Show - May 6, 2023

Jay Day:

Good morning, WFMD listeners. I'm Jay Day.

Christina Day:

and Christina Day.

Jay Day:

Here with Real Talk Real Estate. We are here, we're in May, and let's talk about spring market. What's happened, what's going on?

Christina Day:

It's not spring, it's 50 degrees outside this past week.

Jay Day:

Well, according to the calendar and everything else, we're in the spring market and I think that's really important to talk about things that are going on because we have interest rate hikes happening, banks collapsing, all types of very interesting things. With that, you would think that the real estate market is probably burning up and on fire in a negative way. What are you seeing happen?

Christina Day:

So interestingly enough, I think we're seeing it hold steady and tick up. Not massive gains in terms of numbers with increases in prices, but if we look at Frederick County as a starting point, as we rolled into the start of May, we had 76 homes in coming soon that was 10 more than the prior month. So we are starting to see that springtime listing activity start to take hold. We also had 124 homes active compared to the prior month of 113 homes active. So again, ticking up in that inventory level where we're seeing more people start to put their homes on the market. Contract activity was also up. We had 326 homes go under contract versus 307 the prior month.

Jay Day:

So pretty much the contract activity has offset the additional,

Christina Day:

Yes, it's proportionately being absorbed because I mean, let's face it, 124 active in this little snapshot in time is not a lot of homes to satisfy an entire county all price range, all home types. And what we did see with the contract activity is that the prior month had been 440 for a median price and just in the April closing out in the beginning of May, the contract average median price was 487.

Jay Day:

So that's almost a $50,000 increase.

Christina Day:

Yeah, so that's a significant, I would say about a 10% increase in the dollar volume of what went under contract. Now there were 48 homes that were taken off of the market, which is exactly the same as the prior month. And interestingly enough, the price of those that were taken off the market was also the same and the median was in that 525 range. So higher than what the median of the things that are actually moving. Message to you sellers, this is not the time necessarily to overprice your house and test the market. Just because there's a limited amount of inventory does not mean that you put the highest possible price on it. It is really important to strategize with your agent about what is the best pricing point for getting activity and interest in on the house.

Jay Day:

Well, and the one thing you didn't mention is the days on market before they pulled it is just over a month. Again, that messaging of either these sellers know that they're testing the market and realizing it's not going to work or they're not having that conversation with their agent upfront and giving up very quickly because they realize, I mean when you have under a month's supply of inventory, if your home hasn't sold in a month, most likely you probably are not at the right price point.

Christina Day:

Right, exactly. And those that did go under contract, the days on market was six days on market, which actually was exactly the same as the month before. That's why I said there's very much a holding steady type pattern. Some elevations and upticks with other various aspects, but nothing dramatic. As we roll into spring sold activity, we had 257 compared to 228 the month before. So a little bit more than a 10% increase in that because it was 30 homes. So a little bit better than a 10% increase.

Jay Day:

These are some interesting numbers you're about to get into.

Christina Day:

And so those that sold above list, we had 148 homes that sold above list and the prior month we had had 117, so 30 more roughly that had sold above list price. Now the price point on those sold above list, the median was 412,000. So a little bit lower than the other medians. Things that are a little bit more competitive, that entry level price point in Frederick County, a little bit more competitive, you're going to have to bring your a plus plus game,

Jay Day:

But that was 58% of the sold inventory sold for over asking with median days on market of five. So a little bit faster. I mean when I say a little bit the month before it was six, so one day quicker but still. Now what about sold below list?

Christina Day:

So there were 45 that sold below list and that is almost the same as the prior months. So that number held steady. The median price on those though was 460. So that indicates the things that are selling above list, little bit lower price point as you get your price point up, the amount that are actually selling above list or at list can tend to go a little bit down. Now, sold at list price 64 month before was 64, so that number held steady. That was roughly 24, 25% of the marketplace that sold at list. Good job sellers and agents who priced your home exactly right and sold it at list.

Jay Day:

Yeah, this median price change is pretty big though.

