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back to Trust the Process, the podcast where
we talk about new home industry, real estate,
construction, and everything in between. So today's
kind of fun. We're mixing it up a little bit.
Shot out a few weeks ago on our social media
platforms, the request for questions. As we go
about our days, obviously we work in the real
estate industry and we are working in the builder
industry. And so we see a lot of vendors and
subcontractors and clients and buyers. agents
and other people that we work with, we get a
lot of questions. Yeah, so thought it would be
fun to put that out to you guys and let you lead
us in some of the questions or topics that you
wanted to hear. So with that, we got some good
response and so we're going to jump into some
of these questions. Maybe if somebody else had
the question, it's something you might be wondering
too. So hopefully we can answer some of those.
So we'll start with, and I just put them on note
cards. Pull them from the replies and put them
onto note cards for us. So we'll just start.
I'll go ahead and let you read the question and
then offer your reply and I'll chime in on answers
too if there's some stuff that... But we can
say this one's for me. It says how did you get
so handsome? That's good stuff. That's good.
That's good rebuttal thing and I thought I had
the corner on the market So this question is
and this is probably in in line with our trends
podcast and it is is multifamily the answer to
our housing shortage I agree that it is a really
important piece of our housing shortage, both
multi -family for sale and multi -family for
rent. More passionate about multi -family for
sale. I think that you can still get that pride
of ownership and multi -family product is great
for entry level and I hate to say it, exit level.
If you're kind of, maybe that's your last home.
Sure. You want to be able to travel and still
be able to travel and you've had many, many homes
and this is something that you can kind of downsize
into. Maybe it has amenities and there's zero
maintenance. And I think that a lot of There's
a lot of demand in the market for everything,
especially in fast growing cities. So do I think
it's the answer? Do I think, I think what they're
probably getting at is there's something called
the missing middle. So you have super high density
and then suburban and that's most US cities.
We have these, cause that's, you know, housing
policy is that a favor suburbia like we talked
about. So we have a missing middle. Whereas when
you go to Europe, all these. And a lot of the
East Coast cities, a lot of these cities were
really vibrant. It's because of that middle housing
stock, the five story mixed use, parks, that
type of thing, the walkability that we don't
have here. And then you get into more low density,
either suburban or rural. So I think it's that,
is that missing middle the answer to our housing
shortage? That would go a long way. I think that
that's a pipe dream to think that we're going
to see cities have an about face and suddenly
allow for this missing middle. and for other
reasons we already talked about in our zoning
episode. It's just not politically popular to
densify around your constituents. So you're always
going to see a lean towards what's in the area
already. There is, there has been a push for
multifamily though in recent years. Years ago
you didn't see much of it and then there were
a few builders that pulled out in front with
kind of taking the lead on doing that. And now
most all, you know. Most quarters offer some
sort for purchase. Multi -level product or multi
-family product and so attached in some way.
Definitely changing the number of homes that
we can build. We can put more homes into the
marketplace because of them. Their question was
if it's going to turn around the shortage not
likely but it certainly does make a better dent
in it It does when one project can deliver 300
doors that that same piece of land might develop
80 345 some are delivering over the thousands
in their door to door counts, right? Right. Yeah
Okay next question and kind of thumb them through
them. I should probably just randomly toss them
at you. This one I love and we hear it all the
time. So yes. This person did not mince words.
HOA suck. Why do we need them? Why do we need
them? So many people who live in an HOA or if
they're looking for a home, that's one of the
first things. I have to be in an HOA or I don't
want an HOA. It's a very polarizing topic. I
agree and I just had a spirited board meeting.
for my own HOA for some things that I did to
my house that weren't approved. So it's fresh
for me. They make a lot of decisions and you
live under some pretty strict rules. You do.
You live with them in some ways and they kind
of replicate. I'm from the East Coast, right?
So these small little towns have a lot of authority.
and they are in your life. So yes, we don't have
HOAs in upstate New York, but we have a lot of
little towns that if you paint your porch the
wrong color, someone from the city or the town
will come after you. So I was having flashbacks
when I was fighting with my board, and I promise
I was not the one that put that question in there,
but they do suck, I promise you. No, it was a
conversation. I was fighting with my board, and
a couple of the improvements I made were... Improvements
that everyone in my community has made the behind
the same gates So it was it was frustrating that
I had to justify these actions But I've never
felt more under the thumb of an HOA than the
last couple of weeks So this is a very apropos
question now. Why do we need them? So it's really
I Wish that we didn't but if we want the growth
and we want single -family residential Which
as much as we like to talk about multifamily
and the missing middle Why is there a premium
on single -family versus multi -family? That
tells you that, yes, they're a little bit more
expensive as it will, but they are more desirable.
And usually it is in a multi -family as well.
