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Episode #31: Renovation 101 with Raf Howery and Ralph McLaughlin of Kukun

In this episode, Millionacres editor Deidre Woollard talks with Raf Howery and Ralph McLaughlin of Kukun about the current remodeling boom and how investors can make smart renovation decisions.

Today's guests are Raf Howery and Ralph McLaughlin of Kukun. Raf is the CEO and co-founder of Kukun and Ralph is the Chief Economic Advisor. Kukun is designed to be a resource for homeowners and anyone looking to improve a property. Learn more at


Deidre Woollard: Hello, I'm Deidre Woollard, an Editor at Millionacres and thank you so much for tuning into the Millionacres podcast. You've probably heard that we are in the midst of a remodeling boom right now when it comes to both the homes and investment properties and there are a few trends driving this. The first is that nesting impact of all of us being home for a year during quarantine and the second is that the value of homes just keeps rising, we keep seeing new highs, and that always drives home improvement. With me today are Raf Howery and Ralph McLaughlin of Kukun. Raf is the CEO and Co-Founder of Kukun and Ralph is the Chief Economic Advisor. Kukun is designed to be a resource for homeowners and anyone looking to improve a property, and what they do is they bring together a wide variety of data on home renovation. Thank you for being here.

Raf Howery: Thank you for having us.

Deidre Woollard: One of the things I think everyone in real estate is talking about right now is how do we get more existing home inventory on the market? What are you guys are seeing and what do you think is necessary for that to happen?

Ralph McLaughlin: That's a great question. Two things; one existing owners need to sell their homes, and two, we need to build more new ones. Currently, we are in what I like to call, for lack of a better description, a death spiral of inventory and what that means is that at the start of the with pandemic, a lot of would-be sellers were really scared and freaked out, and those that didn't need to sell, just decided, "Okay, I'm going to take my home off the market not sell and maybe wait." But when that happens, every person that decides not to sell actually disincentivizes someone else not to sell, and so they decide not to put their home on the market, and so on and so forth. It just spirals out of control. In fact, in the large hundred markets now, we're down to under about 300,000 homes this week and that's just the lowest on record. There are a couple of ways that we can potentially solve this problem or that we can break free of it. One, again, is going to build more new homes, that's ultimately the demand relief of, so to speak, for those who want to buy houses, and two, could be migration. Certainly, one thing that's happened during this pandemic is people have been allowed to work from home and/or maybe there's been people that have been pushed or have decided to take early retirement, and they might sell their home, and then move somewhere else maybe where inventory is less tight. We haven't seen any major push on the latter, but we have started to see a lot of new home building and that's important. A third thing that I didn't mention that I think we'll get to a little bit later is one substitute is actually remodeling. If you want to buy a house and you can't find one that you would like to live in, and maybe you can't even find a new one in a location that you like, you will just decide to make your existing home a new home or a newish home by adding onto it, adding a bed, adding a bath, expanding, remodeling, and so on and so forth.

Deidre Woollard: Yeah, I think that's really true. I know in California, one of the things is that people are adding ADUs to get a little extra space too just adding on a whole accessory dwelling unit now that that's legal there. There are a lot of solutions. Certainly, it's been a great time for home builders, and that brings up another question I wanted to talk about which is the aging of homes in America. I feel like this is something that a lot of people don't really talk about. But I know that the homes are getting older, people are starting to see more problems especially not necessarily the older historic kinds of homes, but the homes that were built in the '60s and '70s, you really seem to start to be having problems. Is that something that you are focusing or are aware of too?

