WEBVTT 00:00:00.000 --> 00:00:03.060 Ever wonder what really happens behind the scenes 00:00:03.060 --> 00:00:05.400 in construction, real estate, and development? 00:00:06.019 --> 00:00:08.240 We pull back the curtain on the new home construction 00:00:08.240 --> 00:00:11.060 industry, the real estate market, and the trends 00:00:11.060 --> 00:00:14.099 shaping it all. Discover the stories, insights, 00:00:14.259 --> 00:00:16.219 and expertise behind the process of building 00:00:16.219 --> 00:00:19.640 a new home. Join us for Trust the Process podcast, 00:00:19.940 --> 00:00:24.120 and let's build something great together. Hello, 00:00:24.120 --> 00:00:26.899 and welcome back to Trust the Process podcast 00:00:26.899 --> 00:00:29.039 where we talk about the real estate industry, 00:00:29.420 --> 00:00:32.439 home construction and everything in between. 00:00:33.340 --> 00:00:36.520 Today we are going to dive into what's going 00:00:36.520 --> 00:00:39.179 on since our last update. So we did an update 00:00:39.179 --> 00:00:42.179 at the end of the year starting into 2025 and 00:00:42.179 --> 00:00:46.560 now as we end out the first quarter of that we 00:00:46.560 --> 00:00:49.200 wanted to do a bit of a wrap up just kind of 00:00:49.200 --> 00:00:50.659 what's been happening. A little temperature check. 00:00:51.000 --> 00:00:54.899 Exactly. Like it. Yeah, I like it. So lots to 00:00:54.899 --> 00:00:57.880 talk about Too much is changing too rapidly. 00:00:57.880 --> 00:01:00.640 We're not in a really volatile timeframe right 00:01:00.640 --> 00:01:02.719 now in the housing industry, but enough is changing 00:01:02.719 --> 00:01:05.299 that it's worth discussing and there are Some 00:01:05.299 --> 00:01:07.939 some new things that have come up some fault 00:01:07.939 --> 00:01:11.859 lines. Yeah Yeah, so if you want to jump in let's 00:01:11.859 --> 00:01:13.840 let's just yeah right into it I really wanted 00:01:13.840 --> 00:01:16.680 to talk about the real estate market as a whole 00:01:16.680 --> 00:01:18.980 okay in terms of where we're at in the first 00:01:18.980 --> 00:01:22.760 quarter of 2025 real estate market just general 00:01:22.760 --> 00:01:25.420 resales to how it affects new construction i 00:01:25.420 --> 00:01:27.200 want to talk about mortgages because that dovetails 00:01:27.200 --> 00:01:29.640 into that as well and then i want to talk about 00:01:29.640 --> 00:01:32.439 home building and home builder sentiment and 00:01:32.439 --> 00:01:34.760 those types of things that are really kind of 00:01:34.760 --> 00:01:37.980 dominating in the headlines right now so i like 00:01:37.980 --> 00:01:40.180 that breaking it up into yeah i just think it's 00:01:40.180 --> 00:01:43.420 they all work in unison they are sort of they're 00:01:43.420 --> 00:01:47.519 kind of their own thing yeah so uh The housing 00:01:47.519 --> 00:01:50.319 market is, as you said, it's not very exciting. 00:01:50.540 --> 00:01:53.680 It's just not, it's not a tumultuous year. Uh, 00:01:53.719 --> 00:01:56.280 it's been stable for the last more or less two 00:01:56.280 --> 00:01:58.079 and a half years. I would say probably, well, 00:01:58.200 --> 00:01:59.760 we're going on probably under three years. I 00:01:59.760 --> 00:02:02.180 think it really started to stabilize in middle 00:02:02.180 --> 00:02:05.739 of 2022, which is what the intention was, you 00:02:05.739 --> 00:02:09.349 know, to get, to get a lid on those. that runaway 00:02:09.349 --> 00:02:11.250 kind of price gains that we were seeing and that 00:02:11.250 --> 00:02:15.110 worked. Thankfully, we've just gone into a prolonged 00:02:15.110 --> 00:02:18.449 period of very stable, healthy appreciation and 00:02:18.449 --> 00:02:22.490 a lot of other factors that are affecting the 00:02:22.490 --> 00:02:26.669 market, not necessarily price gains. So inventory. 00:02:26.990 --> 00:02:30.030 obviously remains really constrained. And then 00:02:30.030 --> 00:02:32.789 mortgage rates. And I think this that kind of 00:02:32.789 --> 00:02:36.889 those two things together have honestly functioned 00:02:36.889 --> 00:02:41.009 as a backstop on what could have been some real, 00:02:41.449 --> 00:02:45.009 really marked softening in the market. So the 00:02:45.009 --> 00:02:49.210 high rates all through 23 and 24. And now into 00:02:49.210 --> 00:02:52.669 25, we're still yet to see anything with a five 00:02:52.669 --> 00:02:57.199 handle. So we're Right now sitting in the back 00:02:57.199 --> 00:03:00.900 half of March, we're sitting in the high sixes 00:03:00.900 --> 00:03:05.139 still to this day. So we are probably going to 00:03:05.139 --> 00:03:08.020 land there. That being said, back to appreciation, 00:03:08.180 --> 00:03:11.740 I want to talk about mortgages separately. But 00:03:11.740 --> 00:03:14.900 JP Morgan's you know at the end of 24 JP Morgan 00:03:14.900 --> 00:03:17.919 Zillow the consensus among kind of those economists 00:03:17.919 --> 00:03:20.599 and people that make their living and they are 00:03:20.599 --> 00:03:22.259 things like that you know organizations like 00:03:22.259 --> 00:03:25.020 that pretty much had a consensus that home appreciation 00:03:25.020 --> 00:03:28.680 was going to be around three to four percent 00:03:28.680 --> 00:03:31.300 with the least you know the most conservative 00:03:31.300 --> 00:03:33.099 estimates at three and the most aggressive at 00:03:33.099 --> 00:03:35.680 four okay but regardless that's just about keeping 00:03:35.680 --> 00:03:39.210 up with inflation so. uh that indicates that 00:03:39.210 --> 00:03:41.370 it's a healthy stable market your money is safe 00:03:41.370 --> 00:03:44.009 in real estate if you pay cash for your home 00:03:44.009 --> 00:03:45.669 not only are you living there but the value of 00:03:45.669 --> 00:03:48.449 that home is going up with inflation so your 00:03:48.449 --> 00:03:51.229 cash is not rotting in your house obviously you're 00:03:51.229 --> 00:03:53.650 saving a bucket of money on rates if you're able 00:03:53.650 --> 00:03:56.169 to pay cash for a home and not have those finance 00:03:56.169 --> 00:03:59.310 charges so money is safe in real estate and with 00:03:59.310 --> 00:04:01.650 that we're still seeing a lot of investor purchases 00:04:01.650 --> 00:04:06.289 so we're closed out 24 with $1 billion in investor 00:04:06.289 --> 00:04:08.909 purchases in the greater Las Vegas market. As 00:04:08.909 --> 00:04:11.530 a whole, we're kind of leading the nation when 00:04:11.530 --> 00:04:13.830 it comes to investor purchases, us in Denver 