[00:00:00] Speaker A: Welcome listeners. You're listening to the Deeds in the Desert, where real estate investors tune in for the latest news.
[00:00:08] Speaker B: Welcome back to the next episode of Deeds in the Desert with a familiar face, Ryan Lance. He's here today to talk about construction trends, what's going on new in the market and what's changed over the years. Welcome back, Ryan.
[00:00:19] Speaker C: Thanks for having me.
[00:00:20] Speaker B: Absolutely. Well, as the title of this episode says, you know, we're looking at how things have been evolved over the past few years and maybe more importantly, how things are going into the future. Since you've been in the business 20 years ago or however long ago that was, what are kind of some of the main drivers that have been different that you've noticed over those 20ish years that you've been in the business?
[00:00:45] Speaker C: It's kind of interesting, Pat. On the actual construction side of things, there's some niche stuff that you see. Like you can get on, on YouTube and see people 3D printing homes, you know, and there's actually like Lennars in the space and they're actually, you know, investing money into some innovation. But there's a saying in home building that the, that there hasn't been much advancement in home building such that the biggest advancement took place when they created the nail gun, you know, and that's still to some extent true today when you drive subdivisions, it's guys with hammers and nails making it happen.
So the kind of the brass tax of the homebuilding business hasn't changed a whole lot. Foundations are getting poured normally, you know, like they have for, for 50 plus years. You know, there is some, you know, on the, on the energy side of things that's changed quite a bit, which we can talk about.
We're doing some stuff in Denver.
It's called ready Frame and so it's basically pre cut, pre measured and labeled wood packs that get dropped off at the, at the sites. Innovation, I'm not sure if that's innovating or not. You're just doing the same thing but doing it off site.
[00:01:44] Speaker B: Right.
[00:01:44] Speaker C: In theory that creates less waste, you know, and the trades are starting to get actual framers are starting to get pretty good at it. So maybe it's saves shaves a little time off, off the cycle times. But it's really, it has not been a ton of innovation over the last 20 years in my opinion. Some of the home technologies on the inside of the home, you know, we don't really sell those. You know, we make sure that the home's ready for people. But like you may be an Apple guy and I may be an Android guy, you know, and so I don't want to put a bunch of Microsoft product in my home and then try and sell it to you, who's an Apple guy. So we just want to make sure that the homes are ready for people to plug into. So the home automation thing is a thing, but it's in production home building. We don't touch it a whole lot.
[00:02:25] Speaker B: Gotcha. And on the home automation, we're talking a lot of the low volt side of install. Do you usually have the low volt at your, at least your price points that you're typically operating in? Are those low volt packages already in place or is that kind of an upgrade? What kind of comes as a standard feature compared to what you guys would put in for the automation and technology standpoint?
[00:02:47] Speaker C: Yeah, that's a good question. So we tried to simplify our business in last year, actually this year, 2025, we launched what we call Colorado Complete. Colorado Complete is we sell three packages. And so there's just, it's three base packages. They're all elevated compared to our competition.
Nice cabinets, but nice flooring, countertops, all the fixtures and everything are included. So we, we have very few options that a home buyer can select simplifies the process. We believe it's a more transparent sales process.
And so all of those packages have the BAS home automation package in it, which really is a thermostat. Right. Everybody wants a smart thermostat. Aside from that, people are going to show up with their own ring doorbells anymore. People are going to show up with their own Google home tech that they want in their own home. So we just need to make sure that we have everything available for folks to plug in their technology into.
And so that's kind of how we approach it.
[00:03:46] Speaker B: Gotcha. And from some of the other innovation standpoint, we hear a lot about, you know, solar going in or maybe different hot water heaters, technology changing on the furnace side of things or the AC condenser units.
How has that evolved over the past few years?
[00:04:04] Speaker C: Yeah, so I don't know. I'm not, I'm more on the, the finance and land side. Of course. All of that impacts, you know, all the, all the products that impacts that. Pat, I know enough to be dangerous there to answer that question, but I'm not an expert in it.
