The Great Housing Reset Has Started: Review Feedback from New Construction Builders across Country

Video Closed Captioning:

good morning good afternoon good evening

folks michael zuber one rental at a time

we are doing the three amigos a couple

of days early early because somebody is

retired and they’re enjoying life and

he’s just screwing with our thursdays so

now we’re getting it on tuesday and it’s

all kinds of craziness because the guy

got retired i’m telling you this is fun

how you doing dion

howdy i’m doing great thanks for doing

this early i appreciate it because uh

you’ve said it a few times when you

retire you you start to wonder how you

had time to work exactly

exactly hey man how are you i’m having a

lot of trouble keeping

i’m having a lot of trouble keeping up

with dion’s retirees schedule i just saw

your title still not retired

you guys these little subtle things you

work in that just

you guys are so crafty i love it well

hey i i know you guys didn’t have time

to watch it but i did a uh live stream

this morning at 7 00 am kind of off the

cuff and i’m going to highlight it here

because um

i think july 20th that national

association of realtors day is coming up

i think we’re getting little tidbits of

information both about existing homes

and new homes and i want to show you a

twitter

a user

with his list of builder feedback about

different cities because i think there’s

a lot in there

and it really points to housing

potentially causing the next recession

or the recession that starts here soon

so you guys ready ready

awesome

so again as i said this morning full

credit to the author rick policios it’s

actually one of the reasons i wanted to

do this this way so we could give him

credit uh this is a thread i’ll go

through the top one and then we’ll go

city by city again he was he works for

john burns real estate consulting

john burns is the place to go it’s

either them or black knight if you want

real estate information they have been

doing a home builder survey

for years

yeah and you could actually go back in

rick’s feed and look at last month and

the month before this is for june so

again

lots of contracts being cancelled talked

about that price is being cut greg

dickerson told us that was coming uh

demand uh is finally cooling

construction costs that’s an aha moment

we haven’t talked about that matt you’ve

actually said you’ve got a bunch of

projects you’re waiting to keep people

busy

and and then uh built look at this

builder layoffs i did not think we would

see this so fast

they’re laying off people that’s that’s

pretty eye-opening what do we think of

that headline we’ll go to you first dion

and then we’ll get to the cities next

i would want to know

the percentage

of

real estate transactions that were

happening that were builds

versus new builds because there’s people

like you you know a two-year adu which

sounds like a lot of fun oh

where

when bills stop happening because buyers

disappear buyers cancel deals

i’m curious to see how many get laid off

and how many transition into projects

like matt has projects like i have

waiting yeah no exactly and matt

anything in this kind of surprise you

so i think i heard a number it was 60

000 cancellations

yeah so that’s on existing home sales

you’re absolutely right 50 14.9

of uh june contracts

uh were cancelled roughly 60 000 just

before anybody blows up and you know

goes all nick on me

yeah well it’s it’s a it’s it’s

interesting 14.95

yeah but let’s not get it twisted um we

had a year ago we we had 11 of units be

cancelled so

um it’s it’s up three percent so it’s

not like it went from zero to 14.9 so

again let’s not forget that uh but let’s

go to the cities because i think it is

very interesting because we got cities

from across the country yeah

atlanta someone turned out the lights in

our s on our sales in

june um

this is this is what i this actually is

what i think they’re going to say about

existing home sales

in june um

[Music]

