Hello, and welcome to another episode of the Odd Lots podcast. I'm Joe Wisenthal and I'm Tracy Alloway. Tracy, you know, we've talked a lot about the home builders, and uh, you know, this is the factors that go into building at home, the supply chain, prune, the effect of rates. We've seen this big collapse in a single family home construction over the last year since rate hikes. But there's a pretty big component of housing that we that that I don't think we really hate yet. Yeah, that's right.
We talk a lot about building the houses, but we don't actually talk about securing the land that those houses are going to be built on, right, And so like this is also like a pretty big element. And if you read the transcripts of some of the big publicly traded home builders, a lot of the questions they have to ask are like, well, what's your strategy with land acquisition right now? Because you can't build if you don't
have more land. But on the other hand, like that's a big capital cost, you're bringing that onto your balance sheet, etc. I doubt they want to just have like tons of land sitting around. So the question of like thinking about acquiring land for housing is like a pretty big dimension of like the adequate housing story totally. And it also taps into a lot of other big picture questions like
what are the best markets to actually build in? Do people take into account maybe climate change considerations places that are popular now, you know, you think of some of the Sun Belt states, Artha's going to be viable markets in the future. Yeah, all kinds of questions like that. So I want to like talk about the land decision because you know, again, you know, we talked about the
rate hikes. So one of the things that we've seen with the rate hikes is that actual like physical building and supply it seems to be pretty sensitive and we've seen this to drop in the amount of new homes built. But I don't know anything about like how sensitive land decisions are to rate hikes and how fast that they can respond and how fast new land could be acquired,
because that seems like a pretty big process. Well, the other thing I would say is this is just an interesting business, the business of securing land that you then sell on to home builders for development. And I was not aware that this was a business model that existed. I kind of assumed that the developers themselves would go out and buy the land and then just build it and do everything themselves. But that is not the case. That is apparently not the case. I didn't even think
about it that way. I just, oh, there's plenty of land out there, you just put up a home. I didn't quite figure out. No, there's all these permits and regulatory red tape that you have to change to the land itself. Okay, Well, we are going to be speaking to someone on the land specific side of the question in studio with us. We're going to be speaking with
Chase Emerson. He is the co CEO of Emerson Holdings, a boutique land investment group and broke based in Arizona, which, as we know, is one of the hottest I guess in many ways multiple one of the hottest real estate markets in the country about the business of land. So, Chase, thank you so much for coming on. Odd lots great to be here. Thank you so much. So why don't
you just a big picture what does Emerson Holdings? Why don't you just sort of give us the top line view of like where you sit within the housing industry big picture with our funds and with investor funds, we buy land right on the edge of existing development. We then master plan and design a community, obtain all of the engineering approvals and permits, and then sell to top twenty five national home builders. So my big question, and I alluded to it in the intro, but why does
this business model exist? Like why doesn't a big institutional housing developer just buy the land themselves and then build on it. It's a really difficult industry for institutional investors. So much of it depends on local knowledge and relationships. And so while many many institutions have tried buying land and having land funds, for example, few have had success at that. Looking at the home builders also, home builders have typically started to just buy land that has all
of the final approvals in place, so randomly. This is something I was talking about with farmers in rural Connecticut about a week ago, which is how do you go about identifying land that's for sale? And there are all these secret ways that they were telling me about, like looking up on local hunting registries to see who owns the land, because you can contact people and say can I hunt on your land? And so that's a way of getting in touch with people. So when you say
you need local knowledge for the market. Is that the kind of thing that you're thinking of. Yeah, exactly, when someone goes to sell, oftentimes they'll look at who a large landowner is in the area, or a broker will have a lead on who may be interested in selling, and want to be the first person that they call with that opportunity. Talk to us a little bit more about the perspective of the home builders themselves, and like, I guess my question is, like what business you know?
I guess modern capitalism is all about finding like the specific business that you're in and then outsourcing as many sort of like peripheral businesses to third parties. And so in their view, land acquisition land development is not the business that they're in. Obtaining permits from the local authorities is not the business that they're in. Talk to us a little bit more about like that relationship and what service you provide. Yeah, there's been an evolution in the
way that homebuilders buy land. Before the Great Financial Crisis, builders would go on the periphery and purchase large tracts of land, often without the approvals in place, and many of them got burned. For example, we just purchased a property that a home builder paid one hundred million dollars for sent tax homes before the downturn. We purchased it for just over ten million, just to give you a fi for some of the mistakes that the builders had made.
