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Ivy Zelman Discusses Real Estate · Masters in Business

• 0:02
  Speaker 1: This is Masters in Business with Barry Riddholts on Bloomberg
• 0:06
  Speaker 1: Radio this weekend. On the podcast, I have an extra
• 0:12
  Speaker 1: special guest. Her name is ivy's Elman, and I have
• 0:15
  Speaker 1: been following her research and writing for the better part
• 0:18
  Speaker 1: of a decade plus. UH. She has had a series
• 0:22
  Speaker 1: of phenomenal calls within various aspects of the real estate industry,
• 0:27
  Speaker 1: be it the home builders, the mortgage originators, the credit underwriters.
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  Speaker 1: She is definitely a contrarian. She is somebody who is
• 0:39
  Speaker 1: extremely astute as to the economic cycle and how it
• 0:43
  Speaker 1: affects housing. If you are at all interested in real estate,
• 0:49
  Speaker 1: credit homes, both single family and multi family, and all
• 0:54
  Speaker 1: of the latest innovations in either technology or UH financial
• 0:59
  Speaker 1: and sations and financing of of especially from the private
• 1:03
  Speaker 1: equity side. We we just spend some time talking about
• 1:07
  Speaker 1: I buying the instantaneous buyers that have appeared that facilitate
• 1:12
  Speaker 1: transactions of sellers. I think you're gonna find this conversation
• 1:16
  Speaker 1: filled with wonky goodness. So, with no further delay, my
• 1:20
  Speaker 1: conversation with real estate and equity analyst expert Ivy Selman.
• 1:30
  Speaker 1: I'm Barry rit Halts. You're listening to Masters in Business
• 1:33
  Speaker 1: on Bloomberg Radio. My special guest this week is Ivy Zellman.
• 1:38
  Speaker 1: She is the CEO and founder of Zellman and Associates,
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  Speaker 1: a boutique research firm focusing exclusively on the housing industry.
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  Speaker 1: She is an institutional investor, Hall of Fame Equity Analyst
• 1:52
  Speaker 1: UH The All American Research Team Rankings placed Ivy and
• 1:55
  Speaker 1: her team with eleven first place rankings between nineteen Then
• 2:00
  Speaker 1: you know and and I V. S Ellman. Welcome to Bloomberg.
• 2:04
  Speaker 1: Thank you for having me. Very so you cover one
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  Speaker 1: of my very favorite areas because it's so fascinating, especially
• 2:11
  Speaker 1: in the United States, housing, the pursuit, construction, financing of it.
• 2:18
  Speaker 1: Let's talk about the early days of your career and
• 2:21
  Speaker 1: how you became a housing analysts. You began on Wall
• 2:25
  Speaker 1: Street that about rights right? What path led you there? Well,
• 2:30
  Speaker 1: actually I didn't start out interested in housing admittedly. UM.
• 2:34
  Speaker 1: I was UM really focused as an undergrad on accounting
• 2:39
  Speaker 1: and I was working UM at Arthur Young now Ernst
• 2:42
  Speaker 1: and Young, going to night school. So I went to
• 2:45
  Speaker 1: undergrad for six years and during the time that I
• 2:48
  Speaker 1: was studying at George Mason University and working in Ernst
• 2:52
  Speaker 1: and young as an accounty major. I was asking a
• 2:54
  Speaker 1: lot of these accountants that I worked with, do you
• 2:57
  Speaker 1: like what you do? And they hated it. They almost
• 3:01
  Speaker 1: universally everyone I talked with said you don't want to
• 3:03
  Speaker 1: be an accountant. So I was like, well, what should
• 3:05
  Speaker 1: I do? And they basically all said, go get a
• 3:08
  Speaker 1: job in Wall Street? And I'm like, what does that mean?
• 3:10
  Speaker 1: Because at George Mason, Wall Street firms didn't recruit students there,
• 3:14
  Speaker 1: so I had to network and knock on doors, and
• 3:16
  Speaker 1: eventually it led me to Wall Street, where I got
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  Speaker 1: a job at Solomon Brothers in investment banking and I
• 3:22
  Speaker 1: was there for a two year stint as an investment
• 3:25
  Speaker 1: banking analysts prior to be coming in going into equity research.
• 3:29
  Speaker 1: And so well told you were there from nine about right, Yeah,
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  Speaker 1: kind of overlapping with the Michael Lewis Liars Poker era,
• 3:39
  Speaker 1: one of my favorite books. But so that that is
• 3:41
  Speaker 1: a very much a male dominated period in Wall Street.
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  Speaker 1: Not that Wall Street has has really done enough to
• 3:51
  Speaker 1: to even the gender levels, but back in the nineties
• 3:54
  Speaker 1: that had to be kind of a wild place to work.
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  Speaker 1: It was a lot of fun, I think starting out
• 4:00
  Speaker 1: out first being in a class because I was in
• 4:02
  Speaker 1: a training program. I think I was one of three
• 4:05
  Speaker 1: women of seventy kids, and we were all there for
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  Speaker 1: two years. I was intimidated because most of them were
• 4:11
  Speaker 1: from the Ivy League, and so I initially not even
• 4:13
  Speaker 1: being just a woman, but just you know, having from
• 4:16
  Speaker 1: a state university. UM. But you know, once you're once
• 4:19
  Speaker 1: you're there, you know, you put your head down, you
• 4:21
  Speaker 1: work hard, and it was really just about proving myself
• 4:25
  Speaker 1: and as working hard as I can. So I think
• 4:28
  Speaker 1: that today I look back on that time and I
• 4:31
  Speaker 1: had a lot of fun, but it was about just
• 4:34
  Speaker 1: you know, execution and working as hard as you can
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  Speaker 1: to prove yourself. So how did you transition from investment
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  Speaker 1: banking analysts to housing analysts? After two years you're out
• 4:44
  Speaker 1: of a job, which you know that's the case when
• 4:47
  Speaker 1: you took the job. It's a it's a two year lifespan.
• 4:50
  Speaker 1: It's a two year lifespan, and most of the seventy
• 4:53
  Speaker 1: odd plus or minus will go on to get their
• 4:56
  Speaker 1: m b A and then return, you know, back to
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  Speaker 1: Wall Street. And because I had student loans already through
• 5:02
  Speaker 1: undergrad and unfortunately didn't want to take on the responsibility
• 5:06
  Speaker 1: or go back to school after six years. I just
• 5:08
  Speaker 1: was looking for a job to pay my rent. And
• 5:11
  Speaker 1: internally we had something called the you know, the Treasury
• 5:14
  Speaker 1: scandal going on at that time, and unfortunately John good
• 5:17
  Speaker 1: Friend and the firm was in turmoil. So a lot
• 5:20
  Speaker 1: of people period with Warren Buffett came in and right
• 5:23
  Speaker 1: the ship pretty much. And prior to Warren Buffett writing
• 5:26
  Speaker 1: the Ship, the view was there, you know, the lights
• 5:28
  Speaker 1: were going to go out at Solomon and a lot
• 5:30
  Speaker 1: of people were leaving, and there was an opportunity that
• 5:33
  Speaker 1: opened up in in equity research, in the housing space
• 5:36
  Speaker 1: and the actually in corporate finance. I worked in Transportation group,
• 5:39
  Speaker 1: and gentleman by the name of Julius Maldudas, which is
• 5:43
  Speaker 1: a famous airline analyst, he's like, you should go work
• 5:46
  Speaker 1: in equity research, you know, and and go help them.
• 5:50
  Speaker 1: So I got a job with his recommendation as an
• 5:52
  Speaker 1: associate in the UM. At that time, it was Bruce
• 5:56
  Speaker 1: Harding who covered S n L's and Fanny Freddie, and
• 6:01
  Speaker 1: he was picking up homebuilding and housing as a favor
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  Speaker 1: because Bob Bishop quit said I'm out of here, as
• 6:07
  Speaker 1: many other people were quitting, so I came an associate,
• 6:12
  Speaker 1: and I was just happy to have a job. People
• 6:13
  Speaker 1: like you don't want to be an equity research analyst.
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  Speaker 1: They're just like monkeys. They just companies talma to write
• 6:19
  Speaker 1: and and I just wanted to get a job and
• 6:22
  Speaker 1: stay at the firm, and and there there, there you
• 6:25
  Speaker 1: have it. To be fair, some of them are not monkeys.
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  Speaker 1: Some of them are insightful researchers who put forth intelligent,
• 6:33
  Speaker 1: um actionable wealth generating research. Absolutely agree with that, and
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  Speaker 1: I certainly don't agree with the monkey comment, but it
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  Speaker 1: was the beginning of now my nearly thirty year career
• 6:45
  Speaker 1: as an equity analyst. So not not as a monkey,
• 6:48
  Speaker 1: but but actually generating research. So so you're you're kind
• 6:52
  Speaker 1: of thrown into housing. How did you suddenly discover such
• 6:56
  Speaker 1: a proficiency for it? What made you so astute as
• 6:59
  Speaker 1: as someone without a background and housing going into that space?
• 7:03
  Speaker 1: You know, I think what I really loved about it
• 7:05
  Speaker 1: initially was the fact the challenge was to really find
• 7:08
  Speaker 1: ways to differentiate the work that I was doing. And
• 7:12
  Speaker 1: when you have a fragmented industry and housing is something
• 7:14
  Speaker 1: that you know, I could relate to lived in a home.
• 7:17
  Speaker 1: I like the housing market. It was really about finding
• 7:20
  Speaker 1: companies that were privately held that are in the business
• 7:24
  Speaker 1: of housing, whether they were a home builder or a
• 7:27
  Speaker 1: realtor like your mom, or building product manufacturer, and talking
• 7:31
  Speaker 1: to them about the business and learning from them, and
• 7:33
  Speaker 1: then you using that analysis to then try to correlate
• 7:38
  Speaker 1: or predict what public companies would do. Were other people
• 7:42
  Speaker 1: delving into private companies at that time as a way
• 7:44
  Speaker 1: to give them a little more color into what the
• 7:46
  Speaker 1: reality of the public situation was not that much, to
• 7:50
  Speaker 1: be honest with you, In fact, um not to give
• 7:52
  Speaker 1: too much credit to any one person, but it was
• 7:54
  Speaker 1: really I was assigned a buddy. Salomon Brothers decided that
• 7:57
  Speaker 1: a salesperson and analysts would become buddies and they would
• 8:01
  Speaker 1: work closely together for the younger Alice to learn from
• 8:03
  Speaker 1: the senior salesperson, and the senior salesperson really said, you know,
• 8:07
  Speaker 1: you need to go dig in the channel. You need
• 8:09
  Speaker 1: to find private companies. And that was really the direction
• 8:12
  Speaker 1: I went. Now, it just so happened I happened to
• 8:15
  Speaker 1: have married my buddy, but that's a longer story. But
• 8:19
  Speaker 1: my husband, David, really was the one who directed me
• 8:22
  Speaker 1: to go find private companies and that will really help
• 8:25
  Speaker 1: to ferentiate you. Quite fascinating. So let's talk a little
• 8:29
  Speaker 1: bit about Wall Street and housing. I think for the
• 8:33
  Speaker 1: most part, Wall Street has not done a distinguished job
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  Speaker 1: covering housing in general, covering the retail and department store sector, um,
• 8:45
  Speaker 1: certainly the credit companies that are associated with residential housing.
