The Growing Tension in Today’s Housing Market

Something odd is happening in the real estate market right now. The gap between buyers and sellers hasn't been this big. Right now there is about 630,000 more sellers than buyers in the real estate market. And Florida has the highest gap. So today we sit down with some real estate professionals in Florida to see what you're seeing in the market there. And we want to make sense of this gap between buyers and sellers because there's a lot of talk and thoughts about what this means for the future of real estate in this country. Are we selling lots and residential lots? I would say the phone's starting to ring a lot right now. It's been real quiet for the last 18 months. Really what the nationals want is when they enter the marketplace, this isn't new. We're not recreating the wheel. This happens in real estate market cycles every four to five years or so. And they're micro cycles now because of all the uncertainty that goes on. But the first thing they want is they want developed lots. I think we've learned a lot from that. I don't think people are lending the way they used to. There isn't a ton on speculation. I don't think you see a lot of builders with a tremendous amount of inventory finished out in the market. They've been much more trepidatious about putting QMIs out and available. I feel like we've learned a little bit from the last downturn. I'm Siamak. Welcome to Market Insider. James, it's great to have you on. Welcome. Hey, sir. Great to be on. Thank you for having me. You're involved with the development space and you have a view in the housing market. You're in Florida. Can you tell us what you're seeing right now in the markets? We've been in kind of a down market cycle, right, for specifically both multifamily and for residential. The residential is just because of the affordability problem that we're having right now in the country that ties directly back to interest rates and uncertainty. And then on your multifamily side, your apartments, it's just now starting to free up. We've been basically gone three years now without really building any new units here in the central Florida area. And that ties back to high cap rates, your high interest rates and so forth. It's very hard to get those underwritten. The biggest problem that we have right now, and I think that's the same across the country, is the time it takes to get to the marketplace from the time that you actually control or buy the property to the time you're actually moving dirt. And it could be three to five years. And that's affecting affordability as well. As the overall real estate market in general goes, we thought that we'd start seeing a little bit movement on the residential side. We have a lot of pent up demand. And again, it's very hard when I think like 80% of the mortgages in America are 4% or less. And then all of a sudden, somebody's going to have to move or sell their home and they're going to end up with a five and a half, which they're lucky, six and a half percent mortgage. So it's very difficult, but that's been going on for three years. You have your grandparents that are saying, you know, we really want to move and we want to see the grandkids, but we can't afford to sell our house if we can even sell it right now, because then we have to go buy a house. The affordability is difficult and we can't get a good interest rate. We've had this gridlock going on. And I think some of the things that we're seeing in the news today are also causing that uncertainty where people are just afraid to pull the trigger. I have had a conversation recently in the last 24 hours with a couple of national builders that said that sales are starting to look up and pick up a little bit over the last couple of months. So I really do think we're at the end of that market cycle, especially on the residential side. I will say here in Central Florida, we've done real well on the commercial, which has been, you know, pleasantly surprising, but, you know, commercial's just kind of taken off. And I think that the rooftops are coming. We do have probably a 500,000 rooftop shortage here in inventory in the state of Florida. That's pent up demand that's coming. I also think that you have all of these houses that are sitting on the sidelines and people are like, oh, we have lots of houses for sale, but those are older homes. I mean, there's a massive number, huge number in America that the homes are, I'd say majority of homes in America for sale right now are probably built 1980 or earlier, which means if you're going to buy a home, especially as a new home buyer, you're going to be paying a higher interest rate. You're going to have to have the plumbing probably redone, the electrical, a roof, appliances, and so forth. And then all of a sudden you look at that same exposure and you're going to buy that house. Let's say it's a new home from a new home builder, like a national, who's going to do some forward commits, buy that interest rate down where you're at like a 3.9 and you're going to have a seven-year warranty on the home. It's really hard to compete with those homes that are sitting on the sidelines. All of that's uncertain. James, when you're talking to these national home builders, are they buying lots from you? Because from what I understand, you prepare the lots, right? You come and buy the land