Amazon Prime Day Sales, Blackstone Earnings

Bloomberg Audio Studios, podcasts, radio news.

You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on Apple Car playing Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.

US shoppers spend fourteen point two billion dollars during a prime day. I was not one of them, but that's up eleven percent from a year ago, as Lisa was reporting, so pretty solid results here. You got to like that if you're an Amazon follower. Punam Goyle. She is an Amazon follower, senior US equity, e commerce and retail analysts for Bloomberg Intelligence, joining us from Princeton, New Jersey via zoom pullm that the numbers Lisa was just reporting, you know,

Yeah, the numbers are great. You know, they continue to show that shoppers are focused on sales and their seating value, and when Amazon and others have events such as these, they do drive traffic and conversion onto the platforms. So really good numbers likely some pull forward and spend, so you will probably see things will taper off a little bit after the Prime Day sales event, but nonetheless a very strong start. It seems to three Q for Amazon.

Yeah.

I was just looking at eMarketer, which I know is an independent group that kind of looks at this stuff. They were expecting your shoppers to spend eight point two billion dollars on Amazon during the event, So I guess better than expected as a way to think about it.

Yes, I mean the numbers are a little different because the numbers that Adobe reported are not just on Amazon, they're total online sales okay, but nonetheless very strong results, and they are better than Adobe's initial estimates for a ten point five percent increase.

Average households spend one hundred and fifty two bucks on Amazon on Prime Day. That sounds like a good number as well. How does that stack out?

It's like good number. We expected Amazon shoppers to shop less this year on Prime Day than last year according to our own survey that we ran ahead of Prime Day, so no surprise there. As you know, shoppers are crunched for cash and they are trying to be picky and choosy on where they spend what they spend shopping really on the lists that they had going into Prime Day.

You know, you see numbers like the Amazon Prime Day number of the eleven percent growth year every year. It seems like a really strong number. We had Retail sales earlier in the week came in better than expected. You know, I know the consumer's hurting out there. I know inflation's hitting a lot of folks really hard, but it doesn't seem like we're seeing in the spending. How do you guys think about it? What do you hear from the companies that you cover?

Yeah, I think it depends on the retailers that you're looking at. I do think that, you know, we've talked about this in the past, where the value customer is trading down. We've seen that in the results earlier this year at Walmart, where numbers are strong because they are driving in more customers into their doors and online, and then the middle you know, the department stores. They continue to get squeezed to the large extent, and I think

It's only mid July, but I guess people with kids have to start thinking about back this school. My guys are all out of that stage, thankfully. What's the back to school season look like this year? What are the expectations.

Yeah, the expectations are for back to school season sales to grow and Prime Day is going to help with that. This year's Prime Day event came a little later in the season, which means that more back to school shopping likely occurred, dorm shopping, etc. On the Prime Day sales event. That said, you know, you will see people buy backpacks, you will see them by supplies, you will see them shop for dorm room stuff and apparel. But at the

So what is the expectation for the holiday season this year? Are you guys forecasting growth in holiday spending? Because I know that's the big part for the big season for retailers.

We are expecting growth this holiday season, but I do think there are challenges as we enter the holiday season. Keep in mind that the retail calendar is different this year, so it is a tougher calendar. Comparison. Last year was very very strong. Last year had some extra selling days, so the calendar shakes up as being a headwind and

What are we seeing just in the dynamic punum of the of the bricks and mortar versus e commerce Because we had gone through i'm going to say almost a generation of downsizing retail footprint in the United States, and I kind of got the sense that they're in a pandemic that kind of slowed, if not reversed a little bit. Where are we on that dynamic beyond between I need to own some brick and mortar versus you know, I can kind of go lean more heavily on retail.

On etail, sure, so I think, you know, we'll always need brick and mortar store. They don't think they go away. But we've talked about this before. I do think we need some balance, and we're still continuing to push forward on that balance. There will be more consolidation in retail. I think it's necessary because we still are overstored. But at the same time, we have retailers coming in from

That's that our.