But today builders are just trying to buy land that has all Just to be clear, this was one hundred million dollar land track purchase that was made in what two thousand and seven, two thousand and six, two thousand and six, and today, after all of this and the housing recovery and anything, you were able to get it for ten millions. Yes, exactly, So that really Man two six was crazy. So you know you mentioned the permits and regulation. Walk us through what does the process actually
look like. Say you identify you know it's currently farmland, it's being used to grow alfalfa, and you buy it. How do you go through the next steps and what do those steps look like? How long does it take? Yeah? So the first step is rezoning. So oftentimes there'll be a holding category for the land. It may have one acre zoning and so typically it's up zoning it for
more density. So the first step is rezoning. The next step is what's called preliminary plat and that is the early engineering rough engineering for roads, for infrastructure, A PLAT is a document that gets recorded on the land showing lots and infrastructure, and then the final step is the final engineering, which is called final plat. And how long is this whole process? So the reasoning process can take twelve to eighteen months. If it's political, it can take longer.
The prelimary platting and final plotting process can also take eighteen to twenty four months, So there's a long lead time before land can be converted from agricultural land to land that has final approvals. So it sounds like you do some of the urban planning almost for a lot of these developments, like you decide where the roads are going to be and the basic look of the development. Correct. Yeah, depending upon the municipality. Sometimes you're even setting exact park details, amenities.
You're definitely saying lot sizes, community design, and that it's very early in the process. Why don't the homebuilders want to be in that because you'd think that's something like, well, what is the design of our community that we're building, what's it going to look like, what kind of amenities, parks, etc. Intuitively, I would think that would be the kind of thing homebuilders would want. Like you work closely with them, do they tell you generally the sort of trends that are
like going on in that direction. Yeah, we have close relationships with the homebuilders and get their feedback early in the process with preferred builder buyers, but we maintained control of that process. Typically, sometimes the homebuilder will enter into escrow with the land seller and then they will control
that process. So I want to go back, you know, I'm still like blown away that there is a piece of land that sold for one hundred million in two thousand and six that's still just worth still sold for ten millions. Talk to you know. Obviously, one of the biggest themes of this podcast is scars from downturns and how they affect behavior for years and years and years.
So if you have these homebuilders that in two thousand and six spent egregious amounts of land that they were underwater on for fifteen years maybe forever, talk to us a little bit more about like how that informs still today or up until recently, home builder decisions about land purchases. Yeah, it really has impacted the home builder's outlook on how much supply they should keep at any given time, and I think that we're setting up for a shortage of
developable lots given their narrower outlook. For example, Meritage Homes said that they have four and a half years of supply, but that's based on current levels of demand, and so if home sales increase, that supply drops from four and a half years to perhaps three years. You know, you mentioned in political tension, and I have to ask nimbiism must be a big part of your business, I would expect, like dealing with people who don't necessarily want to see
large scale residential developments next door. Absolutely. Yeah. Cities and towns go through evolutions of being pro growth, and then once a certain amount of residents live there, the mentality can shift, and so sometimes you get city leadership that will push for what's called executive housing or larger lots,
and that can really hurt housing affordability. Has there been a change over time, as you mentioned Meritage, right now they say, Okay, we have four and a half years of spare capacity to build more homes at current demand loals we don't know. Demand might go up, demand might go down, etc. Do those trends change over time? And do homebuilders generally have like targets? Do they try to match each other? Do they all want to be within some range? Is there a number that investors like to
hear that's optimal these days? Yeah, the home builders are typically very conservative in their underwriting. They plan for two to three homes per subdivision per month, and so if you consider that builders need to plan for just two to three months of housing, sometimes they can get be caught flat footed. Sorry, could you explain that I didn't quit get when you say they planning for two or three months per subdivision? Can you? Sorry? I didn't quite
understand why that. Yeah, So two to three homes per subdivision per month is typically what a builder will underwrite a new land acquisition at, so they assume a certain sales level. Okay, but if they only have a few years of supply, they can often be caught without existing supply. And then you have a land grab where builders try to acquire new property and start competing again for land parcels, and we're seeing that now in today's market. So, just
on that note, how do you yourself identify potential purchases? Like, what are all the different factors that go into it? I assume you're looking at the market overall, the exact location of the plot, who you're able to sell it to, and maybe the amount of liquidity or financing available for those purchases. Yeah, first, all of our acquisitions are cash and so, but the main thing we look for is water. In Arizona, it's critical to have in a shured water supply.
