Buyers Market - Are homebuyers back to buying homes now?

 It's official. More areas are experiencing attributes of a buyers market. This means longer days on market, less offers, no more AS-IS, Zero Contingency offers or $400,000 over asking. As a matter of fact, some areas are seeing a contraction in pricing and homes being sold as low as 68% below asking!

Original live date Oct 19, 2022:

When will the housing market crash again? Are we going to see the housing market crash? While we can't even guess at the housing market predictions for 2022 or what 2023 will look like, we know that the market is slowing, because of inflation, the economy, the threat of WWIII, and unemployment, we can ask if home prices will drop in 2023. It's not likely, but anything is possible. What we know is that there are more people than houses. Ibuyer platforms and hedge fund corporations buying houses in 2022 which means they're buying up inventory and ultimately homes for people. This hurts everyone eventually because no matter what, people have to live somewhere. It makes competing against these money giants almost impossible.

  Welcome back Wednesday, October 19th, 2022. Lots of lot and lots to talk about what's going on. Thanks for coming back. Today we're gonna be talking a little bit, more about where the market's headed, but why everybody knows that the market's kind of stalled right now. We know that the rates are going higher, gas is going crazy, and high inflation is high, but we're trying to control it. All this, all these other indicators. But why, is this happening? Not why. What can you do if you want to talk about it? Anyway, let's just talk, let's just go into where the market is. What's going on, like rates? Are we gonna see 8% soon? Quite frankly, I believe we're gonna see 8% soon, probably before Christmas. But what the hell do I know I've only been doing this for 20 years. Let's go talk about race and see what's going on. Hang on a second. Damn. That's my new intro. Who's started working on these things? Have some fun with it. All right, so Nerd Wallet is allowing us to take a look at what non-quoted rates are. These are non-quoted, meaning the minute you drop your application in with a loan officer like Hector or Scott or Louise, they're gonna run the numbers for you based on your credit criteria, your work history, how much money you have in the bank, reserves, that kind of stuff. And these are the starting numbers. So these are non-quoted numbers, but they're at seven, 6.9%. Let's just round that up to seven, right? Last week we saw something here a bit. People are still buying houses, and you're telling me, veto, I'm not gonna buy a house. I'm not gonna buy a house at 7%, but they are. People are buying houses at 7%. Maybe they're not buying it exactly at 7% because we'll go into this story a little bit more. Mostly because they're not buying six or 7% loans. They're buying three-year arms, just full-rate mortgages, which are interest only. I get it. But three, 3.3% is a lot better than 6.9% fixed amortized. So you're, I don't know, maybe a third of that cost. So let's take a look at this thing right here. Earlier this week, 7.043 on October 16th. That was Sunday, Monday. I don't know. But Beto, I'm not gonna buy a loan. . I'm not buying a house at 7% cuz it's so expensive. Okay. There's a lot of stuff that's going on right now. If you look at what's going on in the market, we are coming down a little bit. As far as value is concerned, the houses are still selling. For example, the house across the street from me just closed at 3 million, 1.3 million, and changed to 10,000. Originally it lasted for almost 1.5% or $1.5 million. So it went down in price significantly. There were a few reasons why. One, they didn't use me, they used their son's friend from high school and she didn't know the area and all sorts of stuff, and they, she just got really bad representation. But that's not the point. The point is, is the market slowing down? If you have to have somebody sell a house, you want somebody with experience who know how to keep that negotiation and keep every dollar on the table for you and to market, right? If you're in the mode to buy, this is a good time to buy. Unless you don't have to buy it. If you don't have to buy it. If you don't need to move, there's nothing pressing, right? If you have to buy, now is the time to do it, simply because there's no competition or less. Remember back in April when you heard stories, April, all the way back to two years ago when houses were selling and there were 17 to 25 offers on every house, no matter how it looked or whatever, and people were just desperately trying to buy a house. Now that's not happening anymore. Now buyers can be picky. Now buyers can make their choice. Out of four to 10 houses, I'm gonna go look at these four different houses and I like that one the best. And I'm gonna put an offer on it and I'll, I'm gonna take my time. I'm not gonna feel rushed and I'm gonna go in a little bit lower. Or maybe if there's some competition, I might go in at asking. And I'm gonna ask the seller for some concessions and we can go into that a little bit more. So instead of giving the seller a premium, now is the time for the buyer to take advantage of it. But veto, you say veto, their rates are so high. It was so expensive. I'm almost gonna have to pay $10,000 a month. This is Silicon Valley, right? And a half-million dollar house is gonna cost you about $10,000 a month right now. That's the going rate, that's just how it is. I'd rather rent. That's okay. You can pay a hundred percent to somebody else's mortgage. That's fine. And I know it sucks. You don't have to buy in Silicon Valley. You can buy south, you can buy up in Hayward. You can buy out in the valley. You can buy it in a lot of different places where you don't have this really, high cost of living. I understand that. I feel for those people. I talk to many of these people almost daily about what's going on and the pains that they're having to have to come down with down payments and all that stuff. Now, if you're struggling to come down with a down payment, you can use an FHA loan, three and a 5% if you're in, if you're okay buying in Hollister, like 90% of the homes there are USDA, which is 0% down. I'm working with a ton of veterans right now because veterans are 0% down and this is a great time for them to buy. because they have zero competition and a seller's more likely, more than likely to work with somebody that needs help. Not help but needs, help with the res, the concessions and lowering the rate and closing costs and all that stuff, and wrapping it around. And that's just what's going on. If you look at the numbers, the sheer numbers of what's going on, we're gonna get them to that a little bit. But then, values in real estate are contracting just a tad bit, depending on where you are. If you're