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  Speaker 1: What's your view is Wall Street? Am I overstanding this?
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  Speaker 1: Or does Wall Street not do a great job getting
• 8:58
  Speaker 1: housing right? Well? You know, looking at really our our firm,
• 9:03
  Speaker 1: which um, we think we do get it right. You know,
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  Speaker 1: what we've built has enabled us to really um differentiate
• 9:10
  Speaker 1: our overall views because we're dependent not upon what economists
• 9:16
  Speaker 1: are predicting or um other outside parties perspectives, meaning publicly
• 9:21
  Speaker 1: traded management teams telling them what they should do. We're
• 9:25
  Speaker 1: really going outside through our own network, which again we
• 9:29
  Speaker 1: channel check developed relationships. We have nearly a thousand companies
• 9:33
  Speaker 1: that are throughout what I call the housing ecosystem. Whether
• 9:36
  Speaker 1: they're a builder, they're a broker, there are a mortgage originator,
• 9:39
  Speaker 1: there are a manufacturing company that makes building products, or
• 9:42
  Speaker 1: they're in the single family rental business as as an
• 9:45
  Speaker 1: owner operator apartment. We're taking all of these silos, and
• 9:50
  Speaker 1: we're aggregating data that is proprietary data within each silo,
• 9:54
  Speaker 1: and we're then triangulating it amongst this ecosystem to have
• 9:58
  Speaker 1: a firm view of what's going on in the market.
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  Speaker 1: And I don't think it's unique to Zelman. No one
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  Speaker 1: else has anything like what we do, and it's been
• 10:05
  Speaker 1: built over the course of the decades that I've been
• 10:08
  Speaker 1: in the business. So I can't say what other firms do,
• 10:11
  Speaker 1: but I think we get it right. Well, it sounds
• 10:13
  Speaker 1: like Wall Street is generally a little too close with
• 10:17
  Speaker 1: corporate management and they're looking for guidance and not doing
• 10:20
  Speaker 1: a sort of deep outside the box research UM dive
• 10:25
  Speaker 1: into various aspects of housing or again, am I overstanding that? Well? Again,
• 10:30
  Speaker 1: I can't speak on behalf of what other firms are doing,
• 10:33
  Speaker 1: but I know what we don't do, and I can
• 10:36
  Speaker 1: tell you that back in the I guess Go Go
• 10:40
  Speaker 1: days of the housing market in you know, oh, three
• 10:42
  Speaker 1: oh four, oh five, I wasn't a very popular analyst
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  Speaker 1: UM working at credit suites when I was negative and
• 10:49
  Speaker 1: certainly the companies UM didn't see eye to eye with
• 10:53
  Speaker 1: my views. And it's like being the sober person at
• 10:56
  Speaker 1: the party. Um so um, I was definitely a lone
• 10:59
  Speaker 1: range are at times. So let's talk about that period
• 11:02
  Speaker 1: of financial engineering was endemic. Securitization was a giant revenue
• 11:08
  Speaker 1: source and we ended up seeing that eventually spiral out
• 11:13
  Speaker 1: of control into the Great Financial Crisis. So what is
• 11:17
  Speaker 1: it about that era that led so many people astray?
• 11:23
  Speaker 1: Especially the supposed smart guys doing the quantitative um research. Well,
• 11:31
  Speaker 1: I don't know that you could put pen it on
• 11:33
  Speaker 1: one thing. So then agreed um certainly the inability to
• 11:39
  Speaker 1: really take sort of the entire mosaic and see the
• 11:43
  Speaker 1: risk that was so in our opinion obvious. A lot
• 11:46
  Speaker 1: of people started, I call it drinking their own kool
• 11:49
  Speaker 1: aid and believing that there was a secular shift in
• 11:53
  Speaker 1: home ownership rates and that the government was certainly supportive
• 11:56
  Speaker 1: of continued you know, um enabling people to have the
• 12:00
  Speaker 1: American dream. But there was a optimism that was not
• 12:05
  Speaker 1: supported by the you know ingredients that go into you know,
• 12:10
  Speaker 1: creating that opportunity for people. So it it just was
• 12:13
  Speaker 1: a again, is if people just were convinced that it
• 12:18
  Speaker 1: was different this time and that housing housing was you know,
• 12:22
  Speaker 1: gonna go up forever. So I want to point out
• 12:25
  Speaker 1: this is not a case of hindsight bias, where, of
• 12:28
  Speaker 1: course the risks where obvious, says everybody today. In real time,
• 12:33
  Speaker 1: I recall reading some of your research oh four, oh five,
• 12:37
  Speaker 1: oh six, when did you leave? Oh seven, May of
• 12:40
  Speaker 1: oh seven, So in real time, before the bust, you
• 12:45
  Speaker 1: were effectively saying, there's a problem with credit, there's a
• 12:48
  Speaker 1: problem with housing, this is unsustainable. What what was the
• 12:52
  Speaker 1: research that you were putting out at that time saying
• 12:54
  Speaker 1: how how blunt were you? Pretty blunt? Um? I remember
• 13:00
  Speaker 1: report that we untitled Investors Gone Wild in July of
• 13:04
  Speaker 1: two thousand five. I think we had like a thousand
• 13:06
  Speaker 1: people in our conference call across all of it, beyond equities,
• 13:10
  Speaker 1: within you know, fixed income and rivers everywhere. Um, the
• 13:14
  Speaker 1: securitization guys were there, but generally speaking, the amount of investors.
• 13:18
  Speaker 1: When you go to let's say Las Vegas and you're
• 13:22
  Speaker 1: driving from the airport and your taxi drivers telling you
• 13:25
  Speaker 1: he's buying houses, and then you know, you go to
• 13:27
  Speaker 1: the nail salon, the woman and the nail salon is
• 13:29
  Speaker 1: during your nails is buying houses, and you realize we
• 13:31
  Speaker 1: have maybe we have a problem. I think that the
• 13:33
  Speaker 1: investors and the magnitude that we're buying both new and
• 13:37
  Speaker 1: existing homes with no money down and understanding the mortgage
• 13:41
  Speaker 1: piece was probably one of the biggest um parts of
• 13:43
  Speaker 1: our conviction on why we had a real problem here,
• 13:47
  Speaker 1: and and mentioning again affordability was clearly way out of
• 13:51
  Speaker 1: reach from any historical perspective. Um. The other aspect of it,
• 13:55
  Speaker 1: besides investors gotten wild, was the amount that the builders
• 13:59
  Speaker 1: were willing to pay for land and having the ability
• 14:02
  Speaker 1: to talk to private companies and who would be competing
• 14:05
  Speaker 1: with the builder for that land, and the private builders
• 14:08
  Speaker 1: would tell us, oh my god, you cannot believe what
• 14:10
  Speaker 1: these guys are paying for the land. That was another
• 14:13
  Speaker 1: part of our analysis that really led us to understand
• 14:16
  Speaker 1: the risks that these um companies were really willing to
• 14:20
  Speaker 1: absorb at the expense of shareholders. You put your finger
• 14:24
  Speaker 1: on a couple of things I want to bring up,
• 14:25
  Speaker 1: one of which is historically, most builders are pretty cognizant
• 14:32
  Speaker 1: of the real estate cycle and the business cycle, and
• 14:36
  Speaker 1: they get aggressive when things are cheap, and when things
• 14:38
  Speaker 1: get expensive they pull back. But for some reason, it
• 14:42
  Speaker 1: seemed that a lot of people sort of stopped doing
• 14:46
  Speaker 1: that in oh five or six oh seven. What was
• 14:49
  Speaker 1: it about that period that made them forget, Oh no,
• 14:54
  Speaker 1: you don't want to pay up for lands. It'll come
• 14:56
  Speaker 1: back down when the cycle turns well, you know, I
• 14:59
  Speaker 1: think there was a view that the demographics had shifted
• 15:03
  Speaker 1: and that um there was support for you know, a
• 15:07
  Speaker 1: secular growth in housing that we hadn't hadn't seen in
• 15:10
  Speaker 1: prior cycles. That was the That was what the companies
• 15:14
  Speaker 1: pitched to the investment community. They and they really believed
• 15:17
  Speaker 1: in many of them. Um, they also had Wall Street
• 15:20
  Speaker 1: pushing hard to drive top line. So what had been
• 15:25
  Speaker 1: matching short term assets with short term debt or long
• 15:29
  Speaker 1: term debt with long term assets. You know, what you
• 15:33
  Speaker 1: started seeing is builders willingly taking on more leverage, buying
• 15:37
  Speaker 1: larger parcels because it would feed the machine, enabling them
• 15:41
  Speaker 1: to continue show strong growth. And so the market was
• 15:44
  Speaker 1: really demanding growth and they were willing to put the
• 15:48
  Speaker 1: capital to work. You know, it's one of the only
• 15:51
  Speaker 1: businesses that you know, once you build the factory and
• 15:53
  Speaker 1: then sell it, you have to rebuild your factory. And unfortunately,
• 15:57
  Speaker 1: this is one of a factory that you know, you
• 15:59
  Speaker 1: have to best fifty cents to seventy cents to make
• 16:02
  Speaker 1: a dollar revenue capital intense business, and you start buying
• 16:06
  Speaker 1: land that won't be let's say, put into the manufacturing
• 16:10
  Speaker 1: capacity realization machine for a few years. You can really
• 16:14
  Speaker 1: put some significant risk on the balance sheet. Quite quite interesting.
• 16:18
  Speaker 1: So let's talk a little bit about the timing of
• 16:22
  Speaker 1: the launch of Zelman and Associates. You do this? Was
• 16:27
  Speaker 1: it later on? Oh seven? Is that right? We left
• 16:30
  Speaker 1: Credit Suites in May and started Zelman October seven. Okay,
• 16:35
  Speaker 1: so October fifth, two thousand seven. The October October five,
• 16:40
  Speaker 1: two thousand seven is when the equity markets peaked and
• 16:43
  Speaker 1: would not see that level again until So your timing
• 16:48
  Speaker 1: was kind of interesting and coincidential. You obviously saw some
• 16:54
  Speaker 1: variation of what was coming. Why launch into that sort
• 16:59
  Speaker 1: of Mayhew Or was the expectation, Hey, nobody's job is safe,
• 17:03
  Speaker 1: we might as well do it ourselves, or what were
• 17:05
  Speaker 1: you thinking? Well, my team's at Credit Suites. Dennis McGill
• 17:09
  Speaker 1: who was my UM partner associate and he's the co
• 17:14
  Speaker 1: founder of his Element Associates, along with Alan Rattner, who
• 17:17
  Speaker 1: was also working with us on the team of Credit
• 17:19
  Speaker 1: SUITEZ we were working um as equity analysts, really focused
• 17:25
  Speaker 1: on housing, but we were servicing the entire firm because
• 17:29
  Speaker 1: we were such in the eye of the storm, and
• 17:31
  Speaker 1: we had such a controversial call, and I had such
• 17:34
  Speaker 1: an unbelievable network that we created through these private industry
• 17:38
  Speaker 1: contacts that we wanted. We weren't feeling that we were getting.
