Show- March 4, 2023

Jay Day :
Good morning, WFMD listeners. This is Jay Day

Christina Day:
and Christina Day

Jay Day :
with Real Talk Real Estate. We're coming to you in March and have lots of good information to share, lots of updates. Let's start it off with what's going on in the Frederick Market. Christina, I know you love talking about numbers and stats, so I

Christina Day:
know I'm such a dork when it comes to real estate statistics, right?

Jay Day :
And I'm a dork because I like Star Wars, so we all have our dorky moments.

Christina Day:
So it's been busy. I mean the tail end of last year, second half of last year really, we saw a drop in activity and then come January it was like somebody turned the lights back on and the flood gates opened. And we'll talk a little bit about that during the show today as to why that happened. And then February was still clipping along pretty busy. And the interesting thing about February as we round out this starting March, closing out February, both of us had listings this past week even that had multiple offers over asking. It was almost like it was Spring of 2022.

Jay Day :
Again. Well, and it's interesting because I know on my podcast and on our show, we talked about the seasonality and I said, we'll really be able to see the seasonality once we get into March because we'll be able to see what's closed, what's went under contract. And because last time we went over numbers, the numbers were down. But again, that was compared to the month before. But that was all pretty much tied to the seasonality, and that's really what we saw.

Christina Day:
And I think the big key factor here, which today I really want to talk about the things that are driving the real estate market and some of the kind of ups and downs we're seeing the instability we're seeing. One day you think everything is gang busters and going great, and the other day you think that maybe they put the brakes on again and it's going to change completely. It really is on a week by week basis that we are seeing things shift and change. So let's talk a little bit about February's numbers in Frederick County. As we closed out February, this was as of late February 28th. We pulled the numbers. We had 33 homes in coming soon. It's not a lot of homes in coming soon, guys. That is four less than we had last month or the beginning of the month because the, there's just not as many homes being put up for sale actives.
We have 133 when we closed out February compared to 139 at the beginning of February. And it looks like the pricing on the actives is a little bit higher. The median price for actives is now $475,000 in the Frederick County area. Days on market for those actives is at 30. Now the interesting thing for the days on market, days on market went down by 12 days for the actives. Yeah, that's pretty significant. And this speaks to that uptick in the area activity that we saw. Contracts, we have 260 contracts pending at the end of February, and that was compared to 259 in the beginning of February. Another interesting thing though, medium price on those under contracts was $419,450 compared to $400,00. So a nice gain on the medium price for the contract activity in February days on market also went down to 8 on those that went under contract compared to 20 the prior months. So you can really see the picture that February was much stronger than January was looking.

Jay Day :
Right. I mean, basically if you're listening to this in a nutshell, if your home was priced, it should have been under contract within 8 days. And that's a big change because we were almost at three weeks before. Still good, yes, but a little over a week. That's pretty incredible. Yeah.

Christina Day:
Big difference there. Now, one of the things we like to look at is sold activity, and this is directly related to seasonality the February settlements, those are the solds. Those were contracts that would've happened in late December or in January through essentially January is your primary time to get under contract closing in February.

Jay Day :
Yeah. Post most holidays.

Christina Day:
Yes, there were 207 closed homes in Frederick County compared to at the beginning of February, we were looking at only 141, and the price on those closed homes went up too. It was $380,000 at the beginning of February. It was $395,000 at the end of February. So you're seeing a nice uptick in the pricing for things that have sold by about $15,000 to $20,000.

Jay Day :
So those that have are listening and you've heard stuff that's talking about on national news that home prices are dropping, there's more inventory available. Again, we talk about local is what really matters. And again, we're only talking Frederick County here. We have people that want to meet with us to talk about selling their home in Virginia, Pennsylvania, West Virginia. We can get into those details. County by county. Same thing with the other counties in Maryland. But again, the national news is not the same as what we're experiencing here locally.