00:04:13.830 --> 00:04:15.770 and Phoenix, kind of the suburban sprawl where 00:04:15.770 --> 00:04:19.329 it's easier to buy a block of homes, maybe not 00:04:19.329 --> 00:04:21.050 on the same block, but a block of homes that 00:04:21.050 --> 00:04:24.629 are relatively easy to manage versus a more fragmented 00:04:24.629 --> 00:04:26.790 market on the East Coast where it's harder to 00:04:26.790 --> 00:04:28.850 manage maybe a suburb that's 20 miles this way, 00:04:28.850 --> 00:04:31.629 20 miles that way. So we're still leading the 00:04:31.629 --> 00:04:34.300 nation with Investor purchases and the nation 00:04:34.300 --> 00:04:36.500 is leading the world and the amount of investor 00:04:36.500 --> 00:04:39.360 purchases into single -family residential So 00:04:39.360 --> 00:04:41.540 that's yet another backstop and I think that's 00:04:41.540 --> 00:04:43.980 putting a lot of pressure on that appreciation 00:04:43.980 --> 00:04:46.360 and maybe that's getting getting us the Four 00:04:46.360 --> 00:04:48.319 and five percent appreciation that we saw last 00:04:48.319 --> 00:04:50.860 year I think it's those investor purchases and 00:04:50.860 --> 00:04:53.000 they lean towards the entry -level market. Mm 00:04:53.000 --> 00:04:55.660 -hmm and also thinking about buyer sentiment, 00:04:55.660 --> 00:04:59.209 you know as we talk Obviously we're active in 00:04:59.209 --> 00:05:01.250 the environment. So we're out talking to people 00:05:01.250 --> 00:05:03.310 all the time and the things that we're hearing 00:05:03.310 --> 00:05:05.490 and the sort of the thought other people are 00:05:05.490 --> 00:05:09.529 discussing isn't necessarily Like they haven't 00:05:09.529 --> 00:05:11.449 gotten the word yet that right that numbers are 00:05:11.449 --> 00:05:13.550 stable and things are okay I think the average 00:05:13.550 --> 00:05:15.870 buyer might still be a little leery or might 00:05:15.870 --> 00:05:17.990 still be confused about where the market is or 00:05:17.990 --> 00:05:22.180 how how rates look or feel and whether or not 00:05:22.180 --> 00:05:24.500 now is a good time to buy. So some of these things, 00:05:24.560 --> 00:05:26.060 while yes, they're facts, and we know that the 00:05:26.060 --> 00:05:28.459 big picture is happening. I don't know if that 00:05:28.459 --> 00:05:31.560 has trickled down into mainstream homebuyers. 00:05:31.660 --> 00:05:34.279 I agree. And I think people buy homes when it's 00:05:34.279 --> 00:05:36.319 right for them, not when it's right for the market. 00:05:36.379 --> 00:05:38.360 But everyone is an amateur economist when it 00:05:38.360 --> 00:05:41.639 comes to their home purchase. And I think that 00:05:41.639 --> 00:05:43.480 you're 100 % correct in that they don't know 00:05:43.480 --> 00:05:45.819 how to feel about the interest rates. They don't 00:05:45.819 --> 00:05:49.329 even know what a 7 % rate translates to in a 00:05:49.329 --> 00:05:51.769 pain they don't realize that it's true that is 00:05:51.769 --> 00:05:54.170 a huge when most of your amortization on the 00:05:54.170 --> 00:05:57.189 front end is interest seven percent versus three 00:05:57.189 --> 00:05:59.129 and a half percent is a doubling of your mortgage 00:05:59.129 --> 00:06:01.949 payment because so much of it is interest so 00:06:01.949 --> 00:06:04.490 it is a is a really big deal so i think that 00:06:04.490 --> 00:06:07.389 sentiment might be there i think that the generation 00:06:07.660 --> 00:06:10.420 I'm an older millennial right so my generation 00:06:10.420 --> 00:06:12.600 saw a lot of people get burned by owning real 00:06:12.600 --> 00:06:15.040 estate we were coming of age when people were 00:06:15.040 --> 00:06:17.620 actively getting burned and i know you're significantly 00:06:17.620 --> 00:06:23.579 younger than i am but your generation was actively 00:06:23.579 --> 00:06:27.199 burned by. That market but the newer generation 00:06:27.199 --> 00:06:30.139 has only seen real estate be a good investment 00:06:30.139 --> 00:06:32.480 and the younger millennials as well have only 00:06:32.480 --> 00:06:34.920 really see it be a good investment their parents 00:06:34.920 --> 00:06:38.220 didn't lose houses they didn't lose houses they're 00:06:38.220 --> 00:06:40.819 tired of paying landlord. Twenty eight hundred 00:06:40.819 --> 00:06:43.360 dollars a month for it. Three bedroom house or 00:06:43.360 --> 00:06:44.899 twenty six hundred for a two bedroom apartment 00:06:44.899 --> 00:06:47.600 or whatever it may be. So I think that we're 00:06:47.600 --> 00:06:49.819 at a point now, especially three years into these 00:06:49.819 --> 00:06:52.759 kind of elevated rates where buyers just aren't 00:06:52.759 --> 00:06:55.240 going to put their life on hold anymore. And 00:06:55.240 --> 00:06:57.379 we've seen that in people that we've talked to. 00:06:57.480 --> 00:07:00.279 They're missing. They're missing out on their 00:07:00.279 --> 00:07:01.579 life. They're missing out on their grandkids. 00:07:01.980 --> 00:07:04.000 We just had a situation this week. We just met 00:07:04.000 --> 00:07:07.420 with with potential buyers. Or actually, yeah. 00:07:08.160 --> 00:07:11.139 But in any other... Sellers in a brokerage business. 00:07:11.560 --> 00:07:13.000 Yes, exactly that. They've kind of been holding 00:07:13.000 --> 00:07:14.920 on. They weren't sure what the market was going 00:07:14.920 --> 00:07:16.839 to do. And, you know, it's hard to get the real 00:07:16.839 --> 00:07:20.100 story. You're getting pieces or parts of it or, 00:07:20.279 --> 00:07:22.860 you know, your aunt Jane has a story about when 00:07:22.860 --> 00:07:25.060 they were little. So you're not really able to 00:07:25.060 --> 00:07:27.420 put all of the information together. But same 00:07:27.420 --> 00:07:28.939 thing. They've just had their life on hold. And 00:07:28.939 --> 00:07:31.920 finally, they were going to go eat with our grandbabies. 00:07:32.639 --> 00:07:34.680 Yeah, exactly. We're going to give up our 3 % 00:07:34.680 --> 00:07:36.620 rate and we're going to... So in real time, I 00:07:36.620 --> 00:07:38.139 just say that those are the stories that we have 00:07:38.139 --> 00:07:40.740 been hearing. And now we're real time. It's happening 00:07:40.740 --> 00:07:43.079 to our own clients. It is. So, I mean, I think 00:07:43.079 --> 00:07:45.939 it's, imagine multiplying that times the entire 00:07:45.939 --> 00:07:47.899 U S people just aren't going to wait forever. 