and you get it ready. And then the home builders come and buy these lots. Are the lots moving right now? Yeah, so that's a great question. It's specifically talking about are those residential lots moving? And it depends on what the life cycle is of that lot. So again, we buy them, we entitle them. That turns them into an engineered or a blank. And then sometimes we'll actually go and develop those lots. So all the national home builders over the last three to five years have gone to a land light model where they don't want those lots sitting on their books for whatever reasons, gap accounting rules or whatever they happen to be. But in reality, what's happened now is you had this new sub-market open up of these land banker developers. So what's happened is there's a lot of money on the street right now, especially in private equity. So they're out there funding these land bankers that are coming in and taking these lots down from developers like us, May. In the beginning, let's say right off the bat, as soon as they're engineered, they come in, they'll develop the lots and they'll sell them back to the nationals on pace, basically as their absorption rate dictates. And so that whole cycle has kind of changed a little. We've even changed and flexed a little. We're starting to develop a lot of our own lots. What we'll do is we'll start selling those lots. But to answer the question, are we selling lots and residential lots? I would say the phone's starting to ring a lot right now. It's been real quiet for the last 18 months. Really what the nationals want is when they enter the marketplace, this isn't new. We're not recreating the wheel. This happens in real estate market cycles every four to five years or so. And they're micro cycles now because of all the uncertainty that goes on. But the first thing they want is they want developed lots. And so that's what we're delivering. That's what they're getting out there. They'll pay a little bit more for that developed lot. And in the end, they also do not want to buy in bulk. They want to take those lots down on pace and they're willing to pay a little bit more for that so that they don't have to carry it on their books. So yes, we have a lot of interest right now in our lots. Over the last three or four years, we've taken all of our lots through entitlements. Almost all of our projects, we have about 15,000 lots across 20 projects. And essentially, a lot of those permits are coming in to move dirt. We're moving dirt on several of those projects now where we're developing the actual lots. But we won't sell lots to a builder till we're about, let's say 120 days out from being able to actually deliver the condition to close. Just ties up our property and there's no reason to. We don't need the funds to continue to move forward in what we do here. From what you're seeing, there's movement in your area. Phones are starting to ring. Do you hear that from your colleagues across the country or do you think this is just a Florida specific? Do I hear things across the country from other developers as far as how they're selling to nationals? I mean, listen, the bottom line comes down what's the pipeline that the national builder has. And I use national builder loosely because we deal with a lot of great regionals, even in some markets with some locals. But on the national, that's kind of our bread and butter. We build big projects and so we sell a lot of lots. But across the country, I would say that things are a little bit segmented. Some of your Southeast countries are better than others. One thing I like to talk about is we call halfway backers and I'll explain what that means. But in Florida, we had a lot of people during COVID and even recently that have moved down from let's say New England States, New York and so forth that have moved to Florida. And all of a sudden you got a hurricane or you got hot weather and they're like, nah, I don't want Florida. So they move halfway back. Next thing, now they're in North Carolina, South Carolina, Tennessee. So those markets are doing real well up there. I think they're not as subjected to kind of what we had here in the Sunbelt. That goes across from let's say Arizona, Texas and so forth, where we were really kind of overbuilt about three years ago. But that's all kind of factored in now. There's still probably 4 million home upside down inventory in the United States right now. But again, because of the market, a lot of the national builders went to a land like model. They all started using a lot of the inventory that they currently had on the books. And now that's always starting to subside. And what we're seeing is those phone calls are coming in daily asking what we have because they're looking for 27, 28 and 29 lots. You mentioned that commercial real estate is doing well in Florida. Can you tell us what kind of commercial is doing well right now? Yeah, so again, in that model that we use, those large mixed use projects for risk aversion, we typically have a lot of commercial. And a lot of times in my performance, leading up until let's say like the last year and a half, I always put like a zero value in my perform on that commercial because typically you want those rooftops to lead the commercial. And that's not what we saw because we saw pressure on those rooftops and pressure on those people that are trying to move first