That's a wrap on season one of Trust the Process
podcast. Thank you for listening, sharing, and
sending us your questions and comments. We've
enjoyed sharing our takeaways with you. The final
episode of this season is a mashup of all your
favorite clips from the past year. See you in
2026 with more builds, stories, and lessons from
the field. 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. All luxury homes are custom,
but not all custom homes are luxury. And I say
that, I mean, there are some really nice production
tract homes that you could consider luxury, especially
in some higher cost markets. Sure. But for the
most part, you don't have to be in the luxury
space to be a custom home builder, some rural
areas and some rural states. You could be building
in Kansas and maybe you're a custom home builder,
but your average sales price is $450 ,000. So
I look at it that way. Something that is not
being replicated at scale, irresponsible. Water
management is what equals more water usage. Agriculture
in an arid, dry climate equals water usage. So
as long as we know what we're dealing with, I'm
not advocating to get rid of every farm west
of the Mississippi, I'm just saying we have to
acknowledge that the Colorado River is an agricultural
water supply more than it is anything else. And
then after that, it's its own vegetation, then
every city on the Colorado River, and then evaporation.
It's just crazy to me that that's where the water
goes. Another kind of Interesting thought and
this is way down the rabbit hole, but the city
kind of owns your property too. You're basically
in business with your city. And if you don't
think that just stop paying your property taxes
for a while and that house becomes theirs. So
really every home that's built the city might
see as their home. They have a vested interest
in that home as well. It's their tax base. So
They might own that house one day, if you're
not careful. Welcome back to Trust the Process,
podcast where we talk about real estate, new
home construction, the housing industry, and
everything in between. Today, we are going to
talk about a topic that's a little controversial,
especially here in the desert, water. I know
that just stirred a lot of people up right away.
I can hear them. I can hear the trolls in their
comments right now. All builders taking all the
water, building so many homes. And so wanted
to do a bit of a deep dive on this just so that
we could sort of lay the foundation for the awareness
of the water. Obviously there is a conservation
effort, but some of that and then maybe answer
some of the questions that we get from people
about water and about building as how it relates
to water. So I'll let you. I'll let you take
our resident expert. I'll let you take... And
this is not one I'll claim full expertise on
because it's a... I mean, there's geologists
that study this and there's a lot of things that
go into it. So I don't proclaim to be an expert,
but it is something that's relevant to the industry
and it's relevant to being a citizen of the Southwest.
You know, none of us are probably supposed to
be here. Yeah. I pretty much took some of the
most hostile land in the country and said, let's
put a couple more people. Right. Right. 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 right 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 do they
are a business and it's not 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. We
thought it would be fun to invite you into that
behind the scenes process, seeing how we get
from raw land to finished product where we're
handing off the keys to a happy homeowner and
how all of those pieces come together. As you
can imagine, it's not always a seamless process.
So there's a lot of ebb and flow and highs and
lows, and we'll take you through the successes
of the journey. And I'm sure there will be a
lot of surprises that we don't even know are
coming. Wouldn't be new construction if there
were surprises. Everyone is an amateur economist
when it comes to their home purchase. And I think
that you're 100 % correct in that they don't
know how to feel about the interest rates. They
don't even know what a 7 % rate translates to
in a pain they don't realize that it's true that
is a huge when most of your amortization on the
front end is interest Seven percent versus three
and a half percent is a doubling of your mortgage
payment because so much of it is interest So
it is a is a really big deal proves that each
one is really a labor of love and get air You
know people don't always know how much emotion
has gone into that or how you know How much you
have learned to love that project because you
could have bailed on it and you didn't exactly
by the time you're going vertical you've You've
passed on several off -ramps. You know, I don't
want to do that. I don't do that one I don't
want that one. I want to see it through So need
a third party an adult in the room I even government
that regulates it for you because I can't go
start a Jetliner company tomorrow, although don't
put it past me But I think don't give me any
ideas you also look at back even just a few generations
ago, my grandmother, still going, never rode
a bike and never had a driver's license. So she
lives in New York. She walks everywhere, takes
the city bus, or my cousins bring her, my uncle
brings her, they all take care of her. So the
idea of her living out in a suburb would just
be anathema to everything that she's ever grown
up thinking. It's just, no, why would I do that?
