Show - 9/6/23

Jay Day:

Good morning. WFMD listeners. This is Jay Day.

Christina Day:

And Christina Day

Jay Day:

With Real Talk Real Estate, and we're already back to school in September.

Christina Day:

Oh my gosh, right.

Jay Day:

Hard to believe that the time has flown by and I still am bothered. And you would think I may not be, but the kids just have to go back to school earlier and earlier and earlier.

Christina Day:

I know, I know. I see. And it's funny, I look at Facebook and I see all the back to school posts and ours was what, August 23rd and then Washington County was, I think it was the end of that week or the next week. And then in places like Florida and down south, they seem to start even before that. It's so weird, but it's been like a month long of back to school posts and now it's really becoming quote unquote fall because pumpkin spice lattes are out now. Everything pumpkin everywhere.

Jay Day:

Think I saw some pumpkin cheerios or something, sort of crazy. But the only challenge, normally we love to go over stats, however, with the way the weekends fall, we didn't getting true data for what happened in August, is not really, we would not be able to give you the precise information. It takes a couple of days. There's a little bit of lag time for people to get the final closings in, get the systems updated. So we tend to try and pull those numbers a couple of days after the first, not just on the first. So if you listen to, or if you want the stats, if you've been listening to the show, love the stats. We won't have 'em for August. However, you could go to wfre.com, which is a sister station, and we will have stats on the podcast. That'll give me enough time. We'll have 'em this coming Friday and you'll be able to get all your information there. But we've got plenty of other stuff to talk about. So what do you want to start with?

Christina Day:

We do. So it was funny in talking and thinking about what to talk about today, I wanted to talk about some of the things that have been happening recently. And the question we always get, this is probably one of the most prevalent questions we get, is when is the best time and when is a good time, when is a bad time to sell my home? And that's kind of a loaded question because there's seasonal cycles that we've always had and just talking about back to school being one of those, right?

Jay Day:

Yeah,

Christina Day:

Then we've also been affected by inventory availability, interest rate fluctuations. Then there's the holiday and event schedules and things like that. I actually noticed over the last couple of weeks that the traffic across the board was a little bit slower. In some cases we saw far less activity than what we would've expected. And I think there was a couple contributing factors to that, which we always act like we're surprised, right?

Jay Day:

Yeah,

Christina Day:

Back to school, people doing the last minute, getting everything together, they kind of have to check out of their home buying and things like that.

Jay Day:

And last minute vacations.

Christina Day:

Last minute vacations, moving kids back to college is a big one.

Jay Day:

Yeah,

Christina Day:

A lot of those.

Jay Day:

I will say I've had quite a few clients who are like, oh, I can't meet now. I'm going to be gone this weekend. I have this happening. I have that happening. We're driving down to Georgia, we're driving to Florida. The Carolinas.

Christina Day:

All over the place.

Jay Day:

And even some of our clients have had back to back. I mean, one of my clients had to fly down to Florida. Well, the husband flew to Florida, the wife drove to Florida, and then after they finished there, they had to go up to the Carolinas to take the other kid to school. And it was like a five to seven day event.

Christina Day:

Oh yeah.

Jay Day:

Different areas.

Christina Day:

Thankfully we only had to go to Delaware a couple of years ago. That was two hours.

Jay Day:

Yeah, I can't complain about that.

Christina Day:

We got lucky. So there are things that influence and dictate what is going to be a good time to launch and what is a good time to sell, and also what influence poor timing. So one of the things we tell people is there's never a bad time, but what weekend you choose to launch on can be impacted by things like holidays. I was scheduling time with somebody and we looked at Labor Day.

Jay Day:

Yeah, we're right.

Christina Day:

You don't necessarily want to be going active on Labor Day weekend because what are people doing on Labor Day weekend? They're getting their last little bit of pool time, they're going to cookouts, they're going to festivals, they're doing things that are fun and trying to get that last little hurrah before real life kicks back in.

Jay Day:

And the same thing people we've heard, and we listen to radio shows, podcasts, we listen to presenters. And it always interests me when we hear people say, oh yeah, the holidays aren't a good time to sell. And I'm like, I've always said that's the opposite. Yes, you'll have less traffic, but you're going to have forget the world we're in now where there's a low inventory period. But typically some of the best times to sell is during the holidays you don't have as much competition

Christina Day:

Exactly.

