Show - 7/1/23

Jay Day:

Good morning, WFMD listeners. This is Jay Day.

Christina Day:

And Christina Day.

Jay Day:

With Real Talk Real Estate. Hard to believe. We're actually already in July.

Christina Day:

I know.

Jay Day:

I know. We've got,

Christina Day:

Year's half over.

Jay Day:

I'm telling you, it'll be interesting. I know. We will be having our party in the park. That's going to be fun. I know the setup is a little different this year with some of the changes that the city made. I know we're going to be in the same general area, but our setup is going to be a little different, so it'll be interesting to see how that is. We got a little spoiled being so used to doing things the way we did, except for the one year we went to the fair. So let's talk about what's happening in real estate. We're in the summer. What's going on? Is it moving fast? Is it going slow? What do you see happening?

Christina Day:

My word of the year is wonky. It's an odd word, but it's perfectly applicable to this odd market that we find ourselves in. I say it's odd because there's some homes that are moving quick, flying off the shelves, still experiencing multiple offers, and we'll talk a little bit about what that looks like. But it was interesting coming into the year, realtor.com and the National Association of Realtors, all of these folks who are experts who weigh in on what the predictions are going to be, thought that 2023 was going to be a pretty good year and what we're finding,

Jay Day:

Well, they also said that interest rates, they were going to slowly increase, which was the total opposite.

Christina Day:

Yeah. And so all

Jay Day:

Predictors have been incorrect.

Christina Day:

So they actually have revised their forecast for 2023 now that we're halfway through it and they're seeing what we're really experiencing. And one of the things that they have said is that they expect 800,000 fewer sales than 2022, which would be about as 17% decrease in the amount of homes selling in the US. Now, that's a lot. I mean, you're rolling up on almost 20% there, a fifth of the homes. It's caused by a number of factors.

Jay Day:

Well, yeah. We've talked about it that we had low inventory during covid, and the inventory has been lower now than it was even during that time because we have two things working against us, and I'm assuming you're probably going to jump into that, so I won't steal your thunder.

Christina Day:

No, go ahead, please.

Jay Day:

No, no, no. Hey, you're the expert here. I'm just,

Christina Day:

So what they're attributing it to in the articles that we were researching was a slower pace of early year sales combined with lower inventory explains the modest drag on existing home sales relative to the prior forecast. Now, one of the things that is causing that is the interest rates, obviously. So we've had a number of buyers exit the marketplace because of interest rates. We do hear that a lot when we're talking to folks. Oh, I'm going to wait until interest rates come down, which is really counterintuitive because when interest rates go down, then prices will inevitably go back up.

Jay Day:

That's assuming that anything makes any sense.

Christina Day:

Right.

Jay Day:

Well, interest rates go up and prices tend to come down. And we have not seen that.

Christina Day:

No, we haven't. However, we have seen that the prices have not escalated in the way that they have thought that they would have escalated modestly if not remained almost flat. We haven't seen a decline, but it hasn't escalated at the rate that they expected that it would continue to escalate based on a low inventory market. So with the interest rates going up with buyers, pulling back a little bit with sellers being rate locked, and we've talked about that in prior shows, you've got all of these sellers out there, or homeowner would be sellers, homeowners out there who are sitting on an interest rate that is four or less. There is a massive amount of equity in these homes, a really great interest rate. And what they're faced with is the decision, if I sell this house, where am I going to go? Am I even going to find anything that I want or like, and then what is it going to cost me to get it? And if I'm getting a mortgage, what is that going to look like? Right.

Jay Day:

Oh yeah. I mean, you can imagine if your interest rate was 3% and now you go to six and a half, that's a huge change in your payment. Now, interesting. I had a potential seller I talked to this past week and he was tired of the area. He thought it was going to be a little different than what it was at a different stage of their life, and they were hoping to be a little quieter. And it's not, he said. Well the good thing is I was doing my research and I said it looks like you had a VA loan when you purchased. Here's what the amount of loan was you took, what do you owe roughly? And he said, I'm just under 3%. I said, yeah, that's creating some of this inventory issue is that people really have, you may want to move, but it's taken a little more than a want for people to pull the trigger. He said, well, actually, I'm interested in doing this because I feel like we're possibly one of the highest, and my loan is assumable. I haven't been here long enough that there's a ton of equity. And then we talked about the challenge of that is an awesome situation, but you have to find someone who can come in and do a second, or you have to have someone that has the cash to pay the difference. We went into all of those details, but he was thinking he was going to try to capitalize on the market because he had assumable rate, that assumable mortgage with a rate below 3% and seeing those numbers. I don't know. I mean, candidly, the prediction is, well, I think eventually rates will come down. Do I think they're going to be in the threes again? No, not anytime soon.

