Latest / Real Investor Radio Podcast / Ep. 100 | Fred Lewis on Current Trends, Market Analysis, and Investor Behavior - Part One

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Ep. 100 | Fred Lewis on Current Trends, Market Analysis, and Investor Behavior - Part One · Real Investor Radio Podcast

• Craig (00:12) Hey, welcome back to Real Investor Radio. We've got a special one for you today. I'm Craig Fuhr joined again by the greatest co-host ever, Jack Bevier. And we've got a very special guest today back with us for this 100th episode, Jack. 100 episodes. Can you believe it? Jack BeVier (00:32) Nah, it's crazy. Can't believe how the time has flown, Craig (00:35) Well, we thought we'd bring in the heaviest hitter of all, Mr. Fred Lewis, founder of Dominion, the Dominion Group, which also includes Dominion Properties, Dominion Financial. Jack, what else am I missing? Jack BeVier (00:47) Dominion properties, Dominion financial, Dominion management, our captive insurance company, Dominion insurance. He's on a board of a DC bank. He's the co-GP of Sentinel net lease. That's done about $250 million of net lease deals in the past four years. Fred keeps himself busy. get it. I get that question a lot. Like, Hey, what's, so what's Fred up to? Is he still, is he still in the business? And I just crack up. I'm like, yeah, yeah, he, he, he's still in the business. Yeah, he's, he's working. Craig (01:10) Now. Jack BeVier (01:16) Yeah. Craig (01:17) Well, I have had the pleasure of knowing both of you for many years. And I've also met many, investors across the United States. And the two of you, to me, just represent the pinnacle of what the industry can be with a lot of hard work, a lot of time on task, and obviously now with a lot of great personnel to carry out your visions. I just think it's such a delight to have both of you on this 100th episode to be able to discuss a wide range of things, Jack. There's so many things that when I get you and Fred together that we talk about that I learned from. And so today I thought it would be just a really great show to kick off our next 100, to have both of you on the show and then really just talk about several things. So I really want to talk about the trajectory of real estate investing since Fred got in in 2002 and you know I got in in 2004 had some success and quite a bit of failure towards the end there after 2000 2008 crash and then but then really talk about how the industry hasn't changed you know we still have to worry about you know the main components of real estate investing, which are acquisition and marketing, disposition, finding great contractors, materials and labor, as well as the financing aspect of the business. so I thought I would kick it off, Jack, with just a brief synopsis of what's going on in sort of the top 10 markets in the country right now, MSAs, if you will. Fred Lewis (02:56) Well, first I'd to thank you guys for the intro and I appreciate that and it's always good being with you guys. Craig (03:01) Fred, if you could only talk to when spoken to, that would be... Jack BeVier (03:05) you Fred Lewis (03:07) Sound like my wife. Thank you, Craig. Craig (03:10) as I sit in the building that you and Jack own. I'm going to chastise the owner of the company now. No, honestly, Fred, it's just, it's always great. Always love when we can sit down and I can learn from you. And now our entire listening audience can, which by the way, Jack, think we receive more comments than I think most people might know on how much the podcast means to them and how much they've been listening. I get guys that are like, I'm in the gym at 11 o'clock at night and your podcast is a must listen. The guys are like, whenever I'm in the car, the podcast is on. So it's really become must listen content with some of the great guests that we've had over the last 100 episodes, Jack. And I think if folks went back and really took a look at the guest list that we've assembled, it's really the top who's who in the industry. Guys that are just have been around lots of reps and who are still out there killing it today. Jack BeVier (04:05) Yeah. I mean, that was always our goal too, right? Like we, the, what we felt was the vacuum in the market was kind of like that higher level conversation about real estate investing content. There's no shortage of guys, you know, on YouTube and on podcasts telling people how to get started and how to, you know, break out of their job and telling, using a lot of very surface level conversation, discuss strategies, but like, Craig (04:09) you standing by their rented plane and their rented Lamborghini. Jack BeVier (04:33) Yeah, exactly. but you know, we didn't see, we didn't see that higher level of conversation talking about like what the, what the nuts and bolts boots on the ground, good, bad, and ugly was of operating the business. and full time, know, and at a higher level and trying to succeed at it and treating it as a business, not just as either a hobby or as a dream so that you can quit your job someday. And frankly, you know, I think And we'll, we'll discuss, I'm sure a lot today, the industry has matured a lot and it's not good enough anymore to kind of half asset, right? Like you're just not going to be competitive if you're winging it. and especially with what's happened over the course of the past two years, the wind is no longer at our backs as an industry. So all that, all that, all that tide is going out right now. And frankly, I think the timing is, you know, couldn't have been better for the kind of content that we're putting out right now, because I think that, you know, be being on the cutting edge, being on the front edge of the curve with what's going on in the market and what's working and what's not is the high stakes are higher today than they, than they have been before. and I, you know, I'm proud cause I don't think that I've, I still don't think I've discovered content that is at the same level as, we're talking about in the quality of guests that we've been bringing on. So. We're gonna keep doing that and I'm excited about that. That's the fun part too. yeah, looking forward to the next 100. Craig (05:56) Yeah, it's gonna be great. So, guys, let's talk about, let's just set a backdrop of where we are in the country right now in terms of the market. I did some brief research on the top 10 declining MSAs in the country right now. And they are really no surprise here, but... Fred Lewis (05:57) Great. Craig (06:15) Tampa, Austin, Texas, Miami, Orlando, Dallas, San Francisco, Phoenix, Jacksonville, San Antonio, Atlanta, Georgia. You know, and frankly, not small declines year over year. know, Tampa starts off, leads the list at about six and a half percent down year over year in terms of median price. And Atlanta, Georgia would be the 10 at about three and a half percent. top. Jack BeVier (06:42) Are those year-over-year numbers, by the way? Yeah, think it's worse than that, but yeah. Craig (06:44) They're year over year numbers. That's correct. And the. Yeah, and it might be in those MSA's there could be sharper declines sort of regionally. Still hot MSA's would be this. This is mind blowing to me. Detroit, Michigan, Cleveland, Ohio, New Brunswick, New Jersey, Virginia Beach, Chicago, Illinois, Pittsburgh, P.A., Kansas City, Baltimore, Jack. Thanks. Thanks to you and Fred still keeping the market hot. St. Louis, Missouri and Nassau County, New York. I don't know if I would consider Nassau County an MSA, but, you know, Detroit starting at 10 percent up year over year and Baltimore, Maryland at 6.2. That's number eight on the list. Nassau County at about 5.8 percent. What can we say about let's let's just start there. Would you have would you have considered that? Would you have even considered that those that fact that those more top those those top markets would be increasing year over year? Jack and Fred, we're talking, you know, East Coast Rust Belt, you know, type of markets, not not these, you know, smile states that everybody got hot and bothered with over the last several years. Why are we seeing that type of increase in these markets that we probably would not have considered? Fred Lewis (08:04) know, I think what's interesting is in real estate, there are substantial material changes that occur that you can see coming that are