WEBVTT 00:00:00.000 --> 00:00:02.859 Economists, I think they're right. I think it's 00:00:02.859 --> 00:00:04.919 thawing and the dinosaur is not going to come 00:00:04.919 --> 00:00:06.440 out of the amber just yet, but it's starting 00:00:06.440 --> 00:00:10.900 to thaw, right? And I think once that T -Rex 00:00:10.900 --> 00:00:12.439 starts running around, there's going to be a 00:00:12.439 --> 00:00:15.759 lot of pent -up demand. Real builds, real decisions. 00:00:16.280 --> 00:00:18.559 You see the finished houses and we uncover the 00:00:18.559 --> 00:00:21.480 steps it took to get there. I'm Krista here with 00:00:21.480 --> 00:00:23.960 Michael and this is Trust the Process podcast 00:00:23.960 --> 00:00:26.719 where we chat about construction, real estate, 00:00:26.820 --> 00:00:29.179 and development. We pull back the curtain on 00:00:29.179 --> 00:00:31.399 the new home industry, the real estate market, 00:00:31.440 --> 00:00:34.439 and the trends shaping it all. Discover the stories, 00:00:34.679 --> 00:00:36.759 insights, and expertise behind building a new 00:00:36.759 --> 00:00:40.689 home. In today's episode, we look ahead to 2026. 00:00:41.549 --> 00:00:44.750 Why the end of 2025 felt like a turning point 00:00:44.750 --> 00:00:47.929 and the latest data and what it says about sales, 00:00:48.310 --> 00:00:50.729 inventory and rates. We're also going to talk 00:00:50.729 --> 00:00:53.130 about the recent housing headlines and how that 00:00:53.130 --> 00:00:55.890 could help to shape our year ahead. Thanks for 00:00:55.890 --> 00:00:57.689 joining us. We're glad you're here. Let's jump 00:00:57.689 --> 00:01:01.869 right into it. Welcome back to trust the process 00:01:01.869 --> 00:01:06.849 podcast. We're now in season two. This will be 00:01:06.849 --> 00:01:11.069 our second episode of season two and wanted to 00:01:11.069 --> 00:01:16.290 do a quick launch into 2026. So we are still 00:01:16.290 --> 00:01:18.709 waiting for numbers to come back on 2025 when 00:01:18.709 --> 00:01:21.810 we know kind of how the how the year ended, but 00:01:21.810 --> 00:01:24.670 without any factual numbers. We don't really 00:01:24.670 --> 00:01:26.349 have anything that we can trend on or that we 00:01:26.349 --> 00:01:28.349 could discuss. But as soon as that data comes 00:01:28.349 --> 00:01:31.689 back to us, we'll be sharing a 2025 wrap -up. 00:01:31.870 --> 00:01:34.209 But in the meantime, kind of where are we at? 00:01:34.370 --> 00:01:36.670 I mean, we're into the first couple of weeks 00:01:36.670 --> 00:01:41.450 of January 2026. A lot of economists and analysts 00:01:41.450 --> 00:01:45.430 and speculators on the industry have some ideas 00:01:45.430 --> 00:01:47.909 about what they think will be happening in 2026. 00:01:48.659 --> 00:01:51.340 feels like some really promising news and thoughts 00:01:51.340 --> 00:01:54.480 about where we could go so Michael's done some 00:01:54.480 --> 00:01:57.319 research and Would love for you to share that 00:01:57.319 --> 00:01:59.739 with all of us and sure see where we're at and 00:01:59.739 --> 00:02:02.560 what we think might Might come to fruition this 00:02:02.560 --> 00:02:07.260 year. So yeah, I mean Thank you first I mean 00:02:07.260 --> 00:02:11.740 25 was a really kind of year of malaise and It 00:02:11.740 --> 00:02:14.360 was our last of you know, the three years. So 00:02:14.360 --> 00:02:18.490 25 24 and 23 were malaise era in real estate, 00:02:18.629 --> 00:02:21.210 right? I think we were arguably in a housing 00:02:21.210 --> 00:02:24.889 recession. And it felt like it, we felt it. Anyone 00:02:24.889 --> 00:02:26.889 in the brokerage business, lending business, 00:02:27.250 --> 00:02:31.090 anyone at escrow, title escrow, builders like 00:02:31.090 --> 00:02:34.629 us, even small builders like us feel the market 00:02:34.629 --> 00:02:38.530 and feel the malaise. But we kind of ended it 00:02:38.530 --> 00:02:40.469 with a little bit of a high note. So our pending 00:02:40.469 --> 00:02:44.050 sales from October 25 to November 25, there's 00:02:44.050 --> 00:02:48.780 a 3 .3 % jump. And that represented the highest 00:02:48.780 --> 00:02:52.199 level in three years of pending contracts. So 00:02:52.199 --> 00:02:54.659 we kind of ended 25 with a little bit of a bang, 00:02:54.659 --> 00:02:57.879 believe it or not. And it has yet really to bear 00:02:57.879 --> 00:03:00.060 out in the numbers, but you could, you know, 00:03:00.139 --> 00:03:02.539 I watch the neighboring zip codes around where 00:03:02.539 --> 00:03:04.780 I live. And then I also watch the zip codes where 00:03:04.780 --> 00:03:08.259 we build. And I felt it there too. I felt inventory 00:03:08.259 --> 00:03:10.909 slowly start to dry up. About 6 % of sellers 00:03:10.909 --> 00:03:12.710 nationwide are pulling their homes off the market 00:03:12.710 --> 00:03:14.270 if they're not getting the number that they wanted. 00:03:14.729 --> 00:03:16.189 And that's because they're blessed with those 00:03:16.189 --> 00:03:19.530 very low interest rates, which is why the fear 00:03:19.530 --> 00:03:22.069 monger online and a broken clock is right twice 00:03:22.069 --> 00:03:24.590 a day. So a bear is always going to be right 00:03:24.590 --> 00:03:26.289 at some point because things are going to correct 00:03:26.289 --> 00:03:28.770 and pull back. And they were relishing in 25 00:03:28.770 --> 00:03:30.409 and saying, see, this is the beginning of the 00:03:30.409 --> 00:03:32.969 end. Look how many of these homes are underwater. 