Ralph McLaughlin: Yeah, we're certainly keeping an eye on that. Obviously, because we're a company that's focused on remodeling, on data analytics around remodeling, and also home building. The fact of the matter is, is that there are only about one out of every 10 homes that are on the market are new homes. Most homes that are on the market and that exist are old homes. Every year that goes by, it's endemic to the housing market that the housing market is going to get older. Even if we were to build, say 30 or 40 percent of the existing housing market, we still would see eventually a housing stock that gets old. That's not necessarily anything new. Certainly, we've built less homes of recent than we have in the past and that's contributing to it. But it's also important because a lot of the existing homes, the aging homes, tend to be in already built out areas where demand is high and so there's no replace for space, so to speak. If you have a unique spot in space, maybe near a lot of jobs that was built out in the '50s, and '60s, and '70s, even those homes are old, they are still in demand because there is that unique spot in space. Further to the conversation that we had earlier, owners of those homes are very much incentivized to renovate them when they start to become at a disrepair, because of that uniqueness. The alternative is to mock it down and maybe build three, or four, or five, or 10 homes. But in a lot of areas, especially entering suburbs, zoning hasn't caught up to allow homeowners to do that, so about their only choice is to renovate.

Deidre Woollard: Well, I'm interested to see what happens next with zoning because I think movement toward multi-family zoning was something that was happening before the pandemic. We saw it in Minneapolis and it seemed like that was going to start to be a big movement and then, of course, COVID-19 happened and we didn't think about that for a while. I wouldn't be surprised to see that that starts coming up again. I wanted to talk a little bit about the Kukun website because you have a renovation estimator and I think that's going to be really valuable for our audience to learn a little bit more about for people that are looking to do flips, or looking to buy, and rehab, and rent out properties. What's the most popular project that you're seeing right now and has that changed since the pandemic?

Raf Howery: By far, it's always been kitchens and bathrooms, that's always the most requested projects and we have our tool also at other places. They're use by banks for their customers and we're seeing exactly the same behavior. Windows tend to be very often there, then I think right after COVID, clearly an office and an in-law suite just jumped and that was like one extra. It's similar to an ADU. That was pretty popular and I've seen it also across all the different installations of our tool. So every once in a while, you'll see some other project. But I would say garages tend to be also very popular. A lot of homes are built without garages and you will see a lot of additions of garages. The other thing that we see is that often when folks remodel a kitchen, they do a bit of an expansion. One of the options on our tool is to determine whether you're trying to expand something or add something. You will see a lot of expansion inside the house, which means taken out walls, and of course, that's the open space is a trend that you will see along those estimated efforts that we see there.

Deidre Woollard: Interesting. The open space trend was one of the things I wanted to ask your opinions on because I've been seeing so much discussion about whether or not the open floor plan is over. A lot of people saying they want to close off. The open kitchen used to be the thing, now the open kitchen people don't want that. They're starting to look for rooms just because everybody has had to find a place to zoom for the past year or so. Do you think this is a temporary shift or do you think that the open floor plan might be over for a little while?

Raf Howery: I think it will be over. I think it's just a period people are stuck at home and a lot of folks. I know we ran a survey at one point, and we found a lot of folks set up their office in the kitchen. I think they had to build some walls around it to make it work. But I think that's a style that will go on, they will be very hard to change in today's environment, and getting closer to nature, that is part and parcel of our modern approach. I would not look at COVID's behavior as any indication of what the future is going to hold for design and for live in style. You will work from home more often. So I think we will get to a point where you will describe the house as three-bedroom, two bathrooms and an office, rather than just three bedrooms and two bathrooms. I think that will happen overtime, we're seeing folks add in those kind of structures, and it will become part and parcel of the home DNA. I think that I would not take COVID in any way as something that will change styles and preferences, but it will change the way we view homes.

Ralph McLaughlin: That's a great point and those things aren't necessarily mutually exclusive. Certainly, if you look at your existing home, you might say, "Okay, well, I could care less about this open floor plan now because I need an office." So there might be a push amongst existing homeowners to renovate existing bedrooms or add on a library, or a study, or a nook, or something like that. But if you think about the long-term ways that we use our homes, one of the real values that people were placing on open for plans was a value to entertain, and that's something that we have not been able to do really over the last year. We haven't been able to entertain our family and friends, and the open floor plan really allows that. I would be very surprised if that goes away, especially after we've all been cooped up and are undersocialized these days. I would be surprised actually if that starts to become a major point in the next year or two.