So it's as crazy as putting one of us in a...
you know, 4 -4 walk up. Yeah, that's public transportation.
She gets on the bus. She's 92 years old. She
gets on the bus. Yeah. Wow, Grandma, that's amazing.
It just doesn't happen much in Vegas. It doesn't
happen here as much as it does in other cities.
How do you decide what's going to go on any specific
lot? It's kind of a catch -22 because you're
building out to a product that you're going to
market. months from now. So it's anticipating
what's going to what there might be an appetite
in that area for and how you put that pricing
together. And now this year in 2025 will deliver
around 30 to $32 million worth of new homes.
Yes, so it's quite a ride. And today we're going
to talk about... What are we going to talk about?
Oh, bright spots and headwinds. Oh, bright spots
and headwinds. Which sounds like an 80s punk
band. It should be. A hair band. It isn't, it
should be. Right, I like it. So if the imported
cost is roughly half of that, usually every person
that touches it, it doubles, right? Generally
speaking. So that means that $40 ,000 package
may be a $20 ,000 import, but I already had a
14 % tariff on it at that time. So maybe the
raw cost was 17 ,000. So if we add 60 % tariff
to that, that's around $8 ,500. Let's call it
9 ,000. So instead of 40 ,000, I'm at 9 ,000.
And that's if they went all the way up to 60%.
As a builder, I fatigue much quicker because
even though this is my business, I already, you
know when you have young kids and you know they're
going to freak out over one thing and you're
so tired of that friction point, whether it's
brushing their teeth or whether it's going to
bed. Sometimes this business feels like that.
Can we change this refrigerator to the other
side of the kitchen? No. And when you say no,
you're waiting for the tantrum. You're waiting
for the buildup. You're waiting for the four
AM email or three AM email where they're fired
up and they're got a bunch of things to say to
you. And it's those, that's right. When you think
about, I have to explain this so many times.
That's why I wanted to make an episode. So number
one zoning. So the zoning is you would have to
have a lot of political will to change that zoning
because not only do we have minimum lot sizes,
we have minimum setbacks, many times we have
minimum structure sizes too. So it would be illegal
to build a 400 square foot home on that lot.
There are certain size requirements. Maybe it's
1 ,500, maybe it's 1 ,000. And that's saying
the land's not in any kind of HOA or has any
kind of special conditions that way. That's strike
number one. I'm doing usually one -off. I mean
we have a batch running through four in that
in South Shore So those I had the lots and I
was able to put the same plan on two of them
and then a similar plan on the third and then
a single story another just to mix up my product
offering But once I had all the architectural
design now we're pouring those foundations this
week. So I have to order windows So I ordered
windows on one all over windows, you know, so
this week I have to have all the windows order
because they're six weeks out. So as the lead
time Item starts to come to where I need to have
a mortar so that they're here on time That's
when I start making decisions Aluminum thermally
broken bronze aluminum windows bronze color aluminum
windows are roughly twice as much as the same
product and vinyl and then fiberglass somewhere
in between Efficiency and yeah, there's some
do I buy a name brand and with that one when
you're building in South Shore? You're limited
by the HOA to they have criteria that you have
to meet for the exterior. Oh for sure Yeah, yeah,
you just can't I can't change anything on the
outside. Once I Submitted it to the HOA, submitted
my design and my elevations. That's it. I can
change windows, but I have to reapply. So this
one, I'm deciding to do a bronze window. I just
have to send it in. That's an approved window.
So that's something I've never been afraid of.
I'll jump. I don't even need to know there's
a parachute there. So I'm good with that. That's
entirely true. You will learn throughout the
course of this podcast. Michael is fearless about
moving into your territory. It's a blessing.
