359 Speaker 1: of peninsulas, and so the first peninsula is the Port 690 00:41:15,400 --> 00:41:20,080 Speaker 1: Washington line. The next peninsula is actually in between that. 691 00:41:20,160 --> 00:41:22,960 Speaker 1: The third peninsula is the Oyster Bay Line, which passes 692 00:41:23,000 --> 00:41:25,360 Speaker 1: by the second peninsula. It's the same thing. The further 693 00:41:25,400 --> 00:41:27,480 Speaker 1: out you go, the more expensive, also too, on the 694 00:41:27,480 --> 00:41:32,919 Speaker 1: commuter lines, or it's also the uh you know, whether 695 00:41:32,960 --> 00:41:35,759 Speaker 1: you're on a main line, which there's a premium for 696 00:41:35,800 --> 00:41:38,200 Speaker 1: that in not change you can get an express you 697 00:41:38,239 --> 00:41:40,640 Speaker 1: can go and also that you know, the spurs on 698 00:41:40,680 --> 00:41:42,880 Speaker 1: a commuter line are the ones that tend to have 699 00:41:42,960 --> 00:41:45,080 Speaker 1: more problems because there's only one track and they can't 700 00:41:45,120 --> 00:41:47,759 Speaker 1: go around. The other thing too, is that when when 701 00:41:47,760 --> 00:41:50,799 Speaker 1: you're talking about Long Island is um And this is 702 00:41:50,880 --> 00:41:55,040 Speaker 1: an interesting when you look at the Hampton's luxury market 703 00:41:55,080 --> 00:41:59,680 Speaker 1: to the east end of Long Island, one highway right 704 00:41:59,719 --> 00:42:02,440 Speaker 1: and and one train line and one train line and 705 00:42:02,640 --> 00:42:06,239 Speaker 1: this congestion, it's it's, you know, very difficult to get something. 706 00:42:06,760 --> 00:42:09,080 Speaker 1: So they're trying to preserve the character of the area 707 00:42:09,120 --> 00:42:12,360 Speaker 1: but not having an overbuild. But they're still building like crazy. 708 00:42:12,560 --> 00:42:16,120 Speaker 1: So that's why you just helicopter out right go over 709 00:42:16,160 --> 00:42:20,520 Speaker 1: the traffic. Yes, don't these pleabs know anything but traveled 710 00:42:20,520 --> 00:42:23,920 Speaker 1: by car? Yeah, that's we'll talk about cars in a 711 00:42:23,960 --> 00:42:27,239 Speaker 1: little bit. But before we get two cars. So I 712 00:42:27,280 --> 00:42:30,480 Speaker 1: mentioned seven to nine is now you're talking five bedrooms. 713 00:42:30,760 --> 00:42:32,839 Speaker 1: Then somewhere in the nine to a million to about 714 00:42:32,880 --> 00:42:35,640 Speaker 1: a million and a half you're looking at bigger houses. 715 00:42:36,320 --> 00:42:40,839 Speaker 1: The lands starts getting two acre zing like that. But now, 716 00:42:41,120 --> 00:42:45,160 Speaker 1: how does this breakdown above two million dollars? Is there 717 00:42:45,200 --> 00:42:49,879 Speaker 1: a gradation or is it just bigger? Whatever, all these 718 00:42:49,880 --> 00:42:52,759 Speaker 1: accoutrements and people just charge with it, can get away with. 719 00:42:52,840 --> 00:42:54,839 Speaker 1: I think I think another way to look at it 720 00:42:54,920 --> 00:42:59,120 Speaker 1: is um the bigger the logical step is as you 721 00:42:59,200 --> 00:43:02,760 Speaker 1: move up in price, the bigger the sort of change 722 00:43:02,800 --> 00:43:06,000 Speaker 1: in amenities or not the big just you know, whether 723 00:43:06,040 --> 00:43:10,240 Speaker 1: it's square footage or land size, the jumps get further 724 00:43:10,560 --> 00:43:13,720 Speaker 1: and further apart. Let's bang for the buck for each. 725 00:43:14,160 --> 00:43:18,200 Speaker 1: A simpler a simpler scenario would be just for the listeners, 726 00:43:18,280 --> 00:43:20,600 Speaker 1: is if you're in Manhattan and you have a studio 727 00:43:20,640 --> 00:43:24,200 Speaker 1: and then you trade up to a one bedroom, Uh, 728 00:43:23,600 --> 00:43:27,640 Speaker 1: let make these numbers up. Maybe it's maybe it's thirty more. 729 00:43:28,040 --> 00:43:30,400 Speaker 1: And then you trade up to a two bedroom and 730 00:43:30,480 --> 00:43:32,560 Speaker 1: it's double, and then you trade up to a three 731 00:43:32,600 --> 00:43:35,080 Speaker 1: bedroom and it's triple, and then you trade up to 732 00:43:35,160 --> 00:43:38,919 Speaker 1: a four bedroom and it's you know, exponential. So so 733 00:43:38,920 --> 00:43:40,960 Speaker 1: so you're not just paying for the extra bedroom. You're 734 00:43:40,960 --> 00:43:47,239 Speaker 1: paying for bigger all around square footage, nicer amenities, location, 735 00:43:47,680 --> 00:43:50,440 Speaker 1: you know, school district, all those sorts of things. But 736 00:43:51,040 --> 00:43:54,719 Speaker 1: the problem in a market, and this is this is, 737 00:43:54,920 --> 00:43:57,200 Speaker 1: this is the problem right now with a housing market, 738 00:43:57,200 --> 00:43:59,840 Speaker 1: and why there's so much to talk about affordable for 739 00:44:00,040 --> 00:44:04,560 Speaker 1: ability and affordable housing is that the vast majority of 740 00:44:04,600 --> 00:44:06,719 Speaker 1: people that have a lot of equity in their home 741 00:44:06,880 --> 00:44:08,320 Speaker 1: or not. I don't want to say a vast majority, 742 00:44:08,360 --> 00:44:12,520 Speaker 1: but certainly many. Uh it's called money on paper because 743 00:44:13,040 --> 00:44:17,000 Speaker 1: unless you're up right or even make a lateral move 744 00:44:17,520 --> 00:44:21,640 Speaker 1: because maybe your credit score is because credit conditions are 745 00:44:21,680 --> 00:44:24,520 Speaker 1: tighter than they were. Well, there were no credit standards 746 00:44:24,719 --> 00:44:28,680 Speaker 1: during the housing bubble, but it's it's still skewed very tight. 747 00:44:29,320 --> 00:44:32,000 Speaker 1: There's many people that can't make a lateral mover, downsize 748 00:44:32,120 --> 00:44:37,399 Speaker 1: or trade up. It's uh either kind of stuck. And 749 00:44:37,400 --> 00:44:39,279 Speaker 1: and part of the problem is to be able to 750 00:44:39,400 --> 00:44:42,399 Speaker 1: jump to the next level as your family grows and 751 00:44:42,840 --> 00:44:46,840 Speaker 1: as there as everything was rising in price. You know, 752 00:44:46,880 --> 00:44:48,440 Speaker 1: you can look at it as percentage, but if you 753 00:44:48,480 --> 00:44:52,080 Speaker 1: look at as dollars, the dollars are spreading and and 754 00:44:52,080 --> 00:44:54,279 Speaker 1: and that's been part of the challenge, is sort of 755 00:44:54,320 --> 00:44:58,359 Speaker 1: trade up of of consumers when they're moving from one 756 00:44:59,120 --> 00:45:01,640 Speaker 1: uh one home to the next size. I'm gonna kill 757 00:45:01,680 --> 00:45:04,919 Speaker 1: the periscope just so everybody. This is what it looks 758 00:45:04,960 --> 00:45:08,920 Speaker 1: like here in the studios. And uh, my candy are 759 00:45:09,040 --> 00:45:14,800 Speaker 1: now that's right. That's that's from the Bloomberg yep um 760 00:45:14,800 --> 00:45:18,640 Speaker 1: and I'm gonna so much for that. Um so, so 761 00:45:18,719 --> 00:45:23,000 Speaker 1: that's kind of fascinating. You know, I love playing with 762 00:45:23,360 --> 00:45:26,840 Speaker 1: the various apps, so people should realize this. Jonathan and I. 763 00:45:26,920 --> 00:45:30,000 Speaker 1: Jonathan comes from Connecticut. I come from the North Island. 764 00:45:30,239 --> 00:45:32,720 Speaker 1: We take our boats. We meet in the Long Island Sounds, 765 00:45:33,160 --> 00:45:36,640 Speaker 1: and neither of these are yachts. These are just midsize 766 00:45:36,680 --> 00:45:39,839 Speaker 1: workaday twenty footers. We tie up. We have a couple 767 00:45:39,920 --> 00:45:43,319 Speaker 1: of beers. Has a bathroom? I have a bathroom. Well, 768 00:45:43,480 --> 00:45:45,640 Speaker 1: I have a small head, not that I use it, 769 00:45:45,719 --> 00:45:50,000 Speaker 1: but uh, in both in both senses, but it's uh. 770 00:45:50,080 --> 00:45:52,480 Speaker 1: And I was thrilled when I discovered my marina has 771 00:45:52,520 --> 00:45:56,440 Speaker 1: free pump out services. Really, let's start using the bathroom. Um. 772 00:45:56,480 --> 00:45:59,040 Speaker 1: But what's fascinating? And I think I showed you this 773 00:45:59,080 --> 00:46:01,840 Speaker 1: a couple of summers ago. You take the Zillo app, 774 00:46:02,160 --> 00:46:04,600 Speaker 1: you launch it, you say, show me what's around me. 775 00:46:05,239 --> 00:46:07,800 Speaker 1: It zooms in on on the map and says, starts 776 00:46:07,840 --> 00:46:12,040 Speaker 1: to show you all of the houses along the waterfronts 777 00:46:12,200 --> 00:46:14,200 Speaker 1: that you can now see from the boat, that you 778 00:46:14,320 --> 00:46:17,279 Speaker 1: can't see from the road because and it gives you, right, 779 00:46:17,360 --> 00:46:19,879 Speaker 1: it gives because they're sitting there on an acre or two, 780 00:46:20,200 --> 00:46:22,600 Speaker 1: they're set way off the road. You can't even see them. 781 00:46:23,040 --> 00:46:27,160 Speaker 1: And there are some really insane properties. So it tells 782 00:46:27,160 --> 00:46:30,040 Speaker 1: you if they were recently sold, what they were sold for, 783 00:46:30,360 --> 00:46:33,319 Speaker 1: if they're up for sale, what the asking prices, and 784 00:46:33,360 --> 00:46:36,400 Speaker 1: you could pull up all the details of them, including 785 00:46:36,440 --> 00:46:43,040 Speaker 1: the taxes and everything else. It's really quite fascinating. That's 786 00:46:43,040 --> 00:46:46,440 Speaker 1: of seven. That's transparency one o one. But when you 787 00:46:46,480 --> 00:46:50,479 Speaker 1: say there's a chain of seven transactions from starter home 788 00:46:50,600 --> 00:46:53,319 Speaker 1: to the three bedroom, one and a half bath, to 789 00:46:53,440 --> 00:46:56,799 Speaker 1: the five bedroom to the you know, two acre, two 790 00:46:56,840 --> 00:47:00,600 Speaker 1: million dollar place, I'm trying to figure out, how do 791 00:47:00,640 --> 00:47:04,400 Speaker 1: you break down those gradations from what did I just 792 00:47:04,440 --> 00:47:09,319 Speaker 1: mentioned starter? Three? Five? How do you get from the 793 00:47:09,400 --> 00:47:14,880 Speaker 1: fourth step up to these twenty million dollar waterfront mansions? 794 00:47:15,000 --> 00:47:20,000 Speaker 1: What are their legitimate gradations between or is it just 795 00:47:20,280 --> 00:47:23,279 Speaker 1: I think negotiable. Yeah, I think you're looking at it 796 00:47:23,320 --> 00:47:29,600 Speaker 1: to compartmentalized. They're they're there, it's it's more of a 797 00:47:29,640 --> 00:47:34,520 Speaker 1: hot mess. It's just smeared over and um. And and 798 00:47:34,560 --> 00:47:39,160 Speaker 1: also to that, what is when when when someone's in 799 00:47:39,160 --> 00:47:42,399 Speaker 1: the house and they want to make a trade up, Um, 800 00:47:42,440 --> 00:47:45,520 Speaker 1: there's many layers that they could you know, they could 801 00:47:46,080 --> 00:47:49,279 Speaker 1: you know, you go from a dollar house to a 802 00:47:49,360 --> 00:47:51,279 Speaker 1: three million dollar house, so you go from a five 803 00:47:51,680 --> 00:47:54,239 Speaker 1: you know, there isn't this sort of you know, tradition 804 00:47:55,239 --> 00:48:00,600 Speaker 1: necessarily regimented sort of Uh, well, I'm thinking so in 805 00:48:00,600 --> 00:48:04,759 Speaker 1: other words, what happens typically typically married family buys a 806 00:48:04,800 --> 00:48:08,120 Speaker 1: small house your income, We have a couple of career, right, 807 00:48:08,160 --> 00:48:09,920 Speaker 1: they get they get a couple of kids, they get 808 00:48:09,960 --> 00:48:12,560 Speaker 1: a little more money, and so now they go from 809 00:48:12,960 --> 00:48:15,600 Speaker 1: a three. But see but see also in this region 810 00:48:15,920 --> 00:48:20,239 Speaker 1: you have another thing where you have you have uh, 811 00:48:20,400 --> 00:48:22,879 Speaker 1: you know, a second home in the Hampton's or you 812 00:48:22,960 --> 00:48:28,399 Speaker 1: have or in any any or tear you know at 813 00:48:28,480 --> 00:48:32,520 Speaker 1: a you know, a weekend place, and and so like 814 00:48:32,600 --> 00:48:35,360 Speaker 1: you you know, there's all this uh you know that 815 00:48:35,520 --> 00:48:38,600 Speaker 1: we have the multi the super luxury towers that people 816 00:48:38,600 --> 00:48:43,520 Speaker 1: aren't necessarily living in. But there are thousands of studio 817 00:48:43,600 --> 00:48:49,040 Speaker 1: and one bedroom apartments in Midtown where a U a 818 00:48:49,080 --> 00:48:53,680 Speaker 1: former resident kept it. They moved to the suburbs. They 819 00:48:54,480 --> 00:48:56,479 Speaker 1: they kept the piano tear, maybe they rented it, maybe 820 00:48:56,480 --> 00:48:58,240 Speaker 1: they used it for their kids and they're in college. 