in Palo Alto, if you're in Cupertino, if you're in Los Gatos, those prices aren't coming down. People are still buying those houses and droves. Cuz they have the money. They don't, they're not affected by the interest rate, and they're not affected by the economy. They have money. They can write a check if they wanted to. So what, you know what I'm telling my agents and my team, I'm like, go find open houses out in Willow Glen, out in Los Gatos, in Saratoga and San Mateo. Go make those happen. That's where you're gonna find the buyers. Cuz people that can afford to buy those houses, they're going to those open houses. And yes, there are still people going to open houses there because they have the money and they can afford it. Over here it's a little more, I don't wanna say it's blue-collar we're not as affluent. We don't have a couple of million dollars in our stock portfolio because we work for Facebook or LinkedIn or, whoever. So people over here struggle a little bit. They might be smaller entrepreneurs, mom-and-pop shop places, or they work and they're basic engineers. That's the type of people that live here. So they're not gonna have as much money to throw at homes. So just to, so you can take a look, see what's going on. Like Santa Teresa, which is just due east of where I'm living right now, where I live right now. It's the next area over. Only one home was sold. However, in my area of Blossom Valley, we had 15 home sales, so something happened over the last few weeks. Blossom Valley was struggling, right? But let's go over to Los Gatos. Eight homes, Saratoga, three homes, Cupertino, nine homes. It's under the norm for sure. Sunnyvale 15 Homes, mountain View, seven homes, Los Altos, eight homes, Palo Alto. Those homes are not suffering and I can almost guarantee you, I think the number is 70% of homes that are selling in Santa Clara County are non-contingent zero contingencies. So there are still home buyers buying homes, moving from home to home, buying and selling at the same time, mostly over on the other side of 17. But that's just the way it is, right? Our inventory is relatively stable right now, which is the same thing that you're seeing on the numbers that I show you every week, right? In Santa Clara County, this is all of Santa Clara County. My numbers for San Jose are 421 or something like that today. Let's take a look. 4 45 unsold, right? So we're roughly looking at where am I? Oh yeah. Over here, roughly a third of the unsold homes are in San Jose. Everywhere else, they're not having that problem, okay? And that's what I'm talking about right here, right? Guys? I know that I'm talking a lot over the last few weeks about what's happening in the rest of the world and the rest of the country about what's going on, but even in. Cape Coral, Fort Myers and Atlanta, and Austin. They saw the record, crash. I was just talking to my escrow officer today and she's saying we're slow. We're trying to figure out what's going on, and it's because the market's slowing down. We're having fewer numbers. Then we had last year, which was a benchmark. It was an outlier, excuse me, an outlier year. It was crazy. Take a look these are the volume of the number of homes that sold. We had over 6 million homes sold last year, and it still was a fever-pitch firestorm pricing. People couldn't get enough houses because money was so cheap. Now we're, because of everything else. Gas is cheap. Commodities were cheap. Houses were cheap. Interest rates were cheap. That drove up the housing cost that drove up. The need for everything else, which supply was lacking, which increased inflation or the cost of goods, which is why what we're suffering right now because the cost of money was so inexpensive, everything's gonna have to come back down. And that's why the feds keep meeting and keep popping it up 0.75 basis points, 0.75 basis points. We need to have that slowdown and that's why we're seeing this. But if you look at this as a historical leverage, we're not hurting. We're not in a housing recession at all. Some areas are struggling, for sure. My area is struggling. We've lost probably $200,000 from last year. But you know what, that's not that bad when you consider the fact that over the last five years we've just seen nothing but increase, Right, and that's more like chicken little saying that the sky is falling. I get that. I understand that. But look at this, right? This is the last year, right? The numbers have to come back down cuz this is the natural progression. I don't know if we're gonna see it come down this far back down, but we're gonna see it come back down. Everybody always told me, since I got into real estate, the value of homes go up an average of 8% every year. That's this number right here. And since 1975 ish, that number has not been correct at all. So it's been 15%. That number's adjusted over the last, since the two thousand, it's been closer to 15%. Now all of a sudden we have this big jump because of covid and cheap money and everything. That is one that made it very unaffordable for people to buy houses then was very difficult for people to buy houses cuz there was so much competition and now that competition is going away and people are still buying. I just showed you these numbers over here, right? These numbers right here, houses are still selling. So if you look at Santa Clara County, here's the proof that this was an outlier, right? Houses got more expensive and more expensive. The volume went down. All of a sudden it's a firestorm. Everybody had a great banner year. We had more millionaires in real estate than I've ever seen in my entire life. Now that the market's sizzling out, we're still well above the last three years, before 2021. So we're still doing well. Prices are contracting in certain areas, but not in the well-to-do areas. Cupertino, and Saratoga, are all non-contingent, multiple offer situations still. That's what I've been trying to tell people. Will the market continue to crash? I've been talking about the tipping points for a very long time, right? The health industry, layoffs, stock market automotive industry, all these different indicators, all these other industries that feed in and are, we're all intermingled. If those start to crash, the tech, field, and tech industry fail or crash. Yes. If we start seeing. I just saw something today somewhere. If you're used to doing 60 to 70 hours of overtime or of work every week, so 30 to 20 to 30 extra hours of overtime every week, and that's disappearing, that's a huge indicator that your company is looking at possibly adjusting the big layoff name, right? So could it happen? It very well could be maybe we go, we increase the basis points enough and stop this inflation and we turn things around. I don't know. Why are these people that have money still buying houses? Does anybody want to guess? Send me a guess in your private chat in your