00:03:33.610 --> 00:03:35.610 Even if you bought in 22, which you could argue, 00:03:35.789 --> 00:03:37.430 If you look at certain markets, I follow the 00:03:37.430 --> 00:03:38.909 Denver market really close just because I like 00:03:38.909 --> 00:03:43.490 that city. They definitely have seen true equity 00:03:43.490 --> 00:03:47.270 loss from 2022 to now. Vegas has not as much, 00:03:47.449 --> 00:03:51.110 Phoenix has not as much. Growth zip codes that 00:03:51.110 --> 00:03:55.050 are farther out have suffered more than the inner 00:03:55.050 --> 00:03:56.969 kind of more established zip codes in most of 00:03:56.969 --> 00:03:59.789 those sprawling metros. But even if you look, 00:03:59.930 --> 00:04:01.719 a lot of those people were at... four and a half, 00:04:01.840 --> 00:04:04.419 five percent mortgage rates. And right now for 00:04:04.419 --> 00:04:06.740 the majority of 25, they were in the middle sixes. 00:04:07.199 --> 00:04:09.620 So those people were able to still hold on because 00:04:09.620 --> 00:04:11.620 effectively, let's say they bought a house for 00:04:11.620 --> 00:04:14.719 650, that's now we're 625. They couldn't buy 00:04:14.719 --> 00:04:18.600 that same house at 625 at six and a half percent 00:04:18.600 --> 00:04:21.399 rate with the same payment. So you really only 00:04:21.399 --> 00:04:23.319 the market equilibrated and said, well, I'm not 00:04:23.319 --> 00:04:25.579 going to lose money unless I absolutely have 00:04:25.579 --> 00:04:27.839 to. I got divorced, had a kid, I came into the 00:04:27.839 --> 00:04:29.750 money and I wanted to get out of this and move. 00:04:30.269 --> 00:04:32.949 You found only the most motivated sellers. So 00:04:32.949 --> 00:04:35.050 what that 6 % represents are the people that 00:04:35.050 --> 00:04:36.430 are pulling back that either didn't get their 00:04:36.430 --> 00:04:39.769 number, were in markets that were heavily affected 00:04:39.769 --> 00:04:42.850 by the flood of inventory that we saw in 25. 00:04:43.589 --> 00:04:46.209 And it kind of equilibrated. Buyer demand picked 00:04:46.209 --> 00:04:49.810 up by the back quarter of the year. Sellers started 00:04:49.810 --> 00:04:54.120 pulling off. investors decided to, how many homes 00:04:54.120 --> 00:04:55.959 didn't hit the market? Once the news is out that 00:04:55.959 --> 00:04:59.399 the market was really soft, because I feel overall 00:04:59.399 --> 00:05:02.100 spring of 25 was the worst real estate market 00:05:02.100 --> 00:05:05.839 I've ever functioned in. Because even though 00:05:05.839 --> 00:05:09.339 objectively on paper it was better than 2015, 00:05:09.600 --> 00:05:14.199 2016 in terms of number of homes, it just felt 00:05:14.199 --> 00:05:17.339 fundamentally broken by high rates, high prices, 00:05:17.779 --> 00:05:20.509 not enough inventory. No sales. We are at the 00:05:20.509 --> 00:05:23.009 stalemate standoff that I've never experienced, 00:05:23.089 --> 00:05:24.550 but I've only been in the business for 12 years, 00:05:24.550 --> 00:05:25.910 so I haven't. There was a lot of fear in the 00:05:25.910 --> 00:05:28.170 market. A lot of fear in the market. And we also 00:05:28.170 --> 00:05:30.850 had the stock market drop about 18%, depending 00:05:30.850 --> 00:05:33.769 on what index we were looking at, which is something 00:05:33.769 --> 00:05:37.170 that we didn't, we've never seen all that together. 00:05:37.649 --> 00:05:41.689 So quarter two of 25 was a dark quarter for me. 00:05:42.069 --> 00:05:46.449 It felt ominous. Stock market is falling apart. 00:05:47.230 --> 00:05:49.480 Buyer demand fell off a cliff. Interest rates 00:05:49.480 --> 00:05:51.220 were actually coming down. I'd been the lowest 00:05:51.220 --> 00:05:53.639 they've been in about two years, but they didn't 00:05:53.639 --> 00:05:56.180 put a dent in the real estate market Didn't put 00:05:56.180 --> 00:05:58.579 a dent in the rising inventory and buyers just 00:05:58.579 --> 00:06:00.819 got fatigued and they just really you know what? 00:06:01.560 --> 00:06:05.259 I'm not doing it. I'm not doing it Sellers right 00:06:05.259 --> 00:06:08.459 people to their home of the market You know claims 00:06:08.459 --> 00:06:10.319 that that we know who to have their home on the 00:06:10.319 --> 00:06:12.199 market at the time Like you said pulled it off 00:06:12.199 --> 00:06:14.120 because it just I'm not gonna get what I want 00:06:14.120 --> 00:06:16.800 and I can't make my future plan until this is 00:06:16.800 --> 00:06:19.730 sold even so you just read you know, re -evaluate 00:06:19.730 --> 00:06:22.310 what you really want to extend, take your own 00:06:22.310 --> 00:06:25.870 market. That's right. Or if it means what I can 00:06:25.870 --> 00:06:29.529 buy is, you know, my budget actually goes farther 00:06:29.529 --> 00:06:32.310 now, then they reduce their home accordingly, 00:06:32.350 --> 00:06:34.470 and the market kind of breaks loose again. And 00:06:34.470 --> 00:06:38.649 it just takes a few of those things to kind of 00:06:38.649 --> 00:06:40.670 thaw the market. And it felt like it started 00:06:40.670 --> 00:06:44.670 to thaw in quarter four of 25. And the numbers 00:06:44.670 --> 00:06:48.449 do bear it out, which is funny. So 6%. amount 00:06:48.449 --> 00:06:50.889 of them, what should I call it, seller withdrawal 00:06:50.889 --> 00:06:53.870 rate, 6%. Highest it's really ever been since 00:06:53.870 --> 00:06:55.970 it's been recorded. Pending sells the highest 00:06:55.970 --> 00:06:58.449 they were in three years. Rates the lowest they 00:06:58.449 --> 00:07:01.870 were in 2020, the whole year, the end of the 00:07:01.870 --> 00:07:03.149 year was the lowest they'd been in the whole 00:07:03.149 --> 00:07:06.149 year. So all those factors kind of converged. 