Christina Day:

I don't know that they ever will.

Jay Day:

So that is a little bit of a carrot. The challenge is mending that gap of what the difference is of what's owed versus what it sells for.

Christina Day:

And I think one of the things I've come to hear about the assumables being actually assumed is the banks and the servicers do not want to do that.

Jay Day:

Of course they don't because it's super low rate.

Christina Day:

They want to get rid of these low rate notes. They don't want somebody else taking the low rate note. And they've been putting up a ridiculous amount of hurdles, roadblocks, things that need to happen in order for those assumables to truly be transferred. So it makes it as such that even though you do have an assumable, if you have an assumable and you're thinking that might be a great marketing piece for your home, it can be. But one of the things I would recommend that you do is you reach out to your loan servicer and you say, hey, do I have an assumable loan? Yes. Great. If I were to sell my house, what does the buyer need to do in order to qualify for my mortgage so that we could take advantage of moving a 3% rate with this house and let the servicer send you all the things that are necessary. And then when you have that, give us a call and then we can incorporate that into your plan. But in the ones that I've dealt with, they've definitely not been making it easy.

Jay Day:

Oh, of course not. Like I said, they can double their money basically. And why would they not? The same thing on the assumable side. You're not getting that upfront where a lot of people realize, the banks are realizing people are going to refi out of these higher ones, so they better take the money while they can with these higher rates. And I said, it's a very interesting time in real estate and lending is what I would say.

Christina Day:

Yeah. Well, and so existing homes have been down. We haven't had as many units moving. Home Builders have really also been able to pick up the void there. So home builders, they're not as busy either with the interest rates being what they are, the lesser quantity of buyers out there. But I am finding a lot of our sellers are looking at or making a move into new construction, and then you know you're getting what you want to get. And there's communities out there, they've revisited having incentives and things like that to get buyers motivated to make a purchase. So if you were thinking about new construction as an option, that does alleviate your concern about where am I going to go?

Jay Day:

And anyone that drives anywhere around this listening area, whether it's in West Virginia, Virginia, Maryland, Pennsylvania, you can pretty much throw a rock at a new community pretty much anywhere around here. And there's plenty more coming up as you drive down the road and see the little blue signs on the side of the road. That's just more and more coming. And again, there is a void though. We do not have enough housing to handle the amount of people who need a roof over their head.

Christina Day:

Yeah, exactly. And part of that is also coming from who are these buyers that have showed up? So years ago when I got into real estate in the nineties, it was the boomers, right? The boomers were buying houses and they were trading up and they were trading down. Well, now it's actually millennials who are making up a very large percentage of the buying population. They're deciding to move out of mom and dad's house or move out of a rental situation and start to have home ownership as part of what they're doing in their life.

Jay Day:

Well, and the rental thing, what we're really seeing on that side is people, the rents have gotten so high or the people decide that they thought they were going to continue to rent, but the person that owned the property, the landlord saw such increases in how much they could sell the house for, that they're sort of unloading some of their properties because they're like, wow, I'm going to be able to sell this and I can do a 1031 and get two or three other investment properties with all the equity that I had built in this, and I can have revenue coming in from multiple streams instead of just one.

Christina Day:

Right. Well, and so the interesting thing is if you follow the rate hikes, right? And if you follow our show that the rate hike is not a direct correlation to the mortgage rate itself, but it does impact the markets. So they have said that originally they thought that the rates were going to be hovering around seven, now they're thinking they might hover around six, and we are seeing things with a six. It kind of bounces between that six and seven number a good bit. It's kind of where we're, I would say, hovering with ups and downs as it.