Raf Howery: We've seen a lot of pools, I think folks are entertained in the pool area now. So homes with pools have become in demand versus home without pools. Because I think in the past, the homes with pools had a bit of a challenge because of the cost of repair and insurance and all of that. Now, they are very desirable because people want to entertain outside.

Deidre Woollard: Interesting. Are you seeing also outdoor rooms, outdoor kitchens, things like that also?

Raf Howery: Definitely outdoor kitchens. I don't know about outdoor rooms. I mean, I know that pools and outdoor kitchens are very popular. I think you've all seen also a number of surveys on that, and I think even a lot of the folks are working on landscaping and hardscaping are quite busy now because that becomes your outside-the-walls now, during this. But again, that's a trend for the time being. It will continue, but I don't think it will continue in the same pace.

Deidre Woollard: I think that's true. I think that was a trend that was in motion before the pandemic. I wanted to talk a little bit about renovations in general, because this is a podcast for investors, and one of the things that we've noticed, we've seen it on the website a lot at Millionacres is that, it's so easy to over-improve. What can someone whose house flipping or someone who has a rental do to prevent that?

Raf Howery: We can take a lesson from Realtors when they stage a home. If it's an investment, we tend to sometimes not distinguish between our own homes and other people's homes. In general, you will see the ROI go against the cost. In other words, the higher the finish, the more labor, and the more refined, the more customized, the less ROI there is on that. I think we take a lesson from the staging model and say, basically, you cannot build basic good-looking features that are modern, that are viewed as very in-demand today, and you reduce your cost, and I think you're going to get a much better ROI on that one. That's why if you look at our estimate, our builder grade is the lower finish level. Builders do that classically. They make it look very fancy, but they're actually going on the low end on most of the material they use.

Ralph McLaughlin: To follow up on Raf's comment, yeah, I mean, the two opposite ends to think about, one is that the higher-end, the more customized feature, the less likely you are going to have a big market for that, and so you're definitely playing in a risky market there. On the other end are the things that everyone would value, especially in older homes, which would be new foundational components of the house. Not just a foundation, that's of course part of it, but the electrical, the plumbing, the roof, all the things that could go wrong during a storm. Losing power, losing water because your pipes freeze, having your house start to tilt one way because your foundation is starting to [inaudible 00:13:34] . Those are all things that I think most people, regardless of what their taste for color of finished value in a home is a real solid, secure, up-to-date structural components of the house, the bones.

Raf Howery: A lot of the visual elements make a big difference, right? So a front door, a good curb appeal go up a very, very long way in terms of creating that home for people. There is a fine line between the infrastructure of the house, which is what Raf is going after, and also that kind of feel of our home. That means sometimes very small projects that can really go very far. An example, I think, a front door re-finish, a little bit of a curb appeal, can really add a lot of value to a house.

Deidre Woollard: Yeah, I've seen a whole forum's devoted to door color.

Ralph McLaughlin: Yeah. Especially if you're going to sell it, especially if you think you could put it on the market, absolutely.

Raf Howery: Yeah. That's why I'm talking about selling mostly for flippers.

Deidre Woollard: All right. I've wanted to ask also about home insurance. Because I know that Kukun deals with that, and I feel like a home insurance is something that when people are either renovating or whatever they're doing to remodel, they don't really think about how insurance plays a role, whether or not they have contractors and the house or not. Let's start with that. What should a homeowner know about their home insurance especially if they're having contractors in and they're doing a major remodel like a kitchen or something like that?

