Video Closed Captioning:
good morning good afternoon good evening
folks michael zuber one rental at a time
back with his monday expert mr greg
dickerson how you doing sir feel great
michael how are you today i’m doing
really well man first i just want to
give you another shout out for just
nailing what is happening in the new
home building market we have seen
uh a complete collapse right i think it
was down 14.4 percent
way more than expected i think it was
supposed to be down 2.7 it was down 14.
uh we are now seeing more and more
really price cuts which again you told
us was coming that was after buying
points and all these other things so i
think there’s really going to be a
two-step function in the home building
market but i’d love to get your kind of
take on where it is today because
it’s it’s not in a good place i don’t
think
well it’s just getting started so you
know the builders still help have a lot
of inventory in the pipeline that
they’re finishing they’re cutting back
on starts or eliminating them all
together
they’re offering incentives discounts uh
you know all those types of things to
try to get traffic because they’re you
know there’s just no traffic into the
new home communities
and uh you know like i told everybody
watching if you’ve been wanting to buy a
house you know that’s the first place
you’re going to get a deal but i think
it’s a little early yet because they’re
going to get more incentivized to you
know cut even deeper and offer even more
incentives and interest rates are going
to go higher so it’s you know it’s kind
of relative the higher the rates go the
prices drop you know lower the rates the
higher the house you know prices go so
it’s it’s kind of a relative thing but
right now we’re out of whack because
rates are high and prices are still high
so you got to let prices correct a
little bit more the other thing to keep
in mind the fed is just getting started
they really haven’t done anything yet
0.7 we have 75 basis points they haven’t
started rolling off the balance sheet
selling those security mortgage-backed
mortgage-backed securities and you know
bonds and all that stuff so we’ve got a
long way to go yet yeah so when i look
at the home builders and again this is
all because i’ve been listening to you
for well over two years now i just want
to say what i think’s coming and i’d
love for you to correct me or or or add
to it so absolutely right as you’ve said
and you just you know builders are going
to cut first you told us the price cuts
in housing are going to come for
builders first right they have to react
right they don’t really have options
they have to they have to blow out the
inventory they have
uh and again
this i don’t know i see this first phase
kind of dealing with the inventory they
have as step one which means lower
prices terms all of that but there is i
think a phase two which maybe it’s nine
months from now maybe it’s a year i
don’t know the duration
um but i think they’re going to
significantly slow building so they
don’t get caught and potentially
tweak what they built you know maybe
they were building the 2 000
uh square foot move up maybe in a year
they’re building the 1200 first time
home i don’t know but i really do think
there’s going to be two steps to this is
that is that a way to think of it or am
i just off
yeah well you know like we said there
there’s a lot of stuff in the pipeline
they have to finish they can’t just stop
unless something really bad happens and
they’ll stop like they didn’t know 809 i
mean we saw stuff stop right in the
middle you know back then but um you
know as far as new starts go yeah so you
know that’s going to help relieve a
little pressure in the job market you
know in terms of you know costs coming
down more workers available to do things
you know it’ll eliminate some of the
stress there uh you know as far as what
kind of changes we’re going to see
you know that’s hard to say because we
did go from the mansion in 2009 you know
down to smaller houses people really
reduced because of cost because of you
know
the leverage that they had in the system
and the result of the housing market but
then from the pandemic we expanded
because people needed work from home
solutions i don’t think that’s gone away
i think the whole work from home thing
now maybe the home schooling and all
that you know that people added for but
the work from home thing i think is here
to stay and people are going to want
that space
um and they’re going to want to have in
the back of their mind space for the
kids if that ever happens again
snow storms and weather events and
things like that so
the trends in the in the way we live and
the way we use our homes it’s hard to
forecast that but okay builders are on
the forefront that’s the reason home
builder sentiment comes out regularly
that’s the reason we monitor home
builders because home builders are at
the front lines of the economy
recessions things like that that’s where
a lot of forecasts and changes you know
in the economy you know can be
can be seen in advances in the home
builders oh and you’re so right i mean i
don’t know if you saw it but um
i think it’s the atlanta fed
puts out this gdp kind of q2 forward
looking thing and they put out a
forecast i want to say it was
nine days ago that was 0.9
growth in q2 we got new new housing uh
sales down 14 percent they redid it and
now it shows zero so yeah you’re right
builders are the front end there’s a the
real estate is a big part of gdp right
all
all inclusive and yeah all the residual
stuff there was a great article i
pointed out the other day that shows how
many dollars in a community