It's a gift. Absolutely. remains to be seen,
but it's so far been a blessing. Let's find that
price. Let's find that product that will, that
will carry that sales price because we think
the neighborhood and the lots can carry that
sales price. What kind of designs finishes and
square footage and amenities are people going
to expect for that sales price? And that those
are knowables. I can get an idea of where the
market is a lot those can change a little bit
the finishes the yeah you know and probably we're
gonna use this quality of a product yeah we can
do whirlpool versus genera if we find that oh
we kind of we've kind of mixed it or if heaven
forbid anything should happen or something opens
up and then you realize you want to build a little
bit higher which i'm doing on my serene project
las vegas recycles this sounds hyperbolic 99
% of its interior water usage. So you could run
every faucet all day long, flush every toilet
consistently, and as long as it's hitting a drain,
99 % of it gets recycled back into the water
supply. So an apartment complex with 99 % of
its water use being used indoors, maybe a little
bit of the desert landscaping in the perimeter,
and then 99 % of that being recycled... That's
not where we need to worry about our water. And
to give the viewers or listeners kind of an insight,
in 2025, trust homeowners will build and sell
about $35 million worth of homes. So going from
one little house nine years ago, not even nine
years, barely nine years ago, going from one
little house for $280 ,000 to $35 million worth
of real estate. And that's just what's on the
books now. And there's always more. My ears are
always turning. And for sure. So I don't proclaim
to be an expert, but it is something that's relevant
to the industry and it's relevant to being a
citizen of the Southwest. You know, none of us
are probably supposed to be here. I pretty much
took some of the most hostile land in the country
and said, let's put a couple million people here.
Sounds good to me. But we do live here and we
are realtors. And you've been a broker and now
you're a builder. perspective that overlays.
And we've answered these questions and have these
conversations with so many people over the years
as it relates to housing. So while you maybe
aren't an expert in terms of the geological sense,
I think in terms of the housing market and the
Las Vegas trends and what we understand about
the water conservation. And the greater southwest,
yeah. Exactly. I think there's definitely an
expertise that follows. So you can wear the hat
on this. OK, you're right. And I did get grilled
a lot on this even before I was a builder and
developer and now in a... I definitely get grilled
on it now, but I remember as a broker, people
would ask, well, were you worried about water?
The bottom line is that we're here. We weren't
probably not supposed to be in the middle of
the Mojave Desert or in the middle of Arizona
or in the middle of the Inland Empire. A lot
of those, a lot of California's desert and a
lot of population lives in desert or even arid
climates like Denver. Just really anything west
of the Mississippi is kind of technically arid.
I mean, I guess until you get to the Pacific
Northwest, but a lot of the population that west
of the Mississippi lives in arid climates. So
water is a huge concern and I'm not an insurance
expert, but everything is about the likelihood
of a major loss happening in X number of years
over the amount of value of that loss. So if
a fire is an every 50 year event, that property
becomes insurable. They're pretty much having
to hit you with the 2%. Risk so your property
is a million dollars 2 % of that if you have
a 1 in 50 year chance of a total loss Just general
of these are more that goes into these calculations
and that but in general. That's a $20 ,000 a
year policy Because it's a 2 % risk of a loss
so when you couple that with other natural disasters
and over other overlays and then just an overall
appetite for Wanting to be in that business at
the end of the day Insurance is a capitalist
endeavor, so you're going to have to have people
that want to take that risk. Even if the math
is $20 ,000, maybe the market has policies priced
at $40 ,000, and it just might be an uninsurable,
insurmountable hill to climb. Production homes
are what we might call a cookie -cutter suburban
house, a neighborhood maybe probably 50 homes
or greater, generally built by a publicly traded
home builder. You need very deep pockets to undertake
subdivisions at large, to hold the land, to hold
the infrastructure, and the amount of manpower
just in managing projects at large requires you
to be a very well -funded, like I said, generally
publicly traded company. The other day it's housing.
Housing is a basic need and a luxury good at
the same time. A production home can be a luxury
good. Definitely does not have to be custom to
be a luxury good. And a custom home can be basic
housing, depending on where you live. It's just
kind of the nature of who built it, what was
the process like, what was the end user's involvement
in the process, and that's kind of how. But it's
a Venn diagram, and a lot of it overlaps. 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.
Those variables that now are very shouldering.