comment section there if you have an idea. I do have to thank, Frank. He says he loves the special effects. The people that are buying houses now are not buying for today. They know that if the market crashes tomorrow and they lose 20% value, that's okay because in 10, 15 years they're gonna make their money back. Period. They have to take the money outta the stock market because maybe their, stocks aren't doing well or what have you. I'm not a stock guy. We can talk to Patrick. You can talk to your financial guy. The idea, guys, is that over time, real estate is the best place to do it, to keep your money because it does double every eight to 12 years, however, if you wanna look at that now, guarantee there's never a guarantee. We could all be wiped off the face of the earth tomorrow from a meteor, an asteroid, nuclear war, or whatever. We just don't know, right? But, You believe that's not gonna happen. Continue doing this. Buy real estate, now is the time to buy real estate versus when the market's going down. Because then you have everybody, you're gonna have 10 or 15 offers on every house again, and you're gonna have to start by paying premiums and as is. And you can't ask for concessions. You can't do all that stuff. So my argument is by now and yeah, it's gonna suck. Oh, I missed out, I lost money in the downturn, whatever. I get that. I know that, right? I'm facing that right now cause I'm looking at buying some property. But now is the time because there's hardly anybody out there buying houses, but they're, buying houses. Find the right place to buy. Buy a house. Gilroy, San Martin, Morgan Hill. If you can afford it, Los Gatos mil. Mil Pets is nice. Fremont's nice. Hayward is doing an amazing job at gentrifying its, downtown. It looks beautiful compared to what it did five years ago, and we sell a lot of houses up there. Look out, look around, see what's out there. Okay, so what else is on the thing on the docket here? Let me see if I can have some more fun special effects. for Frank. Okay. So JP Morgan City Group saying that a higher capital requirement. It's gonna hurt lending. And the reason why this happens is that let's say for every million dollars that they lend out, they have to have a certain amount in their bank to cover costs. Just call it 10 a hundred thousand dollars. The Feds are coming back and saying, you might need 150 or $200,000 to cover that same million dollars. That's gonna put a pinch on them. So what's gonna happen? It's gonna make it more difficult for buyers to access that lending because there are those guidelines. Are gonna become stricter. Instead of having a six 80 or six 50 score credit score, you're now gonna be required to have a seven 20 instead of three months reserved. You're not gonna have to have a full year, I'm just guessing, right? I don't know, what could happen. Instead of having one dero, you can't have any, you'll automatically get denied because it's all about risk, right? If you have a DAG and you have a lower credit score, you don't have as enough reserves. You're a bigger risk than somebody that has a ton of money. You can just write the check, right? Banks aren't in the money to be your friend. They're there to make money off of you, no matter how you look at it. And they offer services like lending money to you. That's how they make money. And if it makes it, the Feds stick their gear nose in the gears and slow things down. , then it makes it more difficult and it's gonna be more difficult, and you're gonna be paying more interest rate. You'll be up to eight to 10% in interest rate, which is gonna hurt the little man over the guys with the money. Look at Santa Clara 16 homes. That's about on average. It's about, I wanna say it's 1 7, 1 9 for, a house out there, a standard older house, right? Los Gatos, eight homes. These guys are not hurting, these towns are not hurting. Okay? More news. I already talked about that. I'm, where did I, already have that ready to talk to you about it, and I already, and my office manager had it. All right. This is what I've been telling you, right? This is what we're finding out. Almost 80% of home buyers right now believe it's a bad time to buy property. Why? Because we just went through that. Because we think we're on a precipice of a massive recession. Could be. But again, you have less competition. Is it time for you to buy a house? I can't be the judge of that. That's under, that's between you and you're better. Half and fate and God or Allah, right? Is it, I think this is a salacious headline designed to make you click, but there are a lot of people that are, or a lot of companies aren't, that are doing it. This is Housing Wire. This is, an institute, an immediate outlet for lenders, for loan officers. This is It's a. Public consumer portal for real estate. But this is the single most time, the single worst time of buy. They're saying maybe, not Fannie Mae. That's where, that's the tertiary market where they buy this, the mar your loans, housing sentiment, dips again, so I read this somewhere else, right? Who are the 25%, the 25% of the people, cuz right now volume's down to about 25% or where we whatever, 25% of the people, this is the people with money, they know that they have? They have. Why? Because they know real estate is an asset that appreciates over time. It's not the stock market where you can time it. I have a buddy of mine who I talk to about stocks all the time. He's trying to put that idea stock in a mu through his brick of a brain doesn't work with me. You get tax breaks, not like with stocks, right? You can use it as collateral, right? It can be passed on in legacy just like stocks, but I understand that, right? You can pass that on with Legacy, right? You can build up a fortune. Let's say you have 20 or 30 houses and you pass on, you can give that to your heirs and there are a lot of tax breaks and a lot of raises, to go around that. That's why people are buying real estate. Something completely off the scope, but I thought was cool. , cuz I'm a nerd, in case you didn't know. I've been to one convention in my life. That's cuz I was trying to figure out what my son liked. I'm a total Star Trek and Star Wars nerd. Total. Ask me anything about Star Trek, The Next Generation (TNG). I can tell you most trivia facts, it's pretty pathetic, but it is what it is... But look at this. Isn't this cool? This ring structure right here is the size of our solar system. That is so amazing. Just I can't wait to see more stuff like this. This is so cool. Okay. How are these happening? A lot of people are cutting checks, especially if you have Zuckerberg Money. They just write a check or calls up his bank and say, Hey, give me some money, and then they lend it to 'em and that's not a problem. And they're not paying retail prices, I'll tell you that right now. People with money, know how to collateralize and use money that