that’s this this is exactly the kind of

headline i think is coming

right then we got austin how many people

keep telling you austin’s on fire

sales have fallen off a cliff we’re

selling one-third of what we sold in

march and april trades are willing to

negotiate prices since markets have

adjusted significantly in the past 60

days

birmingham i mean that’s that’s the

south talk about hot of hot

sales have fallen 75 percent the last

two months

and further out communities again we’re

like if you’re close

it’s okay but um yeah farther out you

are they’re going out we’ll do boise and

then i’ll get some feedback boise right

the market that i’ve highlighted for

months is kind of the bubble of all

bubbles uh sales have slowed

tremendously builders are dropping

prices and halting new starts

seeing price drops on labor due to

slowing of starts expecting 15

to 20 reduction in most costs

talk about that that’s this this is this

is d this is kathy wood deflation right

here

yeah so what do you guys think of what’s

what’s happened thus far in this list i

love it yeah a little bit i love every

it i was right and i love it and i was

right and i love it i have a half

million bucks worth of projects that

it’s going to cost me the same dollars

it’s going to cost me 350 to do them

yeah like so now i’ll just do more i’ll

still do a half million bucks worth of

projects and it’ll be 700 000 worth of

value that i’ll get that’s the first

thing second thing is in the interview

that i did with the um uh uneducated

economist we talked about this

he talked about the fact that even right

now you know plywood was going for 84

bucks a sheet

literally just a few months ago and they

just marked their stuff down to like 46

bucks a sheet

so it’s you know that’s plywood’s off

about 50 2×4 studs they’re still coming

off the only downside to what he’s

seeing in the in the you know in that

market the only downside that uneducated

economist is seeing is that they’re

going to start

making loads smaller

which is very frightening because then

that allows you’re not going to buy a

train uh car load of lumber to speculate

you will buy a truckload worth of lumber

to speculate

and so they’re actually taking what used

to be a car a car on a train and they’re

basically breaking it into fours and now

they’re selling off those quote unquote

futures

which when you make it smaller like it’s

what every stock company does right you

don’t want a two thousand dollar stock

you don’t want a two dollar stock you

want a 200 stock so it fits a bunch of

investment portfolios so i think that i

think we’re seeing exactly what we all

kind of expected we were going to see

and yeah there’s going to be pain and i

think it’s good is it a little faster

than you thought

no this is why no i i i mean i really

truly expected when rates got into the

sixes which they did i fully expected

that to cause the massive slowdown not

the fives but the sixes right when they

got into the sixes and that’s what

that’s where they were that’s what

caused all this pukey yeah you know like

we’re gonna see things pick up in q3

because we’re back down in the fives

where you know five and a quarter five

and a half you can find those rates now

yeah

yeah do you on any thoughts on what

we’ve gone through through boys yeah i

have two things the first one is

it didn’t happen as fast as i was

thinking it would

okay

because what i predicted last year and

we have this bet going

is that they would raise rates

it would cost things like this

especially in new builds because

especially and so the second thing i

want to cover is the people watching our

content who are doing one rental at a

time who are

investing to make work optional yep

are they buying new builds no no right

so

this isn’t impacting the people who are

watching this video who are thinking oh

this is doom and gloom there’s a

recession coming because this the new

home buyers are falling off a cliff

unless you’re a builder watching this

who also buys one rental at a time

you’re really not impacted right but

i thought we would increase rates faster

transactions would

fall off a cliff

inflation will continue yeah that’s the

problem is it wasn’t free it wasn’t low

interest rates causing inflation it was

helicopter money st what do you call

them stimulus ballers yeah

people with money to spend that they

didn’t really have to work for

um

and so maybe i got the timing wrong but

i think then we’ll see rates drop and

and now matt just said rates went back

down to the fives that’s because

lenders

lend on margin correct the fed said

we’re going to raise rates so banks

jacked rates up then the fed raised

rates a little and they jack rates up

again

but then lenders are competing with each

other

so they have that margin that they can

squeeze and compress

and as the fed was still holding assets

in their balance sheet there wasn’t as

much risk for lenders that’s what’s

going to shift going forward now that

we’re into uh quantitative tightening

the fed is going to be offloading assets

from their balance sheet which is going

to put more risk on the lenders i think

we’ll see rates go up again even

even if the fed doesn’t do

a 0.75

in this next meeting i think we’re going

to see rates go back up so if somebody’s

looking to lock one in now i would think

this is the week to do it yeah if you

like it lock it for sure something matt

the mortgage guy brings us every

wednesday a couple of things i want

because we got more to go through that