Christina Day:
Not one bit. And so when we're looking at the supply and demand, we still have an extraordinary amount of demand based on the supply that we have. I will say it's not the same extraordinary amount of demand that we had a year ago, but there's a lot of things contributing to why that might be. However, there is still an extraordinary amount of demand in relationship to how many homes are actually available for sale. Now if we're looking at those solds and we're talking about, well, how many sold above list price? What is actually happening with this escalation? Are we still seeing that 80 out of the 207 did sell above list price?

Jay Day :
And that ends up being what, 30?

Christina Day:
That's 38% or so.

Jay Day :
Yeah. Well, and an interesting stat with that one also is the prior month, the median price for those $315,000. The median price in February was $393,625.

Christina Day:
It went up a good bit.

Jay Day :
They got as much that's closer to significance number.

Christina Day:
So then we look at, okay, well how many sold below list? And there were 62 that sold below list and those were a significant part of the market as well. Almost a third, 29%. So we consistently see this pie of solds at list below, list above list, and it really almost falls into a third, a third, a third.

Jay Day :
Yeah. Well, and that's one of the things that you didn't mention. The ones that sold above list median days on market was 6. The ones that sold below list 48 days, meaning obviously they came out of the gate too high, so it took a little longer and that's why they ended up selling for a little bit lower. They were pushing the envelope where candidly, the ones that maybe went out at market value were bit under. They sold in less than a week and sold for a significant amount more than what they were listed for.

Christina Day:
Exactly. And so that's where when we're talking strategy for pricing people always ask, should I price high so that I have room to negotiate? Well, the market really doesn't speak to that very well. If you have the time to sit on the market and give it a shot, by all means it's your time on market and it's your money. So if you want to push the envelope and you want to try a higher number, you just truly have to go in with the expectation that I may have to bring this down and it may take me a good bit longer to get to the closing table than if I price it more in line with where it should be priced. And if I price it more in line with where it should be priced or even potentially a hair under it can create a driving force to push that number back up, increasing the demand and the desirability for the home.

Jay Day :
So when we talk about pricing it, right? Sold at list, we were 65 when the prior month it was 45 with 12 days on market, and that was 31%. So basically what you're looking at is almost 70% of all the homes, if they were priced properly, they were selling there was only 29% that didn't sell exactly at or above because they pressed the envelope. And those homes took 48 days where between price and it was 12 at price. And the ones that went above were 6. So candidly, in less than two weeks, you will know in Frederick County if your home was priced right?

Christina Day:
Yes. And that's actually a good point. When I talk with clients and I say, we're going to give it about two weeks, and people don't think two weeks is a long time, but two weeks is a long time because when you think about how marketing works, you come out with a bang, everybody sees you, they know that you're there, those who are going to want to come see you are going to come see you, and then they're going to make a buying decision as to whether or not they want to move forward with your house or not compared to how they feel about your house in relationship to the price, how they feel about your house in relationship to the other homes that are out there. And even though there's not a lot of other homes out there, that doesn't mean that they're going to settle for your house at a price that they don't feel good about. It means that they're going to go, I can wait.

Jay Day :
Yeah. And I think the reality and what's causing that is because the payment shock with people, the interest rates are higher. So they're not going to settle on a house where before they were, well, the payment was low, they could make some things work, and now they're really pushing their budget, they're paying a whole lot of money per month, so they're becoming a little pickier and they're not going to wait. And then what does that mean? Then it means your price will have to come down because the market and the demand, what someone's willing to pay for your home is really what it's worth.

Christina Day:
I had an appraiser tell me that once, and I wanted to kiss his cheek because he said it was a appraiser I met at a property to let him in. And he said, I truly believe that a property is worth what somebody's willing to pay for it, which goes directly in the face, the opposite direction of what most appraisers will say. But that is truly the reflection of the market, right? If somebody's willing to pay it, that's what it's probably worth.