based on changes in migration trends, overproduction, over investment. You know, the history of real estate investing is always about something happens. There's a thesis and where there could be a break in the market, there could be Craig (08:09) you Fred Lewis (08:29) For example, in Florida, we saw lots of migration. We saw a lot of people moving from the Northeast. It's a tax-free state for a lot of folks. was a lot of, was easier to build there. There was a bigger supply of contractors. It's what happens is people start to oversupply, oversupply, over-invest, and then other factors come in. There's storms all of a sudden. And now you have higher taxes, you have a change in some patterns and the people who are there early tend to not only succeed perhaps, but also over, over emphasize the attributes of why they're there and don't, and then don't prepare for a cyclical change in what may occur. And I think that's happened in Florida. And, and right now we just, it's, it's not, I don't think that Miami, Orlando, or parts of Florida are a bad place to invest. I just think that there's been substantial over investment and over supply recently. Craig (09:36) Fred, how come, you know, after what we saw in 2008, the GFC, and then in COVID, you know, my wife and I were seriously considering about two and a half years ago moving to St. Augustine, Florida. And so we went down and we took a look at not only there, but also in the West Coast where her folks live in Sarasota and every development that we rolled into. Yeah, we're building 10,000 houses here. Yeah, we're building 15,000 houses here. You know, it's a multi-phase plan, but that's 15,000. Next with 5,000 houses, 8,000 houses. And so the builders are pregnant. You know, they've got the land. They've got, you know, they probably got permits. They're probably moving some dirt around. You know, why is it that they don't, they don't see the cyclicalness of making such huge commitments? when not only them, when all the other builders around them are doing the same. Is it a point where you're like, well, we bought the land and we're moving forward and this is what our investors expect us to do. But why is there never, why does there never seem to be like any thought, any thought into like, Hey man, we have just slow this down a little. Fred Lewis (10:45) Well, there's a tremendous bias in historical information or previous information. know, the assumptions you're making from the data that you're using from six months ago, a year ago, two years ago, there's a tremendous bias to lean in on that information and to go with the herd. And it's a really interesting observation. If you think about Craig (11:07) and believe it. Fred Lewis (11:14) just multifamily in general, where every in 2001, two into three, all these operators kept saying, I'm going to have rent growth of some crazy number. I'm going to have occupancy that's almost fully occupied. I've unsatiated demand. And at the height, you could see it coming. You could see that those assumptions and people kept building into those assumptions. And in states like Florida and other states, where they just thought there was an endless level of supply they could build. now fast forward only a few years, it's the opposite. The vacancy rate is much higher. Most multifamily operators are struggling. Rank growth is negative in most markets. So, you know, it's really about being, it's about being prepared for success, I think, and be prepared for failure at the same time. You have to be prepared for both. So if you're, if you are contemplating what it's going to be like to throw down on a new investment, you have to have, you know, as Jack alludes a business, a business operation that also could be prepared for what happens if that doesn't occur that way. Because otherwise you're one investment away from complete failure. Craig (12:38) Well, Jack ahead. Jack BeVier (12:39) Let me, let me jump in. There's the, uh, the back into, remember when I, right when I started in pack in 2007, um, and well, and then what happened the next couple of years? Uh, and there was, yeah, yeah, perfect timing. Yeah. 2000 started in March of 2007. Just did workouts for four years. Um, but the, uh, the, the price decreases that we were seeing in the, in those other, in those other markets, the ones that you're describing right now, right. Craig (12:50) Perfect timing. Jack BeVier (13:08) And, we're much higher, much higher than the kind of the more boring markets that you just also said in terms of the ones that are succeeding right now. And so there was this like conversation at the time that like, Hey, yeah, you know, those, those hot markets, you know, th th they boom, but then they also bust. so like, there's a higher beta, right? Higher volatility to those, to certain markets in the country. And those markets tend to be the places where you can get permits, right? Because. because you can get permits, you can supply the market very quickly. There is land there to build upon their lower tax environments, they actually want people to come live there. And so you have these bigger run ups of and it allows humans to allow us humans to frankly express their nature, right? Like, to me, this is like a fundamentally human problem that like, there's something about humans in markets that we there's something about humans and markets that we get irrationally exuberant on the upside. And then we have both greed and fear, right. And so we get a grass, you're exuberant on the upside. And then we just completely quit the market and starved of liquidity on the downside when we're afraid. And as long as humans are wired the way that we are, that's going to happen. To me, it just so happens. that in Arizona and Florida and Texas and Georgia, you can get permits and it allows humans to behave. Whereas in the Northeast and the places that have regulated that out or of lands or don't have any more like land or don't have any more water, you know, they just restrict permits and restrict humans from acting. And those markets just sit, you know, at inflation, right? Boring. you know, sometimes they have a little bit little ups and downs. But there's nothing special, but that list is the same. list that the two lists that you just described are the exact same two lists in 2009, right? And it just so happens that the first list is following this, you know, is following a pattern that looks like this. And the second list is following a pattern that looks like this. So it just so happens that right now those supply constrained markets in the Northeast and the judicial, you know, the judicial foreclosure States. are, you know, they're on a relative basis stronger than the other ones. But the other but the the markets that allow a lot of supply, because they experience bigger swings, those swings happen on both on both in both directions, because humans and and so they're all experiencing the the correction back right now. And so it'll be fun to I mean, it'll be, you know, I think they're just going to be interesting opportunities in those markets as a result, because we'll watch humanity play itself out and over correct in the wrong direction. Whereas the, you know, the Northeast markets are, whereas the Northeast markets are really have always been kind of cashflow markets, right? Like, why does any money go there at all? It's because the cashflow is a little bit better. And so they're, they're more the boring cashflow markets versus the high beta markets. Fred Lewis (16:06) you Jack BeVier (16:06) are the ones that attract investors because of the appreciation potential. Craig (16:10) So no surprise for you then on those top markets that we just mentioned. Jack BeVier (16:15) No, it's the same list as, it's the same list as, uh, if you wouldn't, if you would put that list up in 2010, it'd have been like the same list, right? And then the opposite, right? Like, but the hot markets in 2006 were also the hot markets in 2015. And I think that the, that's just, you know, I, I, I now, you know, the benefit of 18 years of watching it, like I think that that's just the culture, the nature. That's how these things are going to be. Now you have to run your business differently, right? depending on which those markets you're operating in, knowing what's going to kill you and when to be greedy