Jay Day:

Yeah. And in the sixes it's been mid is sort of on the good side. And the last meeting the Fed had, they decided they were not going to make any changes. However, they had the caveat that they know that they're going to need to, and I think that's why. So like you said, it's not a direct correlation, but your interest rates that do get impacted by that, your credit cards, things like that. But the big thing is as you're seeing, you're in a situation where the market knows and they put that little teaser out there, Hey, we're not done yet. So the rates are, I almost feel like it's in a testing mode of, okay, if we hover around mid sixes, can we bring some buyers back into the fold? And they know if they make the changes, the market loses it a little bit. And then interest rates for mortgages increase dramatically. And I mean, looking at it, when we look at these prices of homes and how expensive it's gotten, yes, in the past there were interest rates that were 13%, 10%, 9%, but the houses, you didn't have to pay 400 to $500,000 for townhouse. Frederick County has gotten extremely expensive. I remember when I first bought here, it was because it was more affordable. And then I sold that house and I ended up buying in Carroll County because Carroll County was more affordable than Frederick County. And that's what sort of pushed people out. A lot of people left Montgomery County because Frederick County was more affordable. Now we're seeing people going into West Virginia and Pennsylvania. And like I said, it's a very interesting time, and you use the word wonky. I tell people that no matter how many years I've been doing this, I've gotten to the point that nothing makes sense on prediction. So we don't know really what is going to happen.

Christina Day:

Yeah, I mean, my thought is with watching the market and being in the market on a daily basis, that what really needs to happen in order for the real estate market to loosen up. It's almost like, and this is going to sound kind of funny, but it's almost like the market's constipated. There's a motion that needs to happen, but it's not happening. Everybody stopped.

Jay Day:

So we need to give the markets some MiraLax.

Christina Day:

Or something. It needs some MiraLax. But yeah, I mean, I think what really needs to happen is these rates need to come down a little bit because we've got to get somewhere closer to what the masses of the homeowners have, and it's going to have to stay relatively stable for a while at that number.

Jay Day:

For people to have the confidence.

Christina Day:

For people to feel good about letting go of what they have and to put their house on the market and to make a move. And we need inventory in order to get inventory, right? Because the people who have homes who would like to move up or move down or even laterally in a different location, whatever that looks like, they've got to have something to buy. So right now, we truly are all just stuck in, it's like being in traffic. You're just stuck.

Jay Day:

Well, and you and I have talked about it. We have clients that have signed paperwork for us to list their home, but have said, do not market it yet. They're on hold until we can find something. So we're out there looking and they're not afraid. Most of our sellers are willing to go and buy something without having to sell their home. They know we'll get it done, but trying to find them something, or even, I remember when we were working, we'd have buyers and you'd be going out and showing them stuff on a regular basis. We have some clients that we're showing them one or two houses a month, and it's like, we're still here. You're still there. We're still looking, but there's

Christina Day:

Just nothing to show you.

Jay Day:

Yeah, exactly. We're knocking on the door and there's just nobody home.

Christina Day:

And just so you know, I mean, one of the things that we do for our buyers is we try to find them homes that aren't yet on the market. If there's a certain area they want to be in, we actually have a go and seek out people in the neighborhood plan to see if they want to sell, if they know of anybody who's going to sell, and try and get that intel upfront and get somebody who may have been thinking about it, who goes, hey, you got a buyer, I'd do it. You never know.

Jay Day:

We've got our salespeople that have clients looking in specific areas acting like, well, I'm going to say it in a joking way, the door to door vacuum cleaner salesman knocking on the door and saying, hey, I actually have someone that wants to be in this neighborhood. This is not just a marketing ploy. We truly have somebody that's been waiting for six months. Do you know? Or are you interested in selling your home or any of your neighbors or any of your friends over here? Because we could sell the house immediately. And that's a tactic that we used to joke about. It was sort of a dicey one because I know there were people in the business, we never did it, but there are people in the business that would say they had a buyer and they may not.

Christina Day:

Now we all literally have buyers. Buyers, no houses.

Jay Day:

The difference is we're putting our people to put their boots on the ground to go literally hitting these neighborhoods of we do have people, here's the situation, here's the budget, and your house sort of fits exactly what they're looking for.

Christina Day:

So another interesting correlation to this shift in the market. So it's not the market that's not performing, it's that the market isn't performing to the expectation because of things like a lack of inventory, high interest rates, things like that. So if we're down 17% in transactions, take a guess on how many agents have left the industry currently.

Jay Day:

Percentage or number?

Christina Day:

A number.

Jay Day:

I have no idea. I'm not even going to try and guess it. I'll embarrass myself.

Christina Day:

60,000 agents have left the business so far.