Estimates call for retail sales growing to a third, retail sales growing to a third of total retail sales, up from twenty five percent last year. So still high single digit, double digit growth in the online landscape for the next five to seven years, which means that people will be shopping less eforic and mortars and more online. And we saw that trend come back, you know, right after the pandemic, you saw this rush to stores because people wanted the

All right, interesting stuff. Put them Goyle, Thank you so much for joining us. Put Them Goyle, Senior US e Commerce and Retail Annis Bloomberg Intelligence. Joining us via zoom from Princeton.

You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on.

Apple card Play and Android Auto with.

The Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa play Bloomberg eleven thirty.

Let's talk to from Earning Shore. We had a big earnings play coming out of the financial services Blackstone profit. Blackstone just huge, huge asset manager. It's just amazing how big they've become on global Wall Street. But their profit missed estimates as real estate exit slow. Let's bring in Paul Goldberg. He follows that part of the financial services sector for us. Paul Blackstone doesn't get any bigger, more influential from an asset management perspective than our friends at Blackstone.

Thank you for having me. The quarter was more and more or less as expected. You did mention and missed by a few pennies. But a lot of the profitability depends on realization activity, which was slow, and it wasn't just the real estate. It was kind of on the slower end across the segments and the strategies that they cover. So I don't think it's surprising. And what we've saw is what we're kind of seeing in the headlines. The

What are they saying about the real commercial real estate business? Because when I think about that business. I think about the Blackstones of the world, I think about Morgan Stanley. They've always been big investors in real estate. What are the smart people telling you about that part of the market.

The smart people that Blackstone said, we got out of that market, so not not completely. So there's still a few percentage of the portfolio in the US real estate, and they still mention that it's pretty painful and globally there is some commercial real estate that they're in, but three quarters of the real estate portfolio is in multifamily logistic data centers where they're pushing with their AI. It's

And Blackstone is up about three and a half percent today, the stock at a fifty two week high. What are they saying about deal activity here? Because I know Paul, the m and A market, the IPO market the last couple of years has been pretty slow, so it's tough for the Blackstones of the world to kind of realize and get some liquidity on their investments. What are they saying about that?

Yeah, so some green shoots there some improvement in second quarter, although obviously not material enough to lift the earnings, but they're seeing getting better into a second half and most of it and they kind of mentioned it three months ago on the earnings call. We'll probably have to wait till the end of the year and go into the twenty five for material improvement. And that's what you're kind of seen in the consensus reflected that people do see

Hey, Paul, you know when you think Blackstoney thinks Stephen Schwartzman, the chairman, the CEO, the co founder, one of the all time greats of the giants in private equity. He's seventy seven years old. And I know Jonathan Gray there is the president's COO and he's fifty four. What is a succession plan there at Blackstone?

You did mention the two figures and it kind of looks pretty straight at the moment unless things engine. But Jonathan Gray has been doing a great job and Schwartzman is not planning to step away as we see in at the moment. But there's a line of succession that's clearly there.

Paul, Are they is Blackson in a capital raise mode?

Now?

Where are they in terms of their capital.

I think with one point one trillion dollars of assets on management and different buckets that I discussed earlier, they constantly in the fundraising mode. So the big areas where they fundraising, they fundraising, and infrastructure they're fundraising, and mentioned data centers, then fundraising in wealth strategies. They have already two hundred and forty billion dollars of assets that in

Absolutely all right, Paul, thanks very much, appreciate it. As always Paul Goldberg. He's a senior echoanalyst Bloomberg Intelligence. He covers a lot of those asset managers, the kqrs, the blackstones of the world. He also covers the Canadian banks, so he does it all for Bloomberg Intelligence. He's then in Princeton.

You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on AFOCAR, playing Android otto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.

Matt Miller sitting in for Alex Steel here today on Paul Sooney. You live here on our Bloomberg Interactive Brokers studio, streaming live on YouTube as well.

Here.

