move and adapt with the market. Ultimately we're
under built. I still believe that. And I cannot
stop now just because spring hurt my feelings.
Which you did. It hurt a lot of people's feelings.
It did. Yeah. This has not been, I'm used to,
you know, wind at my sails and this has been
wind at my sails, right? And it's just been,
it's been gratifying to know that I can adapt
in this market. The company can be solvent and
company can be thriving. even in a year where
almost every housing headline was negative. Yeah.
And we can still do it. And just zig and zag.
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We're gonna do a little wrap up today. It's been
a while since we did a market climate. Just kind
of check the pulse of what's happening out in
the industry, the real estate market, the new
home market, Las Vegas nationally, kind of looking
at everything. And then we did the Q1 wrap up,
but we didn't do anything mid -year. So kind
of have a little moment and we'll jump back in
and see how things are ending up for us as we
wrap up Q3. entering into the fourth quarter
of 2025. What's it look like? Where have we been?
Kind of fun to look back to our Q1 and see some
of those things that we were anticipating for
the year and have we hit them? Did we hit them?
Are we on track for those? Obviously, we have
a whole nother quarter and who knows what could
happen because things do change quickly. But
I think we have a pretty good pulse on what's
happening in the market and where the trends
are headed. You want to jump in on that, Michael?
I know we've got some good stats and there's
a lot of information available to us, which is
nice because you can really have the facts to
lean into and then you and I can look at how
and why and how it's affecting our clients and
our industry or our business specifically. So
I'll let you know. All right. Well, when you
said we missed the Q2, there probably wasn't
much to talk about. It was just a whole lot of
nothing. I mean, don't get me wrong, we had come
off of, I would say, probably four years worth
of atrocious inventory levels, unsustainable
price depreciation. So I guess the news would
have been modulation in that. But I feel like
that's probably more in line with what was happening
in 2024 already. And I just think that Uh, you
know when you're in cruising altitude and then
you hear the engine cut and then you know, okay,
we're gonna start to descend. I feel like we
were at 35 ,000 feet. Something's happening.
Okay. Yep. But fasten your seatbelt and I can't
get any more wine. So, uh, you can if you apply
yourself. You hear the engine cut. I felt like,
you know, midway through last year, Q3, Q4 last
year, I felt the engine cut, right? And there
was only so much low inventory could do to help
us out of that. And then what happened was low
inventory started to not become an issue by January,
February, March, and by spring. So quarter two,
which we should have done a quarter two wrap
up, maybe end of, you know, end of June, early
July. Uh, it was, it was bad. I mean, it's in
terms of, it just corrected way too quickly.
And then once people smelled blood in the water,
investors had tenants leave and people saw more
homes. It kind of became this, at least in Las
Vegas, but you look at our, we were a great microcosm
for most of the sunbelt. It happened almost everywhere.
We were not affected by insurance issues like
wildfires, floods, things like that. But we still
saw an overall pullback from the sunbelt. So.
you know, we were a great microcosm for that
in Las Vegas. And I look at what happened here.
Obviously we're fine and we still had a pretty
healthy first two quarters, but it's not been
for want of hard work. We've definitely had to
work for those numbers. I feel like buyers are
apprehensive and then inventory breeds inventory.
People started to feel like, oh, can we really
sustain these sales prices? Maybe we should sell
now, my tenant's leaving, whatever. We got relocated
and we moved somewhere and decided not to buy
because the market is challenged. So they become
a renter. So that's now a person that left a
house in another market and is now renting a
house. Couple that gets divorced, they both just
decide to rent because the market's kind of unstable.
So I felt like we had a net loss of buyers. putting
their moves on, or purchases on hold, but maybe
not putting their moves on hold. So you'd have
all this inventory. Then as inventory picks up,
the lock -in effect has started to wear thin.
So that lock -in effect, you know, are people
with sub four and a half mortgage rates, where
they're just kind of locked into their houses.
That can only last for so long for everybody.
I mean, in numbers, I'm not, you know, not everybody's
going to move, but the average person moves about
every five and a half years. So let's say that
pushes out to seven or eight. That's not gonna
be 10. That's not gonna be 12 years. Eventually
people have to move away and even if it's locally
and then they get tempted by these Beautiful
homes that are not hitting the market builders
finally caught up with demand So there's a lot
of sexy looking new home inventory that may have
rate by downs and it's okay Well, I don't even
have to give up my rate, you know I'm going from
a three to a four and a half, but at least I'm
going to six and a half or seven So, okay. We'll
buy that new luxury home Unfortunately, it's
not been one of ours, but I'll buy that new luxury
home with a rate buy down. But now they have
their home to sell. And we have a situation on
one of our inventory homes in Lake Las Vegas
where they have a home in Seattle to sell that
has been on the market for 120 something days
with four showings. That's a good market. Seattle
is a pretty, you know, generally speaking is
a pretty robust real estate market. They're kind
of an excerpt, but still it's a new construction
home from four or five years ago. I mean, it
was growing enough at that point. five years
ago for Lennar to do a thousand home subdivision.
So, you know, it just shows you how much of their
market's cooled, which is now having knock -on
effects into our market, because I would have
sold one of my homes, had their home on the contract,
and we would have probably done some sort of
rate buy down or whatever to get the deal done.
