00:00Drew Redding joins us here, Home Builder Analyst for Bloomberg Intelligence.
00:03Drew, we had some housing data out today.
00:06What's important for you?
00:07What's important for the market?
00:10Yeah, so I think from a big picture perspective, if we look at the housing market holistically,
00:16you know, we're still kind of stuck in the mud.
00:17We had pending home sales down low single digits compared to last year.
00:22We're still down about 20% from what is considered to be a more normalized level.
00:27You mentioned it, that it's primarily affordability constraints, home prices, mortgage rates,
00:33but we also have the war in Iran, consumer inflation, and ongoing concerns about, you know,
00:39the strength of the economy and the outlook for employment.
00:42So to solve the housing crisis, if you will, i.e. a shortage of housing,
00:49is it just build more houses or what is a longer term solution here?
00:56So I think you've heard the government start to acknowledge the fact that, you know,
01:02the costs associated with building a home, the regulations that are involved are increasingly
01:07burdensome.
01:08So I think the fact that the federal government has acknowledged this is a positive sign.
01:13The issue is there's only so much that the government can do to force state and local
01:17municipalities, you know, to force home production.
01:22So I think, you know, a lot of it is just really talk at this point.
01:26At the end of the day, I think it comes down to, you know, market forces of supply and demand
01:30that will ultimately drive the market.
01:33We need prices to come down a little bit.
01:35We need to see mortgage rates come in a little bit.
01:37And ultimately, we need to do something to make the cost of building a home more affordable
01:43for the builders because the cost of regulations in a home are very burdensome and it makes
01:49it hard for the builders to reach the price points which many Americans can afford.
01:54So generally, what percentage of kind of a new home would be attributable to some of these
01:59government regulations as opposed to the raw materials, the labor?
02:03How much is that other part that may be subject to government regulation that you bring down?
02:11Yeah.
02:11So, I mean, the cost of government regulations in a new home is pretty significant.
02:16You know, we're looking at 10 to 20 percent of the home.
02:19But what you have to remember is it's not as though all of these regulations can go away.
02:24You know, some of them are in place for certain reasons.
02:26There's others that maybe don't make as much sense.
02:28And it's those that they need to focus on.
02:31You know, you also have the issue of zoning.
02:34And again, it comes down to state and local municipalities who have their own objectives
02:38of what they want to achieve in housing markets.
02:41So until we could find a way to kind of force their hand, you know, we're kind of stuck in
02:46the mud.
02:46Is it easier slash less expensive to build a house in Texas than it is in, I don't know,
02:52New York State?
02:54Yeah.
02:55I mean, when you talk about these larger high growth markets, you know, there does tend
03:00to be less regulation, but you also have more ample land supply.
03:04And that's really one of the big factors for a builder.
03:07You know, if you go to Texas markets, obviously you could build as much as you want with the
03:11land that's available compared to, you know, the Northeast, which is much more land constrained.
03:16It's much more difficult for the builders to get land entitled, you know, from the time
03:20they purchase land to the time they're actually building homes on it.
03:23It could take several years.
03:24So it's a much more difficult and costly process.
03:28And I'll tell you, I'm just looking at the 30-year fixed mortgage, 6.77%.
03:32That's Mortgage Bankers Association.
03:35That's going the wrong direction.
03:36I mean, I think a lot of folks were hoping to see a five handle at some point, but we're
03:40going in the wrong direction there.
03:41How much of an issue is that?
03:43I mean, that's one of the primary issues.
03:45We're now, mortgage rates are now higher than they were at the same point last year.
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