00:07:47.899 --> 00:07:49.680 They're not going to keep renting forever. They're 00:07:49.680 --> 00:07:52.319 not going to share a room with their, their siblings 00:07:52.319 --> 00:07:54.160 forever. They're going to start their own lives. 00:07:54.160 --> 00:07:56.600 Right. And I think that that's what we're seeing. 00:07:56.680 --> 00:07:59.519 A lot of people come off the fence. So that's 00:07:59.519 --> 00:08:02.040 where I see 25 going. And I think that the court 00:08:02.040 --> 00:08:05.339 first quarter has has indicated that i will say 00:08:05.339 --> 00:08:07.279 in terms of the overall real estate market what 00:08:07.279 --> 00:08:09.560 are some bright spots for buyers is that inventory 00:08:09.560 --> 00:08:15.279 is up about 16 from last year but that only translates 00:08:15.279 --> 00:08:17.939 to three and a half months supply versus three 00:08:17.939 --> 00:08:20.079 months supply from this time last year you know 00:08:20.079 --> 00:08:25.980 jan jan and feb 2024 versus now 2025 where we 00:08:25.980 --> 00:08:28.259 we gained an extra two weeks worth of market 00:08:28.259 --> 00:08:31.240 but for those people that don't know what that 00:08:31.240 --> 00:08:35.330 means that Short inventory means it's still a 00:08:35.330 --> 00:08:37.610 seller's market. So bias made a disadvantage 00:08:37.610 --> 00:08:40.029 and still we're getting at least the trend is 00:08:40.029 --> 00:08:42.190 correcting a little bit So thankfully we're going 00:08:42.190 --> 00:08:45.370 in the right direction Conventional wisdom was 00:08:45.370 --> 00:08:48.690 always six months supply was indicated Yeah, 00:08:48.690 --> 00:08:51.039 kind of even kill anything more but But I have 00:08:51.039 --> 00:08:55.059 been six months. Oh, since 2009, 2010, maybe. 00:08:55.879 --> 00:08:58.059 And a lot of that was shadow inventory that couldn't 00:08:58.059 --> 00:08:59.399 be bought and sold. It was on the market, but 00:08:59.399 --> 00:09:01.860 it was a short sale. It was really not true market, 00:09:02.200 --> 00:09:04.980 not true inventory. So I think what we're looking 00:09:04.980 --> 00:09:08.460 at is a steep imbalance. And we've talked about 00:09:08.460 --> 00:09:10.039 this in the past. There's not enough new home 00:09:10.039 --> 00:09:12.820 construction. And we'll get to that. later but 00:09:12.820 --> 00:09:14.659 there's not enough new home construction all 00:09:14.659 --> 00:09:16.659 the new inventory is going to come from new construction 00:09:16.659 --> 00:09:19.019 there's just too many people locked into their 00:09:19.019 --> 00:09:21.419 rates that yes people are not going to wait it 00:09:21.419 --> 00:09:23.879 out forever but there you're also only going 00:09:23.879 --> 00:09:25.759 to find the people that are truly motivated they're 00:09:25.759 --> 00:09:27.519 motivated to sell them move out of state to be 00:09:27.519 --> 00:09:30.419 with their grandkids they're motivated to sell 00:09:30.419 --> 00:09:32.919 and downsize because one of the spouses died 00:09:32.919 --> 00:09:34.779 and they literally can't maintain the house but 00:09:34.779 --> 00:09:36.480 there's a lot of people a lot of families that 00:09:36.480 --> 00:09:38.200 are bursting at the seams and how badly do they 00:09:38.200 --> 00:09:40.320 really need that fifth bedroom or can they make 00:09:40.320 --> 00:09:42.820 it work? So I think that that's kind of what 00:09:42.820 --> 00:09:44.220 we are seeing. So I don't want to understate, 00:09:44.340 --> 00:09:45.700 you know, I don't want to downplay it that it 00:09:45.700 --> 00:09:47.639 is putting downward pressure, no matter how long 00:09:47.639 --> 00:09:50.399 we wait. And no matter how long rates are elevated, 00:09:50.820 --> 00:09:53.159 they're still going to be downward pressure versus 00:09:53.159 --> 00:09:56.679 3 % to 3%. And all you're doing is covering the 00:09:56.679 --> 00:09:58.720 cost of a more expensive home. Now you're more 00:09:58.720 --> 00:10:01.039 expensive home, and you're seeing your rate double 00:10:01.039 --> 00:10:03.000 or if you're downsizing your mortgage payments 00:10:03.000 --> 00:10:04.879 stay in the same because you're you bought half 00:10:04.879 --> 00:10:07.419 the home, but had double the rate. So it's not 00:10:07.519 --> 00:10:10.519 enough motivation there. So, you know, besides 00:10:10.519 --> 00:10:13.799 major life events, death, divorce, what are the 00:10:13.799 --> 00:10:17.679 five D's death, divorce? What are they? Make 00:10:17.679 --> 00:10:20.539 up? No, there are there. Are there five of them? 00:10:20.639 --> 00:10:22.860 Okay. Yeah, there are five. I'll get back to 00:10:22.860 --> 00:10:27.059 that. So those those are the things that I think, 00:10:27.360 --> 00:10:28.899 you know, are going to require the most. But 00:10:28.899 --> 00:10:31.340 other than that, it will have some some real 00:10:31.340 --> 00:10:33.240 downward pressure, the job changes, things like 00:10:33.240 --> 00:10:35.820 that. So we're seeing a movement, but it's just 00:10:35.820 --> 00:10:38.840 not it's nowhere near. What it needs to be so 00:10:38.840 --> 00:10:41.720 the bottom line is quarter one is a boring quarter. 00:10:41.860 --> 00:10:44.919 It's but it's good You want boring. Yes, you 00:10:44.919 --> 00:10:48.600 want stability relative stability. So dovetailing 00:10:48.600 --> 00:10:53.240 into mortgage rates the again the people that 00:10:53.240 --> 00:10:57.360 are way smarter than I am are had estimates that 00:10:57.360 --> 00:10:59.960 the rates would settle in the middle six sixes 00:10:59.960 --> 00:11:02.259 and Probably finish the year out around six and 00:11:02.259 --> 00:11:05.139 a half by the fourth quarter, but we've had several 00:11:05.960 --> 00:11:08.919 Sit situations this year days that the rates 00:11:08.919 --> 00:11:12.519 did already hit that in fact some as low as like 00:11:12.519 --> 00:11:15.600 six and eight So we've already gone below six 00:11:15.600 --> 00:11:17.820 and a half. So our rates are performing a little 00:11:17.820 --> 00:11:21.360 bit better than we expected We also didn't expect 00:11:21.360 --> 00:11:23.899 the stock market to be as tumultuous as it has 00:11:23.899 --> 00:11:27.340 been We didn't expect there the job jobless claims 00:11:27.340 --> 00:11:29.419 would be higher than expected. The new job creation 00:11:29.419 --> 00:11:32.139 would be much lower than expected So the economic 00:11:32.139 --> 00:11:35.539 data has come in worse. So it's kind of Should 00:11:35.539 --> 00:11:37.419 we be happy that rates are performing better 00:11:37.419 --> 00:11:41.419 because it's at what cost, but overall, if we're 00:11:41.419 --> 00:11:44.279 at 4 % unemployment, does that mean 96 % of people 00:11:44.279 --> 00:11:46.059 are still working? You could argue on unemployment 00:11:46.059 --> 00:11:48.200 and a lot of things that people not looking for 00:11:48.200 --> 00:11:50.480 jobs anymore, but we know that we still have 00:11:50.480 --> 00:11:53.360 a very robust job market. So I don't feel that 00:11:53.360 --> 00:11:55.759 there's a lot of pain among the middle class 00:11:55.759 --> 00:11:57.919 and the working people of the country. I feel 00:11:57.919 --> 00:12:01.549 like we're not in a 2008. Right. Are we going 00:12:01.549 --> 00:12:03.769 in that direction? Absolutely not in terms of 00:12:03.769 --> 00:12:05.970 home values, but could we see elevated unemployment 00:12:05.970 --> 00:12:08.870 as the year takes on? I don't know. I mean, I 00:12:08.870 --> 00:12:12.210 don't think so, but it's something that we should 00:12:12.210 --> 00:12:14.730 keep an eye on. So that being said, if these 00:12:14.730 --> 00:12:18.309 kind of trends continue and we see more tumultuous 00:12:18.309 --> 00:12:22.570 stock market and inflation numbers that are still 00:12:22.570 --> 00:12:26.690 in line, we're at 3 % January 2025. January 24, 00:12:26.809 --> 00:12:29.710 24 was also 3%. So I know the feds target 2%. 00:12:29.710 --> 00:12:31.929 That's an arbitrary number, but that is their 00:12:31.929 --> 00:12:34.490 goal, which is why you're not seeing a lot of 00:12:34.490 --> 00:12:36.870 monetary loosening. You're not seeing the feds 00:12:36.870 --> 00:12:38.669 bring down the feds funds rate. You're just seeing 00:12:38.669 --> 00:12:43.610 them kind of do a wait and see. So I think though 00:12:43.610 --> 00:12:45.250 that as we know from our interest rate episode 00:12:45.250 --> 00:12:47.330 that the feds do not dictate 30 year mortgages 00:12:47.330 --> 00:12:49.929 they follow the t -bill I think as as a stock 00:12:49.929 --> 00:12:52.470 market even if this is just a 10 % correction 00:12:52.470 --> 00:12:55.509 that we almost see every year at some point in 00:12:55.509 --> 00:12:58.529 the year a lot of times it's in May you know 00:12:58.529 --> 00:13:03.250 sell in May and stay away I think that I think 00:13:03.250 --> 00:13:06.990 that I think that the montage goes or the the 00:13:06.990 --> 00:13:11.159 moniker so If we see that 10 % even if it comes 00:13:11.159 --> 00:13:13.340 back, it's a volatility that might push investors 00:13:13.340 --> 00:13:15.679 to quality. They say like a flock to quality. 00:13:16.200 --> 00:13:17.980 Ten -year T -bills are backed by the full faith 00:13:17.980 --> 00:13:21.539 and security of the US government. So it's a 00:13:21.539 --> 00:13:23.759 pretty safe investment to be getting 4 % on your 00:13:23.759 --> 00:13:27.340 money with a T -bill. So that's kind of where 00:13:27.340 --> 00:13:29.399 you see, okay, well now they're just now they're 00:13:29.399 --> 00:13:32.980 paying 3 .75 or 3 .8. So it'll be interesting 00:13:32.980 --> 00:13:36.139 to see. But I actually think that we will settle 00:13:36.139 --> 00:13:39.559 in lower than what's expected. I think when we 00:13:39.559 --> 00:13:41.700 average out our 30 year fix this year, it'll 00:13:41.700 --> 00:13:44.639 be the very low sixes. And I think we'll see 00:13:44.639 --> 00:13:47.379 high fives at some point this year. We still 00:13:47.379 --> 00:13:49.919 haven't seen tariffs yet. We still have many 00:13:49.919 --> 00:13:52.039 more months of employment data to get through. 00:13:52.039 --> 00:13:54.740 We still have nine more months worth of data. 00:13:54.799 --> 00:13:57.360 So I have to believe that sometime in those nine 00:13:57.360 --> 00:14:00.279 months, we're going to see a situation where 00:14:00.279 --> 00:14:03.879 we've missed inflation numbers mean in a good 00:14:03.879 --> 00:14:05.220 way, you know, where instead of three, we were 00:14:05.220 --> 00:14:08.960 coming in at 2 .3 instead of unemployment at 00:14:08.960 --> 00:14:11.720 4 .1, we're at 4 .9. I mean, little things like 00:14:11.720 --> 00:14:14.220 that will cause a flood to the treasury market 00:14:14.220 --> 00:14:16.639 because right now treasury yields are amazing. 00:14:17.279 --> 00:14:20.320 The Dow ended up in the last 12 months, 10 .8 00:14:20.320 --> 00:14:23.960 % higher. So it grew 10 .8%. So to have your 00:14:23.960 --> 00:14:26.240 money in the stock market, you made about 10 00:14:26.240 --> 00:14:29.700 % a year. But there's a tremendous amount of 00:14:29.700 --> 00:14:31.500 risk in the stock market, especially if you buy 00:14:31.500 --> 00:14:35.600 an index fund. Right, especially now. So if you 00:14:35.600 --> 00:14:40.149 look at it, We're going to look at it. We're 00:14:40.149 --> 00:14:42.169 going to work four and a quarter for a 10 year 00:14:42.169 --> 00:14:45.450 T bill versus all the volatility, which is pretty 00:14:45.450 --> 00:14:47.370 much guaranteed. And you get paid a couple of 00:14:47.370 --> 00:14:50.029 times a year versus all the volatility of the 00:14:50.029 --> 00:14:51.509 stock market where you don't get paid unless 00:14:51.509 --> 00:14:53.710 you sell. So you have to realize those gains 00:14:53.710 --> 00:14:56.649 and sell the, you know, to generate that income. 00:14:56.750 --> 00:14:58.409 Otherwise it's just on paper. 10 year T bills, 00:14:58.509 --> 00:15:01.519 you get paid. So there's you can see why they 00:15:01.519 --> 00:15:03.860 are appealing right now. They're you know, they're 00:15:03.860 --> 00:15:06.139 the red -headed stepchild No offense to the gingers 00:15:06.139 --> 00:15:08.480 in the audience, but they you know, they're not 00:15:08.480 --> 00:15:10.820 they would want a 10 -year treasury note for 00:15:10.820 --> 00:15:15.559 4 % So boring my Rivian stock grew 27 % Whatever 00:15:15.559 --> 00:15:17.559 that number is you hear all those right those 00:15:17.559 --> 00:15:19.620 darlings and those those stories like that that 00:15:19.620 --> 00:15:21.580 happened But unless you're really timing those 00:15:21.580 --> 00:15:23.779 things, right? That's not common. And then if 00:15:23.779 --> 00:15:25.860 you're taking those kinds of chances to get a 00:15:25.860 --> 00:15:27.919 20 % return on your investment, you're probably 00:15:27.919 --> 00:15:30.559 losing 10 % on some other investments too. So 00:15:30.559 --> 00:15:33.340 there is definitely an appetite for treasury 00:15:33.340 --> 00:15:37.320 bills. So that's why I think that the volatility 00:15:37.320 --> 00:15:40.519 is going to lead to a run on treasury bills, 00:15:40.639 --> 00:15:43.720 or at least enough to see high fives at some 00:15:43.720 --> 00:15:44.899 point this year. I don't know if that'll last 00:15:44.899 --> 00:15:47.500 forever, but I feel that there's enough, there's 00:15:47.500 --> 00:15:50.059 enough vibrations in the ground that I could 00:15:50.059 --> 00:15:52.799 see it happening. Interesting yeah, it'd be interesting. 