Of course, right, of course. But as long as you
want this single -family residential lifestyle
and you don't want to live in a apartment block
and you don't want to live in one of these high
-dense areas, as long as you want your little
slice... you're going to have to probably partake
in the HOA process because cities do not want
to approve new development that does not have,
especially larger scale developments, that doesn't
have an HOA piece with it because they don't
want the street maintenance, they don't want
the park maintenance, they want the developer
to take on those burdens and then they want the
developer to hand it over to the homeowner. So
if you have common elements, such as in las vegas
and most suburban areas especially when the streets
are gated but even not always uh the streets
are private they're privately maintained streets
that the hoa has to do slurry coats over right
someone's got to do it they have to keep the
gutters in in good repair they have to repair
cracks they have to take on liability of someone
falling on that sidewalk it doesn't fall into
the city's jurisdiction anymore. So cities love
HOAs and that's really that I don't feel, yes
it's polarizing, but I do feel like a lot more
people don't like HOAs than do like HOAs. Until
their neighborhood starts to look a wreck and
then you wish that there was someone governing
it. There are probably no other mechanisms that
would be able to enforce neighborhood standards
that would not be an HOA, because if you give
somebody power to do that, if you just have a
community association that's literally just a
neighborhood pact, you have no legal mechanism,
so therefore your laws are just recommendations.
So the states had to give HOAs a lot of authority.
And trust me, when I'm fighting with the board,
I want to be able to tell them to do what with
you know what. But I can't because I know that
they do have an authority over my property in
the same way that I can't just decide to go to
war with the city. I can't just decide to stop
paying my property taxes. The city has rights
over my property and the state has rights over
that. I mean, there's always these layers and
it's just when you live in an HOA, you have that
one extra layer. So. That's why we need them
to continue to grow. Without that, I think our
property taxes would be significantly higher.
And I think you would see, although it's very
sludgy to get development approved, I think it
would be even slower. And I think you'd probably
see caps on the amount of permits issued because
they'd say we have to slow down our growth because
we're not going to be able to maintain this.
And it's all fun and games when the cities are
growing. But when the cities are built out, these
East Coast suburbs that were post -war suburbs
in Maryland and Virginia, those were post -war.
So that was 50s, you know, late. 40s, 50s, those
are now 75 years old. A lot of those suburbs,
they are not sustainable. They're almost always
broke. The taxes are through the roof. They usually
are in charge of their own school districts.
So the schools are sucking out a lot of the funding
and road maintenance, snow removal, things like
that. It just becomes untenable. So you. because
they're built out and they're not getting permit
fees. The housing stock is old, so how much can
you jack the property taxes up on residents who
have been there for 40 years? There's only so
much you can do to increase revenue, but your
expenses are going up every single year. the
west coast, the west of the Mississippi and the
southeast, basically the Sunbelt, cities were
smart in the 90s from a city preservation standpoint
to say we want to preserve the books of the city,
to really mandate HOAs, which is why you see
a sharp increase in HOAs in the late 90s and
through the 2000s and into today. So that's why
we need them. And trust me, I don't like them
either. I resent the authority that they have,
but at the end of the day, how do you give them
any teeth? You have to give them that kind of
legally mandated authority or state prescribed
authority. Yep. But it was a good question. So
thank you. Yes. And it's a good topic. It's an
interesting topic and one that isn't going anywhere.
It's funny how it feathers into development so
much. I mean, you would think, and I get it,
of course, developers have a big part with HOA,
but it really isn't. It's not just a developer
going, do we want an HOA here? Yes or no? It's
not market driven either. So you would think
that because there's so many HOAs, it must be
market driven. People must... Pursue that people
must favor a choice. It's not that's not really
the case So I think it's more it's a it's the
city and you know local governments with their
finger on the scale to say well Everything's
gonna have an HOA Okay next oh I don't I don't
like this one, but I do feel like it's It's one
that we should probably address. Is it another
compliment to me? They all are. Are you that
jealous? That's on the back of each of them.
Yeah, this is a good one. This is a tough one
and a little painful for you to read because
it comes right at you or it seems to come right
at builders as a whole. And they didn't have
to say that about my hair. Don't read that part.
It says, why are builders so greedy, especially
with upgrades? You jerk. No, I get what they're
saying. I think that especially this, I feel
like this probably came from a real estate agent,
because agents are many times on the cutting
edge of price increases and they're delivering
that news to their buyers if they're bringing
a buyer to a builder. It looks like greed, and
some of it is. Most builders are publicly traded.
Most builders that build any volume of homes
are publicly traded. So they have growth as their
mandate, not just doing business. They have to
grow, meaning their profits. They don't necessarily
have to put more homes on the ground. They have
to grow their profits. So they get there through
many different, you know, vehicles or modalities.
So they can either build more homes, which we
know the constraints on that land and the approval
of the time, or they can charge more for homes
or upsell things that are considered extras,
such as upgrades. So it's not that they're necessarily
being greedy, but at the end of the day, there
are no charitable home builders except Habitat
for Humanity. So every builder has a profit.