And while eighteen percent of the land in Arizona is private, only a small fraction of that actually has one hundred year water supply. Talk to us more about that. So if you want to get to go through all of the permitting process, what do you have to demonstrate two local authorities about water? So there's two different jurisdictions in Arizona.
There are areas that are known as certificate of as shured water supply areas, and in these areas, each individual usual developer has to demonstrate that they have one hundred year or short water supply for their community. Other areas have what's called a designated provider, and that might be a city, it might be a private water company, and that entity basically gives the landowner there one hundred year designation.
It's very interesting because it creates different incentives within those areas. So, for example, a designated provider area, all demand counts towards that allocation. So if it's industrial, if it's multifamily, there's a fixed amount of water and everything counts towards that total capacity. Within a certificate of a short water supply area, only single family residential is counted. So it's a loophole essentially where multifamily and industrial can take capacity without any
allocation for that. That's really interesting. So you mentioned how that create sort of different incentives. Just give us a little bit more color on what you mean. So, for example, there's a city called Castagrande, which is just outside of Phoenix. You might be familiar with Lucid Motors, one of the large EV manufacturing companies. Casa grand is a certificate of a short water supply area, and so it's very difficult.
Now castagrand is essentially out of water, so it's very difficult to start a new subdivision in a place like castagrand But you can start a multi family development and oftentimes it will look just like a single family subdivision. Oh, so you can have something called a multifamily that looks like But if you say, but Here's what I don't get. Like, if you say they're running out of water, are they going to run out of water? Yeah, where's the water
coming from? It's like I get that, it's like a regulatory loophole, but people still need to drink or more importantly, and you know, I know there's a lot of semiconductor factories being opened up, like Denis mc stronly water intensive process to like wash the wafers in the cilicle. Yeah, for the semiconductor industry, it is a it is a ton of water. For example, Taiwan Semiconductors uses twenty thousand acre feet of water per year and just to put
that into context, that is roughly eighty thousand new homes. Wow. But it's a lot of water. But at the same time, it's it's not a lot of water if you consider agriculture. So agriculture is in Arizona, there's a lot of cotton production, for example, and five thousand acres of cotton production is equivalent to all of Taiwan semiconductors water capacity. So from a sort of like GDP value add my guess is maybe let's have less cotton productions right in Arizona and
more chips exactly. You know, you mentioned that water rights are top of mind for you and selecting real estate and locations. Has that changed over the years. Has it become more difficult to source water to the extent that you know, maybe ten or twenty years ago, this wasn't as pressing an issue. It's become very difficult to secure water. You have to really look at who stands in line to get the water and what your legal rights are. And that's the very first thing that we look at
when buying land. And this has been going on in Arizona since the very beginning, right, I mean, like, I mean, it's the desert. The entire West is like there's no water there. So talk to us just like generally about like where's that water coming from? Is it piped in from elsewhere? Is underground aquifers that are depleting, etc. And I mean this is like the history of the American West is like fights over this. Yeah. So Arizona has two main sources of water. The first is the Central
Arizona Project, which takes water from the Colorado River. The second is we have abundant groundwater. Depending upon which part of the Phoenix area you're in, there's more abundant water than others, and so that with the Colorado River, we're dependent upon allocation from the Colorado River basin states and that is more at risk of being cut back, whereas with groundwater, it's very abundant and their ancient deposits of groundwater.