Jay Day:

Where the inventory is low. So it'll be interesting to see this year with the inventory already being super low, how quickly things get eaten up over the holiday timeframe.

Christina Day:

And I generally recommend for folks that if you're thinking about going on the market in the fall, that can be a good time because a lot of times people do want to push to get into something before the holidays. And then when you are active during the holiday season, the nice thing is you have far less competition because most people don't want to be bothered during the holidays to have their house on the market. But there are still people who are coming and going, be it relocation, people who have sold their home and we're waiting for just the right thing to pop up. So there's a lot of opportunity there with less competition during that mid-November through mid-January season.

Jay Day:

Right. Now, one of the other interesting parts is you see all of these things on the news out in the media about what's going on with the real estate market, what interest rates are doing. And I hear you talk about it a lot when you talk about micro markets, meaning not only do we serve multiple states, but the type of product and the price point is, we could see something totally different with homes that are listed for three to 400,000, verse seven to 800,000.

Christina Day:

True. And there's a demand for certain areas based on commute, job opportunities, school districts, there's a lot of reasons why certain areas might be in more demand and then price point in a higher demand. And so with some of the clients we've been working with actually this past Wednesday, I was looking at what was the active inventory. And I was trying to get some data together for some folks that were going to be selling. And in Frederick County, there were literally under 500 for inventory, 30 Coming Soons and 67 Actives. Now that was at the tail end, obviously of August, 30 Coming Soons, 67 Actives.

Jay Day:

You're talking resale only?

Christina Day:

Resale only. And that was all house types. That was,

Jay Day:

So that includes condos, town homes, and detached.

Christina Day:

Yes. Now when we go to detached only, 12 Coming Soons and 30 Actives for the entire county.

Jay Day:

That is insane.

Christina Day:

Under 500. So that tells you that demand for that more affordable price point is so high. If you have something that's under 500, you can fully expect that if it shows right, if it's priced according to its condition, it's going to move. And then when we looked at under 400, there were 4 Coming Soons and 18 Actives to choose from for detached homes, Frederick County. When we get over 500, it was 15 Coming Soon in 73 Actives. So far more opportunities there over 500 than when we look at those detached under five, under four. And it's a supply and demand issue. So if you are in that more affordable price point with a selling price, take your cue.

Jay Day:

Yeah. Well, I think the other important thing to talk about is where we're seeing a little bit of a change is, and I might throw you off with how you wanted to roll through this, but I tend to do that just to keep you on your toes.

Christina Day:

That's alright.

Jay Day:

Is the condition, the condition is impacting days on market.

Christina Day:

Absolutely.

Jay Day:

And I think the way you and I have talked about this, obviously not on the show, but that trying to explain to sellers, realistically, the buyers don't have all this discretionary income where right now, let's say you had one the other day, I think house was 450 and roughly their mortgage was what, 35, 36?

Christina Day:

So it's funny, I actually had that information at hand because I did want to talk about what does it cost. So sellers are always thinking, what are they getting? But let's think like a buyer and what does it cost? So 450 on an FHA loan, which is 3.5% down, 6.75% interest rate was what those folks ended up getting. By the way, that interest rate currently is closer to seven if you were to lock in now. So they had gone up in the last couple of weeks by about a quarter of a percent. Frederick County, no HOA, their payment was going to be $3,550 a month.

Jay Day:

Okay. Yeah, that's a lot. So if that house was 3%, it's a totally different animal. So when we're talking to people and we say, okay, so yeah, your carpets do need to be replaced or the house needs to be painted. And one of the examples I use is flooring, because flooring's pretty much a common thing that you see. And at one point we used to have to tell people, hey, you either need to do an allowance, you need to replace it. There's all types of things that can be done, but now it's almost where buyers are really struggling with making that offer or not doing something that's below or getting closing help. And the way I explain it to people is, well one, when they're paying $3,500 a month, which for a house that might've been in the upper twos at one point for a monthly payment, that's really got them squeezed tight. And then the same thing as we see, they're not going to use their credit card. Credit cards are like 28%, and you're not seeing the specials with, you may see something for six months, 0%, but if you don't have that extra money, how are you going to do it? And we have friends in the car business and talking with them, I'm like, so are you seeing a slowdown with car sales? And I'm like, has it slowed down enough that they're starting to do the 0% or 1.9 and no, they're not because the borrowing the money is very expensive. 