00:07:06.509 --> 00:07:10.110 Builders stopped with their starts in most growth 00:07:10.110 --> 00:07:13.149 markets like Las Vegas, Denver, most of Florida, 00:07:14.110 --> 00:07:16.910 inland California. Uh, those growth markets, 00:07:17.170 --> 00:07:20.389 Texas saw sharp declines in their permit issuance 00:07:20.389 --> 00:07:21.949 and those production builders can build homes 00:07:21.949 --> 00:07:25.230 in four to six months. So decisions made in April 00:07:25.230 --> 00:07:28.230 have effects in that calendar year in inventory. 00:07:29.150 --> 00:07:31.670 So suddenly, builders are not sitting on 15 inventory 00:07:31.670 --> 00:07:33.410 homes. They're sitting on three. And then that 00:07:33.410 --> 00:07:35.470 might make that buyer go, well, I don't like 00:07:35.470 --> 00:07:37.050 where they bagged it back the street, blah, blah, 00:07:37.069 --> 00:07:38.870 blah. They back a power line. Let me look at 00:07:38.870 --> 00:07:41.589 some resales. And then it just thaws the resale 00:07:41.589 --> 00:07:44.730 market. So I think that all those things together 00:07:44.730 --> 00:07:49.209 kind of are leading up to a favorable 2026. It's 00:07:49.209 --> 00:07:51.569 interesting to have some numbers and some data 00:07:51.569 --> 00:07:54.350 on that. Because you and I, at the time, we... 00:07:54.360 --> 00:07:57.220 talked about it a lot. I can feel there's a buzz 00:07:57.220 --> 00:07:59.019 in the energy of what's happening in the market 00:07:59.019 --> 00:08:01.560 right now. You did feel a shifting and after 00:08:01.560 --> 00:08:04.420 such a slump coming through spring, getting a 00:08:04.420 --> 00:08:06.220 little bit of an uptick and a little bit of just 00:08:06.220 --> 00:08:10.339 energy in the market. So we knew that there would 00:08:10.339 --> 00:08:12.519 be some sort of a change to the numbers, but 00:08:12.519 --> 00:08:14.819 having that data to actually compare that against 00:08:14.819 --> 00:08:17.660 what we were feeling is interesting. It's satisfying 00:08:17.660 --> 00:08:20.480 because it does show that we do. I'm making the 00:08:20.480 --> 00:08:24.689 word. It's good. Yeah. And we have the tapes, 00:08:24.790 --> 00:08:26.810 so we can prove that we were predicting this. 00:08:27.189 --> 00:08:29.689 Right. We knew something was happening, but having 00:08:29.689 --> 00:08:31.870 those numbers now to make it more tangible, it's 00:08:31.870 --> 00:08:35.149 like, yeah, we knew that. We knew it. Yeah, exactly. 00:08:37.169 --> 00:08:39.570 We knew. Everybody who's in the industry really 00:08:39.570 --> 00:08:42.049 felt, in conversations that we had with colleagues 00:08:42.049 --> 00:08:46.090 and other people in the industry, it was sort 00:08:46.090 --> 00:08:48.750 of the conversation being that this is different. 00:08:48.990 --> 00:08:50.230 Not sure what that means. Something feels different, 00:08:50.230 --> 00:08:53.500 yeah. Yeah, exactly. It was really just launching 00:08:53.500 --> 00:08:57.879 pad to what we hope we'll see further in 2026. 00:08:59.159 --> 00:09:03.820 And that leads me to kind of the next point, 00:09:03.860 --> 00:09:08.159 which is a lot of the economists now are predicting 00:09:08.159 --> 00:09:11.080 a good year for 2026. So some economists are 00:09:11.080 --> 00:09:14.220 saying could be up to 14 % higher sales volume 00:09:14.220 --> 00:09:20.600 this year versus last. If we had a 3 .3 % jump 00:09:20.600 --> 00:09:23.100 from one month to the next, you could, I'm not 00:09:23.100 --> 00:09:24.679 going to say that's every month, but that was 00:09:24.679 --> 00:09:27.120 also from October to November, notoriously slow 00:09:27.120 --> 00:09:30.360 seasons, which are Christmas closings in most 00:09:30.360 --> 00:09:34.600 markets that are 30 -day escrows. So that's telling. 00:09:34.600 --> 00:09:39.139 14 % passive. It's big, yeah. We've seen to hit 00:09:39.139 --> 00:09:42.360 a floor of about 4 million units transacted, 00:09:42.379 --> 00:09:47.049 4 .1 million units transacted nationwide. healthy 00:09:47.049 --> 00:09:49.649 market equities were between five and five and 00:09:49.649 --> 00:09:52.590 a half million. So if we do see a 14 % increase, 00:09:52.610 --> 00:09:55.610 we're still not where we were. But it will just 00:09:55.610 --> 00:09:57.629 shows you how low we were in terms of transaction 00:09:57.629 --> 00:10:01.190 volume, that a 14 % increase would not we would 00:10:01.190 --> 00:10:04.169 it would take a 25 % increase to get back to 00:10:04.169 --> 00:10:07.710 where we want to be. So 14 % would indicate that 00:10:07.710 --> 00:10:11.789 we might see, let's just call 4 .6 to 4 .75 million 00:10:11.789 --> 00:10:16.340 transact units transacted. Where would that put 00:10:16.340 --> 00:10:18.360 us? Is that back to 24 or do we have to go all 00:10:18.360 --> 00:10:22.100 the way back to 23? It's about like 22. 