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. So
it's a convenience. A lumber package, just to
pull back the curtain a little bit, a lumber
package on a luxury home. You know what a good
rule of thumb, a lumber package on a house is
around $10 a square foot. That's going to depend
on ceiling heights and different things. That's
not including your trusses, your floor trusses,
your roof trusses, but a lumber package is around,
so if you build a 4 ,000 square foot home, it's
$40 ,000. Once you've signed off on everything,
design wise. As I mentioned, it sees five different
engineers. It's going to see an electrical engineer
to lay out the electrical schematic and do the
load calculations. It's going to see a plumbing
engineer that's going to draw where all the gas
lines, waste lines, and supply lines go. It's
going to have an HVAC, what we call a mechanical
engineer. These plans are called MEPs. So that's
three engineers right there. And then you'll
have your structural engineer after your soils
engineer. That's why I hesitated to say five,
because you could argue it's six. because we
have a soils engineer that goes out and bores
the soil and does compaction tests and says,
okay, your footers need to be this deep and your
load bearing on this soil, maybe the soil needs
to come out, which we call over -exing. You're
over -excavating it and then putting it back
at a more compacted. And usually having third
party engineers test that during construction
or watch it, what we call lifts. So usually every
foot. That's down the road. That's once we've
broken ground. But those are the things that
are called out during those tests between the
structural engineer, talking with the geotechnical
engineer, working along with the architect and
the MEP engineer. They all do need to talk to
each other. And that's where a builder is kind
of acts as a liaison because no one's going to
own your project the way you're going to own
it. Your builder is your second best proxy for
that. So if you're having, you know, you're employing
a custom home builder, you want someone that
you can trust that has the experience that can
act as your advocate to say, oh, we've reviewed
these plans. This is something I commonly see.
The structurals are over -engineered because
an engineer's main purpose is not to save you
money and build costs, it's to limit liability
on his own license. So I just had a project in
South Shore, one of the ones we'll cover in the
later episode that had a concrete bid come back
at $93 ,000, a home that I expected of $45 ,000
to $50 ,000. And you get the bid and you go,
no, we're re -engineering this house. I looked
at it. He way over -engineered it for the soils
report. He did footers that were two times wider,
two times deeper. What we saw was, you know,
the little bit of, you know, liability avoidance.
I went and shopped it to another engineer, paid
for another set of structural plans, but that
$6 ,000 saved me $50 ,000 worth of concrete slab.
So well worth it. And then other efficiencies
I picked up. Huge. And that's why the build,
you know, the building industry is not for the
faint of heart. When you've got, when you have
15 of those and you make a $50 ,000 mistake,
it can be It's really painful. Costly. Yeah.
And then the other engineer, the final engineer
would be your civil engineer is creating your
grading plan and creating your site plan and
showing where all the water is going to go and
how the home is going to sit and how high the
pad elevations are. And that's your last engineer.
And then you submit that to the city. How does
that zoning get initiated? Where does it come
from originally? That's a deep word. Okay. We'll
save that for another time. I wish there was
something more than water in this. Where is all
the land? Why are we in a land shortage on paper,
but not in reality, right? If we were to drop
an alien into any major US city, and you said,
believe it or not, one of our scarcest assets
as a city is our land, they would beam you up
and shoot you into a comet. Welcome back to Trust
the Process, podcast where we... Yes. Okay, what
are we doing here making cookies or muffins?
3D printing models that come together and that
kind of thing. I mean, there's some of that happening
They look like the hives, you know that in fact
a big publicly traded company did a whole neighborhood
in Texas of 3d printed homes and It's great.
And that's another thing people ask me tiny homes
and then somewhat less frequently 3d printed
homes, but the funny thing is what Okay, what
problem did that solve homes carry around a 25
% premium over resale homes? That's just the
market speaking I can't 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 seven hundred
fifty thousand 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 we're using 75 % of the water that we were
using 20 years ago, and we grew by three -quarters
of a million people. That's good news. That's
great. So it shows you that growth does not equal
more water. usage. Irresponsible water management
is what equals more water usage. Agriculture
in an arid dry climate equals water usage. So
if I'm building a 4 ,000 square foot home, I'm
spending on the order of $60 ,000 before my permit.
And then the permit is generally based on the
size of the home, how many fixtures are in it.
