Is the Housing Market Finally Improving—Or Is It a State of Emergency? With Jon Grauman

Summary

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Money Rehab with Nicole Lapin

Episode: Is the Housing Market Finally Improving—Or Is It a State of Emergency?
Guest: Jon Grauman
Date: September 12, 2025

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Episode Overview

In this episode, Nicole Lapin welcomes back one of her favorite real estate experts, Jon Grauman, to dissect the current state of the U.S. housing market. Together, they explore whether the market is showing signs of improvement or if it's spiraling toward a state of emergency—diving into rising inventory in major markets, affordability obstacles, government intervention proposals, and what it means for both buyers and sellers. Tackling both national trends and local anecdotes—especially in Los Angeles and fire-affected areas—the episode is packed with actionable advice and behind-the-scenes insight for anyone navigating today’s real estate landscape.

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Key Discussion Points & Insights

1. A Vibe Check: The Market at a Crossroads

• Hyperlocal Variability:

  • Jon emphasizes that the real estate market is “hyper local specific”—what’s happening in L.A. might be very different from Miami, Boise, or Austin.
  • Quote:

    “It’s still a supply and demand issue…there’s still not enough supply to meet the demand.”
    — Jon Grauman [03:54]

• Inflation vs Home Prices:

  • Jon highlights a key overlooked problem—construction costs (labor, materials, debt) have inflated faster than home values, squeezing builders and leading to fewer new homes.
  • Quote:

    “The rate of inflation of construction costs is far outpacing the rate of appreciation in home values. That’s a collision course.”
    — Jon Grauman [04:45]

• Luxury Market Surprises:

  • L.A. is seeing a spike in inventory (about 50% year-over-year)—a big change after years of scarcity.
  • Higher rates have led many to stay put, locked in by low-rate mortgages, but life changes are now pushing more to sell.

• National Recalibration:

  • Pandemic-era price growth was unsustainable and markets like Miami and Texas are adjusting, but they’re still benefiting from migration out of cities like L.A. and San Francisco.
  • Quote:

    “In certain markets, that means we’re going to see prices start to adjust downward—and while that’s painful, it’s ultimately healthy.”
    — Jon Grauman [07:40]

2. Buyers vs Sellers: Challenges on Both Sides

• Neither’s a Clear Winner:

  • Buyers face affordability hurdles (high rates).
  • Sellers feel locked-in at low rates—move-up is expensive.
  • Quote:

    “People ask me all the time, is it a buyer’s market or a seller’s market? And it’s honestly neither. Both are challenged in different ways.”
    — Jon Grauman [08:30]

• Personal Timing over Market Timing:

  • The “is it a good time to buy?” question is best answered personally, not with market trends. Rate drops may simply crowd the market and drive prices up due to pent-up demand.
  • Quote:

    “It’s really about, is it the right time for you specifically to buy? Don’t let even interest rates make that decision for you.”
    — Nicole Lapin [10:30]

3. Can the Government Step In? State of Emergency & Policy Proposals

• Treasury Secretary Besant’s Emergency Proposal:

  • Calls to declare a housing state of emergency have circulated, including proposals for standardizing zoning, expediting permits, and cutting closing costs.
  • Jon is skeptical of the meaningful impact unless local governments actually carry through with reform.
  • Quote:

    “This is like trying to turn a very old, big, archaic ship.”
    — Jon Grauman [11:44]

• Cutting Closing Costs:

  • Jon finds most closing cost fees “BS” but points out that even eliminating some “is not going to move the needle in a measurable way” since they’re a small fraction of home prices.
    — [13:26-13:55]

• True Levers:

  • What’s really needed: builder subsidies, expedited permitting, reform of outdated codes, and scaling up modular housing (“house in a box”).
  • Quote:

    “Anything that contributes towards the cause, I’m all for. What we’re talking about doesn’t build more homes. And that’s what we really need.”
    — Jon Grauman [13:58]

4. Innovation on the Horizon: Modular Homes

• The Future is Modular:
  • Jon is bullish on modular construction as a scalable way to address supply constraints—most effective “where there’s more land.”
  • Quote:

    “Modular homes…this is the future of home building.”
    — Jon Grauman [14:32]

  • U.S. now has plants making modules domestically, less reliant on overseas imports.
  • Barriers: Not enough skilled GCs, design limitations, less suited for certain geographies (e.g., winding L.A. hills).
  • Opportunity: Faster, cheaper, and more disaster-resistant building in suburban/rural America.
  • Follow-up: For those interested, Jon's open to helping people explore this path.
  • Quote:

    “If somebody was interested, where would they start?”
    “jonGrauman.com…Reach out to me and watch this space.”
    — [17:00]

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Notable Moments, Quotes, and Explanations

5. Realtor Commissions, The NAR Lawsuit, & Real World Negotiation

• What’s Changed?

  • Despite the splashy headlines, recent commission lawsuits have not really changed how fees are structured—just added some contractual and paperwork steps.
  • Quote:

    “It really hasn’t changed what the final outcome is… It’s a longer, more circuitous route to the same destination.”
    — Jon Grauman [17:58]

• Are Commissions More Negotiable Now?

  • Technically always negotiable. Custom is powerful—offering none to buyer agents makes a seller’s home less competitive.
  • On Negotiating Comms:

    “There’s plenty of discount brokers who’d be happy to take it at a lesser amount…But I try to obviously protect and guard my fee, which is my livelihood…”
    — Jon Grauman [20:19]

• Tactics in Tough Markets:

  • Personal touches may give buyers an edge (writing a heartfelt letter to the seller)—sometimes even in multi-million dollar deals.
  • Quote:

    “Buying and selling homes is very personal and very emotional…if you can connect with someone that can win the day.”
    — Jon Grauman [55:07]

6. Interest Rates: Myth vs Reality

• The Fed Doesn’t Directly Set Mortgage Rates:

  • Jon (and former guest, Fed President Austan Goolsbee) clarify that while the Fed sets short-term rates, mortgage rates are determined by long-term bond yields, inflation expectations, and market sentiment.

  • Quote (Austan Goolsbee):

    “There’s not one interest rate…there’s short rates…the Fed sets, and then there’s long rates which…influence mortgages…The Fed doesn’t set those.”
    — [25:05]

  • Jon agrees, adding uncertainty in the broader economy and political environment further complicate mortgage rates.

  • Quote:

    “Even if the Fed does lower rates…adjustment to mortgage rates might be minimal.”
    — Jon Grauman [27:18]

  • Nicole distills:

    “Long-term rates…the end of the curve is really a referendum on inflation…mortgages are more reflected on that than the 25 basis points the Fed might move.”
    — [27:59]

7. Fannie & Freddie IPO Talk

• Implications of an IPO:

  • Jon outlines the pros (capital, competition, innovation) and the cons (loss of government stability) of taking Fannie Mae and Freddie Mac public, noting their key role in middle American lending.
  • Quote:

    “They could raise capital…create more competition…But they’re also the backbone of the American lending institution for a long time.”
    — Jon Grauman [31:24]

• Government Conservatorship Analogy:

  • The U.S. government’s role since the 2008 bailout is compared to being a “backstop”—with $187 billion injected at the time.

• Anecdote:

  • Jon’s front-row seat as a mortgage broker during the 2008 crisis:

    “It was like having a front row seat for the end of the world…Most people don’t realize how close we were to the brink of total financial collapse.”
    — Jon Grauman [33:50]

8. Natural Disasters & the Real Estate Market

• Post-Fire Market Dynamics:

  • In fire-ravaged L.A., thousands of lots are set to hit the market, creating temporary over-supply and downward price pressures.