But it just shows you that... Inventory breeds
inventory, right? If they have a home to buy
in Las Vegas, now there's a home to sell in Seattle.
Now that home that would have been locked up,
it just shows you that the market is not as static
as you think, and it can change pretty quickly.
That being said, it can change in the opposite
too. When it feels static that we're kind of
frozen and buyers and sellers are at a stalemate,
we're already seeing that kind of start to thaw.
Sellers market pushes people out who don't absolutely
have to buy. Buyers market pushes sellers out.
who don't absolutely have to sell. And therefore
real estate markets equilibrate. They just naturally
do like all markets because homes do not expire
the way produce expires. Homes do not need to
be thrown out like yesterday's steak at a restaurant
to say, well, we can't serve this now. They're
non -fungible. They can be recreated. They can't
be moved generally. So that's the staticness.
And then all it takes in growing Sunbelt markets
is for builders to say, eh, let's just pull back
on our housing starts and see what happens in
90 days. The tonnage builders can create inventory
so quickly because they have a pipeline of lots
that they're working on. Some divisions we're
working on today are 26 and 27, maybe even 28
deliveries. It shows you that if you had 20 years
of pipeline and the capital behind you to keep
pushing new lots into that pipeline, you get
to a point where, let's just pretend we're a
year down the road and our Westridge subdivision
is fully approved, ready to go. The carrying
costs for me are so minuscule compared to just
building up the neighborhood and it not being
successful. I could just stall three months and
then reevaluate the market and say, okay, or
instead of doing all five, I'll do two of them.
And then I'll do the other two. I'll kind of
stagger it out a little more. If someone's trying
to call the bluff, the builders will call your
bluff. They'll just say, oh, if you don't want
to buy our houses, we're not going to give them
away. Yeah, we have all these starts, like some
of our stuff in Las Vegas. Yeah, I have the starts.
And those that are nearly done, I'm going to
have to wheel and deal if I want to move that
inventory. I'm not going to have to wheel and
deal on all of them because maybe out of the
four, I only have to sell two of them. I can
be a little bit more discerning with the other
two, buy myself some time and some runway. That
being said, we purchased two more lots out there,
so then I'll slow roll the development process.
I won't slow roll the HOA approval, the building
department, all the engineering, architectural.
I want that done, but those approvals are good
for months. HOA approval is good for years, I
think two years. city building, I just have to
call in one inspection in six months and my permit's
still valid. So I can really slow roll houses
and I'm a tiny little builder, right? We're small.
Imagine if you're a DR Horton who's putting in,
I would imagine probably 2000 units into the
ground a year. One R another 1800 to 2000. So
imagine they pull back just 10 % or 20%. It's
a lot. It will really affect the inventory situation
down the road. They're in some neighborhoods
now that they can't I don't want to say they
can't give them away, but, you know, they're
really having a wheel and deal and otherwise
great zip codes. And every builder has inventory
right now. I mean, every builder, Valleywide
is carrying some sort of inventory that they
had probably anticipated selling by now, including
us, I would say. We're there. We're with them.
Yeah. Pull back the curtain. We're not too proud
to say that. Right. They definitely have more
than they want. And even in some of the poshest
zip codes. I mean, those are the last ones that
really have to worry about, but there are anecdotal
stories where some of these gray zip codes have
new homes sitting with no buyers, completely
done. And that is something completely anathema
to what we're used to. So we've had five to seven
years of, oh, there's actually inventory. Wow.
That's crazy. Right. Inventory's up 77 % year
over year from 2024, this same ending out Q3.
So we're 77 % over the inventory that was so
tight last year. We've almost doubled. Right.
That's crazy. Now that being said, we're still
not even near our 17 or 18 or 19 levels. So it
shows you how under -inventoried we were. But
you just wonder, were those... really high price
sales prices propped up by that chronically low
inventory. So we are in that stalemate right
now or we are in that period where the pendulum
keeps swinging back and forth and we don't exactly
know where we're going to land and markets hate
uncertainty. So that's why the market feels a
little frozen. I don't follow pending sales weekly
in the US the way that I do locally, but we're
generally still pending out about five to seven
hundred. MLS sales. Now some new construction
finds its way into the MLS. For instance, all
of our new construction, all of our inventory
homes do hit the MLS before they go into contract.
Every single one of them has always been in the
MLS. It's the broker in me that's like, let's
just get it out to as many people. Depending
on when that is, is of course contingent on what
kind of home it is and what our strategy is with
that property. But everything we have hits the
MLS. That's not the case with every single. builder,
many of them, if they sell one of their lots
within the tracks, that will never hit the MLS.
Some of the spec inventory sits on a backlog
and they don't even broadcast it because they
don't want to flood the market. They don't want
to flood the zone and make it look like that
neighborhood has so much available inventory.
They'll just slow roll it and trickle it out.
They'll release, you know, especially the big
tonnage builders, all the NARS and the DR Hortons.
They're, they have 15 of one model and there's
only three models that, you know, if they have
45 houses and 15 of each model, uh, they're not
going to have all 15 available even on the agent's
sheet. They're just going to say, oh, here's
five. So that being said, we're still pending
out about 700. When one of those backlog homes
goes under contract, that doesn't get reflected
on there at all. It gets reflected in the yearly
numbers for the builder. So that's kind of. really
hard to track weekly. But I can tell you that
our weekly resell or MLS data is holding up.