22, okay. 00:10:22.139 --> 00:10:23.480 To get to those numbers because we're in a three 00:10:23.480 --> 00:10:25.740 -year low. We've been hovering around 4 million 00:10:25.740 --> 00:10:30.059 transactions for the last three years. 23, 24, 00:10:30.220 --> 00:10:36.000 25. So, and it follows rates. So economists, 00:10:36.200 --> 00:10:39.080 I think they're right. I think it's thawing and 00:10:39.080 --> 00:10:40.720 the dinosaur is not going to come out of the 00:10:40.720 --> 00:10:42.919 amber just yet, but it's starting to thaw. Right? 00:10:44.259 --> 00:10:46.879 And thank God, once that T -Rex starts running 00:10:46.879 --> 00:10:48.580 around, there's going to be a lot of pent up 00:10:48.580 --> 00:10:51.899 demand. And if you look at, I love watching financial 00:10:51.899 --> 00:10:56.740 analysts and they're projecting not just in real 00:10:56.740 --> 00:10:59.740 estate, but in consumer goods period. We've been 00:10:59.740 --> 00:11:02.860 in a bit of a consumer goods recession, right? 00:11:02.980 --> 00:11:05.899 Everything, cars, everything has been way down. 00:11:07.170 --> 00:11:09.649 kind of mirror image of what the pandemic, post 00:11:09.649 --> 00:11:12.870 pandemic, 2021, 22, it's like a mirror image 00:11:12.870 --> 00:11:14.889 of that. As much as they were elevated, they're 00:11:14.889 --> 00:11:17.029 depressed now from normal. So it's almost like 00:11:17.029 --> 00:11:19.529 we pulled all that demand forward, but now it's 00:11:19.529 --> 00:11:22.330 kind of lasted longer than that boom lasted. 00:11:22.830 --> 00:11:24.330 So that was like a two year boom. Now we're in 00:11:24.330 --> 00:11:26.830 a three year lull. So they're saying this last 00:11:26.830 --> 00:11:29.210 year was actually just a reflection of deferred 00:11:29.210 --> 00:11:31.629 purchases. So we're going to see a little bit 00:11:31.629 --> 00:11:43.179 of an echo boom. And most of 20 was not pulled 00:11:43.179 --> 00:11:45.759 forward demand. Most of 20 was shut down. So 00:11:45.759 --> 00:11:48.940 really was end quarter four, 2020, all of 21, 00:11:49.080 --> 00:11:51.919 all 22 rates started spiking on cars, homes, 00:11:52.220 --> 00:11:53.919 everything short -term credit cards, everything 00:11:53.919 --> 00:11:56.840 in the latter half of 2022. So really the boom 00:11:56.840 --> 00:12:02.500 lasted about 20 months, 24 months. So, um, I 00:12:02.500 --> 00:12:03.100 think that, for the most part, the boom lasted 00:12:03.100 --> 00:12:04.769 about 24 months. They're right when they say 00:12:04.769 --> 00:12:07.789 there could be a boom. The feds project another 00:12:07.789 --> 00:12:13.210 two drops. Maybe it's 500 basis points over the 00:12:13.210 --> 00:12:15.450 course of a year, which is the feds funds rate, 00:12:15.690 --> 00:12:18.129 which kind of dictates more closely your credit 00:12:18.129 --> 00:12:21.970 card rates prime. Auto loans are more closely 00:12:21.970 --> 00:12:24.429 tied to those rates. Long -term mortgage rates 00:12:24.429 --> 00:12:27.090 are more tied to the yield curve, which we're 00:12:27.090 --> 00:12:29.250 seeing a lot of relief in the treasury yields. 00:12:29.600 --> 00:12:32.279 hovering around four. I would love to see a three 00:12:32.279 --> 00:12:34.679 -handle on treasury yields. There's usually a 00:12:34.679 --> 00:12:37.440 2 % to 2 .5 % premium from 10 -year treasury 00:12:37.440 --> 00:12:41.379 yields to the mortgage rate, which brings me 00:12:41.379 --> 00:12:44.940 to a nice little segue. What's that? We're due 00:12:44.940 --> 00:12:47.159 for that. We're due. Yeah. Everybody would like 00:12:47.159 --> 00:12:51.059 to see. Yes. Brings me to my next segue, which 00:12:51.059 --> 00:12:54.740 was this second week of January was very newsy 00:12:54.740 --> 00:12:59.559 for real estate on the federal level. So there's 00:12:59.559 --> 00:13:04.840 executive direction that they want to prohibit 00:13:04.840 --> 00:13:07.200 institutional purchases of single -family homes. 00:13:08.399 --> 00:13:10.600 There's no legislation, it's a tweet at this 00:13:10.600 --> 00:13:13.100 point, but it's showing that the mood and the 00:13:13.100 --> 00:13:15.320 sentiment is, probably need to do something with 00:13:15.320 --> 00:13:18.120 housing affordability. This feels like something. 00:13:19.519 --> 00:13:21.480 And a lot of people say, well, wait a minute, 00:13:22.100 --> 00:13:23.299 how do you dictate that? How are you going to 00:13:23.299 --> 00:13:25.460 police that? They could just form a shadow LLC. 00:13:25.639 --> 00:13:27.220 You can't prevent an LLC from buying houses. 