  • Quote:

    “We started to see about three, three and a half new lots hitting the market every day. That creates an oversaturation…and starts to apply downward pressure on values.”
    — Jon Grauman [38:09]

  • Land values are down 40-50%, except in the Huntington, which remains a prime location.

  • Builders are pushing to get first to market as eventual oversupply is expected.

• Buyer & Renter Tactics Post-Disaster:

  • After the fires, rental demand exploded; people were submitting rental applications before viewing properties to get an edge.
  • Quote:

    “The real estate community…probably worked as hard as we ever have for virtually nothing, which is fine…We were just trying to help so many displaced families find housing.”
    — Jon Grauman [50:36]

• Market Advice:

  • Even after disaster, basic principles of supply and demand rule: early buyers pay more, oversaturation moves prices down, and location remains key for re-building communities.

9. Actionable Takeaways & Tips

• Insurance: Don't Get Complacent

  • Examine and update your home insurance coverage for disasters—know what’s covered, understand scenarios, and make sure you’re protected.
  • Quote:

    “Most areas today are under threat of some type of natural disaster…Really check with your carrier, understand what your coverage is…prepare yourself for that doomsday scenario…”
    — Jon Grauman [53:13]

• Who You Work With Matters

  • Whether buying, selling, or renting, team up with an agent who truly advocates for you—especially during high-stress market events.

• Letter to Sellers: A (Legal) Personal Touch

  • No photos, but a sincere note may win out if offers are otherwise similar in a competitive market.

  • Anecdote:

    “One of the biggest deals I closed…was in multiples…Had them write a letter that spoke to the sellers…and they accepted the lesser of two offers.”
    — Jon Grauman [56:16]

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Timestamps for Notable Segments

• [03:54] – Jon’s market “vibe check”: local specifics, supply & demand, inflation outpacing appreciation
• [07:40] – Patterns in major market corrections and recalibration
• [08:30] – Buyer vs seller challenges in today's market
• [10:30] – Why timing your next move is a personal, not market-driven, choice
• [11:44] – Jon's skepticism of government emergency proposals and reforms
• [13:26] – Why lowering closing costs won’t fix the housing crunch
• [14:32] – Modular homes and construction innovation as the best hope for building more
• [17:58] – Realtor commissions: NAR lawsuit fallout and the reality of negotiations
• [20:19] – On commission negotiation: value, service, and “discount brokers”
• [25:05] – Austan Goolsbee: Fed rates vs mortgage rates explained
• [27:59] – Nicole and Jon explain long- vs short-term rates, mortgage impacts
• [31:24] – Jon’s take on the Fannie and Freddie IPO debate
• [33:50] – 2008 crisis, government conservatorship, and financial system stress
• [38:09] – Post-fire real estate: market saturation, builder strategy, and pricing uncertainty
• [53:13] – Jon’s three practical tips: insurance vigilance, disaster-resistant building, and working with the right agent
• [55:07] – Using personal letters (without photos) to stand out in competitive offers

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Episode Tone

• Conversational, clear, and accessible (“the only financial expert you don’t need a dictionary to understand”)
• Warm, honest, occasionally irreverent, with real-life anecdotes and gentle humor (e.g., “If you want to buy a sexy modular home…”)
• Deeply empathetic when discussing disaster recovery and displacement

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For the Listener: Core Takeaways

• Supply & Demand Rules—the core law even in chaos; watch how inventory shifts, and learn your local trends.
• Time Your Buy/Sell to Your Needs—Don’t just chase rates; act when it’s right for you.
• Don’t Trust Hype Over Substance—Big policy moves, lawsuits, or even rate cuts often only tinker at the margins.
• Protect Yourself—Know your insurance, have disaster contingencies, and choose experts carefully.
• Bring a Personal Touch—In crowded markets, personal stories and relationships can still give an edge.

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For more from Jon Grauman: Visit jongrauman.com
Got questions for Nicole? Email [e-mail]

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Transcript

[Nicole Lapin]

If you take only one thing away from today's episode, Money Rehabbers, let it be this. In my not so humble opinion, Public is the best brokerage for investing in bonds, stocks, ETFs, options and even crypto. You can try it out for yourself and see why I love it so much. @Public.com MoneyRehab Public is legit, the only platform I use to buy bonds. Before public, I used to buy government bonds the hard way. Slow websites, confusing interfaces, website designs straight.

[Co-host or Interviewer]

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[Nicole Lapin]

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[Co-host or Interviewer]

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[Nicole Lapin]

And then I found Public about five years ago and I have not looked back. I can now finally buy bonds without wanting to rip my hair out. Public makes it so easy to buy bonds. Whether you're into Treasuries or corporate bonds, you can browse thousands of options right from your phone. But like I said, Public isn't just all about bonds. You can also find stocks and ETFs and they offer a high yield cash account with a 4.1% APY, which is higher than the national average. They even have retirement accounts. You can now open a traditional or Roth IRA or both right on public so your future self covered. And for a limited time you can earn a 1% match on all your IRA deposits, IRA transfers and 401k rollovers. If you want an investing experience that's both smart and simple, head to public.com money rehab one more time. Public.com money rehab this is a paid endorsement for Public Investing. Full disclosures and conditions can be found in the podcast. Description Support for today's episode comes from Square the easy way for business owners to take payments, book appointments, manage staff, and keep everything running in one place. On this show and in my books, I always talk about how important it is to have multiple streams of income. But how do you actually go from hobby to hustle? The answer? Square. I have seen it so many times in real life. Just this weekend at the Farmer's market there was a mom selling banana bread. We love banana bread and I could not resist. In the past I might have missed out because I never carry cash. But with Square, she was able to take my card. In seconds, I got my delicious treat, she got paid and neither of us had to stress, with Square you can get all the tools to run your business with none of the contracts or complexity. And why wait? Right now you get up to $200 off square hardware at square.com go mnn that's square.com g o/m n as in Money News Network, run your business smarter with Square. Get started today. I'm Nicole Lapin, the only financial expert. You don't need a dictionary to understand. It's time for some Money Rehab. Everyone on Wall street is wondering how the Fed meeting next week is going to affect interest rates. But on Main street, the big question is, how will the Fed meeting next affect mortgage rates? Today, with a pulse check on the real estate market, I'm joined by John Grauman. John is a real estate agent here in California who you might know from Buying Beverly Hills on Netflix, or you might just know him from Money Rehab, because I have him on the show.

[Co-host or Interviewer]

Every single time the real estate market needs decoding.

[Nicole Lapin]

He is one of my faves. Today we talk about whether the Fed meeting will affect interest rates. We break down the speculation that we might be headed for housing correction in some major real estate hubs. And we unpack Treasury Secretary Scott Besson's proposal to declare a housing state of emergency. And of course, we talk about what all of these headlines mean for you.

[Co-host or Interviewer]

John Grauman, welcome back to Money Rehab. Is this the third time?

[John Grauman]

I think it is. Third and fourth.

[Co-host or Interviewer]

You've been to every one of our studios.

[John Grauman]

Yes. I'm definitely like the returning champion.

[Co-host or Interviewer]

You're the only one.

[John Grauman]

Yeah.

[Co-host or Interviewer]

We have to get you a jacket or pin or a sash. I don't know.

[John Grauman]

I want all the things.

[Co-host or Interviewer]

Thank you. Let's do a vibe check on the housing market. What's going on? How are you feeling?

[John Grauman]

You know, real estate is so hyper local specific that it's really hard to speak in generalities because how the market may be performing in LA might be very different than Boise, than it might be in Miami or Austin, et cetera, et cetera. So I would say that generally speaking, it's still a supply and demand issue, which I've talked about previously on this show. I'm sure we'll talk about a lot more in that in most of the country, there's still not enough supply to meet the demand. And that is only continuing to increase because there's been such a strain put on building new homes. They were just not building enough of them. And that really leads to what I think is probably the biggest issue that the housing market is facing right now. And it's kind of the silent killer that no one's really talking about, which is that the rate of inflation of construction costs is far outpacing the rate of appreciation of home values.