Christina Day:

Well, the interesting thing with the price at 450, the payment at 3,500, do you realize how much money you have to make to qualify for a $3,500 a month payment?

Jay Day:

No. How much?

Christina Day:

Almost 130,000 a year.

Jay Day:

Wow.

Christina Day:

And that's pushing the envelope. That's with a one third percent housing ratio, which normally they'd like to see it a little bit lower, but that's pushing the envelope. So realistically, 125-130 or better. And depending on your debt load that you have, car payments, credit card, student loans, those other things that could impact that as well. So how much do you think, just off the cuff on a 450 FHA loan, which is one of the lower down payments, how much out of pocket do they need? So we can put into context for sellers what that looks like for that buyer walking in the door, not asking for closing help.

Jay Day:

Are you going to talk inspection costs everything or

Christina Day:

No. No.

Jay Day:

Okay. Well, I'm not going to guess.

Christina Day:

Just down payment and closing costs.

Jay Day:

You go for it.

Christina Day:

About $34,000 out of pocket at closing.

Jay Day:

Wow.

Christina Day:

So that's closing costs, prepaids, down payment. And like you mentioned out-of-pocket expenses such as home inspections and things like that.

Jay Day:

Some don't put the insurance to be paid at close and it has to be paid before. There's a whole lot that goes into that.

Christina Day:

Oh, yeah. Yeah. So when we're thinking about affordability, and we're thinking about things like closing help, which we haven't seen a whole lot of. We see it every now and then. I think the last time we did stats, it was about what a third or so had closing help associated.

Jay Day:

In Frederick County. It was under 18%.

Christina Day:

Yeah. So that's where

Jay Day:

Pennsylvania was different. Washington County was much higher, was more than half.

Christina Day:

So when somebody's asking for closing help, it's to help ease that pain. And if you don't want to do things like paint, carpet, any minor improvements, or if you haven't had any major system updates and somebody's looking at having to replace an HVAC unit or a roof or something like that, it's got to get factored into what they can really justify the value of the house at. Because there's going to be these out-of-pocket expenses, and they will have come to the table with a significant amount of money. And we were just saying their monthly payment is going to be much higher than what would've been a year and a half ago.

Jay Day:

And due to inflation. I mean, you had one recently where they had to get some quotes for HVAC replacement and it's not cheap. It's what? Over 10 grand per unit?

Christina Day:

Per unit. And if you have a house with multiple units, yeah.

Jay Day:

Yeah, you're going to be spending over $20,000.

Christina Day:

So a lot of interesting things when we start thinking about rates and affordability and the supply and demand and so the point being folks out there who have houses to sell that might fall in that under 500, you are still in a golden opportunity to get that home sold with a lot of competition and a lot of demand. Those of you that are over 500, you have a little bit more competition, but we are still in a drastically reduced inventory situation. So long as your house is looking right, showing right, smells right and priced accordingly, you should have a good opportunity at getting that sold.

Jay Day:

One of the other things that I've been running into more, I don't know about you and your appointments, but I'm running into more sellers that are not buying. They're selling because they know we're at a good place number wise, and they see that maybe before they could have not had do as much condition wise, and now they're starting to see the table turn a little bit and they're like, I just want to capitalize on the market. I want to make as much as I can, and then I'm going to rent and figure out what comes next.

Christina Day:

Where I want to be and really take their time finding the right house.

Jay Day:

Yeah. Listen, I've got a handful that I'm working with right now that are all in that situation and they're like, it's totally fine. I'm not worried about it. We have some that are just going to figure out, I'm going to go down south, but I don't know where. So I booked an Airbnb for a month in this place, a month in that place.

Christina Day:

I've had a couple people who have been living nomadically and really kind enjoying, especially my retired sellers, kind of enjoying getting a little away and travel.

Jay Day:

Trying to figure out where they want to land.

