00:00The spring buying season is about to get underway. You have agents all over the country who are
00:05giving you real-time feedback about what things are looking. This is not a monolithic market. I
00:09hear that location, location, location is everything. What can you tell us about the
00:14state of the real estate industry in the U.S.? Yeah, you know, we have seen some really good
00:20indicators at the end of last year, both in terms of housing starts and in terms of new construction.
00:25And, you know, inventory really is sort of the issue to tackle in the housing market right now.
00:30We know that, you know, more than 85% of people believe that home ownership is central to the
00:36American dream. So that aspiration has not gone away. However, we need inventory. We need inventory
00:42to get people into those homes. So, you know, it is location, location, location, but it really is
00:48inventory, inventory, inventory. And we see sort of mixed inventory across the country. And if you
00:54look at sort of the Midwest and the Northeast, we still have really tight inventory, whereas in
01:00other markets, we do see loosening of inventory, which is causing more price stability.
01:05Is there anything that gets inventory to increase without actually just building more homes? Would
01:12lower mortgage rates increase inventory?
01:14Absolutely. I think, you know, we've talked a lot about that lock-in effect that started occurring
01:19because of the historically low interest rates, you know, around post-COVID era, where we saw
01:24sellers that were really locked into their homes because they didn't want to give up that three
01:28or 4% interest rate. So with the loosening of that lock-in effect, we're going to see sellers
01:34who are more willing to put their homes on the market, who are a little bit more realistic
01:38about prices, right? Because we're not seeing the double-digit year-over-year price increases
01:43that we saw kind of, you know, four or five years ago. And so when we get more sellers to
01:48release that lock-in effect, when we get sellers to get realistic about pricing, that's really going
01:53to be the other factor, in addition, obviously, to new building that gets more inventory on the
01:57market.
01:58How many of that lock-in effect where people, you know, have a low rate and they don't want
02:01to move? Is it everybody or is it largely an older population who either maybe retired around
02:08COVID or made some decisions? And, you know, it's just more to do with demographics than people
02:15who locked in lower rates? Or is it a little bit of both?
02:17It's, you know, it's everybody. I mean, who doesn't love, you know, a 3% interest rate,
02:22right? But I think that what folks are starting to realize is that those were historical lows
02:27for a reason. And now we are, you know, mortgage rates are about 6%, 100 basis points lower than
02:34last year and very much in line with U.S. historical averages. So I think this idea of
02:40just holding on to an interest rate is starting to loosen across all demographics. And people
02:45are realizing that there are other reasons to move. Now, you couple that with the increase
02:51in home equity and the increase in wage earning over the last couple of years. And folks are
02:57really loosening the fact, loosening to the idea that that low interest rate is the only thing
03:02holding them in their home. They're starting to realize that if they do put their home on the
03:06market, they can take advantage of some of those equity gains from price increases,
03:10you know, and just be more realistic about what rates are in line with historical averages.
03:16You mentioned earlier that I think there's tighter inventory in the Northeast,
03:19other areas are looser. Walk us around the country and what you're seeing and be more specific in terms
03:24of markets. Yeah, sure. So, you know, Texas is one market, Austin in particular,
03:29where we are seeing year-over-year price decreases because we've got a lot of inventory there.
03:34Florida actually has more inventory at this time this year than it did last year, which is sort of
03:39an interesting and unexpected dynamic. And, you know, one market that I think is fascinating right
03:45now is the city of San Francisco. We saw year-over-year price declines around the COVID era in the
03:51city of
03:51San Francisco. And now because of the AI boom, we're seeing really strong price increases in the city of
03:57San Francisco, both in terms of rent and in terms of single-family homes. And I think that that's
04:02going to continue to increase. So price increases in that city, you know, but not a lot of inventory.
04:09I live in Los Angeles and we're actually seeing sort of a steadying of the market in Los Angeles.
04:14We had historical highs in terms of year-over-year price increases a few years ago. Now we see prices
04:20are really steadying out in Los Angeles and supply and demand are starting to even out a little bit.