they already have and borrow from. To use it as an asset and gain wealth through time. For you and me, there are different ways of doing it. For people that are struggling, but people that are smart with their money, they save up, live underneath their means, and work on their credit. They don't have to have perfect credit. They have a good job. There's a difference there are different things that you can do to offer a seller or work with a seller and, come up with a deal to make the seller say, yes, I want to work with you, especially if the house has been on market 30, 40, 60 days. Are you willing to work with me? Seller carried back, there's a loan buy down or loan rate buy-down. There are concessions that we can ask for. There's help with closing costs. There are all these different things that we can do to make things happen because now is the time to do them. When the market comes back, I'm not gonna show you that graph again, but cause you already know what's happening. When that market comes back and the market crashes, all the investors come back, all the buyers that were skittish come back and you can't ask for any of that. And you're gonna have to wait until the market comes back and you can afford it. And then you're gonna compete against 14, 15, 20 other offers. And I don't want that to happen to you. So this is happening right now. If you know somebody that owns a small business, I'm not talking about publicly traded, small to medium-sized businesses. There are so many different options, guys, that you can, the guy across the street that just sold his house, was broke. He owned a business, was a dry cleaning business, but he didn't know what to do with it. If he worked with me, I would've told him that you can sell your, business on the market just like a house. There are so many different things that are happening out there, but this is gonna be a big exchange of money. So if you're thinking about real estate as an investment, there are alternative options out there that we can talk about, buying businesses, small businesses, that yes, you can run or you can enhance, you take over and you put your little touch on it, and maybe you can become the next sucker, bird or whoever is happening though guys, so many baby boomers are retiring right now. A lot of them don't have an idea of how to use the assets that they have because they just started doing what they do. And they're not business owners. They're business owners, but they're not educated in the way to, offset this as an asset. If I was him, I would've taken that business, sold it on the secondary market, and financed it to whoever wanted to take it over, and then I would have years of income coming back into, my asset, my bank account from this business that I worked on and toiled over for the last 30, 40 years. But that agent didn't tell them about that. So this is happening all over the place. There are so many different options, and I'm working with another guy that does commercial lending, and I am if you know somebody ready to retire, put them in front of us so we can help 'em make a decision. All right. How are we doing on time? I'm gonna do this second later. Yeah, we're gonna talk about this on a, on another, on a separate video. I'm gonna do that later on because it goes deep into this right here. I might even do it this week as alive. But there are certain things you should do and certain things you shouldn't do, then you can go dig through it and figure that out. But I'm gonna have a video on this here in the next few minutes. On the few days things you should do and things you shouldn't do when selling a house. What kind of upgrades should you paint? New flooring? What kind of flooring, right? Those are the things that we're gonna go over. Oh. Oh, this right here. How long do bear markets last? It's about, yeah. 56 months, right? The reason why you need to know this is because the. Since May technically was the start of our recession, right? You see the kind of sloping down here, although the media's not telling you that and they're not admitting it because they're changing the rules or I don't know what's going on, doesn't matter what they say. The fact is after two quarters, we're in a recession that's six months already, so it could be a very chilly year. Year, nine months after that, right? 56 months. I'm sorry, that's 56. It happens every 56 months, so every four and a half years. How long does it last? Where does it go? I think it was like, yeah, a year and a half. Two, two and a half years on average. 349 days, so about a year. Understand that we're looking at all this stuff, understanding that this is gonna happen, but after this bad time, good times happen. And that's why if you buy now, yeah, you might lose a few hundred thousand, but you're gonna gain a lot more money on the back end. Especially if you're struggling to get into a house. If you were trying to buy a house over the last two years trying to buy a house, maybe think about it, right? So I remember talking a lot about homes and forbearance, that was gonna be the crash and it wound up not being the crash because there's a lot of forgiveness and a lot of getting those people pro back up and on their feet. And yes, houses are happening or foreclosures are happening. Because there are people that just naturally put their heads in the ground and pretend nothing's happening. And the next thing they get kicked out. But homes and forbearance, right now there's three points 345,000 homes and forbearance, which, if you look at all the numbers of homes, which I think was, I can't remember the number, it's 0.24%. That's a quarter of a percent of the homes in Cal, in the United States are in Forbearances. So it doesn't affect us or it doesn't affect anybody. Some homes are bank-owned right now and when, look, and when I say all of all, Oreos, all of California, my MLS doesn't reach into every MLS system in California. It just doesn't do that. So these are just numbers that I can pull. I wanna say it's like 70-80% of the MLS systems within California I have access to. So just so you know, when you look at the numbers, 413, we're on average, we're pretty much stable right now at 400 a week, right? That's 40 days on market or longer. That's stable. Stabilizing is not going up. We're going down. So there you go. 90 days on market. I have way more comments. Hang on. Oh, Hector. Hector, you just jump on the, jump on, dude. Here, let me send you a, you have so much to say. I'm gonna send it to you. Hang on. All right, Mr. Smarty pants, jump on. Let me know that you're here. Okay. The number's doing okay as far as 90 days on market. These are multiple counties, right? The Bay area res, it's 20. These numbers haven't gone up or down. I don't see this being an issue yet, but this is a lagging indicator, right? This isn't just three months and all of a sudden you have a non-paying mortgage