• 17:41
  Speaker 1: First of all, we were unfortunately a lot of people
• 17:46
  Speaker 1: internally within the salesforce and the traders and in the
• 17:50
  Speaker 1: in this curization, the ABS guys, they didn't agree with
• 17:53
  Speaker 1: our call. So we were a little bit um. Hey,
• 17:56
  Speaker 1: somebody has to be on the wrong side of the trade, right. Well,
• 17:58
  Speaker 1: we were not very popular. And you know, I was
• 18:01
  Speaker 1: even told by the head of product management from Credit
• 18:05
  Speaker 1: Suez is um perspective that your job could be at
• 18:09
  Speaker 1: risk if you don't make you know, you had your
• 18:11
  Speaker 1: I think in two thousand six, this is what happened.
• 18:14
  Speaker 1: Two thousand and six. The stocks were down about and
• 18:18
  Speaker 1: there was slowing and we were right. And then Bob
• 18:23
  Speaker 1: toll And told brothers say, hey, things are picking up.
• 18:25
  Speaker 1: This is back in September six and they called it
• 18:27
  Speaker 1: the Zelman bottom, and and that you need to get
• 18:31
  Speaker 1: with it. And you need to be more bullish. You
• 18:33
  Speaker 1: had your little good time. Now now you need to
• 18:35
  Speaker 1: turn around and be bullish. And I remember publishing Dennis
• 18:39
  Speaker 1: and I we had fun writing this report. UM in
• 18:41
  Speaker 1: December of two thousand six. We wrote twelve reasons or
• 18:45
  Speaker 1: the ten reasons to sell homebuilding stocks. Wait, let me,
• 18:49
  Speaker 1: let's just make sure I understand the time in here.
• 18:52
  Speaker 1: So you're negative on on home builders and housing stocks.
• 18:57
  Speaker 1: They fall over the next twenty four months? Is that fair?
• 19:01
  Speaker 1: I think it was July aboh five was when they
• 19:04
  Speaker 1: we started really seeing inventory starting to left twelve months,
• 19:07
  Speaker 1: let's say twelve months. So this is a fierce bear
• 19:11
  Speaker 1: market and it's only the beginning down. Um. And and somebody,
• 19:17
  Speaker 1: not your direct boss, but somebody in the firm says,
• 19:20
  Speaker 1: all right, you've had you a little fun, you've had
• 19:22
  Speaker 1: your little pullback. You better flip bullish and your contray
• 19:26
  Speaker 1: responses bullish. Watch this. No hesitation, not wondering about, hey,
• 19:33
  Speaker 1: these guys can get me fired. There was no thought
• 19:35
  Speaker 1: about that, or was there. Um, Well, this this was
• 19:39
  Speaker 1: a managing director running all of the morning call product manager.
• 19:44
  Speaker 1: And I was pretty piste off. And actually, UM went
• 19:48
  Speaker 1: to my director of research and complained and and actually
• 19:51
  Speaker 1: the research director was very supportive of me, and so
• 19:54
  Speaker 1: with that it was they were great to me. But
• 19:57
  Speaker 1: this particular person, unfortunately it was, was someone I was
• 20:01
  Speaker 1: pretty upset with. But subsequent to that, sort of like
• 20:05
  Speaker 1: the Zelman bottom, we published something in October o six
• 20:08
  Speaker 1: called wonder Land, and Wonderland was basically saying that the
• 20:12
  Speaker 1: home building industry is going to have to write off
• 20:14
  Speaker 1: equity because they've overpaid for so much land. We actually
• 20:18
  Speaker 1: estimated about equity right off. How much was that in
• 20:22
  Speaker 1: actual dollars and it actuality It turned out to be
• 20:28
  Speaker 1: fifty six that they wrote off, So we were way off,
• 20:31
  Speaker 1: but we were so contrariant at this time, so that
• 20:34
  Speaker 1: was what else was off? No nor off, Yeah, no
• 20:38
  Speaker 1: right offs or anything. So that was October six. That
• 20:40
  Speaker 1: was another sort of flagship report. But in December the
• 20:44
  Speaker 1: stocks kept going up, so they were rallying in our face.
• 20:46
  Speaker 1: We're getting a lot of backlash. Salesforce was against us.
• 20:49
  Speaker 1: People internally were like, what's the story. And in December
• 20:53
  Speaker 1: we came out with the ten reasons to sell homebuilding
• 20:55
  Speaker 1: stocks and give us a few reasons out of the tent.
• 20:59
  Speaker 1: The town was they were. You know, basically the mortgage
• 21:02
  Speaker 1: market was not sustainable. The fueling of the growth was
• 21:06
  Speaker 1: coming from you know, these ridiculous exotic mortgage products you had.
• 21:11
  Speaker 1: Land prices were going to crash. We had consumers that
• 21:15
  Speaker 1: were not buying because the investors were buying. Um. I'd
• 21:20
  Speaker 1: have to go back and look at all the specifics.
• 21:21
  Speaker 1: But any any big clients say, I don't care about that.
• 21:25
  Speaker 1: This is contrarian. I'm going to do this and put
• 21:28
  Speaker 1: giant bets to work. Sure. Um. John Paulson was one
• 21:34
  Speaker 1: of our clients that we talked to regularly. Steve Eisman
• 21:38
  Speaker 1: was one of my buddies. I probably spoke with him daily,
• 21:40
  Speaker 1: along with his team Danny Moses and Vinny Daniels. That
• 21:43
  Speaker 1: those guys were every day we were on the phone
• 21:46
  Speaker 1: with them. There were some people that were really convinced,
• 21:49
  Speaker 1: as we were, that this Barrish call at some point
• 21:52
  Speaker 1: was going to work. So the Selma Gomez character and
• 21:55
  Speaker 1: the Big Short that that was supposed to be you,
• 21:56
  Speaker 1: is that right? I got one quote in there, but
• 21:59
  Speaker 1: not that one you did. What was the quote in
• 22:01
  Speaker 1: the Big Short? Oh? I don't remember what the quote,
• 22:03
  Speaker 1: but Michael Lewis did stick me in there? You mentioned
• 22:06
  Speaker 1: the you mentioned the cab driver in in Vegas on
• 22:11
  Speaker 1: the way back from the airport. My favorite scene with
• 22:15
  Speaker 1: Steve Carrell is he's I don't remember it was a stripper,
• 22:19
  Speaker 1: a waitress, but it was in a strip club and
• 22:21
  Speaker 1: he's asking her. They're talking about real estate, and he's saying,
• 22:25
  Speaker 1: how do you afford the mortgage on that house? And
• 22:28
  Speaker 1: she goes, that house I own. I have four houses.
• 22:31
  Speaker 1: And that's the moment where okay, I think I have
• 22:34
  Speaker 1: to I don't remember what character he was who he
• 22:36
  Speaker 1: was playing in real life. He was playing Steve. He
• 22:39
  Speaker 1: was Steve Eisman. Okay, so that character, that's the moment um.
• 22:43
  Speaker 1: It's a little more dramatic in a strip club than
• 22:45
  Speaker 1: speaking to a Wall Street analyst about oh you know
• 22:48
  Speaker 1: I Actually my husband and I we owned um a
• 22:50
  Speaker 1: home in Florida and we go out to the beach
• 22:53
  Speaker 1: and it's in a community. And the guy that was
• 22:55
  Speaker 1: putting the umbrellas in the San Chris, he told my
• 22:58
  Speaker 1: husband that he owned about ten fifteen lots. And I
• 23:02
  Speaker 1: was like, this is probably two thousand four, two thousand five,
• 23:05
  Speaker 1: and he was asking my husband, do you want to
• 23:06
  Speaker 1: go look at some loss with me, because you can
• 23:08
  Speaker 1: buy them with no money down. And I was like,
• 23:10
  Speaker 1: I'm like, David, do you hear this? This is crazy?
• 23:13
  Speaker 1: So you know everywhere you know. But but Steve was
• 23:16
  Speaker 1: on it. He had the call, he really did. So
• 23:19
  Speaker 1: a friend of mine called called that era. Um, the
• 23:23
  Speaker 1: so called home owners were really renters with an option
• 23:27
  Speaker 1: to default, which which I thought was kind of amusing. Interesting.
• 23:31
  Speaker 1: Let's talk a little bit about where we are in
• 23:33
  Speaker 1: the housing market today. I've seen a couple of things
• 23:37
  Speaker 1: that remind me a little bit of the early two thousands. Um.
• 23:42
  Speaker 1: HDTV is going strong and Flip this house is back,
• 23:45
  Speaker 1: and although these days it seems to be more about
• 23:48
  Speaker 1: renovating than it is about buying and selling them. Um.
• 23:52
  Speaker 1: But the housing market seems to have mostly recovered in
• 23:55
  Speaker 1: about half the country. I'm ballparking that. Where where do
• 23:59
  Speaker 1: you see the housing market today? And does it remind
• 24:02
  Speaker 1: you at all of the bad old days? I think
• 24:06
  Speaker 1: the housing market right now is pretty healthy. Two eighteen
• 24:10
  Speaker 1: was a tough year. The market decelerated pretty much most
• 24:14
  Speaker 1: of the year, more month to month, worse than normal seasonality.
• 24:18
  Speaker 1: But by the time we got to the end of
• 24:19
  Speaker 1: the year. It ended with a big thud, and a
• 24:23
  Speaker 1: lot of people thought housing was gonna lead us into
• 24:25
  Speaker 1: a recession again, mainly due to the stock market turmoil,
• 24:29
  Speaker 1: getting the political turmoil global and certainties sort of perfect storm.
• 24:34
  Speaker 1: So housing came to kind of a screeching halt. And
• 24:37
  Speaker 1: yet the fundamentals actually were pretty favorable. We have strong
• 24:41
  Speaker 1: job growth, consumer confidence is high, and incomes are accelerating.