04:25In Los Angeles, did the devastating fires last year affect the way that people think about
04:31living in an environment such as that? You know, Los Angeles is always going to be a really
04:37attractive city. Just the combination of, you know, the weather, the proximity to the beach,
04:42the ocean, you know, mountains, the entertainment industry. The fires certainly had a devastating
04:48effect on specific communities. But we actually saw, particularly in the high end,
04:52that that demand that was in the Palisades and Malibu communities that were devastated by the
04:58fires transferred almost one-to-one into neighboring communities like Beverly Hills,
05:03Bel Air, Santa Monica, Brentwood. And so I don't think that the demand to live in Los Angeles has
05:09changed at all because of the fires. We're just seeing a sort of a rebalancing in where folks have
05:15moved. You know, I'm curious to what sellers are having to do. So is it more of a seller's market
05:24or a buyer's market? Or again, depends on the market. And I am curious about when it's new versus
05:30previously owned homes, what you're seeing. And I bring that up because Toll Brothers reported after
05:36the close yesterday, our own in-house intelligence team writing the post-first quarter earnings outlook,
05:42first quarter orders were flat, 5% below consensus. It did keep its full-year guidance
05:47when it comes to deliveries. Management saying January's gotten off to a promising start with
05:53most customer metrics modestly higher than last year, though cautioned that it's still early in the
05:59spring season. I mean, the spring season is an important one. And I am curious if sellers,
06:04particularly new homes, are having to incent buyers throwing in different things to get sales
06:10going? Or is that not the case? You know, so for new construction incentives have not actually
06:17changed. And so we're not seeing, you know, a major shift in the sort of buyer's market or seller's
06:23market dynamic with regards to new construction. But to your point, you know, whether it's a buyer's
06:28market or seller's market really does differ around the country. And it really is just dictated by
06:33inventory because the macroeconomic factors around the country are steady, right, in terms of wage
06:38increases in terms of mortgage rates. And so it really is dependent on inventory. So when you look
06:44at a market like New England, for example, where we still have very, very tight inventory, you know,
06:49that's going to dictate that sellers have a little bit more power than buyers do. However, in a market
06:54like Texas, and, you know, Texas is very broad, but I'll talk to Austin in particular, we've got a lot
06:59of inventory in Austin. And so prices are down year over year, about 6%. So that indicates that it's more
07:05of a buyer's market, where buyers have a little bit more power at that negotiating table. So, you
07:11know, again, inventory really is the thing that's dictating market dynamics across the country. And
07:17it very much is region specific. You know, I'm wondering about compensation for the agents that
07:24you have that you oversee. And, you know, if we think about the industry, this is one where they're
07:28essentially private contractors, right? They're not employed by you. They work for themselves. They
07:35eat what they kill. The commissions have been under scrutiny for quite a bit of time. There was the big
07:41settlement in recent years. What are commissions looking like in different markets? And is there
07:46pressure on commissions as a result of that? Yeah, great question. So at Coldwell Banker Realty,
07:51we have about 49,000 affiliated agents, all independent contractors. And, you know, what
07:58we're actually seeing is that on the list side, commissions have gone up a little bit. And I think
08:04that is because after the massive conversation and the news cycle around commissions, our agents got better
08:11at talking about the value that they provide. So at that kitchen table, when you're negotiating with an
08:17agent to decide who is going to list your home, which, you know, by the way, the vast majority of
08:23Americans have the vast majority of their wealth tied up in the equity of their home. So that is an
08:28incredibly important decision. Who is going to help you with the most important financial transaction of
08:34your life? Those agents are better able to articulate their value and consumers are recognizing that and
08:41they're willing to pay for it. And that that is what the commission is. It's compensation for the
08:46incredible value that the real estate professional is providing. So contrary to what a lot of people
08:51assume, we actually have not seen commissions decline in the last year or so. They're actually
08:57going up. And I think it really is because of that value that the real estate professional is providing,
09:02particularly at a firm like Coldwell Banker Realty.
09:04Kamini, one thing we have to ask you about is AI, the impact. Fortune has a story out from Zillow,
09:10citing Zillow's CTO, Chief Technology Officer. And he is saying that AI is reinventing every step of
09:17the home buying process, making it easier for shoppers to search for a home and complete a
09:21transaction. We've recently seen the AI scare trade impact some of the residential or not residential,
09:28but real estate servicing companies. AI in your world just got about 40 seconds left here. How is it
09:33impacting it so far? And how might it?
09:35Yeah, I think artificial intelligence is an amazing tool to help our real estate professionals
09:41use their time more effectively and efficiently. At the end of the day, real estate really is about
09:46relationships. It's the most personal transaction that most people are ever going to encounter in
09:51their lives. And so that really does require a human at the center. However, AI can make that human
09:57more powerful, use their time more efficiently, use data more efficiently, and be more effective
10:03in that transaction. So real quickly, it's an aid. It's not going to wipe out what you guys do
10:07or your agents do. No, it is an aid. It is an empowerment tool, but real estate is fundamentally human.
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