Ever wonder what really happens behind the scenes
in construction, real estate, and development?
We pull back the curtain on the new home construction
industry, the real estate market, and the trends
shaping it all. Discover the stories, insights,
and expertise behind the process of building
a new home. Join us for Trust the Process podcast,
and let's build something great together. Welcome
back to Trust the Process, the podcast where
we talk about new home industry, real estate,
construction, and everything in between. As we
go about our days, obviously we work in the real
industry. We get a lot of questions. Yeah. 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 and so we're gonna
jump into some of these questions and Maybe if
somebody else had the question is something you
might be wondering too. So hopefully we can answer
some of them Here's a good one. This one actually
came up for us this week in a client conversation
So that is an 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 it an entire
episode. I agree. No, yeah, it could. It probably
could. But 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 that buyer's agent,
I mean. So they might ask for these varying levels
of commission that is going to affect the offer.
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 5%. the buyer can have
that discussion with their agent to say, hey,
can we keep 3 % of this to pay for our closing
costs and you have 2 % 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.
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's bringing you a non
-phenomenal is the 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 2024. 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. 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. Do you feel like you've seen... Yeah, I
think it's subsided. I think that 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, maybe that forced
them out of the industry. There are people who
would have gotten in but didn't because they
heard about the terminals. I 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. We'll leave better agents on the table.
I agree. I agree. Good question. You know who
you are. Yes. Next one. Let's talk about something
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.
What didn't clarify what exactly. So it could
be, it could be any, it could be interior design.
It could be functional design. Sure. So outside
in, I think community design, 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 and 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
income you know that 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, 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
two story to capture land and capture the economies
of building up versus building out. We're certainly
seeing a lot of that. 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 informing
design and then builders are doing their best
to work within those constraints. 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 gonna 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, 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. Put your big water case or
all those things right into the pantry. Yeah,
so I think we're going to see 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 Sunbelt 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 get 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, you know, I just saw what they were
doing with it. 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. So even in cabinetry, I
saw one the other day that was kind of that,
you know, the blue, that sort of powery 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 things that it's important
to know as a developer. It is. It is. And as
you're a builder, you know, you're putting, we
choose the selections. A lot of times we do.
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 and on trend exactly
with what's out there. Warrantable. You don't
want to put a product that's a nightmare to warranty.
Good point. Good point. Yeah, so. That was a
good question. 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. 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, so let's go with me. 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
that 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 proform
on it because it's so many units and so many
doors in order to get the funding for it from
the banks. They're wanting to see an economist
actually sign off on. Is it a viable project?
Some of that thought work you might see some
of the analysis or at least the compiling of
data might really be streamlined by AI. Ultimately,
no bank is going to sign off on a $50 million
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, to 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 bytes is going to maybe be streamlined
by AI. And I'm actually gonna 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 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 human, 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 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 in my opinion,
it's got to 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 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. Mm -hmm, and everything
is a little flawed. I mean, that's part of its
charm, right? It's good good Yes, because imagine
the image of your house. It would feel hollow,
but you know your house has Dog scratches or
whatever. It's like an artist you would much
rather have a hand -painted versus some computer
-generated image of that you'd write and I could
be partial here Phil homes are art and I think
that it's not going to you can I saw I've seen
AI make architectural floor plans and again We
might be talking about the internet 1989 has
a long way to go, but it is an absolute train
wreck It's 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 the
life of its own. Um, 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. Yeah. Next question. Um, that
one we kind of covered. So this is a regulation
bot wrote this, uh, regulation bot 2000. Why
are you so anti -regulation? This person's got
an axe to grind with me. Uh, I am not, I am not
anti -regulation. I am frustrated by a lot of
regulations. But I understand their place in
the world. And we had 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 the smart regulation
put in place. Yeah, and the fact that regulations
never thinned down They only amp up they 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 the things
that you have to do. 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
or you 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 when they 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 I feel like is that just regulation for regulation
sake? 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 the garage, it's a building code.
versus a regulation. But those are also regulations.
But a regulation that's not a code is something
like 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 on it.
Public Works has to sign off on it. 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 from 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 there's much
traffic So yeah But we got to count the number
of cars that are on on that road and how many
trips are gonna be generated by these homes and
Just part of it But those are the regulations
that really slow things down and cost a ton of
money. Mm -hmm 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 street's
only 14, they barely have speed limits because
you're going to go 20 miles an hour anyway. Because
your mind is going to 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 every
single street being 15 feet wider than 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. Mm -hmm. So Next
question next question next question. I'm tired
of this chat box We pass the green Let's see
All right, how about Oh, 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 teardowns in our city where the land
value has become... More than the home justifies
or maybe against vacation in other cities So
if you look at I think the National Association
home builders assumes the functional life of
the 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 chances
of it still being over time, somebody has done
the upgrades numerous times by that point. 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 are 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.
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. 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. 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.