821 00:48:58,719 --> 00:49:02,240 Speaker 1: But they have this flexible ality, so so they're they're 822 00:49:02,280 --> 00:49:06,080 Speaker 1: they're paying for the upkeep of that. Maybe they don't 823 00:49:06,160 --> 00:49:08,800 Speaker 1: trade up as big in the suburbs to the next 824 00:49:08,840 --> 00:49:11,759 Speaker 1: house because they're going back and forth. So what you 825 00:49:11,840 --> 00:49:15,120 Speaker 1: have in a pretty dynamic you know, in any sort 826 00:49:15,160 --> 00:49:20,040 Speaker 1: of dynamic urban market surrounded by um suburbs, is there's 827 00:49:20,080 --> 00:49:23,720 Speaker 1: this interplay between suburban and urban and and right now, 828 00:49:24,200 --> 00:49:31,320 Speaker 1: with housing prices pushing UH record highs and actually pushing 829 00:49:32,040 --> 00:49:36,480 Speaker 1: UM consumers seeking out affordability to you know, the outer 830 00:49:36,600 --> 00:49:40,759 Speaker 1: boroughs to the suburbs. You know, when you're sitting here 831 00:49:40,880 --> 00:49:43,360 Speaker 1: in Manhattan and you're saying, boy, it's really expensive to 832 00:49:43,400 --> 00:49:47,600 Speaker 1: live here. Um. Right now, sales activity in the outlying 833 00:49:47,680 --> 00:49:51,880 Speaker 1: suburbs is at record highs. Really because people can't afford 834 00:49:51,880 --> 00:49:55,400 Speaker 1: to buy in Manhattan. Well, I think because they're priced 835 00:49:55,400 --> 00:49:59,319 Speaker 1: out of Manhattan, they're going to the burbs, whether it's 836 00:49:59,360 --> 00:50:05,280 Speaker 1: Long Island, Fairfield County, Westchester, New Jersey. So the linkage 837 00:50:05,280 --> 00:50:09,239 Speaker 1: with Manhattan is really important. But you're seeing a tremendous 838 00:50:09,280 --> 00:50:14,480 Speaker 1: outflow because housing prices are up, changes, changes, sort of 839 00:50:15,800 --> 00:50:18,960 Speaker 1: lack of better word, migration patterns of people moving outward. 840 00:50:19,520 --> 00:50:22,719 Speaker 1: That's really fascinating. You know, I always thought I wanted 841 00:50:23,239 --> 00:50:27,520 Speaker 1: a Piatra tear, and then when I finally more or 842 00:50:27,560 --> 00:50:31,280 Speaker 1: less can afford one, when it comes time to actually 843 00:50:31,400 --> 00:50:34,560 Speaker 1: firstly start looking at prices there insane And you know 844 00:50:34,640 --> 00:50:36,960 Speaker 1: my old apartment was in the Gramercy Park area. That's 845 00:50:36,960 --> 00:50:39,200 Speaker 1: where I would want a pier a tear. But then 846 00:50:39,239 --> 00:50:41,120 Speaker 1: when you look at wait, why would I want to 847 00:50:41,160 --> 00:50:46,960 Speaker 1: spend a million dollars plus some ungodly monthly maintenance of 848 00:50:47,040 --> 00:50:50,960 Speaker 1: two thousand dollars a month? Wait for twenty four grand? 849 00:50:51,000 --> 00:50:54,160 Speaker 1: Maybe this is going to appreciate in value, maybe it 850 00:50:54,560 --> 00:50:58,600 Speaker 1: outpaces inflation, Maybe it doesn't. Aren't I better off not 851 00:50:58,680 --> 00:51:01,040 Speaker 1: having a pier a tear staying in whatever hotel I 852 00:51:01,120 --> 00:51:04,759 Speaker 1: want for a long weekend um twenty times a year. 853 00:51:05,200 --> 00:51:08,440 Speaker 1: Doesn't that put me well ahead of not having a 854 00:51:08,480 --> 00:51:11,680 Speaker 1: tie up all this money and heading So I've wrestled 855 00:51:11,760 --> 00:51:14,200 Speaker 1: with that back because it could be you could also 856 00:51:14,320 --> 00:51:17,000 Speaker 1: viewed as you know, I'm gonna hold it for twenty years, 857 00:51:17,520 --> 00:51:23,200 Speaker 1: and there's upside potentially to that as well, but also 858 00:51:23,280 --> 00:51:25,040 Speaker 1: to you know, some people want to go to a 859 00:51:25,080 --> 00:51:29,880 Speaker 1: place that is there's where clothes, there their furniture, and 860 00:51:29,920 --> 00:51:32,400 Speaker 1: that's why there there is no sort of regiment to this. 861 00:51:32,480 --> 00:51:36,080 Speaker 1: It's just flexibility. You and I talked, I want to say, 862 00:51:36,200 --> 00:51:40,279 Speaker 1: eight years ago about Miami. Aside from the fact that 863 00:51:40,320 --> 00:51:43,400 Speaker 1: the odds. Well, there's a couple of issues aside from 864 00:51:43,400 --> 00:51:48,080 Speaker 1: the fact that it's sinking into the sea. It's not 865 00:51:48,160 --> 00:51:50,360 Speaker 1: just the sea is coming up, it's Miami is sinking. 866 00:51:50,719 --> 00:51:54,280 Speaker 1: That's what happens when you build on a coral basis, 867 00:51:54,400 --> 00:51:59,439 Speaker 1: a porous coral rock um and the fact that they're 868 00:51:59,440 --> 00:52:06,400 Speaker 1: winters aren't consistently you know. Yeah. But the other issue 869 00:52:06,520 --> 00:52:09,800 Speaker 1: is same situation. You could steal a condo down and 870 00:52:09,840 --> 00:52:12,360 Speaker 1: I'm told it's still even though prices have bounced up, 871 00:52:12,400 --> 00:52:16,440 Speaker 1: it's still relatively inexpected. So I tracked the Miami market 872 00:52:16,440 --> 00:52:20,120 Speaker 1: as well. And if you just look at Miami as 873 00:52:20,160 --> 00:52:23,680 Speaker 1: a whole and not differentiate between condo and single family, 874 00:52:24,280 --> 00:52:31,160 Speaker 1: it's about twice or about a third distressed, meaning oh yeah, 875 00:52:31,200 --> 00:52:36,600 Speaker 1: that's you more inland than on the beach. On the beach, 876 00:52:36,680 --> 00:52:41,759 Speaker 1: it's more like non distressed distress just rentals anyway. But 877 00:52:41,760 --> 00:52:46,239 Speaker 1: buts but so so. In other words, you have a 878 00:52:46,320 --> 00:52:50,120 Speaker 1: dramatic it's actually kind of surprising that you don't have 879 00:52:50,320 --> 00:52:55,440 Speaker 1: a great differential, uh in terms of geographic difference or 880 00:52:55,560 --> 00:53:00,960 Speaker 1: proximity between um sort of areas that have very little 881 00:53:01,080 --> 00:53:02,879 Speaker 1: distressed real estate in the areas that have a lot 882 00:53:02,920 --> 00:53:05,920 Speaker 1: of distressed real estate, and they're pricing you know, can 883 00:53:05,960 --> 00:53:09,960 Speaker 1: be multiples of three or four or five for similar houses. 884 00:53:10,440 --> 00:53:14,200 Speaker 1: Um uh. So, so the market is polarized. In other words, 885 00:53:14,280 --> 00:53:18,800 Speaker 1: they're mutually exclusive for the most part, which I find, 886 00:53:19,800 --> 00:53:23,799 Speaker 1: uh sort of odd, but but it really is has 887 00:53:23,880 --> 00:53:27,240 Speaker 1: been the way that the market is morphed. So Miami 888 00:53:27,400 --> 00:53:32,319 Speaker 1: is seeing has seen tremendous development growth. Um. I was 889 00:53:32,360 --> 00:53:35,600 Speaker 1: just down there last week, cranes everywhere. You would think 890 00:53:35,719 --> 00:53:39,320 Speaker 1: there was never a housing crisis, right right. It's interesting 891 00:53:39,360 --> 00:53:43,200 Speaker 1: because also what you're seeing now with Miami is there's 892 00:53:43,239 --> 00:53:47,640 Speaker 1: this so like New York, the new development market is 893 00:53:47,640 --> 00:53:52,840 Speaker 1: seeing a slow down, right, stronger dollar uh, more building, 894 00:53:53,000 --> 00:53:57,000 Speaker 1: So the consumer of these properties is taking a longer, 895 00:53:57,040 --> 00:53:58,560 Speaker 1: you know, to make a decision because they have a 896 00:53:58,600 --> 00:54:01,320 Speaker 1: lot more choices in their trying to make sure they're comfortable. 897 00:54:02,080 --> 00:54:04,320 Speaker 1: Still a lot of activity, but not to the degree 898 00:54:04,320 --> 00:54:10,000 Speaker 1: it was a few years ago. Um. You're seeing people 899 00:54:10,040 --> 00:54:15,440 Speaker 1: now talk like in the last housing cycle, Miami was 900 00:54:15,480 --> 00:54:19,840 Speaker 1: the first to fall. So does this mean with Miami 901 00:54:19,920 --> 00:54:24,360 Speaker 1: now um uh, showing some weakness at the top of 902 00:54:24,360 --> 00:54:26,280 Speaker 1: the market, not the but the top of the market. 903 00:54:26,600 --> 00:54:29,280 Speaker 1: Is this a leading indicator, and I sort of chuckle 904 00:54:29,440 --> 00:54:33,520 Speaker 1: that because because the last go round it was about 905 00:54:33,760 --> 00:54:39,399 Speaker 1: doctor I like to say, uh, like nurses and carpenters 906 00:54:39,840 --> 00:54:42,480 Speaker 1: quitting their jobs and flipping real estate for a living. 907 00:54:42,840 --> 00:54:45,239 Speaker 1: In the movie The Big Short, it's the stripper who 908 00:54:45,280 --> 00:54:50,080 Speaker 1: owns six rental properties and and the Steve Carrell character 909 00:54:50,160 --> 00:54:53,040 Speaker 1: is talking about, what are you gonna do, uh when 910 00:54:53,040 --> 00:54:56,440 Speaker 1: your mortgage resets? And she goes, mortgage resets, what are 911 00:54:56,440 --> 00:54:58,560 Speaker 1: you talking about? And he explains us there and she 912 00:54:58,600 --> 00:55:03,680 Speaker 1: goes expletive, I have six properties I bought. And it 913 00:55:03,800 --> 00:55:06,520 Speaker 1: dawns on him. Wait, if strippers are buying, are able 914 00:55:06,560 --> 00:55:09,960 Speaker 1: to get credit to buy six properties and then rent 915 00:55:10,040 --> 00:55:13,799 Speaker 1: them and don't even know their variable mortgages, how is 916 00:55:13,840 --> 00:55:16,000 Speaker 1: this going to end? It's well, it's it's gonna end 917 00:55:16,000 --> 00:55:20,400 Speaker 1: badly and and so so what And what's interesting now 918 00:55:20,960 --> 00:55:26,880 Speaker 1: is that, unlike many other markets, the Miami market is 919 00:55:26,960 --> 00:55:31,759 Speaker 1: still heavily all cash, so the the cash buyer and 920 00:55:31,840 --> 00:55:33,880 Speaker 1: not just at the tie and but the is that 921 00:55:33,960 --> 00:55:38,160 Speaker 1: why the Treasury Department is looking at Manhattan ends Miami. 922 00:55:38,280 --> 00:55:41,080 Speaker 1: That's one of the reasons. Part of the reason that 923 00:55:41,120 --> 00:55:44,920 Speaker 1: Miami has heavy cash is because lenders are still very tight, 924 00:55:45,040 --> 00:55:48,120 Speaker 1: credit tight credit. And also, you know, there's a legacy 925 00:55:48,200 --> 00:55:51,680 Speaker 1: of foreclosures and distressed real estate not so long ago. 926 00:55:52,360 --> 00:55:57,319 Speaker 1: So they they're just very conservative. And that's so So 927 00:55:57,480 --> 00:55:59,960 Speaker 1: to think of that as some sort of leading indicate 928 00:56:00,520 --> 00:56:03,600 Speaker 1: it's unique to Miami. It's not a national trend. It 929 00:56:03,640 --> 00:56:06,120 Speaker 1: doesn't seem to be. I I don't get the connection. 930 00:56:06,200 --> 00:56:08,600 Speaker 1: Are you seeing anything else? Well, let's look at some 931 00:56:08,640 --> 00:56:11,640 Speaker 1: of the other problem areas last go around. In addition 932 00:56:11,719 --> 00:56:17,080 Speaker 1: to South Florida, it was Arizona, it was and it 933 00:56:17,160 --> 00:56:22,000 Speaker 1: was the eastern part of Las Vegas. So so what 934 00:56:22,040 --> 00:56:24,880 Speaker 1: are you seeing in in Nevada, Arizona and and the 935 00:56:25,000 --> 00:56:30,840 Speaker 1: non coastal regions in California. So still you know, the 936 00:56:30,920 --> 00:56:36,520 Speaker 1: foreclosure crisis, while it's certainly has eased dramatically from where 937 00:56:36,520 --> 00:56:39,919 Speaker 1: it was at the peak. Uh, you know, I'd say 938 00:56:39,920 --> 00:56:46,200 Speaker 1: it's stabilized. These markets Uh wildly overbuilt during the period. 939 00:56:46,239 --> 00:56:47,840 Speaker 1: You know that. Do you mean you don't want to 940 00:56:47,880 --> 00:56:51,200 Speaker 1: commute two hours? Right? The ex serbs right doesn't make 941 00:56:51,239 --> 00:56:54,400 Speaker 1: any sense? So um in you know, the sort of 942 00:56:54,520 --> 00:56:57,759 Speaker 1: rule is if you're in a market like Phoenix or 943 00:56:57,840 --> 00:57:04,399 Speaker 1: Las Vegas where land is cheap, endless. It it's not. 944 00:57:04,760 --> 00:57:08,040 Speaker 1: You shouldn't expect it to rise dramatically unless there's some 945 00:57:08,120 --> 00:57:13,160 Speaker 1: external stimulus like credit. Yeah, no credit standards, and which 946 00:57:13,200 --> 00:57:15,960 Speaker 1: is exactly what happened. What about an area where let's 947 00:57:16,080 --> 00:57:19,480 Speaker 1: let's look at d C or New York or San Francisco, 948 00:57:20,040 --> 00:57:23,480 Speaker 1: where there isn't an endless supply of lands and there 949 00:57:23,520 --> 00:57:26,080 Speaker 1: are all sorts of restrictions on on buildings or at 950 00:57:26,160 --> 00:57:29,720 Speaker 1: least regulations on how much we can build, then we 951 00:57:29,800 --> 00:57:33,080 Speaker 1: have a housing affordability crisis, which is a national condition 952 00:57:33,200 --> 00:57:37,720 Speaker 1: right now. Every it just seems like every major I 953 00:57:37,800 --> 00:57:41,320 Speaker 1: get calls from its cities or or or so it's 954 00:57:41,360 --> 00:57:45,280 Speaker 1: a combination. It's there's no doesn't matter whether you're a 955 00:57:45,280 --> 00:57:50,000 Speaker 1: big or small or middle midsize. It doesn't matter whether 956 00:57:50,080 --> 00:57:55,560 Speaker 1: you're you know, sort of a region with similar employment. UM. 957 00:57:55,600 --> 00:57:58,640 Speaker 1: It's it's the fact that when credit conditions are tight, 958 00:57:59,440 --> 00:58:03,360 Speaker 1: it places outsized demand on the rental market because the 959 00:58:03,440 --> 00:58:06,800 Speaker 1: consumer that organically would have transferred from the rental market 960 00:58:06,800 --> 00:58:08,800 Speaker 1: to the purchase market become a first time buyer. Which 