We had a raft of economic data recently, including today, we had the initial jobless claims. Give me a little bit higher than expect it. But I don't know. The question I think is has this been a reserve already gotten us a soft landing. I don't know. It feels like it ticking with a professional who does the stuff for a living wall this joins us in studio. How good is that? So he gets a gold star. He's the chief economist over at RSM Joe, how's our FED done here in landing this economy?

Okay?

So you know, when we look back on this in a number of years, we're gonna think the FED did an extraordinary did an extraordinary thing, a real policy achievement in bringing the US economy in for soft landing after hiking the federal funds rate by five hundred and fifty basis points. You know what, the FED was truly data dependent. We wouldn't be waiting for a September cut to be cutting.

Now.

As a matter of fact, if you're all out there, look at the tayl on your Bloomberg terminal.

Ah, the tailor rule. I love that function.

Actually, you can estimate the Fed's reaction function using four percent as a non accelering rate of inflation and unemployment. That's the Fed's estimate, and I would suggest a neutral rate of one point one. You get an optimal rate of three point nine percent, which implies the Fed's policy rate, people, is way too tight.

Why do you choose a neutral rate of one point one? Isn't it higher?

No?

I think it's actually well, the Fed on Williams thinks it two point five. Now I'm double that and it indeed may be higher. That's something that's unobservable. We do

It's just not due to the just you know, the.

Distortions around movement of supply chains back to friendly countries, and the geopolitical tensions that are going to cause problems no matter who's in the White House.

Now if we get a Trump presidency, I'm fascinated by some of his proposals because the whole premise of you know, the Republican Party is that Biden caused this inflation, and Biden inflation is bad and they're going to stop inflation.

Right.

But Trump wants to cut taxes.

I'm happy about that.

Yes, I know you're not fighting against that, but he wants to basically give us a ton of cash. Plus he wants to put tariffs on everything that's inflationary. Right, those two things are inflationary. And he wants to stop immigration and deport all of the illegal immigrants that are already here, so that would tighten the labor pool. That's inflationary. Seems like everything he wants to do is inflationary. Is he just not going to follow through on this stuff? No?

Actually, after the four years of Trump, I actually take him at his word. Literally, that's what he intends to do. Right, So if you look at expectations on Wall Street, matter of fact, look at the WRP screen FED Funds probabilities market's pricing in one hundred basis points of cuts over the next five meetings. Okay, if Donald Trump is elected, that's a big if. And if he's not a very big if, well, I don't want to go there now.

Gods are strong.

Yeah, I agree, and I see that, and we're all adjusting our base case for twenty twenty five as we speak. But if he gets in, and if he follows through on this, unemployment rate's going to fall, Wage prices are going to go up. The FED is going to be worried about a wage price spiral. Right, then the FED will reverse course and begin hiking rates and there's where we get into what I think is the single biggest economic and financial risk of a potentially second Trump administration

I'm glad you mentioned that. Jason Furman, who was the head of the National Economic Council for Obama. Right, he tweeted out that he has selected recently announced policies and ranked them in terms of how consequentially bad they would be. Number one is the ten percent across the board tariffs. This is Furman's opinion, not mine. Number two is the four and a half trillion of tax cuts. Number three is threatening independence of the Fed. I would have thought

Okay, so number five, I just want to be on the record that's not a good idea.

It might make things worse.

And I mean not just on the supply side of you know, people there won't mean a center for builders to build homes. People will not want to move, and we'll have the same problem in the realm market we have as in the in the home buying market. That's not a good move. But you know, I followed Jason and Jase. By the way, Jason Fremant is an excellent economist, and I envy the people get to take EC ten over at Harvard from him these days. All right, he's

Back, but right, well, I think his premise is that it wouldn't be possible to threaten FED independence. Donald Trump seems to want to. But still you've got to rank them in order.

So I saw Liz trust was at the GOP convention. Yeah, they might want to be thinking about what ahead of Lettuce means, right, because if they were to try to do something like that, you know, we would begin talking about the Bond vigilantes, whoever those guys are. By the way, you know, live in Austin, Texas these days. I've seen one of the guys from zz Top and I'm like, that's what a bond.