[Co-host or Interviewer]

Say that one more time.

[John Grauman]

The rate of inflation of construction costs is far outpacing the Rate of appreciation in home values. And that's a collision course when you start to think about it. Right? We've seen minimal adjustment to home prices or land value, let's just say. But obviously the cost of debt has gone up significantly. Right. For a builder to borrow money on a construction loan is way more expensive now than it was a few years ago. The cost of labor has gone up, the cost of materials has gone up, Everything's gone up. But home prices have kind of started to slide back a little bit. So again, if a builder is buying a property and they're underwriting the deal and what they would need to sell it for is not in line with where the market value currently is, builders start pulling back, which is what we've seen kind of across the board. But on the other side of the aisle, you have a growing population, you have the millennial generation that's putting a greater strain on the housing market that we've ever seen before. Right? They're all married and having kids and getting settled in their jobs. They're ready to be homeowners. But it's very cost prohibitive in today's interest rate environment. And it's a real problem. More specifically in some luxury markets like LA, a very different story. In LA, we've seen about a 50% increase in inventory this year, a huge increase. Because for the last three years there's been a stranglehold on the inventory, right? There were fewer buyers in the market by virtue of higher interest rates, but there were even fewer sellers on the market that felt like they had these golden handcuffs to these historically low rates that they thought we're never going to see again. And it created the stranglehold and that helped inadvertently to stabilize home prices. But it's now three years into this and you have people that are saying, okay, I have life circumstances, I need to sell. My mortgage is going to be adjusting the next couple of years. I want to make a move into a different area, what have you. And now we're seeing this influx of inventory. Well, if the buying demand doesn't show up to balance the scale, the only inevitable outcome is that it starts to apply downward pressure on home prices, which if you think about it, we've been in a, essentially a three year housing recession with minimal adjustment to home prices. We're at a tipping point right now. We're either going to see some improvement in interest rates, which will compel people to get off the sidelines and then start to create some momentum and inertia and maybe the market starts to Pick up steam or if that doesn't happen, the reality is it could get worse before it gets better.

[Co-host or Interviewer]

I do think we're at this tipping point. It almost feels like a game of chicken. And I'm not surprised that LA is leading the way for people to say, okay, life circumstances, enough is enough. I'm sitting on this beautiful, amazing 3% mortgage, but I need to move and I need to just swallow the 6% or whatever I'm going to get on the next place. And I think that we're starting to see that in correction territory for other places like Miami, like Texas. Are you thinking that the way L A goes, so will places like North Carolina, Florida, Texas to an extent, but.

[John Grauman]

Not really because a lot of those places are the beneficiaries of markets like L A and San Francisco. And I'll just say many parts of California that people and companies have moved from and they're moving to parts of Texas and they're moving to Miami and so on and so forth. So I think what we're really seeing is the market is recalibrating from two years of unsustainable price growth. Right. We saw obviously, Prices skyrocket in 20, 21 and 22, and all during the pandemic, and it wasn't sustainable. Everyone knew that. And the market's now recalibrating. And in certain instances, in certain markets, that means we're going to see prices that are going to start to adjust downward a little bit. And while that's painful, it's ultimately healthy. They couldn't sustain where they were.

[Co-host or Interviewer]

Painful for the seller?

[John Grauman]

Yeah, for sure.

[Co-host or Interviewer]

Glorious for the buyer.

[John Grauman]

Yes. People ask me all the time, you know, is it a buyer's market or is a seller market? And it's honestly neither. Both are challenged in different ways. From buyer standpoint, affordability is still a huge issue in the high interest rate environment we're in. From a seller's standpoint, again, most of them feel like they're locked in these historically low interest rates and if they were to sell, what kind of a lateral or upward move could they make? And going from a 2 1/2% rate to a 6% rate, and you know, you have to study a lot of different things here. There's various migration patterns in terms of where people have been moving to and from. As I said, California, I think, has suffered in terms of losing a lot of people to other states, but it's still California and we still are welcoming people here. I feel like every day that are still looking here from various parts of the world because it's still a very desirable place to live.

[Co-host or Interviewer]

We can get into it. But, yes, it's also not as desirable on the tax front, on the crime front, on many fronts.

[John Grauman]

Yeah.

[Co-host or Interviewer]

But everybody probably asks you all the time, is it a good time to buy? We've talked about it each time you've been here. What do you say to them now?

[John Grauman]

I always try to explain to people, the question is really more rooted in, is it the right time for you? Right? Is it's really about sort of, is this the right moment for you to buy versus trying to meet the market or time the market? Right? What are your life circumstances? Why are you looking to buy? Are you currently a homeowner? Are you looking to make an upward move from your current set of circumstances? Do you have two kids? You're expecting your third in an extra bedroom? If it's the time for you to buy, then it's a matter of then. Okay, now let's go find the right opportunity. And that doesn't necessarily mean the right deal. It just means let's find the right house. Let's obviously try to get it at the right price and get as good of a deal, of course, as the market will bear. But to me, it's such a personal question. So, like I said, on a macro perspective, they're both challenged in different ways. But, you know, one could argue it'll be a better time to buy when interest rates come down, whenever that happens. But it's gonna be a better time for everyone. Right? That just means more people are gonna come off the sidelines. That creates competition. Competition inherently raises prices. Again, supply and demand.

[Co-host or Interviewer]

The better question, is it a good time for you specifically to buy? Don't let even interest rates make that decision for you. It could be better, but again, that brings on a lot of competition. Sounds like people are getting less home, though.

[John Grauman]

Interesting. I mean, again, going back to what I was saying before about how there's not enough new homes being built. The trend right now is that everyone, especially new homeowners, everyone wants new construction. Right. They all want new. That's just kind of become, I don't know, sort of the trend or the expectation, especially, again, with millennials. So that is challenging because there's, as I said, not enough of it being built. And perhaps you're getting less for your buck.

[Co-host or Interviewer]

Yeah. There are all these memes and stuff that are showing people with crappy places just not fixing it up, just being like, here you go, you're welcome. Here's a plot of land to do with it as you will. Million dollars?

[John Grauman]

Yeah. It's really difficult right now, especially to be spending the amount that it costs to be able to buy in right now. It's really just, again, personal sort of circumstances and whether it's the right time for you.

[Co-host or Interviewer]

Are you following what's going on? I'm assuming, yes. With Treasury Secretary Besant and talking about declaring a housing state of emergency. Do you think there's anything that government can do to help?

[John Grauman]

That's a loaded question. I think there's a lot of things the government can do to help, in theory. But, you know, this is like trying to turn a very old big archaic ship. There's various things that they can do, particularly in the local levels, in terms of. In terms of reforms to the building codes, in terms of expediting permitting fees or permitting the permitting process, rather. Excuse me, in terms of just streamlining that process and making it less prohibitive for builders to develop. But again, it's very helpful. If it was being done effectively, why isn't it?

[Co-host or Interviewer]

Who's stopping it?

[John Grauman]

I would say city officials at local levels. For example, here in la, there are a number of elected officials in our city council. The members of city council are really the ones that kind of dictate the agenda for LA have a very different outlook. A lot of them would like things to go back to the way they were and are not progressive in their thinking and trying to actually make meet this demand and solve this problem. And it's just everyone has their own opinion on it. So sure, I think government has the power to do so. Will they do it and can it be done and orchestrated in a way that will actually be effective? I wish I had more confidence in it, but, you know, past experiences have left me somewhat jaded.

