Home Builders Are Bleeding as Sales Run Dry, Workers Vanish

0:00Markets always changing. Every week brings a new mix of data forecasts and bold claims about where the real estate market is headed. Today, we're taking a closer look at the headlines on our radar and the takeaways worth carrying forward and the ones you should just ignore. I'm James Dienerd, back with Kathy Feke and Henry Washington to put on the latest stories into practical context. This is On the Market. Let's get into it.

0:31Well, how are you guys doing, Kathy? Good. I am in one of our rental properties trying to get it all fixed up and ready for sale. Or not. The market is horrible, so we might just rent it again and wait. Henry, how do you do, man? How's the grind life of selling properties this week? I closed on a couple sales, but I've been getting some good deals I'm excited about. So, you know, market's a cycle. It's either going to be easy to buy and hard to sell or hard to buy and easy to sell. And right now, it's hard to sell and easy to buy. and I'm a deal junkie, so I kind of like this time. Speaking of a lot of opportunities out there, I mean, Henry, you have an article on a bunch of vacant lots for sale.

1:10Yes, James, I have an article from PR Newswire and it is stating that there are about 300 ,000 vacant lots for sale, which could close 6 % of the housing shortage if anyone builds on them. So the article goes on to talk about that there are 300 ,242 empty lots, smaller than five acres, that were listed for sale on Zillow in June of 2026. That represents about 17.4 % of all sale listings. Building one home on each of these lots would reduce America's housing deficit by 6.3%. That would bring it from 4.7 million down to 4.44 million. And a lot of the lots that are for sale are large enough to build more than one home on it.

2:01The more than 300 ,000 lots currently listed for sale represent the lowest hanging fruit in addressing the housing shortage in America. And I thought that was an interesting perspective because there is a lot of land for sale, but that doesn't happen for no reason. And so I'm cheating a little bit and really talking about two articles. The literal next article that I researched said that new home sales are at its weakest point since 2017. And that's a Newsweek article. And that article is saying that new home sales were only up a modest 1.6 % in June compared to a month earlier. But I'm not going to go on and babble about this article.

2:44Essentially, what it's saying is that builders and developers are struggling to sell the new homes they have right now. The lots that they are building on, they can't seem to move the inventory like they want to. And that means they are bleeding money. And so, yes, it may seem like because there's 300 ,000 lots available that all someone needs to do is just go build a house on it and then we'll have solved the housing problem. There are so many other problems that are tied to being able to solve the housing shortage. Affordability is an issue. Interest rates are causing problems. People are worried about inflation and affording groceries.

3:21And so a lot of these homes that builders are building, they end up having to give away concessions and incentives to try to move the needle to get these products sold. I am a real estate investor. I buy distressed properties to flip. Over the last 60 days, I've had two different builders go on to my website. They clearly know who I am and what I do and that I buy distressed properties. And they said, we have new inventory. I have five homes coming up. Would you take a look and see what you can offer me. If builders are reaching out to this guy, they're having a problem moving that inventory. Yeah.

4:00Yeah. So but they really want to go out and build some more. Right. I mean, what's funny to me about this article is that it says there's a housing shortage of 4.7 million homes. The Trump administration said it's 10 million. I've heard anywhere from three to 10 million. So no, 300 ,000 lots is not going to solve this problem, number one. Even if you put two houses on it, that's $600 ,000. We're not there. But yeah, how are you going to build those affordably? I've told you guys that in our subdivisions, we have to build 30 % affordable. We want to. We want to build housing for the teachers and the firefighters and people who maybe are on fixed incomes.

4:40But as I've told you before, it cost us a million dollars to build an affordable home, and we only are allowed to sell it for$350 ,000. The math don't math. You have to make that difference up in the profits of the higher end. It's very, very difficult to bring affordable housing on. So I don't know what's going on with these 300 ,000 lots, but I'm guessing that it's tough to make it pencil. I think part of it too is people who have assets like land sitting empty, where the economy wasn't as tough, it was fine to just sit on a vacant lot, pay your taxes, and you've owned a piece of land. But if the economy gets tougher, I think a lot of people are like, huh, I wonder how much we could get if we sell this little lot, get an extra piece of cash, help us to be able to afford some more things.