Jay Day :
Well, the shocking thing to me, and I mean you've seen it too it's on the top of my head because I deal with most of them, but we've had a lot of people this year that we went through a phase where there weren't as many people that called us because they couldn't get their house sold. We're running into more and more of that, even with the market the way that it is. And I think what I'm seeing on my appointments when I'm talking to the people, one is either there's no marketing being done. So the agents were used to things just sort of moving. Without any additional funds that needed to be put into it to make it happen. And the second is just a lack of the understanding of the market and educating the sellers because the sellers need to understand what's going on, what we're dealing with.
And we talked about strategy. I mean, I've had so many people that I've met with recently and they all have said, wow, none of this was ever explained to me. If I understood this, I wouldn't have went down the path. I went down and I said, well, when you've been doing this for close to 20 years, you sort of have a little bit of an idea of what's going on. And we've been through these different types of markets and I mean, some of them said their agents are, well, the market's just slow right now. You see the news. And I'm like, not really.

Christina Day:
Right?

Jay Day :
And it's funny, I guide them over and I'm like, Hey, listen to my podcast. You can listen to our AM show. We give it to you real. Again, not to be cheesy with our name, with the Real Talk Real Estate, but I mean that's really what it's all about being straightforward, direct and letting you know exactly what's going on. So I think that's probably a pretty good lead in to, I know you wanted to talk about what's going on with the mortgages and what's causing the market situation that we're in right now.

Christina Day:
So a couple interesting things. One of the things that we're seeing with mortgages is that the rates have been extremely volatile. So they have gone up, they've gone down. And if we look at indicating factors of how do we tell what the market's going to do, one of the leading economic drivers is mortgage applications. And so if we're looking at mortgage applications, then we're getting an idea as to how many people are actually going in putting in a mortgage application for a purchase and preparing to buy. And so this is one of those things that not everybody looks at, but mortgage applications dropped by about 13% the second, third week of February. Okay? So that was a significant decline in the amount of people who were going to a lender and saying, I'd like to apply for a mortgage, be it they found a house or they're getting pre-approved.

Jay Day :
Right? And those are national numbers.

Christina Day:
These are national numbers. But we did see a lot of ups and downs with traffic through homes, the types of offers we get. And it was interesting at the tail end of last year, June through December, we really have been pounding the drum that guys, this is a return to what is more of a normal market as opposed to the fantasy land that we lived in for the last two and a half years from about mid 2020 to mid 2022. And so if we're looking at what was normal, then January happened. And of course everybody on my social media is a real estate agent and everybody's all excited because it feels like spring of 2022 again, and we forgot that we might still be dealing with a return to a normal market that this is a blip in the radar. But these mortgage applications really tell the stories because that's what demonstrates a buyer's true interest in making something happen.

Jay Day :
All right. So on that note, we'll take a quick break and be right back at you.
And we're right back at ya. So let's keep going on that mortgage side and talk about again what we're seeing.

Christina Day:
Right? So a couple of other things we really need to also address with not just the mortgage, but what also is impacting the economics here. So mindset, affordability and personal economic perspective.

Jay Day :
Can I say the I word?

Christina Day:
What's the I word?

Jay Day :
Inflation

Christina Day:
That's definitely a part of it and that's what I want to talk about. Because the other day I was sitting at the nail salon and the one thing I really detest about the nail salon is they play the news. So I'm sitting there trying to relax, get a little downtime, and there's the news. And of course the news is all what? Bad news, right? Doom and gloom. So it's stressing me out sitting there watching the news. But just like a train wrecker, a car wreck, you can't look away. You got to know what happened. So one of the things I saw on there was about consumer credit debt, and it blew me away to see the difference. And then I went and I did some research and I got some real data about it. But here's the thing, consumer credit debt has gone up dramatically in the last quarter as we closed out from last year rolling into this year.

Jay Day :
Well, we talked about even if you didn't make any changes to your habits, just what your costs are per month to survive with your groceries, your gas, yes, things like that. If you didn't get more money at your job, you're probably going to have to finance that. And that's probably what's leading into those numbers.