It's a for -profit industry. It's a for -profit
industry. And you can argue what someone's mission
is, but at the end of the day, the mission of
any company is to... increase profits for their
shareholders. That is just their mission, whether
their shareholders are publicly traded shareholders
or the owners of the company. Now the owners
within the company can have greater missions
and say, this is my overall goal, but the company
itself, that is its goal, that is its purpose.
So it's always going to preserve that. So that
being said, the larger a builder gets, the more
disconnected from their buyer pool that the executives
and their decision makers are. In my opinion,
I don't want to be inflammatory, but they feel
more disconnected. So it's easier to say, oh,
we can make another 10 % on this project if we
dial down what's included and make people pay
extra. And because they're doing it through us,
we can control the pricing because you can't
shop it. You can't shop how much darker cabinets
are versus lighter cabinets because you're here.
You're on our playground. So you play by our
rules. So I will concede that builders are greedy.
I will concede that it's a high profit margin
business, but it is a business with a very high
barrier to entry and a lot of risk and downside
to it as well. So it's easy for me to say this
now, but what if things change in the next three
to five years and you say, well, I'm glad we
had that arsenal in our tool chest because we
were able to weather these storms because we
were able to increase margins on previous projects
and weather the storm. It's hard because at the
same time, you're creating, you can argue, housing
is a human right for a lot of people. I mean,
it's definitely a human necessity. So you're
creating something that's deeply needed. So I
think that there's a resentment that comes with
that, just like you might present oil companies,
because you feel like, well, we need them. We
need gas. We need gasoline for our car, and you're
charging this, and your profits for this, and
you're right. Yes. I get it, they're making something
that is a necessity, but they are a business
and it's not a builder's responsibility. I can
have a mission in my life that I would love to
put more homes into the ground or change the
way home building is done, but at the end of
the day, it's not my responsibility to make the
real estate market affordable or make it in some
way better. My responsibility is to my company
and my company's responsibility is to stay into
this and to stay a company. So I agree. Yes,
but I would also argue that some of that You
know, if you're buying a home, let's just compare
it to a resale home that isn't anything that
you want. You have to go in and put in the cupboard.
So now you have your demo costs, or even if they
were to buy a home with you, one of our homes
that's completely finished and it's the wrong
cabinet color, let's just use that as an example,
they've got to go in, they've got to do the demo,
they've got to hire the labor, they have to order
the product, they have to, so all of those things,
simplicity in the E's that, sure, sure. So it
is a real cost, it's a hard cost, it's an absolute
cost, and it's something that has to be factored
in either way. So it's a convenience. Green or
convenience? I don't know, but there is a fine
walk between. And I think that another thing
that makes us look greedier is that new homes
carry... around a 25 % premium over resale homes.
That's just the market speaking. I can't dictate
the market, good or bad. So if my homes carry
an extra 25 % margin or even your average production
home carries a 25 % margin over a 15 -year -old
home, it looks like the builder is charging $750
,000 for the same thing you could get. as a resale
for $625 ,000 or $600 ,000, but what you're not
factoring into the equation is that all those
components are near the end of their functional
life. All the expensive things are coming up
due, or if it's a 25 -year -old home, all your
windows need to be replaced, and components,
or the floor plans are dated, the market value
is there at about a 25 % premium. So I think
that's part of it as well. It's that, yes, we
are here to maximize our profits, and overall,
you're good at your business. I feel like if
you have a mission that's greater than that,
because that's the passion that people can feel.
but ultimately you profits have to come first
otherwise you can't do the project for charity
right I mean you just can't otherwise I would
open a charity and I think that's part of it
it's multifaceted okay but yes are we greedy
with our upgrades sometimes yes we have to own
that too you want to have you know we're at dirt
or at slab and we're at framing and you want
to add this this and this and well we know we
have to own that more complex build and we have
to source it all and we have to now we're customizing
it for you so if you bow on us and we only get
$20 ,000 of your deposit we have to maybe take
a $100 ,000 hit on that house so we have to build
in that risk as well. I actually had that happen
somebody put a red quartz throughout the entire
house. red quartz countertops and then the home
fell through and they didn't weren't able to
buy it and so then we had to remarket that we
actually in that case ended up taking it out
we did but it was that kind of oh my gosh now
we're stuck with this and sometimes somebody
will go to the design studio and you're doing
exactly that oh gosh i really hope they get this
house yeah yeah so so there is a risk to be associated
i have a lot of that too okay so next question
Thanks for tuning into the Press the Process
podcast. Make sure to follow us on Spotify to
stay in the loop with the latest insights, project
updates, and everything in between. See you next
time. Next question We kind of covered so oh,
here's a good one this one actually came up for
us this week in a client conversation So that
is oh, yeah This is really good, and I think
this is a developing situation This is what do
you think the NAR settlement means for builders
this could probably be an entire episode? But
I agree no yeah, it probably could but they're
probably there's probably so much content out
there for this But for anyone who's not following
it, that's maybe in our audience. Essentially,
the class action lawsuit judgment came down in
August that said listing brokers can no longer
advertise buyer -agent commissions, and buyer's
agents have to negotiate directly with their
buyer how much they're going to charge. And you
can ask for that as part of your contract when
you present your offer. But every offer is going
to have unique compensation. So that buyer might
be working for 1 % or 2 % of the buyer's agent,
I mean. So they might ask for these varying levels
of commission that is going to affect the offer.