and when to be fearful, knowing what's going to kill you and where the money's going to be made, they're different playbooks. You're playing football with Tom Brady as a quarterback where you got phenomenal defense. You need to run a different playbook to succeed, but you can be successful in both. But trying to run the same playbook in both of those, you'll definitely screw that up. That will not be a recipe for success. Craig (17:14) Thanks for bringing up football, Jack, after yesterday's lovely loss for the Ravens. That season is over, by the way. So let's talk about Fred and Jack, sort of how the industry has changed. It's no longer a mom and pop industry. Fred, you were talking about this just before the show today and how it's sort of still the same. I still believe, guys, that there's Jack BeVier (17:17) The rate, the user even. Craig (17:39) that it's a three legged stool. You have to have great acquisitions and great marketing to find those sellers. You know, some way to get great deals. You have to have great contracting. You have to have a real pulse on better labor and how you're going to find materials at a decent price. And you have to have great capital, equity and debt. But that's changed dramatically. And I think both of you feel like, you know, with the advent of some technology coming down the pike that that it could be a real benefit to better real estate investors who lean into better technology. So Fred, why don't you start us off of, know, you've been doing this since 2002 and what was it like then and how is it the same today? Fred Lewis (18:31) I mean, I'll start with Hal's the same today. think the local hustle is still the same. I think the local real estate investor who works hard and leans in on a strategy that works and different strategies work at different times and certain strategies stop working and you got to pivot. But those that hustle understand their markets, understand what side of the street they're on. And then how to apply operationally the right capital, the right contractors, the right management, the right renovation plan, you know, to that house on that side of the street, and then perform and execute is still the same. All of that is still essentially the same. What's really different is just there was no national industry 20 years ago. It was 100 % local. So from a standpoint of the national investors in real estate who buy in big markets and in some key sub markets today, the national players, and even the regional guys who may be in Houston and then go up to Dallas or Dallas goes to San Antonio, or people in Georgia go in various markets and into Florida. I think that has changed to some degree. And then of course, the capital markets has changed dramatically. You used to have to fight in your local market to get capital from your local bank. So if you're in, you know, Savannah, Georgia, hopefully there was a little bank in Savannah that would, that you could go have lunch with that would give you a loan to hold some real estate if you wanted to put a rental. Yeah. Or a local or a local private lender, you know, to give you a bridge loan and, those markets that has changed in that information and Craig (20:01) We're a hard money guy. We're a hard money guy that was like hyper local, Fred Lewis (20:15) an understanding of the product nationally with some leaders that have helped create a national market that has occurred. So now there are national private lenders like Dominion Financial and others that can play in a lot of markets. And I think it's democratized capital in a way that just never existed before. So the good thing is if you're an operator and you're Craig (20:37) Yeah, dude. Fred Lewis (20:41) and your discipline and you're holding real estate for the longer term, you have access to capital that you wouldn't have had before early on. The negative to that is everyone has access to capital. And that's not always a good thing because now you're competing against some of the dumb money in certain markets that probably bid up something that you shouldn't buy. Now it really depends on what side of the street you're on. And you don't want to, you know, so that could be a good thing or a bad thing. But I think what's interesting, probably the most interesting is investing has always changed. That is the focus. Is that the whole idea of being an investor is finding the edge, finding the reason, finding the game that will make you money in what you're buying. And then thinking about it as not just a transaction, but how do you leverage for the long-term? And so when I got into business in, you two, the, market had always kind of been a good old boys club. was just good old boys in the market. They did it a certain way. Their parents, their dad had done it a certain way. They had acquired inventory. There was a immigrant class that had. Craig (21:46) Yeah. Fred Lewis (21:58) that inventory was created to supply that class back in the 80s and 90s and actually earlier the 50s and 60s and 70s when lot of this inventory was built. And that inventory was being turned over because it was being turned over. A lot of those folks moved to the suburbs, expansion of the highway system and the economy. And a lot of that inventory turned to investors. And as that inventory turned, That was really the first big wave of investment real estate in the country. And a lot of folks, it wasn't really about supply. It was about just getting the inventory, doing the minimum possible for a lot of investors, and just trying to hold it. Craig (22:39) And it was a lot of the stock front was that sort of like inner city stock and then just sort of on the edges of the city and the better sort of neighborhoods and a lot. Fred Lewis (22:47) Yeah, whether it was Baltimore, Roe Homes or St. Louis, you know, lowering housing in the inner city or, you know, markets around the country, frankly. You know, not the new markets. wasn't Orlando. It wasn't, you know, wasn't, you know, parts of Georgia, but it was a lot of markets. That's how things turned. And then folks in our generation started to get into real estate. And I saw the opportunity, not as just trying to own old inventory, but how to prepare that inventory for a customer. Craig (22:50) Philly. Fred Lewis (23:15) How does my customer being the tenant, whether it's a section eight tenant, whether it's a lower income tenant, you want them to live in the house, stay in the house like the house, because that's what makes you cashflow over a long period of time is how you make money, not cashflow over a short period of time. Turnover costs and other transactional costs will kill you. So I looked at it that way and I think a lot of folks starting my generation started to look at it that way. And then that gets you into construction and product and it becomes a very different investment. So I think what's changed is just how ubiquitous capital is, information, technology, the ability to access a strategy, but realizing that it's always about the edge. Jack BeVier (23:59) Hmm. Fred Lewis (24:08) It's always about understanding some, some, you know, strategy that you're focused on and that you're always an object. I've always said this since you've known me, you're always on the clock. is a theme that I always believe in. matter what you're doing is successful. It won't be successful forever. So you're on the clock. And so there's only a short period of time that you will win at that strategy. So. Being prepared for success is as important as being prepared for failures and problems and issues and loss mitigation and risk. You got to be prepared because you only will be successful for a period of time until it pivots and then you got to go lean in on something else. Jack BeVier (24:55) I think, I think that is like an incredibly important point and kind of like the thing that like, think that we've always focused on and done very well at is, what differentiates a professional real estate investor who's building a business and who's going to make it through multiple cycles versus the newbie who learns on Tik TOK or Instagram or YouTube or Facebook, what's working at that moment, right? Like the hype guy gets on Facebook and it's just like, I just cashed a hundred thousand dollar check doing this thing. And there's a little bit of truth to that, right? Like