It just feels slow. And I think it's a function
of the inventory situation. So we've kept our
buyers pretty much static. A buyer activity is
down a little bit, don't get me wrong. But we've
kept our buyer, the buyer variable has pretty
much stayed the same. And the inventory has gone
up substantially. and I don't know which one
is going to cave. Markets are constantly equilibrating.
And growth markets, Sunbelt markets, builders
have a really outsized influence in that kind
of balancing. So if you look at a city like Las
Vegas, D .R. Horton and Lennar, probably make
up about 40 % between the two of them together.
Probably 40 to 50 % of all new inventory that's,
you know, for sale inventory comes from two builders
and they're still toll and Pulti and KB and they're
also juggernauts as well. But if you look at
just those two tonnage builders that kind of
just build addresses, that's kind of how I look
at it. You know, nothing super special about
their homes and a lot of customization. You're
basically buying a resale that doesn't need anything
except a backyard versus, you know, like a toll
is kind of a lifestyle they're selling the KB
is customization for the lower price points because
they still built some expensive homes, but they're
definitely closer to the median sales price.
Pulti's kind of somewhere in between those two
and definitely has a much wider product offering,
at least in our market. So anyway, long story
short, you look at those two builders, if they
pull back just 10 % on their housing starts,
that is a huge... huge impact, has a huge impact
on our housing market and the balancing of that
housing market. And then in some ways, builders
have propped up our housing market because they
are publicly traded entities. They're fiduciaries
to the shareholder. I would say, minus us and
a couple of other small companies, all the home
builders in Las Vegas are publicly traded because
the ones that weren't have been acquired. Storybooks
and the... American West, they've been acquired,
signature sold, quite a few. They're now all
publicly traded. So they live quarter to quarter.
If they don't have a good quarter in Las Vegas,
they're not going to add inventory to Las Vegas.
They don't think long -term and they want to
return value to their shareholders more than
they care about creating affordable housing.
Yeah, and they have a national bandwidth that
allows them to pick and choose which markets
they want to amp up and which ones they need
to, you know, pull back, rev up, whatever they
need to do. You know, we basked in the glow post
-pandemic. This whole Sunbell did for five years.
And it's not until this year that the Northeast
really pulled ahead of the Sunbell in terms of
sales. And you go to outside of Philly, you go
to Long Island, you go to those areas. in the
greater metro tri -state area, they're doing
pretty well. Those markets have not seen the
appraised appreciation that we see and that we've
seen in the Sunbelt. And they're kind of having
their little moment right now, especially the
denser cities. They don't have as much new construction
to begin with. So it's the return to work and
kind of the, okay, cities are cool again. It's
going to have that upward pressure. But even
the whole corridor is doing much better than
it had been. So we all have a little moments
and that's a good point. Pulte builds in PA and
New York and Delaware, they build all over. KB,
not as much over there, but there's a lot of
presence with those builders in those markets.
They can say, you know what, Las Vegas, Phoenix,
kind of overbuilt. Let's just get through that
inventory, hold back on some of our lots and
focus on the other markets that are doing well.
And that's what forces us. to balance again.
So I don't worry too much about it. And we definitely
have a lot of exposure. We're in the kind of
entry level luxury that maybe many people's first
step up into luxury that 1 .8 to $2 .2 million
buyer, 50 % of them, 60 % of them still need
loans. So they're still a little rate sensitive.
And we can't play as many games. We can't buy
forward commitments the way that the big builders
can and lock people into 30 year fixes at 5%.
I can do temporary buy downs. I can buy their
rate down, maybe a point. Um, but I can't get
it from six and a half to four or four and a
half or five. I can get it from six and a half
to six. And that's going to cost me a ton of
money on these sales prices. So there's not as
many, there's not as many strings that I can
pull, but I also don't have as much inventory
to move. And our inventory is more unique and
we don't have to. make apologies as much as maybe
one hour does. They've got 15 homes at all back
the busy street. The other 65 homes in the tract
are going to be fine, but those 15, they got
a lot to apologize for. And they got to get that
inventory moving. So we don't really have anything
like that, thankfully, and kind of can curate
our lots and curate our inventory a little bit
more carefully. So that, you know, gives me some,
some solace. Beyond that, the raw numbers, we've
seen a little bit of price moderation, a little
bit of price. declines, but that's also very
hard to track because homes are not movable,
not fungible. No two homes are the same, especially
as they get older. No two homes were maintained
the same, upgraded the same, new construction
in the same track. There's a little bit more
apples to apples comparison there, but for the
most part, homes are not easy to compare, right?
So to say, not only year over year, market over
market, nationwide over... There's so many variables.
You could just have more entry -level homes hitting
the market and then it'll cause median sales
prices to go down. Conversely, you could have
what's kind of happening in Las Vegas and a lot
of the Sunbelt. The Gilded people are moving
around. The entry -level people are not. They're
putting off their purchases. They're staying
in their rentals one more year. Like I said,
if they're getting divorced and they're working
class people, they're selling their asset and
then both of them are going to rent. And I say
that as an example, not to be jocular or or twee
or anything. That's just how it is. It's the
reality of it. Divorce is death. And what's the
third D? Divorce is death. There are five. There
are five. We looked them up once before. It's
diapers, divorce, diamonds, death. Don't forget
the fifth one. I know. Downsizing. Downsizing,
yes. So divorce is a big deal. And how people
handle divorce? You know, five years ago when
rates were pretty low, I mean, still, actually,
that's a bad, oh, five years ago when rates were
in the threes and median sales price was $3 .50,
a couple that was divorcing could each buy their
own home. And now we're seeing that on our brokerage
side is that maybe one's buying, the other one's
renting. However - Or one stays. Or one stays
and tries to refi. Exactly. That's a great example.