To me, a lot of those changes aren't really pushed by builders. Right. It's not me saying, or Dave, my business partner saying, you know, we really wish we had more efficient furnace or we wish we had more efficient AC condensers. It's really pushed by the municipalities in large part in the building codes. So some state codes, some local codes, some federal codes will drive a lot of the requirements around energy. The trick there then is that stuff is expensive. Right. And so now we're trying to hit a price point that's attainable to folks while being required to hit these energy requirements in our market. There are so many municipalities in Colorado and in Denver, each of them have a slightly different take on it.
So you're kind of lining up a Rubik's Cube, trying to figure out costs with efficiency and ultimately what does the buyer actually want? And moreover, what are they willing to pay for. Right. And so. So it's kind of a tough. A tough riddle there to figure out.
And a lot of. We don't have a lot of say in it, to be honest with you. As a builder. If we want to build in Denver, you know, they build under certain building codes. If you want to build an Aurora, it's a different set of building codes.
[00:05:17] Speaker B: How much overlay is there between those different building codes? Because as you pointed out, there's what, maybe six different counties you're currently operating and looking to expand on top of that. Yeah. Each one, as you said, has its own codes, but most of it's probably a lot of. A lot of the same. But the nuances aside, associated with it are enough to be game changers and deal killers for you.
[00:05:39] Speaker C: 100.
[00:05:39] Speaker B: How hard is that compared to a place like Las Vegas where you used to do construction, where you're dealing with basically one or two different regulatory bodies.
[00:05:49] Speaker C: It is so much more complicated on our market with all the different municipalities. You guys are blessed here. You got Clark county, you got North Las Vegas, you got Henderson, and then the city of Vegas.
[00:05:59] Speaker B: Right? City. Correct.
[00:06:00] Speaker C: Yeah.
And so you're kind of. And you know exactly what those requirements are. You know what the fees are, you know how the water situation is, the taps, the sewer fee, all the things. It's like you can figure that out pretty quick. In our market, every city is different. And there's, I don't know, 30 something of them and that make up the Front Range. And so it's a. It's complicated. It's a bit of a barrier to entry for the big publics to come in. You know, a lot of times they'll skin their. Skin their knees trying to figure it out.
And so it is complicated. And it's not just on the product side, you know, with the building codes, it's, it's all. It's the whole what, you know, what, what sewer taps cost. And actually, in northern Colorado, there's no guarantee you're going to get water. If you go buy land, you have to then also source water separately. So it's complicated and very, very different by municipality.
[00:06:45] Speaker B: Gotcha.
What are the. Without throwing anybody under the bus, who's the easiest municipality to deal with in Colorado?
[00:06:52] Speaker C: We really have had a good experience with Lone Tree, that community we just closed on, we talked about in the last episode at Park Meadows Mall. They're in Lone Tree. We have another community also in Lone Tree called Lyric, across the highway there in Ridgegate. And they've been really great to work with. They're just pro business. They have a common sense approach to solving problems, which we're grateful for.
So they're the one that we've had, I think, the closest relationship with. And as a result, we keep reinvesting in their community.
[00:07:22] Speaker B: Absolutely. And when we were talking about the AC units and the furnaces, kind of new building codes, and you said most of that is driven by the municipalities, how have you seen the sustainability change? Is this kind of a catchphrase that you hear on the news and marketing materials, or is this something that the municipalities are really pushing and therefore the developers are actually implementing?
[00:07:45] Speaker C: Yeah, the latter. Like, we have to, you know, if you want to build in Boulder, you know, you need to build to a green standard. If you want to build in Denver. I think they're on the 2001 energy code in Denver.
I'm sorry, 2021, rather energy code in Denver, a little different. Yeah, exactly. 20 years later.
And so you have to meet their criteria, otherwise you won't pass, you know, you won't pass the inspections.
[00:08:07] Speaker B: Yeah. And how do they change that often? And if so, what are usually the biggest hurdles? Does it come from insulation, the sustainability from sourcing, or the, you know, emissions side of things?