he's not completely a charlatan. He's just figured out the thing that's working right now. And then he gets out there and says, Hey, everybody, here's what's working. Here's how you make money in real estate. And he's right for about 12 to 18 months until the market normalizes and everybody figures that out and closes that gap and gets rid of that angle. And they never, but they never zoom out and like, you know, like get back up to 300,000 feet and talk about like, what the dynamics are in all of these various different markets that is creating that little formula for that moment and how, and then watching the trends to be able to figure out six months ahead of everybody else, what the next one's going to be because it takes it. And it takes at least six months to retool even a very competent organization to where, to where the ball, you know, where the puck's going. Right. And, and I think we've done a good job of being like, Hey, we're making money doing this right now, but the conditions are changing and here's what's going to be, here's what's going to be, you know, the formula next and moving resources towards that. And then being there for a year and then moving resources to the next one and then being there for a year. And that has been like our history. Like that is, that is our lives is just like trying to figure out where the puck's going and then move the organization to that. And then move the organization to the next one and move the organization to the next one. Craig (26:50) Can you guys? Jack BeVier (26:50) And you can't do that unless you're zoomed out a little bit or take time to zoom out. Fred Lewis (26:54) Yeah. Craig (26:55) Can you guys think of maybe an example or two where you were, as my dad used to say, a fat hog in the know, like really killing it with a strategy. But you maybe weren't looking to see where the puck was going and maybe got caught off guard. Jack BeVier (27:13) where we got caught off guard. so I'll say that, so for, let me, I'll zoom way back for a long time. before, before wall street got into the single family asset class, right back in 2008, nine, 10, where the debate was, single family, even an asset class? Like that was literally what people were paying to go to conferences and hear panelists talk about was like, is this a trade or a business? And we were always firmly on the business side, obviously, because we were already in the business. But, but the, the before Wall Street got in that the, the way that you were able to add rental properties is you, you know, the capital supplier for long-term debt was local banks, right? So you had to play the game a certain way because the guy who was giving you the long-term money needed the checks needed you to check certain boxes, right? So we had to balance, had to balance how many rental properties we could add, you know, how many refis we, was really a function of how many refis you could get. And we, so we had to do a certain number of income producing activities in order to qualify for those refinances. And so that allowed that, that, that forced us to run the business in a certain way. When, what we didn't see was exactly how the capital markets were going to evolve. So. We went into Atlanta in 2011, bought a bunch of houses, wish we could have kept everything as a rental property. But frankly, we just didn't, you know, at the time the capital markets that for long-term debt were significantly affected. And we didn't, we weren't from Atlanta. So we didn't, couldn't get anybody to lend this Baltimore company properties to buy houses. were buying in Atlanta. Um, except wall street came in with a debt product that we didn't take because at the time it was like, you could sell the property at 6 % cap rate, or you could. or you could refinance at seven and we were like, well, that's, this is easy. Like I've, I took finance one-on-one, like I'm a seller, you know, in that environment. And so we sold a bunch of houses in Atlanta. then fast forward to three years later, one rents had gone up a bunch and we didn't see that coming. we didn't see that market stabilizing like that. So we missed that one and we sold early, but also the debt. markets had come down to the point where we could have, you know, we should have kept those in our rental portfolio. So we didn't quite, we didn't nail, um, how the second, how, how the New York capital markets were going to evolve. And it wasn't really until the DSCR product hit the street, right? was Corvest B2R and first key. We talked about this in our first episode, Greg Corvest B2R and first key were the first guys doing securitized debt back in like 2013, 14, 15 timeframe. Craig (29:44) Mm-hmm. Jack BeVier (29:51) And everyone was thinking it's going to be a CMBS product because that was the closest adjacent vertical for the New York guys to get their heads around. And so they were trying to treat it like a CMBS product. And it wasn't until Verus in 2016-17 started the treat it like an RMBS product and created a non-QM non-qualified mortgage product called the DSCR loan. That was what Main Street actually wanted, right? was for Craig (30:15) Yeah. Jack BeVier (30:16) 13, 14, 15, 16 Wall Street was shoving a CMBS product down main streets throat and we all just didn't want it. And they thought we were, you know, short-sighted and we were like, you don't understand the main street business. And then various figured it out. They're like, these are main street guys, like give them a product that that's simple, that they can understand. And they created the DSCR product and it has been a smashing success from a capital markets perspective. So we did see that though. We like, we adjusted it when the DSCR product came out, we were like, yeah. Craig (30:38) That's total game changer. Jack BeVier (30:45) This is it. Like, this is what's going to work. And then we just shoved all in on that in terms of adding it in terms of actually being like, Hey, we need to actually originate this stuff. Like hell yeah, we're going to borrow hell. Hell yeah. We're going to borrow that money, but this is going to be so popular that we're going to originate it. Also, we just figured that out. You know, we had never, we never done long-term loans before. so that's kind of both examples for you. Craig (31:07) That's a great one. Fred, anything to add there? Fred Lewis (31:10) You know, I would just add, you know, there are obvious disruptions in real estate. The crisis in 07 through 09 was a clear disruption. There's different things that happen that are not quite a disruption, but a material change. And I think that recognizing that that's what that is. It's a material change in a market. or a disruption that you have to, or a fundamental shift like Jack's example of DSCR. It was a fundamental shift in how the whole industry was financed. So there are moments in those changes or disruptions where you have to think about how prepared are you? You know, I was talking to Jack the other day about the yield curve and where the five years been, because a lot of the DSCR product is priced. mostly off the five year treasury. And the five year treasury, although it goes up and down, has been trending really closer to where it was last October, a year ago, where DSCR rates dropped into the low sixes, and you could buy it down even below that. And being prepared for an increase in opportunity, volume, investors all of a sudden click on, that now my rental properties cover more or they cover. So guys like us need to be prepared with loan processors, customer service people, people to service when that phone rings. And so that's a really important thing. And that goes for any investor, whether they're in an adjacent market or in a market where they think they can take advantage of a change. Realizing that that things will normalize or change again. So again, the theory of being on the clock, we've made most of the real successes Dominion has made is being prepared, that educated decision to go all in on something or go mostly in on something. And having the level of preparation and thesis already outlined. Craig (33:17) You know? You know, Jack, I still love to think about the guys in the business and gals in the business that some of who we've interviewed who have learned to scale. But maybe, you know, they haven't been doing it for so long. So question one is, is it still a business where a guy can work full time job and do several transactions a year? Be competitive. you know, put out a great product or is it so, you know, is it so, has it evolved so much that like the small guy just gets cut out? how, if I'm working my full time job, Jack, and I want to do several transactions a year, I've got to beat guys like you and Fred to the punch with my offer. And I've got to go out and find great labor and I've got to go out and do the marketing to find the deals and the financing and all of that. So, Speak to that, speak to the guy who's maybe doing several transactions a year, has hopes of quitting the job and wants to scale up, his size, let's say. Is it still a viable business for guys like that? Jack BeVier (34:30) Well, I'd say like certain aspects have gotten harder and certain have gotten easier. so like acquisitions has gotten harder because the market's gotten more liquid. There's more, frankly, just more people in the industry still. and it's become, you know, there's just more, more, more sophistication today in the market than there was 15 years ago, like period. Like no question. so finding the deal has definitely gotten harder. I'd say, getting the money has gotten a lot easier. Um, and so the relative advantage of having a W two has gone down, right? Like back in 2008, nine, like you might only be the only guys able to get financing back then were because they had a W two income. Whereas today, you know, the, the bridge money and the long-term money just doesn't really care about that. Um, you know, it's focused on other risk factors. Um, and so I'd say that that, that has become a, Fred Lewis (35:07) Mm-hmm. Jack BeVier (35:22) the capital inefficiency has become a relatively less lower competitive advantage for those folks. and then the, then I would say probably the construction and property management has gotten easier. Those barriers to entry have come down. whereas before, you know, back 15 years ago, you had to be paying guys on Friday. So you needed to like get there on Friday to like pay them. you've got. More sophistication now you can ACH, you can do stuff more, you know, more stuff via technology site, site visits, with photos that, that are easier now in the property management infrastructure also has like, you know, it's not as if property, I think there's still a long ways to go in terms of like great property management, that, that, market's continuing to get better at their jobs. Um, but it's a hell of a lot better than it was 15 years ago where for us, third party management was like, not even an option. Like it was like, of course we're starting a property management company because otherwise we're just throwing money down the drain. Craig (36:14) for you. feel like there's a great property manager in every market if you just got to go out and find them. Jack BeVier (36:22) I think that they're a good property. There's a couple of good ones in each market, which is a hell of a lot more than there were 15 years ago. That's my perspective on that. Yeah. Craig (36:30) So how are you given given where we are in the market today when you and Fred sit down and talk and talk about what could happen in the next 12 to 18 months and where you might have to pivot the business the business is what are you talking about now? Like what's on your radar for for things to look out for and the pivot to that that we could give some advice to the listeners on? What do you think? Jack BeVier (36:58) We have, the, things that stay the same, right? Like the humans are still humans and they're still going to behave. We think in the same way. And also towards the end of what stays the S what stays the same is what can kill you is still the same in that what can kill you is over leverage and the humans are still going to over lever. Like that's what they do. And we're in that up cycle right now. And maybe that, maybe that. You know, maybe we think we're kind of in that top end of the curve right now where things are flattening out and cracks are starting to show because the humans have over levered and it takes some time for them to give up. But we're in that process of people giving up and it being really hard and them, you know, deciding that they're not happy and wanting to make other decisions with their life and tossing some keys or just failing for cashflow reasons. You know, all the, the, the run up in those social media guys, teaching people what worked at that moment. And what worked at that moment was money is easy. That led to humans taking a lot of money that they shouldn't have taken. And I credit Fred with the, the, the, the Fred's my mentor. Fred, I started with Fred when I was 23. I didn't know So like Fred taught me everything. And philosophically, one of the things that I credit with him, credit him with the most. that we survived the great recession was, his discipline with respect to not over-levering. Like he would, we would only take out our soft costs on refis and it was not max out every refi for cashflow. was, we were always talking about how do we delever? How do we delever? Let's get, makes, let's make sure that the rental portfolio cash flows. And at the time I didn't realize how unique that was. in retrospect, I do. And that was frankly the reason we made it through. that was, or, know, with, without that, we definitely would have failed. So, I don't think that that's a lesson that most have learned still. And we see evidence of it every day in terms of like, you know, DSCR deals that we're turning away for people over levering. and they're just not thinking, not thinking forward and that chicken's going to kind of, kind of come home to roost. And we think that there's going to be opportunity in the wake of that, in that set of mistakes. So I think that's the one that we're talking about right now the most, in terms of what's going to be a driver of the next phase is that. Craig (39:21) Bread. Fred Lewis (39:22) Well, I mean, I do think it's interesting. think there's a great bias kind of way to think about it where. Where rents are going up, prices continue to escalate. Why? Lots of reasons. Cost of funds, cost of funds are continuing to go to go down as it went down in 2000, 2001. As the cost of funds went down and rents went up, you had a you had a COVID post COVID. know, set of factors that drove some real estate attributes. But basically the environment created this risk bias, mean, this greed bias so that other investors start coming in because they're thinking about, I can make money doing that too, or I'm going to lean in and do more of that. And you're over leveraging, you're over buying and... There are times in markets where the best thing to do is to be educated, learn from what's going on around you and not to buy something. Sometimes that's a good thing. But be prepared for when the cracks do exist. You make money in real estate on the cracks, typically. Not typically because the herd has already moved that direction and you decide to hook your wagon to the herd. That's not usually where you make any money. That's usually where you end up getting slaughtered. when the herd hits the hunters. And I think that's the issue. And for me, it's always been, can we find the cracks? How can we find ways to make money in those periods? But be disciplined. And I think having a level of discipline in your business, so. that you don't make a bunch of money on one thing and then go buy the fancy car. For the listeners, never do that because the assumption is that the next transaction will be just like it, or you're in the business for your ego. There shouldn't be any ego in real estate investing. If you make money on a transaction, it's not because you were smarter that day than the day before. And if you think you're smarter, then you're going to get killed because it's going to force you emotionally to make a move that you'll get killed in because you thought you're smarter all of a sudden. I think the best way to think of it is, is be thrilled that you found the strategy, you found the game, the edge, and then invest it in your business. Invest it in yourself. It's really, if anything's about the long-term, it's about that. And that's really what's helped us through good times and tougher times. where we've had