Vigilant is sweet, right, that's a great face, Right.

That's that's what a bond vigilante looks like.

But they will they will be back quickly, and it will be painful if the GOP attempts to do that or do something something more ridiculous. It's like to value the dollar, right, Yeah.

So we got the ten year treasury at four point one six percent. Where's that going to be year end? Do you think?

Okay, so my year in target was four point two with some downside risk. I still think that's you know, in intact, I think that when the Fed gets to the point where it begins to telegraph it's cutting rates, probably right after the July thirty first meeting, you begin to see the front end of the curve begin to move down. Because what we're going to be doing here is this is a good thing, right, is we want

So we'll get so we will have then we will have had two years of inverted yield curve and no real recession.

Well, Matt, as.

You know, I'm a firm believer in that the yield curves in you know, predicted eleven of the last three recessions. I dropped that rule of thumb a long time ago. Don't get me wrong. We pay attention to it because it shows stresses and strains across the yield curve. I mean, excuse me, stresses and strains across financial markets. But it's not the predictor that it might have been, you know, back in the eighties or nineties, back when.

Paul was at Duke, right back when skipping exactly Cam's courses.

To go play golf. So the golf course is right across the how I mean exactly who.

Is your professor that he can Harvey? Cam Harvey?

So really I didn't know that cool? So he's yeah, so he's one of the out of the Chicago school guys.

So the primary risk.

It sounds like from your perspective, is this FED holds rates too high.

Too high for too long, and of course oil. Right, those are the real two big risks. But you know, I don't think that investors or firms have really priced

I want to get your take on the markets quickly. We lam a minute left. But as an economist, what do you think of the fact that Gena Martin Adams has written about the S and P four ninety three, Right, the companies that aren't the giant megacap tech stocks have been in an earnings recession for six quarters and they're finally going to start to post some growth, at least that's the hope. Do you watch earning season.

Oh, very closely.

We use we actually use the artificial tool on bloomber to go through and look at the key earnings that really are important to our firm. Look, no one likes the over concentration or risk in the bag seven. I'm happy now it's beginning to broaden out. That puts a

Now, how are we going to use that?

Right?

Yep, So we'll get to that. That's the next big thing in this market. How do you use AI? Joe Ruswallows, thanks for joining us. Appreciate that Joe Bershwall's chief economists are semi joining us here in studio.

You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on applecar Play and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station, Just Say Alexa, playing Bloomberg eleven thirty.

Looking at the Airline Business United airlines. They said a third quarter profit will fall short of Wall Streets expectations as US carriers slash ticket prices to lore domestic travelers, keeping even the industry's largest players from fully capitalizing on record summer travel. Let's bring in George Ferguson. He does this stuff for living. He's his senior Aerospace, Defense and

Yeah?

So I tell a lot of people who, right, you can't confuse airline airplanes being full with profitability. Right, everything depends on the price paid by those folks flying. Really, the industry is just suffering from overcapacity, right. United confirm that today. Delta told us the same thing earlier. We saw Alaska results come out today as well, their load factors down, yields flat load factors down, telling me they can't fill airplanes at the right price point.

We need capacity to come out.

Everybody's pointing to an inflection point in three Q. You know today United said that, you know they'd get down and maybe after mid August maybe two three percent growth in capacity. I just think I think that's just still a too high level of capacity growth. Right, This isn't an economy that probably a year over year grew about a percent. I think that number ought to be tied much closer to GDP growth you just talked about in the update about unemployment right right to the the US

So how does that happen? I mean, do the airlines themselves pull capacity out? Don't they have competition in this market? Don't we have regulators to ensure that?

Yeah, So how does it happen? We're starting to see some of it happen. Today.

Alaska announced that they were going to add more premium seeding to the.

Can I just pause here for a fun fact, George. For a long time, Paul Sweeney thought that the Eskimo on the Alaska Airlines tail was actually a picture of Jerry Garcia.

I did, Yeah, actually he's told me that.

I'm not sure what that says about, Paul.

I mean, what an airline do you put a picture of Jerry Garcia on the tail.