movers, second movers, or move downs or so forth into different projects. Product, the commercial started to take off. We traditionally look for A plus properties. We like to follow parkways, extensions and so forth. So what we're seeing is large commercial footprints. I'll give an example, like huge stuff, like BJ, Sprouts, Ulta, Five Below, those kinds of anchors. So like retail, like shopping centers, like small shopping centers. Coffee centers is a good term, yes, sir. So they're doing well in Florida right now? They are, we're constantly building right now. I mean, we've got probably 15 different commercial projects underway and the rooftops are following. What about the office and multifamily? Let's segment that out. So what about offices and what about multifamily, specifically apartments? So multifamily apartments have really kind of struggled. Three years ago, Florida, Texas, and some other areas like that were really overbuilt and oversaturated in the multifamily market. And then what happened is you started to have those cap rates start to rise, interest rates started to follow. And then it became really hard to underwrite it because all of a sudden you didn't have a trajectory of rents increasing because we were in markets with super high rents already. Now what happened is over the last three years, because you couldn't get the deal underwritten, I mean, it costs you more to actually build a door, an apartment than it is to sell it. I mean, it costs you $245,000 to build an apartment and you can sell it for $235,000 three years later after it's stabilized. That doesn't work. Basically everybody pulled out of the market, nobody was building. So now we have the opposite effect. Now we have rents that are starting to rise again because of supply and demand. There is no supply. So over the last, let's say six months, you're starting to see new units starting to come online. Florida's real aggressive under their Senate Bill 1389, which is an adjustment to this Live Local Act you may have heard. That's a way to kind of fast track development to get some of this affordable housing out there. You're starting to see some of those advantages take place. And so you're starting to see that market pick up. On the office market, you've really seen that for the last year and a half start to pick up. As bad as it could possibly be for the last three or four years, the last year is starting to see it pick up. But I will tell you that there's not a lot of product out there depending on what kind of product you're talking about. Like let's say an office warehouse where you have 2000 square feet and maybe two or 400 square feet of office. There's just no product out there and it's expensive. I mean, you could be paying 30 plus dollars for a triple net lease, maybe even $40. And I know that people may be saying, wow, that's not very much if you're living on the West Coast, but it is a lot here in Florida. Affordability is really hard right now for people to afford housing. At the same time, there is this thought that there is a supply shortage. There's a shortage of housing. People are wondering what's going to happen. Would the prices come down? Some people say there should be an adjustment, significant adjustment to the price of real estate. Some people say that there won't be an adjustment. What are your thoughts? Let's talk about that affordability because that is a passion of mine. I like to be able to provide affordability. However, I don't see that happening. As a matter of fact, I've got a 25-year-old son out of UCF working two years here for me, married and trying to find his own first-time home and can't afford it. And his comment to me is, well, I mean, it can't go up any higher. I mean, it's already $450,000 for an entry-level three-bedroom, two-bath house. And I said, son, have you been to San Diego? Have you been to San Francisco? I mean, you're talking $900,000 for a two-bedroom, one-bath. So yes, it can go higher, but the affordability is not going to just come down automatically. I mean, I think that you'll see the cost to build may come down a little bit, but really the problem isn't necessarily just how much it costs to build it. The problem is how long it takes to get it built. It's the regulatory oversight within all of these states and all of these counties. Quite frankly, some are worse than others. I mean, I'll give you an example. I have a project right now in one of the cities here in Orlando area that's taken five years and I still don't have my permits, okay? So I have holding costs every single month and all of that gets absorbed by the end user. The developer passes that on. If it takes you five years to send something out there and start building houses, it's going to cost more for the end user. And it's even worse than that then. Then you've got all the regulations. You've got regulations for architectural standards, for clearing, for grading, for permitting. That just costs a lot of money. And that's what the state and the governor here is trying to do is trying to bring that affordability down. But I don't see that happening. It's too hard. It's going to take a while. Landowners aren't lowering their prices. And then on top of that, you take a few of the states here in the country and you add, like we're having the problem with insurance, homeowners insurance, it's overcoming. How about