um you know
goes out into the community from a real
estate transaction not a new
construction but just a resale
home of all the vendors and you know
just all of the money that’s generated
then when you look at the building
industry and that’s what drove the
economy primarily in you know the lead
up to the 0809 crash and then when that
you know building industry went out you
know a lot of a lot of you know
spending was sucked out of the economy
because all the money that was being
flooded into it through construction
we’re going to see that a little bit too
so that’s one of the downsides of the
contraction the good news is housing is
going to come down it’s going to correct
but you know as people get laid off and
the industry contracts as a whole you
know that affects the overall economy
and powell said we’re coming after
housing he did his last question housing
we’re going to make it more affordable
first-time buyers are priced out we’re
going to fix that yeah he did he
certainly did he really did point in
inventory as kind of one of those
numbers i even think he said that
i hate it when he said the great reset
or the housing recent i think was
housing reset he said housing reset
we’re gonna reset housing yeah it’s like
oh great now we’re gonna get all these
people talking about the great reset and
powell is part of it it’s funny you know
a lot of people don’t understand what’s
really going on so they are doing this
intentionally they want to destroy
demand they want to reduce people’s
feeling of wealth so that it reduces
their uh appetite for spending which
helps bring everything back into check
so they want the stock market to go down
oh yeah they want housing values to come
down you know they want the economy to
contract you know a certain degree they
don’t want recession necessarily that’s
the soft landing they’re trying to avoid
that you know janet yellen is out again
saying well it’s not necessarily
imminent you know we’re not necessarily
good we don’t have to go in recession
yeah which she also said that it was not
going to be in the inflation either yes
she did
yeah you need to put her and jim kramer
together yeah exactly the ultimate
bottom when they say yeah exactly those
two kind of funny but i want to talk one
more thing about housing prices because
i think people hear you and they know
they hear me talk about housing i think
i think we have to appreciate the timing
a lot of people have timing off
right so i think as you’ve educated us
new homes they adjust very quickly right
their their debt structure they don’t
have another option right they they need
to sell
the other thing i think is very obvious
is transactions will crash immediately
we get we get existing home sales
tomorrow which i can’t believe they’re
forecasting 5.4 million which is down
like 2 percent from the month before i
think it’s going to be ugly tomorrow
because again transactions go first and
then we have to figure this out this
reset to take powells i think a lot of
that is next year i think people hear
you talk about prizing crash and think
it’s going to happen like tomorrow and
there are channels talking like that i
don’t
housing is too sticky we’re still way
below supply i think any talk of a
pricing class
crash in prices existing homes that’s a
2023 discussion at least in my book do
you disagree
uh no i mean we’re seeing so what’s
what’s skewing that is you’re seeing
price reductions and you know a lot of
the youtubers are putting these charts
up showing you know austin’s 30 down and
tech you know these markets are cutting
prices 30 but they’re already way
overpriced to begin with exactly i’ve
seen properties listed in my market that
are just way overpriced
you know even before they were still
overpriced before when interest rates
were still at two or three percent okay
so they’re cutting prices by you know 30
40
you would think that’s a housing crash
but it’s really not because now the
price is where it should be sort of but
it’s still overpriced even when it comes
down 20 or 30 percent so right you know
it’s really hard to gauge that what you
got to look at is transactions that’s
right that’s really what you have to
look at as the transactions decline
values will come way back in the check
the question is what is a real fair
value now given the interest rate
environment and it’s that affordability
index right so you can easily take the
median home price right now at 460 or
whatever it is based on current interest
rates now from where they were two
months ago because that’s lagging as
well
brings you down to about 360. it drops
it by about 100 grand so that’s really
where the median price should be so
that’s you know that’s what you got to
watch and like you said the bottom end
of that dropped out well as we go the
top end of that’s gonna drop out yeah
yeah i think this the the housing market
is a complex beast we are going through
something we haven’t gone through right
i’ve studied housing back 52 years and
we haven’t we’ve seen interest rates
double before but we haven’t seen them
double in 120 days this is new
uh
so again i i think there’s just a lot of
things and i think the clearest thing
because we’ve seen i just reported this
morning somebody did the math for me
how many people were priced out because
demand’s a two-step function right you
have to have the desire and the ability
well we just lost 18 million people they
were qualified at roughly three they’re
not qualified at six that’s demand
destruction just straight up demand
destruction then you take on top of that
all the scary headlines about a
recession in job losses and job cuts you