00:15:52.840 --> 00:15:54.500 Yeah, it'd be cool Yeah, I mean not cool because 00:15:54.500 --> 00:15:56.580 there might be there's some untoward effects 00:15:56.580 --> 00:15:58.500 and there's some other things that we're not 00:15:58.500 --> 00:16:01.240 even seeing but it would be nice to feel like 00:16:01.240 --> 00:16:04.419 the fever of these high rates is broken and That'll 00:16:04.419 --> 00:16:06.879 really unlock a lot. I think it'll unlock a lot 00:16:06.879 --> 00:16:12.120 of economic activity So true. Yeah, it will and 00:16:12.120 --> 00:16:16.840 then that works so well for Home builder sentiment. 00:16:16.940 --> 00:16:19.860 So where is construction? Where are home builders? 00:16:20.340 --> 00:16:23.080 So we're thinking that we're going to finish 00:16:23.080 --> 00:16:26.779 about 1 .1 million homes this year. So that's 00:16:26.779 --> 00:16:31.539 up about 13 % from last year. Okay. And the majority 00:16:31.539 --> 00:16:34.500 of that will be single family. And most people, 00:16:34.500 --> 00:16:36.379 you know, we won't really know until the data 00:16:36.379 --> 00:16:38.740 comes out, but we're expecting it to be more 00:16:38.740 --> 00:16:40.600 entry level product. So I think it's going to 00:16:40.600 --> 00:16:46.169 be 1 .1 million homes and Ideally in areas people 00:16:46.169 --> 00:16:47.909 want to be in and product that people really 00:16:47.909 --> 00:16:50.889 need so the non -glamorous entry -level stuff 00:16:50.889 --> 00:16:53.450 Maybe one tier move up stuff that we that we 00:16:53.450 --> 00:16:58.269 need and it will unlock a lot of So that's a 00:16:58.269 --> 00:17:01.840 national number. We know last year las vegas 00:17:01.840 --> 00:17:04.119 specifically built around twelve thousand what 00:17:04.119 --> 00:17:06.339 do you think that looks like well that just based 00:17:06.339 --> 00:17:07.819 on the trends the number of permits that have 00:17:07.819 --> 00:17:09.960 been pulled thus far this year does that send 00:17:09.960 --> 00:17:11.700 the number of available lots i know that we have 00:17:11.700 --> 00:17:13.799 about nine ninety five hundred available lots 00:17:13.799 --> 00:17:17.380 that are developed right now so that's good indication 00:17:17.380 --> 00:17:19.619 i think that we'll probably see around the same 00:17:19.619 --> 00:17:22.819 as we did last year maybe maybe within you know 00:17:22.819 --> 00:17:25.319 five percent of everywhere last year so they 00:17:25.319 --> 00:17:28.759 don't release the data as much as as uh national 00:17:28.759 --> 00:17:31.000 trends but i think we'll I think we'll see that. 00:17:31.160 --> 00:17:34.079 I think we'll see another 12 to 13 ,000 units 00:17:34.079 --> 00:17:36.279 in the ground, which would include multifamily. 00:17:36.279 --> 00:17:37.960 Right. Right. And that's obviously a best guess. 00:17:38.220 --> 00:17:40.099 But based on what we're seeing, there isn't anything 00:17:40.099 --> 00:17:42.519 alarming. No, that would say it should be otherwise. 00:17:42.519 --> 00:17:45.000 So we're right on trend with what we might think 00:17:45.000 --> 00:17:47.710 in order to meet that same. Which rounds for 00:17:47.710 --> 00:17:49.910 the end of the year, right? Which I was, I bet 00:17:49.910 --> 00:17:53.769 my tongue about to say, not literally. Uh, there's 00:17:53.769 --> 00:17:56.089 a lot of factors that could stop that. So if 00:17:56.089 --> 00:17:58.109 we see, because it's going to lead into the next 00:17:58.109 --> 00:18:01.509 topic. So well, if you see a lot of fear on tariffs 00:18:01.509 --> 00:18:04.109 and you see a lot of fear on supply chain and 00:18:04.109 --> 00:18:06.329 you see a lot of fear of, you know, around deportations 00:18:06.329 --> 00:18:09.130 and immigration policy changes, and there's a 00:18:09.130 --> 00:18:12.690 fear that home values are stagnant. So if the 00:18:12.690 --> 00:18:14.970 cost of goods goes up tremendously because of 00:18:14.970 --> 00:18:17.769 tariffs because tariffs because of manpower and 00:18:17.769 --> 00:18:20.309 workforce That those homebuyer that's gonna come 00:18:20.309 --> 00:18:22.690 out of homebuyer margins. So it's the same argument 00:18:22.690 --> 00:18:25.430 over tariffs Okay, if you add a 12 % tariff How 00:18:25.430 --> 00:18:26.710 do you know that the consumer is gonna pay it 00:18:26.710 --> 00:18:29.230 because ultimately the consumer demand has to 00:18:29.230 --> 00:18:33.089 be there and that's true So homes are a commodity 00:18:33.089 --> 00:18:35.609 though that cannot be moved. You know, it's largely 00:18:35.609 --> 00:18:39.700 non fungible. It can't be replicated. You can't 00:18:39.700 --> 00:18:42.859 just sell your wares somewhere else. If you're 00:18:42.859 --> 00:18:44.819 an importer to the US and you're avoiding tariffs, 00:18:44.839 --> 00:18:47.019 you can still charge your same premium and charge 00:18:47.019 --> 00:18:50.000 a tariff because you might export to other markets. 00:18:50.519 --> 00:18:52.500 We can't do that in the new home construction. 00:18:53.019 --> 00:18:56.160 I can't be an exporter. So I'm stuck with what 00:18:56.160 --> 00:18:58.500 I have. So if the buyer demand is not there, 00:18:58.839 --> 00:19:02.359 it's going to take a while for that to work through 00:19:02.359 --> 00:19:04.359 because what you're going to have to see is home 00:19:04.359 --> 00:19:07.529 builders dialing back. And saying well because 00:19:07.529 --> 00:19:10.829 the cost to build went up 15 or 20 % which I've 00:19:10.829 --> 00:19:13.309 lived through in 2020 and 2021 I lived through 00:19:13.309 --> 00:19:16.410 that but I was it was masked because that same 00:19:16.410 --> 00:19:19.710 year home values went up 27 % and especially 00:19:19.710 --> 00:19:22.269 the markets that I was building in that you know 00:19:22.269 --> 00:19:25.309 that that luxury or entry -level luxury market 00:19:25.309 --> 00:19:27.829 really saw a spike because there were a lot of 00:19:27.829 --> 00:19:30.130 people that became really asset rich and their 00:19:30.130 --> 00:19:32.589 stocks and with maybe they own businesses and 00:19:32.589 --> 00:19:35.619 had some stimulus and they