00:13:27.259 --> 00:13:30.500 So how do you know that that LLC? So it's better 00:13:30.500 --> 00:13:33.279 to either play with the tax shelter that real 00:13:33.279 --> 00:13:37.539 estate is or pull other threads on the housing 00:13:37.539 --> 00:13:40.960 market. And I think within two days, you know, 00:13:41.039 --> 00:13:42.580 that news got back to the administration that, 00:13:42.720 --> 00:13:45.240 Hey, that's sounds good on paper. It's a good 00:13:45.240 --> 00:13:48.559 campaign rally and a good rallying cry. Um, but 00:13:48.559 --> 00:13:50.100 it's really not going to do anything. And if 00:13:50.100 --> 00:13:53.049 it. If it overall gives builders less confidence, 00:13:53.210 --> 00:13:56.509 it's actually going to hurt the long -term viability 00:13:56.509 --> 00:13:59.669 of the real estate market. So I went down the 00:13:59.669 --> 00:14:03.110 rabbit hole on that, and it's very zip code dependent, 00:14:03.169 --> 00:14:07.769 as I found out. But even in the most obscene 00:14:07.769 --> 00:14:10.629 corporate ownership of single -family homes outside 00:14:10.629 --> 00:14:14.169 of Atlanta, some parts of Vegas, outside of Colorado, 00:14:14.450 --> 00:14:17.710 Charlotte has huge institutional presence. It's 00:14:17.710 --> 00:14:19.750 only at the highest percentages. You're only 00:14:19.750 --> 00:14:23.389 going to find about 7 % of the real estate market 00:14:23.389 --> 00:14:26.029 held by an LLC that also owns a hundred houses. 00:14:26.110 --> 00:14:28.509 So it's hard again, hard to find it because you 00:14:28.509 --> 00:14:30.690 have to find an LLC that owns a hundred houses. 00:14:31.009 --> 00:14:35.690 How do you even find that entity? And it's about 00:14:35.690 --> 00:14:39.789 5 % of high presence markets. So in markets where 00:14:39.789 --> 00:14:41.889 it's high presence, that whole real estate market 00:14:41.889 --> 00:14:44.929 is about 5%. So Charlotte's about 5%. Las Vegas 00:14:44.929 --> 00:14:48.379 is about 4%. If you look at there's a map and 00:14:48.379 --> 00:14:51.100 the darker blue it goes, the higher percentage 00:14:51.100 --> 00:14:53.240 of institutional ownership there are. You looked 00:14:53.240 --> 00:14:54.919 at the entire map was broken down by county. 00:14:55.559 --> 00:14:58.179 There were only about seven counties that were 00:14:58.179 --> 00:15:01.460 really dark blue. We were a shade lower, Clark 00:15:01.460 --> 00:15:04.679 County, Maricopa County and Phoenix was our shade. 00:15:05.399 --> 00:15:08.559 So, and those were three to 4 % ratios. So it's 00:15:08.559 --> 00:15:12.440 not a huge. It's more symbolic to say, hey, we're 00:15:12.440 --> 00:15:14.820 trying to tackle housing affordability. We're 00:15:14.820 --> 00:15:17.080 trying to tackle corporate landlords. But there 00:15:17.080 --> 00:15:18.899 are a lot of people that like corporate landlords. 00:15:19.019 --> 00:15:20.639 There are a lot of people that will be forever 00:15:20.639 --> 00:15:22.240 renters or they need to rent for one or two years. 00:15:22.559 --> 00:15:25.200 And they'll pick an invitation home or an American 00:15:25.200 --> 00:15:27.480 homes for rent home over a mom and pop landlord 00:15:27.480 --> 00:15:30.179 because there's a maintenance portal. There's 00:15:30.179 --> 00:15:34.100 usually lower deposits. There's more standardized. 00:15:34.929 --> 00:15:37.110 features, stainless steel appliances, let's just 00:15:37.110 --> 00:15:39.850 say, their yards are all done. There's no threat 00:15:39.850 --> 00:15:41.809 of the landlord. If we need another six months, 00:15:42.049 --> 00:15:43.470 we can talk, there's no threat of the landlord 00:15:43.470 --> 00:15:45.529 moving back into their home or selling their 00:15:45.529 --> 00:15:49.970 home or whatever. So there were equal and opposite 00:15:49.970 --> 00:15:51.990 rallying cries in the reverse saying, wait a 00:15:51.990 --> 00:15:56.730 minute, this represents, there's like 1 .3 million 00:15:56.730 --> 00:16:00.139 homes owned by institutional. investors. So there's 00:16:00.139 --> 00:16:02.799 1 .3 million renters that would, what does that 00:16:02.799 --> 00:16:05.019 look like? Do they, if they can't acquire more 00:16:05.019 --> 00:16:06.960 and there's been nothing to say that they would, 00:16:06.960 --> 00:16:09.259 you know, force you to sell them. But the thought 00:16:09.259 --> 00:16:11.059 is, is that if you can't buy more, a lot of those 00:16:11.059 --> 00:16:13.799 companies work only on scale and they'll maybe 00:16:13.799 --> 00:16:16.059 only hold a property for three years and sell 00:16:16.059 --> 00:16:18.580 it or take as much of the depreciation they can, 00:16:18.679 --> 00:16:21.720 1031 exchange it, kick it down the road. So there's 00:16:21.720 --> 00:16:25.200 a lot of factors there that it became unpopular 00:16:25.200 --> 00:16:28.299 in a matter of a couple of days. Um, doesn't 00:16:28.299 --> 00:16:30.000 mean that it won't happen. It would need congressional 00:16:30.000 --> 00:16:31.980 approval. If it does happen, I think there's 00:16:31.980 --> 00:16:34.480 either 101 workarounds or it won't even make 00:16:34.480 --> 00:16:38.100 it past Congress. Um, but there are way too many 00:16:38.100 --> 00:16:40.179 workarounds on that. You could, it's cost you 00:16:40.179 --> 00:16:42.919 $400 to form an LLC. And let's just say the threshold 00:16:42.919 --> 00:16:46.440 is 10 houses that you can hold. Okay. Your LLC 00:16:46.440 --> 00:16:49.059 can't hold more than 10 houses. Okay. Well, if 00:16:49.059 --> 00:16:51.320 you want to own, I think they own about 4 ,000 00:16:51.320 --> 00:16:53.879 housing units, corporations like that. But what's 00:16:53.879 --> 00:16:56.620 a single, I think Blackstone owns. I want to 00:16:56.620 --> 00:17:00.059 say 2 ,900 or 3 ,900 houses. So they would own, 00:17:00.059 --> 00:17:03.159 what, $400? At the end of the day, they're not 00:17:03.159 --> 00:17:05.720 going to stop them. That's just their cost of 00:17:05.720 --> 00:17:07.059 doing business. Even if it doesn't come to fruition, 00:17:07.319 --> 00:17:11.119 or if nothing comes of it, it's holding up space 00:17:11.119 --> 00:17:13.440 in the environment. It's taking up some sort 00:17:13.440 --> 00:17:15.720 of a bandwidth within the industry as a whole. 