They're so cool?

All right?

So sorry, sorry, go ahead.

So we're starting to see capacity come out with these announcements like Alaska where they said, hey, we're gonna take you know, we're gonna add more premium seating, which usually means a bit less capacity in the marketplace. Frontier is gonna block your middle seat so you can get a premium seat out of Frontier. That obviously brings the capacity out. But what you really you know, what you really need

Payment, no matter what.

Right, So I think it gets difficult here, and it takes a little while to get capacity out. Maybe next summer, you know, I don't know.

I was talking to the CEO of JSX the other day on my new television program called Bloomberg Open Interest Tune in weekdays nine to eleven. And you know, they fly fascinating roots. For example, they'll fly from the west Chester Airport to the Naples Airport, right or some airport outside of l A into you know, Palm Beach. So are we gonna see more of these upstarts, George.

Well, so we always do in the industry, right. So the beautiful thing about this industry is when people sell airplanes, someone buys them cheap and starts flying routes like that, and there's always someone that wants that come to this industry, right. It's it's got just a heavy allure. Everybody wants to own an airline. That becomes one of the challenges too, I think, and sort of making money in this industry.

But the big folks, they'd love.

To have more, you know, more maybe the ultra low cost point at those smaller airports, but you just don't get the demand out of those smaller airports, you know, to really fill big airplanes, and so that becomes part of the challenge I think right now. One of the bigger parts of the challenge is definitely business is kinda We heard United say one hundred percent of what it was in twenty nineteen. Obviously that gives you sort of no growth since the pandemic. They're saying the share of

And I think that's part of the problem too.

And Matt, you know, once a year George Ferkston goes on this boondoggle with all these other airline people. They go to either Paris one year and then the next year it's London for these air shows where the big airlines and the aerospace companies buy and sell it always see guys jab Yeah, it's just a total scam. But anyway, George is going next week to Farnborough in England, George, what do you expect there? Are we going to see

I think they are.

I think they'll be holding customer's hands, talking to about, you know, all their quality changes, how it's going to make a better airplane, and you know, sort of giving them an update on when they're going to get deliveries. I don't see this being a big sales show. It is a sales show, but I don't see you know, sort of Airbus and Boeing walking out the door with bags and bags of orders if you put them in bags.

You know.

I just kind of think it's going to be pretty muted because of both those supply chain challenges and you know, the US airlines earning season showing us that maybe too much capacity in the US. We heard Lufton's of Warren already. Maybe there's a little too much capacity In Europe. I think people really expected, you know, a much harder bounce back from the pandemic again, still missing some of that

All right, George, thanks so much for joining us. Appreciate it as always. George Ferguson, senior Aerospace, Defense and Airlines analysts for Bloomberg in Intelligence. But always had some those air shows. You see these monster deals, you know, Emmerts Airlines buying, you know, fifty.

Seven true air and they're often the surprise, so, you know, tough to predict. But I feel like both of the members of our airplane making duopoly have already got order backlogs going out years, right, So what difference.

Does it make?

Yeah, what difference does it make? And Boeing's got its problems. I mean, George talks about the builds they're building, like the thirty five, thirty six, seven thirty seven months that needs to be well north of forty for them to start getting some cash flow.

There you're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on applecar Play and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station, Just Say Alexa Play Bloomberg eleven thirty.

Paul Sweeney live here in o Bloomberg Interactive Broker Studio or streaming live on YouTube. So head over to that internet thing, go YouTube dot com search Bloomberg podcast. Alex steels out Today. They're telling me Matt Miller is going to be here thin eleven o'clock hour. I will believe it when I see it. Let's talk some real estate here, commercial real estate, residential real estate. We can do that with David O'Reilly. He's the CEO of Howard Hughes. Howard

Allways, a pleasure to be here. Thanks for having me. We do have an asset here at the South Street Seaport in the Lower eas side of Manhattan. We're in the middle of filing with the SEC for spinoff of those assets into its own separately traded company focused on entertainment that will leave Howard. You is positioned really just entirely focused on building world class communities that we've been doing since we were form.