961 00:58:08,800 --> 00:58:13,920 Speaker 1: guess what we have shortage of UM. The uh, the 962 00:58:13,920 --> 00:58:18,920 Speaker 1: the supply is relatively inelastic, and the rents go up, 963 00:58:19,520 --> 00:58:23,880 Speaker 1: and and in fact, in you know, credit is there 964 00:58:24,160 --> 00:58:26,160 Speaker 1: is the reason why. You know, if you look back 965 00:58:26,200 --> 00:58:29,640 Speaker 1: over the last five or six years, the rent rents 966 00:58:29,680 --> 00:58:32,800 Speaker 1: got expensive during the foreclosure crisis, you would think that 967 00:58:32,840 --> 00:58:37,040 Speaker 1: they would get cheap because you have the opposite, people 968 00:58:37,080 --> 00:58:39,080 Speaker 1: who can't afford a house so they're forced to be 969 00:58:39,120 --> 00:58:43,040 Speaker 1: a renter, would be buyers, become renters, would be mortgage 970 00:58:43,080 --> 00:58:47,080 Speaker 1: applicants become renters because the bank's credit line. Look, I 971 00:58:47,200 --> 00:58:50,440 Speaker 1: just bought a house, you know, a year and change ago. Um, 972 00:58:51,200 --> 00:58:53,000 Speaker 1: I tell the story all the time. It's and I 973 00:58:53,040 --> 00:58:56,280 Speaker 1: think it's hilarious. The first house we bought out in 974 00:58:56,320 --> 00:58:58,560 Speaker 1: the Bourbs was in a little town called green Vale. 975 00:58:59,080 --> 00:59:03,320 Speaker 1: I think we picked sixty for this. Fifteen plus years ago, 976 00:59:03,960 --> 00:59:06,720 Speaker 1: we did a refi in I want to say, oh 977 00:59:06,720 --> 00:59:09,800 Speaker 1: five or oh six, And I'll never forget. And I 978 00:59:09,840 --> 00:59:12,760 Speaker 1: had already been pretty t clued in to what was 979 00:59:12,800 --> 00:59:14,800 Speaker 1: going on on the real estates. I have been writing 980 00:59:14,800 --> 00:59:17,480 Speaker 1: about it, but I'll never forget. We did the refi 981 00:59:17,640 --> 00:59:20,960 Speaker 1: and the plan was to take thirty grands out, lower 982 00:59:21,000 --> 00:59:23,320 Speaker 1: our costs and redo the kitchen. And now the house 983 00:59:23,400 --> 00:59:27,240 Speaker 1: value goes up and the guy literally pulls into the driveway, 984 00:59:27,320 --> 00:59:30,480 Speaker 1: flings the card door open, leaves the engine running, and 985 00:59:30,560 --> 00:59:32,200 Speaker 1: you hear on the front porch we had it was 986 00:59:32,240 --> 00:59:37,000 Speaker 1: an old style Victorian with a covered front porch, and 987 00:59:37,080 --> 00:59:40,200 Speaker 1: hear him run up the up the porch into the house. Hey, 988 00:59:40,240 --> 00:59:43,320 Speaker 1: I'm really sorry. I have another closing of of a 989 00:59:43,440 --> 00:59:47,800 Speaker 1: sale of a house four blocks away. Sign sign initial initial, 990 00:59:48,560 --> 00:59:50,960 Speaker 1: here's your check, gotta go. And the guy was in 991 00:59:51,000 --> 00:59:55,000 Speaker 1: and out more than sixty seconds. And I looked at 992 00:59:55,040 --> 00:59:56,880 Speaker 1: my wife and I said, well, the good news is 993 00:59:56,920 --> 00:59:59,400 Speaker 1: we we're gonna get a kitchen. The bad news is 994 00:59:59,800 --> 01:00:02,360 Speaker 1: the is going to end badly. There's no other way 995 01:00:02,440 --> 01:00:04,919 Speaker 1: that this sort of stuff Like we looked at each other, 996 01:00:05,040 --> 01:00:08,560 Speaker 1: like what just it was a cartoon where where bugs bunny? 997 01:00:08,560 --> 01:00:11,640 Speaker 1: Where where the witch zips out? You see the lines 998 01:00:11,680 --> 01:00:14,360 Speaker 1: and the hair prints hanging in the air. That that's 999 01:00:14,400 --> 01:00:17,960 Speaker 1: what it's like. Fast forward fifteen years where I'm trying 1000 01:00:18,000 --> 01:00:21,920 Speaker 1: to get a jumbo mortgage and the torturous process the 1001 01:00:21,960 --> 01:00:25,600 Speaker 1: banks put us through, where I have Mike Bloomberg co 1002 01:00:25,720 --> 01:00:29,600 Speaker 1: signing my mortgage. It's still took that's a joke, it's 1003 01:00:29,640 --> 01:00:34,000 Speaker 1: still but it took forever to get this process because 1004 01:00:34,760 --> 01:00:37,920 Speaker 1: you know, credit in auto loans and credit cards is 1005 01:00:38,200 --> 01:00:41,800 Speaker 1: fast and loose. Yeah, you know, that's why auto sales 1006 01:00:41,840 --> 01:00:44,959 Speaker 1: are doing so well. Right, it's you could well but there. Now, 1007 01:00:45,400 --> 01:00:47,800 Speaker 1: let's let's talk about auto biles for a second. Because 1008 01:00:47,840 --> 01:00:51,720 Speaker 1: I love this area. So I read this fascinating article 1009 01:00:51,760 --> 01:00:54,840 Speaker 1: about repose and in college. I love the movie Repoman. 1010 01:00:55,040 --> 01:00:57,720 Speaker 1: That's my favorite movie. Get out of here. Yeah, you're 1011 01:00:57,800 --> 01:00:59,840 Speaker 1: you find one in every car. I got it on 1012 01:00:59,880 --> 01:01:03,880 Speaker 1: my phone. That's hilarious. So they not you know the 1013 01:01:04,000 --> 01:01:07,040 Speaker 1: I think the average time. Now I really respect you, Barry, 1014 01:01:07,560 --> 01:01:12,040 Speaker 1: like you've you've elevated to another people man. Absolutely. Um So, 1015 01:01:12,040 --> 01:01:14,520 Speaker 1: so when you look at a house that goes into foreclosure, 1016 01:01:15,000 --> 01:01:18,200 Speaker 1: so it's it's you miss a payment, it's it's what 1017 01:01:18,280 --> 01:01:23,440 Speaker 1: are the three stages delinquent default? And then so but 1018 01:01:23,560 --> 01:01:26,440 Speaker 1: from from that default where you haven't made payments in 1019 01:01:26,880 --> 01:01:30,760 Speaker 1: ninety days to the actual foreclosure and they take possession 1020 01:01:30,760 --> 01:01:33,320 Speaker 1: of the house and throw the it's five hundred days 1021 01:01:33,360 --> 01:01:36,200 Speaker 1: on average. New York State and New Jersey are a 1022 01:01:36,240 --> 01:01:41,080 Speaker 1: thousand days. Okay. Now, I thought Miami was worse, but 1023 01:01:41,120 --> 01:01:44,440 Speaker 1: they had those had those rocket courts, which were disasters. 1024 01:01:44,440 --> 01:01:48,000 Speaker 1: Into themselves. Now take an automobile, you miss a payment, 1025 01:01:48,840 --> 01:01:52,080 Speaker 1: they know you work, They have a tracker in the car. Anyway, 1026 01:01:52,520 --> 01:01:56,880 Speaker 1: your cell phone is trackable. And now these REPO guys 1027 01:01:56,880 --> 01:02:01,040 Speaker 1: are paying malls and other places to have these cameras 1028 01:02:01,040 --> 01:02:04,720 Speaker 1: at the entrances and exits of every major shopping center. 1029 01:02:05,120 --> 01:02:08,520 Speaker 1: They read the license plate as it goes in. There 1030 01:02:08,560 --> 01:02:11,880 Speaker 1: are some amazing things about this. So if you assuming 1031 01:02:11,920 --> 01:02:15,840 Speaker 1: you're not taking your car and saying I'm going to 1032 01:02:15,920 --> 01:02:18,160 Speaker 1: ship it to overseas to be sold and I'm never 1033 01:02:18,160 --> 01:02:21,680 Speaker 1: gonna make another payment again. Assume you're a typical car buyer. 1034 01:02:22,200 --> 01:02:24,240 Speaker 1: You borrow money, or you do a lease, or you 1035 01:02:24,280 --> 01:02:26,520 Speaker 1: do a financing. You get a car, and you go 1036 01:02:26,600 --> 01:02:28,960 Speaker 1: home and you're going back and forth to work. If 1037 01:02:29,000 --> 01:02:32,520 Speaker 1: you decide to stop making payments on that car, you 1038 01:02:32,600 --> 01:02:37,280 Speaker 1: miss a payment, thirty days later of those cars have 1039 01:02:37,440 --> 01:02:40,120 Speaker 1: been repossessed, and I think the numbers go practically to 1040 01:02:41,840 --> 01:02:43,960 Speaker 1: days later. Right. But the problem of foreclosure, you know 1041 01:02:44,000 --> 01:02:47,360 Speaker 1: that the house side of the story is that no 1042 01:02:47,400 --> 01:02:50,720 Speaker 1: one really knew knows who wants that. Well, that's a 1043 01:02:50,760 --> 01:02:55,160 Speaker 1: whole different match. Thanks and other other things. It's it's 1044 01:02:55,200 --> 01:02:58,320 Speaker 1: really been a uh and if those thousand day houses 1045 01:02:58,360 --> 01:03:02,880 Speaker 1: are because the uh, the mortgage side of things decided 1046 01:03:02,920 --> 01:03:07,520 Speaker 1: to bypass. There is a I have a whole monograph 1047 01:03:07,600 --> 01:03:09,880 Speaker 1: on this, and I won't go into it here, but 1048 01:03:10,040 --> 01:03:12,920 Speaker 1: there is a whole process for making sure we know 1049 01:03:13,560 --> 01:03:18,000 Speaker 1: the exact survey of the land, the chain of title, 1050 01:03:18,680 --> 01:03:22,240 Speaker 1: and and any changes we've made to the legal status 1051 01:03:22,280 --> 01:03:24,120 Speaker 1: of that land. Did you give this person a neasman, 1052 01:03:24,400 --> 01:03:26,800 Speaker 1: did you subdivide? Did you do this? And that worked 1053 01:03:26,960 --> 01:03:29,600 Speaker 1: really well for a long time until we decided to 1054 01:03:29,640 --> 01:03:32,560 Speaker 1: bring until the mortgage people on their own, till the 1055 01:03:32,600 --> 01:03:35,560 Speaker 1: banks on their own decided to put together to save 1056 01:03:35,640 --> 01:03:40,320 Speaker 1: money on transaction fees, transaction fees filing costs local taxes. 1057 01:03:40,440 --> 01:03:43,240 Speaker 1: In many ways, I have argued that what they did 1058 01:03:43,720 --> 01:03:48,080 Speaker 1: was tax evasion and in other ways fraud. They have 1059 01:03:48,240 --> 01:03:50,840 Speaker 1: got argued that, well, we've got an approval or at 1060 01:03:50,920 --> 01:03:54,640 Speaker 1: least and no no fal to that people that are 1061 01:03:54,800 --> 01:03:59,280 Speaker 1: challenging them, when yeah, so so, I can't so it. 1062 01:03:59,480 --> 01:04:02,160 Speaker 1: But it's so widespread it was. It was a huge 1063 01:04:02,760 --> 01:04:06,840 Speaker 1: swath of the mortgage business went through this vehicle. And 1064 01:04:06,880 --> 01:04:10,760 Speaker 1: if you and and again another another fascinating discussion. If 1065 01:04:10,760 --> 01:04:14,200 Speaker 1: this vehicle didn't exist, and here's the best reason for 1066 01:04:14,880 --> 01:04:17,840 Speaker 1: dissembling it and making it illegal, which is very tough 1067 01:04:17,880 --> 01:04:22,640 Speaker 1: to do when you own Congress, but um, when they 1068 01:04:22,680 --> 01:04:25,760 Speaker 1: own you want to do something different. You could not 1069 01:04:25,920 --> 01:04:29,600 Speaker 1: have had a secure mass securitization to the degree we did, 1070 01:04:30,120 --> 01:04:34,000 Speaker 1: where the paperwork was a mess without this electronic system, 1071 01:04:34,400 --> 01:04:37,200 Speaker 1: believe it or not, the old fashioned land record system 1072 01:04:37,240 --> 01:04:40,720 Speaker 1: where someone takes a paper, goes down to the county 1073 01:04:40,760 --> 01:04:43,480 Speaker 1: clerk and he takes out his big stamp and okay, 1074 01:04:43,520 --> 01:04:45,640 Speaker 1: this mortgage has been filed, and now we're taking these 1075 01:04:45,640 --> 01:04:51,120 Speaker 1: papers and sending it to the lawyers. It's fascinating. We 1076 01:04:51,200 --> 01:04:54,560 Speaker 1: have a deep, a deep special effects team. But that process, 1077 01:04:54,720 --> 01:04:57,560 Speaker 1: if you have to send someone down to the county, 1078 01:04:58,040 --> 01:05:01,600 Speaker 1: you're not going to be flipping this property every fifteen seconds. 1079 01:05:01,640 --> 01:05:04,920 Speaker 1: You're not gonna have high frequency trading of mortgages the 1080 01:05:04,960 --> 01:05:07,560 Speaker 1: way we more or less did. And it was just 1081 01:05:07,600 --> 01:05:10,640 Speaker 1: one of those things where, hey, this system works really 1082 01:05:10,680 --> 01:05:14,680 Speaker 1: well and has for hundreds of years. Let's it's funny. 