00:17:15.900 --> 00:17:18.900 And so it recreates a climate around that, that 00:17:18.900 --> 00:17:20.640 whether you like it or not, or whether it ever 00:17:20.640 --> 00:17:24.019 becomes anything, it's still hold it becomes 00:17:24.019 --> 00:17:27.500 a placeholder that keeps people on some sort 00:17:27.500 --> 00:17:30.140 of a question. Yeah, I completely agree. And 00:17:30.140 --> 00:17:32.259 I liked it. I mean, I don't think it's the smartest 00:17:32.259 --> 00:17:34.539 thing to do. I also don't love corporate ownership 00:17:34.539 --> 00:17:38.579 of a single family homes. I know that it's probably 00:17:38.579 --> 00:17:41.039 good for the investors. I know it's maybe good 00:17:41.039 --> 00:17:43.940 for those tenants that want to rent in a single 00:17:43.940 --> 00:17:45.140 family home and they feel more comfortable with 00:17:45.140 --> 00:17:47.240 a large corporation with a maintenance portal, 00:17:47.259 --> 00:17:51.539 with standardized everything. I just wish that 00:17:51.539 --> 00:17:53.450 it didn't. I wish that that didn't have to be. 00:17:53.670 --> 00:17:55.230 I wish we didn't need corporate landlords. I 00:17:55.230 --> 00:17:57.369 wish homes were affordable enough in relation 00:17:57.369 --> 00:18:02.250 to wages to not require that, to not have a market 00:18:02.250 --> 00:18:07.089 for that, I should say. So anyway, so on the 00:18:07.089 --> 00:18:10.930 heels of that, the administration announced that 00:18:10.930 --> 00:18:12.529 it's going to use some of the money that Fannie 00:18:12.529 --> 00:18:15.730 and Freddie is sitting on, the GSEs, that are 00:18:15.730 --> 00:18:20.069 nationalized, basically mortgage -backed security 00:18:20.069 --> 00:18:22.380 traders. you know, Fanning Friday does, we could 00:18:22.380 --> 00:18:24.599 have a whole episode on that. He's going to take 00:18:24.599 --> 00:18:27.059 some of that cash, which is about $200 billion, 00:18:27.740 --> 00:18:30.640 and buy mortgage -backed securities. So none 00:18:30.640 --> 00:18:32.779 of that's happened. It's going to happen. It's 00:18:32.779 --> 00:18:35.539 been announced as of yesterday. It was pretty 00:18:35.539 --> 00:18:37.740 late in the day, actually, on East Coast time. 00:18:38.420 --> 00:18:41.220 And just on the heels of that, or, you know, 00:18:41.380 --> 00:18:46.259 the next day, mortgage rates dropped. 0 .15%, 00:18:46.259 --> 00:18:48.660 which is huge. So they went from 6 .2, which 00:18:48.660 --> 00:18:50.759 they've been hovering around for the latter half 00:18:50.759 --> 00:18:55.059 of 2025 to just over six. And we're really close 00:18:55.059 --> 00:18:58.119 to a five handled. But the funny thing is the 00:18:58.119 --> 00:19:01.579 10 year treasury yields didn't drop by the same 00:19:01.579 --> 00:19:03.660 percentage. They didn't drop hardly at all today. 00:19:04.180 --> 00:19:06.000 So the spreads, which are usually two and a half 00:19:06.000 --> 00:19:07.740 between a 10 year treasury, you know, and a 30 00:19:07.740 --> 00:19:11.220 year fixed are now down to about 2 % today. So 00:19:11.220 --> 00:19:14.710 there's a big compression on those yields, maybe 00:19:14.710 --> 00:19:17.049 because the feds are signaling that they're going 00:19:17.049 --> 00:19:18.509 to start buying mortgage -backed securities, 00:19:19.029 --> 00:19:20.970 which makes people say, I should buy some mortgage 00:19:20.970 --> 00:19:23.190 -backed securities now, buy some bonds now because 00:19:23.190 --> 00:19:28.549 I want to lock in that pricing at 6 % so that 00:19:28.549 --> 00:19:30.289 when I turn around in six months and mortgage 00:19:30.289 --> 00:19:33.869 bonds are trading at 5%, so then that has a cascading 00:19:33.869 --> 00:19:35.509 effect the same way that when people pull their 00:19:35.509 --> 00:19:38.259 money out of bonds, the yields go up. So the 00:19:38.259 --> 00:19:41.660 same math works in the other direction. And I 00:19:41.660 --> 00:19:43.180 think we saw a little bit of that today, a little 00:19:43.180 --> 00:19:44.839 bit of a rally with mortgage bonds, which is 00:19:44.839 --> 00:19:47.640 great. We want rallies on mortgage bonds. That's 00:19:47.640 --> 00:19:50.019 how mortgages get cheaper. We have more people 00:19:50.019 --> 00:19:52.380 competing for that debt. But before you get too 00:19:52.380 --> 00:19:54.500 optimistic, the mortgage -backed security market 00:19:54.500 --> 00:19:57.359 is about $11 trillion, $9 .5 to $11 trillion, 00:19:57.440 --> 00:20:02.059 depending on who you ask. And about $1 .6 trillion 00:20:02.059 --> 00:20:04.880 of new mortgage -backed security debt gets generated 00:20:04.880 --> 00:20:08.250 every year and sold. Daily trading volume is 00:20:08.250 --> 00:20:11.950 about 200 to 300 billion daily trading volume. 