I read an article recently that and I know, like all of these states that sort of depend on Colorado water or Colorado Colorado River water always like these like negotiations, and I have to imagine that like developers in Arizona want to see more allocated to Arizona, and developers in Nevada wantest be more developed, you know, New Mexico, etc. Can you talk a little bit like is there tension between the states and how it affects you and how it affects your thinking in terms of like who is
going to get these allocations? And more importantly, you know, if I know that the Southwest is like in a two decade drought, and this is like what if there are cutbacks or if there are say, look, look we really need to conserve what is that going to do to the ability for these like rapidly growing population states to keep growing at the pace that they are. Yeah, we still have plenty of water for growth, but much of the land in Arizona is not going to be
developable with water. So that's the first thing that we look at. We think that areas that have groundwater versus called river water are going to become more and more valuable. For example, the city of Maricopa is the eighth fastest growing city in the US right now, and that water is entirely from groundwater, and not only it's also replenished, which is a key thing. So that oh I thought
it was just going to empty one day. Yeah. So basically there's affluent produced by subdivisions, by employment, and this affluent is often recharged back into the aquifer or used for irrigation. Maricopas where they have that big Rio Verde controversy at the moment, right, Yes, rio Verde Foothills is just outside of the city of Scottsdale. What is that I don't know about this country. This is where it's
two communities basically fighting over water rights. So rio Verde Foothills is an area just outside of the city of Scottsdale, and residents have drilled wells, built homes and others who were unable to hit groundwater by drilling a well, have relied on hauled water, and so basically a truck will fill up water from the City of Scottsdale, drive it out to these homes and fill up their tank, whether
it's once every couple weeks or once a moe. It sounds insanely costly, but the City of Scottsdale is now turning off the tap for those residents. Yeah, so everyone is either going to have to drill a private well or find water from elsewhere. I mean, people are talking about this as the start of the water wars or a sort of instance of a preview of the water wars to come. I guess a big picture existential question. But you develop land exclusively in Arizona, is that business
model going to be viable, you know, forty years from now? Yeah, I think it will be. If you look at the water use in Arizona today, seventy two percent is used by agriculture, and so when you convert agricultural use to residential use, you actually create a lot of savings in
terms of net water use. So basically like and there was I think there's like, isn't one of like the huge ELFLFA farms, like it's owned by Saudi Arabia, which is their prerogative to like by land, etc. But there are like it does seem like building more home Like you could probably grow a felfa somewhere else, right, Yeah, we're we're leasing roughly ten thousand acres to the Saudi government.
Even we should have done it. We should have had an ELFFLFA farmer in Arizona as the other get We should have had two parts and it's like no a debate what should Arizona's water be used for? Like housing development or elf cell phone? I would have liked that. Well, why don't we talk a little bit about what you're seeing now? And Joe kind of alluded to it in the intro, But we have seen a lot of the
home builders affected by higher interest rates. Is that something that you are feeling on your own business model or does it not matter so much because people are still buying up land for future development. So stepping back to when interest rates went up back in June and July, pretty much all of the home builders either extended escrows on land transactions or canceled escrows, and so they stopped
their land buying entirely. They also often stopped their land development spending, so parcels they had purchased, they stopped finishing some of those lots. We are just starting to see builders approved feasibility on deals and move to closing. So this is based on strong sales in January. Right, so housing is picking up. Did you yourself lose? Did you yourself have buyers walk away? At some point in twenty
twenty two, we had several buyers walk away. Most of them asked for extension and we said no, because we know that land is in tight supply. Is that just a function? I mean, how are they making the decision to walk away from these properties? Do you notice any patterns? Yeah? I think it's a knee jerk reaction, and there's a difference of opinion between the local land acquisition teams and
their corporate view of the market. The local teams recognize the land is in short supply and that they're going to have to start buying land again, whereas corporate is often issuing decisions to shut down land spend altogether. Right. Yeah,
I was in a little bit of a prep. I was reading the recent earnings call from Poulty Homes Group as one does, as one does, And they said in the fourth quarter, we walked away from twenty one thousand auction plots and associated nine hundred million in future land acquisition spend. And as a result of these actions, will occurred a pretext charge of thirty one million for the right off. So they post when they make entering these