rents? Are rents going down? In the last couple of years, it seems like there was some level of overbuilding in your area and the prices have come down. The rents have come down, right? Yeah, I think you're seeing prices come down specifically on single family homes. But I mean, that's by necessity. That's not overall. Those are the people that have been holding out for three or four years and they need to get their house sold. So they're lowering the rate till they get somebody to buy it or lowering the price till they get somebody to buy the house. On the rents, we saw rents starting to come down and they kind of leveled off. But now they're starting to rise again because there's no product. There's nowhere to supply and demand. You got more people that need to rent, not enough places to rent. The price is going to go up. It's not going to go down. I see that you're going to have to have a lot of different things happening on a state level to kind of rein in the local county and city levels to try and bring some of this affordability in. Here in Florida, our great governor is trying to push hard on getting no taxes for property taxes. And I know that's kind of crazy to think about. But when you think about how much waste and abuse is out there on a county and city level, and I'm not saying all of them, but there are quite a few of them, they become bloated. You look at the last five to 10 years, you're talking 35, 40, 50% increase in budgets. And so what do they do? Raise taxes, raise property taxes. So that's coming to an end. James, you're in this space, you've been in this space for many years and you've seen different market cycles when it comes to real estate. Is this a good time for people that are thinking about buying a home or investing in real estate to get in now? Or do you think there is more of a downward pressure on prices? Let's talk about that value for a second and whether it's a good time to buy right now. So for instance, it's always a good time to buy real estate, okay? You can't predict the market. You don't know whether it's going to be high or low. It just depends on what type of real estate you're buying, when you get in and when you get out. So on a single family home, we just had the conversation, my son and I, we were running the numbers. And when I grew up, it's the great American investment. You buy a home, invest your money in your home and it goes up in value. And when you retire, that's your nest egg. But things have kind of changed. I mean, when you have these younger generation that's coming out of college at their fingertips that are learning how to invest and they're actually being able to place trades on their phones in seconds, you start to run the numbers and you start to realize, well, maybe a single family home isn't the best investment in America. Because now all of a sudden, you can control your own investments, a lot of different vehicles to do that. And you'll might find out that your returns are so much better than if you actually bought the house and it becomes liquid. And I say that because we were, what kind of spurred that conversation is, I read an article about a gentleman in San Francisco that spends like $10,000 to rent his home in downtown San Francisco, his condo. And he went through the metrics of, well, if I bought this home, here's what I would be spending. It would be even more and cost me a fortune. I take the difference in what I spend from renting versus buying. And I've probably made three times my money than what I would have made if I bought the property. And it would have been liquid. It would not have been liquid if I bought the home. So there's a new frame of thinking out there. But as far as generally speaking, as far as affordability, it is definitely a problem when you have a first time mover, a new family, 25 years old, just married, and you're going to go out and find your first home. And your first home is going to be a three bedroom, two bath, 1,800 square foot home. And it's going to cost you $450,000 to get into it. And you've only been working at your job for maybe two years. You probably are not making enough to cover that, both of you. Do you think there's going to be more people renting in the future? I think that there's going to be a lot more people renting in the future. And you've seen this product tested all over the country, the build to rents, the BTRs, the BFRs, build for rents. Those are the communities that some of the nationals have even come in where they're building units and they're actually selling those off to private equity to rent that part of the community out. And they've been super successful. And I think you're going to continue to see that. And again, the more education that comes out that is educating the consumer that, hey, you may not have to buy that home. Renting, it may just be just a good of investment as well because you can take the difference and invest it somewhere else. But listen, those are big questions. And they also come all the way down to, are you earning a living wage? Are you making enough to just get by? The majority of Americans out there live in paycheck to paycheck. And in some instances, they're not even getting their paychecks. That makes it even harder. In terms of the supply side of things, what's the shortage in your opinion? There's different kinds of numbers across the