Podcast- February 3, 2023

Tom Whalon:
I'm Tom Whalon.
I'm Jay Day of Jay Day and the Day Home Team of Real Estate Teams, our weekly real estate podcast.
What are we going with today, Jay?

Jay Day:
Well, I think it's important as we, things that are going on. Let's talk about three factors that affect home affordability.

Tom Whalon:
Home affordability. So this would be three factors for the buyer? Yes. To find out if you could afford this place. Yes.

Jay Day:
Some of the challenges, some of the things that are happening as we deal with inflation. Affordability. I mean, affordability has changed for everything.

Tom Whalon:
Yes.

Jay Day:
I mean groceries, and we were talking with our team the other day and just saying, even if you made no changes in your habits, let's say that somebody was still going to the same job, still buying the same groceries, grocer,

Tom Whalon:
Or whatever. Same. Yeah. Life.

Jay Day:
It's been like a 20 plus percent income. It's gone up. Increase in cost.

Tom Whalon:
Gone. Gone up. Yes.

Jay Day:
So some of the things that have impacted affordability number one, mortgage rates seems like common sense now, as we talked about, rates were over 7% at one point last year. So a lot of buyers were super nervous about it. And I mentioned this in our last podcast. We've had one of our lenders we're working with has been quoting just under 6% with no points at all, which has changed the affordability for people. And one of the chief senior [email protected] was saying, let's celebrate some good news. Mortgage rates are down with inflation showing a tangible slowdown. I do expect mortgage rates to follow suit in the months ahead. So hopefully we won't hit over 7% again for a bit. But I mean that 6% makes the big difference one. So the National Association of Realtors gave a little bit of a rough idea with a 6% rate instead a 7% rate, that'll save the buyers close to $3,000 a year on their mortgage payments.
So that's a significant number when you look at it with owning a home. Number two home prices. The second factor that played into this is our home prices. Home prices have been all over the headlines. Everybody knows they skyrocketed. During the pandemic, we were up over 30%. And again Lawrence June a chief economist with NAR says, after a big boom over the past two years, there will essentially be no change nationally. Half the country may experience small price gains while others may have slight price declines. So basically what that means is the home prices are not going to go crazy down. They're not going to go crazily up. They'll be maintaining or increasing or decreasing at a very, very small percentage, one to 2%. So we're hoping that things will be sort of a little more flat where it won't be as crazy and chaotic.
Now the other component with affordability deals with wages. So American wages, what's going on with those? So when you think about that, and we talked about it briefly with it, sort of impacts what we were talking about at the grocery store. Everything going up. If you didn't get an increase in your pay, all of a sudden if you were living paycheck to paycheck, people are having to decide, what am I not going to pay? What am I going to cut if I have to miss something? Am I going to skip getting my groceries or am I going to skip cable? Am I going to drop my Netflix account? Am I going to drop this that? So all of those things come into play. And I mean rates. So they're saying that rates are expected to move lower for the year. Home prices will cool off and that'll help with some of the affordability. And I think mean, I've seen locally a lot of the jobs around here, the pay is pretty significant. You know, drive by the rudders, the royal farm, and you see some of those numbers, more

Tom Whalon:
Money than we made when we were kids and going through getting these kind of jobs, $2.30 cents an hour. I think that that was the minimum wage when I was doing this. Oh

Jay Day:
Yeah. And to see you can get 15, I mean even some of these places paying these crazy bonuses. But I get it in some ways because everything else went up. And if you can't afford things, it just creates a little bit of a firestorm. So one of the other things that you and I were chatting about was the national headlines about the housing crisis, foreclosures, all of that stuff. And I just want to sort of put this in perspective. So when looking at what's going on, according to the year end 2022, US foreclosure market report foreclosure filings were up 115% from 2021, but down 34% from 2019. So what the national headline has been, because again, we talk about this, the media likes to find things to scare people. You've been seeing things on the news saying that foreclosures are up 115% realistically during covid, foreclosures were stopped there. They were not allowed to do foreclosures. So of course if we go from almost zero to anything that's going to be this high up. It's going to seem like it's up.

Tom Whalon:
But Jay, I did not see a million people on the street. I was kind of expecting that. I thought that, oh my goodness, this is going to be a national problem. But I didn't see, I mean, I may be up a little bit, but not I thought it was going to be.

Jay Day:
Yeah, I mean, so think about it. And again, because I was in business selling real estate when we went through the last situation, and I've said it before, it's totally different now, a lot of people who are in their homes, they either bought their homes and got a really great interest rate, or they might have refinanced and got a great interest rate. Anyone that bought three years or so ago or later. So if they bought five years ago, 10 years ago, there's equity. So what caused the foreclosure issue before was one people bought at the height and they got into mortgage payments that required they were adjustable rates or they were interest only, or they were balloon payments and they had to refi. Well, they go to refinanace and the bank won't do a refinance because they owe $350,000 on the house and it's only worth $300,000 because values dropped.
So what's going to happen? Then? They're stuck, they, they're stuck with these adjustable rates that have hit seven, eight, 9% because they adjust up. So what do they do? They just walk away. Why? Their mindset was, my house isn't worth what I owe. The bank's not going to work with me, and why am I going to, and the payment is something I can't afford, so what do I have to lose? Now we have the total opposite where if someone is in distress, like say that someone does lose a job and they need to sell their home, at least if they sell it, they can make money off of it and have a cushion and have cash in hand where that house, they may owe $350,000 on it and it's worth $425,000. So they're going to be more motivated to sell it. Where before, if they were upside down, why would they care about trying to sell it?
So the timing is totally different. The situation is totally different. And I'm not saying that there won't be foreclosures because there will be because people pass away. Let's say it was a husband and wife and there's no life insurance and the husband passes away and he was the breadwinner. There are all types of things that can happen, but it's just not going to be at that rate. And you need to not be fearful of the percentages because you have to remember, any increase from almost non-existent is going to look like it's crazy. You know, could say there was two foreclosures last month and this month there was six. And that when you do the percentages, that looks pretty insane. But realistically, is six really a massive number? No, not compared to what we dealt with in the past. So don't be fearful of that. If you have any questions, you're concerned about it, just reach out to us. Like I said, we were in the business selling homes during the crash that happened before. We can educate you, talk to you about it, hear your concerns, and try to navigate you through things if you are in a distressed situation.

Tom Whalon:
But we're still in a great area here as far as real estate goes. Oh yeah. Just because where we live man.

Jay Day:
Oh yeah. And I mean, the only negative part of the real estate where we are is that it's becoming harder and harder for people to afford.

Tom Whalon:
You got a home of the week.

Jay Day:
I do. So the home of the week 252, Blueberry Lane in Harpers Ferry, West Virginia. This home is situated in Shannondale. It needs some TLC, but it's priced that way. Listed for a hundred thousand dollars on almost a half an acre, two bed, one bath in need of renovation. If you've been wanting to own a home, even a secondary home out in West Virginia, if you want to move out there, I mean there's no way that you could get a rent a place for as cheap as what your mortgage payment's going to be on a house like this. If you want to check it out, go to WFRE.com. Look up Tom and Jay's real estate podcast and you can see photos right there. I'm Tom. I
I'm Jay with our Weekly Real Estate podcast. Thank you for listening. Tell your friends all about it.