5:24So I think you're seeing some of that going on. I think you're seeing people selling lots in vacation town communities who had pie in the sky ideas of building something in vacation towns, but second homes are declining right now. People can't afford their first homes, nonetheless a second home, nonetheless building a second home. And lastly, this isn't even the only issue facing new construction. Because like I said, when I was researching this, I came across a few articles and there is another article that talked about 300 ,000 construction job openings and no one to fill them. So there is a labor shortage in the construction market.

6:02So even if they could build the homes for a reasonable price and people were buying them, there aren't enough bodies to do the work of building the homes. 300 ,000 job openings in the construction market and they can't fill them. That's a big problem. I think part of that is people don't really go into trades anymore. I think people are starting to get back into trades now that AI is becoming a thing and college is not as popular as it used to be. But I don't think we've gotten there yet. And it's just there's not enough labor to fulfill the demand that we currently have. So how are we going to fill and build on 300 ,000 more lots with the problems that we're seeing?

6:45The labor was there. The labor was there. It left in great fear. It was there. Why can't we just give a lot of work permits to people who are willing to work? This is dirty, hard work. I mean, we just had, like I said, I'm here in my rental. We're fixing up this house. It was rented for six years. There's a lot of things that need to be done. And I look at these guys working so hard that you're not going to find some student who wants to go do dig holes. They're not going to do that. So we need to make a more friendly environment for the people willing to do that kind of work. But political stuff here.

7:17I digress. I hear you. I don't know if I'm buying that there's no bodies to work, though, especially in the new construction space. I know in the Pacific Northwest, a lot of companies have laid off 50 to 75 percent of their staff in the new construction space. There's not maybe for labor, but project managers, superintendents, they are struggling for work right now in the new construction space because there was a lot of FOMO going on in 2021, 22, 23, right? Where it was like this war for dirt. Everyone was trying to get it. Everyone was trying to get it. We all overpaid a little bit. And now the problem with development is it takes 12, 24, sometimes longer, 36 months.

7:59You have such a longer opening window and you're exposed to so much more market changes that either you hit it right or you hit it wrong. And right now, if you're selling today, you're hitting it wrong. And there's a lot of money bleeding out. One thing I will say for all this home owners that owned dirt, if you're listening right now, you missed the market. Your dirt is no longer worth what you think. a lot of these lots are for sale because they are way overpriced and people have not came back to reality that their dirt is not worth gold anymore and sellers are not being flexible and it's like well sorry to tell you like dirt is worth like 40 percent less in seattle than it was two years ago yeah i mean dirt's going cheaper because it's harder to sell because builders can't make a pencil right that's just supply and demand and and and james you can say what you want to say buddy you ain't got to agree with it you ain't got to buy it but the article's from the national association of home builders so they seem to think there's a problem and they're the ones that are doing it every day they're saying the national association of home builders estimates that the residential construction sector will need to add roughly 740 000 workers per year to keep up pace with the current industry's growth that to me says there's a problem and there's not enough bodies And you can argue about it all day, but jobs are taking longer.

9:22Homes are taking longer to build. They're sitting on the market longer and they're not selling once they're done. All of that is hurting the pockets of the developers. And if the developers aren't building, we're going to continue to see a shortage. The shortage gap may even grow larger if the trend continues. And so 300 ,000 lots means absolutely nothing if people can't afford to build on it, can't find people who want to do the work to build on it, and can't find buyers to buy the product once it's done. Yeah, and I think it just depends on the market's in, right? Like in this article, 25.3 % of all for sale listings are in rural markets, right?

10:00That's where your slap cheap bill for 150 bucks a foot or less markets, right? Yeah, you can still build affordably in those markets, very affordably. But, you know, where are the jobs? That's the question. Where are the jobs where people, you know, need to be able to afford to live? And I think that's why it's so important for people to isolate where they are, right? Because the West Coast is a different story than the South. The South is a different story than the Northeast. And I can tell you in the West Coast, new construction, no one wants dirt. And if no one wants dirt, they don't need building permits.

10:36and they don't need bodies because they just don't need the staff. Most builders that I know, you know, it's funny. I was sitting on a plane ride with one the other day. I got on the plane, and he also moved to Scottsdale. And so we do the same commute, and he was going once a month. He's like, yeah, no, everything's coming. I go once a month, and he's like, you go every week. I'm like, well, yeah, I got this filming thing going on, so I got to go every week. And I'm like, oh, you're still going once a month? He's like, no, I'm going every week because I got to get through my lots, and I laid off 80 % of my staff.