So your permit in our market is generally on
a home like that, another 8 to 10 ,000. And plan
check these are another 1 ,500. HOAs usually
charge a fee. So on one of our luxury homes in
South Shore and like Las Vegas is just an example
between the HOA and the permitting and all of
the professions that go into the engineering
and architecture, it's around $100 ,000. Before
I move my first speck of dirt, $100 ,000. Just
a home on paper, that's all. Just a home on paper
plus a half a million dollar lot or $400 ,000
lot, right? So you're... There's a lot of guts
and glory that goes into before you've mobilized
your first laborer on site. It's definitely a
trying, challenging industry. There's about $1
,500 in our jurisdiction, about $1 ,500 worth
of plan check. So I get that they're kind of
auditing the plans for code. And then the city
vector is auditing the bill to the plans. It
just kind of cascades down. That being said,
the amount of deviation away from the plans and
the amount of things that are either not caught
in plan check or called out as simple labeling
conventions. I could build a cardboard box on
that, but because of the lot size, because of
the location and the zip code, it's a $1 .4 million
home, we're gonna have to build to 2 ,500 square
foot, simple basic box. And then you're trying
to find the sweet spot where you can maximize
your margins. And then say, okay, I can put another
100 ,000 into this home. and sell it for 1 .7.
And then you kind of start chasing your tail
until you hit your limiter. And you say, OK,
now let's start working backwards. So I understand
why. And I wanted to give our viewers that context
that I'm not anti -regulation. I love the idea
that we have better building standards today
than we did even 20, 25 years ago. So. That being
said, I want to trash the coats for a while.
You're ready to sign at what you thought was
a $2 ,200 mortgage payment now is a $2 ,850.
And some people just literally no longer could
qualify. If you're right on the line, if you're
just barely quires are just barely there. That's
right. And if there's that little bit of swing
knocks them right out of the game. Exactly. So
we can't we can't sustain those payment shocks
and spoiler a lot of move up and move up to buyers
stretch it as well. Right. So as though really
had a lot of canceling. It's not my responsibility
to make them love this house. I'm building this
house. If they love it, then they should buy
it. And if there's things that they want to do
to it. after to make them love it more, that's
on them. I can't be responsible for making sure
they walk in on day one and saying, ah, this
is perfect. I wouldn't change a thing. It's just
not realistic. My point is, is that all those
homes that transact during that time. those people
don't have golden handcuffs on them, right? So
there are people that just have a 6 % rate and
just say, well, I am moving for this job opportunity
or this lifestyle change or I'm retiring and
I'm not going to spend three more winters because
my retirement home in Florida or in Las Vegas
is going to have a 6 % rate instead of a 4 %
rate to give them credit. Zillow has wildly disrupted
the real estate market. And I think in almost
every good way possible, it gave buyers a lot
more authority, gave buyers a lot more Knowledge
of the market buyers can watch Kind of however
things trending but more than that sellers also
know many times a Broker is gonna walk into a
house and a seller is already gonna know within
five percent of what the homes probably truly.
That's how sales prices are set, right? That's
right and the sellers are well those resources
online. That's right. Really great. That's right,
right So it really democratized the whole housing
market to where brokers did not hold all the
info and amount of data just in photos of homes.