really start painting an interesting

picture that we’ve all been talking

about

um

builders are going to be an interesting

stock or company to watch the public

ones because what have we seen so far

right we’ve seen potentially layoffs

which is a it’s cost reduction overhead

uh you’ve also heard now multiple times

that subs are cutting costs as in we

will hear about lumber a big input going

down so yes they may be lowering a price

five percent but if their costs are down

as boise said twenty percent

people are going to be really pissed off

when builders margins go up

right they’re gonna sell less and make

more money it’s going to drive people

crazy

so let’s keep going because there’s more

in here that just kind of shake me this

is one that hurts charlotte

this recession is looking like and

feeling like a big

long five-year depression that’s a new

builder

yeah they didn’t it’s a guy that’s a guy

who started his company in 2012 or 2014

yeah after the last one yeah no nothing

like that it’s

uh i don’t see f i don’t see a five year

depression no what

come on

no it might be five quarters i don’t

know if it would be yeah i think yeah

five quarters is reasonable i think so

yeah i was actually looking for a stat

that i saw yesterday i can’t find it but

it was a great chart

and the chart showed that basically

with in the last decade that we’ve built

5.8 million new homes

from from 20 from 2010 to 20 into 2019.

do you know the last time that we built

5.8 million homes no

1930-1939

oh wow wow

since then we have averaged

21 million homes a year

interesting

there you go you’re the man that’s it

right there

if you can send that to me i will uh put

that as the thumbnail yeah well yeah the

the red line is the last 10 years the

blue lines are each decade before that

oh wow so if everybody wants to

pontificate about how horrible the

market is

it’s supply and demand there you go

there you go i love this so let’s keep

going colorado springs amazing how fast

the market can change with such a rapid

increase in rates so many people were

taken out of the market most builders

will go to suppliers trades and ask for

rollbacks on cost again this is why july

20th july 20th is a big day new home

sales are roughly 10 of the market i

expect uh june home sales existing to be

problematic yeah

for sure

dallas everybody likes texas framing

later framing labor has become readily

available suggesting housing starts slow

down in the finally showing up in the

typical signs haven’t raised prices in

three months framing labor is readily

available what that tells me is they are

slowing down yeah sure managing cash

flow yep

yep

des moines starting to see construction

trades hold labor prices for us that are

fearful of a downturn

again input costs are going down

fort myers how about this one investor

sales have stalled apparently a lot of

investors my fear here these are airbnb

buyers let me go buy a florida home as

an airbnb you know i don’t know i don’t

know that for sure just crazy but even

investor sales have stalled

right does it make sense does it make

sense

uh grand rapids uh believe we’re on the

edge of cost reductions making every

effort to refuse further uh cost

increases and pushing and decrease all

areas have significant two-year run-up

again costs

traffic slowed from red hot feels

different for sure but is a normal

market this is an example of a market

that’s probably doing okay

uh here i want to get to one that i saw

before and we’ll wrap it up let’s see

let’s see again folks follow rick on

twitter he’s an awesome read

um

i want to find the one that if you’re if

you’re a framer in new hampshire

and you want to work for a reasonable

wage yeah

lumberjack landlord gmail.com yeah so

we’ll do two more nashville is the one i

was looking for because this is what i

this is what i pointed at months ago

scary times hoard cash and hang on for

the ride national builders are cutting

staff and offering buyer incentives

move up buyers are now

practically

non-existent yes

this is the fed breaking housing this is

two years of people with rates below

threes going i’m not selling i’m staying

put

right

what i think is funny is

they say

the fed has these tools to slow

inflation

so they use the tools

and then we stop transactions which

you would think in normal years would

slow inflation

yeah well it’s it’s it’s not only going

to slow inflation we a lot of these

builders are talking about lower cost

which is inflationary or deflationary

but really what what i see in all of

this is transactions crashing

huge

like

and it’s and still very few people are

talking about transaction crashing

transactions leading to probably four

percent loss of gdp

and housing being the blame for the

recession this is what i this is this is

all the stuff that i see coming in real

time

yeah i love it yeah so again that’s jets

new construction do me a favor follow

rick he’s put this comes out monthly

i’ve talked about him a couple of times

i’ve interviewed him a couple of times

luckily enough uh matt where can people

find you still not

retired lumberjack landlord

uh instagram youtube and my live stream

on sundays 11 30 a.m eastern time

currently awesome and dion how about you

actually i don’t know where people are

going to find me i’m going to be in a

different place for every video i think

ah that’s awesome you’re doing

retirement right

awesome thanks guys

ciao

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