Christina Day:

499,5 versus 420 the month before. So I think there's a really good message in that with regard to strategy and there's also some really good news in there that the numbers of what had sold didn't go down. We're still seeing our numbers hold steady if not increase. But that also means that we have to be strategic when positioning the house out there.

Jay Day:

And I mean just to get back into the stats in Frederick County, about 58% of the homes sold for over asking only maybe just shy of 18% sold for under and just a little bit below 25% sold at list. So the majority of the properties sold at or above asking price. Again, when we talk about the market, we're still in a position where we have less than, well less than a month's supply. So we still are in a seller's market. However, you just can't push the envelope too much or you may not get it sold or it's going to sell for under.

Christina Day:

Yes or you're going to be sitting there for a while and having to have price reductions. Now there's an interesting category that we track, which is homes that sold with seller help. And so for those of you who may not be familiar with what is seller help, seller help is when your buyer says, I'd love to buy your home. I have my down payment, I have some closing costs money, but I'm going to need a little help with that closing costs money from you. And that amount gets deducted from your proceeds at the time of closing and it gets credited towards the buyer's cost associated with buying your house. This is super common in first time home buyer situations, especially because a lot of times your first time home buyer has scraped up enough money for their down payment, but they may not necessarily have all the money necessary to apply to the closing costs and that are necessary to purchase the home. So seller help is something that if this conversation had happened three plus years ago, it was a given. You were going to have seller help. And it was actually smart for buyers, even buyers who have cash on hand to ask for closing help because it takes a lot more time to save up $10,000 than it does to more or less finance $10,000, right? So if you're the seller and I go to you and your house, let's say is listed at 500,000, and I say, well, I'll give you 515, but I need 10,000 back in closing help. That 10,000 in closing help that I'm basically pushing the price up with is going to cost me very little in my monthly payment, but pulling 10 grand out of my bank account, it's going to take me a long time to replace.

Jay Day:

Oh yeah. And you do the simple math on that with the lender and your agent. I'll explain all of that stuff.

Christina Day:

So we had 62 homes of those 257 that had sold with seller help. So again, that's about a 24% amount of the transactions that had seller help involved. So when we're meeting with our sellers and we're setting expectations on should we be looking at pricing strategy below, at or above what the market indicates? Should we expect that we're going to have closing costs help as a common theme based on the price point that we fall in when we're looking at comparable sales, we're looking at did the neighboring type properties, did they have closing help? What are we seeing as a trend? So based on this, we know the trend is yeah, you might have about a 24% chance, especially if you're in that first time home buyer demographic.

Jay Day:

Oh yeah, that's an important thing. I mean, we educate our buyers too that we're working with. If they say I need closing help, and I mean at one point it was probably under 5% of people were giving that and that's when we had to have that conversation, you're probably going to need to save money because you only have a 5% chance of doing this or getting that. And most sellers are not expecting that they're going to have to provide any closing help.

Christina Day:

When things were crazy, crazy, crazy, there was a snowball's chance and where you were getting it. Now the second half of last year we saw a resurgence of this and the percentages were much higher for people who were asking for it and getting it because the days on market had gotten longer, the amount of buyers that were out there had gotten smaller, the amount of homes that were available had gotten larger. So this first quarter of the year rolling into this second quarter of the year, we are still seeing really good strong activity. And I hope for everybody that continues, I think we're in, it's not a bad place for a buyer and it's not a bad place for a seller.

Jay Day:

I mean we're still not at where we were with interest rates not that long ago,

Christina Day:

Six, nine months ago.

Jay Day:

Yeah. Now when we're talking about this, and I mentioned the Fed making changes, banks having issues, and we hear in the news there's a big debate, are we in a recession? Are we not in a recession?

Christina Day:

Sure feels like it.

Jay Day:

Well, and the interesting thing was I found this article, and I don't remember ever hearing this, but basically what was said, and let me try and pull all this up here. Basically everyone was talking about the recession. However, the Federal Reserve in their March meeting, and this is a quote, this staff projection at the time of the March meeting included a mild recession starting later this year with a recovery over the subsequent two years. So they're still in denial that we're in a recession now, but they're saying that it is coming and that they're expecting it to last at least two years.