The other one gets a small buyout and then rents.
Um, so that all has those generate buyers and
diapers. Okay. Uh, we can make our three bedroom
homework. We don't need to upsize. We can make
this apartment work. Let's wait one more year.
And I think we finally kind of ran out of buyers.
Now that being said. the builders have kind of
propped up that real estate market, right? Because
we have the kind of margins where we can buy
down their rates. We can offer those two -one
buy downs. If you're a big nationwide tonnage
builder, you can do forward commitments where
you're giving them 30 -year fixed rates at 5%.
So, I mean, we help regulate the market. We give
liquidity to the market when we need inventory.
We shore up the market when we're worried about
over -inventorying, especially with the way that
the builder business model has changed into,
they're one part financiers and one part home
builders, right? I mean, they get a huge source
of revenue by selling mortgages. They get all
those ancillary services, they get rebates on
appliances. Really, the home is secondary, right?
I mean, the home is the financial instrument.
So, really has kind of helped. uh, to, to balance
everything out. It's not a normal market where,
meaning a marketplace, right? Where you have
buyers and sellers with equal power, um, or equal,
equal basis, right? You know, there's always,
someone always has a little bit more power in
the, in a market, but builders that can, can
kind of work that market and kind of tweak, tweak
it to fit their business models. And that being
said, uh, that allows the market to be kind of
a bystander. and the real estate market be kind
of a secondary effect. So they worry about their
quarter and their earnings. And if that means
reducing starts, if that means we have no inventory
in six months or a year, that's exactly what
happened during COVID. They pulled all their
starts. Even homes they had permits on, they
weren't actually built. Seven months later, we
had one of the biggest inventory crunches ever.
Yeah, because you can't verbal it in a day. And
you can't foresee what's coming, but you pull
back on those starts and it's actually a repercussion
that we're going to feel in six months and eight
months. Exactly. And then on that scale, because
it was nationwide, every builder ramped up at
the same exact time. And now Whirlpool or GE's
looking at you going, ah, I don't have dishwashers.
We didn't make enough dishwashers for you to
triple your housing starts. Well, at the time
we were, yeah. And then they had issues making
them, but they also had a spike in, it was just
a perfect storm. So that being said. I do feel
that we're, quarter three has definitely, the
back half of quarter three has felt more normal
than at any point this year. I definitely feel
the balance coming in. I see homes coming off
the market that maybe had been languishing. I
see homes coming on and coming off quickly or
more quickly. And I definitely see locally, and
like I say, we're a good microcosm for the rest
of the country. Locally, our pending sales are
up. Inventory is down, new listings down. Because
again, the news is out. The cat's out of the
bag. It became headlines in March. This is nothing
new. We're five or six months on and knowing
that this is a buyer's market. So if your tenant
wants to re -up for next year, let them re -up.
Sell at 26 if you really want to sell it. Again,
it forces people and I hate to say it. hey, we
were going to get divorced. We can't sell our
house. Let's get along for another year. You
know what I mean? It happens. Because I've spoken.
I can speak from experience. I've been in those
situations. But so Days on the Market is up.
We know that. But I know we keep talking about
buyer's market versus seller's market. And I
have clients that we work with who think that
because we're in a buyer's market, they get this
opportunity. I'm going to ask for concessions.
I'm going to ask for this and that. And while
yes, there is definitely an incline toward a
buyer's market, I wouldn't say that we're solidly
there yet. I still feel like, I mean, there's
all signs are showing and yes, we know we're
moving in that direction. But if you go into
bullish on some of these deals, we see them blow
up because people think they can own the market.
I'm the buyer. I get to make the decisions now.
But there's still, there's still a mindset that
is slowly hanging onto the idea that, that sellers
get to in some capacity control. So it almost
feels like an awkward flush right now, because
we know we're talking about the buyers as being
in power positions, though there are still a
lot of sellers that are setting the market. And
builders, obviously, that are setting the market.
So it's a limited buyer's market yet. I think
it'll open up from that more. What do you think?
What's your take? I agree. It's definitely location
sensitive, product sensitive, and price point
sensitive. So if you're looking in a drive to
a qualify area, anywhere in the country, where
there's a lot of new construction, and the median
sales price in your county is $350 ,000, and
these homes are $375 ,000, let's say they're
just a touch over the median, and you're in a
drive to a qualify zip code, looking at a lot
of new construction or next to new homes, you
probably have a lot of power there because the
only people that are on the market are people
that at this point probably really, really, really
want to sell. And builders don't build homes
to sit on them. So builders always want to sell,
right? I want to sell every one of our homes.
And that's representative in how I price them.
That's representative in how I negotiate and
how our sales team engages with buyers leading
up now. How we start them when we start them,
all of those things. Absolutely. Absolutely.