So when you're a developer, you're a seller more
than anything, right? I mean, really, I have
to sell X number of homes this year and next
year and hopefully for many years to come. So
I have a policy in place that I have a set number
that I'm willing to give to someone who brings
me a buyer. And what I'm doing is I'm rolling
that into one larger percentage and then the
buyer let's just call it five percent uh the
buyer can have that discussion with their agent
to say hey can we keep three percent of this
to pay for our closing costs and you have two
percent compensation that's a conversation between
them and the buyer the buyer's agent so i am
not privy to that at all i don't care how it
goes because i've conceded to this dollar amount
i was used to paying commissions anyway so i've
conceded to this dollar amount this percentage
and it's per house depending on how desirable
i think the home is or neighborhood So there's
one neighborhood that I just dialed it up an
extra percent across the board because we have
a lot of homes to get rid of in there and it's
a slow -removing market and I want to get some
of those off my book so I feel that that's a
good enticing way for me to drive traffic. So
I think it's overall a good thing. I think that
it's forcing buyer's agents to be more transparent.
It's allowing sellers a lot more flexibility.
So you're seeing that kind of maybe a not -so
-good offer is matched with a not -so -good compensation
because that buyer's agent is bringing you a
non -phenomenal. As a buyer, you could probably
get walking out on the street and find that kind
of buyer. So I like that it's more tied to the
other terms of the offer. So I think for builders,
I don't you know, most builders are gonna have
to come up with some sort of policy and I'm small
So I can't imagine, you know, these other larger
builders just said no This is just what we're
offering out. So I don't think it affects builders
that much but it is putting downward pressure
on commissions I feel so I think if I can Still
have the same amount of traffic or when I keep
my rates Normal that I'm willing to pay out that
will maybe drive traffic because everyone around
me is sure bringing home, holding down their
rates that they're paying. And when it was first
announced or when the settlement first came down
in, I believe it was July of 2004. Yeah, July
implemented by August, yeah. I think there was
a fear that surrounded it and everybody kind
of went into a panic. Builder's World wasn't
sure how it would affect them on that side. Sellers,
agents, listing agents, all of that. Everybody
kind of had a little moment, if you will. But
overall, I think it's been a pretty non -issue.
I mean, I agree that it's... causes or it forces
agents to be more transparent. It's a conversation
that wasn't being had before, that was being
had in somewhat, I don't want to say shady, but
it just wasn't in a pure light. So I think it
just brings that to the forefront. Commissions
are real. It's part of the real estate industry
and part of how homes are transacted. And so
having that as a forefront conversation with
your buyer or seller I think is is a value add
to them and to the whole experience and it creates
a more professional environment for the industry
as a whole. I think it makes it more competitive.
Agreed. So anytime you have more competition,
I think you have better outcomes. Yeah. It might
be bumpy for a little while in the beginning,
but I think ultimately it will lead to better
outcomes. But don't you think that a lot of the
panic that was, I don't even want to call it
panic, but a lot of the anxiety that was created
by that. Yes. I think, do you feel like you've
seen? Yeah, I think it's subsided. I think that
it's, the real estate is a high. turnover business
anyway, so I feel that there's maybe people that
were on the fence to get out of the industry
and maybe that forced them out of the industry.
There are people who would have gotten in but
didn't because they heard about the terminal
stuff. Or think it's easy. It's easy to get into
real estate, but if you don't have all of those
pieces in place, you're just not going to survive
it. So it made it more complicated, but I think
it's a good thing. I agree. I think it will leave
better agents on the table. I agree. I agree.
Good question, you know who you are. Next one,
let's talk about... This one's a little close
to my heart. I love that one. So yeah, let's
talk about design. What do you think the future
of design is? So there's a couple of, I mean,
this could be home design. I'm just going to
assume they're talking about everything. Yeah,
didn't clarify what exactly. So it could be any.