and it is like six months to 18 months and then the bank will take it back. There's a whole new process compared to what it was like in 2008. So understand that res, they will trickle through, they just won't be at the numbers that we saw in 2008, 2009. So don't plan on it unless you're ready to go and look at some real hump dingers. We can take a look at any one of this real quick. Can't instead because it's too many now. I think next week or the week after, they're gonna report the median. But we've been falling quite drastically as far as across the nation, which leads us into, hang on, let me get back to my little graphic here. Probably the numbers by Vito. Our numbers are stabilizing, right? You're seeing these numbers staying about the same, right? They haven't gone up since 6 88. I think that was high. I was right in the beginning when we're like, oh my God, the world's gonna fall apart. Now we're kinda like, see, come down and stabilize a lower number here is better. But we want to have enough supply so that the demand can meet and say, I have my choice. I want to buy this house and this house. Or I don't like this house. I want that house. For every thousand people that are here in San Jose, there are roughly four tens of a home for sale, okay? Last week we had a full point off of the list price itself, the price ratio. That's coming back, up, or close to a hundred percent, but we're not at a hundred. Last year was 1 0 9. This week we had 150% over the list price. And don't get your panties up in an uproar here. That wasn't about anything other than somebody listed the house way too low because he just didn't want to battle with it. He said it was upgraded. I couldn't tell because there was only one picture on the house and it closed and it went from $750,000 to, I don't know, I wanna say like 1.1. So it wasn't like, oh, maybe this is it. Yeah. So anyway, again, if you want these numbers, if you want, I'm happy to send them to you. They're, I only keep 'em for a couple of weeks though, so if you want 'em, text me, let me know. So the lowest one was 90%, far better than 68% from last week. So we're getting back to normal. This was an outlier. The other one was like 116%, I think. The average sales price is 1.6. Again, we're going back up and this is just San Jose, this is the entire county, right? These are. Single-family homes, not PS townhouses or condos, not mobile homes or anything else. They're just single-family homes. Three bedrooms are larger than under $2 million. So these numbers here totally do not make sense because I don't even go to the $3 million mark. This is just what an average person can afford in California, in San Jose. Okay? So for every square mile, there are two and a half homes for sale. That's important because if you look over here, Tampa, for every home for sale, there are 12 houses for sale. Same thing with Cape Coral. 31 homes for sale and their numbers continued to go up. This one went down by just a tad bit. But again, remember Cape Coral. Got hit with Hurricane Ian, so there's probably gonna be a number of those that are off the market because of storm damage, even though they weren't in the path, they were an ancillary city to it. The bridge that went down Sanibel Island bridge that was right next to Cape Coral, Fort Myers, and Tampa. The numbers are going up, not substantially, not crazy, but I think you're gonna see that's a natural number for consumption right there. If you look back over the last five years, the same thing with Austin. Numbers are going up. Atlanta's numbers are going up. 12 homes per square mile in Atlanta. That's one of the hottest markets outside of Austin. And Phoenix and Idaho Boise, Atlanta was the hottest market. on the East coast for a very, long time, and now their numbers are rising. LA yeah, LA is just a complete shit show. Chicago. I have a lot of hope for it. Here's something weird. I had to take triple-check to make sure that number was the same. This is the same number. It's the same number. That's crazy. I have never seen that. Just what are the chances? What are the odds, Hector? You're asking these questions and they're half questions when homes come out of forbearance. Okay. When homes come, oh, how will that affect the market when homes come out of forbearance? It won't because it'll trickle. We don't have a huge number of homes in forbearance. That was the point, right? It was a quarter of a percent of all the homes in the United States, a quarter of a percent, 345,000. So even if they did fix it and they come out of forbearance, chances are they're gonna step stand right back up and keep that house. Cause that's the intention. There's that small amount of homes that want to keep their head in the wall in the ground, and they're gonna lose their house. But it's, I don't think that's gonna be it. The big thing is going to be unemployment. And I was saying look at automotive, look at tech, look at all this stuff. Those are the outlying industries that are affecting everything. If you don't have a job, you can't buy a house, right? So if you're unemployed, you can't buy a house that's gonna hurt demand. Phoenix, their numbers are continuing to grow. Again, these they're, slowly going up, but I don't, these are areas where people don't have a ton of money. There are areas, there are affluent areas like Phoenix Scottsdale and Las Vegas in the Upper West area. I don't know what that is. My sister could tell you, Knoxville, those numbers are going up. But Knoxville is very low, then, I think their biggest industry is a college. It's, there's not much else going on there. , I was there. My mom and dad live there, so I but they're not, there's not a ton of supply, but there's also not a ton of demand. I don't think they're gonna get hurt too badly. Jacksonville, their numbers are, going up. That was a pretty big jump. But I think it's because over the last. When Ian came through, people are like, ah, let's hold up, see what happens. And then I don't think they hit, I don't think Ian hit Jacksonville, so everybody's okay, let's go back to normal. And I think that number's gonna come right back down because demand was pretty even there if you think about it. Hey buddy, can I, can you talk? I sure can. Right on, dude, how are you doing? Great. How are you? Good. You're sticky. There you go. I'm sorry, I was just playing through my settings while I got led into the room. How are we doing today? I'm great. I just hurt my finger. I am great. I'm going to the gym every day. How about You I'm trying I'm, getting to that point I'm eating better. How about that? Of course, it's time to reevaluate my gym membership coming in December. Of course. But I'll get there. It's good to hear that you're staying healthy, I'm feeling so much better. I'm outta covid and all that. I think we all understand that health is wealth and it's super important to stay on