Christina Day:
So there's been about a 20% to 25% increase in the cost of goods. Jay and I actually take we're involved in a financial coaching program, which is really great for learning more about finances, budgets and things like that. And one of the things that they talked about was the cost of gas, the cost of electric, the cost of food, the cost of overall purchases at the store. If you go to the grocery store, the difference in your walking away with the same amount of food is about 25% or so higher than what it used to be.

Jay Day :
I mean, even I was talking to a banker earlier in the week about one of the homes that I had one of the more affordable ones that was in the $100,000 range. And she had been doing mortgages for over 30 years and she was saying, I remember when you could actually get a livable house for that amount of money. And now when you're talking $80,000 to a $100,000, sometimes you're just talking about a car. Just that whole world of what's changed. And she's always lived in West Virginia and we were talking about loan limits and all types of different things, but I never even thought about it that way. But sometimes when you look, you know want a Jeep or you want something, and I'm not talking like some crazy luxury cars, no, they're all very, very expensive.

Christina Day:
And so if we think that just the cost of living has gone up by 20 to 25% in a very short period of time and then people have to put that money somewhere. If it's not in the bank account, where's it going? Going on credit cards and then add to that, the cost of interest rate on credit cards revolving debt, consumer loans has gone up. So now you can't afford to pay off as much because you're paying more in interest than what you were paying before. So all the things are costing you more and you're paying more interest and you don't have the money in your bank account. So you're putting these things on credit cards. It's really also putting a pinch on things like vacations. We were involved in a conversation with a community of Airbnb type properties and they were saying bookings are dramatically down for what they would've normally expected going into the springtime and for summer. But a lot of that is attributed to how much disposable income do people have left over?

Jay Day :
They were saying that some people were doing two to three vacations a year and now they're cutting it back to one. And we've seen it even with the airfare, and I mean it's went up. Oh yeah, ridiculous amounts and it's tied to fuel and all that other, absolutely all that other good stuff.

Christina Day:
It all affects every little kink in the chain affects the rest of the chain. And so with this mortgage debt is considered what we would call good debt because you're paying for something that you will actually eventually own. It's not something, it's an asset that you're asset, yes, it's over time it will grow. It is the roof over your head. But when people's budgets are really having pressure put on them from all of these other aspects, it affects what they can afford to do with everything else. Vacations, housing, cars, the whole bit. So it's not that the buyers specifically are saying, no, I don't think your house is worth it, even though we know we have a limited amount of properties available, it's that they're looking at their discretionary income and they're going, huh, well where do I make this fit?

Jay Day :
Well, and that gets into some of the stuff we talked about with the condition where they don't have that extra money to replace the flooring. They don't have that extra money to update that kitchen. They don't, because the income has not changed and their expenses have went up. And like I said, it's so in addition to their mortgage being higher, just their disposable income to do things like that just not there. That's why we're also seeing closing help coming into play more than it was before because that's cash needed on hand. And that again, has impacted things pretty dramatically.

Christina Day:
With in speaking of closing help. So that is a statistic we also track on a continual basis and 69 out of the 207 homes, so roughly 33% did have closing help on them. And that is something that we did not see for a long time. So buyers, here's your good news. Your good news is a third of the sellers were willing and ready and able to give closing help in order to help you get into the house.

Jay Day :
And we're not at the high point of when interest rates went up. As of right this second we are not at 7% or higher. And also if you're looking at doing FHA, their mortgage insurance amounts have dropped, which impacts your monthly payment. So that's a good thing. So there are pots of gold at the end of the rainbow on some of these things. Yeah, there's just a harsh reality of what's happening in other rates. And I mean, one of the things that I wanted to talk about, and of course I'll have to jump in here we talk about, and you mentioned it, our inventory is going down still and what's causing that? Before it was covid fear. What's happening with that now? And I saw this and this blew my mind. So one of the reasons that we're seeing people not put their homes on the market, and you and I have talked about this before, is people have an amazing rate on their house. Now there's a statistic for people that have FHA loans and I apologize, I don't even know, I've never seen that before.