have a lot of people that were ready to
sign on the dotted line and qualified
that aren’t going to sign on the dotted
line so demand destruction i think we
have crazy supply destruction which
again hasn’t happened before the move up
buyer the first time that’s why that’s
why the median home price i believe is
again median home price national median
home price is going to shock people as
it surprises to the upside
throughout the rest of the year yeah
because that bottom that bottom half has
fallen out
and you know and these things take time
so like you said we saw rates go up
quickly we’ve seen the markets start to
correct quickly you know things like
that but when it comes to housing when
it comes to the overall economy and the
consumer you gotta understand where we
came from so there’s a lot of cabin
fever out there we’re in summer people
are going to take their vacations when
we went through 0-809 the great
financial crisis you know the the
biggest event we’d seen in our lifetimes
since the depression people still took
their vacations in the summer oh yeah
what they did was they cut back on what
they did while they were there they
didn’t go out to eat they brought food
they didn’t spend excessively on little
things but they still went to the beach
and because it’s a cheap vacation yeah
they had it booked and they’re like you
know what if i’m going to lose my job if
the economy is going to fall in
depression i’m taking this last trip so
people have that mindset now we’ve been
locked up for two years we couldn’t
travel abroad now all the restrictions
have been lifted no more you know
vaccine you know no more tests no more
vaccine proof none of that you can get
on a plane go wherever you want
if you can get there because they can’t
service it yeah exactly the airlines had
a rough weekend
if there’s no flying but um anyways
people are out spending right there
they’re tired of that they’re gonna go
you know to that vacation they’re gonna
make up for that lost time they have you
know had built up some savings they’ve
you know reduced debt so it takes a
little while for all that to reverse you
know they start working through savings
they start racking up debt we’re seeing
you know debt balances increase and
things like that so i think by the end
of the summer going to the fall winter
you’re gonna have a very different
consumer if we stay on this path and
then you know housing kind of lags all
that so going into next year i think is
yeah you know when you can see the
biggest you know form of the corrections
versus what we’re seeing now yeah i
don’t think we’re gonna the median home
price again in 2022 is not coming down
it’ll shock people to the upside because
of the structural imbalances in in the
transactions that will close
uh i it’s just math so i think that’s
pretty obvious
i know you won’t know but i’m gonna
hopefully you’ll take a guess if not i
will when you if you are looking for a
new home
and given kind of the two steps that
we’ve talked about do you think max
payne
might be six months out right because
we’ll have a couple more rate increases
they’ll be blowing through some of their
last inventory that might be the best
time to kind of negotiate strong you
think it’s earlier than that what do you
think
yeah
you know it depends on the seller right
and it depends on the market so every
market’s different every seller is
different but on average what we saw
last time even in the you know as bad as
that was it still took people six months
to a year
sellers to adjust to you know new prices
except for the ones that had to sell and
then the banks were in control there
from a short sale and all that so
you know it’s a different borrower this
time it’s a different resale market yeah
sorry
sorry greg i was specifically for
builders new new oh builders okay yeah
so builders yeah i mean you’ll see that
by the end of the year because they’ve
got this inventory in the pipeline and
if they start having units stack up
they’ll see
discounts because they’re going to want
to clear the books before the end of the
year i think that’s important i think
really i mean a lot of people follow us
they’ve been following your talk about
new home construction i do think max
payne
kind of between thanksgiving and
christmas because again they want to get
it off the books right they want to have
them sold i think if if you’re again
every market is different
some of them won’t get there but if i
were to pick a national time frame like
that’s kind of where my head went as
well yeah they’re going to hit it and
get it to get them done they want them
done in out there for sale so they can
burn through what what this backlog is
while there’s still some demand because
there’s still some demand in some
markets but they want to get these units
done get them out to the market and get
them off the books um you know because
they don’t want to stop that’s the worst
thing that could happen they don’t want
to sit there with foundations in the
ground houses framed and they just have
to wait yeah
and again uh
new builders need need to sell because
of their debt structure right they have
what’s called construction financing it
needs to be paid in increments or like
every 10 homes there’s a big chunk due
all of this means they have to sell
that’s why max payne will build up later
in the year is that fair yeah yeah and
they’re all reporting this week so
you’ll see what this happened tomorrow
lennar kb homes wednesday it’s going to
be a lot of fun greg where can people
find you yeah greg dickerson.com that’s
where all my info lives go check it out
awesome thanks buddy