Raf Howery: Well, first of all, I think you have to consider yourself an insurance company and the first thing you need to worry about is risk. Anytime you expose your home to any sort risk, the insurance company will get nervous. An example, a pool is one of those renovations that if you do not inform your insurance company that you've done at, that introduces a lot of risk and as a result, it could cause you a lot of pain with your insurance company eventually when they find out. The other piece that I think folks also forget is that sometimes when you modernize things, actually, it may reduce your cost of insurance. When you modernize your electric, modernize all your infrastructure, you create more fire resistance elements into house, that actually could reduce it. That's mostly the thing that I would say is that be careful and look at what you're doing. Is it increasing the risk or is it lowering the risk. If it is lowering the risk, It's a great deal, go for it. If it's increasing the risk, you got to call the insurance and find out what that means to you and to your insurance policy.

Deidre Woollard: If you do a major renovation, do you then need to change your insurance either before, during or after, or what does that process look like?

Raf Howery: You need to let your insurance company know and ask them, tell them what you are doing that will have an impact. As I said, it could be a positive impact. It's not always a negative impact. As a matter of fact, your insurance premium is higher on an older home than a newer home. So it's not always a negative impact. Having said that, if you include any higher risk items such as a pool, another one is a trampoline, actually, believe it or not. A trampoline can impact your insurance policy. Those are too high risks element that you should let your insurance know. It's going to change your cost. But you better find that right now versus when you have to claim something after the fact and then they found that you've violated your insurance policy.

Deidre Woollard: Good point. Yeah. Communication is definitely essential. I wanted to know what the building permit data is showing you about the pace of renovation. We're seeing housing starts and building permits still continuing to go up. But what about renovation permits?

Ralph McLaughlin: Yeah. I mean, renovation is going up. On a year-over-year basis, we are looking at about depending on the data that you're looking at and the type of project, about 20 percent to 30 percent above where we were last year. So it's becoming a major focus of the housing market. Again, that's partially because inventory is so low and yes, new-building is up, but maybe unsurprisingly, a lot of the new home sales are actually homes that haven't been constructed yet. When things get really tight, people start to look up-river for their water supply, and that's what's happening. So for those that have decided not to move or maybe not move into a new house or they can't find existing ones, they are absolutely looking to renovate, and it's not just, of course, building permits that are up, which is the first sign, but all of the other indicators of materials sales are up. The Home Depot index I think is up. Lowe's is reporting a lot of increase in sales. So yes, all signs are that people are really trying to make their home something different than it was pre-pandemic. From a wonky standpoint too, we are going to enter phase, we're looking at year-over-year changes is going to be a little odd. We're now in March, and March last year was when the pandemic started to cause things to go haywire. So if you are a data analyst out there or an economist, or even just a casual observer of the market, even beyond home renovations or new home sales, using year-over-year stuff is going to look a little weird over the next three or four months. We're continuing to see a very decent uptake in home renovations and new construction.

Deidre Woollard: Very good point about the fact that 2020 was just such an anomaly year. It's been the same thing for real estate investing in terms of REITs and real estate stocks. It's like you really can't compare the two years. It's just going to be a little bit of a lost data year in some ways. So one thing with all of this renovation is it seems like to me, there's just an incredible surge in demand for contractors. I think it's been a boom time for contractors. You talked about landscape architects earlier. I wanted to talk a little bit about hiring contractors and what people should look for. One of our team members bought a house recently, and he was doing some renovations, and he got just this really wide variety of quotes, [laughs] and it happens. I think when that happens, a lot of people don't know what to do. What's your advice on that?