[00:08:19] Speaker C: It all ends up. It all ends up just being additional costs. Right. So the home buyer, all of us would rather live in a more efficient home. Right. We, all of us would. I don't think anyone would be like, yeah, I want to live in a really inefficient house. Right. No one says that, but are you willing to pay an extra $80,000 for your home, you know, to save. To save money on your energy bill? Like, not. And even if you want to do that, can you do that? Can you afford. Can you afford to do that? So that's really where the rubber meets the road on a lot of this stuff. It's the municipalities drive the energy code, drive the energy requirements. We do our absolute best to source the best product at the lowest, at the most affordable price so that we can both meet the, we can meet the, you know, the energy code requirements and try to bring our product to our consumer, to our home buyers that they can afford. It's a tap dance.
[00:09:04] Speaker B: Absolutely. And I know you're on the finance and land acquisition side, but going back to the sticks and bricks of it over the last few years with building codes changing, what have been the biggest changes, more specifically in cost driven changes that you've seen in the Front Range.
[00:09:22] Speaker C: So a lot of like right now what we're dealing with is uncertainty, you know, and the tariffs are kind of an interesting deal. Like we, we were fortunate enough to meet with the kohler team maybe 90 days ago or so, had breakfast with them with our national team and they were, it was really interesting to meet with somebody who really actually runs a multinational, you know, global corporation like Kohler.
And you know, they source components from, for their toilets, for their sinks, for their, for their, you know, all their other stuff all over the world. And so, you know, you got the administration saying we're going to put a 50% tariff on, on, on China, you know, and so they actually start moving, thinking about pricing. Okay, we're going to move our manufacturing from China. We can't afford to impact, you know, our consumers can't afford to absorb this 50% impact. So then we're going to, okay, we're going to take that and go over to India where it's, you know, less impact impacted by these tariffs. And then three weeks later they're like, hey, just kidding, call that out now it's a 10% tariff or whatever, you know, and so it's just this up and down. And we see that in our, in our, in our conversations with our trades, you know, our trade partners, the manufacturers that we work with. It's just the pricing, the volatility in the market right now is making pricing kind of nerve. Everyone's a little bit nervous about it.
[00:10:33] Speaker B: Yeah. With that volatility and the uncertainty, how has that had an impact on the timelines and the return on investment that you guys expect to earn as a home builder?
[00:10:42] Speaker C: Yeah. So some of it, like we're right now getting, haven't started to have some conversations. Like James Hardy said that they're going to push through a 5 or 6% price increase in January cabinets are talking about a 10% increase. This is all tariff related.
And so we have some of that going on, Pat. But there's the other side of things on the commodity side of the world, like, for example, lumber. Lumber's down over 60% from its peak, you know, during COVID So there's. There's generally parity in our world, you know, to some extent, one part something's going to be having. There's so many components of going to. Going to a house that there's generally always something is struggling, something's hard to source, something is going on. It's fires, you know, up in Canada. Right. Or it's the tariffs that are impacting some of the component parts and appliances or cabinets or whatever.
But there's generally an offset. And right now some of the commodities are coming down pretty substantially to kind of get us back to a place where we can operate.
[00:11:39] Speaker B: Gotcha. And yeah, you talked about that kind of craziness with COVID and where, you know, lumber was through the roof, you know, just every day you look at it, and it was up 10%. You're saying this can't be sustainable?
[00:11:53] Speaker C: Yeah, I think at one point it was over $1,500.
A thousand for four foot? Yeah. And now it's down to maybe five or 600, you know, so depending on where you're. Type of what you're getting and where you're getting it from.
[00:12:05] Speaker B: Absolutely.
[00:12:06] Speaker C: So, I mean, that's. Obviously that's. There's a lot of wood in the house, so that's helpful.
[00:12:09] Speaker B: And speaking of wood specifically, where do you typically get yours from and how far in advance do you order that?
[00:12:17] Speaker C: Yeah, so we get ours from Boise Cascades. A supplier of ours. We have a couple different ones, too, but they're the large one. And we try to lock it in, you know, as far as we can. But they're smart. Right. And they're not gonna. They don't want to take that exposure. And we're not really smart enough to hedge the futures on wood.
And they try, you know, and so we try to lock it in as far as we can. Sometimes it's for a whole subdivision we can lock it in. Sometimes it's for 60 days, six months, six weeks. It really. It's just a dynamic market.
[00:12:45] Speaker B: Gotcha. And since we're on the topic of sustainability, do you know where they source their lumber from? Is it from. From our friends up north?
