Monthly $OPEN Space Series - Episode 2

just a real quick thing. This is our second scheduled open space episode two. Like I said, we're kind of working on the technicals and the particulars. So bear with us if we make mistakes or things sound kind of funny. I do kind of have a prepared intro to kind of to go through. So it should last about five, eight minutes. So, you know, basically what I wanted to do is before we get into the interview of the special guest and open mic after that. I wanted to quickly explain, you know, how we're going to handle these open spaces. This is our, like I said, our scheduled one of the month. We are trying to hold one scheduled open space per month at towards the end of the month. We'll also be holding spaces during earnings either before to kind of talk about expectations and then most likely definitely after it so we can kind of discuss and review. The outcome of the earning and then also in between. We'll do some impromptu spaces will definitely post it in the chat group and have our members repost it. So look out for that if you want to join the chat group. I'm sure at some point myself or real open will put it up in the nest so you guys can access that. Consider joining if you, you know, want to learn more or be part of the conversation. And some of these impromptu ones are our, our man, a Grayson has put out there and some really good stuff holding some open mic answering some good questions and taking some deep. Dives while he drives. So they're really cool. They've been really cool to, to be a part of so. What we kind of want to do with these spaces is kind of go through how open door actually works. Kind of bring attention also to the community, the open army community. That we're trying to grow to be able to support, you know, one another. You know, including educating people about what open doors do doing and the housing market in general. There's a lot of people out there doing some really good research, putting out some charts. Following the filings we have people that have developed websites that are tracking the products, home sales, so on and so forth. We're talking about macro. We're talking about geopolitical things and a different part of the open door thesis. Excuse me. So and some people are not going to agree with you know come across some of those bears out there. But I think that's important. I think all all views are important and keeps the thesis honest. So, you know, the goal is to bring the different perspectives together share better information and also challenge each other. And what makes sense and help the community and people understand about the company. So we want these spaces to be open, educational and partially entertaining as well. So, you know, thoughtful questions are welcome constructive criticism is welcome and respectful disagreements are also welcome, especially if speakers want to come up. And during open mic, you know, be respectful. And you know, we can have a debate and a discussion. I also wanted to give a special thank you to some of the open OGs in the community. Long time contributors are keeping the conversation growing. You are definitely appreciated. I know a lot of you guys have spent a lot of time going to indeed dive into open, you know, building those charts, talking about breaking down the thesis. Our offering hypotheticals also as well of what the future open door can bring to the housing industry. So with that, I want to get into the fundamentals of open door. You know, what open door was, what it is today and what it's trying to become. And the next phase of the story could look very different from the one a lot of investors first bought into whether it was back in the summer or even before. Quick disclaimer, nothing said by the host speakers or any members of the open army or anyone in the community should be taken as financial advice. We're here to share ideas, research, opinions, and different perspectives. Do you all research make your own decisions and do what makes sense to you. So one of the biggest things that we're open door spaces is the macro dynamics and open doors resilience to those macro dynamics. So we're tackling one of the most critical questions facing the housing industry and also real estate technology itself. So how resilient is open door to the broader macro economic environment. So just to keep it simple, let's focus on one question here. How well can open door operate in a difficult housing market, especially where we're at now? Because this macro backdrop doesn't look very good and it matters a lot. So we have mortgage rates that are elevated treasury yields are high housing inventory is tight and transaction volume remains under pressure. And housing sales volume is really one of the biggest macro issues here. When few homes are changing hands, it's it doesn't just affect agents home builders. It affects the whole entire housing transaction ecosystem. Fewer transactions means fewer mortgage originations fewer title and escrow opportunities fewer closings and fewer chances for open door to monetize on the broader two piece stack that they're building. So that's why I think housing buying matters so much to the thesis and even Kaz has mentioned this, you know, it's velocity is what's going to bring the revenue. Open door can build the infrastructure now while the market is still difficult, but the real operating leverage shows up when more transactions start moving through that to be infrastructure. If mortgage rates eventually ease affordability improves and existing home sales begin to recover. Open door should have more opportunities to generate revenue from mortgage mortgages agents title escrow closing and other transaction services without needing to own every home itself and keep it on their balance sheet. So for me housing volume is one of the biggest macro indicators to watch alongside the rates and also the treasury yields, we do need to keep an eye on those. But open door can't control how many homes are changing hands across the country, but the volume matters because every transaction is another opportunity to monetize the stack. More transactions can mean more mortgage applications as we said and more opportunities to bring the customer deeper into the open door ecosystem, whether you are the seller or the buyer. So when housing volume is weak and naturally puts pressure on revenue opportunities across the board, but when volume starts to recover this 2 p model has a chance to really work and really speed up. That's why I think the shift from 1 p to 2 p becomes really important. Now the