country. There are millions of homes short. I get that debate all the time. I get the debate of what this supply issue really is. And part of that is, and I'll just kind of drop it down to a local level, but you take one county and I get, we have 58,000 lots here that are approved. We don't need any more development, right? What they don't realize is of those 58,000 lots, half of them will probably never get developed. They'll get dropped because it took five to six years to get there, right? And so the developer either ran out of money, ran out of time or what have you. The other half's gonna take probably 25 to 30 years to get 75% completed. So when you talk about, we have a lot of inventory, a lot of lots, we really don't. Not developed lots, not ready to actually put a house on it, not to create the demand. Forget all of the other economics out there as far as uncertainty and interest rates and so forth. But in the end, that number's always floated around. Four and a half million in the hole right now in new home inventory is what's needed to actually meet the current demand. So if you took all of the national bills, you doubled their output, you still wouldn't even be close to what the actual demand is. That's how far we really are in the hole. You don't see that right now because you have higher interest rates and you don't have anybody moving. They're all just kind of stationary. But that doesn't mean there's two or three families in a house that actually need to get out and find a place to live on their own. Some people say, because we have this affordability issue and every time we have had this, a lot of times the real estate market has crashed. What are your thoughts on that? Is this time different? I hear a lot of times, what about a crash and all of these things and this time's different? So I've been through a lot of market cycles in the real estate business myself at my age. And if you go back and you look at some of these real estate cycles over the last, let's say, 40 years, typically every six years you have a market cycle. It goes up, it goes down, and when it goes down, it goes down for two or three years, which is kind of like what we're seeing right now. Then you add into that all this uncertainty that we have across multiple administrations and you have high interest rates, you have COVID and all of these other things that kind of upset those normal dynamics. Just in the last real estate cycle that we've had that's been going on for probably three years, there's probably 10 micro cycles that go on in there where it's a head fake, it comes up, it comes down. Overall, do I think we're going to have another great financial crisis in the housing market? No, I do not. I think that you're going to have some people that are unable to pay their mortgage payments. I think you're going to have some foreclosures, but it's not like it was in that market that we had in the GFC that we saw. That was a credit market. Those were some issues. We were overbuilt. You had projects, I saw it in Las Vegas where it was cheaper for the developer to flatten 150 brand new homes than let them sit vacant and pay the taxes. We don't have those issues right now. Do you see things stagnate from here? If you're looking at the economics as far as affordability and inventory and supply and so forth, a good example, a good national example is to look at California, specifically Southern California, maybe even the San Francisco, San Jose Valley and those areas. Those are good examples of what you're going to see around the rest of the country. Wages didn't necessarily go up for middle America there, but affordability went up 400% or 4,000%. You got two or three families living in a two bedroom, one bath that they went in and bought $900,000. I'm just like everybody else. I'm watching the real estate shows and I'm like, how can anybody afford that? But that's what you're going to have is you're going to have people coming up with solutions on figuring out how they can actually get into a place to live. And that's going to be some of the things that we're looking at where you have additional dwelling units, ADUs, where you're going to have houses that are being built specifically in mind that there may be more than one family in it. You're going to have cities and counties starting to understand that large lots don't work anymore. A 25 year old new family cannot afford a one acre lot with a $650,000 starter house. That's not going to happen. So those things are starting to be taken into account. Imagine if ADUs, additional dwelling units, and they're starting to really pick up here in Florida and I'm sure in other parts of the country, but all of a sudden you buy your first home, right? And now you may pay $450,000, $500,000, but you got an ADU in the back that you're renting that brings in additional revenue. So those are kind of the creative things that we have to get to. We have to solve the insurance, property insurance and flood insurance problem because you cannot afford to buy a house for $450,000 and then pay $10,000 in insurance. There's no end in sight for that. It's got to be resolved at a state level. You have been in this space for many years and you're seeing the market the way it is. What do you recommend to people that are thinking about buying a home or people that are thinking about investing in real estate? There's