11:05There is a pullback right now on the West Coast for smaller builders that expanded out to get bigger. They're all shrinking back because they don't enjoy it. And that's where a lot of people are getting laid off. And again, it's not the labor. Labor we need. Like your straight labor needs, we need that. It's the middle tier. And the middle tier is also who buys the houses. The people making$100 ,000,$150 ,000 a year as superintensive project managers, they are hurting for work right now. There is not a whole lot of job openings. And there's a lot of construction that is stopping. And because it's stopping, it's causing a problem.

11:45Because the people don't have the work to do it. And we're going to go through this transition right now. But the dirt that I've been seeing is at least 35 % cheaper than it was 12 months ago. Wow. A lot of opportunity because a lot of builders have just frozen because they are sitting on way too much expensive inventory. I feel it. But we definitely need the workers though, because I can't, that, my demo costs and everything are still way through the roof. I can't get that down. It's that the entry level employee is definitely harder to find. Yeah. I mean, even if the lot price is down 35 % on the opposite side, how much of an increase has it been on material costs, labor costs, all the other costs, is that 35 % discount on land going to make a difference?

12:25And I don't know, I could tell you with a lot that we have that we would love to build on. And I looked at all opportunities. I looked at manufactured housing and it was not much cheaper to do manufactured housing. In fact, once we ran the numbers, once we built it and tried to sell it as a spec home, it would be as if we got the land for free. All the costs just cancel out the land. So we'd rather just sit on it. And we're trying to sell the lot, but no one wants it. Yeah. Because when you have rural lots, there's a lot of money has to go into a rural lot. You got to run your utilities. You You got to get that thing buildable.

12:59That's the cost. It's like, that's why sometimes you can get a lot for free and you still can't even make it pencil. It's not free. No, especially if it is raw land like that. Yeah. You've got so many development costs. No, but right now, if you can pick up, you know, like I know, Henry, you do a lot of this where you flip house and put a lot in your pocket. Like those are really good deals to buy right now because the land is not worth a whole lot. And your land is not worth anything today, but in five, 10 years, it's going to be worth some money down the road. And so if you can put some lots in your pocket, you're doing okay.

13:31All right. Well, lots of dirt for sale right now. A lot of opportunity there. We're going to talk about where you can find your opportunities after our break. We talk a lot on the show about financial freedom. And for some of you, that means eventually having the choice to walk away from your W-2. But there's one expense I think a lot of investors underestimate when they're calculating their financial freedom number. Healthcare. Because once you're paying for health insurance yourself, you might suddenly be looking at hundreds or even thousands of dollars every month. That's a lot more cash flow your portfolio needs to produce before you can comfortably leave your job.

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16:22We are back on On the Market. And Kathy, you brought in an article that talks about off-market listings and more regulation coming through on those. Boo. I know. I know. Well, this is an interesting article from Housing Wire. It is called the off MLS debate moves to Washington and agents need a clear script. So guys, I don't know if this is going to affect you with your off market deals. This is more about brokerages and kind of keeping it in house and are, you know, is this allowed? House panel is going to be reviewing private listing networks while Compass sites 4.6 % gains and other studies show off MLS homes sell for less.

17:07So what that means is basically lawmakers are reviewing these private listing networks, specifically Compass, where they will do like a pre-sale or a coming soon with a property. And then they just kind of circulate it within their own network. At least this is what's being stated. And they say, you know, it works great because these coming soons and new listings are exciting for their current list. And they think that they're getting higher prices for their sellers by doing it that way. But some legislators don't think that's the case. Specifically, Elizabeth Warren wants to see if this is actually hurting the seller because they're not going on the full MLS right away where every agent can see it and every agent can show it and anybody can see what's for sale.

17:58Then Zillow did a report saying that actually they studied more than 15 million sales and Zillow found that if you keep your property off the MLS, they would actually sell for less, 1.3 % less, which is a combined$1.36 billion lost to the seller. So I think this is a situation where politicians are getting involved in private market issues and maybe just wanting to make sure that the sellers really know what's happening. that there's enough disclosure that they understand, hey, this isn't going out on the full MLS. This is just going within our own brokerage to our own agents so we could get the double listing.