Christina Day:

At the risk of getting political. I mean honestly, do we really trust anybody at the helm of the financial situation of this country at the present time? I mean, I am not sure what sector has actually benefited from any of the economic changes and policies that have been made. Eggs are $8 a dozen, gas has kind of leveled off and calmed down. Companies are,

Jay Day:

Well, that's what, and again, I don't want to get political, but that's the whole thing. They've gotten us used to that the prices now are pretty good, but they're not, when you look back, they were like two bucks, 2.25.

Christina Day:

I filled up my tank the other day and it was $3.70 a gallon. And I actually thought, oh, that's a relief. It's not $5 anymore. But companies are shutting down, businesses are closing, businesses are laying off. We were hiring for a position in the office and we had hundreds of applicants coming in for a very entry level position. And the feedback I was getting from a lot of the people who we talked to while interviewing was that they were really having a hard time finding work.

Jay Day:

I mean, I think there was a report that was put out recently and it was Amazon, Facebook. I mean there's massive amounts of layoffs that are happening and it's not just brick and mortar. There's a lot of places that are realizing they've got to sort of batten down the hatches a little bit to weather the financial storm so that their companies remain profitable and at least break even so that they're not in the red and risk getting shut down.

Christina Day:

Well, I was talking with one of our good friends who owns a team in brokerage in Colorado, and she was telling me that within their company, they had a lot of financial evaluations of what was happening and that the prediction is it's going to be about another 18 months of real estate being, what I like to use the word is wonky. You kind of don't know what's going to happen on a week to week basis. We're all feeling our way through this. And I had somebody ask me the other day while I was meeting with them, when is going to be the best time for me to put my house on the market? And I was like, well, traditional wisdom four years ago would've been this. And current wisdom says, I know what I know today. I can give you a good hunch as to what I think might happen in the next couple of weeks. But my crystal ball to be able to predict anything that is coming down the pike is really quite broken because nothing is predictable. There's so much news that impacts housing and impacts financing.

Jay Day:

And the patterns of the consistency of this happens, then that happens, this or that, or when this happens, then this will happen. That has been thrown out the window. And we've talked about that multiple times because typically what happens is when interest rates go up, house prices go down, and we just went over the stats in Frederick County and for what's selling, the prices have not gone down at all. Speaking of that, one of the important things that I think we might've touched on this before, but again, I just like people to understand that whether you want to recognize or say we're in a recession or not, we're not going to get into that debate. However, recessions do not always equal falling home prices. And there's this graphic that I look at and I keep handy, and it's so during the last six recessions, we've only had home prices drop for two of those. When we look back in, and it's funny because 2020, they have it marked as a recession and sales prices went up 6%. 2008, the big crisis that everybody talks about and is all worried about home prices dropped about, well, 19.7%, I'll be precise. 2001, they went up 6.6%. 1991, they dropped 1.9%. 1981, they went up three and a half, 1980, they went up 6.1%. So realistically when we hear people saying, well, we're waiting for things to fall to crash, the economy's rough, even over the last six timeframes that were considered recession, we've only had home prices drop twice. And one of them was really odd, and we sort of talked about that the 2008 was sort of tied to some of the crazy mortgage programs that were out there.

Christina Day:

2008. The housing numbers I think had so much less to do. Let's frame it like this. The economic recession of 2008 was actually driven by the real estate, by housing, real estate, the finances that were associated with real estate, real estate actually instigated that situation as opposed to what we're working with now is how will these other factors affect real estate? Real estate affected the overall economy because so much is tied to real estate, home improvement, home goods, things, not the store, but things that you buy for your home, the contractors who work on your home, the transfer taxes and revenue that goes to the county and the state. Every time a home transfers, there's moving companies, lenders, title companies, real estate agents, there's so many things that go into and are associated with home ownership and the transfer of home ownership that when that piece of the economy fails and it was failing for a multitude of reasons, it spills over to so many other industries and it affects them and then that affects their ability to pay their mortgage. Right.