the capital to sustain because we didn't go on the edge like a lot of other investors. It's amazing we see that even today. We see people in the industry go down that we know. And the story ends up being they borrowed all the money. They just assumed rents would continue to go up or their outsell market, their Dispo side. would continue to hit the same numbers. And then in the last 18 months, that changed. And think about if you run a business where a change, a reasonable change puts you out, then you're running a really bad business. Craig (42:38) You know, I think we're all you guys have both mentioned some of the cracks that we're seeing in the market. And I want to get back to the capital side and Wall Street's appetite for single family residential. Do you see any changes currently, Jack, in some of the guidelines that we're seeing from from the DSCR side? Is that is that box tightening or is it it getting bigger? for DSCR refis. And let's play out a scenario where we could see a more than significant downturn in the next 12 to 18 months in the economy. What does that look like from a Wall Street appetite side for more DSCR financing? Or frankly, just for single family residential? Jack BeVier (43:25) We don't see any changes to the DSCR guidelines happening right now. When you look at the non QM mortgage products and the relative delinquency rates of each of those products, DSCR is one of the best performers. Yeah, still all, all delinquency rates are up a little bit, but also if you look at credit card debt and automotive debt, that's up significantly. Also, I was reading this article the other day about, about automotive debt and how those delinquency rates have risen and how sometimes six to nine months later mortgage delinquencies start to uptick also. Not always though. There are some reasons to think that this time might be okay and that that won't happen this time. I'm kind of hedged on the idea, you know, it's a wait and see and watch the data. But we haven't seen DSCR programs tightening up. What we have seen is DSCR loan purchasers more acutely focused on the risk management practices of the of their originators of their counterparty. So the guys actually press and send them the wire. And so I think we're seeing a reset right now from a period from 2021 to 2020, you know, early 2025 when there were when risk management was deprioritized was definitely not prioritized. And sales was all that mattered. Yeah, exactly. Check, check all the boxes, send the wire, check all the boxes, send the wire. Craig (44:37) just go out there and rip the loan. Yeah, yeah. Jack BeVier (44:45) And, we're seeing a reset in that, or maybe a swing in the other direction, from, you know, the strength of the risk management team. and some, a lot of originators are scrambling to build risk management teams. cause that was just never part of the recipe for success before. and also bear in mind, we're talking about a product that's less than five years old, or that's only five years old, less than it's really five years old now, from a adoption perspective. So, um, anyway, no one's seen a cycle through this stuff yet. Uh, and, um, so I think that's what we're seeing on the, uh, on the DSCR side. Uh, I'm less concerned, uh, as to like whether I guess, you know, it depends on what the five year does and what the delinquency rates do. Like does a, does a consumer recession cause a cause DSCR loans that were originated at 70 % loan to value to default. I don't know. There's an argument that that would make. You know, the prevalence of renters stronger and, and, you know, I'm not, not, I'm not certain that I think that that's going to be the product that's affected by a recession. So I'm not quite, I can't quite draw that direct connection in my mind as to why that'll be the product that gets affected by it. So less, less concerned. Craig (45:58) I'm glad to hear it. Fred? Fred Lewis (46:01) Well, I think my viewpoint is. Standards will change a little based on the people who behave poorly. And there people who use the product who intend to behave poorly from the very start. I'm a glass half empty guy when it comes to people in general, because I think people will, there's always that five or 10 % of people who are looking for not just an angle, but looking to steal from somebody else. And so if you are, Craig (46:16) Mr. Optimist. Fred Lewis (46:28) Or just it's an opportunity to take something. So if you have a property that gets appraised for $200,000 in the market that's worth $120,000 or $400,000 is maybe the better example. It's really worth $300,000. You know, like, don't know how the hell I got that appraisal, but I'm going to take all the money and it doesn't really cover, but I'm going to do that anyway. And I'm going to keep collecting as long as I can. And the minute I get a vacancy and I got turn up expenses. the bank bought the property. That thread is real and it's just a function of behavior. And that behavior does exist. I think that as DSCR product got launched, the industry, once they were sold on it, they also diluted themselves that everyone taking the product would act the same. Every investor with good intention is why would they not? Why? They want to buy and hold. And this is an important property for their retirement and for their family. And they personally guaranteed the damage. So those are back in the envelope, sitting in a boardroom of functions that make total sense. then humans behave. And so there'll be outliers. It may be 5%. I don't know what it's going to be. I mean, it's already happening. But that 2 and 3 and 4 and 5 %? of that behavior can kill a pull depending on how bad they pay. So I think there'll be some adjustment trying to dissect and understand that behavior. And then there'll be overlays to that behavior. I'm just hoping that those overlays don't get exaggerated or don't get over, you know, overdone so that it hurts, you know, a certain market or a certain type of person. But I think, I think there will be adjustment in the product. Craig (48:25) I just think I'm probably glass quarter full when I think of sort of the pool of investors across the United States. And I think that that you and that you and Fred Jack have become exceptional at what you do. But I think we we live in a market where there's not that you guys are truly the exception. as operators and that there's a lot of folks out there that are utilizing the DSCR loan but aren't really looking around all the corners. Jack BeVier (49:02) Yeah, they don't know their own math, right? They believe when they get a 1.2 DSCR loan that it covers 1.2, right? Which is to me, seventh grade math that it doesn't and everyone knows that. But if, Hey, if you just never wanted to know, and learn this off of YouTube, then maybe you think it does, you know, Craig (49:21) Yeah, it's... Fred Lewis (49:21) Well, as an example, Craig, someone will call and they'll ask, hey, I see the product. I can borrow 70, maybe up to 75 of the praise value and it covers at 1.2, but it's really more like a 1.0. Hey, but do you have an 85? Do you have an 85? And I heard that there's a 0.9 out there in coverage. So I can literally borrow money for, I'm going to borrow all the money, basically. the property won't cover at all. And do you have that? Because I want that. and that's an extra point in rate. And I'm going to pay, instead of six point whatever, I'm going to pay seven point or 8 % for that product. Think about the mentality of that human and that investor. That's not an investor. That's what we need to really illustrate here, is there's true investing. And then there's Jack BeVier (49:57) In rate, yeah. Craig (49:58) I'm willing to pay that. Fred Lewis (50:16) there's someone seeking a trade for some human behavior that really isn't investing. And the speculation of that means that you better hope that that real estate that you just refinance goes up in value some way, somehow in a market that we're seeing declining values. Jack BeVier (50:35) Yeah. And it's not anymore. And it's not in the past nine months. And the math that you were just talking about, Craig is, is the data very recently, but that's also the year over year data. When you look at the month over month data, it's worse. Like you annualize the current month over month price decreases in the