deals with you, they post some sort of escrow. If they walk away, they lose it, correct, correct, is part of your business? I mean, like that's obviously not great for you, but is like part of like why there's a business margin opportunities essentially like warehousing this risk, so to speak. So it's like, okay, like in twenty twenty two, you take a hit from these homebuilders that want to walk away, and it's like, okay, they can do that
because they put some escrow. But then they're really going to pay up in twenty twenty three and pay a premium in the ideas that over time you sort of like make more by warehousing this risk. You make more in the good years when they're like, oh, we need more land suddenly, that's exactly right. A lot of homebuilders were looking for big price reductions based on the drop in demand and land sellers just aren't giving the price
reductions because they know that demand will return. There's not more land to build on and the builders will have
to pay if they want to keep home building. Well, just on that note, I mean, you mentioned the pickup that we've seen in housing activity in the SHANU and I think that's surprising some people who thought that after interest rates went up to I think eight percent in late last year, did they had eight app okay, seven or eight percent higher than they happen for many, many years, that that would at least knock the market for more
than a few months. Talk to us about how you're viewing that portion of the housing market at the moment, what accounts for the rebound and the strong activity. Yeah, I think builders were surprised by the strong activity in January. We've heard several of the top builders actually exceeded their January sales from the prior year. And so builders have dropped pricing in the range of fifteen percent for entry
level homes. But you have to consider they had thirty five percent gross margins at the peak, and now that might be in the lower the mid twenties, but it's still a healthy margin. I mean, I know you're not a builder, but since you talk to them, maybe you can anch It is your impression that their supply chain issues setting aside land, lumber, windows, garage doors. We did you know there are a million stories. Have they eased?
They have? I think builders have seen roughly fifteen thousand dollars in cost reductions for entry level new homes, and so that's helped their margins as well. What's the catalyst for another leg up in the housing market in your opinion? Is it simply interest rates starting to fall back or mortgage rates starting to fall back. I think there's a structural shortage of lots in the Phoenix market and in
many other markets. John Burns Consulting came out with the report that said Phoenix is the fourth most undersupplied housing market and we only have twenty thousand finished lots available, which is compared to about twenty five thousand permits for new homes in a year. I want to go back to to one short question. Did you slow down or put a pause on the pursuit of new land for
your business? We did, and we buy through cycles. We focus on making good buys and we did find some opportunities where sellers were impatient and didn't want to wait for the recovery. And so, for example, that one hundred million dollars transaction that dropped to ten million was an institutional seller that just wanted to get out. And then
can you describe a little bit further your financing. I mean, I think you said you bought them in cash, but do you borrow like can you describe a little bit about like the sort of ye your financial arrangements. Yeah, we use our internal capital, plus we have a close network of investors, okay, And but by buying for cash, we can be patient and wait for the market to return. Is that unusual in this business to purchase through cash
only or is that sort of the norm. Since the Great Financial Crisis, it's been very difficult to get debt financing for land, and it also can put pressure on ownership. So we find that buying cash gives us the most flexibility. And just on that note, but this type of business land acquisition, I know you mentioned local knowledge and expertise earlier, but how do you compete against other land purchasers. Is it through you know, making sure that you're very good
at acquiring all the needed permits expeditiously. Is it simply offering you know, good value to a developer and competing on price. Yeah. I think there's a few components to that. The first is competing on buys, So through relationships with landowners, with brokers, you try to be the person to get the first phone call when an opportunity comes up. The second is on your community design. You try to design as closely as possible to what builders will want often two, three,
four years out. And the third is by being easy to work with. Since we're talking about how like everything in modern economy is like outsource and everyone specializes. Do you yourself as a company go through the permitting process or there are other companies whose specialty is helping the land developers walk through all that process. There's a big land development industry that that that we use. So we have teams of attorneys who are focused on water law,
for example, attorneys focused on rezoning. We have engineers who are special specialists in floodplain So there's these are out so the so the homebuilders they have an outside company deal with land acquisition. The land acquisition companies I have outside parties deal with like, uh, the whole water law,
