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Douglas C. Yearley Jr.

lines on the record: 20
first: 2022-02-08
most recent: 2022-02-08
sittings or episodes: 1
sources: podcast

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“Well, I think we work very closely with Terry when we think about growth, M&A. We buy one to two small local builders a year. We call it bolt-on acquisitions, which is bolts on to what we're already doing to either enter a new market or to just get bigger in an existing market. I don't know when it comes, but there is opportunity in this industry for consolidation public to public. There's a lot of builders. There's a lot of public builders. There's some large private builders. And we overlap a lot in what we do. And it's a lot harder than when regional banks merge or national banks merge. But I think at some point, you're going to see more of that. And so I think that's going to accelerate growth for certain companies. And so we'll keep our eye. There's nothing going on now. We're always in the conversation as the other publics would be. And there have been very few large public to public mergers. And some have succeeded and some have not. So I think we need to.”
2022-02-08 · Goldman Sachs Exchanges · What’s Ahead for the Housing Market · IDENTIFIED FROM THE TRANSCRIPT
“As we call it, property technology, which is smart home technology and how it operates and all the related gadgets and things that we can do, there's a lot of opportunity back to where I started. When you walk a job site and watch the plumber in the mud plumbing the house and there's only five employees in a small company and he's happy working on two or three communities on only the northern suburbs of Philadelphia. That's the business, unfortunately. And so it's been harder for us to bring these efficiencies through technology, but we're not giving up. It has to change. It will change, but it is a difficult industry to flip the switch on.”
2022-02-08 · Goldman Sachs Exchanges · What’s Ahead for the Housing Market · IDENTIFIED FROM THE TRANSCRIPT
“Panel that comes out is just the wood, then you have to put the plumbing and the HVAC and the electric wires through that wood on the job site, put the insulation, the drywall on. If you can put that all together where it's a closed panel and you literally clip together, panel to panel an electric clip, an HVAC clip, plumbing pipes that clip, you know, there's talk of that so far. Those companies have failed because they're just more expensive and it's so hard for transportation to get all these components from the factory to the job site. As lumber got really expensive, we started moving to steel and doing light gauge steel framing, different trade base, you know, the wood framer isn't ready to jump into the steel framing. It's completely different. So it's slow to come. FinTech financial technology, the mortgage company software programs, the title company, that's moving pretty well.”
2022-02-08 · Goldman Sachs Exchanges · What’s Ahead for the Housing Market · IDENTIFIED FROM THE TRANSCRIPT
“That is allowing us to be a bit more efficient in terms of how we schedule the trades, how we pay bills, how we run the job site. Modular construction where the house comes out on four or five flatbed, 18 wheelers and gets put together in a week, that hasn't yet really caught on, particularly with the bigger homes that we build that are more custom. There is some opportunity for off-site panel and trust manufacturing, which is the wall panels and the roof trusses. Factole brothers, we have our own plants that do some of that. You know, Lenar recently announced that they're going to a 3D printing community in Texas where the homes are going to be printed with concrete out of the 3D printing technology. And that's pretty exciting to see how that works out. Robotics were what we call closed wall systems where a traditional”
2022-02-08 · Goldman Sachs Exchanges · What’s Ahead for the Housing Market · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, there's great opportunity for the industry because we've been very slow to adopt new technology. I was out in the field with my Timberland boots on and blue jeans working out of a trailer 30 years ago building houses and they're built the same today. You've got 30 to 40 subcontractors. We don't own a hammer. We don't have plumbing companies and electrical companies. It's all subcontracted out. They're very local mom and pop small businesses. And from when you dig the hole to pour the foundation, to frame the house all the way through, it feels very similar today as it did back then. And I think that will be slow to change. We don't have national traits. They're not all that sophisticated. There's technology that's hitting the industry rapidly when it comes to construction management software and some of the back office programs.”
2022-02-08 · Goldman Sachs Exchanges · What’s Ahead for the Housing Market · IDENTIFIED FROM THE TRANSCRIPT
“It's interesting on your millennial point, Alison is I think a lot of people have talked about this generational wealth gap, which is certainly true. A fact that a lot of people don't talk about is that right now you have 35 trillion dollars of wealth in the US controlled by folks over the age of 70. And over the coming years, that wealth is going to be distributed to younger generations naturally through inheritance, investment, and just the general economic cycle. So again, while the wealth gap is real, it does feel like something that remedies itself over time.”
2022-02-08 · Goldman Sachs Exchanges · What’s Ahead for the Housing Market · IDENTIFIED FROM THE TRANSCRIPT
“Buying at 35 years old. I'm a boomer. I had my first house at 26 years old. I was a little bit early compared to my friends, but only by a year or two. And I was newly married and we were poor at 26. At 35, it's not unusual to have a dual income couple at 35 years old making $200,000. Their first home is the Toll Brothers three series, which we now offer. We don't just do the five and the seven BMW. We do the three. We have many, many clients who never thought that their first home would be a Toll Brothers home. But because they are older and wealthier and we have come down in price, it's a perfect match. And so as we continue to widen the net, and as these millennials just keep becoming of home owning age when they want to own a home, and then you got $70 million. They're buying their second home or they're downsizing into those smile states I mentioned. So I'm comfortable with the demographic trends, notwithstanding.”