Raf Howery: As we all know, this industry has no standards. It's not like you can receive a quote in a standard format and compare others. So as a result, there's a lot of interpretation and a lot of details that tend to remain opaque. I think what you can do at this stage is one, is you've got to understand what the real costs are and I think that's why we got the estimator. Let's just give it as more of a budget exercise rather than an actual quote, but that's your starting point. The second thing is, history is everything. The contractor history, and how many years in business, any complaints that they have been [inaudible 00:23:23] ? The third thing that you can ask which is having a lot of serious conversation, which is, I want to see a project plan with cost of labor and materials separated, so that I can really figuring out what the cost of that material is, and you'll be surprised when you start to ask everyone to give you that project plan with that same level of detail, everything will come a little bit clear. The other piece is that the demand for contractors is not new. This just became worse. It's been like this for a long, long time. It's been at least two to three years. Where I live, I think if I need to do something in my house, significant at least, I need to wait for another year. It's not that easy to get somebody. So first thing is to figure out your budget, figure out the material, figure out also your taste upfront. If you are going to be into that expensive hardwood, and he is going to budget for you a very average hardwood, then you're going to be surprised at the end. So figure out material that you want upfront, try to price it in the market, get a project plan that is detailed with the task level where labor and material is separated, and then compare the market prices for at least material, and then you'll get a lot of clarity. Then you can ask all the hard questions. That would be my personal advice and I've done that multiple times.

Ralph McLaughlin: There's been an old, I guess saying in the construction bidding world that you want to not take the cheapest and don't take the most expensive either. Because there may be very good reasons why something is extremely cheap, and good reasons why something is very expensive and usually somewhere in the middle, maybe a little low, middle low is going to be a decent bid. Of course, if there are others that you can get to provide references or examples of work, and actually even better yet and it's hard these days, but if you can see the work that they've done and actually look at the craftsmanship, that could also give you an idea as to whether or not you're getting what you're paying for, whether you're getting a good deal, or not getting what you paid for.

Raf Howery: On our website, there's a find a contractor feature where we show you the history of every contractor. There are at least I think 800,000 of them on our website. So it's easy to go and just type in your address and look at the contractors that work in your neighborhood, find out which homes they've worked at. It's so easy to find out if they worked with your neighbor, to knock on your neighbor's door and ask, "What did you think, and how was his pricing? What did you have as an experience?" You will also see on the website a full sentiment analysis of their reviews, what people think about them, every home they worked at, if they are licensed, if there's anything negative at the Better Business Bureau, you will see that too. So I think it's a good source for independent information that allows you to think a little more about how you hire the right contractor. I would try it as just a fact finding thing before you hire any guy.

Deidre Woollard: Yeah. That's an excellent point, and I think getting multiple quotes is really important, which I know is hard right now with so many contractors vying for work. That actually makes me want to ask you, do you feel like the issue with contractors and the need to try to find contractors, is that related to the same problem that we're seeing in construction where the age of the construction worker is going up? Do you feel like there's going to be a skills deficit there going forward?

Ralph McLaughlin: Yeah. I mean, even before the pandemic, homebuilders have been blaming labor supply as one of the problems that they faced. In addition to that, we now have materials supply issues, but certainly, there are those that have worked in homebuilding that have seen an increase in demand on the renovation side and maybe have taken their skills over to renovation rather than homebuilding. There's very much interrelated relationship between labor supply in new construction, and even labor supply in home renovation. When demand goes up, and demand for both of those things goes up, it is going to be increasingly challenging and difficult and perhaps frustrating for those that are looking to renovate their home or even buy a new one to get their home built-in time, or get their home renovated in a decent time-frame. Absolutely. It's hard to ramp up skilled labor when it comes to remodeling. For example, in the community I live in, it's a small rural town in California, few thousand homes there. But I talked to someone to potentially get my driveway repaved, and I talked to my neighbor who had his done, and I said, "How long would it take you to get that?" "I was nine months on that list." It was [laughs] nine months to get his driveway re-done, so he said, "If you want it done, sooner than that"

Raf Howery: There's another potential phenomena we did see from the [inaudible 00:28:22] a while ago. We looked at it about a year ago, and what we found is there are fewer people coming into the workforce. Younger folks are not choosing to be contractors, and as folks retire, there's a bit of an imbalance of the new workforce coming in and the one that's leaving. I also think the marking of the contractors, the tools that are out there the house, the HomeAdvisor has created a market for those that know how to market themselves and those that don't, and there are many of them got lost in between, and so they are also not as accessible to be found and so their network is really key. But I think we're going to see some more of that behavior because the profession hasn't necessarily adopted the Internet well yet, and so the younger folks who've grow up with computers, just don't find it to be exciting anymore.