the homebuilders have land acquisition teams that are internal. Yeah, but they also rely on water law experts and engineers and oftentimes are the same people that we are using on the turning land into land that can build a house. Whose responsibility and who does that like paving the roads, um actually putting in the pipe so that water rights can be turned into drinking usable water. Where does that happen in the process, And does that happen before or
after it's sold to the home builder. So going back, but before the financial crisis, builders would buy land and take it from raw land all the way through the improvements. Just after the financial crisis, builders were still very risk averse, and so they would typically just purchase finished lots, which means all of the water, sewer and roads complete. Now we're starting to see builders close at final approvals and sometimes do those improvements themselves, or sometimes they'll share that
risk with the land seller. You know, we mentioned a number of times that parts of Arizona have seen a big boom since the pandemic. Everyone moving to the sun Belt states. Everyone wants to enjoy you know, lower taxes, warmer weather and all that. Yes, yes, we all want that. Do you see that continuing, like or do you see that some of the pandemic era migration is starting to tail off. We see it continuing for a few reasons. The first is this reshoring trend that you spoke to,
I think on your recent podcasts with Steve Eisman. So we're definitely seeing reshoring in the Phoenix market. Major manufacturing companies are coming to Phoenix. We created more than eighty thousand jobs in the prior year, and so there's a robust employment market. It's not just speculation driven. I do think we're going to have to do like a elfelfa Like I feel like everyone's like just chips and houses
and evs and all. That's great, But we'll get all the water stakeholders of Arizona together, room the Saudi cattle companies that need elfalfa to feed our college like they have, you know, Like who's gonna replace that? I don't know if it's a if it's totally obvious. So is there are there any other sort of like interesting dynamics that we've missed so far, like things that you're thinking about
right now? Yeah. I think the big thing is unexpected demand increases or drops coupled with a delayed supply response for these finished lots is really setting up for a
structural shortage of lots, right. So, actually, this is the question that I wanted to delve further into, which is we talk all the time again about scars from the Great Financial Crisis, particularly as they relate to housing and then all the other inputs, But then we hit this shock like twenty twenty two is the fastest rate hike cycle in like decades, probably caught a lot of people by surprise. Is weird because it's at a time of
like low unemployment a lot of demand for housing. Talk about the sort of like knock on effects that we'll see just from the rate shock of twenty twenty two. So, stepping back first to COVID, you had builders kind of hit the brakes on development and then they got flat footed when demand returned with a vengeance. And then next we have this increase in race which has led the
builders to pause yet again. And so we're really setting up for the builders to be in a position where their lead time on finishing landing lots is going to be so tight that they're not going to be able to meet coming demand if and when rates return to more normal levels. So we've had a bunch of episodes by now about the hangovers left by these sort of
extreme cycles. Yeah, what in your view when it comes to the real estate market, would help to smooth out some of that volatility or to change developers' behavior in the sense that maybe they feel like they don't have to hit the brakes so hard on construction, or you know, they don't have to wait so long to start new projects. I think the growing importance of water in the Arizona market particularly is leading builders to take larger positions where
they know that they have water. Oh interesting, and so I think that is driving builders to get away from this just in time mindset. And so especially the private builders have taken the lead on this and acquiring larger parcels with maybe four or five, six or seven years of supply, whereas some of the public builders have been focused on just two or three years. This is such an interesting dynamic that public private that we probably like.
And I think you see something in oil too, where it's like in the last you know, when the oil prices boomed in twenty twenty one. In parts of twenty twenty two, you had this sort of like quarterly obsessed. Public companies are like, oh, you know, we're maintaining capital discipline. I think a lot of the new production in oil actually came from private companies that didn't feel those constraints. So it's interesting to hear a similar dynamic pop up
on the builder side. Yeah, they're definitely more aggressive in the landmarkts some of the public. Some of the public builders just will not close on property unless all the final approvals are in place, whereas a private builder sometimes is able to close even without the zoning in place. So that gives them an advantage because they're able to
acquire the land for a more attractive price. I ought to say, though, when you talk about water supply for five or seven years, that still doesn't seem that long to me. What happens after those five or seven years, Well, to be clear, these properties have one hundred year assured water supply builders are buying, so Arizona actually has some of the most conservative groundwater management laws in the whole country.