Jay Day:

And I wanted to talk about it because it's not uncommon, and I think the biggest thing that we hear from people is, well, on the buying side is oh, they're just waiting for prices to drop. And with the economy, they think, because again, most people, we always go back to one of the most recent situations, and that's 2008. And like you said, the housing market that sort of led it. And when I say the housing, we talked about that it's really what led it is the type of, like you said, the financing. And we haven't seen that there are some wonky things that are starting to happen that the government's rolling out on the finance side that some subsidies and things that could create a problem. But as of today, there's nowhere near the amount of things you would get a interest only loan because you couldn't qualify for something with principal and interest. And then you knew it was going to go and convert to you have to pay on principal or you'd have an adjustable rate mortgage and you know were going to have to refi because that would change and you couldn't even qualify at the highest amount. So you were setting people up for, okay, I know you can't afford it the real way, so we're going to give you this fake way that'll get you there for a couple of years. And then once that time's up, you'll just have to try and figure out what to do.

Christina Day:

And currently, and we've talked about this in previous episodes, currently the vast majority of homeowners have an interest rate that's below 4%. And I actually had a conversation this past week with somebody who had an interest rate that was in the sixes, and they had been in their home for quite a while. They actually had their mortgage from back in the early two thousands. I was stunned that they still had that mortgage. I don't know why they still had that mortgage, but they did. And we were talking about what are their options with what to do with their situation because realistically right now, they could probably get a better rate now even if they sold that home and moved. Whereas other homeowners, and this is why the inventory is limited, the people who are selling are not people who just willy-nilly, oh, I think I'll just buy another house. I like that better. You see that every now and then, but that's not the vast majority. The vast majority are making a move because they have to make a move, something in their life has driven them to that. So that's why we're seeing these numbers of 124 active and 76 coming soon as we start May.

Jay Day:

Maybe you don't love your house, but you like it and you can love your payment because your interest rate is 3% and then you see another house that you love. But then when you find out what that payment is, you all of a sudden that love goes down to, eh, I don't love it. And that's a reality. I mean, if it wasn't for relocations and other, divorce, things like that, or

Christina Day:

Divorce, deaths, births,

Jay Day:

Children being born, children moving out of the house, medical issues, our inventory would be even lower. So like I said, it's just been very interesting and even seeing that the sales prices are going up, we're seeing inventory pick up, but the problem is that demand is also still creeping up as well. So it's not like we're seeing we're getting to two months supply of inventory, we can't even get over a month. And that's what's driving the market right now with it being a seller's market.

Christina Day:

And we're seeing as we put homes on the market, we're getting good decent traffic through the homes in many cases, if the home is priced in the right price point, it was staged and looking appropriate for the price point that it falls in. We're seeing multiple offers and we're seeing those multiple offers back to offering higher than list price. And typically we're seeing a five to 10% amount above list price. And we're seeing in some cases, people waiving inspections. We're seeing appraisal guarantees again, and it comes down to negotiating. Somebody asked me the other day, how does that all work? Well going through, well, what has the things that are important to you as a seller and what has the least amount of risk of falling through? What has the highest likelihood of making it to the closing table that you feel good about?

Jay Day:

Yeah, it's ultimately all up to the seller what they want to deal with.

Christina Day:

We're seeing good strong terms coming in.

Jay Day:

Yeah, it was weird for a period of time we were having no inspections at all and then everybody was having inspections and then we were seeing maybe one out of five offers not having them, and now we're at least 50% of the ones.

Christina Day:

I was just say it's about 50/50.

Jay Day:

And that was going away and then all of a sudden right back in there, and it's not that rates have dropped or anything like that, it's just,

Christina Day:

It's the demand and it is spring, right? So let's remember, spring market is typically a busy time. People, we are mammals. We came out of our little hibernation period and we're ready to start looking at the opportunities that are before us. And I think that as that spring market activity picks up, you're going to see this continue so long as there is not any major economic disruption happening that would cause buyers to, again, like they did last year, retract and go, wait a minute, let me figure out what's going on. I think this is a good indication as to what we're going to be working with.