Deidre Woollard: Well, you brought up an interesting point with the Internet too, because one of the things that I hear about a lot is people going on YouTube and trying to figure out how to do something. There's YouTube tutorials, [laughs] just about every home improvement you'd ever want to do, and there are a lot of people, I think, who see one of those and think, ''Oh, I can do it.'' Do you think that that's a growing issue? Do you think that, I mean, the old rule is that you've most the DIY as you shouldn't do plumbing or electrical, do you still feel like that should be the rule?

Raf Howery: Yes. [laughs] If you don't like to be burned. That's for sure. This is the one area you need a specialist. Don't mess with it. It's too catastrophic if you make a mistake.

Ralph McLaughlin: Exactly. I mean, it's a question when you ask yourself when it comes to electrical and plumbing and unless you're an expert, there's two questions you've got to ask yourself. Do you like shock and do you like shit? Because if you don't know what you're doing, [laughs] you'll eventually going to come across one or both of those, hopefully not at the same time. But it's a real possibility. Of course, there might be things like electrical plates, outlet plates that can be replaced. That's generally pretty easy if you have a small leaky faucet, where you just need to replace a gasket or washer. But if you're talking about rewiring your house or if you're talking about redoing a sewer line, I mean, unless you really, really know what you're doing or you have someone there to guide you, you could end up in a world of pain or a world of stink. [laughs]

Deidre Woollard: So true. My step-father was an electrician.

Raf Howery: I myself will hire an unlicensed contractor, but we'll never hire an unlicensed electrician. It's just like it's not making that mistake. [laughs] Even a lot of folks still wouldn't mess with that. I wouldn't mess with it.

Deidre Woollard: Yeah, very good point. Let's talk a little bit about loans for renovations because I think that's something that obviously people want to renovate so they're thinking about maybe getting the a HELOC, a home equity line of credit, or our other types of loans. What are you seeing on the loan front right now? What do you think that both homeowners and real estate investors should know about renovation loans?

Raf Howery: I mean, there are three types of loans available generally. Two of them are the ones that we look at, and those are the home equity type of loans, potentially early finance also, and the personal loans. Personal loans tend to do well for small projects that you need to do fast because the closing of a personal loan happens very quickly. It is a higher interest rate. But since that most home renovators are home owners, they tend to quantify for a better rate with doing the HELOC. Only problem with the HELOC, two things. Right now, the banks have tightened up that ticking off [inaudible 00:32:13] and so they're not giving many of them. The other one is time. It does take a good five weeks to close a home equity loan and so what we're seeing, especially on our website, we're seeing folks that are basically looking for a better rate and we only offer is the HELOC and the banks are not given them as regularly as they used to. We're starting to see banks or some of our partners banks, we're seeing a little more softening of that now, but in general, I think the HELOC is your only finance as depends on the size of your project, is your best bet. Personal loan allow you for a bridge potentially. You can get a personal to start early and then refinance and do your HELOC and then pay that back. But that's what I've seen people do and I think that's the right way at this time.

Ralph McLaughlin: Beyond what the right product is for you and that's a very important consideration because if you take out, say, a lump-sum home equity loan, you're paying that interest right away. Whereas a HELOC, you're only paying interest when you use it, and then they are very important considerations that Raf mentioned between which is going to be the best for your circumstance. Even beyond that, I did analysis last year looking at Freddie Mac loan originations that have detailed information on borrower's credit score, LTV, DTI, who the lender was, and one of the biggest things that we found in that analysis is that there is over an 80 basis point spread just across lenders. That's controlling for credit score, controlling for LTV, controlling for PTI, controlling for the type of house, controlling for whether it's a refi or purchase. What that means is it actually pays to shop around and if you're looking to do something very quickly, it's about the best way you can get the lowest rate out there. It's very hard to move your credit score in a short time. It's very hard to come up with, more loan-to-value in your house or to lower your DTI. Those things are very tough to do in the short-run, but what's easy is to shop around, and that's exactly what our analysis are.