you got some PPP loans 00:19:35.619 --> 00:19:38.259 and things that really made them feel very rich. 00:19:38.619 --> 00:19:42.339 And that market that 1 .2 to $2 .5 million market 00:19:42.339 --> 00:19:44.880 really went nuts. And the greater market went 00:19:44.880 --> 00:19:48.339 nuts, too, as a whole in Las Vegas, at least 00:19:48.339 --> 00:19:52.400 in the country. But I think that what does that 00:19:52.400 --> 00:19:55.039 look like when tariffs increase the cost of a 00:19:55.039 --> 00:19:57.200 home labor shortages and workforce shortages 00:19:57.200 --> 00:20:00.359 due to changing immigration policy? inflate the 00:20:00.359 --> 00:20:02.700 price of labor. What does that look like? I don't 00:20:02.700 --> 00:20:04.619 know. Do these big publicly traded companies 00:20:04.619 --> 00:20:06.640 still want to put all that all those homes in 00:20:06.640 --> 00:20:08.619 the ground just because it's already in the books 00:20:08.619 --> 00:20:10.599 and they're paying maybe paying interest on it 00:20:10.599 --> 00:20:12.660 or maybe they've committed that for the quarterly 00:20:12.660 --> 00:20:14.839 numbers they want to hit their numbers and they'll 00:20:14.839 --> 00:20:17.880 just allow that they're they'll they'll take 00:20:17.880 --> 00:20:19.980 it instead of 27 % margin maybe they're at a 00:20:19.980 --> 00:20:23.220 21 % margin or do they hold off and not build 00:20:23.220 --> 00:20:25.259 5 % of their inventory 10 % of the inventory 00:20:25.259 --> 00:20:28.049 we already talked about how many Homes are dominated 00:20:28.049 --> 00:20:29.750 by about three builders. How many of that 12 00:20:29.750 --> 00:20:32.230 ,000 will be? Represented by about three builders 00:20:32.230 --> 00:20:35.069 probably half of it Just by three builders and 00:20:35.069 --> 00:20:36.809 there's other publicly traded builders in our 00:20:36.809 --> 00:20:40.170 market So if they if they collectively pull back 00:20:40.170 --> 00:20:44.049 10 % that's a big number Yeah, it's thousands 00:20:44.049 --> 00:20:46.369 of homes. That's gonna be the one thing that's 00:20:46.369 --> 00:20:47.970 gonna that's going to be the variable But you 00:20:47.970 --> 00:20:50.109 can see how that will take a minute to work its 00:20:50.109 --> 00:20:52.549 way through Prices that will ultimately have 00:20:52.549 --> 00:20:55.950 upward pressure on prices, but it takes a minute 00:20:55.950 --> 00:20:58.250 to bear it out even happen this year. I don't 00:20:58.250 --> 00:21:00.690 know. I don't think if they do pull back and 00:21:00.690 --> 00:21:03.450 you two or three. No, because deliveries maybe 00:21:03.450 --> 00:21:05.569 Q4 because it's a six month delivery start to 00:21:05.569 --> 00:21:06.970 feel right because they've already started. They're 00:21:06.970 --> 00:21:08.930 not going to right. They've already started. 00:21:08.970 --> 00:21:10.569 They're not going to dial back just because of 00:21:10.569 --> 00:21:11.769 tariffs. They're going to finish those homes 00:21:11.769 --> 00:21:13.490 like everything I have in the ground. We're going 00:21:13.490 --> 00:21:15.329 to finish. It doesn't matter, but it could affect 00:21:15.329 --> 00:21:19.609 my Decision going forward. So starts the new 00:21:19.609 --> 00:21:21.849 starts and say how aggressive do I want to be 00:21:21.849 --> 00:21:23.750 until we get through some of these tariffs? Are 00:21:23.750 --> 00:21:26.089 these just negotiating tools? Are they tactics? 00:21:26.490 --> 00:21:29.730 And is it something that I have overpaid for 00:21:29.730 --> 00:21:32.710 things and supply chain crunches? I did it a 00:21:32.710 --> 00:21:36.269 lot in 2020 2021. Everybody did I had to you 00:21:36.269 --> 00:21:39.569 had to and I bought lumber at the absolute peak 00:21:39.569 --> 00:21:40.990 I bought an entire lumber package for house. 00:21:41.349 --> 00:21:43.569 And it was like, I was probably the one that 00:21:43.569 --> 00:21:46.069 set that peak, because then the next day it fell, 00:21:46.509 --> 00:21:49.109 not fell, not precipitously, but it started its 00:21:49.109 --> 00:21:51.089 downward trend enough to where I could have said, 00:21:51.089 --> 00:21:53.549 Oh, why don't I just wait a month? But if I had 00:21:53.549 --> 00:21:55.910 five or six on the ground, right, it would have 00:21:55.910 --> 00:21:59.769 been times five or six at that stage. So, um, 00:21:59.849 --> 00:22:03.490 I think that it will, it'll work its way through. 00:22:03.829 --> 00:22:07.009 Home building is such a long kind of drawn out 00:22:07.009 --> 00:22:10.690 process. Maybe it just doesn't. Maybe maybe it 00:22:10.690 --> 00:22:12.950 irons out all these temporary blips and news. 00:22:12.950 --> 00:22:14.650 It's not like the stock market where you can 00:22:14.650 --> 00:22:17.029 literally watch it on CNBC in real time. You 00:22:17.029 --> 00:22:20.470 can watch your wealth go rise and fall home building 00:22:20.470 --> 00:22:22.609 is just not that way. There's not I've said it 00:22:22.609 --> 00:22:24.869 before. There's not enough elasticity in the 00:22:24.869 --> 00:22:27.230 supply and in the demand to have it affected 00:22:27.230 --> 00:22:30.230 that quickly. So I think it'll iron it out. I'm 00:22:30.230 --> 00:22:32.109 not really that worried about it. I think that 00:22:32.109 --> 00:22:34.910 there's enough margin as a builder. I know there's 00:22:34.910 --> 00:22:37.119 enough margin and you're going to want There 00:22:37.119 --> 00:22:38.940 are a few businesses that have the kind of margins 00:22:38.940 --> 00:22:42.640 that we enjoy. So you're, you're going to take 00:22:42.640 --> 00:22:46.799 22 % margin versus 28 % with the hope that maybe 00:22:46.799 --> 00:22:48.579 home values go up 3 % in that same amount of 00:22:48.579 --> 00:22:50.640 time and kind of offset some of those, some of 00:22:50.640 --> 00:22:53.960 those losses, but I can't predict how a publicly 00:22:53.960 --> 00:22:56.440 traded company will act. They have boards, they 00:22:56.440 --> 00:22:59.140 have shareholders. And they have a national spread, 00:22:59.579 --> 00:23:01.579 so sometimes they'll do really well in one market 00:23:01.579 --> 00:23:03.900 and not so well in another, so they can cover 00:23:03.900 --> 00:23:06.140 those overages or underages in order to make 00:23:06.140 --> 00:23:08.980 the overall goals. Yeah, exactly. They report 00:23:08.980 --> 00:23:10.759 quarterly earners for one company. That's it. 00:23:11.000 --> 00:23:13.099 They don't care about Las Vegas. Those division 00:23:13.099 --> 00:23:14.779 presidents have to report to that, but they're 00:23:14.779 --> 00:23:17.940 not really... But as a builder when you're selling 00:23:17.940 --> 00:23:20.279 against other builders in our market and you 00:23:20.279 --> 00:23:22.579 see somebody take a huge you know it's the end 00:23:22.579 --> 00:23:25.720 of their fiscal year so you see them take huge 00:23:25.720 --> 00:23:27.259 incentives or offer something that you're like 00:23:27.259 --> 00:23:30.339 well wow what is happening here it's because 00:23:30.339 --> 00:23:32.720 maybe their market here has done well but they're 00:23:32.720 --> 00:23:34.579 trying to make up for a margin in another market 00:23:34.579 --> 00:23:36.640 right and then apply here because it's doing 00:23:36.640 --> 00:23:41.990 well soon. Right. Yes. Yes. And for us, you know, 00:23:42.190 --> 00:23:45.190 Trust Home Builders is a local brand. So we just 00:23:45.190 --> 00:23:49.029 get the Vegas market to use as our par. Right. 