old model was mostly buying a home holding it on the balance sheet, doing some renovations and then reselling it. But the new opportunity in 2 p is much broader and again, just to repeat mortgages agents title escrow closing and other services may be possibly in the future homeowners insurance can all be a part of the same transaction that open door handles and offers. So obviously this will give more opportunities for open door to revenue that generate the revenue. So housing volume improves open door has more ways to benefit from that recovery than just buying and selling more houses. Now I posted earlier that you know, I think the housing market within the next year is going to be one of the biggest opportunities. I think open door is going to be the champion to that. And to be able to take full advantage and is just something to keep an eye on. And that's just open door. There are other housing companies out there that are also going to benefit because these yields and these rates in this macro environment is not going to last long. If you're looking at it at a 30 day pace, I mean, you're not going to get the big picture. You got to step back and look at the housing cycle, look at the macro, look at the geopolitical things, all this will pass at one point. So that's why we're looking at open door. That's why we're looking at the price. That's why we're looking at the opportunity to be a part and invest into open door. I think open door home loans can become a really important part of it. And that's the mortgage side, which has just been recently rolled out. You know, most people look at mortgage rates and think it's all about the Fed or the 10 year treasury. And that's definitely part of it, but it's not all. There's also the pricing around the rate itself. Things like lender margin, customer acquisition, processing, underwriting rate locks, points, credits and closing costs. All matter and go into the rate that is being offered. If open door can lower some of those costs by using AI automation, fewer handoffs, lower customer acquisition costs and more integrated transactions in the stack, they will have better room to offer better pricing. And we've seen that in the drop. We've seen that they're offering, you know, over a half percent less in pricing and also in rate. Well, how does that happen? It happens because fewer points, more lender credits, lower fees or a combination of all of that that goes into that. And on certain open door own homes, they may also be able to use those select credits and rate by downs instead of simply cutting the price of the home. So usually if you want a product to move, you cut the price of the home, which you make less of a transaction as far as the home sale. But if you own the whole stack and able to calculate where you could maybe not make as much money, but make money over here, it's going to increase the revenue. And this is where the volume comes back in the velocity, the more transactions that are happening through the platform, the more the revenue will increase. So another piece people may over also overlook is the secondary market. Well, what's the secondary market? Well, this is where the originated mortgages that open door home loans does. They can pull them together or solve individually, but usually they pull them together together and they sell them to Fannie and Freddie or other secondary market investors. And they can also earn revenue from that sale, you know, whether it's an eighth of a percent or a quarter of a percent. What have you is they have, you know, $400 million worth of mortgages and they make a quarter percent on that. That's additional revenue that they can also make. So that's just another part of where another revenue street is in part of where the open door home loans and the mortgages could be had by open doors. So the mortgage itself can become both a customer benefit, but also an additional revenue stream inside the larger transaction in the two piece that. So and again, like I said, the volume matters velocity more transactions, more revenue. So for open door can increase the number of customers moving through the platform, then that same infrastructure can support more mortgage originations, more title and extra activity, more closings and more fee based revenue. So and that's where the operating leverage can start to show up, you know, the platform gets more valuable when more transactions move through it. That matters even if treasury yields stay high open door can't control the bond market can't control the rates, but it can control how much additional costs and market margin get layered into the loan. So and if the yields eventually move lower, then those market driven savings could stack on top of whatever internal cost advantages there already being built in. Lower yields can also help unlock more housing volume. And if that happens at the same time, open door is as already built out the two PM structure and the company could potentially benefit from both sides of the transaction better mortgage economics and more transaction moving through that platform. And that's where I think the model and the thesis gets really interesting, especially in the two piece stack. At some point I also put together a post thread of some kind breaking down the mortgage economics. I know I've posted that out in the chat group that I would come out with something, but I wanted to wait till after the space today. And maybe Monday or Tuesday put that out breaking down the mortgage economics in a more detailed way, including the pricing, the buy downs, the margins, the second secondary market sales, how AI influences that also rate locks, how long your rate, your rate locks are for most mortgage companies locked the rates anywhere from 30 to 45 days, because that's how long it takes to close transaction. Underdork and closing transaction in 21 days or less, that's the less cost and pricing to the rate. So that's that's absolutely huge. And then again, obviously housing volume, increasing velocity and also the broader two piece stack and how all that could work. I'll do a deep dive on that and send out a post that you all can take a look at and respond. So today, I think the main focus should be on the two piece stack. And also how is open door managing through this difficult housing environment right now and what could this business look like when that macro backdrop eventually improves is going to improve. And cash and the team are building and shipping the two piece stack right now. And that's the part of the pieces that matters most in the near term throughout.