[00:12:51] Speaker C: Don't. Dave, my business partner, is way closer to the product side of the business.
I'm pretty far out of my swim lane here talking about, talking about some of this stuff, but I don't actually know the answer to that.
[00:13:02] Speaker B: No, no problem.
[00:13:03] Speaker C: Yeah.
[00:13:04] Speaker B: And so, you know, back during COVID we had the issues with lumber. We also had some issues with the trades people getting on site and actually being able to do the work. So the shortages not only came from materials, but also from the labor standpoint, right now, at least in today's market. Where are the shortages now? Is it from the components or the materials or is it from the labor side?
[00:13:27] Speaker C: To be honest, Pat, when we switched to, when we switched to the Colorado Complete package, you know, they're doing the packages, we're able to work with our trade partners and they can go out and contract stuff. They know they got all the flooring in the community. There's, it's, you know, so they can go out and lock down and get the material for cabinets, they can go get the material for flooring, they can go, you know, pre buy some of this stuff, which really has taken out of the equation for us any kind of supply chain disruption, product related.
[00:13:52] Speaker B: And so we're pretty much in a equilibrium when it comes to the supply and demand side for the most part. Then when it comes to home building, when you look at whether or not to build a new spec home, how far in advance do you look to want to build a new spec home and how long will it kind of sit there before it's eventually sold?
[00:14:11] Speaker C: Yeah, that's a great question. And that is that that side of our business has totally changed post Covid.
So going into Covid, the business predominantly operated on a pre sale basis. So you'd pick a, you come into a community, you pick a lot and you pick a house, right? And you say, I want to, I want to build this house on that lot. And then we would build it for them or for you. And today the market is now conditioned where homebuyer comes in, they want to buy a home and close on it and 30 days or 60 days, certainly no longer than 90 days. Right. Predominantly when you get up into higher price points, the conversation changes a little bit. But for production homebuilders, it's mostly a spec driven business. Today we have a business plan for the year that includes our sales projections, our starts projections and our closing projections. So sales starts and closings, we need parity in all three of those levels. So it's starts driven. So we're going to start them right, and they're going to take anywhere from four months to seven months to build and so we know that. And then, so we're gonna start it today that I need that thing to sell. As it starts getting closer to being a completed home, then we'll start ratcheting up the discounting on the home because we don't want to have completed homes in our life.
And so ideally we would never own a complete home. Right. We would start it, it would sell during the lifecycle of the construction, and then it would close as soon as we get a certificate of occupancy. So we really, we really manage it like that. And if we're, if we get backed up on specs, then we're gonna, we're gonna, you know, in a particular community, we're gonna ratchet up the incentives on that home to make sure that we're, we're staying kind of even flow as a business.
[00:15:39] Speaker B: Gotcha. And that is basically a 180 pre Covid, right?
[00:15:43] Speaker C: It is a 180 pre. Covid. Pre Covid.
[00:15:46] Speaker B: You were doing everything on a pre sold basis. Very few specs. Right. They were kind of a four letter word when it comes to, from a lender perspective. Right.
[00:15:54] Speaker C: I was gonna ask you that. Yeah. You've seen it more than anybody. It's like, let's go going on here.
[00:15:57] Speaker B: Yeah, absolutely. And you know, what I've seen is the biggest driver behind that is kind of cost and price increases. Once you lock in a home price nine months before you can actually deliver it, no matter what happens during the market during that time, you're locked in. Same with the buyer. Yeah. They kind of have a little bit of an exit strategy associated with it because they can walk away from a deposit.
[00:16:18] Speaker C: Right.
[00:16:19] Speaker B: If prices skyrocket, which they did over Covid, you can't ratchet up price. You're locked in.
[00:16:25] Speaker C: Yeah.
[00:16:25] Speaker B: But your cost can ratchet up. So your margin was really getting eaten into with those pre sold.
[00:16:31] Speaker C: Exactly why we are where we are. Yeah. Because as an industry, we got smart and we thought to ourselves, you know what, sales are easy. You know, so let's protect our margin here. Let's build these things and we'll price them and sell them when we know what our costs are going to be. Because they were, you're right, they were runaway costs. It was, they were, they were escalating and our revenue is fixed.