00:23:50.369 --> 00:23:52.529 So I think those are, that's where we're sitting. 00:23:52.690 --> 00:23:56.269 And in quarter one, end of quarter four, 2024, 00:23:56.470 --> 00:23:58.250 we knew there would be threats of tariffs. We 00:23:58.250 --> 00:23:59.829 kind of knew where the administration was going 00:23:59.829 --> 00:24:02.779 to lead. and set the tone of the country. But 00:24:02.779 --> 00:24:04.980 I didn't expect it to kind of start to play out 00:24:04.980 --> 00:24:07.819 this early, where we have hard numbers on tariffs 00:24:07.819 --> 00:24:09.359 and we have hard dates on when they're supposed 00:24:09.359 --> 00:24:11.599 to start. You know, we were supposed to start 00:24:11.599 --> 00:24:14.420 last week and it got pushed to April 2nd. So 00:24:14.420 --> 00:24:16.420 it'll be very interesting. And a lot of these 00:24:16.420 --> 00:24:18.359 trade organizations, National Association Home 00:24:18.359 --> 00:24:21.420 Builders is one of them, are lobbying the administration 00:24:21.420 --> 00:24:23.019 to say, look, can you carve this out? Can you 00:24:23.019 --> 00:24:24.440 carve this out? It'd be funny if we end up with 00:24:24.440 --> 00:24:26.690 Swiss cheese and only... Only a few things are 00:24:26.690 --> 00:24:28.910 tariffed, like some of the crap of the dollar 00:24:28.910 --> 00:24:31.089 store. Maybe we could tariff that stuff. Can 00:24:31.089 --> 00:24:34.190 we keep lumber? You know, can we keep lumber 00:24:34.190 --> 00:24:37.309 off the table and aluminum? So on that topic, 00:24:37.930 --> 00:24:43.289 this study is, or the prevailing wisdom is that 00:24:43.289 --> 00:24:46.170 tariffs are going to add Around ten thousand 00:24:46.170 --> 00:24:48.410 dollars to the cost of an average home in material 00:24:48.410 --> 00:24:52.210 cost So we build probably to twice the average, 00:24:52.210 --> 00:24:54.430 right? I would say our average home trust home. 00:24:54.509 --> 00:24:56.069 There's probably two times the size of the average 00:24:56.069 --> 00:24:58.750 home So I think it'll probably cost us around 00:24:58.750 --> 00:25:00.990 twenty thousand dollars extra material costs 00:25:00.990 --> 00:25:02.869 So when I look at my budget for an entire home, 00:25:03.289 --> 00:25:05.650 that's not enough for me to make decisions over 00:25:05.650 --> 00:25:09.329 It just isn't I can I can have a utility surprise. 00:25:09.329 --> 00:25:11.730 It's more than that So I'm not going to make 00:25:11.730 --> 00:25:15.049 any changes to my projections and my goals and 00:25:15.049 --> 00:25:17.670 my projects that are interesting in the pipeline. 00:25:17.670 --> 00:25:20.869 There's just no, I can't. Yeah. You can't. You're 00:25:20.869 --> 00:25:22.210 building $30 million at the home. You're going 00:25:22.210 --> 00:25:25.670 to make a decision over an extra $250 ,000, which 00:25:25.670 --> 00:25:27.930 is about what got to for all the houses. You're 00:25:27.930 --> 00:25:29.990 going to make a decision over that. You pivot 00:25:29.990 --> 00:25:33.589 for something that may or may not come to fruition. 00:25:33.730 --> 00:25:37.410 Exactly. So I just can't. So it's not enough 00:25:37.410 --> 00:25:41.519 for me to make major changes. So if it is interesting, 00:25:41.640 --> 00:25:44.519 though, you realize how much of the build industry 00:25:44.519 --> 00:25:47.019 is relying on imports. Around 30 % of our lumber 00:25:47.019 --> 00:25:50.960 comes from Canada. We source about 60 % domestically. 00:25:51.019 --> 00:25:52.940 The other 10 % we get from Brazil. We get from 00:25:52.940 --> 00:25:55.559 Mexico. We get just from an assortment of other 00:25:55.559 --> 00:25:57.579 countries. So if we increase those right now, 00:25:58.059 --> 00:26:00.099 the Department of Commerce already had a 14 .5 00:26:00.099 --> 00:26:03.240 % tariff on lumber. On the second, it's expected 00:26:03.240 --> 00:26:05.720 to be 39 .5 % because it's supposed to add another 00:26:05.720 --> 00:26:08.920 25 % because it's from a different department. 00:26:09.510 --> 00:26:11.750 And then the Department of Commerce wants to 00:26:11.750 --> 00:26:14.009 add another, they want to double the 14 and a 00:26:14.009 --> 00:26:16.630 half percent tariff in addition to the new executive 00:26:16.630 --> 00:26:18.910 branch tariff. So we could see tariffs as high 00:26:18.910 --> 00:26:22.529 as 60 % on lumber from Canadian lumber by the 00:26:22.529 --> 00:26:25.549 end of the year. So that'll be interesting, but 00:26:25.549 --> 00:26:28.430 we're already at 12%. And a lumber package, just 00:26:28.430 --> 00:26:29.930 to pull back the curtain a little bit, a lumber 00:26:29.930 --> 00:26:32.549 package on a luxury home. You know what a good 00:26:32.549 --> 00:26:34.450 rule of thumb, a lumber package on a house is 00:26:34.450 --> 00:26:37.079 around $10 a square foot. It's going to depend 00:26:37.079 --> 00:26:38.940 on ceiling heights and different things. That's 00:26:38.940 --> 00:26:40.559 not including your trusses, your floor trusses, 00:26:40.619 --> 00:26:43.119 your roof trusses, but a lumber package is around. 