1083 01:05:14,680 --> 01:05:19,320 Speaker 1: A parallel, maybe a distant parallel is appraisal licensing didn't 1084 01:05:19,360 --> 01:05:24,880 Speaker 1: come into nine and and it was a byproduct of 1085 01:05:24,920 --> 01:05:28,760 Speaker 1: the SNL scandal, and with thousands of people went to 1086 01:05:28,840 --> 01:05:34,120 Speaker 1: jail right right, exactly unlike the last. But what was 1087 01:05:34,160 --> 01:05:36,919 Speaker 1: fascinating is the way that that worked is they would 1088 01:05:37,120 --> 01:05:40,920 Speaker 1: they would find a chrony appraiser and they would appraise 1089 01:05:41,080 --> 01:05:47,040 Speaker 1: the value of a house every hour. Come on. So 1090 01:05:47,080 --> 01:05:51,040 Speaker 1: it's changed so much because apparently the data was that 1091 01:05:51,960 --> 01:05:55,400 Speaker 1: granular that you could you could you could sort of 1092 01:05:55,640 --> 01:05:59,200 Speaker 1: extract a value change from ten fifteen in the morning 1093 01:05:59,280 --> 01:06:03,760 Speaker 1: until too already five in the afternoon. Here's the great scam. 1094 01:06:03,760 --> 01:06:06,000 Speaker 1: Now I know you no longer do the sort of 1095 01:06:06,040 --> 01:06:10,560 Speaker 1: mass appraisals that that there. What you mean is for 1096 01:06:10,680 --> 01:06:14,240 Speaker 1: like the big retail banks. And that's the whole discussion 1097 01:06:14,280 --> 01:06:16,760 Speaker 1: about that. Well, let's let's quickly have that discussion, because 1098 01:06:16,760 --> 01:06:22,560 Speaker 1: that's fascinating. If the basis of giving let's step back 1099 01:06:22,960 --> 01:06:28,680 Speaker 1: when when the famous uh Benjamin Graham quote is in 1100 01:06:28,680 --> 01:06:32,280 Speaker 1: the short run, the market is a voting machine, but 1101 01:06:32,400 --> 01:06:36,080 Speaker 1: in the long run it's a weighing machine, meaning opinion 1102 01:06:36,120 --> 01:06:39,600 Speaker 1: and sentiment affects short term prices, but of a long haul, 1103 01:06:39,800 --> 01:06:45,640 Speaker 1: intrinsic value will ultimately win out. Now, the entire appraisal 1104 01:06:45,720 --> 01:06:48,200 Speaker 1: system is I've witnessed it as a buyer or seller 1105 01:06:48,280 --> 01:06:52,280 Speaker 1: of a house seems to be based on comps on 1106 01:06:52,360 --> 01:06:55,720 Speaker 1: comparable homes in the area. But stop and think about 1107 01:06:55,760 --> 01:07:00,640 Speaker 1: what that means during a credit bubble or a housing boom. 1108 01:07:00,680 --> 01:07:03,720 Speaker 1: Because that house sold for a hundred grand more than 1109 01:07:03,840 --> 01:07:06,919 Speaker 1: we You and I know, wink wink, nudge nudge, it's 1110 01:07:06,960 --> 01:07:10,240 Speaker 1: really worth. But it's similar to my house. Now I 1111 01:07:10,280 --> 01:07:12,960 Speaker 1: could get in my house to go up in value. 1112 01:07:13,040 --> 01:07:17,480 Speaker 1: All you're doing is ratifying an upward spiral. There is 1113 01:07:17,560 --> 01:07:20,600 Speaker 1: no you're not looking at at how home price is 1114 01:07:20,720 --> 01:07:23,680 Speaker 1: relative to income in the area. You're not looking at 1115 01:07:23,720 --> 01:07:27,240 Speaker 1: the Holmes price relative. There is a check to that 1116 01:07:27,320 --> 01:07:31,080 Speaker 1: because because we also look at contract activity, contract prices, 1117 01:07:31,640 --> 01:07:34,320 Speaker 1: and you can see a market turn whether going up 1118 01:07:34,440 --> 01:07:38,280 Speaker 1: or down. Do appraisers not not approved houses for for 1119 01:07:38,480 --> 01:07:41,680 Speaker 1: in those circumstances. So so think of what's happened since 1120 01:07:41,760 --> 01:07:47,000 Speaker 1: Dodd Frank and financial reform is that they have installed 1121 01:07:47,360 --> 01:07:51,160 Speaker 1: or legitimized a middleman called an appraisal management company or 1122 01:07:51,240 --> 01:07:56,680 Speaker 1: a mcswards. The bank isn't hiring a favorite appraiser because 1123 01:07:56,680 --> 01:08:01,760 Speaker 1: the implication is the bank knows me for thirty years, uh, 1124 01:08:01,840 --> 01:08:06,600 Speaker 1: and they trust me that somehow morphed into you know, 1125 01:08:06,720 --> 01:08:09,760 Speaker 1: I'm on the doll you know, because and I understand that, 1126 01:08:09,800 --> 01:08:13,240 Speaker 1: you know, there certainly is that component to but but 1127 01:08:13,480 --> 01:08:16,439 Speaker 1: the idea was every major bank had an appraisal panel 1128 01:08:16,800 --> 01:08:19,000 Speaker 1: that you were a member of, and they were hard 1129 01:08:19,040 --> 01:08:22,040 Speaker 1: to get on, and you were vetted and they review 1130 01:08:22,120 --> 01:08:24,559 Speaker 1: your work and they constantly go after you. It's not 1131 01:08:24,680 --> 01:08:26,880 Speaker 1: like some guy at a death says, hey, I needed 1132 01:08:26,880 --> 01:08:29,880 Speaker 1: to come in. Uh. You know. That was a widespread 1133 01:08:29,920 --> 01:08:36,640 Speaker 1: practice until the housing bubble, when when credit are uh, 1134 01:08:37,400 --> 01:08:42,680 Speaker 1: collateral value didn't matter because everything was already sold off. 1135 01:08:42,720 --> 01:08:45,600 Speaker 1: You could offload the risk to some unwitting investor, a 1136 01:08:45,640 --> 01:08:49,280 Speaker 1: school system in Minnesota, or the Icelandic banking system, whatever, 1137 01:08:49,360 --> 01:08:52,639 Speaker 1: whatever you happen to pick. So so, so the point 1138 01:08:52,720 --> 01:08:56,560 Speaker 1: is is that what happened to take away the control 1139 01:08:56,720 --> 01:08:59,719 Speaker 1: that the lender or influence a lender would have over 1140 01:08:59,760 --> 01:09:03,439 Speaker 1: the appraiser. Maybe it was best intentions, but it was 1141 01:09:03,760 --> 01:09:06,720 Speaker 1: it was idiotic because what it ended up doing was 1142 01:09:07,200 --> 01:09:10,360 Speaker 1: putting installing a middleman, which is essentially think of them 1143 01:09:10,400 --> 01:09:13,880 Speaker 1: as a giant automated conveyor belt. The faster you do work, 1144 01:09:14,120 --> 01:09:17,480 Speaker 1: the faster you get more work. And the only standards 1145 01:09:17,640 --> 01:09:21,320 Speaker 1: they use, uh, first of all, the bank doesn't pay 1146 01:09:21,360 --> 01:09:24,120 Speaker 1: for that. The appraiser pay for that by giving up 1147 01:09:24,200 --> 01:09:27,599 Speaker 1: half their fee. So right now there is an app 1148 01:09:27,960 --> 01:09:32,719 Speaker 1: the the banking industry is saying there's an appraisal shortage 1149 01:09:32,720 --> 01:09:37,479 Speaker 1: in the US undesirable. No no, no, no, no, no no. 1150 01:09:38,120 --> 01:09:41,760 Speaker 1: There are plenty of appraisers. They're just are not enough 1151 01:09:41,800 --> 01:09:44,800 Speaker 1: praisers that are willing to work for half the market rate. 1152 01:09:45,280 --> 01:09:48,479 Speaker 1: So so what's happening is you have a misalignment of 1153 01:09:49,080 --> 01:09:52,639 Speaker 1: the talent pool against what the wages are. So what 1154 01:09:53,000 --> 01:09:57,240 Speaker 1: appraisers like myself and others left retail banking and where 1155 01:09:57,280 --> 01:10:01,560 Speaker 1: we do you know, litigation, cort testimony, estates and trust, matrimonial. 1156 01:10:02,240 --> 01:10:06,200 Speaker 1: And I'm never going back because because to to the 1157 01:10:06,200 --> 01:10:11,120 Speaker 1: retail banking side, because it's so distorted and dis sort 1158 01:10:11,120 --> 01:10:17,200 Speaker 1: of disconnected from any worry about collateral value. So the 1159 01:10:17,280 --> 01:10:20,600 Speaker 1: old problem was, and you had a bunch of appraisers, 1160 01:10:20,600 --> 01:10:26,280 Speaker 1: it was mortgage brokers that were controlling the appraisal the appraiser. 1161 01:10:26,400 --> 01:10:31,360 Speaker 1: They were essentially the bank is saying to the mortgage broker, 1162 01:10:31,479 --> 01:10:34,360 Speaker 1: find the appraiser. Now, remember the mortgage broker only gets 1163 01:10:34,360 --> 01:10:36,920 Speaker 1: paid if they get it, if the deal closes, right, 1164 01:10:37,200 --> 01:10:41,360 Speaker 1: So there's a complete conflict. And then as who's going 1165 01:10:41,400 --> 01:10:45,320 Speaker 1: to rubber stamp, who's Gonnas, Who's no longer an appraiser, 1166 01:10:45,360 --> 01:10:49,800 Speaker 1: they're a deal enabler, and so that so that loan closes, 1167 01:10:50,040 --> 01:10:52,800 Speaker 1: and and then the appraiser gets another assignment and you know, 1168 01:10:52,800 --> 01:10:56,519 Speaker 1: they get higher comparable and higher prices are immediately just 1169 01:10:56,800 --> 01:10:59,400 Speaker 1: and all the appraisers that I knew in this area 1170 01:11:00,040 --> 01:11:02,920 Speaker 1: at all of a sudden exploded. They went from two 1171 01:11:03,040 --> 01:11:06,240 Speaker 1: or three people to a hundred people. And we're you know, 1172 01:11:06,280 --> 01:11:09,120 Speaker 1: the owners are driving in limos with cell phones doing 1173 01:11:09,160 --> 01:11:13,679 Speaker 1: deals with banks. They're all gone. They all exploded because 1174 01:11:14,040 --> 01:11:20,080 Speaker 1: because when the credit uh bubble popped, uh, that was 1175 01:11:20,120 --> 01:11:23,360 Speaker 1: it for the mortgage brokerage industry as well. That's been 1176 01:11:23,400 --> 01:11:28,360 Speaker 1: decimated since the financial crisis. So so the problem that 1177 01:11:28,439 --> 01:11:33,880 Speaker 1: we had was that you had, I want to say 1178 01:11:33,880 --> 01:11:36,240 Speaker 1: it was oh four. You had a bunch of appraisers 1179 01:11:36,280 --> 01:11:40,599 Speaker 1: go down to Congress and complain about this, saying, look, 1180 01:11:40,720 --> 01:11:43,960 Speaker 1: something's going on in the housing market where we can't 1181 01:11:44,000 --> 01:11:47,879 Speaker 1: do a legitimate appraiser. The prices are coming in crazy, 1182 01:11:48,040 --> 01:11:51,160 Speaker 1: and if you don't approve it, you don't get used anymore. 1183 01:11:51,320 --> 01:11:55,599 Speaker 1: So it's either rubber stamped this nonsensical price, or I'm 1184 01:11:55,600 --> 01:11:58,720 Speaker 1: not sending you any business. It's similar to what took 1185 01:11:58,800 --> 01:12:02,240 Speaker 1: place in the credit rating agency. Hey, if you don't 1186 01:12:02,240 --> 01:12:04,600 Speaker 1: give me triple A, I'll go down to the praisers. 1187 01:12:04,680 --> 01:12:08,559 Speaker 1: Predicament is exactly the positioning that the credit rating agent 1188 01:12:08,920 --> 01:12:12,880 Speaker 1: are in, UH with the investment banks. I mean that 1189 01:12:12,880 --> 01:12:16,240 Speaker 1: that is the problem is that you're you're at the 1190 01:12:16,280 --> 01:12:21,720 Speaker 1: trough being fed and you can't disappoint your provider. And 1191 01:12:21,760 --> 01:12:23,560 Speaker 1: then so what does this new model do? Does it 1192 01:12:23,640 --> 01:12:25,880 Speaker 1: do anything better or is it just it doesn't It 1193 01:12:25,960 --> 01:12:29,720 Speaker 1: actually is does things worse. It relies on automated valuation, 1194 01:12:29,880 --> 01:12:34,559 Speaker 1: which is um wildly inaccurate. Certainly will improve over time. 1195 01:12:34,800 --> 01:12:36,960 Speaker 1: But the problem with data, as we we've touched on 1196 01:12:37,120 --> 01:12:41,240 Speaker 1: before is that UH public record data, the quality of 1197 01:12:41,240 --> 01:12:46,440 Speaker 1: public record data varies significantly from municipality. In the municipality, 1198 01:12:46,479 --> 01:12:51,040 Speaker 1: New York City has the most archaic, primitive raw for 1199 01:12:51,200 --> 01:12:54,439 Speaker 1: being the financial capital of the world in quotes, the 1200 01:12:54,960 --> 01:12:57,959 Speaker 1: raw data here through the AQUAS system is the most primitive, 1201 01:12:58,080 --> 01:13:02,280 Speaker 1: raw inaccurate data I cover. I do research in eighteen 1202 01:13:02,280 --> 01:13:06,000 Speaker 1: different housing markets across the country. By far, New York 1203 01:13:06,040 --> 01:13:10,479 Speaker 1: City is the dirtiest raw data that we come done. 1204 01:13:10,680 --> 01:13:15,639 Speaker 1: Not cheap, dirt cheap. That's amazing. You would think if 1205 01:13:15,680 --> 01:13:19,439 Speaker 1: anyone has good data, maybe this is home country bias 1206 01:13:19,439 --> 01:13:21,960 Speaker 1: here for me as a New Yorker sitting here in 1207 01:13:22,120 --> 01:13:26,080 Speaker 1: Data Central and Bloomberg. But that's amazing that that is 1208 01:13:26,120 --> 01:13:29,160 Speaker 1: still so. I guess it works good enough. So there's 1209 01:13:29,200 --> 01:13:33,000 Speaker 1: no incentive to replace it, right, or it's just been 1210 01:13:33,120 --> 01:13:35,360 Speaker 1: that way for a long time and no one's bothering 1211 01:13:35,400 --> 01:13:38,559 Speaker 1: to to look at it. The the you know, in 1212 01:13:38,600 --> 01:13:42,120 Speaker 1: the research we do, like I publish a report, for example, 1213 01:13:42,120 --> 01:13:46,760 Speaker 1: on the Manhattan sales market, fifty of our research time 1214 01:13:46,880 --> 01:13:50,760 Speaker 1: is spent cleaning and verifying public record, which to me 1215 01:13:50,880 --> 01:13:56,120 Speaker 1: is insane. Uh. There's lots of issues with wrong numbers, 1216 01:13:56,200 --> 01:14:02,400 Speaker 1: you know, zero's missing punctuation. Uh, combined departments given the 1217 01:14:02,439 --> 01:14:06,439 Speaker 1: wrong square footage. Um, it just goes on and on 1218 01:14:06,479 --> 01:14:09,280 Speaker 1: and on in public record. Really is only the buyer 1219 01:14:09,320 --> 01:14:13,080 Speaker 1: and the seller, the address, the apartment number and are 1220 01:14:13,160 --> 01:14:16,720 Speaker 1: the unit number if it's a condo, the price, the 1221 01:14:16,800 --> 01:14:20,519 Speaker 1: closing and recording date. That's it. There's no ard put. 1222 01:14:20,600 --> 01:14:25,080 Speaker 1: That's a simple database to assemble. But is it manual. 