Jay Day:

And I think another reason that we're seeing the demand continue to rise and be strong is those that were renting, the rent rates are going up pretty dramatically as well. So normally when you see it fall off is when the mortgage payment, let's say for example, is going to be $3,800 and the rent is 3000, it's $800 swing. Then you start to see people, well maybe, but when they're right almost in line and sometimes some of the rents are more than the other side, it really, it creates a really interesting dynamic for those that are looking for the most basic thing in life, which is shelters. I remember my dad many years ago was talking about professions and how you can make sure that you're going to be fine in any economy. And one of the things like grave diggers, he goes, that's just people are going,

Christina Day:

Everybody's going to go.

Jay Day:

And he is like, and they're not just going to leave them laying around. And it always hit me, it was, what are the things that really you cannot give up? And I mean, yes, we see in other parts of the country that yes, there's a lot of homeless camps and things like that, but in the general sense, that is one of the things that people will need to have a roof over their head. And so I don't see any slowdown in the demand side of it,

Christina Day:

The owning a home in the benefits that go along with owning a home. So when we talk about what makes sense to rent, what makes sense to own, there are tax benefits associated with owning, but there's also the security associated with owning it's yours. And so long as you make those payments and you get it paid off, it's yours. It's an asset that will appreciate over time, it may have periods of slight depreciation, but over time it's going to appreciate. And so with that, you have the security of knowing it's mine, it's the roof over my head, it's the place I call home. It may have some financial benefits tax-wise in the short term depending on your situation, but over the long run it's going to go up in value. And then at some point in your life, when it's time to change where you live, you have a saleable asset that you can get money out of and you can transfer to yet another home. Or you can do what a lot of people do to build wealth is you don't take the money out of that necessarily and sell it. You turn it into an investment property, you buy another home. And then later on in life when it's time to think about retirement, you sell that first home, second home, third home that you had acquired and held onto, and now you have a retirement plan.

Jay Day:

Well, let's wind the show down with something that the listeners may not know about. So if you're listening and you're a buyer, and let's say for example, you have student loans, a lot of people do not realize that there are programs in place. Now there are amounts like you can't have it all taken away. However, there are programs that there's a certain amount of your student loans that can be paid in full. There's a whole mathematical equation that goes towards that. And if you stay in the house for five years, your student loans are eliminated and you don't have to pay those payments on the student loans while you're in the house. And if you do sell, there's a recapture fee and stuff like that. But ultimately, 20% of your loans is paid off each year, and this is a big win. I mean, let's say you have $20,000 in loans and you were paying a couple hundred dollars a month if you were going to buy a house anyway, but you were holding off because you're trying to pay that loan off, you're trying to pay the loan off. There's a lot of different programs that are out there. So what I would say, if you happen to be listening to this and you have student debt and you're thinking about buying, reach out to our team, we'll be happy to put you in touch with a lender that can give you some of the details on that. And you can reach out to us by going to our website dayhometeam.com, or you can call the team directly, 866-702-9038. I had a senior moment for a second. Again, dayhometeam.com. 866-702-9038. So anything else you want to add to this?

Christina Day:

Well, and you kind of landed on the buyers sellers. Sellers are my first love. I think that if you're curious about what's happening and you want to try to sort out the details and get a plan, the plan doesn't have to be for today, it can be for the next year, two years, three years. Give us a call and we'll talk through that plan with you.

Jay Day:

Yeah, there's no pressure. We've said this before and we call our radio show Real Talk Real Estate because we don't give you a bunch of bs. It is real talk, what's going on. Your interest is the most important to us. So on that note, I'm Jay.

Christina Day:

Christina.

Jay Day:

Thanks for tuning in to Real Talk Real Estate right here on WFMD. 

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