00:26:43.220 --> 00:26:44.839 So if you build a 4 ,000 square foot home, it's 00:26:44.839 --> 00:26:48.900 $40 ,000. That's a great little tidbit. So if 00:26:48.900 --> 00:26:50.980 you're a retail customer, I'm a technically a 00:26:50.980 --> 00:26:54.279 retail lumber buyer because I'm buying from a 00:26:54.279 --> 00:26:57.319 supplier, several down chains and not buying 00:26:57.319 --> 00:27:00.420 from the lumber mill. Right. or not importing 00:27:00.420 --> 00:27:02.700 it directly. So if you think how much of that, 00:27:02.759 --> 00:27:04.480 because that's just off of the imported cost. 00:27:05.019 --> 00:27:06.700 So if the imported cost is roughly half of that, 00:27:06.779 --> 00:27:08.299 usually every person that touches it, it doubles, 00:27:08.640 --> 00:27:11.079 right? Generally speaking. So that means that 00:27:11.079 --> 00:27:14.460 $40 ,000 package may be a $20 ,000 import, but 00:27:14.460 --> 00:27:17.000 already had a 14 % tariff on it at that time. 00:27:17.480 --> 00:27:19.519 So maybe the raw cost was $17 ,000. So if we 00:27:19.519 --> 00:27:23.009 add 60 % tariff to that, That's around $8 ,500. 00:27:23.269 --> 00:27:25.930 It's called 9 ,000. So instead of 40 ,000, I'm 00:27:25.930 --> 00:27:28.009 at 9 ,000. And that's if they went all the way 00:27:28.009 --> 00:27:31.049 up to 60%. But will there be downward pressure 00:27:31.049 --> 00:27:33.029 on Canadian lumber prices because of those tariffs? 00:27:33.809 --> 00:27:36.549 Will domestic lumber go up in value because it 00:27:36.549 --> 00:27:38.849 will kind of reach a middle ground? So we'll 00:27:38.849 --> 00:27:41.130 see. Ultimately, the demand has to be there. 00:27:41.750 --> 00:27:43.869 You hear tariffs, but you're not really sure 00:27:43.869 --> 00:27:46.490 how they apply specifically. So you take it all 00:27:46.490 --> 00:27:49.170 the way back to that lumber cost where you have 00:27:49.170 --> 00:27:51.670 a hard fact, it has to happen in every home that's 00:27:51.670 --> 00:27:54.670 built. And then how does that change your number 00:27:54.670 --> 00:27:56.529 right on the front end? So I love that you were 00:27:56.529 --> 00:27:59.029 able to offer some insight and real numbers. 00:27:59.170 --> 00:28:01.369 So good fact. It's hard because everyone thinks 00:28:01.369 --> 00:28:03.670 lumber is 50 % of a house, Kyle. A house cost 00:28:03.670 --> 00:28:05.549 a million dollars. Oh, lumber must be about half 00:28:05.549 --> 00:28:07.509 a million dollars. That's just not the case. 00:28:07.599 --> 00:28:10.279 So it's not really a big, I mean, it's one of 00:28:10.279 --> 00:28:14.000 the biggest line items, but I spend more on tile 00:28:14.000 --> 00:28:16.980 and flooring and I spend more on, on cabinetry. 00:28:17.500 --> 00:28:19.859 So it's not a big, I mean, it's a big, but it's 00:28:19.859 --> 00:28:23.420 not as a percentage of a build cost. It's around 00:28:23.420 --> 00:28:28.619 5 % of the construction cost interest. Trust 00:28:28.619 --> 00:28:31.559 is what you would think it'd be more trust is 00:28:31.559 --> 00:28:33.799 add another 5 % to that. So roughly trust is 00:28:33.799 --> 00:28:37.099 in numbers about 10%. So entrusts is obviously 00:28:37.099 --> 00:28:38.740 are made of lumber. So you think trust prices 00:28:38.740 --> 00:28:41.500 are going to go up as well. Um, higher percentage 00:28:41.500 --> 00:28:44.059 is the concrete and that's such a, yeah. Yeah. 00:28:44.059 --> 00:28:46.559 That's right. Yeah. Yeah. Concrete, the aluminum 00:28:46.559 --> 00:28:49.900 wire. Right. Right. And gypsum, a lot of gypsum 00:28:49.900 --> 00:28:52.859 for drywall is important. So there's, there's 00:28:52.859 --> 00:28:55.680 things, I mean, but we got to remember now, barring 00:28:55.680 --> 00:28:59.579 any labor shocks from immigration policy changes, 00:29:00.240 --> 00:29:02.140 really, we're only talking about the materials. 00:29:02.960 --> 00:29:05.420 So the materials are on around half the cost 00:29:05.420 --> 00:29:08.880 of a home so even if every single thing were 00:29:08.880 --> 00:29:11.339 imported and every single thing had a tariff 00:29:11.339 --> 00:29:13.559 on it every single thing and there were no car 00:29:13.559 --> 00:29:17.099 violence and it's still it would yeah of course 00:29:17.099 --> 00:29:21.160 it would shrink our margins but it's not devastating 00:29:21.160 --> 00:29:22.960 to the industry that's good to hear because you 00:29:22.960 --> 00:29:24.539 don't really know what you're what you're up 00:29:24.539 --> 00:29:26.700 against in terms of every industry it's scared 00:29:26.700 --> 00:29:28.220 i mean i think it's scary a lot of things it 00:29:28.220 --> 00:29:30.000 is scary and it's unknown because that's what 00:29:30.000 --> 00:29:32.720 makes it scary unknown yeah because no no business 00:29:32.720 --> 00:29:35.700 owner wants to wants any unknown but that's just 00:29:35.700 --> 00:29:38.119 why you're a business yeah because if it was 00:29:38.119 --> 00:29:42.319 simple everyone would do it true true that's 00:29:42.319 --> 00:29:45.000 all i have i do have that the average tree is 00:29:45.000 --> 00:29:47.619 harvested at 25 years i don't know if the audience 00:29:47.619 --> 00:29:49.660 wanted to know that they might they might have 00:29:49.660 --> 00:29:51.819 and if we're all putting up christmas trees that 00:29:51.819 --> 00:29:54.500 could become very important in december so recycle 00:29:54.500 --> 00:29:58.900 your trees for lumber So thank you yeah really 00:29:58.900 --> 00:30:01.740 good information and overall nice to hear that 00:30:01.740 --> 00:30:04.299 there hasn't been anything too alarming and obviously 00:30:04.299 --> 00:30:06.799 we don't have a crystal ball we're not able to 00:30:06.799 --> 00:30:09.140 predict any of this with a hundred percent accuracy 00:30:09.140 --> 00:30:11.420 but as we trend through and like you said just 00:30:11.420 --> 00:30:13.480 to get a temperature on it so we're getting a 00:30:13.480 --> 00:30:15.980 temperature on what is happening this year the 00:30:15.980 --> 00:30:18.339 direction that we're going and we'll do another 00:30:18.339 --> 00:30:21.160 update as we get into the end of second quarter 00:30:21.160 --> 00:30:22.799 third quarter and then we'll see how the year 00:30:22.799 --> 00:30:26.279 ends out but for now. pleased to hear that not 00:30:26.279 --> 00:30:29.059 too much is changing and a lot of not too much 00:30:29.059 --> 00:30:32.359 news is good news so very happy yeah good well 00:30:32.359 --> 00:30:34.480 thanks for joining us on this episode of trust 00:30:34.480 --> 00:30:36.839 the process podcast and we'll look forward to 00:30:36.839 --> 00:30:40.440 seeing you next time thanks bye bye thanks for 00:30:40.440 --> 00:30:43.359 tuning into the process podcast make sure to 00:30:43.359 --> 00:30:45.619 follow us on spotify to stay in the loop with 00:30:45.619 --> 00:30:48.440 the latest insights project updates and everything 00:30:48.440 --> 00:30:50.339 in between see you next time