Christina Day:

And feeling out what the future holds for them. Now the interesting thing you mentioned about the tide shifting, right? So we were just talking about in a micro market setting that prices and activity can really be heavily influenced by what that market has to offer. And ours of course is very constricted, but I do a lot of reading and talking to other agents around the country. Goldman Sachs did a report and their expectation for housing prices through 2026 is that we're still going to see a one to 2% a year appreciation. And so that is far less than what a normal appreciation would be. Normal would be somewhere in the 5% per year range, give or take. And what we saw from 2020 to 2022 was about 12, maybe a little more percent per year. So it was pretty significant and drastic. So coming down off of a 1% a month versus one to 2% a year feels like they're dropping, they're not dropping, they're just appreciating much slower. The problem is a lot of our sellers out there, their mindset hasn't caught up with that. They're still in early 2022 where they're thinking my house should sell for 10% more than the person who sold last year in the neighborhood.

Jay Day:

Yeah. A client I'm met with recently when I pulled comps, we were going over things and his neighbor's house sold over a year ago, so I didn't pull it up because comps so it doesn't work. So, he was a little disappointed in the number that I gave him. And he goes, well, wow, that's sort of insane. My house shows so much better. And I'm like, well, you're still appreciating. You still have a higher number. And then when I broke down the whole thing, I'm like, okay, so when that sold, and I look back, I'm like, okay, here's what the rates were. Here's what they are now. So let's talk payment and when you see the difference in payment. And he was like, wow, that makes sense. And the funny thing is when you tell the sellers like, hey, here's what it would cost to have your mortgage, now. I think, I haven't had one that said actually most that I've said have been like, wow, I wouldn't pay that.

Christina Day:

Well, when it comes up a lot is when we start talking about rent backs and they go, well, I'd have to pay their mortgage. Well, what's their mortgage? And when you tell 'em what their mortgage is going to be, they're like, oh, heck no. I'll get out of here in time.

Jay Day:

Yeah, it's a motivating factor.

Christina Day:

And the thing here is guys, and this is as much for buyers as it is for sellers. So buyers, if you're listening, the prices are not predicted to crash. They're not predicted to come down. They're predicted to continue to go up. And then the other variable that we have zero control over and that we do not know what we are going to be working with is interest rate, right? We are in a very turbulent time with economics. We are in a very turbulent time with politics. We have an election coming. There's all kinds of, dare I say the word covid rumblings right now. And that as we know from 2020, highly impacted the housing market. And so if we're talking about things that are unpredictable going into the future, there is a lot that is unpredictable as it relates to interest rates, the economy, jobs, lockdowns, all the things and the election. And we know when it comes to elections, typically people would pause.

Jay Day:

Right?

Christina Day:

Now, last year or last election four years ago almost, we did not have that. We had people actually racing to buy a house because interest rates were low, the prices hadn't skyrocketed yet, and they were like, I'm going to buy something right now because I don't know what's going to happen in the future. And so we don't know how this is going to impact us in this next 12 month window, but we know that there will be impact.

Jay Day:

And none of us have crystal balls. We can't predict the future. I will say on the podcast, and I should have brought it for today's show, and I just didn't even think of it. When we were looking at what the predictions were for interest rates, and I went on record and said, I think all these are wrong. And we have already hit numbers higher than what they expected us to hit by the end of this year. So the expectation that rates are going to drop, I think is unrealistic at least this year, probably into next year. And when people ask me, I'm like, you have to be comfortable with the payment. Period. You have to be comfortable with the payment. If you're not comfortable with the payment, it doesn't matter what the interest rate is, because if you're not comfortable with $3,500 a month, it doesn't matter that the rate to get that you bought a more expensive house that was 3% versus a less expensive house that was 7%. It's all about the payment. And do you feel confident in your ability to continue to earn what you're earning so that you can be comfortable in being able to pay that each month.

Christina Day:

And you're going to need a roof over your head. So you have to look at why am I buying, why am I selling? And you have to make decisions on, okay, realistically the predictions are all that the numbers for pricing are going to continue to escalate based on the constricted inventory. The interest rates could hover. They tend to go up and down within about, I would say a half a percent, three quarters of a percent is what we've seen. Little bit of bounce

Jay Day:

6.75. 7.25. Has sort of been,

Christina Day:

Right, kind of hovering. So a 1% difference can impact things by about 10% of actual cost to you and your payment. But the reality is you should have a little bit of a cushion there that that's not going to change your life. If it's going to change your life, you're probably buying outside of your means.