always something in the real estate market at any time that's a good investment. You got to have a little bit of a self-taught education or find a mentor. That'll save you a lot of money, right? There's opportunities, like I said, for the last couple of years, commercial has been great. Multifamily is going to be great coming up depending on what type of investment you're talking about. If you're talking about though, the traditional American investment, which has always been buy your own home. I'm not saying that you don't buy your own home. I'm not saying that you buy a used home or resold home or you buy a new home. I think that it starts with your budget. And I've been there. I've made every mistake that you can possibly make financially. And I've learned from everyone and I try not to do it twice. Although I have done some twice, but not really any three times. But you start there and then you start to determine what you can do. And listen, today is still a great day to go out and buy a villa or duplex and live in one half of it and rent the other half. Those are the kinds of opportunities that I'm talking about that are always there. They'll always be available. And if you're going to buy a new home, shop around because the national builders will get good rates for you. I mean, they're doing forward commits. You're going to be able to buy something a lot lower than you can if you bought an older home. And then I am not a realtor, but I will tell you that realtors still are worth their weight in gold because the realtors out there know their market and they're the ones that are going to help you find the best deal if you're looking to buy your first home or any home at that matter. You mentioned you have made a lot of mistakes in this space. Can you tell us some of those and what lessons did you learn in the process? I will tell you the number one lesson that I've probably learned the hard way when I was younger. And it wasn't because I didn't have mentors. It was because I was a little stubborn and didn't listen. I'm sure some people can relate to that. But leverage, being over leveraged as an investor is probably one of the worst things that you can do. And low leverage would be anything, let's say 30% or less. But when you have those market cycles that change, you need to be able to withstand those. And the first time in the GFC, it actually probably goes back even further. Probably in the late 80s, I learned that watching my family, when the tax codes got changed. And then in the late 90s, I learned that when the real estate market had issues again, and then in the GFC. And so this time around, when I rebuilt again after the GFC, I don't have any outside debt or anything. And I remember my investors came to me one time and said, James, we don't want to hear about the sunshine. Tell us about the rain. What happens when the market changes? And my answer was to, well, we are in a good position. We own our land. We can't lose it. Nobody can take it from us. We continue to invest and we'll invest in and develop lots. On the single family or the individual investor side, it's always pay yourself first. It's always start your savings, start your prepaid college, start putting money aside for that rainy day. Learn the rule of 72, 20% interest doubles your money every 3.6 years. There's just some basic strategies like that, that everybody should learn. And with chat GPT or Google, which I didn't have, makes life a lot easier. James Dix with Dix Development. It was great to have you on Market Insider. Hey, I enjoyed the conversation. Look forward to any time we ever can have another one. Now we go to Rick Severance to see what he's seeing in the market. It is a strange time in real estate right now. White House is saying that we need 10 million more homes. At the same time, it's hard for people to afford and buy homes right now. As you can see, the gap is the highest between sellers and buyers and sellers don't have to sell. They're not forced. You have a master plan community, a big community in Florida. We wanna understand what's happening in the real estate market. Sure, absolutely. I'm the president of Welland Park. We're an 11,000 acre master plan community in Southwest Florida. I was brought in to basically monetize the land, Mattamy Homes is our primary owner for the land itself. And we've been here, I've been here now about seven years. So our master plan includes everything. So we have healthcare, we have education, we have commercial, we have retail, we have residential, we have multifamily. And then of course, recreation, which is a huge part of what we do to make us a little bit different than others. And we're close to the beach. And you guys built a lot of homes, right? There's developers in your master plan that are building homes, right? Single family home. Correct, yeah. We have about 18 builders that includes multifamily. Single family builders, we probably have 14 and they run the gamut. So you have entry level kind of value builders or national builders like Lennar and Pulte of the World. And then you have the middle tier, David Weakley, Taylor Morrison related. And then we have what we call super regionals, guys who do really great stuff, semi custom and custom work. So we really run the gamut in terms of opportunities for people to live here. Rick, what are you seeing right now in the