2022-02-08 · Goldman Sachs Exchanges · What’s Ahead for the Housing Market · IDENTIFIED FROM THE TRANSCRIPT
“Philadelphia, where with the small local builder, there's a lot of that going on. So there's more factors than just birth rate. I'm not focused on the kids born today and when they're ready to buy a home in 30 years from now and there's less of them what that market will look like. There's too many things that can change in the next 30 years where that's just not on the top of my list or even on my list. We look out three to five years because some markets, it takes that long to get land entitled. The approval process is very tedious and that's actually the biggest supply constraint of home building is land. It's not readily available. You can't do whatever you want on a piece of land that you buy. The town will tell you what they may let you do if you jump through a bunch of hoops. So I think with the millennials, 70 million millennials beginning to buy a home. And remember, they're now”
2022-02-08 · Goldman Sachs Exchanges · What’s Ahead for the Housing Market · IDENTIFIED FROM THE TRANSCRIPT
“We're very optimistic and positive on the longer term business. The last 10 years, as I mentioned with the imbalance of supply and demand, those were good 10 years, but it was steady and slow. It never got frothy. It never got overheated. So there was no need for a correction. Longer term, you have to also, in addition to Ivy's analysis of babies being born, families being smaller, you've got to think about immigration. You've got to think about a second home market, particularly as more and more people are understanding the opportunity to work remotely. They're focused on lifestyle issues and moving to certain areas that they have wanted to live. And you have to think about obsolescence. The existing housing stock in this country is aging. And it is slowly being replaced. We're not in the teardown business, but I live in an area of urban.”
2022-02-08 · Goldman Sachs Exchanges · What’s Ahead for the Housing Market · IDENTIFIED FROM THE TRANSCRIPT
“Now let's talk a little bit about the long-term trends. Doug, you've already begun to speak to some of them, but we do have people like Ivy Zelman, for anyone who doesn't know, the influential housing analysts who predicted the 2005 housing top talking about demographics slowing population growth, that that in itself might be a big limit to demand over the medium and longer term. So how are you thinking about some of these longer-term trends and how do they affect your strategy?”
2022-02-08 · Goldman Sachs Exchanges · What’s Ahead for the Housing Market · IDENTIFIED FROM THE TRANSCRIPT
“The cost of living is higher into more affordable places like Austin, Texas, Boise, Idaho, Reno, Nevada, Las Vegas, Phoenix, Denver, Florida, Charleston, Raleigh, and all these smile states. So there's less pressure on affordability when you're trading out of a more expensive area to a less expensive area. And so I think that's another reason why it's going to take longer to feel depressure.”
2022-02-08 · Goldman Sachs Exchanges · What’s Ahead for the Housing Market · IDENTIFIED FROM THE TRANSCRIPT
“Pressure slows this market down or not. We'll have to see. Right now, there is so much more demand than there is available supply, available homes to buy, whether they be resale homes or new homes, that this is going to be very different than other cycles. It's going to take longer. It's going to take higher rates. It's going to take more price increases, I think, until we feel the affordability pressure. And the migration trends, again, because of COVID, because of remote working, but also because of what I described pre-COVID, which is just people are leaving the Northeast. They're leaving California because the cost of living. The migration trends tend to be from very expensive states, New York, Massachusetts, New Jersey, Pennsylvania, California, where homes are more expensive, taxes are higher.”
2022-02-08 · Goldman Sachs Exchanges · What’s Ahead for the Housing Market · IDENTIFIED FROM THE TRANSCRIPT
“Sure. So we're not sure where rates will land through all this, but it's pretty clear they're going to be going up. So even though the Fed hasn't officially had their first rate increase, which many believe could be as early as March, and remember, the Fed rate is not the mortgage rate. The Fed rate is a very short-term rate and the mortgage rate is a 30-year. There's a correlation. It's not always perfect, but there's certainly a correlation. But the rates have already moved. The mortgage rates have already moved in anticipation, I think, of what's coming. We haven't seen any negative impact yet. I think rates, because of how hot the market is, would probably have to get into the mid 4%, almost another 100 basis point or 1% increase until you start seeing, I think, a bigger impact. There's no question, it's just common sense, that when your price is up, whether it be 20 or 25% year over year and mortgage rates are going to go up, there's pressure on affordability.”
2022-02-08 · Goldman Sachs Exchanges · What’s Ahead for the Housing Market · IDENTIFIED FROM THE TRANSCRIPT
“Let's talk a little bit more about that topic affordability. The environment is changing as we've discussed completion is rising. Interest rates are rising and by extension mortgage rates are likely moving higher. We're also beginning to see the cost of raw materials. I'm thinking lumber rising again. So what impact could these various factors have on home buying demand and home prices going forward? How is that all impacting Toll's strategy?”