• 24:46
  Speaker 1: And if you look at the housing market from supply
• 24:49
  Speaker 1: and demand, we actually have a pretty significant deficit of
• 24:53
  Speaker 1: a lack of supply, which we estimate to be about
• 24:57
  Speaker 1: So when you just look at what we need in
• 24:59
  Speaker 1: order to provide shelter for the incremental households growing and
• 25:03
  Speaker 1: those getting knocked down demolished, that that's a pretty strong
• 25:08
  Speaker 1: positive part of the thesis. Now, you mentioned half the
• 25:11
  Speaker 1: market for the United States recovered. That's in terms of
• 25:14
  Speaker 1: home prices, so about half the country is actually below
• 25:17
  Speaker 1: its prior peak. Um. As you think about pricing, the
• 25:21
  Speaker 1: pricing in the in the housing market is a little
• 25:23
  Speaker 1: bit now um more challenging. So builders are in fact
• 25:27
  Speaker 1: and brokers and real estate agents are seeing a momentum
• 25:30
  Speaker 1: in spring um pick back up from the thud now
• 25:33
  Speaker 1: was the stock market close to record highs again. The
• 25:36
  Speaker 1: political turmoil has settled down, but spring selling season actually
• 25:40
  Speaker 1: is definitely pretty good now. The entry level is much
• 25:44
  Speaker 1: stronger than the move up and luxury and depending on
• 25:48
  Speaker 1: a market where job growth might be stronger versus another
• 25:50
  Speaker 1: city where it's not as strong, so all real estate
• 25:54
  Speaker 1: it doesn't necessarily move in tandem. But right now I'd
• 25:57
  Speaker 1: say it's healthy and affordability is still reasonable. Bowl I
• 26:00
  Speaker 1: don't see a lot of concerns at this point. Things
• 26:03
  Speaker 1: that we're watching I'm happy to elaborate, but generally i'd
• 26:06
  Speaker 1: say we feel pretty good about the market today. So so,
• 26:10
  Speaker 1: we have constrained supply, relatively low rates. Even after the
• 26:15
  Speaker 1: past year of increases, rates are still historically Um what
• 26:19
  Speaker 1: what is a mortgage today? Four for a quarter for
• 26:23
  Speaker 1: a quarter? I mean that's pretty reasonable, isn't it. So,
• 26:26
  Speaker 1: So given the limited supply and low rates, what does
• 26:29
  Speaker 1: that mean for home prices over the next couple of years. Well,
• 26:34
  Speaker 1: home prices have been up. The first year they increase
• 26:37
  Speaker 1: was two thousand twelve, and since two thousand twelve we've
• 26:39
  Speaker 1: been running out about a five to six percent growth.
• 26:43
  Speaker 1: Kager and what we're seeing right now is some moderation
• 26:46
  Speaker 1: and home price appreciation. You know, the inventory is available
• 26:50
  Speaker 1: for sale in the United States if you look at
• 26:52
  Speaker 1: it over a long period of time, and we look
• 26:54
  Speaker 1: at it inventory those homes listed for sale as a
• 26:57
  Speaker 1: percent of households, which we think it provides a friend line.
• 27:00
  Speaker 1: Unlike most realtors and your mom probably talked about months supply, um,
• 27:05
  Speaker 1: what we'd tell you is that inventories in the US
• 27:07
  Speaker 1: are actually at nearly at thirty year lows, so inventories
• 27:10
  Speaker 1: and nationally are very very low. And what that means
• 27:14
  Speaker 1: is that that there's more demand and supply, so prices
• 27:17
  Speaker 1: continue to increase. But we're starting to see some moderation
• 27:20
  Speaker 1: and how much pricing power there really is, more of
• 27:23
  Speaker 1: that being skewed to more challenging environment at the higher end.
• 27:26
  Speaker 1: Some cities, for example, in the luxury price point, are
• 27:29
  Speaker 1: actually seeing pretty significant inflation, like New York City, Miami
• 27:33
  Speaker 1: and others are just challenged and buyers or sorry, sellers
• 27:37
  Speaker 1: need to capitulate, especially on older stock that's boxy or
• 27:41
  Speaker 1: you know, dated that needs to be rehabbed and hasn't been.
• 27:45
  Speaker 1: So there's sellers I need to be more. They need
• 27:48
  Speaker 1: to be more realistic. What about the ultra high ends? Uh,
• 27:52
  Speaker 1: my friends, we we both know. Jonathan Miller, he calls
• 27:55
  Speaker 1: that aspirational pricing. When people slap a forty or fifth
• 28:00
  Speaker 1: you're a hundred million dollar priced egg on something that's
• 28:03
  Speaker 1: really worth a fraction of it. Um. What's happening with
• 28:06
  Speaker 1: the ultra high end uh end of the market? Is
• 28:09
  Speaker 1: that finding a little reality or do we still see
• 28:12
  Speaker 1: crazy prices? Um? I think the markets in general are
• 28:18
  Speaker 1: still seeing crazy prices. There has been some capitulation. Whereat
• 28:22
  Speaker 1: sellers and Grenwage, for example, are starting to recognize it's
• 28:25
  Speaker 1: been three years, the helm's not moving, let me lower
• 28:28
  Speaker 1: the price of it. So we do see some you know,
• 28:31
  Speaker 1: um capitulation, but not nearly as much as we need to.
• 28:34
  Speaker 1: In fact, yesterday as with a client visiting in New
• 28:37
  Speaker 1: York and when when a New York City prices gonna
• 28:40
  Speaker 1: go down more? And I said, well, they've come They've
• 28:42
  Speaker 1: come down quite a bit from their aspirational peak. Like
• 28:45
  Speaker 1: Jonathan likes to say it. From two thousand fourteen, he says,
• 28:47
  Speaker 1: developers aren't willing to lower their prices or giving me
• 28:50
  Speaker 1: ten years of no maintenance and no taxes. But they
• 28:53
  Speaker 1: won't lower the price. I said, stay tuned, they will.
• 28:57
  Speaker 1: You think that will eventually they'll be forced to. I
• 28:59
  Speaker 1: think they have to otherwise there might be distressed for
• 29:01
  Speaker 1: some of these developers. I mean, the sales for the
• 29:04
  Speaker 1: luxury in New York City in the first quarter is
• 29:06
  Speaker 1: like non existent. Really, it's very, very weak. So so
• 29:10
  Speaker 1: what about the fat part of the distribution of housing.
• 29:14
  Speaker 1: The let's call at half a million to a million
• 29:17
  Speaker 1: dollar homes more than stut and by the way, that's
• 29:20
  Speaker 1: my New York bias price or San Francisco or Chicago
• 29:26
  Speaker 1: is more reasonable. Um, lots of places in the rest
• 29:28
  Speaker 1: of the country more reasonable, but more than a starter home,
• 29:32
  Speaker 1: less than the really high end houses. How is that
• 29:35
  Speaker 1: area doing. It's really more market dependent, you know. I
• 29:39
  Speaker 1: can tell you in Dallas, for example, over four hundred
• 29:42
  Speaker 1: thousand to six hundred thousand, it's very competitive and you're
• 29:46
  Speaker 1: probably seeing um a little pressure there builders being forced
• 29:50
  Speaker 1: to use more concessions. Whereas if you go into let's
• 29:54
  Speaker 1: say a market like um Phoenix, the four to six
• 29:59
  Speaker 1: is very healthy and you might even see some pricing power.
• 30:02
  Speaker 1: So generally that segment of the market has been more
• 30:07
  Speaker 1: um I think mature in terms of the cycle. And
• 30:12
  Speaker 1: when you think back to two thousand, really two thousand
• 30:15
  Speaker 1: level with the bottom, so as we saw growth, really
• 30:18
  Speaker 1: the fat of the market really has had now seven
• 30:22
  Speaker 1: eight years recovery, whereas the entry level, believe it or not,
• 30:26
  Speaker 1: the builders did not want to build that true affordable
• 30:29
  Speaker 1: product where we call it, you know, building out in
• 30:32
  Speaker 1: the excerbs, the pioneers where you have to drive to qualify.
• 30:36
  Speaker 1: Part of which it was because the mentality was that
• 30:40
  Speaker 1: consumers only want to walk to work and or you
• 30:44
  Speaker 1: can't get a mortgage. Now, the mortgage market was so tight,
• 30:47
  Speaker 1: builders were concerned about building affordable for lower credit quality.
• 30:51
  Speaker 1: So really the entry level, true entry level price point
• 30:55
  Speaker 1: didn't start getting constructed until really in earnest, until two
• 30:58
  Speaker 1: thousand sixteen. In fact, we would argue to today the
• 31:02
  Speaker 1: entry level portion of new home sales is still materially
• 31:05
  Speaker 1: below where what would be perceived normal. So it's a
• 31:10
  Speaker 1: bit of a tale of two markets where you have
• 31:12
  Speaker 1: one of one. Meat of the market still has some legs,
• 31:15
  Speaker 1: but it's later stage and it's still reasonable healthy in
• 31:19
  Speaker 1: terms of inventories. Still the six months that that's a
• 31:22
  Speaker 1: balanced market. The move up is still below six months,
• 31:26
  Speaker 1: but you are seeing the low end entry level where
• 31:29
  Speaker 1: there's real robust demand but just not enough product. Quite
• 31:34
  Speaker 1: quite interesting what you mentioned how regional UM real estate
• 31:38
  Speaker 1: is what areas stand out, either for good or bad reasons,
• 31:43
  Speaker 1: as interesting or unusual around the country. UM. I was
• 31:48
  Speaker 1: just in Nashville last week and I was just unbelievable
• 31:51
  Speaker 1: booming market with you know, really a pro business stance
• 31:55
  Speaker 1: that you know, companies continue to move there and the
• 31:58
  Speaker 1: migrations moving there. But just top of mind because having
• 32:01
  Speaker 1: just been there, were we were there, I was speaking
• 32:03
  Speaker 1: as a guest for a real estate conference, and I
• 32:05
  Speaker 1: was sort of blown away by the growth. UM. What
• 32:08
  Speaker 1: we're seeing a lot that we study the markets and
• 32:10
  Speaker 1: we understand where migration patterns, importantly, which states are winning
• 32:15
  Speaker 1: and which are losing. And Florida is just a winner,
• 32:18
  Speaker 1: both with millennials and with the boomers. And you're seeing
• 32:23
  Speaker 1: a tremendous amount of migration into Florida. And despite Miami
• 32:27
  Speaker 1: Beaches softness right now at the higher price point, I
• 32:30
  Speaker 1: think Florida is going to continue to be a winner. UM.
• 32:33
  Speaker 1: You continue to see winners out west and the Southwest,
• 32:35
  Speaker 1: strength in Vegas, Arizona, and Colorado. California, on the other hand,
• 32:41
  Speaker 1: is where we see some concern and we've lost foreign
• 32:44
  Speaker 1: national buyers there, that for foreign national Chinese buyers pretty
• 32:47
  Speaker 1: much all but gone. People that are there Chinese buyers
• 32:50
  Speaker 1: are buying, but that foreign nationals are gone. The Bay
• 32:54
  Speaker 1: Area despite Silicon Valley and you know, the benefits there
• 32:58
  Speaker 1: seems to be just not accelerating like the rest of
• 33:01
  Speaker 1: California off of what was the weaker period of eighteen um.
• 33:06
  Speaker 1: And some of that is it related to tax reform? Salt?