housing market based on the movement of your properties? So we've been very blessed and fortunate. I understand there's some areas where there's been some headwinds. Last year, we were up 4%. Year to date, we're up about four and a half percent already year to date. So we've had really strong demand, especially given what experience nationally last year, certainly the first half of the year was really rough. You know, our sales were pretty even quarter by quarter. I would say the one thing that's very interesting is that our average sales price continues to be strong. I mean, it's grown, gosh, compound annually more than 8% year over year since 2018. So really growing the price. So I think that has something to do with the buyer profile. We really increased our capture, specifically COVID changed. We never had a Northeastern buyer and we definitely have a Northeastern buyer in New York, Massachusetts, Northern Virginia, which we didn't have before. And we're getting buyers from California's in our top six. They've never been even on the radar screen before to come to Southwest Florida. And then we have a lot of migration from in the state of Florida because our school systems are so good in Sarasota County. It's number one rated school system, I think in Florida, a lot of in-state migration, Tampa, Orlando and Miami in particular. You mentioned that you have had the price increase 8% a year in the last few years and some parts of Florida have had the price decline, right? And what do you think is happening in the general market based on what you're seeing? Well, it's really interesting. We've seen prices pull back on first-time home buyer market, entry-level prices, where we're seeing the growth is really anything over about a million, two is where we've seen significant price appreciation. But we have seen the lower, I'll say entry-level pull back or stabilize a bit. And I think that anytime that buyer has got sensitivity to interest rates or credit issues, loan to value, there's a little bit more trepidation right now. They just want to make sure that that investment is where they want to be. But in the upper tier where we trade a lot of, we're not finding the pushback on the pricing. Do you see the volume, the market right now being steady for you guys, or is there upticking or downticking? Do you see any trends in the number of transactions you have? I think the number of transactions, since we're up year to date, I think will be flat to last year, if I was guessing. But we have a lot more of that upper tier product, as I referenced. I would think we're going to be flat in terms of pricing and total unit volume. I will say the options and upgrades, we're finding that builders aren't able to sell as many. So you may sell the unit, you may sell the home, but you and your wife may not choose to put the extra 60,000 in for cabinets, or you're only going to spend X amount for the pool instead of Y amount for the pool. So they still may be getting to the house, but they may not be spending as much on the options and upgrades. Based on the information you're seeing, do you see a major downturn for the housing market? Or do you think we are kind of not going to get there? What are your thoughts? I think that that's both a national question, a regional question, or a local question. So I'm going to try to answer it really more on the regional. We're from Florida as a market. Having lived through the downturn and watched what was the perfect storm I think the sensitivity to loan to value, being able to loan people money that couldn't or didn't have the credit to justify why they were purchasing the mortgage-backed security market was bad. So there were a lot of things that drove the downturn. I think we are very fortunate. I think we've learned a lot from that. I don't think people are lending the way they used to. There isn't a ton on speculation. I don't think you see a lot of builders with a tremendous amount of inventory finished out in the market. They've been much more trepidatious about putting QMIs out and available. I feel like we've learned a little bit from the last downturn. Publicly traded builders still need to generate sales, right? They still need to generate units and numbers. So I think that's always going to be a bit of sensitivity for them. But I am a little bit more bullish. I think that we learned our lesson. Not that there won't be a slowdown. I think there's always going to be dips and corrections. I would say, given the economic and demographic profile of, my oldest is 27. She's not necessarily, if you look at the data, as quick to buy a home. She's perfectly fine renting for a number of years until she starts to have children. So I think that stretch of those, that younger generation, wanting to get a house, they really are waiting and they're renting until they have children, delaying it a little bit longer. So I think you're seeing that nationally. And then lastly, you still have to, in some markets, you still have to sell your house. If you're not buying a second home, but you're buying a primary and you're moving or migrating from one market to another, the buyers of new versus old, it's very challenging unless you're in a prime market. I would say also, anyone that got a mortgage, what, 10 years ago, at three and a half percent, do you think they're going to flip it out? If they need a