[Co-host or Interviewer]

Fun fact. This happened after World War II. There was a state of emergency allowed. But we have a lot of other issues that we're dealing with a lot of other headwinds. So far, all we've heard from the government is that they're studying ways to decrease closing costs, standardize building and zoning codes, which you talked about. What would decreasing closing costs look like? That's interesting because some of what's in closing costs could be up to the banks to decrease.

[John Grauman]

Sure. I think that there's a lot of BS fees in closing costs that could easily be done away with an underwriting fee, a doc prep fee. There's so many fees, it's ridiculous. It's not going to move the needle in a measurable way.

[Co-host or Interviewer]

Why?

[John Grauman]

Because we're talking about thousands, and we need to be talking about tens of thousands or hundreds of thousands. It's not your closing costs. It's a de minimis amount in the grand scheme of things. Your closing costs are generally 1% of your purchase price, somewhere in that ballpark. So if you're taking off a fraction of that 1%, it's not going to move the needle in a measurable way.

[Co-host or Interviewer]

But I think it would help. Like, why haven't we done that before?

[John Grauman]

I don't know. And I'm all for it. And we have anything that contributes towards the cause, I'm all for what we're talking about doesn't build more homes. And that's what we really need. We need subsidies for builders. We need building reform. We need again, to expedite the permitting process. Those are all the things that will ultimately incentivize builders to get out there and build. And there may be a whole new wave of how homes are built that I'm not going to get into a ton of detail on. But, you know, modular homes, which has often had a negative connotation sometimes associated with, you know, a mobile home or something like that, which they are not. This is the future of home building.

[Co-host or Interviewer]

No, there are some sexy ones.

[John Grauman]

There are some sexy ones. And by the way, they are house in a box. They are oftentimes more solidly built and more resistant to all the outside threats like fire and like wind. You know, some of these are fire resistant. They can withstand winds of 180 miles an hour. They can be built in a fraction of the time at a fraction of the cost. I'm bullish for sure. Where the future is going. You do have to work within a box. Right. You can't then have free rein on your architectural design and so forth because it's being assembled at an assembly line and it needs to all fit within a cargo container that can't exceed a certain height limit for transportation purposes. But again, for mass building in, let's just say, the broader America, you're not going to see one of these going up Laurel Canyon, for example. Right. It's just not going to happen. Too windy and twisty of a road going up those tight little hills. But for broader America, where there's more land, and that really kind of goes back to what Truman was hoping and trying to achieve after World War II. He had a lot of land to work with. We're not experiencing the same thing here, at least in major metropolitan cities. Right. It's very condensed, very built up land. Of course, is the one thing everyone wants and the one thing they're not making any more of, for sure.

[Co-host or Interviewer]

Are these things coming from China or are there places in the US largely.

[John Grauman]

In part coming from China? There are US Plants that are manufacturing them. The cost is substantially different, as we're experiencing with every product coming from China that, you know, we're trying to now compete with in the US So it's also very difficult to try to coordinate that building from China. If you don't have boots on the ground, if you have dedicated employees that are actually overseeing these projects for you, it can be a very sort of mixed bag of what you might be taking receipt of.

[Co-host or Interviewer]

So if you want to buy a house in a box, I feel like.

[John Grauman]

They'Re on a terrible.

[Co-host or Interviewer]

I know. Okay, so if you want to buy.

[John Grauman]

A further cause for.

[Co-host or Interviewer]

If you want to buy a sexy modular home, you need to get a general contractor here to deal with all the pieces that are coming from wherever.

[John Grauman]

Yeah, you need a GC that is specialized in modular homes, which many are not. It's still a very new concept, relatively speaking. There are very few builders that actually understand how to construct one of these, which manufacturers they're working with. But this is going to be a big part of the future and potentially how we solve this housing crisis because you can build that many more units that much quicker and for that much less.

[Co-host or Interviewer]

I agree. So it sounds like you're bullish. If somebody was interested, where would they start?

[John Grauman]

John grauman.com Somewhere around, you know, reach out to me and what's the space?

[Co-host or Interviewer]

No, you. I feel like this is another business line for you.

[John Grauman]

I have some clients that are heavily involved and very bullish on it. That's where I've learned about it from. And yeah, it's hard to refute because the way of yesterday in terms of home building isn't sustainable today. Not in the environment. Based on what I said earlier.

[Co-host or Interviewer]

Agreed.

[Nicole Lapin]

Hold on to your wallets. Money rehab will be right back. And now for some more money rehab.

[Co-host or Interviewer]

Okay, so closing costs might not move the needle. Zoning and standardized building costs and procedures are really dependent on local governments. And that's been challenging. Where do the realtor fees come in? Like, where's the line item for your commission for overall closing costs?

[John Grauman]

Well, that's changed since the N lawsuit, which was settled last year. It's interesting there was so much made up about this going into it. People thought, this is going to forever change the real estate industry. The buyer's agent will cease to exist, et cetera, et Cetera, it honestly proved to be kind of much ado about nothing, in my opinion, in as much that it really hasn't changed what the final outcome is. There are different procedures and different documents that we have to use to get to that outcome. But the simplest way to describe it is that previously the way it worked is as a listing agent, I would go meet with a homeowner. I would sign a listing agreement with them. That listing agreement would stipulate what the total commission is generally about 5% here in Los Angeles. And then that would be split equally, 50, 50, with the cooperating broker, I.e. the buyer's agent. And that was all stipulated in the agreement. Now that agreement is only between the homeowner, that is the seller, and myself as the listing broker. There is no mention of what the buyer's agent makes, because part of that settlement, or rather that lawsuit, was why is the listing agent negotiating the buyer's fee for them? Let them negotiate it on their own. So we're no longer allowed to advertise what commission is being offered on the mls, which is somewhat ironic because that's largely in part what the MLS was created for, to have a place to house that. But buyer's agents are coming in and saying, here is my offer, and included in it, I am asking for this commission. 99 out of 100 times. I'm seeing that it is the same commission as we saw before and that the seller is still paying for it. It's a longer, more circuitous route to the same destination.

[Co-host or Interviewer]

It's changed nothing in practice.

[John Grauman]

I mean, the closing costs are still basically the same amount in terms of what the realtor commissions are. Technically, they are negotiable, and they've always been negotiable. And that was a huge part of the case, is that there's a bunch of splashy headlines. You know, commissions are now negotiable. They've always been negotiable. Technically, contractually, you were only ever obligated to pay one penny. Anything above that was negotiable. There are certain customs and normalities in each respective marketplace. Like here, it's generally around 5% that vary from marketplace to marketplace, and all of that is negotiable. But, you know, you can be the seller that says, I'm not offering a commission to the buy side. Okay, that's your prerogative. No problem. But if there's nine other homes in your neighborhood that are on the market and all of them are offering a commission, that puts you at a pretty big disadvantage.

[Co-host or Interviewer]

How many People have successfully negotiated with you to lower your commission.

[John Grauman]

I'll say this, I'm a full service, full fee agent. You get what you pay for it. There's plenty of discount. Brokers would be happy to take it at a lesser amount. I'm also a team player. I see the big picture. I see the field. There are certain instances where, you know what? Okay, it makes sense for everyone's going to stand in line at the blood bank and make a donation. I'm game. But, you know, I try to obviously protect and guard my fee, which is my livelihood, because I feel that the value I provide is commensurate with that.

[Co-host or Interviewer]

So you are obviously an elite real estate agent. If somebody wants to negotiate their fee with their local realtor. Yeah, what works? What are the catchphrases that work? What's an argument that resonates with you? If I want to lower my commission?

[John Grauman]

If. So, I'm the seller right now, and I'm trying to make an argument to you. You're being me in this moment.

[Co-host or Interviewer]

Let's roleplay.

[John Grauman]

Oh, wow. I don't know. I feel like, how would you get.

