The Builder's Daily Land

TBD Land

Land

The Take-Away: Scott Cox Offers 10 Gems Of Timely Wisdom And Wit

From business, investment, and real estate's rich trove of quotable quotes, Scott picks 10 of his favorites, and adds a dispassionate, clear-eyed view of how each applies to the present-day wild ride.

Land

The Take-Away: Scott Cox Offers 10 Gems Of Timely Wisdom And Wit

From business, investment, and real estate's rich trove of quotable quotes, Scott picks 10 of his favorites, and adds a dispassionate, clear-eyed view of how each applies to the present-day wild ride.

Scott Cox
March 10th, 2022
The Take-Away: Scott Cox Offers 10 Gems Of Timely Wisdom And Wit
SHARE:
SHARE:
Scott Cox
March 10th, 2022

[Editor's Note: SLC Advisors principal Scott Cox needs no introduction. We don't call his perspective on land, capital, and strategy a MasterClass for nothing. At a moment of racing change and even higher stakes – inflation, a mixed-signals economy, a Fed monetary policy pivot and a macro demographic inflection – Scott channels 10 sage quotes from real estate's book of wisdom, and annotates each with a punchline every vested and invested stakeholder should hear to try to filter biases, fallacies, and pattern recognition into smarter decision-making. Here are the 10 take-aways, with due respect to those who originally spoke these words of wisdom.]

Signal Vs. Noise

"Be fearful when others are greedy and greedy when others are fearful."
SC: Do you know more greedy or fearful people right now?

Assumptions

“What a man wishes he also believes”

“It’s a rare person who wants to hear what he doesn’t want to hear”
SC: When someone asks you to put money in a deal, or believe in something, their having skin in the game is a good sign. After the deal closes, it just clouds their judgement. The only people I can find who are genuinely concerned are stepping out of the game.
“Just because a reversal of something unsustainable has not happened yet does not mean it won’t”

“If enough people believe something cannot happen – it will. Because their actions will alter the environment”
SC: Trees don’t grow to the sky. Neither do house prices.

Perspective

“An action which is perfectly rational at the level of the individual can lead to catastrophe at the macro level”
SC: Just because you have a shortage of lots, does not mean the market does.

False Binary

“Longer term projections can be more accurate than shorter ones”

“Cognitive dissonance is the inability to hold two or more conflicting ideas”
SC: We will probably have a long-term shortage of lots in nearly every major metro. But we could also have a short-term oversupply. They are not mutually exclusive. Housing demand can be inelastic to price in the short run – not the long run.

Illusions of Causality

“It is far easier to figure out whether something is fragile than to predict the occurrence of an event that may harm it”
SC: You don’t even need an event to change the housing market. Sometimes buyers just say “enough.”

Prediction Bias

“No amount of sophistication is going to allay the fact that all your knowledge is about the past and all your decisions are about the future”
SC: No one can know what is next, especially when much of what’s happening now is unprecedented. Yet I see little concern about what’s next.

Reduction Fallacy

“Trends create the reason for their own reversal”

“Too much capital availability makes money flow to the wrong places. When capital goes to where it should not, bad things happen”
SC: Price rises create more supply than anticipated. Price increases make land sellers who would not sell, sell. Further out deals now have a big enough price differential to work. Higher lot values make possible projects whose conditions of approval previously made them infeasible. Price increase x absorption rate increase = way bigger deals getting done. Combine that with a tsunami of money for everything residential and you have a combustible mix. I’d also note, there is big difference in getting a flood of inexperienced money buying distressed – and completed – assets, from what we have now which is a flood of money that will require operating excellence for the assets to perform well.

Model Vs. Real World

“Bubble = seed of truth (housing shortage) x fertilizer (low rates) x super-charging (price appreciation)”

“If every asset has multiple bidders, what’s the chance it sells for a fair price?”
SC: Speaks for itself

Data, Data everywhere

“If we have data, let’s look at the data. If all we have are opinions, let’s go with mine”
SC: There is a lot of conflicting analysis out there regarding sustainable demand. So, you can make your own call on which you believe. But you have to believe that higher prices ultimately reduce demand.

Join the conversation

Land Capital Homebuilding Homebuilders developers economics housing economics land valuation land asset Land appreciation Leadership Real Estate investment residential investment construction costs carrying costs

ABOUT THE AUTHOR

Scott Cox

Scott Cox

Principal, SLC Advisors

MORE IN Land

As More Would-Be Buyers Opt To Wait, BTR Demand Heats Up

As consumer households hesitate to purchase until signs of clarity emerge on the pricing, interest rate, economic and political backdrop, etc., the industry could witness a shift from owning to renting, a change worth watching.


Misawa's 51% Buy Of Visionary Homes: A Theme And Variations

The combination is Misawa's second U.S. market inroad, having completed a similar deal to take a majority interest in North Texas operator Impression Homes in December 2018.


The Elephant In The Land Acq Room: Underwriting For Inflation

We need to underwrite where we would operate today on present conditions, which hopefully is a floor under our speculative ceiling.


Land Capital Homebuilding Homebuilders developers economics housing economics land valuation land asset Land appreciation Leadership Real Estate investment residential investment construction costs carrying costs

ABOUT THE AUTHOR

Scott Cox

Scott Cox

Principal, SLC Advisors

MORE IN Land

As More Would-Be Buyers Opt To Wait, BTR Demand Heats Up

As consumer households hesitate to purchase until signs of clarity emerge on the pricing, interest rate, economic and political backdrop, etc., the industry could witness a shift from owning to renting, a change worth watching.


Misawa's 51% Buy Of Visionary Homes: A Theme And Variations

The combination is Misawa's second U.S. market inroad, having completed a similar deal to take a majority interest in North Texas operator Impression Homes in December 2018.


The Elephant In The Land Acq Room: Underwriting For Inflation

We need to underwrite where we would operate today on present conditions, which hopefully is a floor under our speculative ceiling.