It could be interior design. It could be functional
design. Sure. So outside in, I think. Community
design. Oh, community design. I would love to
think maybe we see more mixed use. I would love
to think we have. more walkability but i don't
know if that's if that's a pipe dream or not
so uh outside in i think i think there will be
architecture and design is going to be informed
by building costs because it is to this day because
at the end of the day like we said the majority
of new doors created are from production builders
so they are penny pinchers and bean counters
so the extra eve embellishments and things that
you may have seen in the 90s and early 2000s
when margins were there to support that, and
there was more competition back to our, you know,
that's the other kind of C word, the competition,
that home building is so much more consolidated
now, so home builders don't have to do that.
In the most consolidated markets, for the heck
of a better word, the homes are the ugliest,
in my opinion. If you have only five or six publicly
traded builders that are creating inventory,
they're the... the pressure is not there to make
a product that really stands out, especially
when you're in a housing shortage. So I think
from the outside in, we'll see cost informing
a lot of exterior design, simple roof lines,
a lot of simple footprints that are probably
too storied to capture land and capture, you
know, the economies of the building up versus
building out. A lot of vertical three -story
to get a 19 on a square foot home and a footprint
that may have only been a 1200. So we're seeing
kind of I think those things in form design and
then builders are doing their best to work within
those constraints. And then going inside with
floor plans, I think that the era of the purely
open floor plan might be drawing to a close.
I think you might start seeing, especially in
your larger homes, I think you're going to start
seeing a little bit more room division again.
And I've read some blogs and that's some of that
secondhand information but I'm already feeling
it from buyers and they're wanting those extra
spaces, they're wanting those flex rooms where
they can have pool tables or bars or offices.
Right, right. Still like the great room. Everybody
still loves the great room concept. I think the
great room concept will... But I think additional,
kind of going back to that formal living or a
den or a family room. I think those kind of third
spaces that... So you've got the great room and
then a separate... Yes, exactly. Those semi -private
spaces. So I think we're going to see that and
I think we're going to see... the emphasis on
large kitchens still being ever -present. And
I think in the luxury homes, we'll see now more
than ever the prep kitchens and the mess kitchens.
We've done some of that and it's been very, very
well received. So I think we're going to see
a lot of that. large pantries, we're going to
see the Costco door maybe, it's a fire nightmare,
but there are these little doors that go right
from the garage into the pantry and it's usually
a small door that only a kid could get through.
Yes, it's kind of a dreamy thought. They call
it a Costco door. You put your big water case
or all those things right into the pantry. Yeah,
so I think we're going to see the kind of those
little things in new home construction. I think
we're going to see an additional push towards
energy efficiency so you may see. Windows deleted
and things, you know, those are all perforations
in your home So you're gonna see that in the
more middle market homes I think as you go into
the luxury the indoor outdoor living at least
in the Sun Valley is really emphasized I think
that's that's not going anywhere getting bigger.
I agree in the luxury stuff The windows are only
getting bigger. The doors are getting bigger.
The window walls are getting bigger So I think
that's kind of what we'll continue to see I think
volume ceilings are going to be here to stay
but that being said I think the The era of that
great room. It's just one big room with a 14
foot ceiling on a single story I think you're
gonna start to see some more second and third
spaces in those homes and in those floor plans
that will give people kind of Refuge away from
those big hard to hard to climatize hard to control
rooms. So and then in terms of aesthetics I think
we're in an era of earth tones and beiges and
creams and I think we're getting away from the
stark shiny finishes of the middle 2010s and
the moderns. Do you agree? I do. That I agree
with, yes. And that we definitely know is happening.
So the warmer tones, earthy tones, all of that
is really... Although we are seeing in design
right now some... some big pops of color that
are happening in the kitchen so kind of the brighter
count you know I just saw one red cabinetry yes
which I don't have anything against red it was
just a lot in that particular home and it was
stitched remember oh my gosh that leather bridge
that we saw was so pretty but so even in cabinetry
I saw one the other day that was kind of that
you know the blue that sort of powdery blue countertop
or cabinet which so we're seeing a lot of colors
popping back in so while most it's still a neutral
it's still going to be those earthy tones you're
getting into the away from the cold stark colors
right into the warmer tones and I think we'll
see more color coming into kitchens moving forward
colored cabinetry I agree you know still the
white countertops that's still the clean fresh
look that most people are going towards so But
agreed as far as colors. Mm -hmm. Yeah, these
are the things that it's important to know as
a developer It is and as you're a builder, you
know, you're putting we choose the selection
Every tile has to be selected has to be chosen
has to be decided and it has to be something
that's neutral and relevant market and on trend
exactly with Warrantable you don't put a product
that's a nightmare to warranty. Good point. Good
point. Yeah, so That was a good design trends
are yeah design trends are a big part of it and
especially as you backed it out into even just
the exterior design. So, love it. Another good
one. All right, so I have a couple more here.
You have time for a couple more? I do, yeah,
I do. Okay. Ooh, here's one. Ooh, that's a good
one. That is a good one, AI, and this is something
in the marketing world that I am up against a
lot and a topic that is forefront for myself
and everybody else in the marketing industry.