our daily routine with, eating, exercising and, going to the doctor and all that good stuff. Eating right? Yeah. Donuts, Costco, hot dogs, pizza, those are all food groups, right? Yeah. Dairy, and sugar. So what's up man? Man, I appreciate you having me on. I'm your number one fan. I love to you do such a good job of getting information out to buyers and I think in today's pivoting market it's one of the most important things and so I appreciate when I get emails that you're talking and I always if I can put you on, and I always wanna listen and know what's going on in the local market. And, that's super important for me being in the industry. And obviously, it's super important for our community clients, and friends who are always asking questions regarding real estate. And, I think now more than ever wanna know what's happening and what direction we're going a lot of, really important stuff. I think what caught me in, captivated me to, jump in today is the fact that you were talking about a buyer's market, and I don't know if I'm, it seems like on my side I'm a little bit behind, but hopefully, you can see me in here. What was your kind of notes on that and, what are you seeing? Yeah, so like over the week last week I showed two houses, two separate clients. One, they have the house on for sale and we're still waiting for it to sell. So we're just like tricking and waiting went on to another house and it feels like they were getting more particular, not picky or they're like, I'm taking my time on this one. I feel like I can take my time and see what's out there and I'm not in a hurry, which is good, but they're still. Yeah. The other side of the thing is, whatever, but they're buying, they're selling a house that's worth one and a half, let's say one and a half. They're gonna buy a house that's one and a half. So their numbers are gonna be relatively the same. Sure. And you know who I'm talking about, which is that's common that's a really common scenario, right? We either have someone who's moving to that larger home or downsizing to the smaller home. Sometimes the price is the same. Sometimes the price can be a little bit more or less, depending on what scenario we're, going through. And what's interesting, like about this client is this client was entertaining this move about a year and a half ago, right? About a year and a half ago. I know I, had spoken to the client we had talked about, and at the time and one of the things we were talking about and that we do really. It helps clients transition from one home to the next. Whether it be just the coordination of doing that, which you deal with a lot within your team, or whether it's the financial aspect of it, right? Like by way of, being able to do some bridge financing or, another creative way to help them buy potentially without selling. And we had talked to this good client. He's a very. A typical client in the sense, very obviously cost is very, important very detail orientated, and wants to know and be, driven precisely. And for instance, if you recall a year ago, doing a unique creative solution just really wasn't something that he was comfortable doing. It was almost over the top for him. And I, explained to you, hey this is normal. It's, not necessary sometimes that doing these types of deals isn't, necessarily for everyone. But what's neat now about where we are is that he's able to basically get into a contract and then put his house on the market. Or as he's doing now, also just has his house on the market and is looking at the same time. And so we're in a time right now where the market. And apologize if I'm stepping over some of the things you've said the market has balanced out, right? We have at least locally more of a balance between buyers and sellers. And so I like, I know you were talking about earlier, the ability for us to negotiate, right? The ability for us to potentially get credit through a lot of things that we haven't already done in years, right? And, once a decade, one of those things is helping buyers sell & buy at the same time, right? And just really interested and plays to the tune of like where the market is today. And I think a for, what I'm seeing is we have a lot of interested buyers, right? We have a lot of pre-approved buyers. Some looking at all different levels of, of. like how aggressively they're looking. But we do have the activity, we have more folks dipping their toes in the water to, test the temperature. And the reality is that we just forgot about what it's like to, be a buyer, right? This is a big decision and sometimes it takes time to really, and I don't know if it's picky if that's the right word, but we have the, you have, as a buyer, you have the ability to now and, us as, their advisors have to be patient and do our job, which helps them to understand the pros and cons of each house, of each possible transaction to determine whether it's the right fit for 'em. We had I forgot where was gonna go. Go ahead, Goodbye, man. That's it. Always. But, it's like, where are the buyers? This is a market that we, that they wanted last year. This is what we talked about. We, because we were, remember, we were 20 deep in line to make an offer, it was nuts, right? And this, you had a one-20 chance hoping for this market right here. Everybody was hoping for this market to buy. And what I'm getting now, oh my, my interest my rate is too high. That's a temporary inconvenience compared to the fact that yeah, you're gonna spend a lot more money for the first few months, but when rates come back down, you refinance it, and then you're done. And I don't know, sometimes you can recast them too. So recast is a little bit different though, and it's, something to be careful with because naturally, and it's funny cuz the last week or two I've now heard several different social media content guys, like talking about this. And so recast is a, it is important in, it is a, it's a good tool, right? But then, I'll quickly explain it since you brought it up, what recast allows you to do is to pay a lump sum towards your mortgage, towards principal reduction. Okay? And then it allows, the lender will allow you typically at least one time, to amortize the new principle by the remaining months, right? Because remember when you engage, when you sign on a 30-year mortgage, for instance, which is the most common, right? 