• 33:09
  Speaker 1: Is it concerned just in terms of the continued pressure
• 33:14
  Speaker 1: literally literally my next question. So, so we keep reading
• 33:18
  Speaker 1: about the egress from New York to Florida and from
• 33:22
  Speaker 1: California to Arizona. And I know some of that is
• 33:26
  Speaker 1: just normal retirements. Hey, at a certain age. Um, if
• 33:30
  Speaker 1: you live in in Westchester, Long Island, you may not
• 33:33
  Speaker 1: want to go to Florida, but it's the law you
• 33:35
  Speaker 1: have to move down there. Um. But you know the
• 33:38
  Speaker 1: David Tepper story leaving New Jersey because it saved him
• 33:42
  Speaker 1: a bajillion dollars in taxes. How significant are those most
• 33:47
  Speaker 1: recent tax changes and the loss of the state and
• 33:51
  Speaker 1: local tax deduction to the real estate market. Well, first
• 33:55
  Speaker 1: you have to look at it in totality and appreciate
• 33:58
  Speaker 1: that about eighty four percent of tax filers actually had
• 34:02
  Speaker 1: a reduction in the taxes that they pay, right, So really,
• 34:06
  Speaker 1: but that's on a gross number, is it Is it
• 34:08
  Speaker 1: a big deduction? Is it a little deduction? You mean,
• 34:11
  Speaker 1: after if you took everything into consideration, the benefit is
• 34:16
  Speaker 1: actually the majority actually had a benefit. Now, where the
• 34:20
  Speaker 1: negative impact is at the higher price or the higher
• 34:23
  Speaker 1: income brackets. So where the risk would be is for
• 34:27
  Speaker 1: that eighty to eighty five percentile incomes percentile. So we're
• 34:31
  Speaker 1: if you're in the highest income bracket. But really the
• 34:34
  Speaker 1: question will be if you assumingly are in let's say Rye,
• 34:39
  Speaker 1: New York or Scarsdale, or you're living out in Long
• 34:42
  Speaker 1: Island and your kids are in high school or your
• 34:44
  Speaker 1: kids are in elementary school, are you really picking up
• 34:46
  Speaker 1: where you work and leaving the state because the taxes? No,
• 34:50
  Speaker 1: you know, could you start to see some pricing pressure
• 34:53
  Speaker 1: because maybe my buddy and his wife that are empty
• 34:55
  Speaker 1: nesters and they can you know, everybody's mobile today. With
• 34:59
  Speaker 1: today's technolo ology, you can work for from their home.
• 35:01
  Speaker 1: They're gonna pick up and leave, So you're gonna see
• 35:03
  Speaker 1: more inventory start to build for that marginal person that
• 35:07
  Speaker 1: can leave. That will put some more pressure on prices.
• 35:10
  Speaker 1: So I think the lever is price and I don't
• 35:13
  Speaker 1: think that it will create a collapse. But I think
• 35:15
  Speaker 1: the coastal sort of tri state area California markets are
• 35:19
  Speaker 1: going to see some more incremental inventory lead to moderation
• 35:23
  Speaker 1: and pricing. Quite quite interesting. Can you stick around a bit?
• 35:26
  Speaker 1: I have a ton of more questions for We have
• 35:28
  Speaker 1: been speaking with I V. Selman, CEO and co founder
• 35:32
  Speaker 1: of Zelman Associates. If you enjoy this conversation, be sure
• 35:36
  Speaker 1: and come back for the podcast extras, where we keep
• 35:38
  Speaker 1: the tape running and continue discussing all things real estate.
• 35:42
  Speaker 1: You can find that wherever Finder podcasts are sold, Apple, uh, Stitcher, Overcast,
• 35:49
  Speaker 1: Bloomberg dot com. We love your comments, feedback and suggestions
• 35:53
  Speaker 1: right to us at m IB podcast at Bloomberg dot net.
• 35:58
  Speaker 1: You could check out my daily column on Bloomberg dot
• 36:01
  Speaker 1: com slash Opinion. Follow me on Twitter at Rid Halts.
• 36:05
  Speaker 1: I'm Barry Ridhults. You're listening to Masters in Business. I'm
• 36:08
  Speaker 1: Bloomberg Radio Welcome to the podcast. Ivy. Thank you so
• 36:25
  Speaker 1: much for doing this. I've been looking forward to this
• 36:26
  Speaker 1: for a long time. UM, I am a real estate junkie,
• 36:30
  Speaker 1: not only because it was dinner table conversation every night
• 36:35
  Speaker 1: back in the days when mortgage race were um, but
• 36:40
  Speaker 1: it's just fascinating. Everybody has to live somewhere. Why not
• 36:43
  Speaker 1: live someplace fun, interesting, neat in the house that is
• 36:49
  Speaker 1: um sort of representative of your style and tastes and
• 36:53
  Speaker 1: values and interests. And it's really, uh, it's really a
• 36:57
  Speaker 1: fascinating space. You have to be thrilled that you found
• 37:01
  Speaker 1: your way into real estate, even though that was never
• 37:03
  Speaker 1: your intention when you began. I am I'm thrilled. I
• 37:07
  Speaker 1: love it so um. So let's let's go through a
• 37:10
  Speaker 1: few of the questions we missed during the broadcast section
• 37:13
  Speaker 1: before we get to our favorite questions in a few minutes. UM,
• 37:19
  Speaker 1: I have to ask about the launch of Zelmann Associate.
• 37:21
  Speaker 1: So October seven, we were talking about the date you
• 37:24
  Speaker 1: said you launched October three. I believe October five was
• 37:28
  Speaker 1: the old time high back then, at least for the dow.
• 37:32
  Speaker 1: What was it like launching right into the teeth of
• 37:36
  Speaker 1: the rollover and slide down for the next eighteen months. Well,
• 37:40
  Speaker 1: my partner and I Dennis mcguel, Um, we recruited our
• 37:45
  Speaker 1: partners in crime. It's Credit Sweet, Alan Ratner and Melinda Greantedge,
• 37:50
  Speaker 1: who was my secretary at the time, kind of pulled
• 37:53
  Speaker 1: her over from Credit Sweet, and my husband was also
• 37:56
  Speaker 1: in the beginning, so it was really the five of
• 37:58
  Speaker 1: us and um it was seven. We were working our
• 38:03
  Speaker 1: butts off in order to be prepared for our big
• 38:05
  Speaker 1: date that we set. But I think it was so
• 38:07
  Speaker 1: much fun as well, because we at this point it
• 38:10
  Speaker 1: already had taste of victory where we knew that what
• 38:15
  Speaker 1: we had predicted was actually not only coming to fruition,
• 38:18
  Speaker 1: but way worse than we had ever considered or or predicted.
• 38:21
  Speaker 1: And so while we were in the teeth of the
• 38:24
  Speaker 1: storm with not you know, clear certainty which direction and
• 38:28
  Speaker 1: how much more severe the storm could be, we had
• 38:32
  Speaker 1: um just a fantastic times circling investors and interest. We
• 38:37
  Speaker 1: were we were in the sweet spot. So it was
• 38:39
  Speaker 1: so much fun. I mean, we had um crazy days
• 38:42
  Speaker 1: and nights and it was all consuming. I I can
• 38:46
  Speaker 1: tell you that it was difficult with three little babies
• 38:49
  Speaker 1: running around, but it was like where you'd wake up
• 38:53
  Speaker 1: at four in the morning and you just couldn't wait
• 38:54
  Speaker 1: to get in front of your computer. So it was
• 38:56
  Speaker 1: just thrilling, really thrilling. So I remember, I'm trying, I'm
• 39:00
  Speaker 1: want to do the get the years right. I could
• 39:02
  Speaker 1: be doing the My memory could be faulty. In in
• 39:05
  Speaker 1: I think it was OH five the home builders rolled over,
• 39:09
  Speaker 1: and I don't remember that was that year, but it
• 39:12
  Speaker 1: was clear they were undistressed while the rest of the
• 39:15
  Speaker 1: market was going higher. And then the next year, um,
• 39:19
  Speaker 1: the banks and brokers OH six started to come under pressure,
• 39:23
  Speaker 1: and again the market kept going up, and then OH seven,
• 39:27
  Speaker 1: I don't remember what segment rolled over. It was New Century,
• 39:31
  Speaker 1: is that what it was? March of seven mortgage, So
• 39:35
  Speaker 1: that so is the mortgage and the writers in OH seven,
• 39:37
  Speaker 1: and the market kept going up. So when you're launching
• 39:40
  Speaker 1: the firm, these are three calls that you had previously
• 39:45
  Speaker 1: talked about as a contrarian, as an outlier, who turned
• 39:49
  Speaker 1: out to be correct. When you launched the firm, I
• 39:52
  Speaker 1: have to assume a lot of clients came along with you.
• 39:54
  Speaker 1: Fortunately they did, so it was a very strong launch.
• 39:59
  Speaker 1: And um, you know we have had the ability to
• 40:02
  Speaker 1: continue to recruit new clients and really provide what we
• 40:06
  Speaker 1: think is unique proprietary research that no one else UM
• 40:11
  Speaker 1: and on no one else on Wall Street does anything
• 40:14
  Speaker 1: like we do. So we really provide a significant advantages
• 40:17
  Speaker 1: to our institutional investors and private equity firms that use Selman.
• 40:21
  Speaker 1: So private equity are are also clients. Yeah, mostly it's
• 40:25
  Speaker 1: hedge funds and mutual funds, but we also have some
• 40:26
  Speaker 1: private equity clients as well. So so let's talk a
• 40:29
  Speaker 1: little bit about that network. How do you go about
• 40:33
  Speaker 1: because the only thing I can even remotely compare it
• 40:35
  Speaker 1: to In the early days, Ed Hyman started a UM
• 40:40
  Speaker 1: on an economic side, building out a network of private
• 40:44
  Speaker 1: companies that would report their data to him. And basically
• 40:49
  Speaker 1: part of the reason he was so successful in the
• 40:52
  Speaker 1: economic space as a non economist is his data was
• 40:56
  Speaker 1: better than what BLS was generating. Right, sounds like you
• 41:00
  Speaker 1: you created something similar within the real estate space, builders, brokers,
• 41:07
  Speaker 1: real estate UM developers. Who who else was in that network?
• 41:12
  Speaker 1: And how do you go about reaching out to these folks?
• 41:15
  Speaker 1: So we we do follow Ed's model in going after
• 41:20
  Speaker 1: sort of understanding what is happening in various UM silos
• 41:24
  Speaker 1: within the economy. But ours is dedicated just to housing
• 41:27
  Speaker 1: and housing related But so we've got UM survey of
• 41:30
  Speaker 1: private homebuilders, a survey of land developers, UM, a quarterly
• 41:35
  Speaker 1: survey UM for banks to discuss their lending to acquisition
• 41:39
  Speaker 1: and development financing for builders. UM. We have a apartment survey,
• 41:44
  Speaker 1: a building product manufacturing distribution survey. We just published that today,
• 41:48
  Speaker 1: Single family rental and home center survey. We just publish
• 41:52
  Speaker 1: published that one as well today, Chairman, to forget one
• 41:55
  Speaker 1: UM the broker survey, which we survey about ten percent
• 41:59
  Speaker 1: of existing homes. Else So if you look at each silo,
• 42:02
  Speaker 1: the home building survey is the most mature and UM
• 42:06
  Speaker 1: most significant, probably in sample size. UM. Oh, I forgot
• 42:09
  Speaker 1: the mortgage Originator survey UM, which is also very significant
• 42:12
  Speaker 1: in size. But all of them we have not not
• 42:17
  Speaker 1: to discount what ed's survey does. But ED has a
• 42:19
  Speaker 1: very few questions. Most of the surveys we have will
• 42:22
  Speaker 1: be anywhere from twenty to thirty questions. So how do
• 42:25
  Speaker 1: you reach out to somebody and say, hey, listen, I
• 42:27
  Speaker 1: want you to participate in a quarterly thing. Don't worry,
• 42:30
  Speaker 1: it's only eight pages of questions. They'll take your less
• 42:33
  Speaker 1: than a week to fill it out. How do you
• 42:35
  Speaker 1: make that pitch? Well, first you go back years and
• 42:40
  Speaker 1: you have um A survey that's done over the phone,
• 42:42
  Speaker 1: and you build and cement relationships, and over time, with technology,
• 42:46
  Speaker 1: you create a platform where they can do it online.
