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Housing: ‘We have at least 2 years’ of strong real estate markets, Douglas Elliman CEO says

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Douglas Elliman CEO Howard Lorber joins Yahoo Finance Live to discuss why the company is going public and the outlook for the housing market.

Video Transcript

BRIAN SOZZI: Douglas Elliman is being spun out of Vector Group, which we'll see it trading today on the New York Stock Exchange under the ticker symbol DOUG, Doug. The real estate brokerage is one of the New York's-- one of New York's largest residential brokerages, the prime focus on the higher end of the market.

Joining us now is Howard Lorber, Douglas Elliman chairman and CEO. Howard, nice to see you this morning. Congrats on the transaction. Why was now the right time to be spun out?

HOWARD LORBER: Well, good morning, and thank you. We've been thinking about it for a while, and we have had a very, very good year, and we thought that it would be an ideal time. And the basic reason for the spin-out is, you know, there are too many people or too many funds and institutions that can't invest in Vector because of the tobacco company. Now they'll have a choice. So if you want tobacco, fine. Buy Vector. And if you want real estate, fine. Buy Douglas Elliman.

So hopefully the run-up in the real-estate stocks will continue in the next couple of years. I think they will, and it'll be good for our shareholders.

JULIE HYMAN: So, Howard, it's Julie here. Talk to me about where we are in this real-estate cycle. Obviously you guys have seen and the real-estate industry more broadly-- the residential industry, that is, more broadly has seen a big 2021 as we've seen price appreciation, as we've seen really blockbuster sales. What is 2022 going to look like?

HOWARD LORBER: Well I think-- I think I go past 2022. I think we have at least two years, OK, through probably '23, and it's pretty simple. Look, interest rates are starting to go up. Mortgage rates will go up a little bit along the way. And what happens traditionally is that when mortgage rates start going up, it brings people in to buy it this time. They're afraid they're going to miss the opportunity, and all of a sudden mortgage rates will be too high. Prices will be too high, and they won't be able to purchase.

Then, of course, with the inflation, people know that the cost of houses is going to go up. Building is going to go up. And so it's sort of a-- it's sort of a perfect opportunity for the market to keep going plus all the money that's going to be pumped into the economy. So I think we have at least a couple of years of strong real-estate markets-- residential real-estate markets for sure.

JULIE HYMAN: And you guys are at the upper end of the market. Are we going to continue to see the type of price appreciation that we have been seeing?

HOWARD LORBER: Well I don't if it-- you know, you can't-- you can't be seeing every year where, if you look at some of these markets like Palm Beach, which we have the largest market share in, where, you know, you bought something in January and you sold it six months later for a 40% or 50% increase. I don't think that can continue.

But I think you're going to see a steady growth in prices. And I think, again, because of inflation, because of the lack of inventory. And the only way you're going to get more inventory in the market is if prices go up because as prices go up, that brings sellers into the market and you have more inventory. So it's-- I think we're in good shape, and I think they will go up, albeit not at the same what we saw in 2021.

BRIAN SOZZI: Howard, so many of us that work in New York City, we're still working from home. I'm in my kitchen right now talking to you, not in the office. What are you seeing in the New York City real estate market?

HOWARD LORBER: Well, again, on the residential side, I think that's really helping it. I think it's helping it throughout the country because people-- a lot of people have decided, look, I like to work from home. So I think that that will probably continue to some degree. There will always be people that want to go to an office and certain type of businesses that they'll go to an office.

But in the residential real-estate business, the brokers are independent contractors, and they can work wherever they want to work. And probably we won't be increasing our footprint as it relates to offices. We'll be in new markets, yes, but in existing markets as leases come due, we probably won't renew and consolidate because I don't think we're going to see everyone come back that used to come here before the pandemic.

JULIE HYMAN: One of the other things we've been watching amidst this pandemic, of course, is trouble finding workers, having to pay workers more. And there always seems to be a war for talent when it comes to brokers, right? So I'm just wondering how you guys are positioning for that, how you're trying to attract the best talent to your business.

HOWARD LORBER: OK, well, again, brokers are, you know, independent contractors, so it's not a matter of employees and, you know, that they want higher salaries or whatever. You know, brokers, they get paid-- they get paid on commissions. There's been for the last number of years there have been tremendous push to bring in new brokers. We are still one of the few firms that brings in brand-new brokers sometimes, OK? We have good training, and if we think they have a great future, we'll invest the time and the money into doing it.

But then what you have is you have the experienced brokers and the top brokers that are with us that have been with us a long time, and we're hoping to keep them and bring in other strong brokers from other companies where they're not as happy as our brokers are here at Douglas Elliman.

BRIAN SOZZI: Howard, lastly, it's been a tremendous year for housing. You know, we've talked to the folks at Rocket Companies, United Wholesale Mortgage. I know you're different, totally understand, but do you think the market just misunderstands what you all do? I've been surprised by some of the low multiples on some of those other companies.

HOWARD LORBER: Yeah, I think so. I think that's probably true. I think it's people don't understand the business to any great degree. But that'll change, and we think there's a lot of upside, and obviously that's why we spun out the company. We think that the Douglas Elliman shareholders now will benefit greatly from the spin-off.

BRIAN SOZZI: All right, we'll leave it there. Howard Lorber, Douglas Elliman chairman and CEO, good to see you. Look forward to talking with you in the new year.

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