Jay Day:

In what time?

Christina Day:

Through to 2023 to now.

Jay Day:

So, so far this year. And that's nationwide.

Christina Day:

Yes.

Jay Day:

That's not surprising. I mean, the reality is it's the thinning of the herd in a different types of term because there's so many mouths to feed if you have that many less sales. People's responsibilities, financial responsibilities and providing has not changed. If anything, as we've all talked about, our grocery bills have grown, our gas prices have grown. I mean, even when you go and look at how expensive cars are, you think, oh, I'm going to go look at an inexpensive type of car. And then you look at the price and you're like, I thought this was a cheap car. I mean, there's cars that are not super high end, that the numbers are 50 plus thousand dollars. And you're like, what? Yeah, it's really, really interesting. I said, nothing has gotten more affordable.

Christina Day:

Yeah, it's funny. I was at Chick-fil-A grabbing dinner. It was a on the road kind of day, and my Chick-fil-A bill for literally three food items in a beverage was almost $20.

Jay Day:

And we used to think fast food. Remember? Was it McDonald's had the dollar menu?

Christina Day:

Yeah. I don't think they have that anymore.

Jay Day:

I don't go there, but I'm sure maybe you could get two french fries for a dollar. I'm not really sure.

Christina Day:

Yeah. But as for the agent population dropping, the agents a lot, there was a ton of agents who got into the market between 2020 and maybe even a little bit before 2019. And the things that they had to do to sell houses was dramatically different than what you've got to do to sell houses in 2023. And so it's really important for those of you that are consumers that are going to be buying or selling, it's really important that you have a good quality talk with the agent that you're going to use about what tactics are they truly going to implement in selling your home. Because I mean, we know we can put homes on the market and they're going to sell quick, and it might not need all of our tools in our basket, but there are other homes that are not, and they are going to need all the tools in the basket.

Jay Day:

And realistically, we still use a lot more tools than other people do because we want to get them maximum exposure, the most amount of offers, the most opportunities and that was the one thing I was going to say is a caveat with yes, some people have gotten to the point that they just had to drop out of the business. The other side of it is you do still have a lot of agents. Again, their bills haven't changed. So do you think they're going to stop paying their mortgage payments? Do you think they're going to stop grocery shopping? No. They're going to cut back on their marketing, which means your home is going to get less exposure because they have their own priorities. And you sort of fall on that lower end of the spectrum. Where, and like I said, I see it, and when we're looking at comps and I'm like, oh my gosh, I can't believe this house is a $700,000 house. And yes, the iPhone cameras have gotten better, but you can tell it's a cell phone pictures. There's no professional photography, They didn't want to save. They wanted to save money so they didn't have it staged. Or you have a farm and there's no aerial photography and you're like, hold on. Or you have an interesting looking house. And on the inside, the layout's a little odd. It may look a little small from the outside, but those are ones you do the video so you can truly show what everything looks like. I've got one coming up in West Virginia and I told them from the front of the house, it looks smaller. I would've never thought you had a two-story, family room. You have this open floor plan. Totally shocked me. I'm like, we have to do video here because I don't want people to be discouraged just by the outside and not get an expectation of how open and flowy the floor plan is.

Christina Day:

Right? And we deal with multiple marketing companies that are professional marketing companies to help us with our marketing. And two of them I can think of off the top of my head have said that many of their agent clients have pulled back, if not dropped off from doing the paid for marketing. And they're just kind of winging it. But like I said, if you're thinking about selling, it is really important for you to make sure whoever it is you interview, be it us or anybody else, that they have a full comprehensive plan so that when you get your house on the market, you're getting, like Jay said, the maximum exposure, the maximum amount of opportunities and demand to get that home sold. Now, likewise, if you're a buyer, you need to be talking to your agent about what are you going to do to find me a home?

Jay Day:

Are you just going to wait for me to find them on Zillow and tell you I want to see this one.

Christina Day:

Right?

Jay Day:

If I tell you I want to be in a neighborhood and you tell me nothing is sold in there in four months, are you going to go knock on the doors? How are you going to try and shake the trees to see if there's something that can fall. The days of sitting back and letting the sales just happen? Especially if you're in a situation where your lease is about to up be up and you have to make a decision. Am I going to sign another year lease or do I have to find something in 60 days? And those are the types of conversations that our agents will have with the buyers, if you only want to be in the specific area in the last 12 months, this many homes sold. So we are in a smaller percentage. However, these are the things I'm going to commit to you that I'm going to do to make sure that every effort that's possible is happening to try and get you to where you need to be. And if we don't, here's what the game plan is. Instead of trying to do a year, see if you can do a three months, see if you can do all these different things.