market right now. And we're going into the winter where the, it does, where it gets, where you, where the seasonally, you know, the seasonal adjustments, when you get rid of the seasonal adjustments, that's not a thing, right? Like in reality, the winter's awful. That's what that's the reality is from a cashflow perspective, December sucks and no, and, and, values are even worse. And so like, you're, not making money flipping or you're getting squeezed on your in flipping. Um, you're, if you're a real estate agent and you're making commissions, that's hard right now. And you quit your W two because you cashed out a bunch of refi proceeds and pulled in more cash than you'd ever seen in your adult life. And now you're going into this winter. I'm super skeptical. I think that it's going to be a long one. So, anyway, sorry, go ahead. Craig (51:36) Yeah. Fred? Fred Lewis (51:38) So there's a new product that was being launched this earlier in the year, late last year, which was a close in second product. And the idea of, and it became like a buzz thing in the whole industry, which is, there's buyers now, just like they buy DSCR and they aggregate it and send it into Wall Street into a bond. They're doing the same thing for the second product. Craig (51:46) yeah. Explain quickly though, Fred, how a close end second on an investment property works. Fred Lewis (52:05) So if you own a rental property, let's say you did a DCR loan three years ago, and you believe that the appraised value today is much higher, therefore you have equity in it, not to suspend the coverage comment, because it may not cover a whole lot more, maybe rents went up a little bit since you financed it. On a reappraise, it may come in and in that your existing loans around 60 % or you may be 50 % of that new appraised value. So what is close in second is it just a specific second lien product. They'll go from 50 or 60 % back up to 70 or 75 or 80, depending on what you're able to get. We'll call it 75. So that junior part of the capital stack there, you can get a loan. Now that loan will be much more expensive. It won't be the 6%, 7 % loan. It'll be the 8%, 9 % loan or maybe even a 10 % loan. But the argument that one makes is, but I got all this equity that I want to unlock. Like this idea that I want to unlock this equity that's sitting there and not earning me money so that I can take it and go buy another piece of real estate and then try to borrow 85 % of that. Jack BeVier (53:01) 10. It's 910. Fred Lewis (53:22) Like that mentality is wrought for destruction. And that's what I think that's just a moral hazard. Jack and I looked at the product. It was a high commission product. was a high margin product that we were to issue it as a company as Dominion. And we just couldn't get over the moral hazard of it. Craig (53:41) Yeah, we discussed it very briefly at lunch one day, Fred. And I was kind of trying to wrap my head around it as well. If I'm borrowing 10 % for the remaining equity that I have in a house, what's my business model on going out in this market right now and making above 10 %? I guess maybe some flips, but like on another rental, am I making 10%, over 10 % on that money? Am I thinking wrong there or? Jack BeVier (54:00) Yeah, it's hard. Fred Lewis (54:10) Well, I mean, here's the thing. The fact that a lender is willing to lend it because they're the ones making it to earning the 10 percent and they feel there's enough equity inside the real estate to lend it to you. So they're just they're making their decision based on the validity of the appraisal and that that they'll just take your equity if you don't pay them. And that doesn't mean you take the loan. It actually means you probably should reconsider taking that Jack BeVier (54:25) Yeah. Which by the way, all of this is not to say that we think that that's definitely going to fail in all situations. We just think it's, it's just above our risk tolerance in terms of the, the, the, the transactions that we want to be involved in. Like that's just, it's just not for us. Like, is everyone going to fail there? No, but, but enough people are going to fail that we just, you know what? That's not the way we want to make. Fred Lewis (54:53) Yeah. Jack BeVier (54:56) In our opinion, that's, we're also guessing, right? As to how many people are going to fail, but we think that enough people are going to fail that it's like just business. should stay away from. Craig (55:05) Getting back to my point of Wall Street's appetite for single family, not only housing from a a purchase standpoint, you Wall Street. But from a financing standpoint, I still think that there in any sort of downturn when the keys start coming back, I think that the DSCR envelope is going to close very quickly. Like the guidelines will be like enough bad actors will change that product precipitously. And I think it would happen very quickly as well. It won't be a gradual thing, but. that we always like predictions on the show, Fred. So that's that's my prediction. know, recession, you know, a little geopolitical event, anything that could happen to like make people foreclose on these loans. Like, look, you know, I think that we do great loans here at Dominion. We underwrite great. We we check appraisals. We do really great DSCR loans by and large. But as a loan officer with the company, I talked to a lot of investors and frankly, I'm just going to lay it out there. If you're listening, I'm sorry. I think that there's there's bad deals when I'm looking at, this is the guy's mortgage. This is the guy's mortgage PITI every month. And this is his rents. He's making $250 a month cash flow. How many of those do you have to own that go vacant before you start giving back keys? And I just think that there's a lot of guys out there in the market right now that have those loans. Fred Lewis (56:36) Well, I I certainly think there will be some of that for sure. You know, to the scale of what occurs, it's a wait and see. I think that, again, back to bad behavior, I think there's enough bad behavior in markets where for those that take all the money, they're just playing the game at the edge is really my point. Some of those will... Craig (56:44) Yeah, that's it. Fred Lewis (56:59) bear out fine because they'll just work it really hard when something bad happens. And then there's investors that don't know how to grind or don't know how to deal with conflict or don't know how to deal with their problem. If you work through, if you renovate a property well enough and you have a decent enough tenant and you execute on the real estate side, again, just fundamentals of real estate investing, and you happen to over leverage, It's not a death sentence. It just means that you're more on the edge. And to the extent you're on the edge, if there's other factors that you're alluding to, which is the vacancy, the maintenance cost, the turnover costs become high, and you didn't execute well enough across the board, then yeah, those guys are going to likely fail. Jack BeVier (57:47) let me play devil's advocate just because everyone agreeing with each other is no fun. The the argument against is that they're just gonna they're gonna turn it over and put it on the market into a supply constrained environment. And if you and then the question is, did you get the appraisal right? And if and if and if it was a 75 or 70 % loan to value loan, then they can get out and keep their personal guarantee and their FICO intact. And there's enough equity there, right? Like know, these DSCR loans are being done at 70 you know, 6570 75 % Lundi value, the conventional resume market is like 80, you know, 8090 95 FHA 96 and a half, like, there's a lot more equity in this mortgage product than everything else that's being compared to. And that is the reason that Wall Street is telling itself right now as to why performance is better is that even Yes, guys, guys get themselves upside down operationally, they just screw up life happens. But then they sell it and they sell it and they get out because we only lent at 75%. And there's enough room to pay commissions and closing costs and turn the thing over and keep the guys and not keep the guys FICO intact. ⁓ Craig (58:53) Yeah, but who does that but who does all that inventory go to Jack? Are you and Fred going to go out and buy houses