00:20:12.390 --> 00:20:14.750 So it's probably not going to put a huge dent 00:20:14.750 --> 00:20:17.289 in it. But if it's part of a bigger plan, it 00:20:17.289 --> 00:20:20.029 might put a dent in it. And it might help signal 00:20:20.029 --> 00:20:21.710 that, hey, we're going to start pulling some 00:20:21.710 --> 00:20:25.430 other levers to bring down. We pretty much out 00:20:25.430 --> 00:20:27.349 of tricks to bring down the long -term yield 00:20:27.349 --> 00:20:29.789 curve. We're having a really hard time. with 00:20:29.789 --> 00:20:32.190 them on a national debt we hold to see 10 -year 00:20:32.190 --> 00:20:34.069 treasury yields go any lower than where they 00:20:34.069 --> 00:20:35.829 are now. It seems like they're really resistant 00:20:35.829 --> 00:20:38.210 to the threes. And then Japan will have a debt 00:20:38.210 --> 00:20:40.789 crisis or Japan will have bonds spikes and then 00:20:40.789 --> 00:20:43.130 makes everyone nervous about bonds. And, you 00:20:43.130 --> 00:20:44.589 know, I know that China has stopped buying a 00:20:44.589 --> 00:20:47.829 lot of our bonds because they're kind of in a 00:20:47.829 --> 00:20:50.450 recession. So I think that we're a long ways 00:20:50.450 --> 00:20:53.329 out from seeing 3 % treasury yields, 10 -year 00:20:53.329 --> 00:20:55.269 treasury yields. So we're going to have to start 00:20:55.269 --> 00:20:58.910 pulling some other levers to see. mortgage rates 00:20:58.910 --> 00:21:01.549 in the low fives. Either the spread gets lower, 00:21:01.789 --> 00:21:04.329 maybe we do see rates go, 10 -year treasury yields 00:21:04.329 --> 00:21:06.490 go to three and a half, but then the spread is 00:21:06.490 --> 00:21:07.890 only two, so we're at five and a half, rates 00:21:07.890 --> 00:21:12.529 go to three. That's conceivable. Lowering the 00:21:12.529 --> 00:21:14.369 short -term rates, the Fed's funds rate will 00:21:14.369 --> 00:21:15.950 have downward pressure on the long -term yield, 00:21:15.970 --> 00:21:18.549 we just don't always know what kind of yield. 00:21:19.910 --> 00:21:24.390 So that's... Kind of the newsiness of the week 00:21:24.390 --> 00:21:30.349 We're only you know couple weeks in yeah, we're 00:21:30.349 --> 00:21:32.269 about two weeks into the year Yeah, and we were 00:21:32.269 --> 00:21:34.130 only a few days into the week before we started 00:21:34.130 --> 00:21:36.269 seeing some big news coming down It's a midterm 00:21:36.269 --> 00:21:39.529 year midterm cycle and I think that there's a 00:21:39.529 --> 00:21:42.769 lot of disenchantment in in the economy Especially 00:21:42.769 --> 00:21:45.049 among you know the middle to lower middle class. 00:21:45.569 --> 00:21:50.359 Yeah You know, mentally, I hadn't really considered 00:21:50.359 --> 00:21:52.599 what it's kind of enough that we'll have. It's 00:21:52.599 --> 00:21:54.220 creeping up. It's creeping up. I mean, it is 00:21:54.220 --> 00:21:56.700 January 2026 and we're going to be, you know, 00:21:56.779 --> 00:21:59.380 we're starting seeing ads probably in the next 00:21:59.380 --> 00:22:02.980 three to four months. So I know. So we've got 00:22:02.980 --> 00:22:05.880 an election in about 10 months and I think housing 00:22:05.880 --> 00:22:08.859 and just cost of everything and rates and we're 00:22:08.859 --> 00:22:10.079 going to have a new Fed chair in a few months, 00:22:10.160 --> 00:22:11.859 a new one probably announced in the next couple 00:22:11.859 --> 00:22:15.930 of weeks and. Again, the feds can't control the 00:22:15.930 --> 00:22:17.710 long end of the curve, feds can't control mortgage 00:22:17.710 --> 00:22:20.890 rates, but if you can get a, you know, the prime 00:22:20.890 --> 00:22:24.430 rate, let's say the feds funds rate is two, mortgage 00:22:24.430 --> 00:22:26.089 rates aren't going to be six, right? It's just 00:22:26.089 --> 00:22:28.569 not. Banks have to balance their books. It will 00:22:28.569 --> 00:22:31.609 eventually put long -term pressure on rates, 00:22:32.150 --> 00:22:34.630 downward pressure. We're all just heading in 00:22:34.630 --> 00:22:37.910 that direction. We have a lot of goods. We don't 00:22:37.910 --> 00:22:42.009 see a lot of inflation. Job growth has been pretty 00:22:42.009 --> 00:22:44.180 good. no matter how you look at it. It's not 00:22:44.180 --> 00:22:46.480 overheated, but unemployment rates still, I think, 00:22:46.660 --> 00:22:49.779 4 .4 as of yesterday, 4 .4, 4 .6. It came in 00:22:49.779 --> 00:22:51.779 right around expectations or right at expectations, 00:22:51.819 --> 00:22:53.839 I want to say. For the year, yeah. For the year. 00:22:54.500 --> 00:22:56.339 And wage growth was 0 .3 % month of - No, we're 00:22:56.339 --> 00:22:58.779 still at the close throughout the year. But I 00:22:58.779 --> 00:23:01.660 think over all the, yeah, not huge swings, but 00:23:01.660 --> 00:23:04.279 yeah, it was - But it's the market, the job market, 00:23:04.420 --> 00:23:06.819 it's a low hire, low fire job market. That's 00:23:06.819 --> 00:23:11.259 that much we know. And with that, We love stability. 