We have one hundred year planning window, and so these properties have an assured supply for decades to actually, can you clarify that point about how so you mentioned that industrial uses they can get away with certain things. What's the difference in multifamily development. I think you said multifamily is characterized more like industrial, So what is that resulting in terms of what gets constructed? So a big boom in the Phoenix market has been the build for rent product,
which is so these are single family homes. These are single family homes with small yards, and they build roughly twelve units per the acre, so you have much greater density than maybe single family at three or four units to the acre. And the loophole is they're able to lease these for three hundred and sixty four days a year. And so if it's three hundred and sixty five days a year more, you have to get one hundred year short water supply. Oh and if you have three hundred
and sixty four, then what what are your album? If you have three and sixty four, you do not have to demonstrate. Why does loophole exist? Is that was that created on purpose in order to encourage more housing density or I think it stems from consumer protections and people buying single family homes. The impetus of that law was designed to protect the homeowner, whereas the owner of a maybe one hundred and twenty two hundred unit multifamily development
is a bit more sophisticated. So three hundred and sixty four you can renew your rent or do you do you have to go sleep at a hotel one day? You can renew your RuPay? Okay? So what are you looking out for? You know, we talked a little bit about how unusual this period of time is. We still have the post pandemic hangover, but housing activity and maybe picking up a little bit. But on the other hand, the FED says that rates aren't going to come down
anytime soon. What are you looking out for this year? Like, what's the big catalyst on the horizon. I'm looking for mortgage rates to come down and for buyers to get off the sidelines. I think part of the shock has not just been affordability, It's also been psychological. I think some buyers are fear of buying at the top and now with rates coming down with pent up demand for how that the builders are doing a similar thing as well.
They're kind of all looking at each other, when are we going to get back into the market and start buying land again? And I think home buyers are doing just exactly the same thing. Do you think you know you mentioned Okay, they like walked away from agreements to buy land. Do you think they they do that, like walk away from agreements to buy garage, doors and windows, And we might actually see some constraints e merge because of that twenty twenty two shock on the supply chain.
St that's interesting question. I know they have paused development trying to wait for pricing to adjust downwards. But I think that if all the buyers return at the same time the home builder demand, that might cause another problem. Maybe they've been stockpiling kitchen sinks. They might that's the best case scenario. All right, do you have any kitchen sinks in your in your in the basement of your home tracing, I have but one kitchen sink. I do
have an extra coal stove though randomly. Oh quick question, speaking of stoves, most of the homers that you built an Arizona electric or gas ovens, mostly electric on the high end gas stoves, gas stoves. That's what I mean. Okay, this isn't a politics. I'm not going to get into Only in the last month did did electric versus gas oven or stoves become a political question? But I was curious about that, all right, Chase Emerson, so great to have you on the podcast. There's like, uh, totally new.
You know. The other thing that I'm glad you brought it up on the whole build for rent market is something we I think we talked about it the other day, but this is yet another episode that has sprung forth, like three other episodes that we need to do, including one obviously up diving in even more on water rights something absolutely all right, Chase, thank you so much. That's so thank you for having me. You know, Tracy, there
are so many interesting things in that conversation. But I also I am like just sort of like generally fascinated by the degree to which like all companies want to eliminate every single risk outside of like their one narrow expertise, which I guess on some levels very obvious. We know outsourcing and third party consultants is big, but like this is like a very interesting example of it for me.
I guess it's the natural tendency towards specialization, right. But it is strange that I had never considered that the housing developers would not be buying the land themselves. I always just assumed that was the way it worked. I'm still blown away by that one step that there were like tracts of land that we're selling for one hundred million dollars fifteen years ago, or I guess there's longer two thousand and six. I can't seventeen years ago whatever.
Maybe like I did not appreciate how crazy that bubble is. That is a true bath on a financial asset. I gotta say, not even a financial asset, actual land. Yeah, all right, shall we leave it there. Let's leave it there. This has been another episode of the ad Thoughts podcast. I'm Tracy Alloway. You can follow me on Twitter at Tracy Alloway, and I'm Joe Wisnthal. You can follow me
on Twitter at the Stalwart. Follow our guests Chase Emerson on Twitter at as Land Investor, follow our producers Kermen Rodriguez at Kermen Arman and Dash Bennett at Dashbot. And for all Bloomberg podcasts, check them out under the handle at podcasts. And for more odd Lots content, go to Bloomberg dot com slash odd Lots, where we post transcripts of the episodes. Tracy and I blog and we have a newsletter that comes out every Friday. Go there Thanks
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