[Co-host or Interviewer]

Me to lower my commission successfully?

[John Grauman]

This is the opposite of the argument that I'm always in. So this is a hard one for me. I don't know. I kind of feel like I've heard just about everything and what's worked for me. It's more just about. Again, speaking candidly, if it's a listing that I know there's heavy competition for in terms of who might get it and the caliber of agents I know I'm competing with, and there's a squeeze on the commission to get that listing. You know, I'm always of the mind that I'd rather have a part of something than all of nothing. And each listing leads to the next listing because it's just, you know, success begets success. So sometimes might be willing to compromise a little bit there. But I'm going to. I'm going to pass on this question.

[Co-host or Interviewer]

So what if I said something to you like, hey, John, there's so much competition, you know, everybody wants to help represent me. What if we could go down 50 basis points?

[John Grauman]

I would probably say something along the lines of, I completely understand where you're coming from, and I appreciate you sharing your perspective with me. Listen, there's over 30,000 licensed agents in Los Angeles alone. And I can tell you they're not all created equally. And there's unfortunately, an embarrassingly low bar for entry into this business. And ultimately, you get what you Pay for. And as I said before, I'm a full service, full fee agent. I think my track record speaks for itself. And the value that I'm going to deliver is going to be commensurate with the commission rate you're paying. There's plenty of other discount brokers I'm sure would be willing to take this for less. In fact, I'm happy to give you the number of a dozen of them if you'd like to call them when I leave. But this is my fee. Damn.

[Co-host or Interviewer]

Okay.

[John Grauman]

Something like that.

[Co-host or Interviewer]

Okay. Some reverse psychology vibes. It feels like, oh, okay. Well, now I must use you. Because you're just willing to walk away. That's the best tactic. Mind of negotiation. Right. If you're really willing to walk away.

[John Grauman]

That'S what it really comes down to. And that's why I always say to my clients, when, you know, we're in a negotiation and as sort of simplistic as it may sound, oftentimes what I'll say is, make an offer that reflects your desire. If your desire is, that's my house, I have to own that house, then don't be cute and don't be coy and let's not be cheap trying to save a couple thousand dollars here or there, not to make light of a few thousand dollars. My job is to also guard my clients, bottom line and try to get them the best deal. But again, in a competitive situation, make an offer that reflects your desire. If you're, I'm not sure about this house. Okay, well, then we don't need to be super aggressive about it. If this is, you know, how's it going to feel? You know, okay, I'm willing to offer $5 million on it. Okay. If I call you tomorrow and say, it's sold for 5.1, can you live with that? Are you okay with that? And it's a genuine question. I'm not like, there's no reverse psychology. It's a genuine question. You really have to think about, like, at what point are you willing to walk away and be okay with it?

[Co-host or Interviewer]

Yes. On the flip side, if you weren't in love with it and you got a deal, then that would make it more interesting.

[John Grauman]

Does it? I always tell people, like when I'm working with people that this is going to be their home. A great deal doesn't make it the right house if you're an investor. Well, we're looking at it through a different lens. But if you're a homeowner and I've had people be like, oh, we're really compromising here and I really don't like this and it's missing a bedroom, but I really love the deal. Great. If the deal is your driver, so be it. But a great deal doesn't make it the right house.

[Co-host or Interviewer]

Yes, your primary house is not a place to invest, it's a place to live and raise your family.

[John Grauman]

That's it.

[Co-host or Interviewer]

If you're a housing investor, it's a totally different story. All of this is really driven by interest rates. And I'm sure you saw it on the show because you're avid listener of Money Rehab. We had Fed President Austan Goolsbee on who said not to be mad at him for mortgage rates. By the way, I want to play you this clip and let's talk after.

[Fed President Austan Goolsbee]

Remember that when people talk about interest rates, there's not one interest rate. Okay? There's short rates, they influence things like credit card rates and stuff like that. And that's what the Fed sets. And then there's long rates which influence mortgages and Treasuries and things of that nature. And the Fed doesn't set those. And so they can go different ways. So if you're investor, let's say, and you're thinking about if the Fed's going to cut rates, what's going to happen to bonds? It makes a big difference. What kind of bonds are you talking about? And take that to the bank and remember.

[Co-host or Interviewer]

Yeah, all right. So if mortgage rates are up, don't be mad at you.

[Fed President Austan Goolsbee]

Don't be mad at me. I didn't do it. Yeah, right.

[Co-host or Interviewer]

He didn't do it. We all look at what happens with the Fed, but the reality is that it's not a direct correlation to mortgages.

[John Grauman]

Correct. First of all, that's a tough act for me to follow. Just super clear for me to come in and speak about interest rates on the heels of that. But I can only obviously concur with his sentiments that, look, the Federal Reserve has control over what's known as the Federal Fund rate, which as he was alluding to, is short term lending between banks, credit cards, et cetera. It does not have any direct correlation to long term interest rates, which is what the 10 year yield is based on. And that's based on a much broader economic conversation about investor sentiment, consumer confidence, inflation, demand for treasury bonds, et cetera. And the reality is we're living in a world right now that feels very uncertain to most people. There's a palpable sense of uncertainty in the market right now, and the natural human Tendency when people feel uncertain is to pump the brakes. Right? So everyone's just kind of cautiously waiting through this because we're in a very uncertain political time, a very uncertain geopolitical environment where, you know, if you don't know what the weather is going to be, most people don't want to go outside. So you have a lot of people just staying in and just saying, okay, I'm going to watch and wait. So that all directly impacts what the ten year is doing. And that's why even if the Fed does lower rates here by a quarter, a half, even a full point, the adjustment to mortgage rates might be minimal.

[Co-host or Interviewer]

Yeah, we saw mortgage rates come down in the last couple of weeks, but that was before the Fed even met. So just basically, you know, the yield curve is a plot of yields and maturities. And so when the Fed moves, it moves short term rates, but long term rates, the end of the curve is really a referendum on inflation. So if people think inflation is going to go up, they want to protect their money and buy long term bonds. If they think it's going to go down, not so much. And so mortgages are more reflected on that than the, you know, 25 basis points that we're probably going to see from the Fed.

[John Grauman]

That's exactly right. Yeah. It's all future forecasting. It's the same way that the stock market will sometimes, you know, try to move four or six months in advance or anticipation of where they think is going. Everyone's trying to skate to the puck.

[Co-host or Interviewer]

But I think it's an important nuance and you're one of the few brilliant real estate agents out there who can talk to that nuance. Because I think that there's a lot of noise and a lot of information, especially online, shocking with real estate agents like really focused on the Fed decision as it relates to mortgages.

[John Grauman]

I think in large part people think that it's a symbolic move that will help stimulate what happens to happen next. Right. That like we have to get things churning and if the Fed says, hey, we hear you, we see you, we know what's happening, we're going to lower interest rates, that many other things will follow suit. Because the real estate market really tends to follow these self fulfilling prophecies. If everyone starts talking about the market going up, gradually starts to go up, everyone says the market's going down, fear creeps into the market, you start to see the market trend downward. So I think the hope here is that a couple of cuts will start to demonstrate that confidence and move the market in the right direction. And then it's just all momentum and inertia building in terms of where it goes from. From there.

[Co-host or Interviewer]

So what are some better headlines that impact your work besides the Fed meetings?

[John Grauman]

I've been looking for one for the last three years, to be honest with you. The last three years have been really difficult and understandably so. This is not all that dissimilar to kind of what we saw on the heels of the 2008 crisis, where they lowered interest rates so low and kept them there for so long it became virtually impossible possible for them to raise the interest rates. And then, of course, we got hit with the pandemic and they dropped interest rates to the floor. They dropped rates to zero. And in trying to kill one monster, they created a whole new one. And this one, unfortunately, is going to have lingering effects for years in terms of these historically low interest rates that a lot of people are just saying, I'm not moving, I'm not going anywhere. So if you're limited in the supply that's coming from existing homeowners, where else can it come from builders? And then it comes right back to the conversation we were just having.