I mean, you, you don't even need to go bring
your neighbor a jello mold anymore because you've
already seen 55 photos of their house before
they bought it. So, you know, your neighbors
know your house as well as you do in many ways,
right? So it just kind of was a, was a, in my
opinion, a great positive disruptor. And it's
one reason why we took a pause for a couple of
years on build to sue clients because after two
or three years you are so fatigued of each other
and there's so many things that can change and
didn't turn out the way they thought and they
blame you or whatever there's always somebody
to blame that's not them their relationship always
struggle appreciate you being open to being on
camera no problem and you look handsome as hell
the hair's looking he's got his tanning engineering
shirt on he's just looking good Anyway, and maybe
when we get some good news on our granny plans,
you'll look even better. In your eyes, hopefully,
at least. Yeah, probably. What I found interesting
when we talk about cycles, the biggest cohort
of buyers moving through the system right now
is 56 years old. 17 years ago, the average buyer
moving through the system, the largest cohort
was 39 years old. They're the same people. 17
years later they're 17 years older. It is the
most alarming statistic I've ever seen. It's
showing you that there's almost like this property
gilded land and gentry class that's moving through
the market. I do find it interesting that not
every jurisdiction requires it, so why do some
and not others? I can't find a reasoning behind
that. You know, we have something on certain
permits, standard details. So you don't have
to get a soils test to do an ingrown pool. You
don't have to do a soils test for a wall, especially
a fence. I mean, if you want to do a retaining
wall. There's still, there are standard details
though for Nevada soil. So I just find that interesting
that we don't have that for a home and why that's
so cost prohibitive. But after two days of agonizing
over the plans, I had my coffee and the first
thing they boots up and it was zoomed in on the
common area almost comedic like cinematic and
it zooms in and the screen lights up and I 35
75 I'm gonna calculate it's not 500 times eight
that's 500 times seven so after all that I had
to scrap it all the builders have kind of propped
up that real estate market right because We've
been able to, 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 we, we help regulate the market. We
give liquidity to the market when we need, 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 their one part. finance sears and one part
home builders, right? I mean, they get a huge
source of revenue by selling mortgages. They
get all that and all those ancillary services,
they get rebates on appliances and it really
the home is secondary, right? I mean, that the
home is the financial insurance instrument. So
really can has kind of helped to balance everything
out. It's not a normal market where Meaning a
marketplace, right? Where you have buyers and
sellers with equal power, uh, or equal, equal
basis, right? And you know, there's always someone
who 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 a secondary, the real estate
market be kind of a secondary. We build pools
at our own cost, and we're spending around $90
,000 just in hard costs. Equipment, excavation,
gun ice. I mean, we do it nice. We upgrade a
lot of things. They're all smart pools and telecenter
run by your phone. But even if I were to trim
it down to bare bones, I'd still be spending
in the 70s, probably 71, 72. Cabinets are thought
of in boxes. You break them into a box. Even
if it's ... You know a whole bank of cabinets.
It's how many boxes made up that bank of cabinets
We had a house that's just not finishing that
when I really broke it down. This one did sticker
shock me It was twelve hundred dollars per box
It was forty nine boxes and it was a sixty two
thousand dollar cabinet package 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 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. And they don't, they don't think about
the fundamentals of real estate as an asset class.
That'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, real estate as an asset class,
just two. resilient and it's too rigid. It's
got not nearly enough elasticity in it that would
have this kind of instability that people associate
with the stock market or cryptocurrency or whatever.
the drama and spiciness of new home construction.
So I hope that people can garner value from this
podcast. I know that new home construction and
design and real estate and the market are passions
of a lot of people. There are a lot of enthusiasts
connected. That's right. Springboarding into
Las Vegas and other Sunbell areas. We're seeing
finished about 11 ,500 homes in 2024 and we expect
to finish around that same number in 2025, just
based off of what permits are pulled right now.
And trends, there's about 9 ,000 ready to develop
lots. And that's just something that could be
developed within the next six to nine months.
So there is the lot inventory in Las Vegas. Now,
again, most of that's held by those Fortune 500
home builders and publicly traded home builders.
Those aren't lots. You can't go buy 9 ,000 lots
in Las Vegas. I would say it's probably... 400
lots and they're all luxury lots for the most
part that you can actually buy in Las Vegas.
But there are there's the lots that are developed
that's not even counting the infrastructure and
the work that's going to be happening in the
next three or four quarters that will deliver
more ready -to -go lots. So assuming that builders
will build on all 9 ,400 plus additional lots
being brought to market stands to reason that
we'll probably see around the same number of
homes delivered single -family homes. give or
take 10 % which is not nothing 10 % and that's
still well over a thousand homes but I think
will be probably not less than 10 and not more
than 12 ,000 times being completed in a little
hack but I do hopefully this doesn't publish
in a bag of curtains you actually don't need
a permit until you call for your first inspection
this is probably gonna get me blacklisted by
the city so I go into it thinking Okay, can we
get townhomes in here? Let's just say 2 .3 million
divided by 23. I'm into $100 ,000 per pad or
door. Okay. Very doable in that area because
even a townhome would still sell for five or
$600 ,000 if I did them right. So then I'm starting
there at $100 ,000. Amazing. Let's do it. So
if you're building to that bottom of the market,
you're very exposed. and the greatest underserved
market. It's a positive feedback loop. It's so
underserved because it is underserved. As we
get in the weeds later on in the podcast, talk
about some individual projects that we have coming
as a company, and as we're making decisions as
to how to build those out, this is informing
my decisions. The risk is higher building to
the bottom of the market. First, you have less
room to go. You have less room to absorb surprises.