Deidre Woollard: I think that's a really important point. I think it's the same thing. I've noticed that too, when people are buying a home, they will tend to spend a lot of time looking at a lot of different homes. They will not take the same process when they're looking for their mortgage and one of the things we've tried to explain a million acres that is very important. That is a very important step. The house hunting is the fun part you get to do after you've done the part about looking around and trying to find the best mortgage, I think that's true with home renovation. The same thing happens where you get the anticipation of the remodel and the excitement of choosing tiles and choosing cabinetry. It's a lot more fun to think about that HTDB candy than it is to think about interest rates and closing costs and the other considerations that might come up if you're getting a loan. I wanted to ask you also, [laughs] yes, wanted to know what other features that you are seeing in terms of demand for green features sustainability, I mean, obviously like ESG investing is very popular now people are concerned more about the environment. Are you seeing that remodeling is taking on that? Is there a concern about sustainable features and also about the construction waste involved?

Ralph McLaughlin: Basically, the way to think about this is things that are going to reduce your operational costs are going to have immediate value, so if you were to add a solar system, that's going to have cost, but if that completely eliminates your electricity bill, that's going to be capitalized into the home value. If you have, say, a graywater system, that is immediately going to reduce your water bill. That's going to be recognized by home buyers. I think increasingly, we're also seeing some premium, some demand for those things that go above and beyond what they actually save you. In particular, if we're talking about resilience and the ability to be resilient through, say, a disaster. For example, in many places, we are seeing times when the power gets shut off, not just here in California, Texas has gone through that. I know many places on the East coast during storms and hurricanes or what not. Many of these systems that cut down on your, say, electric bill or your reliance on municipal water, also are going to allow you to be resilient through those sorts of events, and especially when we're in a highly connected world where we do require electricity, so you have this conversation or to have meetings with folks at work, being able to keep the lights on, being able to keep the Internet running, being able to stay in your house with water is, I think, increasingly adding value of your house above and beyond the cost savings. It's a convenience that those things add. I still think it's a little bit early to be able to tease out and pinpoint exactly what that is separating it from the immediate cost savings. But I think for those of us that have lived in areas that are susceptible to those disruptions, we do see these things, for example, I got a solar system put in just several months ago and has already been three times where the power has gone out and have been able to continue with my work and keep up my productivity and stay connected and that is worth something. Whether or not that's going to be more of a premium, hold, steady, or drop, I think it remains to be seen about where we choose to live and work. That is still playing out. But I think it's important to recognize those two things and we've gone from just the cost-savings capitalized on home value to also the convenience.

Deidre Woollard: Excellent. One question I also wanted to ask about was estimating the cost of things going forward, lumber prices had been going up a lot this year. I know, usually, they tend to peak in May or that's usually the hype. But what are you thinking about lumber prices, and also, are you still seeing supply chain disruption when it comes to getting materials?