[Co-host or Interviewer]

It's okay if you give a mouse a cookie.

[John Grauman]

I read my kids that book recently.

[Co-host or Interviewer]

Yeah, Just start all over with this.

[John Grauman]

Did you know that book before you had a kid? Or is this like when I was a kid? Okay. All right. I know. If this was new, like, all of a sudden you start speaking in, like, a whole new sort of nomenclature once you're a parent.

[Co-host or Interviewer]

I know. Although, you know, my daughter. We've already talked about interest rates.

[John Grauman]

Sure. That's natural. For eight months.

[Co-host or Interviewer]

Eight months?

[John Grauman]

Eight months.

[Co-host or Interviewer]

That's time.

[John Grauman]

You're actually a little late.

[Co-host or Interviewer]

She's already trading derivatives.

[John Grauman]

She's all over. Yeah. I'd love to see your portfolio. I'm sure it's impressive.

[Co-host or Interviewer]

I think we did a video with her. What you should be doing around eight months old, sitting up, rolling over, trading stocks. If not, go see your pediatrician asap. Follow me for more parental advice.

[John Grauman]

That's really good.

[Co-host or Interviewer]

Okay. Another hot topic in real estate is a potential IPO of Fannie and Freddie, which I told my husband I would like to be for Halloween.

[John Grauman]

What's the costume look like?

[Co-host or Interviewer]

We're not sure. Like houses? I don't know. Or my daughter can be a small house. We're still workshopping it. So, Fannie and Freddie, right now. Can you explain just sort of in John conversational real estate lingo, what Fannie and Freddie do and why this is important.

[John Grauman]

I mean, this is a highly controversial topic in terms of whether or not Fannie and Freddie should ipo. And there's multiple different sides to this. And it really kind of depends on, generally speaking, whether you're in favor of things remaining public or going private. I'll give you a couple different sort of sides to this. There's an argument for them going private, for sure. So Fannie and Freddie have been under government conservatorship since the 2008 mortgage crisis that I referenced earlier. By going private, they could raise capital, they could create more competition, innovation, flexibility in terms of loosening up certain guidelines so that more people can qualify. So it has that going for it. On the other hand, they have been the backbone of the American lending institution for a very long time here, and that often is what helps give and create stability. So, again, various sides to this argument, but that's how I see it.

[Co-host or Interviewer]

I mean, the concern, right, is that the government guarantees the debt. And so we don't know if that's going to be the case if they go public. But they could raise a bunch of money. The plan could value them at 500 billion, raise around 30 billion for the government. The government needs money.

[John Grauman]

That all checks out. Yep.

[Co-host or Interviewer]

And you can still buy them over the counter. By the way, my husband did buy some Fannie and Freddie.

[John Grauman]

Fannie and Freddie have much lower loan limits than do conventional lenders like Wells Fargo and Bank of America and so forth. So, you know, the mortgage options that they provide aren't really applicable in many parts. Many of the affluent parts of this country, in la, in San Francisco, in New York and Miami, you're not seeing a lot of Fannie and Freddie product. It's mostly in sort of the broader middle America. And that's why I was saying before, it's kind of like the backbone of the American lending institution.

[Co-host or Interviewer]

Yeah. Which is why I think we should be talking about it more. Conservatorship means what we think. Britney. Not the same.

[John Grauman]

I couldn't speak to the specifics of what the US Government's conservatorship over Fannie and Freddie entails.

[Co-host or Interviewer]

It's a backstop. Basically, 2008 happened, the government swooped in, put, you know, $187 billion as a bailout for Fannie and Freddie. Then they went under conservatorship. So basically they were under timeout and the government backed all the loans.

[John Grauman]

Yes, there was a massive bailout. For those of you listening and watching that didn't live through it. God bless you. Because it was. That was a scary time, in fact. So there were two great movies done on. This one, obviously, is sort of a more of a major feature film called the Big Short that I'm sure a lot of people saw. The other one that was equally good, in my opinion, is called Too Big to Fail. And that was an HBO movie. And I've watched that probably 20 plus times because every time it came on, I was like just a moth to a flame. Most people don't realize how close we were to the brink of total financial collapse. I mean, Armageddon arm gets it like, no milk on the shelves, no cash in the ATMs. Like, we were right on the brink. So while the bailout, of course, was very controversial at the time and still continues to be, most people don't grasp just how serious it was. I was a mortgage broker during the mortgage crisis, which was like having a front row seat for the end of the world. And it was all unfolding so quickly. I as well, had no grasp or comprehension of just how severe and significant it was.

[Co-host or Interviewer]

I was also in the front row covering it. A lot of ptsd. Maybe people are forgetting. I don't know. I just gave birth and I'm sort of in the time where you forget the pain. I still remember, honestly.

[John Grauman]

It's a real analogy. That's a great analogy. Yeah.

[Co-host or Interviewer]

The Too Big to Fail is based on Andrew Ross Sorkin's book. So I was at CNBC at the time and covering all of this. It felt like I couldn't watch the movie. I watched it once. I haven't watched it as many times as you because it just felt like deja vu. It was just like, too soon. Still too soon.

[John Grauman]

Yeah.

[Co-host or Interviewer]

And that's what worries me about interest rates that we romanticize and glamorize this idea of low interest rates. Like we were addicted to them for so long, but the reason we did that was because we were so close to apocalypse Armageddon.

[John Grauman]

Right.

[Co-host or Interviewer]

And that was an emergency extreme measure because everything else was on life support. So getting back there doesn't feel ideal to me.

[John Grauman]

We're continuing to solve for the problems that were created from previous solutions, if that makes sense.

[Co-host or Interviewer]

That's a good one. That's a bar, John.

[John Grauman]

Yeah, that's really where we are. The solution that they came up with then created a future problem that we had to solve for that created another problem that we're trying to solve for. We're constantly just going back and trying to solve for the previous solutions.

[Nicole Lapin]

Hold on to your wallets. Money rehab will be right back. And now for some more money rehab.

[Co-host or Interviewer]

So for you, the solution was to not leave LA but diversify away from LA after the fire. Because that was its own micro Armageddon that I live through. We've all lived through.

[John Grauman]

Yes.

[Co-host or Interviewer]

So tell me more about that move for you personally.

[John Grauman]

Yeah, just to be clear, one thing doesn't have anything to do with another. I wasn't trying to solve for anything as it pertains to the market or market conditions or the fires that didn't have anything to do with it. I have been spending a lot of my adult life in Napa. It's a place that I've come to just absolutely love and adore. And it's been a very special place for my family and thought that my kids, being of five and eight years old, that this would be perhaps the greatest gift that my wife and I could ever give to them, is to give them the opportunity of maybe growing up outside of a big city where they can just ride their bikes in the street and drink wine. Yeah, well, not yet for them, but. So for me personally, I'm just splitting my time between LA and Napa, which are two great places to be spending your time. So I feel very lucky and fortunate. My presence is still here. My business is still here. Frankly, I spend about as much time commuting on an airplane as I would sitting on the 405 trying to get from Studio City to Brentwood. So, for sure, it's not too bad.

[Co-host or Interviewer]

So in the stock market, we buy low, sell high. We actually have a sweatshirt right behind you that says that in a town after a disaster. I think I'm ready to talk about this from these terms, after living through it, is there a strategy like that that can work? Can you buy low or get deals after a disaster? After the fires in L. A, are there deals to be had?

[John Grauman]

I want to be careful how I answer that, because I don't want to. This sort of opportunistic viewpoint is not one that I identify with wholeheartedly. I understand, like, there's always going to be opportunity and chaos. And I have clients who want to, I'll just say, take advantage of those opportunities to try to buy low and sell high. But there's so much sensitivity to what happened and real people that lost their homes and, frankly, lost everything. So I just try to be a little bit more delicate in my handling of this. But let me give you just an overall overview, which, again, is going to go right back to what I always talk about, supply and Demand. So There were about 6,000 homes that were lost in the Palisades fires and another 4,000 lost in the Altadena fires. We estimate, and we could be wrong, that roughly about 20 to 30% of those homes or those lots now are going to be coming to market for sale. Okay, so that's 1900, 2000 homes or 2000 lots. Excuse me, significant number. So we started to see that happen over the last few months, and it quickly started to snowball. And at one point we were seeing about three, three and a half new lots hitting the market every day. And that creates an oversaturation. And when there's an oversaturation and oversupply, it creates an imbalance between the supply and demand and starts to apply downward pressure on the values. So while before some of these like 6,500 square foot lots were maybe getting 2 million, 2.1 million, they were quickly going down to 1.8, 1.7, 1.6. So over the last few weeks or couple of months, what we've seen is a reversal of this. We've now seen less inventory coming to market because a lot of people realize, whoa, now's not the time to sell. We've already very quickly created an oversaturation. So a lot of people are pulling back on that and either holding off or assessing their options or perhaps still working through their various insurance claims. As of right now, as we sit here, and this is real time data, so this could obviously change, you know, tomorrow or the next day. There's 191 lots that have sold. There are 198 that are currently on the market, and there are 28 that are currently in escrow. That's real time right now of the 10,000. I'm just speaking to the Palisades for a moment. So let's say 6,000, or let's say even more specifically of, let's say the 2000 that might come to market. Based on our estimates, it's still only a couple of hundred right now. Right, so we have a few hundred. It's still only a few hundred right now. So we have a lot more that we need to work through. Now let's cross the bridge and get to the other side for a second. Let's see about what happens once they're done. Historically, there have only been about 25 new home sales in the Palisades per year. What happens when there's hundreds of new homes coming on the market? And further to that point, there are a number of people who are rebuilding but may not move in Right. They've either decided, hey, in order to maximize my insurance claim, I need to actually rebuild because if I sell the lot, I'm not going to take the full amount. So I'll rebuild and then I'll sell it because I already moved to Huntington beach or I already moved to Santa Barbara or what have you. And it's a different time in my kids lives. They're going to a different school, life circumstances again. There will be at some point here an oversupply and oversaturation of inventory which is going to compress prices. So if you're a builder, your objective is to be first to market right now because the first ones will ultimately be the first of their kind and hopefully we'll get really good prices. But the process, I have to say, is going much faster than even I anticipated in terms of the permitting process, the expedition of that. There are 80 homes currently being built in the Palisades right now and there are almost 500 permits that have been issued. The first house is going to be done in a couple months, which is crazy to think about. This is a seasoned builder, they know what they're doing. They got their permits asap. They got in there, they have their own crews. Not everyone's going to follow suit. But in four to five years, the Palisades, it's going to be on its way. You have a lot of the infrastructure back in place, schools, restaurants. It'll be interesting to see where it goes. It's really going to be so much about the ebbs and flows of supply and demand and catching. For example, if a few homes come on the market and they fetch big premiums and then a couple dozen come on, and then a few hundred come on. For a buyer, that's gonna be your time to pounce.

[Co-host or Interviewer]

This is such a hard conversation for me to have, obviously, objectively, but even early on there was like a community WhatsApp that was going around with a Google forum saying if you lived in the Palisades and you wanna buy in the Palisades, we're gonna do a little database so we can sort of keep it in the family. And as people, you know, think about putting their lots on, you can sort of connect with them directly. And I remember it was my birthday in March and I just wrote to this guy sobbing and I was like, all I want for my birthday is to go home. Please send me whatever you guys find. And we found that they said, what's your budget? And he came back to me and he was like, your budget is too low. I Was like, fuck you, first of all. Second of all, how do you guys know how to price these things? I keep stocking like my area and my street and I've seen such disparate pricing. Nobody really knows what does. This plot of land that used to be such a special community and talking four or five years out, you know, I truly can only dream that something similar to what it was can come back. We're just so far away from that. And I don't know if anyone really knows where to price.

[John Grauman]

No. Lots. No. And that's why, you know, ultimately there's. I always say there's only one fundamental truth in this business and that's that ultimately the market will dictate what it's worth. But the market has to have an opportunity to weigh in. And it's just still formulating its own sort of thought process as it pertains to this. Meaning a bunch of properties came on varying price points. Now we're trying to figure out like which ones have actually transacted where the values are settling to try to give some guidance. Looking ahead, I can tell you that as a whole, land value in the Palisades is down about 40 to 50%. Except the Huntington. Huntington is still so desirable that that has held pretty steady in terms of values. But yeah, nobody really knows where it's going to go. And there's a lot of talk about, well, there's going to be an increase. A lot of people are talking about there's going to be the Huntington.

[Co-host or Interviewer]

Just so if anyone.

[John Grauman]

Yes.

[Co-host or Interviewer]

Doesn't know the area is like just close to the ocean.

[John Grauman]

It's close to the ocean, it's close to the village. It's like the 50 yard line right where everyone wants to be. I would just say that there's a lot of talk, a lot of misnomers out there about, you know, there's going to be a squeeze on construction and the cost of materials and labor is going to go up significantly as a result of this. Okay, let's look at where labor comes from in Southern California. It comes from all over. It comes from la, it's going to come from San Bernardino, it's going to come from Riverside, it's going to come from Orange county. In those four counties alone, there's about 42,000 new homes that are built every year. Okay, so let's say it takes about four years to work through this. That's about 170,000 ish. We're talking about rebuilding 10,000 homes between Altadena, Pasadena and the Palisades. 10,000 out of 170,000 ish over the course of four years. That's 5, 6%. It's not enough in my opinion to make a justifiable argument for well, my labor costs have gone up and my material costs gone up. No 5 to 6% fluctuation shouldn't impact that. So, you know, finding a reputable, credible, trustworthy builder that is not going to try to gouge in a situation like this is, I would say, critical what I've seen.

[Co-host or Interviewer]

And again, this is not like me, this is more on vibes than data. But your comment to the prices going down 40 to 50, like I've kind of seen that sentiment happen in real time. There was a lot of obvious emotion around this where people were pricing it as if it used to be. Yeah, the house. And then there was like this pullback of coming to terms with reality and now there's bills that are going through the state to put low income housing in the area. All sorts of other factors that are going to weigh into what is this thing really worth?

[John Grauman]

What's it going to look like? Yeah, I've met with multiple homeowners, as you can imagine, that sadly tragically lost their homes, some of whom have been in a very fortunate position, which not everyone finds themselves in, where they don't have to do anything with it right now. They can sit on it and their insurance claim, you know, covered them. And I've just said to them, if you don't have to, don't. You're waiting for a few different things to happen right now over there. You're waiting for an established proof of concept which doesn't exist yet. You're waiting for interest rates hopefully come down which is going to create more demand and more buyers in the market. And you're waiting to get on the other side of this oversaturation. That to me are like the three things that you just kind of. It's very fluid. You really have to just be looking at this and it's going to largely come down to the Palisades will always be valuable and desirable. But how many people are going to come back? And that's a question that bears no answer right now. The people unfortunately lost their homes fall into three buckets as I see it. They're the people who lost their homes who still want to be in proximity to the life they lost. So areas like Brentwood, Santa Monica, right, The sort of tertiary areas, you know, saw extreme benefit and appreciation in the short term following the fires. Then you have people who want to replicate the coastal living that they lost. And they went to the South Bay, they went to Orange county, they went to Santa Barbara. And for a lot of them it's a nice life in those communities. Not to say that isn't in the Palisades or wasn't in the Palisades, but a lot of them are going to, you know, they're going to set up camp there and they're probably going to carve out a nice home for themselves. And then the third bucket is the people that this was just the proverbial straw that broke the camel's back. And I'm said, you know what, I'm done, right? I've just lost everything. What else do I have to lose? I'm moving to Austin, I'm moving to Nashville, Vegas, Miami, where have you.

[Co-host or Interviewer]

I think early, early on there were some really high sales that happened with this idea that like foreign investors are coming in and it's going to go over market. And that happened. And I felt like there was a moment of rumor mill and some excitement. But that has faded.

[John Grauman]

And that's not what you want, I think in a sustainable rebuild anyways, right? You don't want these big conglomerates coming in, foreign conglomerates buying up city blocks and stuff like that. I don't think restores the Palisades to what it once was that so many people want to come home to.

[Nicole Lapin]

But there's nothing you can do about.

[Co-host or Interviewer]

That except my little WhatsApp group, I guess. Not really Citizens Against Conglomerates. I don't know.

[John Grauman]

Not really. As of now, there's nothing to protect against that and I'm not really seeing that be the case. But you know, you asked earlier about like when is it time to buy, when is it time to sell? The people that bought the first few lots, why? I mean, they just paid such a premium relative to what they were just a few months later. There's Again, I said 191 lots that have sold and I would estimate probably half of those are homeowners and the other half are builders, developers. So it'll be very interesting to see how this all plays out and it's all unfolding in real time. We are in unprecedented unchartered waters here.

[Co-host or Interviewer]

So it'll definitely. Please come back to recap on it. I did want to tell you in my journey after the fires, I learned some a lot of people as you know, were renting because a lot of policies do pay for rentals, you know, while you're placement, additional living expenses for the win and the Rental market was so, so, so, so competitive. I found when I was going to try and find a place for my family, people were putting in applications before they saw the house to try and get approved, before they even went there. That really surprised me. I was like, damn, I need to step up my game. I need to get, like, much more crafty and creative. What were some of the weird, aggressive moves that people were making besides paying up front? If you do that?

[John Grauman]

It was, God, it was, you know, frantic and fast and furious during the immediate weeks and months following the fires. Look, I want to be super clear. I'm not the victim here. I'm not the one that lost my home. But the real estate community and realtors like myself, I got to say, probably worked as hard as we ever have for virtually nothing, which is fine. This is our contribution, our way to give back. But make nothing on leases, that's fine. We were just trying to help so many displaced families find housing. And to your point, and again, sorry to be repetitive, supply and demand, right? All of a sudden you saw this massive increase in demand. Huge and not nearly enough supply to meet it. Then you had opportunistic homeowners that thought, oh, well, if I can least, I've never thought about leasing my house, but if I can get 20, 30% over market, then I'll go ahead and do that. So then there were those really just kind of sticky and icky situations that, you know, there are certain laws and price gouging protections in place that everyone need to steer clear of. But it also created so many misconceptions and again, like misnomers about what this was going to be. I had clients a week later calling me from Los Feliz going, so I guess my house is probably worth about 20% more now, right? No, if I. Let's go back two weeks before the fires, and if I had polled 100 homeowners in the Palisade and said, hi, Mr. And Mrs. Smith, would you ever consider living in Los Feliz? Most of them, which hang up on me like it's location specific. People that lived in the Palisades don't want to move to Los Feliz. They want to, again, replicate that coastal living they just lost or be within close proximity to the life that they just had and where they go to school and where they pick up their dry cleaning and all those things. So we saw the demand spill about as far east as Beverly Hills, and then it just kind of ran out of gas. And even that was mostly just for leases. But yeah, I'm glad to be on the other side of that because it was impossible. You can only lease the house to one person and you have a dozen applicants who all lost their home, who all have a different story to tell and they're all tragic, they're all heartbreaking. It was really. I'll just say I'm glad to be on the other side of it, as I'm sure everyone else is.

[Co-host or Interviewer]

You and me both.

[John Grauman]

Yeah.

[Co-host or Interviewer]

Is there any takeaway from this that we can give listeners not in LA or not going through something like this? As you know, we end our episodes by giving a tip you can take straight to the bank. I know you just every time someone you're like I said everything, I said everything. I got nothing left. Is there any takeaway? Even if somebody is looking at a competitive rental market or competitive housing market that they can use from this conversation to get a leg up or an advantage?

[John Grauman]

Well, I guess the best I can really offer here is first off in your insurance coverage, which is something that I think a lot of us overlook and don't read the fine print. Most areas today are under threat of some type of natural disaster. Right? Earthquake, fire, hurricane, tornado. Really check with your carrier, understand what your coverage is, understand what your options are, understand what happens in the event of an X, Y or Z scenario and just better prepare yourself for that doomsday scenario that like any insurance, you hope you never have to cash in on. But I would say it's something people need to really explore much more closely. I would say if you're building homes, be more thoughtful about fire resistant materials and wind resistant materials and how it's constructed and so forth. And then I think I've ended on the same answer before, but it really just continues to be so true. Is who you work with matters, Right? So in your respective market, find somebody that is really going to be your steward, your advisor, someone that's going to put your interests first and can help you through those moments that hopefully you never have to go through, but can at least you know, again, in a situation like what happened here, having someone that can help you find those rental opportunities and position you for success. It's everything.

[Co-host or Interviewer]

We had Barbara Corcoran on the show and she had a place in the Palisades and she fell in love with a place. She said that she wrote a note. Now, Grant, it's Barbara Corcoran. And so if she's writing a note to a homeowner, they would be more stoked about potentially selling it to her. Maybe is there anything like that that people can use as an advantage, like personal touches that are within the legal realms. Can you clarify what people can do or what they can do to position themselves in a competitive marketplace? I know you can't send a photo.

[John Grauman]

Yes.

[Co-host or Interviewer]

Which I found out the hard way. I tried to send like a photo of my family and a handwritten note to a homeowner and then I was told that's illegal.

[John Grauman]

A lot of people still do it, but yes, you're not allowed to include a photo, but you certainly can write a letter. And it's all case by case. There are certain sellers that just don't care. They just are looking for, hey, who has the best terms and the cleanest offer. But all things being equal in a multiple offer situation, if you are looking at multiple offers of comparable terms, one of them wrote a letter and that letter really connects with you or resonates with you. I mean, you know, buying and selling homes is very personal and very emotional. So if you can connect with someone that oftentimes can win the day. I have actually some of one of the biggest deals I ever closed was a $26 million deal where it was in multiples. I repped the buyer and it was very much a David versus Goliath situation. The other buyer hailed from one of the wealthiest families in the world. And my person, I'm not going to get into their specifics, but wasn't of the same caliber and had them write a letter that spoke to the sellers in a way that I knew they would connect with. And they ended up actually accepting the lesser of the two offers because.

[Co-host or Interviewer]

Wow.

[John Grauman]

Yeah.

[Co-host or Interviewer]

Go David.

[John Grauman]

Sam. Foreign.

[Nicole Lapin]

Rehab is a production of Money News Network. I'm your host, Nicole Lapin. Money Rehab's executive producer is Morgan Lavoy. Our researcher is Emily Holmes. Do you need some Money Rehab? And let's be honest, we all do. So email us your money questions moneyrehaboneynewsnetwork.com to potentially have your questions answered on the show or even have a one on one intervention with the me. And follow us on Instagram @money news and TikTok MoneyNewsNetwork for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make.