If you're building at the median, which is in
the middle $400 ,000 range, if you have a $50
,000 surprise per home site, It's 10 % of the
entire end -of -day sales price. It's risky.
If you're building to 150 % of the median sales
price at $800 ,000, you have a $50 ,000 surprise.
Those are the things that I'm excited to expose.
Those are things that people aren't aware of
or thought about it from that back -end perspective.
Some of these are actually bigger line items
than the first three. but they're such integral
parts of the house, you would expect them to
be higher. So I consider it reverse sticker shock.
Well, that's really, well, I still spent 1 .7
in build costs, but the lumber was only X number
of dollars. And when I was new in this, especially
when it was really becoming a true business about
six, seven years ago, I made a lot of mistakes.
So I'll humbly admit that I made a lot of mistakes
about letting buyers come in and rule the show.
And you felt so gratified. Oh, someone wants
to buy something I created. Of course. Oh, yeah,
you want to change this? I want you to love it.
That lasts about three times and then now it's
no That's why builders set the market and builders
what we're in the business of built we have to
sell them So we're not holding on to this asset
that was part of our retirement It's can we have
to sell so we move on to the next ones or we
know we're gonna get this batch of homes kind
of move through the ecosystem so we can Move
on to other projects. I'm already committed to
and money's already on the line and we're thinking
about selling that Before it hits the ground
right that our whole idea of examples that might
Maybe wake up the city to say look we have to
find a happy medium here We are a growing city
were desirable city and ultimately people deserve
peaceful enjoyment of their property and that
includes improving it and making it better and
putting it into The city itself. Otherwise, we're
a city of just raw land and then we're not a
city 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, there's
a reason this house has been passed over. On
a home that might cost around $300 a square to
build with an end of day value of around $500
per square foot, your labor is probably only
$100 a square. And that is generous, actually.
Really? Yeah. So, because labor is less than
half of the total cost of construction costs
and about 20 % of the end of day value of the
home. I told my engineer that. I said, we are
going to pick one or two waivers. That's it.
I don't want to go to them and say, oh, by the
way, I know I already asked to not have to do
any park space. Can I also do narrower streets?
Can I also not do a sidewalk? Can I also not
do a cul -de -sac? That's what your sanitation
person wanted. Now I'm going to get none of them.
Sounds like a little kid. Do you want to stay
up till 10 and ask nicely? Or do you want to
go for midnight and also ask for ice cream too
and also has to go to the park tomorrow and also
So I think that you know, that was the path of
listers and the network analysis is just are
we? Did they have water supply in the area essentially
to let us tap in to our water? Pressures meet
the minimum so that when you turn on your faucet
like it's not just a drip system It's gonna flow
out and you can wash your hands. So so There's
about fit in our jurisdiction about $1 ,500 worth
of plan check so I get that that they're kind
of auditing the plans for For code so and then
the city vector is auditing the bill to the plans
It's just kind of cascades down that being said
the amount of deviation away from The plans and
the amount of things that are either not caught
in plan check or called out as simple labeling
conventions We're paying almost 1 million dollars
for this we will have almost another million
dollars in engineering Infrastructure the cul
-de -sac the all the everything the grading sits
on a hillside and it's a mess It's gonna be a
lot of work to get these things pet ready. Yeah
Easily easily might even be a little bit more
so it may be two one or two one five So you can
see when that is the new the numerator I want
to minimize the lot cost by maximizing the denominator,
i .e. the total amount of home sites. It just
seems like once you move your shovel, just figure
$70 ,000 and then go up from there. And that's
our cost. That's not a company being greedy.
That's us paying the excavator, us paying the
rebar people, us paying the pool plumbers directly.