And so we got smart as in smart as an industry. And we're going to build them all and then we won't even attempt to sell them until they're complete because we know we can sell them, you know, within 30 days and they'll close.
That mentality has gotten us to where we are today, which is now a softer sales environment. Builders are carrying a lot of inventory. Right. Because of that. Exactly the fundamental you just described. And it's challenging, you know.
[00:17:09] Speaker B: Right. Have we started to see the tides turn the pendulum shift a little bit?
[00:17:14] Speaker C: Homes just came out in the same said they're not going to do it anymore. They're going to go to a pre sale model again. And I don't know if that was a national statement or if that was just in our market.
Lennar has said publicly that they're going to stop producing homes.
They've been on this like tear where they're just maintaining pace, using discounts to sell the home. Basically the model I just described for us and they've said they're going to start slowing down, starts again, which is on their way to pre sales again or. Sorry, yeah, pre sale. A pre sold driven business model. It is a much safer business model for builders and for lenders if we've got a buyer, you know, in a deposit from that buyer before we start the home. So that wouldn't hurt my feelings if we went back there as an industry.
[00:17:55] Speaker B: How do you see that shifting right now? Or maybe if you, if I asked you this question a year ago, it was darn near 100% of the market on a spec basis. Instead of pre sell at below in your market, maybe a million dollars, not 800,000, whatever the number is out there.
Where do you see that right now and where do you see that going over the next two or three years?
[00:18:16] Speaker C: I wish I knew the statistic, Pat, but I think predominantly all of the starts, I mean 80% of the starts are specs.
[00:18:26] Speaker B: Okay.
[00:18:27] Speaker C: Still, Jackson Creek is in the community that we're in together. That deal is a little bit different. $850,000 price point. We have a fair amount of pre sales in that community. We also have homebuyers coming in, still want to buy a home and close in 60 days. Right. So having both is I think a good thing.
[00:18:42] Speaker B: But.
[00:18:43] Speaker C: But it is. Our market is still predominantly a. A spec driven markets. Yeah, absolutely. And to answer the second part of your question, I do feel like the tide is changing a little bit. You know, like KB pulling back, Lenrs pulling back.
You know, I would really like the market to go back to the way that it, that it was.
[00:19:01] Speaker B: So it was kind of an 80, 20. Previously, 80% pre sold, 20% spec. Now we're kind of 80% spec, 20% pre sold where do you think the equilibrium really will be in a few years? We're going to go to 50, 50 or we're going to go back to way it was, where more were on the pre sold basis.
[00:19:17] Speaker C: I think it depends a bit on price point. Right. Because if you're a, if you're a tenant, whether you're in one of these new BTR communities, you know, build to rent communities, or if you're in an apartment, you just signed a lease today, right. You're not going to go out tomorrow likely and start looking for a home to buy. Right. Or even in 90 days, you know, you're not going to go out and start looking for a home to buy. You probably won't start thinking about where you're going to live until maybe 60 days, 90 days when your lease is starting to roll. Then you're like, I'm going to go look for something to buy. I think those buyers are always going to want a spec, you know, they're not going to want to wait for nine months to get a home or six months to get a home delivered to them. So I think in the lower price point, you know, I think we'll probably, probably see, see this trend continue in terms of spec driven.
You get up into the, you know, where people are moving down, you know, to a maybe, maybe in my market, in the denver market, maybe 650, 700, $800,000 move down buyers, right. They're not, they can wait, right. They're thinking we're going to leave this big family home and we're going to go buy a patio home for 700.
They're more patient, right. They have a plan, they're a little bit more strategic about it. And so those folks I think would be happy to go pick their home and pick their lot and take their time with it. So I could see that, that, that flipping pretty quick back to kind of the other 80, 20 rule, right?
Yeah. So I think maybe it's a tale of, tale of two stories there, depending on price point.
[00:20:32] Speaker B: Absolutely. Kind of getting back onto the sustainability topic, we talked a lot about sustainability and we talked a little bit how that sustainability goes into affordability. Right. Everybody wants to live in a green home and energy efficient home, but there's a cost to that.