I think we're all thinking. This question is
asking, what do you think AI can do for building?
I'm going to sub out building with developing
because building is you could be a project management
company, you could be doing whatever. constructing
of the home. So to answer the direct question,
I think it's going to be challenging to see AI
improve scheduling and unless you're a really
well -oiled machine, but construction is a messy,
think on the fly problem solving in the moment,
a lot of physical, tangible things that I don't
think AI is going to do much for the building
industry. I think the developing industry in
terms of being a developer, I think maybe some
of our economic analysis we have one multifamily
project that's needing an economist to kind of
give us a pro forma because it's so many units
and so many doors in order to get the funding
for it from the banks are going they're wanting
to see an economist actually sign off on sure
is it a viable project some of that thought work
you might see some of the analysis or at least
a compiling of data might Really be streamlined
by AI Ultimately, no bank is going to sign off
on a 50 million dollar loan that was generated
by an AI chat bot from Microsoft So I think that
you're always gonna want that human touch to
do those so it's kind of smooth out those edges
but I think a lot of the data harvesting and
the analytics and Just kind of compiling everything
and getting it into digestible bites is going
to maybe be streamlined by AI I'm actually gonna
ping Ping -pong it back to you for the marketing
piece. What do you think marketing? How do you
think marketing will be affected by AI? It already
is affected by AI in so many ways and I was just
gonna say last year when I went to CES conference
here in Las Vegas and then the Builder Show,
National Association of Home Builders. CES' Consumer
Electronics Show. Consumer Electronics and then
the Home Builders Association. Two separate shows
but... hot topics at both were AI and things
like even just the refrigerators, you know, the
refrigerators all have that component built into
them. Now you can connect it to your phone and
it can tell you temperatures and it can read,
you know, the wine, the wine we've looked at
at the builders. Yeah. You can take a photo of
your wine and you can go to your. Yeah. So I
think every, you know, your dishwasher and your
washing machine, everything, all of the supplies
and accessories that have gone into homes now
are being. tapped into AI. As far as the marketing
side, there are things about AI that, again,
can't be done. I know people who work in the
interior design industry and they do entire homes
through AI. And it just is, while yes, it gives
you a general idea, it's really, really hard
to narrow in on exacts when you're using AI.
What about that human touch? The other thing
about AI is that you can't really use it for
spoken. It's not good with fair housing. So it
can say all these elaborate things. But there
are things in fair housing that we can't say
or that you would want to steer away from because
we're not trying to pose the home to one buyer
segment versus another. And AI doesn't necessarily
have that intuitive language to determine that
on its own. So while it can create great descriptions
and things like that, they always have to be
read. They always have to be run through the
filter of a otherwise you're not getting the
human touch. I think so much is being lost through
AI that now people are beginning to get that
kind of washed out feeling and we're all kind
of craving that bring it back to the real. So
I hope we get back to real. I do had some you
know there was a time where years ago if you
didn't jump in on the computer you were getting
left behind right? Computer was here and you
have to get on the internet. We were all going
to be using email someday I mean years ago when
people were going through that I'm sure there
was some resistance, but those people that never
got a website Are no longer in business. So if
our competitors are using it or they got into
the group, right? They had to either, you know,
do it or be out. So I think AI is that same thing.
It was that moment where I kind of had to realize
this doesn't feel good to me, but I know all
my competitors are using it. Every other builder
in the industry is using it. All the real estate
agents in the world are using it. There has to
be some piece of it that can streamline and help
us too. So it's, it's in my opinion, it's gotta
be a fine balance. And I think it's been so overused
and so mass produced and every, every, everywhere
that people are now beginning to crave that.
Let's get back to the human touch again. Do you
think we went too early? Do you think AI should
have been tweaked and honed a little bit more
before it kind of was thrusted onto the public?
And now we kind of have this I see a lot of AI
imagery is very hollow, and you can spot it a
mile away. You can see it a mile away. And when
you read it a mile away, you see these auto replies
from different people in different industries,
and you can tell the email was AI. And now I
guess there's AI email extensions that will draft
responses to emails that come in, and then you
can just go into your drafts and hit send, send,
send. And I've been on the receiving end of some
of those as recently as last week. And then you
read and go. Yeah, or even the chat box online.
If you're on somebody's website and you're trying
to get a question answered and you end up with
this chat box, you're like, this is clearly not
a real person. I'm going to pick up the phone
and call because I just need to talk to someone
who can actually understand what I'm asking.
Right. And we're asking this in early part of
2025. So maybe this is like asking about the
internet in 1989. I don't know. I don't know.
So maybe it will get better. I don't see. I just
updated our sales contract for our new home builds
for what I call a piano disclosure. So a house
is not a piano. It is imperfect. It's built on
site by human hands out of imperfect, mostly
natural materials. And as I was writing that,
I realized, you know, it's one of those things
that's why people love homes. It's so human.