And starting those conversations with Builders
ready, builders motivated. Okay, so if you like
the house, it's worth coming out and looking
at it because you're probably gonna be pretty
happy with the terms. Because I'm a seller, I
have to sell these homes. I have no interest
in setting the comps anymore. That was a 2021,
2022, 2023 even. version of the company that
doesn't exist, but we're doing more than ever.
We're building more rooftops than ever. So I
really don't care. I don't care what market we're
in as long as I know what I'm in. And then I
know how to make decisions and kind of strategize.
It's as a builder to be able to make the decisions
about starts and sells and prices and all of
those things. Obviously that's informing, but
also to be able to advise. I mean, a lot of people
look to you as an expert and look to our experience
in the industry as an advice platform. So being
able to have our thumb on the pulse in a way
that lets us offer productive and qualified advice.
As good as we can, right? I mean, we've been
in situations where you're giving advice and
then they pull the trigger a month later and
your advice is completely outdated. I know. I'm
thinking in terms of like a seller. And that's
the thing, yeah. It does change quickly in something
you told them in the situations. And it did this
spring change quickly. the sands shift right
under our feet as we stood there. Wait a minute,
what is happening? And so advice that we had
given to our clients at that point, we had to
really, wait a minute, this isn't what we thought
was cool. How many conversations that we had
to have like that, where we had to re -explain
where we're at and why we are here and how we
need to now reprice their home or whatever it
is. Or reset their expectations at minimum. So
I think that that's So to answer your question,
are we in a buyer's market? It certainly feels
like one, but ultimately, this is going to go
against every economist because they would say
buyers set the market. I think in real estate,
tell ourselves at the market, because for all
the reasons I mentioned before, they're static,
the inventory is relatively fixed. If you look
at how many households there are, hundreds of
thousands of households in Las Vegas, and we
build about 12 ,000 houses a year. That is a
tiny fraction of the amount of housing stock.
Now, the amount of housing that changes hands,
currently nationwide, about 30 % of available
homes are new construction. So we are really
overrepresented. We're overrepresented in new
construction. When you say sellers, I think to
be specific, builders are the selling standard
that sets the market, right? Right. Exactly.
especially as in markets that are even more fixed,
like the Northeastern seaboard, certain zip codes,
there are certain areas of Las Vegas that have
not seen growth for 10 years in terms of new
rooftops. There are certain areas that people
have to live in for family, for work, for whatever.
We're already seeing that in our cities. Denver
has been seeing that for about 15 years, certain
areas that there's no more growth there. You
got to drive to qualify and hope you can negotiate
a great deal there. Most of the East Coast those
are more fragmented markets. So it's really hard
to say where one ends and the other begins but
The sellers meaning the individual sellers set
the price and I would tell when I was really
heavy in my brokerage business tell a buyer,
look, you can either get the house you want or
the deal you want. There's just very unlikely
that those two things are going to line up perfectly.
So if you're ready to make concessions on that
noisy street, on the fact that the school bus
stops there or the crosswalk, you can't leave
your house from 245 to three because there's
so much school traffic. If you're okay to make
those concessions, but there's a reason this
house has been passed over. And that's a great
point to your, you know, the great, great call
back to your other point is just because you
see it 58 days in the market, we're in the first
time in five years, perfectly fine homes are
sitting for 50 to 60 days. We have some new builds
of our own that are on the market that I don't
think have any reason to be sitting except the
market is soft and there's more competition.
And that's average days on market. Exactly. So
we have, I have a particular home that I am worried
about, but I have to remember we're barely at
the average days on market. And if you look at
the price point the house is at and the high
one millions. We're certainly not anywhere near
the average days on market, so they've been making
major price decisions. That's why I'm done with
my price adjustments on that house forever. I'll
sit on the house. I will sell every other piece
of inventory before I sell that house. I cannot
go any lower and I will not go any lower. Doesn't
mean that someone came in and wrote something.
Yeah, of course, if the deal makes sense, but
advertising marketed price, that's where it's
at. 1679 is where that house is staying. Forever
which kind of goes back to my point. So it's
that yes homes are sitting for longer. So somebody
who comes in as a buyer, now they walk in and
go, oh, this house has been sitting for so long.
I'm going to come in and ask for this and ask
for that and chunk the price and take this off.
And it must be, no, no, you don't have that kind
of leverage yet. We're in a slower market. So
that doesn't necessarily give a buyer the leverage
to walk in and think they own the deal or that
they can sweep the rug out from underneath our
sellers. Builders have the inventory and so they're
willing to negotiate a little bit more though.
It's still not quite It doesn't allow for you
to run in with a bullish attitude and expect
that you're gonna get you know Served up with
the best deals out there. So it's kind of a kind
of a strange thing. It's just slower. It's slower
and just and it's Market sensitive right entry
-level luxury. I mean our our luxury market.