So those are our costs. I'm talking about pulling
back the curtain. I mean, that shows you. Those
are our true costs. That's what we're spending
on a pool. And 10 years ago, companies were retailing
pools for $40 ,000. Isn't that crazy? It's crazy.
The model that we think of, but that model home
is permitted. And then all you have to do is
submit. So all that engineering is permitted.
All the architectures are permitted. All the
codes that are referenced are permitted. And
then all you have to do is submit with that home
on that lot. And then the city grants you that
permit, but it's a production permit or a trucked
home permit. What does that do? to our home prices.
A lot of our, like I mentioned, a lot of appliances
and Samsung and things like that. They come from
Asia and they're imported. Thankfully, homes
are one of the last things still built by hand
and one of the last things that you cannot import.
Right. So many of the goods that go into that
home, maybe the copper comes from China for the
electricity, depending on where you're sourcing
it from. And we're closed out 24 with one billion
dollars in investor purchases in the greater
Las Vegas market. As a whole, we're kind of leading
the nation when it comes to investor purchases
us in Denver and Phoenix kind of those suburban
sprawl where it's easier to buy a block of homes
maybe not on the same block but a block of homes
that are relatively easy to manage versus a more
fragmented market on the east coast where it's
harder to manage maybe a suburb that's 20 miles
this way 20 miles that way so we're still leading
the nation with investor purchases and the nation
is leading the world and the amount of investor
purchases into single -family residential so
that's yet another backstop and I think that's
putting a lot of pressure on that appreciation
and maybe that's getting us the four and five
percent appreciation that we saw last year. I
haven't had a home that sold for north of two
million that didn't have at least $30 ,000 worth
of appliances in it because where do you stop?
we should probably have an ice maker, an under
counter ice maker that's plumbed in, and we should
probably have fridge columns, and we should probably
make them panel ready and do the cabinet panels.
The nicer you make those fridge columns, now
this has to match, and now that has to go, and
this has, you know, you kind of, do you want
to keep the same brand? Right, that's right,
and before you know it, you've spent $40 ,000
to $50 ,000. The most I've ever spent was $70
,000. On an appliance package? On an appliance
package for a $3 million home. But that home
warranted it. Oh, it did. It had to. It did,
100%. And the end -of -day buyer actually noted
the high -end appliance package that tipped him
over from buying a home. And it was good. It
was really great. So if I shared it over time,
it was a fun one. So the housing market is, as
you said, it's not very exciting. It's just not
a tumultuous year. It's been stable for the last...
more or less two and a half years, I would say
probably. Well, we're going up probably in three
years. I think it really started to stabilize
in middle of 2022, which is what the intention
was, you know, to get to get a lid on those that
runaway kind of price gains that we were seeing.
And that worked. Thankfully, we've just gone
into a prolonged period of very stable, healthy
appreciation and a lot of Other factors that
are affecting the market not necessarily price
gains. So Inventory obviously remains really
constrained and then mortgage rates and I think
this that kind of those two things together have
honestly Functioned as a backstop My interest
is let's get into this project. Let's develop
it. Let's move on to the next one This is not
my end all be all this is not my opus. I'm not
here to make this little hillside on Horizon
Ridge 15 home subdivision. I don't make it seven,
right? I'll leave 23 ,000 square feet on thin
of you know, but preserve hillside and we'll
move on I'm not gonna fight on the common area
element. I'm gonna reduce the zoning I'm not
gonna fight on the street with I'll give them
the street with right So that's kind of wait
a minute four homes have sold in the last few
months on this very street and this one had this
pool and this one didn't have one this one had
this finishes and this one and you can even scroll
through the house and see this looks like that
that yes ours has this right didn't have and
yeah, so I think in many ways That has that's
why I throw history out because I can't believe
I just said that Because there's there's no there's
never been a time like this Where buyers had
and just general public had so much knowledge
at their fingertips of the real estate market
Street and people will say builders, you know,
they don't build like they used to it. Yeah feel
the same. It doesn't They're right and But they
don't know the back story as to why it isn't
that you had some idea to throw less houses and
put in more street. There are these rules. Trust
me. I don't want it to. Thanks for tuning into
the Press the Process podcast. Make sure to follow
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insights, project updates and everything in between.
See you next time.