Christina Day:
So any of the government loans had a pretty great rate and right now we're looking at people who are facing rates of 6% and more. And the problem for a seller is you have a 2.5%, 3.5% interest rate. It's actually called rate locked existing homeowners. And they have two fears. One is a fear they're not going to find something else to buy. Two is it's going to cost them so much more to buy something.

Jay Day :
65% of people with the mortgages are paying under 4%. When you go up to 5%, we're talking 85% of all homeowners that have mortgages are under 5%. So what that means is when they go to sell and buy a new home, they may be downsizing or if their up upside and put their payment is going to go up dramatically.

Christina Day:
Sellers, here's one of the things though to consider, and I've had a lot of people I've talked to lately who have been doing this. A lot of sellers have a whole lot of equity in their homes and I read a statistic, it's 48%.

Jay Day :
Yeah.

Christina Day:
Here you go, almost half. So if you have close to, so 48% of the mortgages out there have 50% of equity in the house. So what a lot of people are doing, and there's a lot of us Gen Xers, I'm rolling up on 50 and a lot of us a little bit older than that. We're a huge part of the population right now. And the interesting thing about us is we're planning for retirement. Our kids are leaving the nest, they're going off to college, they're starting lives of their own. And what I'm seeing is a lot of sellers I've talked to lately are considering selling property and trying to buy something for cash.

Jay Day :
And then you don't have to worry about the rates.

Christina Day:
Or for a very minimal mortgage. They're looking at downsizing sooner than later in an effort to free up their monthly budget and their obligations. And I think that's an amazing strategy. But the thing for you sellers to be thinking about is we know that you are enjoying an interest rate. So we've got the couple things that are keeping homes from going on the market, this rate locked seller situation where they're like, I don't know if I want to give up my 2.5%, 3.5% interest rate. Even a 4.5% interest rate feels pretty darn good compared to 6.5%, which is where we are right now. So we that we also have the fear of, am I going to find something that I'm going to and enjoy and want to buy? So we've got that gridlock again.

Jay Day :
And that's a reality. I mean, we tell people it's if they can do something with renting or living with family in between, that's really the smart thing. And what we've, I mean, and it's doable. We have quite a few people that are going that route. So they're not rushing. They're like, I want to capitalize and take advantage of this market because they saw when it softened and it scared them. And most things that go up do have to come down. But the good thing with real estate long term, it's the best long term investment that has proven itself over and over again. But they're trying to capitalize and say, like you said, I want to get as much cash out of this place as I can. Why would I not do it now? And if they have the financial wherewithal have the proceeds to do it, and they can buy something and not have a mortgage, it's it's an extremely smart move.

Christina Day:
So the interesting thing is for sellers, they are still predicting that though we have had a lesser appreciation with that lesser appreciation, we are still seeing appreciation. It's just not the ridiculousness that we had before. So in the last couple of years, we saw 12% to 20% year over year appreciation depending on where you were and what demographic of house type and affordability you fell into. Now we're looking at about a 6% year over year appreciation.

Jay Day :
Which is still awesome.

Christina Day:
Yeah, fantastic. So the good news is we're not going in a downward, literal downward direction. And so if you're a seller, now is definitely a good time to evaluate how much equity do I have in this house? What is my long-term game plan? I've talked to people recently who are looking a year out and that's fine. Let's strategize and get a game plan together for a year out.

Jay Day :
The biggest thing is, if you're even considering anything, there's no obligation to meet with us, to talk with us. We have clients that we've met with and years ago and now they're ready to roll. There's no rush. It's never a bad time to start talking about your options. And you know, can always go to our website www.dayhometeam.com. You can also reach out to us at 866-702-9038 and we'll give you the details. And we need to know your plan. You can talk to us openly about it, and we will work towards hitting those goals for you. So again, if you want to find our information, go to www.dayhometeam.com or you can reach out to us at 866-702-9038 and we will definitely give you the real deal, real talk real estate. I'm Jay Day and Christina Day, and we'll be back at you next month. Thanks for tuning in.