18:39We can get the buyer and seller fees. As long as that's disclosed, I feel like a seller should be able to do whatever they want. But I think that's what this is about is just making sure that disclosure is there. What are your thoughts? I have thoughts, but I'm not an agent. So I'm curious to know what James thinks. Oh, I have lots of thoughts on this. The first thing I think is politicians aren't salespeople. They don't understand sales, packaging, or marketing whatsoever. And their opinions are irrelevant to me on this. Because they don't know what they're talking about. And I would love to go debate them.

19:08And I would totally come into a hearing. I will pull properties. And these properties that I just bought are all on market. And these on market deals I bought for less than what they trade for off market. Really? I mean, that's what the article is trying to say is, hey, we're actually helping the seller. I could go through my last 20 purchases and 18 of them are on market. Because the off market, the thing about off market, when people are packaging and selling, they're selling exclusivity, right? Like it's this rare thing. You can't find it anywhere else. And that's where you get investor frenzy.

19:42It's like when you go down to the public auction. When you go buy at the public auction for a foreclosure, you don't really get a good deal. A lot of times they're paying 80 to 85 cents on the dollar down at that auction because why? There's a frenzy. there's competition people get caught up in it that's why i won't physically allow myself to go to auctions because i can't control myself like because i was overpaying because i just get so caught up in the moment right and so i disagree with this across the board because you should be able to market and package these things whatever which way you want because it's your property and it really comes down to as a seller you should be working with a person that you trust and if you trust in that person that's a professional, then they're going to market it the right way.

20:26Some properties will sell for much higher when a buyer is getting exclusively, especially like luxury real estate. For sure, luxury. I'm looking at reselling my flip in Newport Beach right now because I want to lock in a price. And once it goes to market, everyone can look at it and they feel like it's less special. And so I just don't agree with what they're saying. I do agree with everything should be heavily disclosed. Sellers need to know. Yeah, because I don't think Elizabeth Warren is very worried about the luxury. I think she's worried about typical home seller going to an agent and not knowing that their property hasn't been marketed widely.

21:03It's not even luxury though. Like there was a deal that was just sent to me yesterday or it was like three days ago. And they're like, Hey, you can buy this house for 360 grand. I'm like, Oh, that sounds like a good price. Then I pulled the MLS and there's two homes that were listed for 400 that sold for 325 and 335 on market. And not only that, these homes were in better condition than this off market deal. And I'm like, I'm not going to overpay on the as is value. And someone bought that deal anyways, whereas that same person could have gone on market and just bought themselves a much simpler project.

21:34And, and so the exclusivity does work. Everything should always be disclosed. And, and people need to have all the information to make the right decision. I think the seller should have that information, but then give the sale. It's America. Let them do what they want with their property. Yeah. That's the point I was going to make, James, is I hear what you're saying. And you're right. These politicians don't understand the marketing that's involved. These are marketing and sales tactics that most agents are using to try to get the house sold for a good price. Remember, they get paid a commission.

22:03The more they sell it for, the more money they make. So they're incentivized to sell it for more, but they also want to make sure it gets sold. So I don't think that the government should step in and regulate how the houses are marketed and sold, unless it tampers with some sort of fair housing. In other words, unless we're purposefully leaving out a specific group of people by using these marketing tactics that I don't agree with. But they should be able to market it how they want to. But I also agree that it needs to be disclosed property. Me as the consumer, me as the person who has a home to sell, If I go to my agent, I want to know what's happening from a marketing perspective.

22:44Like, why are you marketing my property this way? If it's all done in good faith, meaning you're trying to get the home sold as quickly as possible for as much money as possible, you should have no problem having a disclosure out there telling us what you're doing so that at least we have an understanding. Because at the end of the day, it's my home, right? So I think it should be disclosed. I'm fine with that, but I don't think it needs to be regulated. I don't think you should get to tell people how to market and sell their properties unless it's some sort of discrimination. Agreed. Politicians need to keep their hands out of the cookie jar and work with people rather than tell them what to do.

23:21Well, we're going to take a quick break right now, but when we come back, we're going to talk about why maybe it's a good time to sell off market because home sales have plummeted according to this news article. We'll be right back. If you listen to the show, You've heard us say this a thousand times. Run the numbers. Don't buy a property because somebody tells you it's a great deal. Look at the income, look at the expenses, and decide for yourself whether the numbers actually make sense. So let me ask you something. When was the last time you ran the numbers on what you were paying for health care?

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