360 payments. , even if you aggressively pay down your mortgage, your payment will always stay the same. Is that clear? So even if you pay an additional amount towards that principle, what your ins is doing is you're removing payments from the back end of it. Okay? What a recast allows you to do is, for instance, pay an aggressive amount down. You do have to pay a pretty significant amount. This is something that you use, but you would certainly want to make a, fairly sizable payment. And then what the lender will do is, will amortize that new principle. So let's say you paid it down from 500 to 400 right? Over the months remaining. So now for the remaining part of payments on the loan, your payment is less. Right? And the reason I, reason, I mean we're talking about that is that Refinances don't make sense, right? Normally what happens in an environment where rates are coming down or lower than where folks are, you just do a refinance, right? Which means we pay off your existing loan. You start a new loan, you can set how many years Most people just refinance into 30 years again. And when you take that same amount you owe by a lower interest rate over the same amount of time, guess what happens? That payment drops a lot, right? A lot. Because refinances aren't an option right? Now, folks talk about recasting, right? So but to do a recast, you would have to be paying a large sum of your mortgage down, right? And that's where I'm not sure exactly where folks. Or would be having that? Where I do see it, and for instance, I had a client just probably over the summer do this, was that they bought before they sold. So they bought, and then they turn around and sold prepared their home, sold it on the market. And then they had once, that was sold, they had a, a chunk of money there. And so what they did was they took some of that money they had and they just paid down their current mortgage. In other words, if they would've sold and bought they would've put like 40% down. Okay. But because. They had to buy before they sell just because of what they wanted to buy. They borrowed against their property, put 20% down, turned around, and sold their home. They had another big chunk of money. They paid down their, current mortgage. So at the end of the day, they were left with a smaller mortgage than the way they originally intended to. Yeah. Something like instead of 80% loans of value, it was more like 40%, whatever the numbers are just Yeah. 60, 50%. Exactly. It's just like sometimes we have to get creative at the end of the day when the dust settles. We're in the same position, but sometimes we do we're, we have strategies and we deploy 'em for our clients to help them reach their goals. Sometimes it's just a little different path. And depending on where the market conditions are. We're that's what we do, right? We offer solutions and options to our clients to help them attain that. And so that, that's where a recast would be popular or would be, would make sense, I should say. And it's important to know how these conversations are before you do anything another client set of ours, make sure the ones over here. When you go to talk about buying and selling, don't just talk to your agent. Bring in your lender as well, because you have to have the 500-foot view. And if you're working with a lender and a listing agent like me, bring us in at the same time. Not the initial one, but once you start moving, once you start chunking away and getting your house ready to sell, bring in Hector because that way we can have the conversation about scenarios and strategies and different tactics that might be better for you than, you know what I know because Hector lives this every day. Know yourself. I work closely with financial advisors, CPAs, Lawyers, Insurance companies, and other Professional Services. They're, part of the team and, part of what we're doing is we're helping each other understand the role that we play for our clients. And, it's just in layman's terms, it's like doing our construction job. Imagine if we're both vendors. And we don't have any idea what either of us is doing. That's what a general does. He brings 'em all in and he pretty much coordinates. And that's what allows it to work. And so absolutely like it, it's imperative whether you're buying or selling to be in communication, whether it's the other agent or the lender on the, on your next purchase or what, have you, right? Or if you're just buying, how important it is for your lender and your realtor to be on the same page, to understand for you as a realtor, to understand, hey, the approval, what we're doing, what type of loan for the importance of the lender to communicate with the seller as well, right? On the due diligence we've done in this day and age like we're writing offers with credits, right? We're asking for repairs, we're doing stuff right. And sometimes our approvals and the cost analysis that we provide for clients, Are set up that way. And so very often I'm trying to reach out to, the agent as well and help them understand the importance of maybe trying to negotiate credits because it's gonna be very important to help, for instance, our buyer buy down the rate maybe, right? If that's or, what have you? Or, help with closing costs because we're very skinny on our cash to close. Or because the client is very sensitive to payment. Our, rates are going up, actually, payments going up. One of the things that if you don't want me continuing that, you've probably heard very recently, and I'm gonna share something cool that I'm building out, is an explanation of a two-to-one buy down, right? Because that's probably tough, the payment right now is a pain for buyers. Payment is the pain. Why? Because. Our payment has gone up maybe, a thousand dollars in some cases, right? If you take the same purchase price, you double the rate, let's say over what's happened over the last nine months. Our payment is much higher, right? Even if you qualify it's, quite a bit more for a buyer to have to, do. And something that you're hearing a lot of, we've been talking about this, these are programs that two to one and the 3 21 buy down or programs that have been around a long time, and they tend to always rear themselves here in high-interest environments. Right? And what, it does is a two-to-one buy down can help a buyer become comfortable with their mortgage payment. And how it works is for the, let's just say that the standard rate today is, let's just say it's 6%, okay? That means that in a two-to-one buy down the first year of the mortgage, Your two percentage points lower. So 4% of your payment is based on 4% in your second year, and the payment is based on 5%. And then the third year you move back to the current market rate, which for this example is 6%. And so what this does is it helps a buyer transition into a higher payment over the first couple of years of that mortgage, right? And the cost. Okay? The cost that a buyer would pay would be the savings and interest on the first year. Plus the savings on the second year is what the buyer would pay as a cost when they close or loan, right? So in an environment like this, we could, could potentially help a buyer want or be able to buy a home. and the great part about it is the seller, we very likely could negotiate this, that as it is paid by the seller, it's paid down. It's a point, find down the points, but it's, let's call it 15 or $20,000. Instead of lowering the purchase price, you ask the seller to concede that and drop that off as a payment to the loan. Sure. Maybe as part of the negotiation, right? Yeah. Yeah. That's, and there's a certain procession of how to do it, right? Cause you can't just throw up and say, Hey, here's my offer. I want everything, and net you're gonna owe me $500,000. After everything. You have to proceed to the unit saying, okay, this is where we are right now. Okay, what? Rates are changing, so we're gonna ask you for this. And we just found out this on the repair, on the inspection. So we want you to pony up. So it's like biting the arm off of somebody one inch at a time. But it's the best way to do it because you came up and said, here, let me, here's a machete. Let me take your whole arm off. You're gonna say, no, I'll pass. It is all about how you present it, right? Not only to our clients but also to the other party with whom we're looking to get into contract. But it absolutely could make sense and in many cases, it's literally what allows our client to buy or not. And sometimes when the other side understands that they're certainly more likely to work with us rather than be resistant because they feel like we're just trying to take as much as we can. And, that's at the end of the day, we are, but we can't just tear off that arm. We have to figure out what the balance is, and what both sides can accept. Sure. No, absolutely. And here's the thing. If your house is worth 1.9 million back in April, the news is your house isn't worth 1.9 today here. If you're in Cupertino and Palo Alto and you have multiple operas, sure that's, not the story We're talking about normal homes. This site is 17, not including Willow Glen, cuz Willow Glen's still really hot. . If it's a home in Blossom Valley, Santa Theresa, you want to make it happen. You have to understand that the values have just contracted. There's just nothing you can do about it. And you have to be a little more flexible. You have to, and here's the thing, don't get that in your mindset the first 10 or 15 days, because if somebody comes up and says, I wanna buy your house, they know they're going to, they're gonna pay the price at the full price. And once the house is on market like 30, or 40 days, then there's more to work. And if it's, if the price is reduced, that's showing that the seller's being a little more aggressive and that they're not desperate, but they're understanding, Hey, we missed the market. Gotta comes down a little bit, which means that there's more room for negotiation. Potentially. Yeah, absolutely. They're more motivated to sell and the reality is the price of that home is closer to the reduced price now. That's all right. And a lot of it keep in mind, appreciation has been ridiculous the last couple of years, right? Beyond double digits, right? I'd say closer to 20%. So the fact is that now we're not taking the last hold and adding that onto it. We're just accelerating to normal appreciation, which should have been the last couple of years, right? When the judge settles, we'll see that houses continue to gain value. It's just that right now it shows like this, it shoots straight up, right? And, it's going to level out a bit. And for, that reason, it's still really important to, if you're at all considering and buying, if you're currently, especially if you're currently renting, is to look see where you, stand, run the numbers, right? And figure out how much or what you should buy, right? Because one thing for sure is that. Monthly payments increase over time, monthly payments increase. So if the price goes down, obviously it's inverse to interest rates. Your monthly payment's still gonna be higher. Just like today, you're buying a home for less than you bought one in February, but your payment is way higher. Why? Cause interest rates have gone up. Conversely, next year home prices are still going up. So if home prices still go up next year and even if rates stayed the same, what would've happened to our payment? It's gonna be higher. And this is very, similar to what we've experienced in the past. You can just take 2018. It was a very similar market. Most people said, why are you buying now? It's insane. Buyers today would die to have the price they had back then. And what happened in 2018 if you bought, you got in by 2019 and 20. You refinanced. Most of them have interest rates of around 3% now. And then what happened? Interest rates go down. What happens to the price of homes? They go up. Yep. And here we go again. And we go on a run. So if we're expecting a downturn cause I, know that we like to talk about that on this forum. We're expecting a downturn, expect prices to go back up. Remember what happened when the rates were very low? We had 15% of purchases were institutional buyers. Like hedge funds, large investors, that kind of thing. That, that's what's gonna happen, right? So it's recessions, it's a redistribution of money. It's not that it's, necessarily going away. It's just who buys the houses and when. And if we understand that, today is a very good time to buy. Yeah. , and I think you talked about, you were heading towards the idea that prices increased in most of the recessions outside of 2008d. Yeah I, mostly stay flat. There was only one recession, obviously, the last one, which has short-term memory, but that's the only one where prices were reduced. And then now obviously they've gone look how much higher they've gone. I'm losing you there for a second. I know. My, I hope it turns out okay. I'm cutting out every, few seconds I'm gonna, we're gonna have to figure it out. Last time I was doing this as well, and I don't know if it's, again, my internet or your audio is fine. Your, digital, face is a little digital. It freezes up, and then it goes and it freezes up outside of that. Are you plugged in or are you still on wifi? I'm on wifi, yeah. You can plug it in or you can blow out the wifi router. A lot of different things. I'm, learning a lot from this might help. Yeah. I don't know. You'll reboot it. The rest of myself using my phone, I could try something different next time. Yeah. Either. But dude, I'm gonna get going. I have a five-clock that I'm five minutes late for, but it's always nice to jump on. It's refreshing to hear a lot of your data information. And please engage me. I'm always motivated to jump on, share what I know, excited too, to talk about stuff because yeah it's, yeah, it's good. I appreciate you jumping on. I know this was last minute for you, so really jumped in. I appreciate it. I love it. And everybody always likes watching you and, listening to, what you have to say. Go get on your next appointment. I, Matt, thank you so much. Talk to you soon. I'm Vito Scarnecchia with Abitano Group, powered by Compass. We'll see you out there.

Vito Scarnecchia

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