1223 01:14:25,160 --> 01:14:28,479 Speaker 1: Is it not on a there's enough manual to make 1224 01:14:28,520 --> 01:14:32,559 Speaker 1: it really dirty and in a and and it I've 1225 01:14:32,600 --> 01:14:35,599 Speaker 1: been doing this in the market for thirty years now, 1226 01:14:36,000 --> 01:14:39,040 Speaker 1: started when I was five, as I say, and uh 1227 01:14:39,200 --> 01:14:42,720 Speaker 1: and and the data is exactly the same in the 1228 01:14:42,720 --> 01:14:45,200 Speaker 1: mid eighties when I started, as it is now. No 1229 01:14:45,200 --> 01:14:49,680 Speaker 1: no upgrade due to technique zero. So so in the 1230 01:14:49,760 --> 01:14:53,120 Speaker 1: last five or ten minutes that we have are there 1231 01:14:53,160 --> 01:14:55,799 Speaker 1: any real estate? I mean, We've already done these standard 1232 01:14:55,880 --> 01:14:58,240 Speaker 1: questions before, so I'm not gonna ask you who your 1233 01:14:58,240 --> 01:15:00,640 Speaker 1: mentors were or what your favorite books were, although I 1234 01:15:00,680 --> 01:15:03,000 Speaker 1: can ask you have you read any interesting books since 1235 01:15:03,040 --> 01:15:05,000 Speaker 1: the last time we've had you on. By the way, 1236 01:15:05,040 --> 01:15:08,920 Speaker 1: you're only our third repeat guest, and so it's an honor. 1237 01:15:09,240 --> 01:15:12,559 Speaker 1: I appreciate that you took you took the bronze. Well 1238 01:15:12,720 --> 01:15:15,320 Speaker 1: enough stuff has changed in the housing market that I 1239 01:15:15,320 --> 01:15:18,799 Speaker 1: thought it would be interesting to chat about. Hey, what 1240 01:15:18,800 --> 01:15:21,920 Speaker 1: what's different? What's going on? And we still have a 1241 01:15:21,960 --> 01:15:26,080 Speaker 1: fairly okay housing market, it sounds like, but lots of problems, 1242 01:15:26,200 --> 01:15:30,680 Speaker 1: lots of distortion from FED policy and um, you know, 1243 01:15:30,720 --> 01:15:34,680 Speaker 1: the whole idea of of type credit conditions that are 1244 01:15:34,680 --> 01:15:38,920 Speaker 1: being created from the distortion. So so we basically have 1245 01:15:39,320 --> 01:15:44,120 Speaker 1: a an okay housing market, but it's it's we're dealing 1246 01:15:44,120 --> 01:15:46,200 Speaker 1: with these distortions from the FED. We're dealing with some 1247 01:15:46,240 --> 01:15:49,080 Speaker 1: of these other issues. So if I were to ask you, 1248 01:15:49,160 --> 01:15:51,400 Speaker 1: what's the state of the housing market here and now, 1249 01:15:52,600 --> 01:15:54,720 Speaker 1: how do you contextualize it? What do you say? The 1250 01:15:55,000 --> 01:15:58,160 Speaker 1: uh U S state of the housing market is it's 1251 01:15:58,160 --> 01:16:01,160 Speaker 1: still very uneven around the country. Your what do we 1252 01:16:01,240 --> 01:16:05,920 Speaker 1: basically seeing? So sorry, I don't think that that the 1253 01:16:06,000 --> 01:16:11,280 Speaker 1: unevenness description applies anymore. I'd say that it certainly has improved. 1254 01:16:12,320 --> 01:16:16,719 Speaker 1: Uh it is in this transition period from UH weak 1255 01:16:16,960 --> 01:16:20,519 Speaker 1: to it, but it has not normalized. And do we 1256 01:16:20,560 --> 01:16:23,679 Speaker 1: still have the same inventory issue we have? I remember 1257 01:16:23,760 --> 01:16:26,760 Speaker 1: you we have chronically low inventory across the you know, 1258 01:16:27,080 --> 01:16:30,240 Speaker 1: that's driving prices, that's driving prices higher that don't match 1259 01:16:30,280 --> 01:16:33,840 Speaker 1: wage growth. So so that's what you also had previously 1260 01:16:33,840 --> 01:16:37,760 Speaker 1: wrote a long piece about the number of homeowners that 1261 01:16:37,840 --> 01:16:41,240 Speaker 1: either have are either not We all know about underwater 1262 01:16:41,720 --> 01:16:44,840 Speaker 1: homeowners whose house is worth just low equity, but you've 1263 01:16:44,840 --> 01:16:47,320 Speaker 1: talked about no equity or low equity, and that locks 1264 01:16:47,360 --> 01:16:51,160 Speaker 1: them in place. They can't roll into the next link 1265 01:16:51,240 --> 01:16:53,599 Speaker 1: in the chain in houses. Right, if you're a homeowner 1266 01:16:53,640 --> 01:16:57,759 Speaker 1: and you don't, uh, you don't have any financial problems, 1267 01:16:57,760 --> 01:17:00,240 Speaker 1: you're honor d arrest, You have your job, everything's rate, 1268 01:17:00,240 --> 01:17:03,479 Speaker 1: and you keep reading about record low rates or rates 1269 01:17:03,479 --> 01:17:07,360 Speaker 1: are very low. You apply for a mortgage and you 1270 01:17:07,360 --> 01:17:10,200 Speaker 1: don't qualify because you have low equity. You don't have 1271 01:17:10,360 --> 01:17:14,200 Speaker 1: enough for a down payment. Uh you And I'm not 1272 01:17:14,280 --> 01:17:17,680 Speaker 1: saying that's bad, but it is. There's no but it's 1273 01:17:17,720 --> 01:17:20,920 Speaker 1: it's impacting the market. It's impacting the market um to 1274 01:17:21,000 --> 01:17:24,760 Speaker 1: the point where Uh so now you, as that homeowner, 1275 01:17:24,840 --> 01:17:27,120 Speaker 1: are you going to list your property for sale? Of 1276 01:17:27,160 --> 01:17:30,080 Speaker 1: course not, even though you have all that money on paper. Uh, 1277 01:17:30,120 --> 01:17:32,880 Speaker 1: you know, even if you only have phantom equity. Yeah, 1278 01:17:32,920 --> 01:17:34,760 Speaker 1: even though even if you only you don't have enough 1279 01:17:34,800 --> 01:17:37,479 Speaker 1: to buy the trade up, but you still have, you know, 1280 01:17:37,640 --> 01:17:40,360 Speaker 1: a hundred thousand dollars in equity in your house. You 1281 01:17:40,400 --> 01:17:43,160 Speaker 1: can't realize that or do anything with it because you 1282 01:17:43,240 --> 01:17:47,679 Speaker 1: probably can't get a home equity loan credit standards I 1283 01:17:47,720 --> 01:17:51,720 Speaker 1: believe are the standard is sort of I call it 1284 01:17:51,800 --> 01:17:58,879 Speaker 1: quadruple A, like irrationally, it's irrationally tight that any concert 1285 01:17:59,160 --> 01:18:04,120 Speaker 1: you talk to anybody going to a closing, the impression 1286 01:18:04,160 --> 01:18:06,880 Speaker 1: they get from the lender is the bank is up 1287 01:18:06,960 --> 01:18:10,680 Speaker 1: until the day of the closing, are looking for reasons 1288 01:18:10,720 --> 01:18:13,760 Speaker 1: not to close. Let me tell you when I and 1289 01:18:13,840 --> 01:18:17,760 Speaker 1: again not to make this personal about my transaction. I 1290 01:18:17,840 --> 01:18:20,600 Speaker 1: had a stock option issue and oh four and I 1291 01:18:21,080 --> 01:18:24,320 Speaker 1: resolved it a decade ago. It shows up on the 1292 01:18:24,360 --> 01:18:28,000 Speaker 1: credit report. I actually had to go to forty Street 1293 01:18:28,439 --> 01:18:31,720 Speaker 1: to the I R. S Building, take a number, go 1294 01:18:31,800 --> 01:18:35,600 Speaker 1: to a thing, and and get proof that. So there 1295 01:18:35,640 --> 01:18:41,200 Speaker 1: are apparently multiple levels of If it says tax paid, uh, 1296 01:18:41,439 --> 01:18:42,960 Speaker 1: tax lan sat up because I didn't even know I 1297 01:18:43,000 --> 01:18:45,679 Speaker 1: had a tax lan and the accountant found it. We settled, 1298 01:18:45,720 --> 01:18:48,360 Speaker 1: took care of this a decade ago, no exaggeration, a 1299 01:18:48,360 --> 01:18:51,320 Speaker 1: decade ago. Now I had to go and get this 1300 01:18:51,439 --> 01:18:54,800 Speaker 1: taken care of. And the hoops they make you jump through. 1301 01:18:55,120 --> 01:18:57,200 Speaker 1: So you go there, you have to sign this thing. 1302 01:18:57,240 --> 01:19:00,040 Speaker 1: You have to prove you have no outstanding taxes, you 1303 01:19:00,080 --> 01:19:02,360 Speaker 1: owe no money, you have none of this. So it's 1304 01:19:02,400 --> 01:19:06,840 Speaker 1: not just satisfied, it's satisfied, discharge, fully, caught up, etcetera. 1305 01:19:07,080 --> 01:19:09,599 Speaker 1: That was a crazy hoop to jump through. And then 1306 01:19:09,640 --> 01:19:13,960 Speaker 1: they would say, so I get paid certain things, certain 1307 01:19:14,000 --> 01:19:18,040 Speaker 1: things on a normal W two And it's not like 1308 01:19:18,160 --> 01:19:20,600 Speaker 1: it's a variable. It's each month the same amount of 1309 01:19:20,640 --> 01:19:23,080 Speaker 1: money hits. It's more or less the same day. It 1310 01:19:23,160 --> 01:19:27,360 Speaker 1: comes from the same source. Hey, what's this on the dude, 1311 01:19:27,439 --> 01:19:30,080 Speaker 1: I've told you this every month for the past three months. 1312 01:19:30,400 --> 01:19:33,240 Speaker 1: That's a ten. Here's the source. Here it is, and 1313 01:19:33,280 --> 01:19:36,200 Speaker 1: it's like an odd amount ending in nine thirty three 1314 01:19:36,320 --> 01:19:40,040 Speaker 1: spot six six. It's the same thing month after month. 1315 01:19:40,560 --> 01:19:43,640 Speaker 1: It's like you realize that this isn't like, Okay, we're 1316 01:19:43,680 --> 01:19:46,840 Speaker 1: gonna do a cocaine run and and here's what we 1317 01:19:46,920 --> 01:19:49,719 Speaker 1: got for the haul. It's to the penny, the same 1318 01:19:49,760 --> 01:19:53,240 Speaker 1: exact amount. Why can't you figure this out? And I 1319 01:19:53,320 --> 01:19:56,240 Speaker 1: was lamenting about this to our real estate attorney and 1320 01:19:56,280 --> 01:19:59,439 Speaker 1: he said, well, welcome to housing, and well, well we'll 1321 01:19:59,479 --> 01:20:05,960 Speaker 1: think about why that's happening. Is is uh rapidity over compensation? 1322 01:20:06,400 --> 01:20:11,519 Speaker 1: They were so completely responded my last time. Now they've 1323 01:20:11,560 --> 01:20:15,160 Speaker 1: gone the opposite. But the mindset and banking um in 1324 01:20:15,240 --> 01:20:18,840 Speaker 1: mortgage lending, that is um for you know, the big 1325 01:20:18,880 --> 01:20:23,559 Speaker 1: retail banks is uh. The legacy of bad decisions in 1326 01:20:23,600 --> 01:20:27,600 Speaker 1: the last cycle, forced by backs by the former g 1327 01:20:27,760 --> 01:20:30,960 Speaker 1: s c S on on loans issued in oh six 1328 01:20:31,000 --> 01:20:35,679 Speaker 1: with a typo a typo or or we're warranting that 1329 01:20:35,800 --> 01:20:41,599 Speaker 1: this is a seven score with someone making dollars and 1330 01:20:41,680 --> 01:20:45,599 Speaker 1: it turned and a loan to value of of when 1331 01:20:45,680 --> 01:20:48,559 Speaker 1: they had a four hundred score they were making thirty 1332 01:20:48,600 --> 01:20:51,880 Speaker 1: grand and the loan to value was a correct So 1333 01:20:51,920 --> 01:20:54,160 Speaker 1: I don't believe if it was like a mere typo. 1334 01:20:54,240 --> 01:20:57,400 Speaker 1: And yes, if they wrote street instead of lane, that's 1335 01:20:57,520 --> 01:21:00,639 Speaker 1: material and they could put the mortgage back. So so 1336 01:21:00,720 --> 01:21:06,080 Speaker 1: that's but that is we're seeing an extreme um overreaction 1337 01:21:06,200 --> 01:21:08,640 Speaker 1: on that. Uh it's you know, not like oh and 1338 01:21:08,760 --> 01:21:11,120 Speaker 1: E should have been typed as an a. But but 1339 01:21:11,160 --> 01:21:14,160 Speaker 1: it's not material to the collateral to the value is 1340 01:21:14,200 --> 01:21:18,160 Speaker 1: what we're seeing. UM. And on top of that, um, 1341 01:21:18,280 --> 01:21:21,120 Speaker 1: you know, I think low interest rates are also keeping 1342 01:21:21,120 --> 01:21:24,160 Speaker 1: credit tight. Ten year by the way, as as of 1343 01:21:24,200 --> 01:21:27,880 Speaker 1: this recording is to zero zero percent in the United States. 1344 01:21:28,479 --> 01:21:30,559 Speaker 1: And two years ago I told people, hey, if you 1345 01:21:30,600 --> 01:21:33,639 Speaker 1: have a variable mortgage, you might want to think about 1346 01:21:33,720 --> 01:21:36,760 Speaker 1: locking in these low rates while they're here. And here 1347 01:21:36,760 --> 01:21:39,080 Speaker 1: it is two years later, and we still have well 1348 01:21:39,160 --> 01:21:42,720 Speaker 1: even after the FED right right at the first FED 1349 01:21:42,840 --> 01:21:46,320 Speaker 1: rays and and we have rates drifting lower. So what 1350 01:21:46,360 --> 01:21:50,000 Speaker 1: does that mean? That means that things are not necessarily 1351 01:21:50,040 --> 01:21:53,320 Speaker 1: that great um demand for or it means there's still 1352 01:21:53,600 --> 01:21:58,840 Speaker 1: such a demand for low demand for capital. Uh that 1353 01:21:58,840 --> 01:22:02,120 Speaker 1: that's what tends to it to some degree course competition 1354 01:22:02,200 --> 01:22:07,920 Speaker 1: for mortgages and rates. But it's an amazing, amazing and 1355 01:22:08,000 --> 01:22:11,960 Speaker 1: also to also too that you know, the sort of 1356 01:22:12,000 --> 01:22:16,800 Speaker 1: the media conversation about rising rates, it was, it was 1357 01:22:17,080 --> 01:22:20,000 Speaker 1: it was like, you know, it was like waiting for 1358 01:22:20,000 --> 01:22:22,000 Speaker 1: the ball to drop on New Year's Eve that you 1359 01:22:22,040 --> 01:22:25,400 Speaker 1: know that what's you know, the housing markets going to implode, 1360 01:22:25,560 --> 01:22:32,240 Speaker 1: and nothing happened because because it's first of all, um, 1361 01:22:32,400 --> 01:22:35,240 Speaker 1: the the rise would be very was anticipated to be 1362 01:22:35,360 --> 01:22:38,040 Speaker 1: very small, and it was. And what what are they 1363 01:22:38,120 --> 01:22:41,400 Speaker 1: they're saying under the best of conditions, it's it's gonna 1364 01:22:41,439 --> 01:22:45,080 Speaker 1: they're gonna take it up four quarter point increases over 1365 01:22:45,120 --> 01:22:48,960 Speaker 1: a year, which which still I think the inordinately low 1366 01:22:49,040 --> 01:22:51,599 Speaker 1: rates one that would be one I think the markets 1367 01:22:51,600 --> 01:22:53,679 Speaker 1: are saying there's a fift chance of that or something 1368 01:22:53,720 --> 01:22:59,920 Speaker 1: like that. I am skeptical that they'll be any when 1369 01:23:00,080 --> 01:23:02,600 Speaker 1: the actual rates are drifting lower, but I know that 1370 01:23:02,640 --> 01:23:06,639 Speaker 1: their FED isn't only looking at housing um obviously UM. 1371 01:23:06,800 --> 01:23:10,439 Speaker 1: But but the idea that low rates are keeping credit 1372 01:23:10,479 --> 01:23:14,080 Speaker 1: conditions tight as well, because there's no margin, there's no spread, 1373 01:23:14,120 --> 01:23:16,639 Speaker 1: there's no money to be made, there's there, there's there's 1374 01:23:16,800 --> 01:23:20,479 Speaker 1: no there's no room for error. And and so it's 1375 01:23:20,560 --> 01:23:25,440 Speaker 1: part it feeds this sort of paranoid or conservative UM mindset. 