00:23:11.400 --> 00:23:13.279 The market does love that stability. And I think 00:23:13.279 --> 00:23:15.859 people are going to feel a lot better in 26. 00:23:16.200 --> 00:23:18.140 Sentiment is going to go up. And again, people 00:23:18.140 --> 00:23:20.859 can only put off large purchases, moves. It's 00:23:20.859 --> 00:23:25.380 only so long they can put those off. So that's 00:23:25.380 --> 00:23:27.240 where we're at. And I think I'm very optimistic. 00:23:28.029 --> 00:23:31.670 Right? I mean, they held in 2025 those people 00:23:31.670 --> 00:23:33.970 who, you know, who maybe thought they wanted 00:23:33.970 --> 00:23:36.250 to make a move in 2025 and it just didn't feel 00:23:36.250 --> 00:23:38.509 like the right climate to do that. They're ready 00:23:38.509 --> 00:23:40.990 now, you know, so whatever it was that had them 00:23:40.990 --> 00:23:43.930 interested before that they just weren't quite 00:23:43.930 --> 00:23:46.240 ready to pull the trigger on. They're, they're 00:23:46.240 --> 00:23:49.059 tired of waiting. So we can already see in this 00:23:49.059 --> 00:23:53.019 first couple of weeks, um, you know, the mortgage 00:23:53.019 --> 00:23:54.859 pulls are up and, you know, I mean, we're all 00:23:54.859 --> 00:23:58.160 of those things that really trend or, or appear 00:23:58.160 --> 00:24:01.859 to initially trend us on a better sales year. 00:24:02.500 --> 00:24:06.640 Um, they're all, all of those moves are in place 00:24:06.640 --> 00:24:09.640 and we're already seeing early indicators. I 00:24:09.640 --> 00:24:13.420 agree. And inventory begets sales and sales beget 00:24:13.420 --> 00:24:17.019 inventory and. As long as the market's thawed, 00:24:17.200 --> 00:24:19.140 listings are still about 20%, but we're still 00:24:19.140 --> 00:24:22.920 not where we were pre -pandemic. And rates are 00:24:22.920 --> 00:24:25.059 ticking down and there's a lot of deferred moves. 00:24:25.279 --> 00:24:28.640 I just feel like it's going to be hard to imagine 00:24:28.640 --> 00:24:32.559 another Malaysia. Could be, but I just don't, 00:24:32.559 --> 00:24:35.180 I don't see it. And builders have inventory. 00:24:35.460 --> 00:24:37.240 I think builders are tired of sitting on that 00:24:37.240 --> 00:24:39.980 inventory and so they're making some bigger incentives 00:24:39.980 --> 00:24:41.799 or buy, you know, greater buy downs that they 00:24:41.799 --> 00:24:45.769 can offer too. So I think that. then that will 00:24:45.769 --> 00:24:49.670 create a surge in sales creates a surge in sales 00:24:49.670 --> 00:24:52.470 that you know it it's that it begets sales we 00:24:52.470 --> 00:24:54.549 get sales and i think the more people that are 00:24:54.549 --> 00:24:57.509 jumping into the market the more people see that 00:24:57.509 --> 00:25:01.210 as a stability that they could also enjoy exactly 00:25:01.210 --> 00:25:05.730 i agree i agree good economic data good gdp growth 00:25:06.089 --> 00:25:09.569 I think it was over 6 .5 or something, the total 00:25:09.569 --> 00:25:12.670 GDP for the year, which was insane. And the overall 00:25:12.670 --> 00:25:14.490 consumer price index, I believe, was a little 00:25:14.490 --> 00:25:16.730 over three, which is great. We had GDP growth 00:25:16.730 --> 00:25:21.750 without a lot of inflation. Wage growth is outpacing 00:25:21.750 --> 00:25:23.170 inflation by a little bit, but at least it's 00:25:23.170 --> 00:25:26.609 not falling behind. It's 20 -25 overall. We had 00:25:26.609 --> 00:25:32.130 turmoil, but I don't know. I think we kind of 00:25:32.130 --> 00:25:40.319 - Yeah. predicted to now continue and accelerate 00:25:40.319 --> 00:25:43.380 as the year goes on. I agree. Love it. It's not 00:25:43.380 --> 00:25:48.359 stopping us. Right on the right foot. Ideally, 00:25:48.619 --> 00:25:50.759 yes. If you had asked me in March of this year, 00:25:50.940 --> 00:25:54.579 or 25, I was very nervous. You didn't know. We 00:25:54.579 --> 00:25:57.859 didn't know. But we'll take a step in the right 00:25:57.859 --> 00:26:00.339 direction and hope it continues. And obviously, 00:26:00.420 --> 00:26:03.039 we'll be here to walk that through with you guys. 00:26:03.579 --> 00:26:05.700 So as we see how this all unfolds and what it 00:26:05.700 --> 00:26:07.559 looks like. And again, as more numbers come back 00:26:07.559 --> 00:26:10.640 from 2025, we'll do a bit of a wrap up or a more 00:26:10.640 --> 00:26:13.119 significant year. Yeah, we'll do a bit of a post 00:26:13.119 --> 00:26:15.599 -mortem on 2025. Exactly. I've been throughout 00:26:15.599 --> 00:26:18.799 the year or how the numbers play into what we 00:26:18.799 --> 00:26:22.650 saw at the time. So yeah. Thanks for being here. 00:26:22.990 --> 00:26:24.490 Appreciate you joining us. Anything else you 00:26:24.490 --> 00:26:26.710 want to add, Michael? I have. That's all I have. 00:26:27.369 --> 00:26:30.470 All right. Yeah. Great. Well, thanks. Appreciate 00:26:30.470 --> 00:26:33.410 your time and your knowledge. And we'll see you 00:26:33.410 --> 00:26:35.829 guys back on the next episode of Trust the Process 00:26:35.829 --> 00:26:37.569 podcast. Bye -bye.