We know is even longer than that 60 -day And
there's, there's more inventory in it because
people like myself, you know, our company, um,
operates in that space. And there's some other
competitors that we have that do not maybe the
number of rooftops that we do, but definitely
are adding to that. It's happening in our South
Shore country club with that product. There's
another spec builder that has two in there and
one guy has one. He's a one off more of a construction
company than a home builder. And I think there's
a distinction. You know, we're really the only
true home builder in that country club. Uh, but
there are, there are construction companies building
spec homes. So, cause that's, their margins are
there. It's easier when you're a smaller outfit
to build in a luxury space versus doing subdivisions
with a hundred houses. Uh, those are, those are
big ticket items on utilities and infrastructure
and the land costs. Everything's just a lot,
you know, big boy, big boy numbers. So we cut
two fold. We have competition. The resale homes
generally in that 1 .9 to 2 .9 are also very
nice. Some of them are relics, depending on where
you're building. Some of them were really nice
in 2004. Maybe not so much now. And then you
work. So you go in at 1 .9 and have to do a teardown.
I mean, we're in the middle of one right now.
It's a lot. It's a lot. That's the value that
we bring and that's a space I like to play in.
But that is also a flooded space right now, honestly.
Middle to high ones, low twos, is there's track
builders that play in that space. Some of your
Toll Brothers and maybe even your Pulties, depending
on your area. Pulties, TriPoint. TriPoint, great.
Yeah, good one. Completely forgot about that.
Yeah, TriPoint loves playing in that space. Taylor
Morrison, I mean, there are lots of them playing
in those numbers. So yeah, it's not as, you know,
a million dollar home now is not as... crazy
move up as it once was, unfortunately, with prices
the way that they've been, median home prices
already in the 460s. So now our million dollar
home is beautiful. And I mean, I don't take anything
away from it. But most of those tonnage builders
are finding their way in that direction. Some
of those luxury. Enough. Enough are, right? to
move the market a little bit. And that's where
the margins are, too. It's kind of like how they
say, why do car builders build all SUVs now?
Because they're high margins. And why do builders
build big houses with high sales prices, with
over -upgraded? Because I'm already here. I'm
already doing all the site work. I already have
all the liability. I already have all the risk.
Why not shoot for the higher end of the market?
And we could have another episode. We outfitted
our serene spec levels. And I had to... make
a lot of little in the moment decisions, stuff
that needed to be decided now. There's certain
things like appliances and cabinet specs I might
tweak as the market changes or if the market
changes or if demand is not where I hope it is.
We may have to kind of entice buyers with higher
trim levels, basically. But that being said,
it's an evolving market and I feel a change this
month or end of August. I certainly have seen
the traffic pick up. I think inventory, like
I said, will kind of naturally equilibrate. And
by this time next year, I think we'll see better,
better rate environment. We're already seeing
it as a time of recording. We're at about six
and a half right now. We got as high as eight
in 2023. We've spent a lot of times in the sevens
in the last, you know, in the two years since
we spiked, I think it was September or October
23 at eight per 8 .1%. an average 30 -year fix.
So we had to come all the way down from there.
We do see change in the horizon. I mean, there's
some things that are happening politically that
are anticipated to make a big shift in that world.
Yeah. I think monetary policy, I think the Fed
knows they're at least... probably 100 basis
points off of neutral, and that obviously won't
have a direct effect on the long end of the curve
and the 30 -year fix, but it will certainly not
hurt it. Generally, we had some rate drops last
year, November, October, November 2024, and the
30 -year fix actually went up because the market
said, oh, we shouldn't be cutting right now.
The inflation was still too high, like 3 .2.
Right. And then they panic. Exactly. They panic.
Be correct. Over -correct. Be over -corrected,
like markets always tend to do. And then it confuses.
But it confuses, you know, the industry as a
whole gets a little confused and then buyers
get fearful. And then they take a step back and
they, you know, it all creates a shift in mental
fear. Correct. That's right. Buyers, like I said,
markets hate uncertainty. I hate it as a builder.
I hated to buy two more lots, but I knew I might
as well lean in. By the way, I got great deals
on those lots because there's a lot of people
who have... Said let's just go ahead and try
to get rid of our our custom lot in Sasha. Let's
go ahead and get rid of it And because of that
I saw an opportunity and that is the second cheapest
third cheap third cheapest Parcel I've bought
in there. Well, I bought two next to each other
but and they're beautiful. They're great parcels
They're flat the quarter acre they have a hundred
feet of gold 120 feet of golf course frontage
Good views. I'm gonna put two One of our tried
and true single stories on there and then a new
plan that we created for it For the other lot
and that'll add her into our kind of our repertoire
So yeah, it's pretty exciting. I move and adapt
with the market ultimately We're under built.
I still believe that and I cannot stop now Just
because spring hurt my feelings I'm used to,
you know, wind at my sails and this has been
wind at my sails, right? And it's just been,
it's been gratifying to know that I can adapt
in this market. The company can be solvent and
company can be thriving even in a year where
almost every housing headline was negative. And
we can still do it. Um, and just zig and zag.
So that could be the theme for our Q3, a zig
and zag, right? Yeah, exactly. Change your spec
level, change your pricing strategy, not changing
the overall vision of the company in terms of
growth, very growth, you know, growth minded.
And growth sometimes doesn't mean growth and
profit. Sometimes it might mean other metrics.
Do we own more lots? Do we have more finished
lots? Are we getting faster? That's growth. Are
we getting fewer warranty calls? Are we getting
shorter punch lists at the end? Yes, have we
tightened our process? Yeah. In a lot of ways,
yeah. Right, are we seeing an uptick in traffic?