1376 01:23:25,520 --> 01:23:29,200 Speaker 1: I I use uh, you know, it's it's just the 1377 01:23:30,000 --> 01:23:32,200 Speaker 1: free money out of the FED, which is not really 1378 01:23:32,200 --> 01:23:34,880 Speaker 1: an accurate thing to describe it as. UM is allowed 1379 01:23:34,880 --> 01:23:37,839 Speaker 1: banks to grow their lines of business, you know, rebuild 1380 01:23:37,880 --> 01:23:41,760 Speaker 1: their capital, but it allows allow all this bad debt 1381 01:23:41,800 --> 01:23:45,840 Speaker 1: that are on the books to gradually run off, either 1382 01:23:45,880 --> 01:23:49,920 Speaker 1: through foreclosure or rising home prices. That took what was 1383 01:23:50,040 --> 01:23:54,920 Speaker 1: once a wildly underwater mortgage and say, okay, tell you what, 1384 01:23:55,200 --> 01:23:58,360 Speaker 1: we'll take the house, will forgive the loan. You're done 1385 01:23:58,360 --> 01:24:02,439 Speaker 1: with it, and now we could sell this and unless 1386 01:24:02,439 --> 01:24:05,080 Speaker 1: you're in Spain, and then you're like on the hook 1387 01:24:05,160 --> 01:24:07,960 Speaker 1: for life. Well, you know, the US has some states 1388 01:24:07,960 --> 01:24:11,400 Speaker 1: that will recourse, some states that noncre recourse. Different countries 1389 01:24:11,479 --> 01:24:15,920 Speaker 1: don't necessarily have that same dichonomy. There there are some 1390 01:24:16,439 --> 01:24:20,120 Speaker 1: uh any so too. In in New York, I believe 1391 01:24:20,160 --> 01:24:26,320 Speaker 1: we're a nonrecourse state. And basically the contract says, you 1392 01:24:26,400 --> 01:24:29,200 Speaker 1: lend me a more money to buy a house, and 1393 01:24:29,240 --> 01:24:32,040 Speaker 1: I'll give you an interest in the house as collateral 1394 01:24:32,120 --> 01:24:34,240 Speaker 1: to make sure you get repaid. Hey, and if I 1395 01:24:34,320 --> 01:24:37,240 Speaker 1: ever stopped paying the mortgage, you get the house. That 1396 01:24:37,280 --> 01:24:40,200 Speaker 1: seems like a fair deal, assuming the house price is 1397 01:24:40,280 --> 01:24:43,760 Speaker 1: reasonable and stable. I put ten or down, So I'm 1398 01:24:43,800 --> 01:24:46,280 Speaker 1: not just gonna walk away. I have skin in the game. 1399 01:24:46,800 --> 01:24:49,840 Speaker 1: H an expression I've come to despise and and that's 1400 01:24:49,920 --> 01:24:53,519 Speaker 1: very different then then saying hey, you owe this money 1401 01:24:53,560 --> 01:24:56,120 Speaker 1: and we don't really care what happens. Well, just just 1402 01:24:56,200 --> 01:24:59,320 Speaker 1: sort of a piggyback on this. But maybe maybe I'm 1403 01:24:59,320 --> 01:25:01,559 Speaker 1: going off on a tangent. One of the things I 1404 01:25:01,640 --> 01:25:05,040 Speaker 1: learned in in the last down cycle is that in 1405 01:25:05,080 --> 01:25:09,160 Speaker 1: the new development world, the deposits that a that a 1406 01:25:09,200 --> 01:25:13,040 Speaker 1: buyer would put on a purchase was ten percent. That 1407 01:25:13,200 --> 01:25:16,880 Speaker 1: was the That was the standard deposit. So it's a 1408 01:25:16,920 --> 01:25:19,040 Speaker 1: million dollar you know, you put a hundred thousand down. 1409 01:25:20,080 --> 01:25:28,040 Speaker 1: When Lehman collapsed and September sales stalled, uh for the 1410 01:25:28,120 --> 01:25:33,640 Speaker 1: next excuse me? In two thousand nine, many many consumers 1411 01:25:33,680 --> 01:25:36,080 Speaker 1: walked away from that ten percent. How do you walk 1412 01:25:36,080 --> 01:25:38,600 Speaker 1: away as opposed to take in the house as opposed? No, 1413 01:25:38,880 --> 01:25:42,519 Speaker 1: because no, they hadn't closed yet. It was just a 1414 01:25:42,520 --> 01:25:45,080 Speaker 1: contract waiting for the building to build. But they walked 1415 01:25:45,080 --> 01:25:49,880 Speaker 1: away from the from the deposit. Because because they did, 1416 01:25:50,040 --> 01:25:53,639 Speaker 1: they did not close. The consumer is out the hundred 1417 01:25:53,680 --> 01:25:57,200 Speaker 1: thousand dollars and they don't have a million dollar mortgage 1418 01:25:57,200 --> 01:25:59,680 Speaker 1: on a five correct, except for the market came back 1419 01:25:59,680 --> 01:26:02,360 Speaker 1: in like three years. So what I learned from this 1420 01:26:02,560 --> 01:26:07,599 Speaker 1: is that's fascinating by distress real estate, right. So so 1421 01:26:07,640 --> 01:26:11,880 Speaker 1: what I learned though, is that uh, the the developers 1422 01:26:11,920 --> 01:26:16,000 Speaker 1: were the deposit was twenty or no. One walked away, 1423 01:26:16,600 --> 01:26:21,320 Speaker 1: and um, you know, the developer was in better shape, 1424 01:26:21,600 --> 01:26:25,120 Speaker 1: you know. As as a result, the last house, this 1425 01:26:25,160 --> 01:26:29,320 Speaker 1: house that we we live in now, I think I 1426 01:26:29,360 --> 01:26:32,800 Speaker 1: think the mortgage was either a ten or deposit and 1427 01:26:32,840 --> 01:26:36,519 Speaker 1: we ended up putting down well over, which is really 1428 01:26:36,560 --> 01:26:39,480 Speaker 1: tying up money you can otherwise use for other things. 1429 01:26:39,520 --> 01:26:42,280 Speaker 1: But from my wife's perspective, she's like, I want to 1430 01:26:42,320 --> 01:26:45,200 Speaker 1: know that there's a huge buffer and we don't have 1431 01:26:45,240 --> 01:26:48,439 Speaker 1: to worry about anything, and and the peace of mind 1432 01:26:48,479 --> 01:26:52,720 Speaker 1: and psychology of not feeling like, you know, is this 1433 01:26:52,800 --> 01:26:56,840 Speaker 1: an optimal financing. No, but it's that place you live 1434 01:26:56,880 --> 01:26:58,920 Speaker 1: in and it's not a place where you want to 1435 01:26:59,000 --> 01:27:00,479 Speaker 1: want to be a source. Well, the problem in the 1436 01:27:00,520 --> 01:27:03,439 Speaker 1: last cycle, the housing bubble, is that there was a 1437 01:27:03,640 --> 01:27:10,920 Speaker 1: mistaken the fact that was not that securitation. Securization was 1438 01:27:10,960 --> 01:27:15,440 Speaker 1: the problem, but the securitization vehicle and all the financial 1439 01:27:15,880 --> 01:27:19,320 Speaker 1: engineering that went on gave a sort of false security 1440 01:27:19,360 --> 01:27:23,280 Speaker 1: that risk could be managed and and that the the 1441 01:27:23,280 --> 01:27:27,720 Speaker 1: the consumer, uh, you know, thought that prices would go 1442 01:27:27,760 --> 01:27:31,040 Speaker 1: up forever there. It was just leverage the heck out 1443 01:27:31,080 --> 01:27:34,080 Speaker 1: of it. Uh. And you offer people free money. And 1444 01:27:34,160 --> 01:27:36,840 Speaker 1: I just remember the mindset during that process like oh yeah, 1445 01:27:37,000 --> 01:27:39,080 Speaker 1: you know, I'll just REFI again, or you know, like 1446 01:27:39,120 --> 01:27:41,519 Speaker 1: that was the thinking. But that's what people were told 1447 01:27:41,640 --> 01:27:44,360 Speaker 1: when you went when you went to So I spoke 1448 01:27:44,400 --> 01:27:46,639 Speaker 1: to a number of mortgage brokers in that period. I've 1449 01:27:46,680 --> 01:27:49,599 Speaker 1: always you know, what some people call shopping, I call 1450 01:27:49,680 --> 01:27:52,960 Speaker 1: economic research. And I've spoken to a number of people 1451 01:27:52,960 --> 01:27:55,200 Speaker 1: and I said, why would I want to do variable 1452 01:27:55,280 --> 01:27:57,200 Speaker 1: with rates as low as they are? By the way, 1453 01:27:57,360 --> 01:28:00,360 Speaker 1: they're much lower today is the joke. But why would 1454 01:28:00,400 --> 01:28:01,960 Speaker 1: I want to do that? You know, the odds are 1455 01:28:02,040 --> 01:28:03,920 Speaker 1: that ten years from the other rates are much higher, 1456 01:28:04,200 --> 01:28:06,240 Speaker 1: And the answer was the same thing, by as much 1457 01:28:06,280 --> 01:28:08,760 Speaker 1: house as you can afford. And if you if you 1458 01:28:09,000 --> 01:28:10,840 Speaker 1: you run into an issue, if rates go up, you 1459 01:28:10,840 --> 01:28:14,320 Speaker 1: could refly, you could do the The assumption was always 1460 01:28:14,680 --> 01:28:18,280 Speaker 1: that the conditions at present would continue into the future. 1461 01:28:18,800 --> 01:28:21,680 Speaker 1: And you know, when you see aberrational conditions, that's a 1462 01:28:21,720 --> 01:28:25,439 Speaker 1: bad assumption to make, right. You can't assume stuffing is 1463 01:28:25,479 --> 01:28:28,960 Speaker 1: going to stay the same. Actually, the mindset during the 1464 01:28:29,000 --> 01:28:33,519 Speaker 1: bubble was you don't even look at the price, you 1465 01:28:33,560 --> 01:28:38,120 Speaker 1: look at the payment, the monthly nut. I've written about that. 1466 01:28:38,280 --> 01:28:41,080 Speaker 1: That's exactly right, and so it was. So as the 1467 01:28:41,160 --> 01:28:44,080 Speaker 1: rates went down, the home price went up, but the 1468 01:28:44,120 --> 01:28:47,040 Speaker 1: monthly payment was still more or less the same, And 1469 01:28:47,120 --> 01:28:51,600 Speaker 1: that's something that low rates drive prices up, at least theoretically, 1470 01:28:51,640 --> 01:28:53,800 Speaker 1: if people are buying houses based on what they can 1471 01:28:53,840 --> 01:28:57,640 Speaker 1: afford to pay, right so at once that became unhinged, 1472 01:28:57,680 --> 01:29:00,720 Speaker 1: then all bets were off. Um. So we've talked a 1473 01:29:00,800 --> 01:29:04,040 Speaker 1: lot about about the current housing situation. We've talked about 1474 01:29:04,439 --> 01:29:07,120 Speaker 1: what went off the rails during the boom and bust, 1475 01:29:07,800 --> 01:29:11,040 Speaker 1: um any any important thing we might have overlooked in 1476 01:29:11,160 --> 01:29:15,559 Speaker 1: terms of housing before we get to automobiles. No, I 1477 01:29:15,600 --> 01:29:18,400 Speaker 1: think I think you've drained my housing song. Okay, so 1478 01:29:18,439 --> 01:29:22,160 Speaker 1: now let's talk about So everybody thinks that you're sort 1479 01:29:22,200 --> 01:29:25,240 Speaker 1: of the middle of the road conservative guy. I think 1480 01:29:25,240 --> 01:29:29,280 Speaker 1: more accurately, I'm a dull and boring number. He's a John. Yeah. 1481 01:29:29,320 --> 01:29:32,200 Speaker 1: I like Miller. I look at his stuff. He's interesting, 1482 01:29:32,240 --> 01:29:35,280 Speaker 1: he really knows his stuff. He's kind of a data wank. 1483 01:29:37,520 --> 01:29:41,479 Speaker 1: But you're really kind of a gadget head as well. 1484 01:29:42,240 --> 01:29:44,240 Speaker 1: I see you have your Apple watching on and your 1485 01:29:44,240 --> 01:29:48,600 Speaker 1: other stuff. But you recently came into possession of a 1486 01:29:48,760 --> 01:29:54,360 Speaker 1: hillacious vehicle, and I love this story. What are you 1487 01:29:54,479 --> 01:29:58,559 Speaker 1: driving these days? Um, I'm driving a buy American. I 1488 01:29:58,600 --> 01:30:05,000 Speaker 1: know that absolutely, a two thousand sixteen Dodge Challenger s 1489 01:30:05,120 --> 01:30:08,559 Speaker 1: RP coupe with a V eight hemy Is that Is 1490 01:30:08,560 --> 01:30:11,120 Speaker 1: that the hell Cat version? It is not. It is 1491 01:30:11,200 --> 01:30:13,719 Speaker 1: one step below the hell Cat. And I only did 1492 01:30:13,760 --> 01:30:16,320 Speaker 1: that because I didn't want to wait four months this 1493 01:30:16,360 --> 01:30:19,760 Speaker 1: one was available, and so what's the horsepower on this? 1494 01:30:21,680 --> 01:30:24,080 Speaker 1: And it shaved twelve seconds off my commute, So I 1495 01:30:24,080 --> 01:30:27,400 Speaker 1: feel like it's a there's like a benefit. But by 1496 01:30:27,439 --> 01:30:29,920 Speaker 1: the way, the joke is your commute is how far 1497 01:30:30,720 --> 01:30:32,559 Speaker 1: you drive to the trade. It's about a mile and 1498 01:30:32,560 --> 01:30:37,160 Speaker 1: a half, but you took twelve seconds off. Yeah, you know, efficiency, 1499 01:30:37,240 --> 01:30:40,880 Speaker 1: you know it. So what's the difference between this and 1500 01:30:40,960 --> 01:30:43,960 Speaker 1: the hell cat? That's seven I think, so yeah, it's 1501 01:30:43,960 --> 01:30:47,920 Speaker 1: like just under seven maybe, uh yeah, it's it's it's 1502 01:30:47,960 --> 01:30:51,360 Speaker 1: a little unnecessary. But so what on earth made you 1503 01:30:51,880 --> 01:30:54,760 Speaker 1: buy such a ridiculous So there's the thing. I have 1504 01:30:54,920 --> 01:30:58,920 Speaker 1: four kids. We have like an auto dealership in our 1505 01:30:59,000 --> 01:31:01,080 Speaker 1: driveway with all the and let me let me just 1506 01:31:01,120 --> 01:31:04,479 Speaker 1: stop you there and say, you have a driveway full 1507 01:31:04,520 --> 01:31:08,360 Speaker 1: of rust bucket pickup trucks, and there isn't a nice 1508 01:31:08,439 --> 01:31:11,880 Speaker 1: car any The last time we drove by, even the 1509 01:31:11,920 --> 01:31:15,000 Speaker 1: little two seat sports car you had was rusting and 1510 01:31:15,040 --> 01:31:18,280 Speaker 1: a little dinged up. There wasn't much. Yeah, it's it's 1511 01:31:18,360 --> 01:31:22,719 Speaker 1: six three kids in college and and six cars besides 1512 01:31:22,800 --> 01:31:26,840 Speaker 1: mine with my wife and my son. So so I've 1513 01:31:26,840 --> 01:31:31,080 Speaker 1: been holding off for a while. And uh my my 1514 01:31:31,080 --> 01:31:35,280 Speaker 1: my wife, who incidentally, today is our thirty second anniversary. 