Christina Day:

Or what is the break lease if you do have to break your lease? The other thing is making sure that your agent knows how to negotiate and how to properly advise you on what to write. So nobody wants to be told you're writing a crappy offer, but it's your agent's job to tell you this is a crappy offer and you're not going to get it accepted. We had multiple offers over the weekend on multiple properties, and I can tell you there were some that after they found out they didn't get it, they came back and said, oh, we could have done that. Well, then why didn't you do that? I had agents who hesitated, who waited too long, right? You can't wait too long.

Jay Day:

Yeah, let's put this out there. This is a big one, and we've been hearing it a lot in the last year or so. The agent will call or they'll hear, we send out the notice that, or they're like, oh my God, they went out. They were the second agent to show it. And they're like, my person just, they can't, they don't want to compete. We know there's going to be a ton of offers. Sometimes we may not get offers for two, three days. If you write a strong enough offer, that seller might say, hey, they met all the terms. I don't need to keep it on the market. So your agent could be preventing you from getting homes. Now, not all sellers are going to take the first one that comes in. Some of them are going to set deadlines, some of them are going to wait. However, you don't even know what do they say in basketball or hockey? You miss all the shots you don't take. If you don't try, then you're never going to get anywhere.

Christina Day:

And I had that exact situation. Agent had showed the house told me her person loved it, many messages about how she loved it, and I kept saying, what are you going to sign the offer? And then she said they did. They were afraid of competing. And I said, well, like I said, I don't have anything in hand right now. Get it over to me. So their delay created the situation where then in fact, they were competing. And I had said to her about the competing, okay, well, here's the reality and here's your reality check sellers slash buyers. If you don't want to compete, this might not be the market for you, period. Because anything worth buying that is in the right price, shows right, in the right locations in high demand areas. If that's where you want to be, you're going to be competing. So you bring your A plus game, you figure out what your a plus game is, and you have an agent who can advise you on what that a plus game needs to look like, and you get it out there. If not, just sit on the sidelines and wait until, who knows when. I don't know when it's ever going to change, if it's ever going to change, but aside from that, the reality is you're going to be competing or you're sitting on the sidelines or

Jay Day:

You're going to buy something nobody else wants.

Christina Day:

You're going to buy something nobody else wants.

Jay Day:

And that's not a way to be or to live. I mean, I think one of the terminologies you say is, yeah, everyone wanted to take this person to the prom. So many people are going to ask, one was going to, and then you don't want to be, oh, well, I can take Jessica because Jessica, no one's asked her. That's not really.

Christina Day:

And there are properties that are out there that honestly are perfectly good. For whatever reason, they don't move. It could be priced, could be location, could be conditioned, could be that it's unique and it's a little different or whatever the case might be. But the reality is, in those situations, if you are truly looking to not compete, you need to be looking at things that have been on the market for more than two weeks. Don't come in first weekend and talk about, I don't want to compete.

Jay Day:

Yeah,

Christina Day:

Right.

Jay Day:

You're not going to win. And you've got to have that mentality. You've got to, and you nailed it. I mean, you have to have an agent that is all over it and willing to be honest and tell you the things, what is it, Jack Nicholson? You can't handle the truth. You need to lay it out there. And a lot of people are afraid to tell people the truth. They want to make them happy, and you're going to be a lot happier if I set the right expectations. Yeah,

Christina Day:

You're going to be a lot happier when you buy a house.

Jay Day:

So we covered a whole lot in this show. We normally take a break. We ended up not taking a break. We are just rolling along. If you have any real estate questions at all, don't hesitate to reach out to us. Again, no obligation. We're happy to talk to you. We want to be part of your plan. We want to help you try and figure out your timing, and a lot of that is having a consultation with us. You can reach us at 866-702-9038. Again, 866-702-9038. You can visit us [email protected]. Again, dayhometeam.com. I'm Jay Day.

Christina Day:

And Christina Day.

Jay Day:

With Real Talk Real Estate. We'll be back at you next month.

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