• 42:49
  Speaker 1: Is all automated. But the exchange with the c suite
• 42:53
  Speaker 1: executives that taliated nearly a thousand throughout the ecosystem is
• 42:57
  Speaker 1: we will give you the research for free, for free
• 43:01
  Speaker 1: if you fill out the survey. And everybody who participates
• 43:04
  Speaker 1: wants to know what's happening in the ad Jason silos. Well,
• 43:08
  Speaker 1: they want to know what's going on within their peers,
• 43:10
  Speaker 1: within their own silo, but they want someone that can
• 43:13
  Speaker 1: triangulate all of it. And in fact, our institutional investors
• 43:16
  Speaker 1: are so data driven that sometimes the c suite executives
• 43:21
  Speaker 1: are information is almost too much for them, which is
• 43:25
  Speaker 1: one of the reasons we developed a newsletter called the
• 43:29
  Speaker 1: Z Report, which is a much higher level um BI
• 43:32
  Speaker 1: monthly report that just gives you really that foot perspective,
• 43:36
  Speaker 1: seven to eight articles on all the pieces of the mosaic,
• 43:38
  Speaker 1: because some of them were like IVY, it's just too much,
• 43:41
  Speaker 1: so they prefer that. So when you say bi monthly,
• 43:44
  Speaker 1: it's every other month, not I'm saying bi weekly, bi weekly. Sorry,
• 43:47
  Speaker 1: so twice a month off actively, Um, I never know
• 43:51
  Speaker 1: which is which. That's no, I said bi monthly, but
• 43:53
  Speaker 1: it's twice twice a month. So and that how how
• 43:56
  Speaker 1: big of a document is that? Is that something quickly?
• 44:00
  Speaker 1: Or I'd say you can read it an intent fifteen
• 44:02
  Speaker 1: minutes and it has some charts, but you know whether
• 44:05
  Speaker 1: the articles are on you know, rising healthcare costs as
• 44:08
  Speaker 1: an impedimental homeownership or affordability, you know, heat reaching a
• 44:14
  Speaker 1: new high or or low, whatever the topic, um might be,
• 44:18
  Speaker 1: the demographics millennials, you know, accelerate um family formation. We
• 44:23
  Speaker 1: take each of the pieces of our puzzle and we
• 44:27
  Speaker 1: take articles that we think are timely and it allows
• 44:30
  Speaker 1: people again to walk away from a ten to fifteen
• 44:33
  Speaker 1: minute read with hopefully a nice hot cuts heat or
• 44:35
  Speaker 1: coffee with wow, I really get what's going on now
• 44:38
  Speaker 1: in the housing market overall. That's very very interesting. So
• 44:42
  Speaker 1: if you want to express an idea in a trade,
• 44:46
  Speaker 1: how do you go about doing it? Is it long
• 44:48
  Speaker 1: or short? The home builders the credit side, how does
• 44:53
  Speaker 1: do some of these hedge funds. We know what happened
• 44:55
  Speaker 1: to know you know nine, But how to hedge funds today?
• 44:58
  Speaker 1: Take your research and apply it to capital well, because
• 45:03
  Speaker 1: we are an equity research firm, So our recommendations are
• 45:08
  Speaker 1: to buy, hold, or sell equities. Whether they're going to
• 45:12
  Speaker 1: do something that's outside of the equities, we don't recommend.
• 45:16
  Speaker 1: So are we're strictly going to recommend whether they short
• 45:19
  Speaker 1: or go long stocks? So that's all really the firm.
• 45:23
  Speaker 1: So what what sort of stocks do you cover? Obviously
• 45:25
  Speaker 1: the home builders are going to be one group, um
• 45:28
  Speaker 1: the mortgage originators or another. Do you go further afield
• 45:32
  Speaker 1: to reats or anything like that. So we have home builders,
• 45:35
  Speaker 1: building product manufacturers and distributors. We have real estate brokers.
• 45:39
  Speaker 1: We follow redfin, Zello, Relogy, Remax, We follow mortgage insurers,
• 45:45
  Speaker 1: mortgage title companies, and mortgage tech. We follow the home centers.
• 45:49
  Speaker 1: We follow single family rental rates and apartment reats. And
• 45:53
  Speaker 1: I think, do you do office space or storage or
• 45:56
  Speaker 1: or retail. No, we only do residential. So that's one
• 46:00
  Speaker 1: of the you know, I guess the way we think
• 46:02
  Speaker 1: of our niche that it has to be within residential.
• 46:05
  Speaker 1: So so let me take you a little off of
• 46:07
  Speaker 1: that niche a bit. There's a giant article, uh in
• 46:11
  Speaker 1: the Wall Street Journal about the big malls how they
• 46:16
  Speaker 1: continue to have some of their anchor stores going away,
• 46:19
  Speaker 1: and then once that goes away, everybody else starts to
• 46:21
  Speaker 1: fade and it becomes problematic. And there was some place
• 46:25
  Speaker 1: some going to get this wrong. I don't remember if
• 46:28
  Speaker 1: it was Minneapolis or somewhere where the mall essentially gets
• 46:32
  Speaker 1: sold to a developer who raises it and now is
• 46:36
  Speaker 1: putting in apartments, homes. It's it's a whole multi use.
• 46:41
  Speaker 1: So so is there something worth tracking on the retail
• 46:45
  Speaker 1: apocalypse side relative to housing or is that just so
• 46:49
  Speaker 1: distant and so far removed it's not worth paying close
• 46:52
  Speaker 1: attention to. Well, I think it makes sense to assume
• 46:56
  Speaker 1: it's getting repurposed, and as we think about shelter or
• 47:00
  Speaker 1: really you have to think about it with with the
• 47:03
  Speaker 1: complete eyes, with the complete view of rental as well
• 47:07
  Speaker 1: as for sale, and so it gets repurposed for for
• 47:11
  Speaker 1: sale or for rent in single family where we have
• 47:14
  Speaker 1: a deficit, then we'll be able to track that through
• 47:17
  Speaker 1: the land development survey that we're doing, and tracking that
• 47:20
  Speaker 1: will enable us to see where the growth is going
• 47:23
  Speaker 1: to be and whether or not the growth is justified.
• 47:25
  Speaker 1: But today, if you look at shelter, we believe the
• 47:28
  Speaker 1: multifamily market is actually above normal and there's plenty of
• 47:32
  Speaker 1: supply of that. It's above where it should be. In fact,
• 47:35
  Speaker 1: there's um if you look at multi family five plus units,
• 47:39
  Speaker 1: so multifamily high rise or generally where the problem is
• 47:42
  Speaker 1: is predominantly urban core multifamily is at multi decade highs
• 47:48
  Speaker 1: with what with the amount of inventory in backlog where
• 47:52
  Speaker 1: a suburban is not as let's say, problematic, but there's
• 47:56
  Speaker 1: a real core urban is where the inventories for we
• 48:00
  Speaker 1: believe multi family market is actually significant above normal. So
• 48:04
  Speaker 1: if we had a guess coming out of the crisis,
• 48:06
  Speaker 1: people were either reluctant to buy or unable to qualify
• 48:10
  Speaker 1: for a mortgage, so there was a ton of renters
• 48:13
  Speaker 1: and it seemed the builders went a little hog wild
• 48:15
  Speaker 1: over there. Is it safe to assume that the pendulum
• 48:20
  Speaker 1: is going to start swinging in the other direction or
• 48:23
  Speaker 1: do does this really have to do they really have
• 48:26
  Speaker 1: to run out the rope and and see some problems
• 48:29
  Speaker 1: before they adjust what they're building. So if I understand
• 48:33
  Speaker 1: your question correctly. You're you're asking, will the builders start
• 48:37
  Speaker 1: to build affordable product again? Um, when will they shift
• 48:40
  Speaker 1: from multi family to single family? If there's a a
• 48:44
  Speaker 1: plethora of multi family and a dearth of single family. Well,
• 48:47
  Speaker 1: they're completely different operators, um, different developers, different um operators
• 48:52
  Speaker 1: from the perspective that there within their silos, the multi
• 48:55
  Speaker 1: family operators would never just go do single fam very unusual.
• 48:59
  Speaker 1: You'll some times have like Lenar Corporation is a publicly
• 49:03
  Speaker 1: traded company and they're saying they're known for their single
• 49:05
  Speaker 1: family building, but they also have a multi family business.
• 49:08
  Speaker 1: But very few organizations companies have in the multi family
• 49:12
  Speaker 1: space do single family as well. So when when you
• 49:15
  Speaker 1: really what I'm wrestling with is if there's way too
• 49:17
  Speaker 1: much multi family multi family builders, they're not going to say, hey,
• 49:23
  Speaker 1: there's too much supply, let's take a year off. Do
• 49:25
  Speaker 1: they just keep building? Do they move towards luxury? What?
• 49:28
  Speaker 1: What do they do in the face of excess supply? Well,
• 49:33
  Speaker 1: right now, what you'll start to see is that they
• 49:35
  Speaker 1: have pressure on rents and they're underwriting requirements that are
• 49:40
  Speaker 1: what the way they underwrote the land, they won't be
• 49:42
  Speaker 1: hitting their hurdle rates at some point if this supply
• 49:45
  Speaker 1: that we believe is still in backlog actually gets delivered
• 49:49
  Speaker 1: and pressures their returns. So right now, there's a lot
• 49:52
  Speaker 1: of capital chasing this asset class because when you compare
• 49:55
  Speaker 1: it to malls or other reeds, it's actually a tall
• 49:58
  Speaker 1: midget in many respects, even though right even though it's expensive,
• 50:03
  Speaker 1: it's actually one of those very consistent businesses. Doesn't have
• 50:06
  Speaker 1: the kind of cylicality that the single family for sale market.