Ralph McLaughlin: Two things to think about, one is that yes, we do have a lumber shortage. Lumber prices are high. Some of that was because we have tariffs in place with foreign lumber. That certainly isn't helping the supply chain and can make it difficult for homebuilders not only to sell their homes, that's what they thought they want to sell them for and recoup their costs but also finished in a timely manner. Homebuilders, even if they were to be able to stomach the cost of an increased price of lumber, you still have to wait for it to get to you. It can be hard for it to arrive and that can slowdown completion and slowdown construction. But I think, ultimately, if these things persist, it's really the shocks that can be disruptive. High lumber prices on their own don't necessarily mean that homes have to be more expensive. The way homebuilders and the way developers work is everything comes out of value of the land. So if your price of lumber, if your price of labor in the long run go up, it just means you pay less for the land that you're going to develop on. It's landowners that ultimately take the hit. But what happens in the short run is that there are builders and developers that are already planned to build and plan developed and already paid for that land, and then when you get a spike, that's what can cause disruptions. That can lead to problems in the short run with not only completing, but also being able to recoup the cost of construction. I would anticipate that we do have a new administration. The new administration may rethink some of the tariffs we have in place with lumber. I think the bigger issue over the long run, like we talked about earlier, is going to be skilled labor. We are at a point where our replacement costs from a birth rate perspective is starting to drop below replacement levels, starting to look a little bit more like Europe and Japan. Over the next 10-20 years, one of the only ways really going to grow, not just our population, but also grow the supply of skilled labor is likely to be through immigration. I don't say this because I'm trying to make a political point. I'm saying that as a matter of fact as an economist, that also tends to look at demographics. If we are naturally replacing our population from birth rates above replacement rates, about the only way to do that is through immigration. But the good news is, at least for myself, that's a political discussion not an economic one so I can bow out and let those who deal with politics focus on it.

Deidre Woollard: Just want to know from you, Raf, what are the best ways that has flippers and rental property investors can use Kukun in their businesses?

Raf Howery: Simplistically speaking, I think the cost estimate is like the beginning of everything. I think that's a good starting point. That's a budgeting exercise. I would use it as a budgeting exercise to figure out what your base cost is going to be. That's the first one. I think also you had mentioned about finding a contractor and I think that's a really good source because it's a neutral source, it's all based on our data. There's no promotion there and I think there's a lot of history, that's another one. I think we're coming up with two other, maybe Ralph talked about the two algorithms I think are going to forecast how homes will do in the future in certain areas and we have another two that's going to come out in about a month, but maybe quickly, Ralph, if that's okay with you, maybe just address some of those and other things that will make available to flippers soon.

Ralph McLaughlin: Sure, really, three things that we're working on. One is being able to incorporate building permit activity, both residential construction into home price forecasting. We do incorporate a lot of the important things that go into home forecasting, Capstone price behavior, also forecasted economic activity. But also when you see, say a new permit pulled for an office building or a new permit hold for a café or what have you that often signifies that there is likely to be employment growth where there's growing demand. Incorporating that into our home price forecast, it gives us an edge and increases our accuracy about what's going to happen over the next one to two to three years. The second, the third, things that we're really working hard on and really breaking through, especially over the last several months, is improving the accuracy of an AVM. One of the ways that flippers tend to make money is not just they sell at a premium, they also can buy it at a discount. Sometimes, it can be hard to figure out what that discount is based on the condition of our home. One of the things that we're doing is actually pulling in permanent formation to be able to get a good idea as to what the actual condition of the house is in. If you have a 40-year old house, is everything 40 years old or maybe some things are a little bit younger? Maybe some things have been renovated and that can, not only make our AVM more accurate, but what it can do is also give flippers an idea as to what's the best combination projects to take on from a return on investment perspective. Those are the big three that I'm working on now and that we're really on the costs. We broke through on several of those and really just working on scaling up now. So I'm very excited to get the full suite available to the investment community to help them with their projects.

Deidre Woollard: Interesting. When will that be available approximately?

Ralph McLaughlin: We're on the cusp now being able to have a forecast available to anyone that wants it. We're probably no more than a few months out. We've got some good Beta AVM products, ROI products. Now, actually, we have an ROI available for many cities, we're going to improve upon that. Timeline may be two to three months before really starting to roll out to many of the large markets in the country.

Raf Howery: I would encourage your listeners to check out our website by April to start to see some of that progress. They will start to see all that. Once available, we'll roll it out in time, if they register, they'll start to get regular news on what's available, what's not available. That's another way to keep up with what's going on with us.

Deidre Woollard: Excellent. Well, thank you both for your time today and just a reminder for our listeners, [MUSIC] the website is That's M-Y and K-U-K-U-N. Stay well and stay invested.

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