And everything is a little flawed. It is part
of its charm, right. It's good, good. Yes. Because
imagine an AI image of your house. It would feel
hollow, but you know your house has dog scratches
on it or whatever. Right. It's like an artist.
You would much rather have a hand -painted versus
computer -generated image. Right. And it could
be partial here. Philith homes are art, and I
think that it's not going to... I've seen AI
make architectural floor plans. And again, we
might be talking about the internet in 1989.
It has a long way to go. But it is an absolute...
train wreck. It just cannot be an AI doesn't
know how humans live and how humans want to live
and you can't train that. Very hard. I mean,
I'm no AI expert. I barely know how to work my
phone. So take what I say with a grain of salt.
And when you say, did we release it too soon?
I don't know if they expected it to take off
the way that it did. I think when they just brought
level one chat GPT to the world, they thought,
let's just see what happens. And it got so much
response and so much momentum. And then it became
a Wall Street darling. Yes, I think it's taken
off from a life of its own. maybe it did grow
too much too fast and get incorporated into too
many other places that now there isn't, you know,
it's just all washed out. This person also had
another question. I'm starting to think these
were written by robots. So this is Regulation
Bot wrote this. Regulation Bot 2000. Why are
you so anti -regulation? This person's got an
axe to grind with me. I am not anti -regulation.
I am frustrated by a lot of regulations, but
I understand their place in the world. And we
had a kind of a whole episode on this. And I'm
sad if that was the takeaway from that episode,
that I was anti -regulation because I thought
I was pretty emphatic. Appreciate regulation.
Thank you. Yeah, I think you covered both sides
of it and it isn't an anti -regulation Necessarily
as much as the just like our regular put in place.
Yeah, and the fact that regulations never been
down They only camp up and only beef up they
only get thicker sludge here. Mm -hmm So I think
those are the things so and that's a real part
of home -building It's a part of any industry,
but I think it's really a part of what you do
and so there is the obstacles that are put in
place and being transparent about that and admitting
that This isn't easy and jumping through all
of these hurdles and trying to, you know, cut
all of these red tape and all of the things that
you have to... What's so challenging about it
is that it's so fragmented because building is
largely dictated by the lowest form of your government.
So whether it's a town, township or even an HOA,
the first clearance I have is within a, if I'm
building an existing HOA, my first step is getting
it cleared with the lowest rung of government,
the first, you know, circle. So you're clearing
that, then you're clearing that, then you're
clearing that, then you're clearing that. So
there's just so many layers of it. Whereas I
feel like if I were building cars, you're dealing
with mostly federal agencies, you're dealing
with maybe I'm sure several. Again, I don't know
how to build cars, but I can't even change my
own oil or work my phone. But I just feel like
what's so uniquely frustrating about developing
and about housing and about building is just
the layers of it and how it starts with... One
person on a design review board can curtail area
can definitely derail your entire project and
I've had it happen before one rogue board member
on an HOA just didn't like me and made everything
really challenging. And the reason I know it
was them is because when they left the board,
my life got a lot easier. Interesting. So it
was going from six -month approvals to three
-month approvals. And some of that regulation,
I feel like, is that just regulation for regulation's
sake. And that was what we talked about. And
there's a difference between regulations and
codes, which would be a totally different question.
But maybe just answer that quickly if you want
to. because I think people are confused by the
structure that's put in place. So a regulation
would be, you can have this many homes per acre,
or every 10 homes per acre you have to have one
quarter acre of community space. That's more
of a regulation. You could call that a development
code, but it's more of a regulation. All codes
are regulations, but not all regulations are
codes. So every code is a regulation on the building
industry. But a building code would be, Egress
windows have to be 44 inches from the floor and
have to be at least 30 inches wide and 30 and
24 inches tall or whatever enough for a person
to get out of So that's a building code a fire
door going into garage. It's a building code
versus a regulation so but those are also regulations,
but a regulation that's not a code is something
like my park space or The fact that you need
an HOA versus not. The fact that you have to
have a hillside overlay study done. That's a
regulation. The fact that you need a signature
on this document. Yeah, the water district has
to sign off and a public works has to sign off
on a traffic study. All those things. For even
a five home subdivision has to have a traffic
study. That's a regulation. That's, I mean there
can be, you could just have a house party and
there'd be more people. You know what I mean?
Versus a five home subdivision has to have a
traffic study. But that's the study. there's
only five homes and this is only this much traffic.