Stories for me and my gang at the South stat Street Board in the late nineteen eighties. We'll just leave it at that. Talk to us about, first of all, Howard Hughes. Where did this company come from? Given the name?

So it was spun out from General Growth Properties.

Bill Ackman of Pershing Square took control of General Growth, the mall company that went bankrupt fourteen years ago, and he found in the mall company were these great communities, the woodlands outside of Houston summer and outside of Las Vegas, YEP, Columbia, Maryland.

Between DC and Baltimore. He said, these.

Companies don't belong in a public mall red Okay. They need their own company, all.

Right, So let's just talk. I'm just looking at what you guys have there. Let's talk about office space. You have six point eight million square of office space. Six point eight million square feet of office space. I go through any town, USA, any office yard, You're going to see the sign stuck in the grass outside X number square feet for for rent here. What's your portfolio look like in terms of occupancy rates, that kind of thing.

You know, our occupancy is traveling up close to ninety percent last quarter really and it has defied gravity and really defied the national headlines of doom and gloom.

Why is that?

You know, we during the pandemic saw the migration of a lot of really smart, well educated workers coming from the coasts, leaving higher crime, leaving higher taxes, chasing quality of life, chasing affordability. And now we're seeing companies chase those employees. And we're seeing those companies come in from those big cities into places like the Woodlands, where we filled up over the past two years almost three quarters of a million square feet.

Interesting, So where is your office space today versus maybe pre pandemic in terms of vacant occupancy and rate and that kind of thing.

I would say vacancy is a tick higher. We were about ninety two percent. Pre pandemic rates are almost identical.

Really, yes, interesting because I mean you know the story. And then cities like New York City, for example, you know the story Here is if if you're in an a office space like Bloomberg's headquarters, you're fine. Right, If you're in anything else, good luck.

Tough sletting, no doubt.

But in a community like the Woodlands, we control the development of all new product, so We're only building to meet supply. There aren't four folks with a shovel in the ground, all at the same time, rushing to be first and the other three lose.

So by controlling the.

Supply side of the equation, we're able to mitigate some of those bigger swings that are typically associated with the office market.

Six thousand multi family units. Where are those units generally speaking? And how's that business doing?

The business is incredible. We've seen great same store growth year over year. A big picture, we have a three million plus housing you to shortfall across the country, and multi family is trying to address some of that, especially from an affordability perspective. Our portfolio in the Woodlands remains high nineties, rents increasing year over year. Same with our portfolio in Columbia and some of land outside of Las Vegas.

I love some of another great golf course there and some of it all those courses out there. How is Vegas doing generally, because that's one of those markets up and down. It's kind of the poster child from when things are great, poster child when things are bad. Where are we now in that cycle for Vegas?

Vegas isn't a really good spot right now. You know, we're selling over a thousand homes in Summerland this year, and last year we hit ruck at home sales. First quarter we were up twenty four percent. Builders are buying land from US at a record price per acre, and where you know, kind of the catcher's mitt of all those residents looking for quality of life.

All right, you've got a land bank. I'm not a real stick guy, so I don't know what a land bank is. I'm guessing you guys just own you guys owned thirty five thousand acres in a land bank.

All right, what do.

You do with that? Build stuff he developed, develop it or we sell it.

We play SimCity.

We build, We put in the roads, we put in the hospital's, police, fire stations, wetewater treatment plans, and then we grade land and sell it to homebuilders who build homes.

Residents move in.

They need commercial amenities, places to shop, office buildings to work. We build those with the cash from selling land to home builders and create these communities like Summerland.

Sometimes we build golf courses.

Right exactly, the TPC some in I've lost a lot of golf balls in that desert. What's next? What's the growth for your company. Here I'm looking at just on the Bloomberg terminal. Here here's a company, folks. You got a market cap about the three point seven billion dollars. This company's got revenue, you know, about just right around a billion dollars billion. Two is a forecast for twenty twenty four ebitdah, which is what I look at because that's actually you guys are a real estate company, so

It's across all of our communities.