Before we brought you on director of marketing,
and we've just put them in the MLS, we would
maybe show those homes once a month. And now,
ourselves, people are showing them two or three
times a week often. Now, we have more of them
to show. Maybe that's part of it, but I have
to think. You check out our website, our marketing
collateral and all that. That's growth too. And
that's an important way to look at it. Not every
night when you close out the till at the restaurant
is going to be a record breaker, but maybe you
got a good review. Maybe you had a food critic
come in. I love restaurant examples because the
market, you know, that business is so... unforgiving
and quick. You might go two years without knowing
you're doing something wrong when you're a home
builder. It's going to take you a while. There's
some doubt that I even have on some of our floor
plans. Did I do that right? Because I haven't
actually seen this model successfully sell yet
because I haven't built it yet. I don't know.
Whereas I feel like restaurants, you kind of
get that real in -the -moment feedback. So I
love to use those as an example. Yeah. I love
that perspective because we have done, I mean,
in the last six months, the amount of growth
that the company has had internal growth in our
processes, in our policies, in our just tightening
things up, in our collateral, in our webs, all
of those things would not have been possible
had we been slamming through sales and pushing
in other areas. So it kind of gave us that moment
of pause to redirect and focus and continue to
grow. I mean, it isn't that we all took a map.
I mean, we're all continuing to work. Yeah, we're
all busy. Yeah. Yeah, we're very busy, but a
lot of that it's a just it's a different focus
on the busy Which I love that perspective because
you don't really think about how much has actually
been accomplished right in What was otherwise
not a huge selling spring? No, it hasn't honestly
been a great year overall for the company I mean
in terms of if you looked at us if we were publicly
traded company, they don't care about your new
website. They don't care about The fact that
what we're building today will carry us through
26, 27 sellers markets, right? We're going to
have that infrastructure built up. Exactly. So
when I look at that, and also Necessity is the
mother of invention, we had to be better at marketing.
It didn't have the luxury of throwing the MLS
with some renderings. They call either me or
someone on my team and we go out and show it.
If they like it, great. Put a contract together.
Perfect. I never had one sit done. And now we
have had, we have had two this year sit done.
One for about 30 days and the other one is not
even sold yet. It's running in about 50, 55 days.
So I don't know. That's, I'm encouraged by the
fact that we took the year and said, all right,
this has not been great. We still built. We finished.
We're finishing homes. We'll have three new rooftops
hitting the market. That's good or bad. I don't
know. think of how much time and effort you've
been able to apply to the other projects, to
the Serene backend, to the Westridge backend.
I mean, it's giving you really projects that
you are, you know, we're loading up for next
year, but would you have the bandwidth to be
everywhere? Probably not. I mean, I don't know,
you manage a lot, but sometimes I'm like, where
are you? Are you like cloned? How do you get
this all done? Got it. God, I hope there's only
one of me. I can't imagine. You're right. We
pulled a parcel out of the master plan and rezoned
it from public space to residential and pushed
the density. Which was time consuming and required
so much of your mental bandwidth and time and
energy. Totally. And meetings with the landowner
and then we did a JV with the landowner and we
had all this. We did all that in six months.
Engineers. Engineers, city council, planning
commission, all these things. We could have easily,
easily had that drag on for nine months to a
year. They did it in six. And I have to believe
it's because I was able to focus on it and it
wasn't pulled in a hundred different directions.
And those dividends, you won't get. For a year,
you know, we won't feel that for end of 26 on
some of them early 27 on others I mean, it's
something that's not instant gratification That's
why I said you can go be going you can be doing
the wrong thing for two years as a homebuilder
before you even realize Oh, that wasn't a good
direction to take the product line in that wasn't
a good You know policy to have with buyers, you
know, whatever it is. You don't necessarily know
it doesn't you don't get that kind of instant
feedback So in summary q3 has been Cute okay.
So in summary q2 I would say was the worst because
it was new the feelings were new. Oh, this is
not just a weird winter Yeah, very just confused
and unsure and it's the sky falling. Yeah, exactly
and We got through that fear in q2 and I feel
like q3 has kind of thought a little bit We still
have enough inventory. I feel like the average
seller is going to have 90 to 180 days before
they'll give up, whether they're overpriced,
whether they're hard to negotiate with, whether
their house is inferior in some way. I think
that we've kind of weeded through some of those
people that maybe were April 15th listing. Now
we're four and a half months on and you've had
no activity, no traffic, no offers, no anything.
Eventually that seller says, you know what, maybe
we really don't need to sell. Maybe we'll put
our move on hold. Maybe we'll put a tenant in
there again or whatever. So I think that Q3,
the theme for Q3 is equilibrium. Q4, I think
we'll see. The 10 -year treasury has been doing
really well, meaning going down. So I think we'll
continue to see rates fall. Like I said, we're
below 6 .5 right now, which sounds like a lot,
but considering we spent a lot of last year in
the sevens, it's a lot. I mean, 1%. Think about
if we were at 5 .5, how we'd be dancing in the
street. So we don't celebrate 7 .5 to 6 .5, we
should be. That's a huge difference. I mean,
you look at a $700 ,000 loan amount, 1 % of that's
$7 ,000 a year. It's an extra $600 a month. Just
from seven and a half to six and a half. Of course,
that same logic applies from six and a half to
five and a half. So I get it. Where do you stop
it? I just think we should maybe count our victories.