• 50:09
  Speaker 1: So it's still a very good business. But what may
• 50:12
  Speaker 1: happen from the supply being um in our opinion, at
• 50:16
  Speaker 1: excess levels, is that they won't get the returns that
• 50:19
  Speaker 1: they underwrote if rents start to come under pressure. We
• 50:21
  Speaker 1: do think they get least up. But the question is
• 50:24
  Speaker 1: will that spicket of growth start slow as those lease
• 50:29
  Speaker 1: rates come under pressure, That in itself will start to
• 50:32
  Speaker 1: slow the growth. And before I get to my favorite questions,
• 50:35
  Speaker 1: any other things standing out within the residential real estate
• 50:39
  Speaker 1: market that's unusual or interesting, be regional or what what
• 50:44
  Speaker 1: are you kind of going, huh, that's that's surprising. Well,
• 50:47
  Speaker 1: there's a few things UM I can talk about. The
• 50:50
  Speaker 1: eye buyer market being I Buyer. Today, we have companies
• 50:55
  Speaker 1: that are offering consumers to buy their homes for cash
• 50:59
  Speaker 1: within a few days. So Instant Buyer and UM open Door,
• 51:04
  Speaker 1: which is a private company, is the leader in this
• 51:06
  Speaker 1: business where at a discount to we have an algorithm
• 51:10
  Speaker 1: that basically will determine the price that they're willing to
• 51:13
  Speaker 1: pay for home, allowing that person to be able to
• 51:16
  Speaker 1: move to a move up home. And actually Lenar was
• 51:19
  Speaker 1: an investor in open Door, and the reason they invested
• 51:22
  Speaker 1: in open doors concept and these guys are a Silicon
• 51:25
  Speaker 1: Valley Eric Wu as a CEO, is because they found
• 51:27
  Speaker 1: that a lot of our buyers can't sell their homes
• 51:30
  Speaker 1: to move in our home. So that was conceptually why
• 51:32
  Speaker 1: they did it. So what happened Someone comes along and says,
• 51:35
  Speaker 1: we'll pay you cash theoretically at a discount, say let's
• 51:39
  Speaker 1: five seven discount to what is retail, and then they'll
• 51:43
  Speaker 1: turn around and sell it. They'll put with that money,
• 51:45
  Speaker 1: they'll fix it up and then they'll sell it. Now
• 51:48
  Speaker 1: Zillos in the business now Zilo offer Redfinn, now Um
• 51:53
  Speaker 1: offer pad Knocked. It's it's really growing to be a
• 51:57
  Speaker 1: very big business. In fact, Zillo, who we have a
• 52:00
  Speaker 1: cell rating on is actually changing their entire business model
• 52:04
  Speaker 1: to go after this I buyer market. So that's a
• 52:06
  Speaker 1: big interesting thing going on in generally speaking professional flippers, yes,
• 52:11
  Speaker 1: professional flippers. Another interesting thing that's going on is the
• 52:14
  Speaker 1: built to rent market. So I mentioned that we have
• 52:17
  Speaker 1: a deficit of housing, but not everyone can afford to
• 52:20
  Speaker 1: buy a home. So what consumers want today though, is
• 52:24
  Speaker 1: they want the American dream, they want the backyard, they
• 52:28
  Speaker 1: want their own home, but in many cases they can't
• 52:31
  Speaker 1: for whatever reason, either get a proof for a mortgage,
• 52:34
  Speaker 1: or they don't want to be committed and they don't
• 52:35
  Speaker 1: want to they want to have flexibility. So the built
• 52:38
  Speaker 1: to rent market is actually accelerating to help close the gap.
• 52:42
  Speaker 1: And if you look at the build for rent market,
• 52:44
  Speaker 1: it could be builders that are willing to sell the
• 52:46
  Speaker 1: last few units in a phase to a build or
• 52:49
  Speaker 1: a single family rental operator, or they in factor keeping
• 52:53
  Speaker 1: the asset themselves on the balance sheet and renting them
• 52:55
  Speaker 1: out to generate cash flow. But I believe that the
• 52:58
  Speaker 1: build for rent market will accelerate to become a bigger
• 53:02
  Speaker 1: portion of today's household So roughly twelve percent of the
• 53:06
  Speaker 1: households in this country live in a single family rental home,
• 53:09
  Speaker 1: rental home, not in a multi family no singal family rental.
• 53:12
  Speaker 1: And one of the misnomers in the marketplace is that
• 53:15
  Speaker 1: you either live in an apartment or you live in
• 53:16
  Speaker 1: a single family home. And and what people don't appreciate
• 53:20
  Speaker 1: is that if you just look at like living alone,
• 53:22
  Speaker 1: do you have any idea how many people that live
• 53:24
  Speaker 1: alone live in a single family home forgetting if they
• 53:27
  Speaker 1: rent it or own it? Just a guess what Really
• 53:33
  Speaker 1: that's a giant n well, I guess if you start
• 53:35
  Speaker 1: thinking about the older demographic, the second person, the survivor
• 53:40
  Speaker 1: once one of the husband wife passes away, that's got
• 53:43
  Speaker 1: to be a pretty hefty number. And then divorces, and
• 53:47
  Speaker 1: then people who just want to own a house. But
• 53:48
  Speaker 1: I would never have guessed. We'll keep in mind this
• 53:51
  Speaker 1: is we're not distinguishing between owning versus renting, So just
• 53:53
  Speaker 1: thirty percent. So then when you think about lifestyle, if
• 53:56
  Speaker 1: you go, okay, then roommates, then I get married, then
• 53:59
  Speaker 1: I have children by the time our data shows by
• 54:02
  Speaker 1: the time you're married with two children live in a
• 54:06
  Speaker 1: single family home. And that in fact is again not disinguishing.
• 54:09
  Speaker 1: Writing versus owning. But when you think about millennials, millennials
• 54:13
  Speaker 1: today call them seventy million. I've got two millennials or
• 54:16
  Speaker 1: young fourteen sixteen high Zoe and Zach. I got Zia two.
• 54:19
  Speaker 1: She's all youngest, but she's not a millennial. Um when
• 54:22
  Speaker 1: you start to see these millennials actually get married or
• 54:26
  Speaker 1: cohabitate and have families, this they're at the early they're
• 54:31
  Speaker 1: in their early thirties right now, there's seventy five million
• 54:33
  Speaker 1: of them. We're just at the beginning of this wave
• 54:36
  Speaker 1: of what will be an unbelievable tailwind too for the
• 54:40
  Speaker 1: demographics for the need for single family shelter, assuming you
• 54:43
  Speaker 1: believe that people will continue to get married to have children,
• 54:47
  Speaker 1: and we have some fun ways to analyze this. So
• 54:50
  Speaker 1: we do some obviously studying birthrates. A lot of people
• 54:53
  Speaker 1: see the national birth rate for the country is going down,
• 54:57
  Speaker 1: but when you look at the twenty five plus year old,
• 55:00
  Speaker 1: that birthrate has been growing at a very fast rate.
• 55:03
  Speaker 1: We called the good birth rate because nationally birthrates are
• 55:06
  Speaker 1: going down, because teenage birth rates are down over since
• 55:10
  Speaker 1: so seven, which is which is a good thing, right.
• 55:13
  Speaker 1: So what we really look at and I think it
• 55:15
  Speaker 1: just to reiterate, it's about lifestyle. Lifestyle drives a need
• 55:19
  Speaker 1: for shelter or changes in the type of shelter. So
• 55:22
  Speaker 1: when we look at build for rent and we see
• 55:26
  Speaker 1: that phenomena is a growing trend, I think that you'll
• 55:29
  Speaker 1: hear more about it, and there's more Wall Street money
• 55:32
  Speaker 1: contemplating it and builders that are selling to the single
• 55:36
  Speaker 1: family reads and doing it themselves, the I buyer market,
• 55:39
  Speaker 1: and then just technology. Um, you know, the real estate
• 55:42
  Speaker 1: industry is one that is is being disrupted. If you
• 55:46
  Speaker 1: think about you know, your mother is a real estate broker,
• 55:48
  Speaker 1: it's a very very tough time. They're being attacked from
• 55:52
  Speaker 1: all from all angles. I mean she's retired, but the
• 55:55
  Speaker 1: days of six percent commissions, that's pretty much gone, right.
• 55:58
  Speaker 1: I think that certainly has yet to be eliminated. But
• 56:01
  Speaker 1: there's a lot going on that can continue to pressure margin,
• 56:05
  Speaker 1: pressure splits. The market is being disrupted from a lot
• 56:08
  Speaker 1: of different angles. Huh. Quite fascinating. So the firm is
• 56:12
  Speaker 1: called Zelman and Associates. Is this really the I vs.
• 56:15
  Speaker 1: Elman show or is it something else? Actually, thank you
• 56:19
  Speaker 1: for asking, No, this is not just the I vs.
• 56:22
  Speaker 1: Aleman show. In fact, I've got probably close to thirty employees.
• 56:25
  Speaker 1: We have about a dozen analysts. Each analyst is responsible
• 56:29
  Speaker 1: for their silo and are very successful in aggregating data
• 56:34
  Speaker 1: and analyzing the industry that they're responsible for. So it's
• 56:38
  Speaker 1: it's really I'm a small piece of what really Zelman
• 56:41
  Speaker 1: Associates is, And there's a lot more of a strength
• 56:45
  Speaker 1: behind the person you see sitting here and whether it's
• 56:49
  Speaker 1: Alan Rattner, our senior homebuilding analysts justin Spear, these people
• 56:52
  Speaker 1: work their tails off and UH really appreciate all the
• 56:55
  Speaker 1: work and I get a lot of credit, but they're
• 56:57
  Speaker 1: the they're the power behind the firm. So before I
• 57:00
  Speaker 1: let you go, I have to get to my favorite
• 57:02
  Speaker 1: ten questions we ask all our guests sort of a
• 57:05
  Speaker 1: speed round. Are you ready for this? Ready? Tell us
• 57:08
  Speaker 1: the first car you ever owned? Your making model Toyota Corolla. Nine.
• 57:15
  Speaker 1: What's the most important thing we don't know about you?
• 57:19
  Speaker 1: That I live in Cleveland and I have three beautiful
• 57:23
  Speaker 1: children and they are my life. So you went over
• 57:27
  Speaker 1: Cleveland pretty quickly. How do you like? How do you
• 57:30
  Speaker 1: like living in Cleveland? Um? Well, I admittedly went kicking
• 57:34
  Speaker 1: and screaming married Cleveland boy who I met at Solomon Brothers, David,
• 57:38
  Speaker 1: But it's a wonderful place to raise a family, and
• 57:41
  Speaker 1: I get to be with my husband's family all the time,
• 57:44
  Speaker 1: and it's great for the kids. And if we could
• 57:46
  Speaker 1: just get the sun to come out. The weather is
• 57:48
  Speaker 1: not great in Cleveland, but the browns are supposed to
• 57:50
  Speaker 1: be good this year. So yes, they are supposed to.