But we got to count the number of cars that are
on on that road and how many trips are going
to be generated by these homes. It's part of
it, but those are the regulations that really
slow things down and cost a ton of money. And
there's just not a lot of smartness to it. There's
not a lot of surgical precision to say, well,
if it's under 50 homes, you don't need this,
this, this, this. That'd be a way of deregulating
some of the industry. There's a lot of other
regulations on street widths and you're looking
at a regular residential street might have a
45 foot wide street and all that does is promotes
on -street parking, clutters up the street, makes
it hard for kids to play because we know the
wider the street the faster the car goes. We
just know that. That's why back east or in small
European towns where there's trees on both sides
and the streets only 14, they barely have speed
limits because you're going to go 20 miles an
hour anyway. your mind is gonna slow your car
down. So I just feel like those are the regulations
that do nothing in fact make suburbia less livable.
And of course take up a ton more land. Every
single street being 15 feet wider than it needs
to be adds up over an entire just neighborhood
let alone a city. So those are the kind of regulations
that are really hard to get behind because I
don't see the logic to them. So. Next question.
Next question. Next question. I'm tired of this
chat bot asking me questions. We probably ask
the greedy one too. Let's see. All right. How
about... This is a great one. I did touch on
it a little bit, but you can circle back on that
the yeah Yeah, it circles back on what we talked
about a little earlier We kind of we kind of
touch on this every time because it's something
I'm really passionate It is and it's a question
people have because we're all affected by and
it is out there And the question is what do you
think the biggest factor affecting them? They
can't see it What do you think is the biggest
factor so they're asking for one? I can't give
a multifaceted 20 -minute answer here. What do
you think the biggest factor affecting home prices?
It's supply. I mean, it's supply. So that's the
bottom line. There's just not enough supply.
We know that we're under building in Las Vegas
alone by about 8 ,000 rooftops, I think we figured,
based on household generation. So that is the
biggest factor. How do you fix that is the zoning
and the regulation and cutting that kind of thing.
And maybe incentivizing building instead of disincentivizing
building and construction. Maybe tightening up
some of the laws that consumers can sue builders
for years after it disincentivizes builders.
City governments can block development and ask
for extra things and there's development fees.
Those are all things that construct supply. But
the simple answer is supply. When we had more
supply, homes were cheaper. So, and is it just
supply construction? No, there's also a lot of
homes kept off the market owned by hedge funds,
owned second homes. There's a lot of reasons
we have constrained supply. And then a housing
market is something that becomes obsolescent.
There's an obsolescence to the housing supply,
right? I mean, the homes can only go for so long
without either needing massive improvement or
not fitting the bill anymore. We're starting
to see some tear downs in our city where the
land value has become... More than the home justifies
or maybe a densification in other cities So if
you look at I think the National Association
homebuilders assumes the functional life of a
house is around 70 years So it doesn't mean that
they fall down at 70 years, but it just means
they would need such a substantial investment
the original home is basically zero, because
it requires so much investment. And the chance
of it still being over time, somebody has done
the upgrades numerous times by that point, sure.
Yeah, does it ever go a full 70 years? No, probably
not. But then it only takes it back to 1950 when
you think of 55. So that's not really, 70 years
sounds like a long time. I'm picturing in my
head a home from the 1920s, but that could be
a 1955 Rambler, a little ranch home. Yeah. you
know that yeah somebody's redone the roof somebody
has ideal yeah but the thought is that over 70
years they become basically worth zero they require
so much so if you've not been maintaining okay
so that affects supply as well okay and we'll
take one more of the questions um and this one
i i i like the thought on this one As we talk
about your role as a developer and some of the
obstacles that you face, what's the most challenging?
What's the most challenging aspect of developing
slash home building? It's the time. It's just
the amount of time to bring something to market
is the single greatest. And that is not just
because of Regulate. It's just the time to build,
the time to conceptualize. You're herding cats
in many ways, right? Just to get my architect
to deliver on time and then that over to my engineers
and get everyone talking and those things just
take time even if there were no regulations.
So it's not just regulations that slows things
down. These aren't really complicated projects
that we do. And we even if it's just an inside
of an existing each way, it's still a house.
It's going to be there for. Yeah. Functionally
just 70 years. Right. So I think that's the biggest
challenge is just the time and the patience.
It's. requires an astounding amount of patience.
So that's my biggest kind of frustration slash
thorn in my side. It's just the amount of time
it takes to do anything. And the time requires
patience. And the time requires patience and
requires a lot of grit. That you have to have
the stones to... to invest all this money up
front or take on all this debt or a combination
of both. You usually have a lot of money invested
in and a lot of debt. And you just say, I hope
this works because it's too far in now. So that's
the next challenge. Oh good. I love it. And thank
you guys for... Far in now. Well good, I love
it and thank you guys for sending the questions
really good conversation that we were able to
start here We'll do others So if you have questions
or if there's something on your mind, you'd like
us to address feel free to send it You can shoot
it over to any of our online platforms and I
will get those and we'll rally them together
and address them in a future episode So thank
you so much. Thank you shade it and we'll see
you guys again next time on another episode of
trust the process See you then. Bye bye.