2022-02-08 · Goldman Sachs Exchanges · What’s Ahead for the Housing Market · IDENTIFIED FROM THE TRANSCRIPT
“In the market were wealthier, and we have these tremendous migration patterns because you could work remotely. It became a perfect storm. It was a category five hurricane that turned into the perfect storm for our industry for all these reasons. The market just roared. It slowed a little. It's not frothy anymore. It's really good. Our prices I mentioned on our earnings call back in December, you know, our prices are up 25% year over year on average around the country. There's cost pressure, so that's obviously not dropping to all profitability, lumber and other billing materials are up significantly. Supply chain issues are acute, like nothing I've ever seen. But these have been really happy times for the builders. And it feels like it's going to continue. There's certainly pressure on rates. There's some pressure with affordability because prices are up and the resale market is the tightest it's ever been on record.”
2022-02-08 · Goldman Sachs Exchanges · What’s Ahead for the Housing Market · IDENTIFIED FROM THE TRANSCRIPT
“Of 20, the Fed dropped rates pretty dramatically. So if you were a renter in the spring of 20 because rates were so low, you could own a home for the same monthly payment if you could scrape together 10, 20, $30,000 for a deposit. When you look at the monthly payment for the starter home market, that's what led. The starter home market led for those reasons, just affordability was tremendous. The resale markets got incredibly tight as very few people were putting their house on the market. They didn't want people coming through their homes, touring their homes in the midst of the worst of COVID. And so the new homes compete. Home builders all compete with resale inventory. That dried up. Prices went up dramatically on the resale market, which gave people equity in their home. They never thought they had. So they were able to trade up to a newer or bigger home with more equity. The stock market started performing well.”
2022-02-08 · Goldman Sachs Exchanges · What’s Ahead for the Housing Market · IDENTIFIED FROM THE TRANSCRIPT
“You know, we're all at home. I remember walking the dog in suburban Philadelphia, and somebody came towards you walking the dog. You'd go to the other side of the street. You know, we were scared. Nobody knew what was going on. And then by May, just two months after we all went home, we started seeing these green shoots of significant demand coming out. Our sales teams, we stayed open. And in most of our markets, we were allowed to continue to build some states shut down construction. And then through the summer of 20 all the way through to today, we have experienced the hottest housing market I have seen in my 32 years at Toll Brothers. And it was driven by those fundamentals I mentioned going into COVID of significant imbalance of supply and demand, 10 years of pent-up demand that hadn't come out. The millennials now in their mid-30s buying their first home, very low interest rates in this.”
2022-02-08 · Goldman Sachs Exchanges · What’s Ahead for the Housing Market · IDENTIFIED FROM THE TRANSCRIPT
“Sure. So if we go back to the winter of 2019-2020, the market was poised to really be strong. There had been 10 years of undersupply of homes, millennials 70 million millennials were just approaching their age of wanting to own their first house. So before COVID hit in March, we were enjoying the beginnings of a really good winter spring selling season because of this imbalance between supply and demand over the last decade. The last 10 years leading into COVID, this country built significantly less homes than each of the prior four decades. And then COVID hits, Tollbrothers Stock went from $50 to $13 in two weeks. Wall Street never thought we'd sell another home. The first couple of months of the spring of 20 were slow as everybody was absorbing this new normal.”
2022-02-08 · Goldman Sachs Exchanges · What’s Ahead for the Housing Market · IDENTIFIED FROM THE TRANSCRIPT
“Thanks, Alison. Doug, as I've just mentioned, we've been in the midst of a white hot housing market for the last two years where demand for new homes has essentially outpaced supply. First talk about some of the drivers of this demand, as well as the challenges that have made it hard for new home construction to keep pace, and also how Toll Brothers has navigated this environment.”
2022-02-08 · Goldman Sachs Exchanges · What’s Ahead for the Housing Market · IDENTIFIED FROM THE TRANSCRIPT
“Is exchanges at Goldman Sachs, and I'm Allison Nathan, a senior strategist at Goldman Sachs Research. Today we're going to be talking about a sector of the economy that affects us all, housing. The pandemic has ignited what can only be described as a home-buying frenzy, limited inventory, record low interest rates, and shifts in where we work have led to bidding wars and sky high prices. But we're also starting 2022 with new uncertainties such as high and rising inflation and a new COVID variant that's slowing economic growth. So are we entering an inflection point in the real estate market to help us make sense of the housing market and what lies ahead in 2022? I'm delighted to be joined by Doug Yearley, CEO of Toll Brothers, and Terry Haggerty, co-head of home building and building products investment banking at Goldman Sachs. Doug, Terry, welcome to the program.”
2022-02-08 · Goldman Sachs Exchanges · What’s Ahead for the Housing Market · IDENTIFIED FROM THE TRANSCRIPT