[00:20:48] Speaker C: Right.
[00:20:49] Speaker B: And right now with the affordability where it is and the getting people qualified for homes, it sounds like a lot of what you're doing is kind of starting to move a little bit out of the entry level market where people tend to be more price sensitive into the maybe the move up market or the middle market in your market, the Front Range, where. What, what price point is that? Middle market?
[00:21:12] Speaker C: So I would say 675 probably.
[00:21:18] Speaker B: Okay.
[00:21:18] Speaker C: Kind of starts, you know, and it probably goes up to about a million bucks.
[00:21:21] Speaker B: Okay. And in that price point in the middle market, price point, what, 700 maybe. Okay, 700 to a million million dollars is that middle market in the Front Range at least today. Who knows what it's going to be next year.
But as of right now, what, what type of amenities are home buyers really looking for in that price point in.
[00:21:41] Speaker C: The home or in the community?
[00:21:42] Speaker B: Both.
[00:21:42] Speaker C: Yeah. So we're really lucky in our market to have so many amenities just in Denver, you know, and you know, access to the mountains and ski range, ski.
Ski properties and all the things up there. So we kind of have some built in amenities kind of starting at a high level and then the community level amenities. It's interesting. I'm starting to see some master plans come back with pools and clubhouses. We're building in Lyric. And in Lyric there's homes from a million 6 million 8 down to our condo product at, you know, in the, in the mid to high fours and through four different layers in between. And it's cool. There's a coffee shop in there, there's a restaurant in there, there's a community pool and clubhouse, a gym. And so we're having some of these amenities old school kind of master plan style, which is pretty nice.
So we have that and then we have a lot of other communities where it's just the location of the community is itself an amenity. Like that community I was talking about earlier by Park Meadows Mall. There's so many amenities right around there. And so those folks, they still want to have you connected to a trail system, which we are. They want to be able to move around the city, which we have.
But I think locational, the location can be the amenity and then in the homes, you know, I think really thoughtful design. Like one of the things that's the hangover again from COVID is the functionality of the home. Like people spend a lot more time in their homes today than we used to, you know, and so folks work from home, kids will, you know, my kids still have zoom meetings, you know, from time to time with different clubs that they're in or different things. And so how that shows up in a house is you, you've got drop zones where, you know, you can set up a computer or two, you know, and kind of have an opportunity to do like we call a zoom room and. Or just flex rooms. So, you know, we have a space in all of our. Most of our homes will have a space that could be an office, it could be a gym, it could be one of these zoom rooms, it could be a small bedroom. So giving some flexibility, I think is important.
[00:23:41] Speaker B: So that's definitely a change over the past few years. Right. We. From a home buyer's perspective, you always hear the open concept. Right, Right. That's what everybody wants. So that's a big change of what has happened over the past decade or two.
More recently, you have these zoom rooms or these flex spaces that people can really modify to their needs and to their. Their family's needs.
Where do you see that evolving? Do you think we're going to go back to more of these compartmentalized houses? Where here's the zoom room, here's the media room, here's a TV room, here's the kitchen.
[00:24:14] Speaker C: We.
[00:24:14] Speaker B: Or is it going to be back to way it kind of was a few years ago, which is the open concept. Here's one big layout and floor plan that is a little bit of everything.
[00:24:23] Speaker C: Yeah, I still think that people want that open floor plan. Right. Like the volume spaces. When you walk into a room, they want to feel expansive spacing. Right.
And you can also still have. Upstairs, you can have an open air loft. You can have a counter that kind of attaches to the loft where you can put three computers. Kids could work from there if you. If you needed. Right. And, and. Or you can still have. On the first floor of a lot of our townhome product, you got the garage. You walk into the garage, and then there's a flex space right there. So that could be an office, it could be a bedroom. It could be, you know, a zoom room. It could be whatever, you know how. Whatever fits best for those. For the. For that family's needs.
And so I think. I don't. I think you can have both open concept and thoughtful design that gives you more multiple options to do. To do a lot of these things that people are looking for.
[00:25:09] Speaker B: Gotcha. So that's kind of how things have evolved over the past few years. What is the number one thing buyers are looking for in the home themselves? Is it that open concept? Is it a smart home design? Is it the energy efficiency? Do you have any one thing that they're looking for?
