LET'S TALK A LITTLE BIT MORE ABOUT HOUSING IN LIGHT OF THOSE RESULTS AND AS INVESTORS WATCH THE EFFECT OF THE PAUSE ON THE REAL ESTATE MARKET JOINING US NOW, TOM OF GTS PARTNERS GREAT TO HAVE YOU ON THE SHOW. HOME BUILDERS HAVE BEEN LEADING THE CHARGE RECENTLY IN TERMS OF TRYING THE FILL THE VOID WITH SINGLE FAMILY HOME INVENTORY WHEN YOU HEAR NUMBERS LIKE THAT FROM LENNAR, I WONDER WHAT YOU THINK ABOUT THE STATE OF HOUSING, GIVEN THE FACT THAT WE HAVE HAD THE FED, YES, PAUSING TODAY, BUT WE HAVE HAD THIS HUGE TIGHTENING CYCLE UP UNTIL TODAY. >> YEAH, IT IS SOMEWHAT OF A SURPRISE, BUT LET ME TAKE YOU THROUGH. FIRST, WHAT OUR NUMBERS LOOK LIKE, AND THEN WHY WE'RE SEEING THIS PHENOMENON, BECAUSE INTUITIVELY, YOU WOULD THINK, GIVEN INTEREST RATES ARE AT 7% FOR A 30-YEAR MORTGAGE, YOU'D ASSUME THAT HOUSING WOULD BE SELLING OFF AT THIS POINT. BUT IF I LOOK BACK, PRE-COVID, PER COMMUNITY, PER MONTH, WE WERE SELLING ABOUT FOUR HOUSES DURING COVID, IT SPIKED UP TO SIX AS PEOPLE NEEDED SHELTER AND WERE LOOKING FOR HOMES, AND THEN IT DROPPED PRECIPITOUSLY TO ABOUT 3% LAST YEAR, SO THAT'S SORT OF IN THE DOLDRUMS. TODAY, IT'S 6.75 HOUSES PER COMMUNITY PER MONTH, SO WE ARE SEEING A HUGE SURGE AS WELL, AND WHY IS THAT? I THINK THERE ARE TWO MAIN REASONS WHY THAT'S HAPPENING ONE, THERE'S JUST NO SUPPLY, AND THAT IS BECAUSE IF YOU FINANCED YOUR HOME WITH A 2.5% OR 3% MORTGAGE, YOU ARE NOW TRAPPED IN THAT HOME. YOU ARE NOT SWAPPING THAT HOPE FOR A 7% MORTGAGE. THE OTHER PART, I THINK, IS REALLY THAT HOME BUILDERS ARE BUYING HOME MORTGAGES DOWN TO 6% AND BELOW, AND I THINK THAT'S SORT OF A MAGIC NUMBER FOR THE CONSUMER IS GETTING IT DOWN TO 6% ONE THING YOU HAVE TO FACTOR IN WHEN WE TALK ABOUT HOME PRICES IS WHAT ARE THE CONCESSIONS THAT THE HOME BUILDERS ARE GIVING TO BUY DOWN MORTGAGES TO 6% AND BELOW? ONE STORY THAT IS GETTING INTERESTING IS THAT HISTORICALLY, ABOUT 13% OF OVERALL SALES ARE NEW HOMES. TODAY, IT'S 30%. THAT'S GOT A LOT TO DO WITH THE FACT THAT THERE IS JUST NO SUPPLY IN THESE MARKETS. THERE'S NOTHING AVAILABLE, AND AS STEWART MENTIONED, WE HAVE BEEN UNDERSUPPLIED FOR A LONG PERIOD OF TIME NOW >> WHAT DOES THAT MEAN FOR YOU IN TERMS OF REAL ESTATE INVESTING IN THE HOUSING MARKET? I MEAN, WE KNOW RENTALS HAVE BEEN RED HOT THE HOME BUILDERS, THE PUBLICLY TRADED HOME BUILDERS, THEY'RE ALL UP DOUBLE-DIGIT PERCENTAGES THIS YEAR. WHERE WOULD YOU BE PUTTING MONEY TO WORK? >> SO, WE LIKE THE HOME-BUILDING SECTOR A LOT, AND WE HAVE BEEN HEAVILY INVESTING IN IT. A LOT OF WHAT WE HAVE BEEN DOING IS MORE ON THE CREDIT SIDE, BUT WE HAVE BEEN INVESTING IN EQUITY IN HOME-BUILDING COMMUNITIES, AND WHAT'S REALLY SHOCKING IS OUR ENTRY LEVEL HOME BUILDING, WE HAVE A VENTURE WITH A GROUP CALLED CASA FRESCA, THEY'VE BEEN DOING INCREDIBLY WELL, AND YOU WOULD ASSUME THE ENTRY-LEVEL HOME BUILDER WOULD BE THE MOST PRICE SENSITIVE, BUT THEY'VE BEEN EXTREMELY STRONG. WE HAVE HAD VERY STRONG SALES. WE'VE BEEN CONTINUING TO INVEST ACROSS OUR HOME-BUILDING PORTFOLIO. OUTSIDE OF HOUSING, WE REALLY LIKE THE INDUSTRIAL SECTOR AS WE'VE CONTINUED TO SEE A LOT OF DEMAND AS THERE'S MORE AND MORE ON-SHORING THAT'S HAPPENING. YOU CAN'T JUST HAVE JUST IN TIME DELIVERY OF INVENTORY ANYMORE AS YOU NEED TO MAKE SURE YOU HAVE ENOUGH STUFF IN THE WAREHOUSE IN ORDER TO SUPPLY THINGS >> TOM, I HEAR YOU, BUT IT SOUNDS LIKE -- IT SEEMS TO ME LIKE WE'RE IN A UNIQUE SITUATION, ESPECIALLY WHEN IT COMES TO NEW HOMES EMPLOYMENT IS UNCOMMONLY HIGH, AS YOU MENTIONED EXISTING HOME INVENTORY IS UNCOMMONLY OW. WE HAVE HAD THIS RAPID MOVE HIGHER IN INTEREST RATES THAT GIVES HOME BUILDERS THIS OPPORTUNITY TO PROVIDE AN INCENTIVE AND RAISE THEIR SHARE OF THE HOME SALE MARKET TO 30% WHEN THAT TICKS DOWN, ISN'T THAT GOING TO HURT A LOT OF HOME BUILDER STOCKS >> FOR SURE. BUT DON'T FORGET ABOUT THE DEMOGRAPHICS YOU HAVE 1.2 MILLION HOUSEHOLDS BEING FORMED EVERY YEAR RIGHT NOW. NOW, OF COURSE, WE GO INTO A DEEP RECESSION, THAT MAY CHANGE, BUT WE STILL HAVE -- WE NEED SHELTERS FOR PEOPLE. AND IT IS -- AND I'LL GIVE ONE TO YOUR SIDE, WHICH IS, IT'S A THOUSAND DOLLARS MORE NOW TO OWN A HOME THAN TO RENT A HOME, BUT I THINK POST-COVID, AND THE FACT, TOO, THAT PEOPLE DON'T NECESSARILY NEED TO LIVE IN THE CITIES BECAUSE THERE'S A LOT OF WORK FROM HOME, AND THE MILLENNIALS NOW ARE GETTING INTO THEIR LATE 30s, 86.5 MILLION PEOPLE, THERE ARE MORE AND MORE, YOU KNOW, WHO WANT TO BE IN HOMES, WHETHER THEY RENT THEM OR OWN THEM THAT'S A DIFFERENT STORY, BUT THEY'RE MAKING A LIFESTYLE DECISION TO BE IN A HOME THERE'S