mortgage, they're going to flip it out and double it? Maybe not. Maybe they'll choose to upgrade what they have or get a loan, line of credit or something to do that. Some people are saying the supply is the problem. What are your thoughts on that? And do you think this is the level we have reached now, that the housing costs are going to be higher? As you mentioned, your daughter, young people may not buy for a while until. I think I referenced, it's probably market specific. I would say, I do not feel Florida has been oversupplied. I would say there are sensitivities to the product, the product for a age targeted or a 55 plus customer, you have to have the master down. So the product has to match the market. It has to be large enough if you're going to have multiple children, school age children. So in some instances, the product has to match the market. And I can't speak for how that is nationally. I'm on a couple of national councils. I don't get the impression that we're oversupplied. I would say this, I think that builders can't get margin proud if they were making 30, 40% margin X number of years ago. Now that they have that inventory, they have to be really realistic about what they need to sell that unit for and how much margin they're going to be able to post. And maybe there's a little bit of that. So builders are watching for the inventory. They're not building unless they can sell it, right? Yeah. Being smart about putting that capital to work. If they don't feel like there's a buyer, we call them to be built. And I see a lot more of the to be built. Now, which is Mr. and Mrs. Severance going to make a reservation and that house is going to be built later. So you're using that capital as you have a contract versus what used to call it spec homes. Now they're quick move and ready homes versus a builder making an investment and putting 10 to 15 houses out there and hoping you match that house with a buyer. That's much more challenging in today's market because there's a lot more available. For people that are looking at the housing market and they may not understand that they might want to buy a home. They might want to invest in real estate. Do you have any thoughts for the many recommendations based on what you're seeing? I think that a home is your most important decision and a home should be where you have soul and you feel you can create roots or you feel connected to community. I always start with the place and you're feeling great about the place and the sense of place and it tie with your ethos. I think so many people want to just focus on price instead of focusing on the location because I think location is the memory maker not necessarily how much your mortgage is. And we know it's funny, right? Because I have 20 some year old kids. When you communicate, well, what's that extra? I'm making this up with that. What's that extra $300 a month going to do for you in terms of the type of house versus where you want to live? I think you would probably look at that as a return on investment and ensure that there would be that return on investment and you'd get that back in spades. So I think it's location specific. I think being trepidatious about what you can afford and not getting out over your skis, I would say we don't see a ton of investor market like we did in the downturn where people were just buying a bunch of spec inventory and thought they could rent it maybe. I do think people need to be much more mindful of if there's a dip, if you're buying it for investment or you're buying it for growing your family that it meets those things that tie to your soul not necessarily the bricks and sticks of a building. You brought up different types of housing for different people. Is there a mismatch or is there different kinds of inventory out there? Can you tell us what you're seeing? I would say one of the things I probably most proud of at Welland Park is that we have the gamut, right? So we have very small bungalows. They're under 700 square feet that are built for rent bungalows. They're wonderful, but you don't share a ceiling or two walls. We have multifamily. And then we have entry-level price points. We can get a condo for 250, 270, two houses at three and a half million. So for me, it's about having product for everyone because if you fall in love with Welland Park, we wanna keep you here. We wanna find a place for you. We don't want you to have to go someplace else. And I think the other thing too is making sure we've been really mindful about this, making sure we don't have a number of builders fighting against themselves at the same price point. Be very mindful of how different builders can play on maybe the same chassis size of home so that they're all not cutting prices just to capture the buyer. There's gotta be a unique selling proposition with each one of them. One could be environmentally sustainable. One can have a front porch. One has a mezzanine or a wonderful outdoor pool area. They've gotta have some differentiation. So that the buyer doesn't feel like they're overwhelmed with the same kind of product. Rick Severance, it was great to have you on Marketing Insider. Thank you very much. Appreciate it. Tell us what you think about what's going on in the real estate market. You can always comment or contact us. This is Yamai Korami. This is Marketing Insider. We'll see you next time.