• 57:52
  Speaker 1: So tell us. Tell us about your early mentors who
• 57:55
  Speaker 1: affected the way you you did UH analytics and thought
• 57:58
  Speaker 1: about housing well already Credit David, my my my buddy
• 58:02
  Speaker 1: at Solomon. Um, but I have to say when you yeah,
• 58:06
  Speaker 1: this husband was later, but um, when you think about
• 58:08
  Speaker 1: your life in the a list of people I had
• 58:10
  Speaker 1: the pleasure of working with, whether we're talking about people
• 58:13
  Speaker 1: on the South side of Credit, Swist and Sally, as
• 58:15
  Speaker 1: well as all the clients that I've interacted with. You know,
• 58:18
  Speaker 1: I can give you ten people that come to my
• 58:20
  Speaker 1: top of my head. But one that really stands out
• 58:23
  Speaker 1: is Melinda Greenwich, who was really my mentor early on
• 58:28
  Speaker 1: in my career, my secretary, but she had been at
• 58:30
  Speaker 1: Drexel and she was with me for over twenty years
• 58:34
  Speaker 1: and is a friend business, family life every day, and
• 58:39
  Speaker 1: she no longer works with me. Now, Kim Gray's my mentor.
• 58:42
  Speaker 1: And people think about mentor where you call someone up
• 58:45
  Speaker 1: and you know you have a challenge, you want to
• 58:48
  Speaker 1: talk something through. You know, these women are are there
• 58:51
  Speaker 1: for me through thick and thin, you know, call in
• 58:54
  Speaker 1: the middle of the night. Those are the people that
• 58:55
  Speaker 1: I want to highlight, the people that that mean everything
• 58:57
  Speaker 1: to me. Quite quite interesting, it um, what fill in
• 59:02
  Speaker 1: the blank investors, analysts, UM managers helped shape your thinking
• 59:10
  Speaker 1: about the housing market? Give me your list again. Investors
• 59:14
  Speaker 1: could be anybody, investors, strategist, analysts, economists. Who who has
• 59:19
  Speaker 1: influenced the way you approach the real estate market? Well,
• 59:24
  Speaker 1: it's so many. I think that builders themselves, a lot
• 59:28
  Speaker 1: of the private builders in the market that really helped
• 59:31
  Speaker 1: me to understand the business and give me from an
• 59:33
  Speaker 1: unbiased perspective. And there you know, the quality of information
• 59:37
  Speaker 1: and and and and being able to absorb from the
• 59:40
  Speaker 1: perspective of an open sort of white board. The builders,
• 59:45
  Speaker 1: the private builders. Bert's Silva, who's a good friend, and
• 59:48
  Speaker 1: and the CEO in the in the home building industry,
• 59:50
  Speaker 1: I just learned a tremendous amount from him. Um in
• 59:53
  Speaker 1: the investment world, you know, I think about today some
• 59:56
  Speaker 1: of my top clients, UM, certainly Richard Chiltern and Chiltern
• 59:59
  Speaker 1: advisor 's learning about to go after the best in
• 1:00:02
  Speaker 1: class managements and understand, you know, just a long term investing. Um,
• 1:00:08
  Speaker 1: there's an art to it and it doesn't necessarily mean
• 1:00:10
  Speaker 1: you day trade, and that there's ways to differentiate. UM.
• 1:00:14
  Speaker 1: Bob Bishop at Impala, who was originally Solemn Brothers Housing Alice,
• 1:00:19
  Speaker 1: who's now a client. Um, he taught me a lot
• 1:00:22
  Speaker 1: about the business. UM. Ricky Sandler at Eminence Capital, who's
• 1:00:26
  Speaker 1: UM someone I grew up with, but he was ahead
• 1:00:29
  Speaker 1: of the curve from that versus where I was. Taught
• 1:00:31
  Speaker 1: me a lot about the business. So I can keep going.
• 1:00:33
  Speaker 1: But that's a that's a healthy list. So let me
• 1:00:36
  Speaker 1: shift gears on you. What do you do for fun?
• 1:00:38
  Speaker 1: What do you do when you're out of the office. Well,
• 1:00:42
  Speaker 1: I love to walk my beautiful Australian shepherd, go for
• 1:00:46
  Speaker 1: long walks, UM hike. I do a lot of puzzles,
• 1:00:50
  Speaker 1: jigsaw puzzles like the new Wood puzzles. That's been my
• 1:00:53
  Speaker 1: new thing. And UM, I've been also doing brain games,
• 1:00:57
  Speaker 1: which has been fun. And hang watch my kids and
• 1:01:01
  Speaker 1: watch the kids play sports. My daughter is a great
• 1:01:03
  Speaker 1: soccer player, and she runs track and she keeps us
• 1:01:06
  Speaker 1: every weekend very busy. Oh and my oldest is off
• 1:01:09
  Speaker 1: to University of Miami, so hopefully I'll be there and
• 1:01:10
  Speaker 1: seeing the sun more. Yeah, in the in the winter. UM,
• 1:01:14
  Speaker 1: tell us about a time you failed and what you
• 1:01:16
  Speaker 1: learned from the experience. Well, I would say that I
• 1:01:20
  Speaker 1: was convinced I was gonna be an investment banker, and
• 1:01:22
  Speaker 1: I was going Well Street to be an investment banker,
• 1:01:25
  Speaker 1: and I found that it wasn't the right fit for me,
• 1:01:28
  Speaker 1: and I was pretty devastated. And what I learned from
• 1:01:32
  Speaker 1: that experience was that your first job won't necessarily be
• 1:01:35
  Speaker 1: your last, and that even though you're convinced you think
• 1:01:38
  Speaker 1: you know what you are going to do with the
• 1:01:40
  Speaker 1: rest of your life, you actually can evolve into something
• 1:01:42
  Speaker 1: else and be successful. So for me, that's really the
• 1:01:45
  Speaker 1: path that led me to where I am today. So
• 1:01:48
  Speaker 1: what has you most excited about what's going on in
• 1:01:51
  Speaker 1: the real estate industry these days? Um? The uncertainty of
• 1:01:58
  Speaker 1: what's next, from technology, from disruption, from sustainability. You know,
• 1:02:05
  Speaker 1: it always is changing every day. What's you know? Unfortunately,
• 1:02:08
  Speaker 1: a lot of it's dependent upon the economic backdrop. But
• 1:02:11
  Speaker 1: there's a lot of interesting new things that are going
• 1:02:13
  Speaker 1: on in our sectors, so we have to stay on
• 1:02:15
  Speaker 1: top of them and obviously continue to guide our clients
• 1:02:19
  Speaker 1: down the right path for where to steer their investments,
• 1:02:22
  Speaker 1: and and sizing and and getting out before the market
• 1:02:26
  Speaker 1: turns is going to be the next goal. So everybody's
• 1:02:30
  Speaker 1: favorite question, tell us some of your favorite books, be
• 1:02:32
  Speaker 1: the fiction, nonfiction, real estate related, or whatever. I've got
• 1:02:36
  Speaker 1: a colectic a number, but I enjoyed and it was
• 1:02:40
  Speaker 1: life changing. A book called Thrive by Arianna Huffington's Okay,
• 1:02:44
  Speaker 1: remember one and um that was really impactful, life changing,
• 1:02:48
  Speaker 1: life changing from a person who worked seven and learned
• 1:02:52
  Speaker 1: a little more balanced from things to Ariana. I read
• 1:02:56
  Speaker 1: uh and loved an Acquendolen's Plenty of Cake Plant Candles,
• 1:03:00
  Speaker 1: which really gave me a renewed optimism on aging. Much
• 1:03:05
  Speaker 1: better than the alternative, much better than the alternative. I
• 1:03:08
  Speaker 1: can't help but mentioned Liars Poker and The Big Short
• 1:03:11
  Speaker 1: my one of my friends and favorite authors, Michael Lewis
• 1:03:15
  Speaker 1: um All the Light You Cannot See by Anthony Dough,
• 1:03:18
  Speaker 1: which is um World War two fiction, but an incredible
• 1:03:23
  Speaker 1: read if you like that period. UM. And then just lastly,
• 1:03:26
  Speaker 1: I've read a lot of a mother of teenage children
• 1:03:29
  Speaker 1: and UM Leonard Sachs Um the books that he's written
• 1:03:33
  Speaker 1: for parents. Girls on the Edge is a must read.
• 1:03:36
  Speaker 1: And I'm a little bit anti social media parents for
• 1:03:39
  Speaker 1: our children, and so I would recommend that highly for
• 1:03:43
  Speaker 1: her parents. What sort of advice would you give to
• 1:03:46
  Speaker 1: a millennial or someone interested in uh financial real estate
• 1:03:51
  Speaker 1: who is just beginning their career. I think that everyone
• 1:03:54
  Speaker 1: should find a mentor everyone should appreciate your first job
• 1:03:58
  Speaker 1: isn't your last, and read a lot I think UM.
• 1:04:03
  Speaker 1: For me, it was networking as well. Never stopped networking.
• 1:04:07
  Speaker 1: I remember folding towels in a gym at six am
• 1:04:10
  Speaker 1: to pay for school, and I would talk to every
• 1:04:13
  Speaker 1: gym member and ask them if they knew anybody. So
• 1:04:15
  Speaker 1: network network Network. Our final question, what do you know
• 1:04:19
  Speaker 1: about the world of real estate related investing today that
• 1:04:23
  Speaker 1: you wish you knew twenty five or so years ago
• 1:04:25
  Speaker 1: when you were first starting out? Well, I wish I understood.
• 1:04:31
  Speaker 1: I wish I had the benefit of hindsight and appreciating
• 1:04:34
  Speaker 1: cycles and being UM willing to tolerate more risk that
• 1:04:40
  Speaker 1: there's opportunities and when there is disruption in the market
• 1:04:44
  Speaker 1: to take advantage of it. I think I'm way too
• 1:04:46
  Speaker 1: conservative and I was way too risk averse makes perfect sense.
• 1:04:50
  Speaker 1: We have been speaking with Ivy Zellman of Zelman and Associates.
• 1:04:55
  Speaker 1: If you enjoy this conversation, well look up an intro
• 1:04:57
  Speaker 1: down an Inch on Apple iTunes and you can see
• 1:05:00
  Speaker 1: any of the other two d and fifty or so
• 1:05:03
  Speaker 1: such conversations we've had over the previous h five or
• 1:05:07
  Speaker 1: so years. We love your comments, feedback and suggestions right
• 1:05:11
  Speaker 1: to us at m IB podcast at Bloomberg dot net.
• 1:05:15
  Speaker 1: Be sure and give us a review on Apple iTunes.
• 1:05:18
  Speaker 1: We we love your feedback, comments and suggestions right to
• 1:05:22
  Speaker 1: us at m IB podcast at Bloomberg dot net. I
• 1:05:25
  Speaker 1: would be remiss if I did not thank the crack
• 1:05:27
  Speaker 1: staff that helps put together these conversations each week. Medina
• 1:05:30
  Speaker 1: Parwana is my producer slash audio engineer. Michael Boyle is
• 1:05:35
  Speaker 1: our booker, UH Michael Batnick is our head of research.
• 1:05:39
  Speaker 1: Atica Valbron is our project manager. I'm Barry Hults. You've
• 1:05:44
  Speaker 1: been listening to Masters in Business on Bloomberg Radio.