1515 01:31:35,479 --> 01:31:37,320 Speaker 1: So you can see I'm a great husband. I'm here 1516 01:31:37,320 --> 01:31:41,920 Speaker 1: talking to you, but we're happily married. She's awesome, but anyway, 1517 01:31:42,520 --> 01:31:45,880 Speaker 1: just alone, she's awesome at alone where we're going to 1518 01:31:46,200 --> 01:31:48,559 Speaker 1: six thirty now and you're not just see her till 1519 01:31:48,600 --> 01:31:54,240 Speaker 1: later class tonight, honey, wake up, Happy anniversary. But but anyway, 1520 01:31:54,280 --> 01:31:57,760 Speaker 1: what it was funny because I had long eyed the 1521 01:31:57,800 --> 01:32:02,439 Speaker 1: Tesla and and also just in car d yes, so 1522 01:32:02,520 --> 01:32:05,599 Speaker 1: I and that insanity mode is pretty zero to sixty 1523 01:32:05,640 --> 01:32:09,320 Speaker 1: and that's mostly it's amazing crazy, but that's faster than 1524 01:32:09,400 --> 01:32:12,439 Speaker 1: any production guest line car in the world. It's it's amazing. 1525 01:32:12,439 --> 01:32:14,519 Speaker 1: And I'm a Mac nuts. So the whole idea of 1526 01:32:14,840 --> 01:32:19,439 Speaker 1: updating your software overnight and plugging in and you know, 1527 01:32:19,479 --> 01:32:22,680 Speaker 1: the interstate next to me, there's a supercharge station and 1528 01:32:22,720 --> 01:32:24,760 Speaker 1: I could put one in my house, and you know, 1529 01:32:24,960 --> 01:32:31,519 Speaker 1: the whole sort of you know, uh n Musk called 1530 01:32:31,840 --> 01:32:34,240 Speaker 1: the whole sort of Internet, right. It was. It was 1531 01:32:34,280 --> 01:32:36,240 Speaker 1: just sort of that feel that appealed to me. And 1532 01:32:36,320 --> 01:32:39,360 Speaker 1: I was looking at the prices, you know, for somewhere expense. 1533 01:32:39,439 --> 01:32:42,639 Speaker 1: I drive three thousand miles a year, so so it 1534 01:32:42,720 --> 01:32:46,479 Speaker 1: was without the incentives, it was like eighty five thousand 1535 01:32:46,520 --> 01:32:49,760 Speaker 1: dollars for the mid size model and without the full 1536 01:32:49,800 --> 01:32:53,320 Speaker 1: insanity mode pack, correct, And it was eighty five thousand, 1537 01:32:53,400 --> 01:32:55,679 Speaker 1: And I thought, well, you know three thousand, wells here 1538 01:32:55,840 --> 01:33:00,240 Speaker 1: eighty five thousand. This seems excessive. You're not really pull it. 1539 01:33:00,240 --> 01:33:01,760 Speaker 1: You're plluting more with the both than you are with 1540 01:33:01,800 --> 01:33:05,559 Speaker 1: the car, right, like in multiplied by six cars, it's 1541 01:33:05,600 --> 01:33:07,800 Speaker 1: a difference, right and then uh, and then the other 1542 01:33:07,840 --> 01:33:10,880 Speaker 1: one was um just looking at like a used like 1543 01:33:10,960 --> 01:33:15,560 Speaker 1: a Porsche. Uh, Panamera. I wanted an adult car, but 1544 01:33:15,760 --> 01:33:19,200 Speaker 1: so I've been I have to tell you my wife 1545 01:33:20,520 --> 01:33:23,080 Speaker 1: first saw that car and she is not a go 1546 01:33:23,240 --> 01:33:26,000 Speaker 1: get something expensive. She's like, you know, we could get 1547 01:33:26,000 --> 01:33:29,240 Speaker 1: a used hand to be fine. I'm the ones like shiny, 1548 01:33:29,320 --> 01:33:33,559 Speaker 1: I want that. The Panamera is gorgeous, but having two 1549 01:33:33,600 --> 01:33:36,920 Speaker 1: giant dogs. The back seats are buckets. You can't put 1550 01:33:36,960 --> 01:33:40,439 Speaker 1: dogs back the Um, we don't have any dogs, so 1551 01:33:40,479 --> 01:33:42,840 Speaker 1: that was never factored into the math. Now, if you 1552 01:33:42,920 --> 01:33:46,120 Speaker 1: like the Panamera and you need a back seat, they're 1553 01:33:46,240 --> 01:33:50,880 Speaker 1: mccan s. They're small, small, which is based on the 1554 01:33:50,880 --> 01:33:54,280 Speaker 1: outer Q five. Every review I've seen of them are 1555 01:33:54,479 --> 01:33:57,640 Speaker 1: off the charts. You've you've seen my driveway, which is 1556 01:33:57,680 --> 01:34:03,759 Speaker 1: like a a cross country mountain climbing expeditions, and people 1557 01:34:03,760 --> 01:34:07,640 Speaker 1: who follow me on Twitter have seen my orange crush, 1558 01:34:08,000 --> 01:34:10,840 Speaker 1: my midlife crisis, which I picked that up. That was 1559 01:34:10,880 --> 01:34:14,519 Speaker 1: a salvage vehicle that some idiot had fried the electrical system, 1560 01:34:15,000 --> 01:34:18,360 Speaker 1: and the the insurers sold it for you know, pennies 1561 01:34:18,400 --> 01:34:20,839 Speaker 1: on the dollar, and it it costs next to nothing 1562 01:34:21,240 --> 01:34:25,840 Speaker 1: to turn that into a full I was never a 1563 01:34:25,920 --> 01:34:29,080 Speaker 1: jeep guy. I always thought they were bouncy and idiotic vehicles. 1564 01:34:29,120 --> 01:34:32,360 Speaker 1: And after last winter, I am a full blown convert 1565 01:34:32,439 --> 01:34:35,519 Speaker 1: I used to get into. So I remember last year, 1566 01:34:35,560 --> 01:34:37,120 Speaker 1: I think, I don't think I've told this story on 1567 01:34:37,160 --> 01:34:41,200 Speaker 1: the air. Go to work, a foot of snowfalls, come 1568 01:34:41,240 --> 01:34:44,200 Speaker 1: home the Long Island Railroad and all their wisdom decides 1569 01:34:44,240 --> 01:34:47,760 Speaker 1: to plow the parking lot, and of course plow everybody in. 1570 01:34:48,439 --> 01:34:51,120 Speaker 1: So everybody comes in and people are digging out. My 1571 01:34:51,160 --> 01:34:52,800 Speaker 1: buddy with his out he is trying to is in 1572 01:34:52,880 --> 01:34:55,120 Speaker 1: a suit and tize digging out. And I get into 1573 01:34:55,160 --> 01:34:57,280 Speaker 1: the jeep and go, let's see what happens. And I 1574 01:34:57,320 --> 01:34:59,360 Speaker 1: put into reverse. This is like a three ft hill 1575 01:34:59,720 --> 01:35:01,519 Speaker 1: because go right over it, up and over it. And 1576 01:35:01,560 --> 01:35:03,599 Speaker 1: I'm the first guy out of the parking lot. And 1577 01:35:03,720 --> 01:35:06,799 Speaker 1: I just laughed at the thought of this guy's grimace 1578 01:35:07,200 --> 01:35:10,160 Speaker 1: as I drove by and making a gesture as I 1579 01:35:10,280 --> 01:35:13,000 Speaker 1: as I drove by, So I'm a convert into that. 1580 01:35:13,400 --> 01:35:16,439 Speaker 1: And every review I've read of the mccan s, which, 1581 01:35:16,479 --> 01:35:19,560 Speaker 1: by the way, the interior very much looks Porsche Panamara. 1582 01:35:19,680 --> 01:35:24,120 Speaker 1: That's the whole thing with the luxury. Porsche's the uh 1583 01:35:24,560 --> 01:35:28,720 Speaker 1: we could talk about the pronouncement and Porscha. Porscha is 1584 01:35:29,360 --> 01:35:32,479 Speaker 1: really top notch. That's one of my attractions. But again, 1585 01:35:32,600 --> 01:35:34,960 Speaker 1: I drive three thousand miles a year, so so I 1586 01:35:35,040 --> 01:35:37,640 Speaker 1: have like all my monitors open. I've got, you know, 1587 01:35:37,680 --> 01:35:41,599 Speaker 1: the website for Tesla, for Porsche, and uh, I pull 1588 01:35:41,760 --> 01:35:46,800 Speaker 1: up the Dodge option only because it's much Dodge. Are 1589 01:35:46,800 --> 01:35:49,320 Speaker 1: you looking? At the time, I was looking at the Challenger, 1590 01:35:49,439 --> 01:35:51,880 Speaker 1: which for my whole life, I've always wanted one, the 1591 01:35:51,960 --> 01:35:55,960 Speaker 1: old Challenge of the class. But I'm not American Monkey. 1592 01:35:56,360 --> 01:35:58,559 Speaker 1: I don't want to or I don't want to like 1593 01:35:59,080 --> 01:36:02,360 Speaker 1: have a mechanic auto mechanic be part of my family, 1594 01:36:02,800 --> 01:36:06,280 Speaker 1: can't say so. So I I just love the lines 1595 01:36:06,400 --> 01:36:10,760 Speaker 1: and and it was so much less expensive orders of 1596 01:36:10,840 --> 01:36:15,080 Speaker 1: magnitude or it retailed for fifty two, which which you know, 1597 01:36:15,200 --> 01:36:18,960 Speaker 1: compared to eight five. Uh. And not only that, but 1598 01:36:19,240 --> 01:36:21,640 Speaker 1: it's got a heavy and it's your wife tells the 1599 01:36:21,720 --> 01:36:25,640 Speaker 1: story that you guys went to the Yeah. Yeah, So 1600 01:36:25,680 --> 01:36:28,600 Speaker 1: what happened was I showed my wife and she and 1601 01:36:28,640 --> 01:36:30,479 Speaker 1: I said, well, let's go just check it out, and 1602 01:36:30,520 --> 01:36:34,719 Speaker 1: she said yeah sure. And um and in the parking lot, 1603 01:36:34,800 --> 01:36:37,559 Speaker 1: you know, you're you're worried about what the uh. We 1604 01:36:37,600 --> 01:36:39,439 Speaker 1: go to this dealership, which is the only one in 1605 01:36:39,479 --> 01:36:43,599 Speaker 1: Fairfield County that has this car. And ironically, twenty years ago, 1606 01:36:43,720 --> 01:36:47,040 Speaker 1: when our kids were young, we bought a Dodge Caravan 1607 01:36:48,320 --> 01:36:52,200 Speaker 1: and uh and I and I said a joke to 1608 01:36:52,439 --> 01:36:56,320 Speaker 1: the sales guy because we're looking at caravans and grand 1609 01:36:56,320 --> 01:36:59,759 Speaker 1: caravans and the difference in you know, they're about fourteen 1610 01:36:59,800 --> 01:37:03,040 Speaker 1: inch is different in length behind the back seat, so 1611 01:37:03,080 --> 01:37:06,080 Speaker 1: there's still and but the difference in retail price was 1612 01:37:06,120 --> 01:37:08,120 Speaker 1: about a thousand dollars. So I said, oh that's how, 1613 01:37:08,479 --> 01:37:11,200 Speaker 1: that's why it's a grand caravan. It's a good it's 1614 01:37:11,240 --> 01:37:14,839 Speaker 1: a good grand bar and find humor in that. Anyway. 1615 01:37:14,880 --> 01:37:17,000 Speaker 1: So we go to this deal ship and the and 1616 01:37:17,080 --> 01:37:19,920 Speaker 1: the guy um uh walks out to the parking lot 1617 01:37:20,040 --> 01:37:21,920 Speaker 1: and all he did I couldn't see the car is 1618 01:37:21,960 --> 01:37:24,880 Speaker 1: he turned it on and it was he wasn't just 1619 01:37:24,920 --> 01:37:27,160 Speaker 1: the idling of it. I turned to my wife and said, 1620 01:37:27,360 --> 01:37:29,360 Speaker 1: that's it. And then we did a test drive and 1621 01:37:29,400 --> 01:37:33,320 Speaker 1: she loved it. She loved it. And hey, we've been 1622 01:37:33,320 --> 01:37:37,599 Speaker 1: married thirty two years, so I'm twenty three years and 1623 01:37:37,640 --> 01:37:41,519 Speaker 1: I'm so I'm the irresponsible one in the family. My 1624 01:37:41,560 --> 01:37:44,680 Speaker 1: wife is down to earth. Look, we've we've hung with 1625 01:37:44,720 --> 01:37:47,639 Speaker 1: each other and the four of us have gone out. 1626 01:37:48,240 --> 01:37:50,640 Speaker 1: I'm the one, Hey, what's this new restaurant. Let's go 1627 01:37:50,680 --> 01:37:54,880 Speaker 1: try this. So I'm usually the one who is pointing 1628 01:37:54,960 --> 01:38:00,400 Speaker 1: at the shiny objects and my wife is like, down, boy, sit, stay. 1629 01:38:02,320 --> 01:38:07,040 Speaker 1: So so we were driving the other day, uh, and 1630 01:38:07,200 --> 01:38:10,679 Speaker 1: this before the snow had come down, and we come 1631 01:38:10,720 --> 01:38:15,080 Speaker 1: across the new corvette, which is also about fifty grand 1632 01:38:15,120 --> 01:38:18,680 Speaker 1: about fifty horse and she's I go, is it just me? 1633 01:38:18,760 --> 01:38:21,760 Speaker 1: Or is that a really good looking corvette? And she's like, 1634 01:38:22,240 --> 01:38:24,479 Speaker 1: I would have that in the minute. The trick is, 1635 01:38:24,920 --> 01:38:26,960 Speaker 1: there are only a handful of cars left that you 1636 01:38:26,960 --> 01:38:29,400 Speaker 1: can buy with a stick shift, and if you want 1637 01:38:29,400 --> 01:38:33,360 Speaker 1: to drive us old guys who like to shift our 1638 01:38:33,400 --> 01:38:38,920 Speaker 1: own gears and not use a ridiculous flappy uh the 1639 01:38:39,320 --> 01:38:45,160 Speaker 1: paddle flippers um, which on my infinity is titanium. I 1640 01:38:45,200 --> 01:38:49,200 Speaker 1: don't need a titanium paddle shifter. I want a proper 1641 01:38:49,240 --> 01:38:53,519 Speaker 1: three pedal car. But anyway, UM, she's like, you want 1642 01:38:53,520 --> 01:38:56,120 Speaker 1: to go get that and we have another car that's 1643 01:38:56,120 --> 01:38:58,600 Speaker 1: all will drive feel free. We have the jeep. You 1644 01:38:58,640 --> 01:39:01,680 Speaker 1: could do that. The problem that I'm run into is 1645 01:39:01,720 --> 01:39:03,840 Speaker 1: so I start looking at the VET and then the 1646 01:39:03,880 --> 01:39:05,840 Speaker 1: next step up from the VET is the L T one, 1647 01:39:05,880 --> 01:39:09,720 Speaker 1: which is the six horse engine. UM. And then if 1648 01:39:09,760 --> 01:39:12,439 Speaker 1: you've ever seen that Jaguar F type, I have never 1649 01:39:13,120 --> 01:39:16,160 Speaker 1: I have never desired a Jaguar since the E type, 1650 01:39:16,200 --> 01:39:20,759 Speaker 1: which is spectacular. Every Jaguar ever since has been Yeah, okay, 1651 01:39:20,840 --> 01:39:25,160 Speaker 1: let me know when you make something during the during 1652 01:39:25,280 --> 01:39:29,880 Speaker 1: every era from the E type until last year, the 1653 01:39:29,960 --> 01:39:33,799 Speaker 1: new F type, which you can get the six cylinder 1654 01:39:34,240 --> 01:39:36,400 Speaker 1: with the stick. You can't. I don't believe you get 1655 01:39:36,400 --> 01:39:37,960 Speaker 1: the eight cylinder with a stick, but you can get 1656 01:39:37,960 --> 01:39:44,360 Speaker 1: the six cylinder, which according to UM, according to top gear, 1657 01:39:44,520 --> 01:39:46,559 Speaker 1: you really don't need more than that for that car. 1658 01:39:47,320 --> 01:39:49,840 Speaker 1: That's kind of so that My problem is the same 1659 01:39:49,840 --> 01:39:52,640 Speaker 1: thing happened with the boat whenever I start shopping. So 1660 01:39:52,720 --> 01:39:56,120 Speaker 1: my wife, right, So my wife grew up her brother 1661 01:39:56,160 --> 01:39:58,439 Speaker 1: had to sail both. The other brother had a motor boat. 1662 01:39:58,840 --> 01:40:01,120 Speaker 1: I will live on an island by the water. I 1663 01:40:01,160 --> 01:40:04,120 Speaker 1: want a boat. Who needs a boat? After not eleven 1664 01:40:04,240 --> 01:40:06,400 Speaker 1: she said, all right, go get yourself a boat. And 1665 01:40:06,439 --> 01:40:08,920 Speaker 1: then I spend the next seven years researching boats until 1666 01:40:08,920 --> 01:40:11,680 Speaker 1: I finally then the financial crisis hits, and then I 1667 01:40:11,680 --> 01:40:13,920 Speaker 1: buy a boat. I have a different relationship with my 1668 01:40:13,960 --> 01:40:16,280 Speaker 1: wife because I was at a little league game and 1669 01:40:16,320 --> 01:40:18,639 Speaker 1: we're talking to this woman's single mom with two kids. 1670 01:40:19,160 --> 01:40:22,760 Speaker 1: And she said, uh, and she had a boat, and 1671 01:40:23,160 --> 01:40:25,640 Speaker 1: she had a boat, single mom, two kids, right, And 1672 01:40:25,680 --> 01:40:30,000 Speaker 1: so my wife said really and uh, and told her, 1673 01:40:30,080 --> 01:40:31,680 Speaker 1: you know how you do it? You know, go to 1674 01:40:31,720 --> 01:40:34,439 Speaker 1: this marina blah blah blah and uh and she said, 1675 01:40:34,439 --> 01:40:37,280 Speaker 1: well that sounds great, and I we took her. I 1676 01:40:37,360 --> 01:40:40,760 Speaker 1: just I said, let's go. Look, we went and bought 1677 01:40:40,800 --> 01:40:43,960 Speaker 1: a boat that day. Really, Now, you didn't disclose to 1678 01:40:44,000 --> 01:40:46,559 Speaker 1: your wife that this woman has a trust fund and 1679 01:40:46,600 --> 01:40:48,800 Speaker 1: that you know the marina fees are five grand a 1680 01:40:48,880 --> 01:40:51,920 Speaker 1: year and it's not. Listen, the only thing that makes 1681 01:40:52,080 --> 01:40:56,760 Speaker 1: the toys fun is if your partner has fun with it. 1682 01:40:57,360 --> 01:41:00,560 Speaker 1: Because if it's a source of agitation or it's not 1683 01:41:00,640 --> 01:41:02,840 Speaker 1: worth it, and so I only want to do things 1684 01:41:02,880 --> 01:41:05,800 Speaker 1: like that that she's on board with because that's what 1685 01:41:05,880 --> 01:41:10,320 Speaker 1: makes it fun. I'm the same way we I occasionally 1686 01:41:10,320 --> 01:41:13,720 Speaker 1: have to twist her arm on vacations, and look when 1687 01:41:13,880 --> 01:41:17,280 Speaker 1: when I show her vacation goes gee, that's awfully expensive. 1688 01:41:17,360 --> 01:41:21,400 Speaker 1: I'm not talking like a forty dollar lux vacation package. 1689 01:41:21,960 --> 01:41:24,920 Speaker 1: It's like a six or seven or an eight thousand 1690 01:41:24,960 --> 01:41:30,120 Speaker 1: dollar vacation, which is not cheap, but it's not egregious 1691 01:41:30,439 --> 01:41:33,639 Speaker 1: for two people who work, have no debt and no kids. 1692 01:41:34,160 --> 01:41:37,240 Speaker 1: It's not a crazy number. Look if I said to her, 1693 01:41:37,479 --> 01:41:39,360 Speaker 1: look at this package, we're gonna go to Bali. It's 1694 01:41:39,360 --> 01:41:42,240 Speaker 1: only ninety dollars, she would hit me in the head 1695 01:41:42,280 --> 01:41:45,360 Speaker 1: with a frying pan. But when I show her, look 1696 01:41:45,520 --> 01:41:49,280 Speaker 1: this is St. Thomas, it's eight grands. Really, isn't that 1697 01:41:49,320 --> 01:41:51,840 Speaker 1: a lot of money? No, I take a week off 1698 01:41:51,880 --> 01:41:55,120 Speaker 1: a year. I think we can. But you're absolutely right. 1699 01:41:55,160 --> 01:41:58,400 Speaker 1: If your partner is not on board, it's right. It's 1700 01:41:58,479 --> 01:42:02,160 Speaker 1: it's not worth it. It's so she signed off on 1701 01:42:02,160 --> 01:42:05,040 Speaker 1: on the h on the house, she signed off on 1702 01:42:05,080 --> 01:42:09,000 Speaker 1: the boat. The smartest thing I did in my relationship 1703 01:42:09,400 --> 01:42:12,200 Speaker 1: was when we were dating. I taught her to drive 1704 01:42:12,240 --> 01:42:15,680 Speaker 1: a stick. So the Jeep is a stick, the BMW 1705 01:42:15,800 --> 01:42:19,000 Speaker 1: is a stick, and whatever replaces that car is gonna 1706 01:42:19,040 --> 01:42:21,760 Speaker 1: be a stick. And she couldn't be happier. And my 1707 01:42:22,200 --> 01:42:24,760 Speaker 1: wife can drive a stick. You have to because one 1708 01:42:24,840 --> 01:42:27,040 Speaker 1: day you'll be drinking and somebody has to get you 1709 01:42:27,080 --> 01:42:30,120 Speaker 1: home or uber well that's the other option, but then 1710 01:42:30,120 --> 01:42:33,320 Speaker 1: you're leaving a car in some restaurant or bar. That 1711 01:42:33,400 --> 01:42:36,760 Speaker 1: was literally my thinking. I said to her, I like 1712 01:42:36,840 --> 01:42:39,080 Speaker 1: a stick. Trust me, you'll learn to like a stick. 1713 01:42:39,479 --> 01:42:44,760 Speaker 1: But one day, listen, it's it's yeah, absolutely, you know. 1714 01:42:45,760 --> 01:42:49,200 Speaker 1: I could digress about automobiles over and over again. The 1715 01:42:49,320 --> 01:42:53,479 Speaker 1: five series BMW, if you've ever driven one, I think 1716 01:42:53,520 --> 01:42:56,800 Speaker 1: they're pigs. That's just my opinion outside of the M five. 1717 01:42:57,479 --> 01:43:00,080 Speaker 1: But about ten years ago, maybe it was close of 1718 01:43:00,120 --> 01:43:04,160 Speaker 1: fifteen years ago, we were gonna buy a five with 1719 01:43:04,200 --> 01:43:07,639 Speaker 1: a stick and it was one of the nicest driving cars. 1720 01:43:08,360 --> 01:43:10,439 Speaker 1: We drove it, we went home, we made an offer, 1721 01:43:10,479 --> 01:43:12,639 Speaker 1: it was accepted. The next day, the guy's wife hit 1722 01:43:12,680 --> 01:43:15,600 Speaker 1: a pole. That was the end of the car. But literally, 1723 01:43:16,439 --> 01:43:18,759 Speaker 1: that was just a beautiful car. And my wife says, 1724 01:43:18,880 --> 01:43:21,879 Speaker 1: I love this car. I never liked the five series. 1725 01:43:21,880 --> 01:43:25,400 Speaker 1: This drives like a dream. And the difference is, you know, 1726 01:43:25,479 --> 01:43:31,559 Speaker 1: the floaty automatic versus a proper versus a proper three 1727 01:43:31,600 --> 01:43:35,120 Speaker 1: pedal car where you're controlling the power man, you're controlling 1728 01:43:35,120 --> 01:43:37,800 Speaker 1: where now, where you are, you're not that far from 1729 01:43:37,880 --> 01:43:39,559 Speaker 1: Lime Rock. You should get up to that. We have 1730 01:43:40,400 --> 01:43:42,920 Speaker 1: not to race, but no, I mean to to do 1731 01:43:42,960 --> 01:43:45,799 Speaker 1: the either the advanced driving classes or put in some laps. 1732 01:43:46,360 --> 01:43:50,519 Speaker 1: It's ridiculous amounts of fun and you come away feeling 1733 01:43:50,560 --> 01:43:53,160 Speaker 1: like I'm a much better driver now because I know 1734 01:43:53,360 --> 01:43:55,960 Speaker 1: I know what I'm doing, all right. So it's way 1735 01:43:56,000 --> 01:43:59,200 Speaker 1: after six thirty. I know you have to take a 1736 01:43:59,240 --> 01:44:02,479 Speaker 1: train home eventually. My train just left, so I'm good 1737 01:44:02,479 --> 01:44:06,680 Speaker 1: for another forty five minutes. Um. Any other subjects that 1738 01:44:06,720 --> 01:44:10,800 Speaker 1: we haven't touched on that are relevant to the three 1739 01:44:10,880 --> 01:44:14,920 Speaker 1: or four listeners who are still hanging around at this point. 1740 01:44:14,360 --> 01:44:17,759 Speaker 1: To get a prize or award, that's right, anybody who's 1741 01:44:17,800 --> 01:44:21,840 Speaker 1: listened this far, send an email to tweet me or 1742 01:44:22,160 --> 01:44:25,800 Speaker 1: Jonathan Miller either at Jonathan Miller or I was even clever. 1743 01:44:25,960 --> 01:44:29,160 Speaker 1: I'm at rid Halts and and we'll we'll arrange some 1744 01:44:29,240 --> 01:44:31,840 Speaker 1: special prize for people whoever, at least you'll have our 1745 01:44:33,400 --> 01:44:36,040 Speaker 1: respect and admiration for listening to and that's got to 1746 01:44:36,080 --> 01:44:39,240 Speaker 1: be worth Where something did we Did we leave anything out? 1747 01:44:39,320 --> 01:44:41,759 Speaker 1: Have we probably left? And I think there is nothing 1748 01:44:41,840 --> 01:44:45,679 Speaker 1: left on the carcass, So I'm again. I started out 1749 01:44:45,720 --> 01:44:48,480 Speaker 1: by saying, this is a little different type of podcast 1750 01:44:48,560 --> 01:44:51,280 Speaker 1: where I'm not going to just put out a list 1751 01:44:51,320 --> 01:44:54,240 Speaker 1: of questions. We're just gonna kinda I don't want to 1752 01:44:54,280 --> 01:44:57,400 Speaker 1: say wing it, but have broad topics and and very 1753 01:44:57,479 --> 01:45:01,679 Speaker 1: Larry David like improv. You know, Curb is an improv, 1754 01:45:01,840 --> 01:45:06,400 Speaker 1: but it's it's loosely defined in the actual dialogue itself 1755 01:45:06,479 --> 01:45:10,280 Speaker 1: is within the framework is pretty improved, and I think 1756 01:45:10,320 --> 01:45:13,519 Speaker 1: we kept this fast and loosen. I don't know if 1757 01:45:13,520 --> 01:45:14,880 Speaker 1: I can I'm gonna be able to do this with 1758 01:45:14,960 --> 01:45:17,960 Speaker 1: Muhammed Alarian or somebody else like that. I think I 1759 01:45:18,000 --> 01:45:19,840 Speaker 1: have to be a little more structured like that. But 1760 01:45:20,439 --> 01:45:23,880 Speaker 1: by the way, if if you guys, if the listeners, 1761 01:45:23,960 --> 01:45:26,080 Speaker 1: that both of you guys who are still left listening, 1762 01:45:27,400 --> 01:45:31,519 Speaker 1: if you go to dinner with Jonathan and myself and 1763 01:45:31,640 --> 01:45:35,800 Speaker 1: our wives, this is pretty much dinner count It's it's 1764 01:45:35,840 --> 01:45:40,599 Speaker 1: boats and houses in real estate and cars other than 1765 01:45:40,640 --> 01:45:46,080 Speaker 1: the food and we actually we have some Bloomberg sponsored yep. 1766 01:45:46,960 --> 01:45:48,640 Speaker 1: This this is pretty much it. So I want to 1767 01:45:48,640 --> 01:45:52,160 Speaker 1: thank you again for doing this and being so generous 1768 01:45:52,240 --> 01:45:56,760 Speaker 1: with your time. Um So to to reiterate for for 1769 01:45:56,760 --> 01:46:00,760 Speaker 1: those people who want to find Jonathan's search and work 1770 01:46:00,800 --> 01:46:03,799 Speaker 1: in addition to Douglas Aleman, you'll see it at Jonathan 1771 01:46:03,800 --> 01:46:08,719 Speaker 1: Miller on Twitter or at Miller Samuel dot com, and 1772 01:46:08,960 --> 01:46:13,840 Speaker 1: the blog and the podcast regularly all showing up at 1773 01:46:13,880 --> 01:46:17,000 Speaker 1: Miller Samuel dot com. I would be remiss if I 1774 01:46:17,080 --> 01:46:22,120 Speaker 1: did not thank my recording engineer, Mark, my producer Charlie Vohmer, 1775 01:46:22,360 --> 01:46:26,439 Speaker 1: and today my head of my head of research, Michael 1776 01:46:26,439 --> 01:46:29,280 Speaker 1: bat Nick, got the day off because this was a 1777 01:46:29,360 --> 01:46:35,120 Speaker 1: less deeply researched than usual podcast. I'm Barry Ridults. You've 1778 01:46:35,160 --> 01:46:45,840 Speaker 1: been listening to Masters in Business on Bloomberg Radio. Michael 1779 01:46:45,880 --> 01:46:49,479 Speaker 1: Bloomberg is the founder and majority owner of Bloomberg LP, 1780 01:46:49,720 --> 01:46:51,960 Speaker 1: the parent company of Bloomberg Radio.