And I get it. I think part of the problem is
that when buyer's fuel rates are going down or
trending down, they actually... freezes the market
a little bit more, even though rates are better
than they were six months ago or three months
ago. But they feel like, well, if they've done
a six and a half, I really want to go through
all that and then have to refi again in a year
anyway. So it's, we're just sorting through it.
I just think I don't have money. I don't have
high expectations for 2025. I don't, I don't,
we have a lot, even not a lot as a company, we
have, we're going to go from one to four active,
completely done, ready to go. Assuming none of
them sell. I mean, we could end the year with
four or $2 million homes, you know, it's not
great feeling, but I've mentally I've grappled
with it already. I mean, it's, you know, especially
given how uncertain things have been, I think
just kind of a wrap up and what is it? What has
it been? What does it look like? I think a lot
of people are sort of still. figuring it out
and threading their way through this without
a lot of understanding about actually what has
transpired and what's sort of in the mix of where
we're going. So big terms, you know, and I know
we talk about it a lot, but the news and social
media and the fear and the, you know, I mean,
you just, to cut through all of that and hear
a real perspective of boots on the ground, what's
really happening out here is helpful. Right,
right. I, you know, people are busy and they
got their own lives. They have soccer practice,
they have work, they have family, friends. They're,
they're doing a temperature check. They're dipping
the toe in and then not thinking about it again
for a couple of months. So they're, that's why
it just takes time. Once the news goes sour,
it takes a long time for that faith to come back
and the confidence to come back. A lot of times
people have to feel it because as a broker, I've
been through a couple of these cycles in 11 years
and It takes a minute, right, for people to get
that out of their head that, oh, the market's
not going to crash because the strip is closed
down and people are wearing masks. It just took
a minute. And honestly, it really wasn't until
the early part of 21 that we saw the biggest
spike in buyer demand. And rates had been low
for most of 2020. So we can't just blame the
rates. And homes were sitting for, I mean, there
were homes that were sitting for a long time
in 2020. There was not, it was not, we remember
it that way. It was not, it was, back half of
the year you had to get better, but it wasn't
a frenzy until 21, 22 and rates have been down
for about eight, nine months. So it just shows
you how long it takes to, for sentiments to change.
For sure for sure or they're fearful of something
else, you know, there's something in the political
like Political climate or eggs prices have gone
up or you know, I mean there are other things
other factors that have happened in in our world
in our universe in recent year that People are
like, oh you can't can't afford a house now because
the grocery stores and they're just kind of sitting
on the sidelines making these you know, yeah,
whatever they what they call that like a pre
-conceived notion. Armchair quarterback, right?
Armchair quarterback, exactly. All the plays
that you're not really in the game on, but they're
not willing to step into the game to even inform
themselves entirely about what is exactly happening
in this industry and how it's changing or what
leverage they do have as a buyer, a bill seller,
whatever. They don't think about the fundamentals
of real estate as an asset class. It's just the
bottom line is these are not cars. These aren't
even precious metals. These are homes. I mean,
they have 3D, they're 3D structures. They have
emotion, they have feeling, they generate, they
create the city. I mean, there's no city without
houses. It's something so fundamental to restaurants
can fall and fail. Tech companies can fail. But
at the end of the day, real estate as an asset
class is just not, it's just too resilient and
it's too rigid. And it's got a, it's got not
nearly enough elasticity in it. that would have,
you know, this kind of instability that people
associate with the stock market or cryptocurrency
or whatever. Right. Even the car market. Those
are all topics that have played into some of
the narratives that we've heard, you know, that.
Exactly. Like I said, the eggs. I mean, there's
just random things that pop in, people just associate.
It's not necessarily. And if you average it out
or look out over the entire scheme of the real
estate market, it's always... performed. It has,
if you can hold on to it, if you can keep it,
it has, you know, proven itself over time as
a earning. A robust asset class because it can
also be utilized. It has utility. It has Um,
you can borrow against it. I mean, there's just
so much that it has to offer. Of course it's
the location. If you buy something in inner city
Detroit, of course it's very, not every investment,
real estate investment has been a great, has
been a winner, but overall, if you're swimming
with the current, right? And everyone's moving
to the Sunbelt and everyone's moving to low tax
burden states and everyone's moving to suburbia.
I mean, let's face it. We did a walkability episode
a couple months ago. It's not taking off. It
just isn't. Suburbia is where it's at. If you're
investing in Suburbia, you're not investing in
these surfside condos in Miami that have had
taken a beating. I mean, if you're swimming with
the current and you're buying single -family
residential or town homes, you know, something
where you kind of control the earth you're on,
generally, you're pretty safe. And it might not
be the best. Exactly. It might not be the best.
Maybe not always as an investment, but as a home,
you can't go wrong. Well, good. All right. So
that's what's going on in Q3. A lot, but not
really? No. More just information. How do we
feel? How do we think buyers feel? How do other
agents feel? And how do other builders feel?
It all kind of plays into it. It does, for sure.
For sure. Well, thank you. I appreciate your
time. Sounds good. And we'll be back soon. So
you guys tune in again next time. We will look
forward to seeing you then and we'll have more
great topics, more great insight, more great
information, and look forward to an opportunity
to chatting with you then. Thanks. Bye -bye.
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