at the courthouse steps at seventy five percent of appraised value? Jack BeVier (59:01) not goes, goes back to those first time home buyers that got boxed out by these invest, you know, these bad investors in the first place, right? You know, these, investors in the first place that were gobbling up inventory and creating the shortage in the first place, you know? And so all that story is very cohesive, right? Like, the bad investors are cycling out and the first time home buyers will have a new opportunity again. And then Trump's putting pressure as of this morning on Fannie and Freddie to do something about affordability. PIMCO's arguing that, that we should be buying MBS again to stabilize the housing market because it's good for policy and also super self-serving for PIMCO, course. But you know, everything could be fine. know, like there's, there is a case that everything's going to be fine. So. Craig (59:37) Just a little. Fred Lewis (59:45) Let me play devil's advocate to devil's advocate. Craig (59:48) Let's go. Fred Lewis (59:49) I think it's about execution purely. think it's to the investor who renovated the property fairly well or bought something that was in newer condition that they updated, they have a much higher likelihood of achieving on a vacancy a homeowner sale. To the extent that the real estate doesn't look anything like what a homeowner product needs to be. and they got a relatively high appraisal, I think that becomes an issue. Jack BeVier (1:00:19) Yeah, both of those, in my opinion, the way, I would argue though that both of those are V issues. If the appraiser both chose the wrong comps and was comparing apples and oranges, well, Jesus, yeah, well then the appraisal is screwed and those are gonna be your delinquencies, yes. Fred Lewis (1:00:25) Yeah. Right. But I think the point being is what's really great about single family real estate investing is there tends to be, and there's always has been multiple exit opportunities. There's optionality in a lot of what we do. And a lot of what we think about when we buy real estate is what does that optionality look like? We can rent it. We can sell it. There's different things you can do to exit and to invest in it. And I think understanding those two are really important. So, hey, that investor who's going to over leverage, maybe his point is, yeah, but I'm still inside of what homeowner pricing is. I can always sell to a homeowner. So that may be a thing. But I'm one that doesn't think that doom and gloom is coming. I think that there'll be adjustments around behavior. But I just don't see a fundamental change in investment in the investment values. think they'll just be, I think we're in a period of rents have stopped. They have, they're not growing and they're receding in certain markets. Vagancy rates are higher in certain markets. V has started to kind of stabilize or actually recede a little bit here and there. I think all that's great because all those cracks in different places only provide new rounds of value. Investors who want to you'll find the edge there or find the opportunity. But you can always make money in real estate investing if you can directionally take a bet and that direction is reasonably valid. I just don't see a direction where we're going to see substantial declines, generally speaking, in investment real estate. Not our investment, not single family. Jack BeVier (1:02:18) You would, I'd argue that the, that the, what's coming next is going to be a, I have a hard time understanding how it's not going to be a better time to buy over the course of the next 24 months than it has been over the last 24 months. I think that there's going to be all of this leads to, we can argue about like, you know, the relative scale of how much disruption there's going to be. But I think just, you know, you'd have a hard time convincing me that there's not going to be some investors who fail and some investors who have cashflow issues as a result of this stuff. And there's, as a result, there's going to be fewer bids on that property, fewer people at the auction, fewer people sitting at, you know, sending direct mail, looking to buy houses, fewer customers for the wholesalers that are sitting across the kitchen table, trying to buy houses. And as a result, the investment real estate prices, even if the top line doesn't move, right? Even if ARV does not change, the investment number is going to come down because all of the investors have headwinds right now. And so you should see increasing spreads, increasing margins, better coverage. Fred Lewis (1:03:26) Yeah, your argument is an increase in spread and margin. I actually do buy into that. think that if you ask me, there's a list of things that can trouble an investor in the world of execution, whether it's the real estate itself, the side of the street, the location, the renovation, all those things are really incredibly important. I think liquidity and cashflow is the number one. I think that is going to have the most impact in the investment markets over the next year or so. Jack BeVier (1:03:48) Yes. Fred Lewis (1:03:55) And I think that that is, I agree with the point that that then leads into fewer dumb money buyers or just buyers in general in various markets. You know, certainly there will always be new entrants, but I think that, I think that is the driver. Jack BeVier (1:04:11) Craig, just one of the things I was thinking of, like the, uh, the data that you talked to you, that you, launched us off with in terms of like the Baltimore was one of the better performing markets. And it had seen something that was like 6 % home price appreciation year over year. I will take the under on that number every, you know, all day, um, that the problem with this reported real estate data is it's always three months lagging. Craig (1:04:11) Okay, eat please. Jack BeVier (1:04:34) almost always reported year over year, which is completely irrelevant. Like that's just not, know, the market moves slow, but not that slow. Like it should be, it should be what's last month's, you know, but, but it's also, it's, hard to do last month, same store math, right? Like that is mathematically very difficult to do. So I understand why, but just, which is why then people, you know, argue that like, the, local anecdotal evidence, like is really necessary in order to operate within a market. And if you're just looking at charts all day and trying to invest in, you know, from out of town, you're, you're gonna be behind the curve, like always. And I do subscribe to that. but the, I just feel very confident even, even in the Baltimore market, which is on the top 10 list is down actually right now. ⁓ then it was, yeah, in the past three months, you know, in the Craig (1:05:21) Really? Jack BeVier (1:05:24) I think I think it's down since November, it's definitely down over the course of the past 120 days. And every month is getting a little bit worse. But for that, you know, we had like a two week period 30 days ago, when interest rates got a little bit better for a minute, there was a shot of contracts, and then it just died again. So like, the market is uber sensitive to mortgage rate, the homeowner market right now is uber sensitive to homeowner to mortgage rates right now. And I think it's a reason that the, you know, the, Trump administration is now taking aim at Freddie Fannie and Freddie and trying to pressure them into doing something to lower mortgage rates. because that's where like, you know, that'll be good politically. but I also think that is a very effective lever right now for the real estate market is mortgage rates. if we, if we could put a five handle on them, everything would be fine. Are there, is there fundamentals though, for there to be a five handle on the mortgage on mortgage rates? I don't think so. Like I don't, I don't actually personally think that the mortgage rates are mispriced right now. So, Hey, if the government comes in and subsidizes the market somewhat in some way, we'll certainly keep an eye out for that. And maybe that bails out this whole freaking conversation, but planning our business based off of like what we think rates should be. And I don't see any reason for this, you know, for this status quo to change other than for, you know, from some kind of government intervention.