Jay Day:

And the Fed isn't hiding anything. They're saying, we have to keep increasing rates. They had to slow it down because of the knee jerk reaction of Wall Street and how all of that stuff got impacted. But they are talking that they still need to do more rate hikes. And the whole, I never studied economics, so I'm anything but an expert on it, but it's always baffled me like, okay, so we need to have unemployment and jobs change in a negative way for things to be better. I'm like, this just doesn't even make sense. There's too many jobs. There's too much work out there. So we have to keep raising the rates to get people to spend less money. It's a very unique and interesting time is what I would say.

Christina Day:

Yeah. Well, and so I mean, I think that when you look at the market, there's so much out there to weigh and consider. And people of course, listen to various news channels and whichever news channel you listen to is going to give you a certain spin on the data and how things are going. And what you really have to look at for yourself is what are you doing? Why are you doing it? And you have to have an agent who is going to be able to give you good advice, who understands the market, and can walk you through what's going to be best for you. So talking about what your agent's role is, us as agents is to advise and to understand the market that you're trying to buy or sell in, what could happen, giving you advice, getting through the contract process, trying to protect your wants, needs and best interest. That's the goal. So if we look at that and we go, okay, I'm a buyer, or I'm a seller and I'm looking for an agent, what are the things you should be looking for?

Jay Day:

Right. Well, and it's funny because the other day I had a consult sat down with people, and when I really broke it down, and I don't think I've told you how all that equated, so I was like, I'm talking to them and I'm talking about the pros and the cons and giving them the real, again, we call it real talk, real estate radio show for a reason. We do talk to people very bluntly of this is what the situation is. And I said, I'm not trying to talk myself out of a job here of selling your home, but I think there's a whole lot of stuff that you need to get sorted out. And they were like, no, no, no. We want to sign. And they signed all the paperwork and then within 24 hours, they were like, we talked about it. We'd like to put it on hold if at all possible. I said, yeah, we haven't started anything. It was just the time, that's not a problem at all. I said to 'em, I told you it's a lot to digest. That's why when I met, I said, maybe you need to take a little bit of time to figure this out, not just jump on it. But I think the thing was they were sold when they started that they wanted to do it. And then when they heard of all the things and all the moving parts, when I explained to them, well, where are you going to go if you're not retiring for another five years and you have a kid in school and they have to be in the same school district. Have you looked at rentals? Have you looked at this? Have you looked at that? And then we went through what are the things that they didn't want, they didn't like dealing with, it was too much of a yard. The driveway was a nightmare when they had a lot of snow. But once they sat down and waited it all out, they're like, you know what? That's going to be easier to deal with than trying to keep my kid in the same school, find something that I can rent. And then also when they compare it to what their rent payments were going to be for places versus what their current mortgage payment is. And I've had others that have crazy credit card debt, and it made perfect sense for them to sell because they're like, I'm paying 24, 28%. I want to get my proceeds, pay off all that debt, get rid of that, and have a fresh start where I don't have that weighing me down.

Christina Day:

I had a client recently who by virtue of selling their house and the appreciation that they had seen, they were able to pay off a significant amount of debt and they were able to buy a newer, bigger house that accommodated their family, and they were able to transfer what was revolving debt and other types of debt into a housing payment that the house better accommodated their needs. So for them, the juice was worth the squeeze.

Jay Day:

And listening to this, I know it's a whole lot of information, what I would say is, we meet with you. There's no pushing, there's no, it's really a consultative approach where we get into all of the details and sometimes it may make more sense, and we will talk to you, what are your goals? Do you have a lot of credit card debt? Do you have a lot of these other things? And you'll never be pushed or prodded to do something that doesn't make sense for you. If anything, you might be surprised and we're like, well, you may want to really think about this. We're here. We'll do it. We can sell your home now or we can sell it five years from now. It's what's best for you.

Christina Day:

We're still going to be selling houses then too.

Jay Day:

Yeah. So if you have any questions about real estate at all, please feel free to reach out. You can go to our website dayhometeam.com. That's dayhometeam.com. Or you can reach us at 866-702-9038. Again, 866-702-9038. I'm Jay Day.

Christina Day:

And Christina Day.

Jay Day:

With Real Talk Real Estate. We'll be back at you in October.

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