[00:25:27] Speaker C: I don't think there is one thing. I think. I think that what we need. What we need to do is as home builders is build a product Offering in a community and in the community, like around in multiple locations that fit everybody's needs. You know, different price points, different square footages.
Some people want views, some people want walkouts, some people want a really low payment. Some people want they have to be able to plug in their ev, you know, automobile into their, into their house. Like, you know, you want to check as many boxes as you can in each location, location.
But everyone's preferences are different, you know. Truly.
[00:26:01] Speaker B: Absolutely. And so there's obviously a give and take there with you and your home buyers. What they want, what they're willing to pay for, what you can realistically put into place as a production home builder.
[00:26:11] Speaker C: Right.
[00:26:12] Speaker B: There's obviously a give and take that, that obviously goes into play and has been for umpteen number of years. And we're considered to be. But that kind of cat and mouse game as it evolves, you know, we, we see different price points coming in. We see different amenities becoming standardized and different aspects kind of evolving into a more standard, original home. When somebody goes in and buys that new home, they expect to kind of be getting involved of exactly what they want, right? They choose your product, which is typically priced a little bit higher than the resale home next door because they can kind of customize exactly what they're looking for.
Have you seen that new home premium decrease or increase post Covid?
[00:26:59] Speaker C: Well, it was traditionally, and this is my opinion, backed by data, but I don't track this super closely.
But traditionally, conventional wisdom maybe would say that a new home should sell at about a 20% premium to, to existing homes or what we call used homes.
And so, so which, which kind of makes sense for the reason, some of the reasons that you just said. But Pat, right now is the second time in my career new homes are less expensive than resale homes.
[00:27:32] Speaker B: Why is that?
[00:27:34] Speaker C: I think as an industry, we're trying to create urgency, right? And so if something's worth, if a house is worth 500,000 and you're driving around and look at a bunch of resales for 500,000 and then you come to our store and you're looking at, you're like one of our locations and it's a similar square footage, okay, fine, it's new, but it's $600,000.
They're like, well, there's a lot of opportunities for 500, I can go buy new for 600. Interest rates are pretty high right now at six, six and a quarter. Down from eight, right?
And down from eight and also up from under three, you know, but still six is a pretty good, is a pretty good interest rate for these guys. Pretty high interest rate as it relates to payment.
So what they do is they don't do anything. You know, they're like we're just gonna, we're just gonna wait. We're gonna wait and see if interest rates come down. We're gonna wait and see like what happens in the market. We're just nervous. So as an industry we got to create urgency with these folks. So here's what we're gonna do. How about you come buy a new home from us and we'll sell it to you for 495 and then it's a no brainer. We created urgency. It's a unique opportunity and time for these folks folks to be able to execute that and get into that a brand new home at an under resale price. And we've created the urgency that we needed to create to get a deal done. So I think as an industry we're doing that right now.
We're selling houses, we're not making much money, you know, but we're moving through our inventory. So I think that's what's going on right now.
[00:28:52] Speaker B: Absolutely. And that's a huge change. What builders mindsets have been pre and post Covid of how they build, when they sell and what rates they go for. So we've definitely seen some evolution from the builder standpoint and the home buyer standpoint of how things are being done differently over the past few years. I'm sure that ebb and flow will continue on for the foreseeable future and it'll be in our industry as well. You know, we're working hand in hand with you. We got, we've been working with you guys for was it 13 years now, quite a while and doing kind of the same type of lending but different project, different price points. And as this evolution continues, continues to evolve, we'll be there right along your side and hopefully you guys will be there right along our side as well. At D's in the Desert doing another episode with Ryan Lance talking about the trends in builders and how it's evolved over the past few years. Please, please like follow and subscribe to the link below. And never miss out on any bit of content we have from Ryan Lance or other developers just like him. Thank you.
[00:29:55] Speaker C: Thank you.
[00:29:57] Speaker A: Thanks for joining us this week on Deeds in the Desert where short term investments meet long term investors. We hope you enjoyed the content so much that you share it with all your friends. Who doesn't like learning about passive fixed income, right?
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