Deidre Woollard: Hello, real estate investing Fools. I have a special treat for you today. I'm speaking with Ben Caballero who is the current Guinness World Record title holder and number 1 ranked real estate agent in the United States since 2013, according to RealTrends. He set a new record for home sales last year. He individually sold 6,438 homes worth more than 2.46 billion in 2020. Well, Ben, how do you keep doing this? It's amazing.
Ben Caballero: Well, of course, I specialize in a certain type of customer, which is homebuilders and the production homebuilders, and then I have a platform that we developed in '07 and have continually refined it, and still in the process of improving at every opportunity we have. We remove a lot of the duplication that a builder would have to do in order to maintain the accuracy and the speed of a number of listings,.It's just a very efficient process. We have a 13-minute turnaround average for a request, that it takes 13 minutes on average to get them at MLS. That's just something that we have dedicated ourselves to, and the result is we have about 60 builders in Texas of four markets. Actually, we've expanded into some other smaller markets also, but the main markets are the Texas big cities: Houston, San Antonio, Austin, and Dallas-Fort Worth.
Deidre Woollard: Well, interesting. From an investor perspective, I've been watching the homebuilder stocks over the last year. It's been kind of crazy watching how big the homebuilding boom has gotten in the past year or so. Do you think this current situation is going to last?
Ben Caballero: We have a very big shortfall. I estimate based on my analysis of the US Census about a 5.5 million unit shortage in homes. There's no way that builders are going to be able to immediately resolve that. Right now, we build just under one million homes last year, and this cannot ramp up to solve 5.5 million unit shortage. My estimate, if they increase production every year by 10 percent, it's going to take onto 2028 in order to achieve equilibrium in the market. I have that written up on my website. If you or anyone wants to see it, it's at homesusa.com/shortage. There's a very detailed article there where we analyzed the census data, did a projection, and gave the causes and that sort of thing. It's, I think, a pretty informative article. We've got a lot of compliments on it.
Deidre Woollard: Great. Well, you specialize in Texas. I know the population in Texas has been booming since last year. I think the story was everyone in California moving to Austin, moving to Dallas. What's happening with housing developments and which areas do you think are seeing the most buzz?
Ben Caballero: Well, of course, Austin is head and shoulders above. I think I saw somewhere where their appreciation was like 42 percent, and the other markets, Dallas I think was 22 percent, Houston was 19 percent, and San Antonio, I believe it was about 20 percent also. Austin just got so much going forward. They have the University of Texas there, which is a very large enrollment. They have the state capital there. It's become a new Silicon Valley in Texas. Elon Musk is building his new Cybertruck facility there, a manufacturing facility. It's also probably or certainly not as large as Houston or Dallas-Fort Worth, so any recoverable growth that we have here in Dallas, if they have that same growth at Austin, it would cause it to have a significantly greater impact on inventory and pricing due to demand.
Deidre Woollard: That makes sense. I know you were a builder for a long time. Lumber is becoming the big story right now. What do you think about the current very, very high prices of lumber, copper, other commodities related to homebuilding?
Ben Caballero: The COVID situation, the COVID shutdown caused manufacturers to shut down, or greatly reduced if not shut down, their capacity. Then when that happens, people, the employees, some of them just don't come back. So it's a ramping-up process, and you just can't do that overnight. That's going to be probably a year or so before we can get staff back up. Lumber is particularly vulnerable. They had forest fires in Canada, which restricted supply. We had floods in Louisiana, which affected our logging ability there. The consequence of COVID has not only affected lumber but all the other commodities, appliances, windows. It's just a very, very difficult situation for homebuilders to deal with.
Deidre Woollard: That's true. In terms of development right now, are you seeing communities being built further and further away from the major hubs? Do you feel like is there any concern that we're going to have a situation similar to the great financial crisis where then people move back towards cities?
Ben Caballero: I don't think it's going to be ever like it was. The remote work, people working from home I think has, to some degree, changed the way that we look at work and the way to work business travel. I was watching TV the other day of the financial news, and they're predicting that business travel will never get back to where it was. We've proven that you don't have to go to a meeting, and you and I are doing it right now. We don't have to be face-to-face to have an interview. People are going to be moving to where they want to be rather than where they have to be. This is good because land is cheaper the further out you go, and builders are building communities that have amenities that heretofore were not available. It is a changing situation that COVID has some positive effects as well as some negative.
Deidre Woollard: Did you see an uptick in demand on your individual site during the pandemic, and when did that start to pick up for you?
Ben Caballero: Well, our business is essentially listing homes in MLS for builders so that the realtor community can have them for their buyers. We don't represent buyers as such because we're representing the builders as the owner. We had the best April ever, April of last year, and we had a fairly good year. But as inventory and lots and so forth and demand has increased so strongly that builders are not needing to list homes in MLS. A matter of fact, they are all kinds of variations of trying to modify the demand to build at a pace that their suppliers and land and everything will allow them. I mean, like I have a builder that they only release three homes per month, and they only sell two in the first part of the month and one in the last part of the month. I have other builders with five. We had a builder couple of weeks ago that had 30 homes. So they just said, "Everybody that's interested in one of these homes, come and see us at 10 o'clock on Saturday and we will give you a number based on where you are in line and we will have a lottery," and they sold out the homes all that day. There are just all kinds of variations of people that are builders are doing to moderate or mitigate the demand to comply with their ability to supply.
Deidre Woollard: Yes, the scramble is just crazy. Are any of these builders working with investors right now? Because we're seeing the single-family rental trend gaining ground really fast. Is that something that's factoring in with your homebuilders?
Ben Caballero: Builders don't need to really work with investors on an individual basis. They would prefer to deal with people that are going to be living and the owners that are living in the homes, but I did hear of a situation in a community North of Houston, in Conroe, where an investment company bought out the entire subdivision and are starting to enter rentals, which is a shocking development, but that's just a very unique situation, I don't know. The builder made out like abandoned. From what I understand, their profit was not reduced at all. A matter of fact, they claimed to have made more money doing that than would have if they'd sold individually. They don't have a lot of retail people to deal with, they don't have individual sales. Probably their sales and marketing cost was much reduced, so that went to the bottom line.
Deidre Woollard: Interesting. Just to wrap up, what do you see for the next year? Obviously, last year was a very odd year. What are you forecasting for the future?
Ben Caballero: I think more of the same. Until we are able to get the supply of all the materials that go into the home: copper, appliances, glass, lumber, roofing materials, sheetrock, all of it, to some degree, supply is greatly restricted, and until that happens, our builders will not be able to increase supply enough to keep up with the demand. Of course, we have a very large pent-up demand that was created by the shortfall that has been going on in building for years. It now has reached a point that is historic really. I've been in the business many years and I know other people, no one has seen anything like this, and it's just unfortunate that buyers are having to deal with it.
Deidre Woollard: Absolutely. Well, thank you so much for your time today and congratulations on another record. It's really amazing.
Ben Caballero: Well, thank you very much. I appreciate the opportunity to give whatever I can add to the situation. Like I said, if somebody wants to see more detail, they can go tohomesusa.com/shortage and really get some good information.