Our job is to transform that raw land, that land bank as you referred to it, into income producing assets by meeting the demands in our community. And like I said, across our portfolio, our multi family is very tight, high nineties occupancy.

We need to build more.

So we're moving very quickly to start that next multi family project in the Woodlands and the next one in Summerland to meet the demand that's in that community.

So it's better to stay, I guess your strategies and take your existing communities, the Woodlands in outside of Houston, summer land in Vegas and expand those as opposed to saying I'm going to Phoenix or something.

Well, it's funny you should say that. Two years ago we went to Phoenix and bought thirty seven thousand acres in a community called Arravalis. We're entitled for three hundred thousand residents and fifty five million square feet of commercial space, roughly the size of Saint Louis. We've already under contract and sold over eight hundred lots to home builders at over seven hundred thousand dollars an acre to meet the housing demand that exists in the West Valley of Phoenix.

So who builds the homes? Do you build the homes here? You go to DH hort and or Toll Brothers are one of those guys.

We sell to all the public builders, a lot of large regional private builders as well. We try to be Switzerland sell land whoever bids highest and delivers the best product.

What's this interest We've been in this interest rate environment for the past couple of years of much higher rates. We all grew up, seems to like over the last fifteen years with zero in interest rates. How's that impacted your business's higher rates for longer.

It's been an accelerant sell It's absolutely contrary to popular opinion, and its contrary to the headlines that we read every day that higher rates is killing homes.

They're less affordable.

But really what it's done is it's taken out supply.

There's almost no.

Resale out there, so the home build there's a new home construction, which is our business, are thriving.

We're seen greater.

Demand for those new homes than we have seen in a long time. And if you add in that, last month, for the first time in decades, new home pricing was less expensive than resale. New homes have typically traded on average for twenty or seventeen percent premium. Last month, they were less expensive, interesting, and it's really pushing a lot of buyers that want that quality of life in our communities to buy new home construction. And that has been an accelerant on our business.

I'll tell you, I mean just dh Horton. Just today the stock jumps to a record high as their third quarter earnings beat estimates.

Sometimes I'm lucky, not good.

I think it was about six months ago I thought that to twenty twenty four would be the goal age of home building rates would start to tick down a little bit so that we'd see more demand in buying homes, but not so much that.

We'd see resale pickup.

And the record margins that public homebuilders have been printing, you know, twenty five to thirty percent, which to me, I don't remember that in my career, just going to remain strong.

So when you're selling lant to a dhort and you're like, I'm not giving you a break on this, and I just saw your earnings yesterday, guys are crushing it.

We put them out for bid, and we bid based on a couple of different factors. One is price per acre, but other is our builder price participation. We're expecting a home to sell for call it five hundred thousand dollars.

If it trades for six hundred thousand, I get about twenty percent of that upside. Okay, to make sure it's a little bit.

Of smuck insurance, right if the market rips, I want to make sure I get paid for my dirt appropriately, so we have a little true up at the end when the homes are sold.

Interesting, that's so smart. What do you expect in straits to do? Here, I mean here, this global Wall Street, that's all we talk about. It seems like what you're on the ground, actually in the business.

Yeah.

Look, if I knew for sure, I wouldn't be talking to you. I'd be on a beach somewhere. I do think, you know, rates will start to come down towards the end of the year. I think it'll be a modest decrease. I don't think there'll be anything massive that will that will shift the tides, so to speak. And I think it'll be continue to be good for new home sales, continue to be good for home builders, and continue to be good for the value of our land.

All right, very good, and we'll see I mean again, DH Horton came up with some big numbers today, so that new housing market remains very strong. And if you've got quality prop properties like you know the woodlands, or you know someone in a good spot to be David O'Reilly, thank you for joining us. David O'Reilly. He's the CEO

This is the Bloomberg Intelligence Podcast, available on Apple, Spotify, and anywhere else you will get your podcast. Listen live each weekday, ten am to noon Eastern on Bloomberg dot com, the Ihart radio app tune In, and the Blue Bomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal