Loading summary
Transcript34 lines
- [00:02]
Podcast Narrator
Some of the best lessons don't come from a classroom, they come from experience. On the Power of Advice, a new podcast series from Capital Group. You'll hear from CEOs, investors and founders about how they built careers, took risks and reinvented themselves. If you're starting your own journey, this is the kind of advice you won't want to miss. Available wherever you get your podcasts. Published by Capital Client Group Inc.
- [00:34]
Alex Osola
Trump endorses Ken Paxton over incumbent Senator John Cornyn in a tight Texas GOP Senate race. Plus, some of the biggest home builders in the US Are facing more lawsuits over shoddy construction.
- [00:45]
Nicholas Miller
Some of the big builders, their reserves for legal liabilities had surged in recent years, money that they are kind of setting aside in order to pay for settlements and illegal claims that the homeowners bring against them.
- [00:57]
Alex Osola
And Spanish authorities say the son of the billionaire founder of the Mango fashion chain played a role in his death. It's Tuesday, May 19th. I'm Alex Osola for the Wall Street Journal. This is the PM edition of what's news, the top headlines and business stories that move the world today. First up on today's show, the talks to end the war in Iran. President Trump said yesterday that he called off a US Attack on Iran to make room for negotiations. Now we're reporting that progress seems to have stalled out. Regional mediators and US Officials said that Iran's position in the talks hasn't changed much from before. That's raising questions about whether there even is an off ramp to the conflict. During a White House press conference Today, Vice President J.D. vance said the negotiations are ongoing.
- [01:46]
J.D. Vance
So we're gonna keep these negotiations private until we've got something, of course, to tell the American people and at that time we will.
- [01:51]
Alex Osola
Vance also said that Trump is willing to restart the military campaign if necessary.
- [01:56]
J.D. Vance
We are not going to have a deal that allows the Iranians to have a nuclear weapon. So as the president just told me, we're locked and loaded. We don't want to go down that pathway. But the president is willing and able to go down that pathway if we have to.
- [02:09]
Alex Osola
We understand that the US And Israel have been preparing to carry out new attacks within days and that strikes could still happen by next week. Tehran has warned of a fierce response if it is attacked again. Separately, the Journal has learned that the US Seized an Iran linked oil tanker in the Indian Ocean overnight. President Trump is keeping up the economic pressure on Iran as well as threatening to resume military strikes. The Pentagon didn't respond to a request for comment. Back in the U.S. president Trump has endorsed Texas Attorney General Ken Paxton for Senate over incumbent Senator John Cornyn. Trump's endorsement throws an 11th hour curveball into a tightly contested Republican primary. Cornyn has held the Senate seat since 2002. He's been backed by old school Republican supporters. But Paxton has accused Cornyn of not being firm enough in his backing of Trump. The election is next Tuesday. In Washington, Acting Attorney General Todd Blanche testified in front of Congress today. He answered questions about The Trump administration's $1.8 billion, quote, anti weaponization fund, which we told you about yesterday. It's drawn criticism from lawmakers in both parties. Blanche will appoint the commission members who will decide how to dole out the funds. He said that none of Trump's family members will receive a direct payout.
- [03:26]
Todd Blanche
That is not what the what the AG Order that I signed yesterday says. It does not limit it to President Trump or President Trump's friends. To the contrary, President Trump isn't taking a dime.
- [03:36]
Alex Osola
But the agreement that created the $1.8 billion settlement fund has now expanded in a way that could be a significant financial benefit to the president. The deal has now expanded to end all pending tax audits of President Trump and of his businesses. A DOJ document posted today said the government would be, quote, forever barred and precluded from pursuing certain claims against Trump, his businesses and family members, including anything related to previously filed tax returns. This spring. We've been covering how the US Housing market is doing and whether a hoped for recovery could still happen. Today we've got some different ways to gauge how it's doing. First, Home Depot reported lower profit in its fiscal first quarter. Chief Financial Officer Richard McPhail told the Journal that homeowners are still pulling back on big home improvement projects because of economic uncertainty. Meanwhile, there's a growing trend in the world of mortgages. Lenders are increasingly turning to alternative loans. According to the real estate data firm Inside Mortgage Finance, mortgages using alternative lending practices made up nearly 6% of all home loan originations last year. That's a small portion of the market in the scheme of things, but that's the highest percentage since the housing crash two decades ago, and it's doubled in size over the past three years. Nonconforming loans offer an opportunity for homebuyers who might not otherwise qualify for traditional loans. Like people who are self employed, they carry a higher interest rate for the borrower, but they also come with more risk for lenders. Lenders are accepting those risks to boost lending activity during a slower period and a Growing number of people who bought a new home are suing the builders over what they say are defects in construction. They say that builders are using cheaper materials, cutting corners, and hiring unqualified subcontractors. The legal liabilities for some of the country's biggest homebuilders, like Dr. Horton and Lennar, have surged in response. For more on these lawsuits and how they're affecting the housing market, I'm joined now by Journal reporter Nicholas Miller. Nicholas, what are some examples of the kinds of defects that people are suing over?
- [05:41]
Nicholas Miller
Yeah, it could be kind of everything. There is litigation going on right now between the Seminole Tribe of Florida vs. Lennar involving over 400 homes that the tribe says involve all sorts of problems, including improperly installed roofs and mold issues. There's another kind of legal dispute going on in a community in Nevada that alleges that their builder, which is Pultegroup, improperly prepared the soil underneath the community so that the homes they allege are, you know, literally sinking into the ground. Blake and Beth Horio, they are retirees. They moved to Henderson, Nevada, and they very quickly started having problems.
- [06:24]
Blake or Beth Horio
We're all seniors here. This is a 55 plus community. This is our retirement. We worked hard to get here, and we can't enjoy our home. The backyard, the pool, the jacuzzi. I can't even have coffee.
- [06:38]
Nicholas Miller
Outside, there were cracks spreading across their ceilings. Their sliding glass doors wouldn't open, and their foundation sank, kind of leaving a gap underneath the house, creating all sorts of problems.
- [06:50]
Alex Osola
The Horyos are involved in a legal dispute with Pulte Group. A Pulte representative said that some of the homes in the community could have been affected by the, quote, compression of native soils in isolated areas. He said Pulte follows strict quality standards and is committed to completing needed repairs. But, Nicholas, the homebuilders that have seen this increase in lawsuits, how many suits are we really talking about and is it affecting their operations?
- [07:14]
Nicholas Miller
It really depends. One thing I know this, looking through the financial statements of some of the big builders, including Dear Horton and Lennar, is that their reserves for legal liabilities had surged in recent years. Money that they are kind of setting aside in order to pay for settlements and illegal claims that the homeowners bring against them. In the Dr. Horton's case, their reserves rose to over a billion dollars at the end of 2025. Dr. Horton resolved 405 claims for a total cost of 57.2 million last year. Both of those numbers are more than double the number of claims and their costs in 2022.
- [07:53]
Alex Osola
What do the companies say about these suits?
- [07:56]
Nicholas Miller
Principally that the number of claims that are involved are a tiny fraction of of homes that they build. And they also say that some of the plaintiff lawyers who are bringing these claims are, you know, adopting kind of aggressive strategies to kind of drum up some of these claims, knocking on doors in new communities, sending out flyers encouraging homeowners to pursue dubious claims.
- [08:23]
Alex Osola
You know, Nicholas, we've been talking on the show a lot this spring about this key home buying season and how it's like kind of shaping up to be a bust, at least so far. What does this rise in lawsuits mean for the housing market writ large?
- [08:36]
Nicholas Miller
So the thing that's difficult for builders here is that they are trying to save costs wherever they can. Labor costs are very expensive because of the storage and skilled labor. Materials costs are also rising. A lot of the homeowners bringing these cases, they allege that using cheaper materials, cheaper subcontractors that create some of these problems.
- [08:58]
Alex Osola
That was WSJ reporter Nicholas Miller. Thanks, Nicholas.
- [09:01]
Nicholas Miller
Thanks so much.
- [09:03]
Alex Osola
Coming up, used car titan Carvana is expanding into new cars. We'll get into what that means for the traditional dealership model after the break.
- [09:19]
Red Bull Advertiser
Ready to soundtrack your summer with Red Bull Summer All Day Play? You choose a playlist that fits your summer vibe the best. Are you a festival fanatic, a deep end dj, a road dog, or a trail mixer? Just add a song to your chosen playlist and put your summer on track. Red Bull Summer All Day Play. Red Bull gives you wings. Visit Red Bull.com BrightSummerAhead to learn more. See you this summer.
- [09:49]
Alex Osola
It was another day of caution on Wall street. And as investors worry that without a diplomatic breakthrough on Iran, oil prices will keep rising. All three major indexes fell. Nasdaq led, the losses falling 0.8%. The company Carvana brought buying used cars into the digital age. Buy a car online and get it delivered to your door. No test driving or visit to a dealership now, though, it's also expanding into new cars. Chris Otz, who covers the auto industry, is here now with more. Chris, what kind of threat does this present to the traditional dealership model?
- [10:25]
Chris Otz
What we've seen in the data that we've been able to get access to is that when Carvana takes over an old school dealership, they have a lot of power to ramp up the sales very quickly. So really interesting test case, you know, on the outskirts of Phoenix, this little dealership that they bought about a year ago was doing 30 to 50 sales a month as of April, it is the number one dealership for Stellantis in the country. That's Jeep, Chrysler, Dodge, ram doing about 350 sales a month.
- [11:03]
Alex Osola
Now are there changes expected in the way people buy cars long term from this?
- [11:09]
Chris Otz
It's a really tricky question because in the United States, franchise automotive dealers really dominate the new car space and they have a lot of protection for their business model in terms of state laws, rules that they agree to with the automakers. So it's a very difficult space to disrupt with a new model. Those franchise dealers, by and large sell in their local areas and sell the way that has been done for decades, where people come in and do the whole thing in person. They've been trying to, to move more online, but it is a big complicated transaction. So dealers today, you know, a dealer in Florida, there's nothing that prevents that dealer from selling, you know, a new Jeep to somebody in Missouri. It's just that that dealer in Florida hasn't built a nationwide network to deliver it cost effectively. Right. So just the basic economics gets in the way. Carvana has this scaled approach that they are trying to with new cars, but they have to service those cars. They have to keep up with all the obligations of being an automotive dealer. There's lots of costs involved with that. It's just a very complicated, tricky system to come in and disrupt. So it'd be really interesting to see how far they go with this.
- [12:35]
Alex Osola
That was WSJ reporter Chris Otz. Thanks, Chris.
- [12:37]
Chris Otz
Thank you.
- [12:42]
Alex Osola
And finally we go to Spain where there's been a big development in a long running investigation into the death of a major business figure. The billionaire founder of fashion chain Mango, Isak andyk died in 2024 after falling more than 300ft during a hike. Now the founder's son, who was the only other person with him on the hike, has been arrested by Spanish police. He's accused of playing a role in his father's death. After learning that he planned to change his will. Jonathan Andick was questioned today by authorities at a police station near Barcelona. He was released after paying bail of more than a million dollars. Isak Andyk was one of Spain's most celebrated business figures. He was chairman of Mango and he controlled the family's holding company which owned a 95% stake in the business. Jonathan is now chairman of the family holding company which he inherited along with his two sisters. Jonathan hasn't yet been charged with an offense and both he and the Andick family have maintained his innocence in his father's death. And that's what's news for this Tuesday afternoon. Today's show is produced by Pierre Bienname and Danny Lewis with supervising producer Tali Arbel. I'm Alex Osola for the Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.
- [14:03]
Telus Demos
Hey, this is Telus Demos.
- [14:04]
Miriam Gottfried
And I'm Miriam Gottfried. We're reporters at the Wall Street Journal and the hosts of WSJ's. It's a weekly show that gives listeners a leg up in the world of markets and investing.
- [14:14]
Telus Demos
From the Fed's moves to market bubbles, we dive into the biggest deals, key players and business news ahead. If you're looking for more news and tools that you can use to help navigate the markets, consider becoming a subscriber to the Wall street journal.
- [14:25]
Miriam Gottfried
Visit subscribe.WSJ.com Take on the Week to subscribe now.