How Has Real Estate Changed In The Last 10 Years | Decade | Real Estate | REIal Talk | EP. 62

Foreign.

Hey, everybody, Flip and Danny here, founders of the Freedom Real Estate Group family of companies. And welcome to another episode of our podcast, which is called Real Talk, which.

Is real talk for real estate investors.

And well, before we get into all that, but right now, if you're going, wow, where are they at? We're actually in the. We're on our live recording set for our other podcast, which is called Freedom through Passive Income. So it's hard not to say that podcast name when we said this podcast.

Yes. And for those of you listening, you have no idea what we're talking about. For those of you who are watching, you can actually see the new kind of location. So if you haven't checked out that podcast, podcast definitely do that.

Yep. Make sure you do. And this is podcast episode number 62.

62. Anyway, you'll get that joke if you watch the other one.

It's been a long time since we've been on one of these podcasts. Yeah, that's awesome. Yeah, I don't even remember the last one we were on.

Yeah.

What the number was. But that's impressive.

We're so appreciative and I hope you guys are too, of the team.

Yeah.

Because this particular podcast, Real Talk, was meant to be about the family of companies and the day in the life of what we do across all five companies. And so as it's progressed, the team has really jumped in and taken over and everybody's doing them. And I just think it's so interesting to see a family of companies and be able to hear from the team members. Right. That are working in it every single day and hear from them and what are they doing and what, you know, it's brand new topics other than what you would normally hear on most podcasts. So I just, I love that it's progressed into that way and it's exciting that we're actually back and being featured on one of them.

I love it. I love it. Well, this podcast is entitled because we haven't even gotten to the title yet.

Oh, yeah, sorry. We're just jibber jabbering.

Yeah, yeah, that's what we do.

Good.

Yeah. Yeah. Chatterbox over here. So this one's called how has the Real Estate Market Changed in the last Decade?

Yeah. So if you watch the vlog, the little snippet preview, before we got here, I kind of summarized it by over the last 10 years and a little bit longer, because we are going to talk about 2008 and the great Recession. We went from an abundance of foreclosures, cautious Buyers and hesitant lenders to now where we've got soaring prices, low inventory, and fierce competition. And there's eight key points that we're going to go over in this podcast that we only highlighted on the vlog to give a little teaser, but now we're really going to dive in. So you're going to start us off.

Yeah, absolutely. And it seems like the real estate market. Market, of course, it ebbs and flows.

Yes.

Right. It's like the weather here in Ohio. If you don't like it, wait a minute. Because it will change. We had four weather changes in one day.

Yeah.

We went from snow to sun and. And through all the other ones in one day.

I always was like. Whenever I heard that, I was like, I don't. I don't get it. Until now that I've lived here. And now I'm like, oh, gosh, that's so true.

Yeah, now I get it. It's snowing. It's gonna be sunny and 60 in a minute. Hold on. So number one we're gonna talk about is this homeowner stats. And now. And you back a little more than 10 years. This. We're going back almost 20 years. It actually peaked in 2004 at 69.2%. But then in 2008, we went down to 67.8%. But this is the stat. When I read this the first time, it blew me away. It says only 35% of those that lost their homes bought again.

Yes.

That's a. That's a staggering number of the amount of renters.

Yes.

Because that means that out of 100% of the people that lost their houses, 65% of them did not buy again. They went strictly to renters.

Exactly. I think that's a result of the buyers becoming. So they became so cautious because they watched people who had equity in their home lose it. All Right. And then the lenders got. Just as everything changed, there was new guidelines, new disclosures, new everything. And so even if you weren't cautious because you just lost everything that you put money into. Right. Even if you went back to get a loan, I bet part of that 65%, there's a large part that just couldn't get approved. Couldn't get approved.

Right. Well, they were just four clothes on.

Yeah, yeah, exactly.

And so then. But then by 2016, it was back up to 62.9%. And then in 2020, it started edging up even higher, up to 67.9. And 2020 to 65.4%. And what's actually, funny is that I was surprised when I was running through those numbers. I was surprised that quarter one of 2022 was only 65.1% or 0.4%, because of the just obnoxious buying habits of homeowners. The last year and a half, you know, it was just heavy. People were buying properties without even seeing them.

Yes.

And there was, you know, a house would go up for sale, and it'd be a line down the street.

Yeah.

It's just unbelievable. And so that's why I was surprised that. That that number wasn't higher. But it's still. Again, I'm still blown away at the renters.

Yes. And I wonder how many of them are people who see the market and are like, I'm selling and I'm gonna go upgrade now.

That's true. They sold and then buy. They're not new buyers.

Yeah. So, yeah, very interesting. I like the homeownership stats. That was interesting to research as well. It was surprising to me how much it dipped in 2016, honestly. But we're climbing back up to that peak in 2004, which is 69.2. All right, so the second topic that we want to talk about for the last decade is new construction. So In Ohio alone, US Bridge reported that we saw more than 4 billion in new construction. And that blew me away. And so I said, let's go research the stats nationally. And so here's what I found. 2000 to 2009. I know that's not the last decade, but I'm just trying to give you some reference points here. 2000 to 2009 was the highest amount of new construction, and it was 14.56 million homes that were new construction according to this graph. Now, I will disclose that in this graph that I was looking at. And I didn't even look up the source, but Google it, because that's what I did. And it was a reputable Source. There was 58 million in the unknown. They couldn't track it to a year. So of the 58 million, they're gonna track somewhere, but of all of them, still, 2000 to 2009 was huge. Now let's talk about 2010 to 2019. It was only 6.9 million compared to the previous decade. So that was really shocking to me because we've seen new construction boom like never before, and it's probably part of that 4 billion that we see here in Ohio that's going crazy. It's also partly because of all of our investor friends that are like, you know what New construction is there's a barrier of entry. You really have to know what you're doing, and you have to have the network and you have to have the money in order to do this. I'm going to get in there because the prices are crazy. We're getting in this industry, and we've watched it. And so I think maybe that's why my feeling was this has got to be the highest amount of new construction ever. But when I actually looked at the stats, it was the previous decade, so that was interesting. But now, look, I think it's actually going to start edging up, because in 2021. 1.6 million. So 2010 to 2019, as a reminder, almost 7 million. Right. 2021 is now 1.6 million.

Just that year.

Yeah. So it's up 16% from 2020. So that was big. And they were talking about in that 2010-2019 range that it dipped down so much because there was a long way to go after that 2008 Great Recession period at the storage. There was a short of shortage of materials and labor and things like that. So they just had a lot that they up against, and that's why it dipped down. So that was really, really interesting to read. And again, Ohio. New construction in Ohio. What? Like, this is the. We've lived in Texas and Arizona, Florida, and I'm used to newer homes, new neighborhoods.

Yeah.

Moving to Ohio, I was like, whoa. And when people talk about rehabs in those states, I go, you don't know nothing. Come to Ohio and be rehabbing something from the 1900s.

Yeah. Yeah. One of our first properties we did was 8, 1896. And I'm just like, seriously, I don't think we're going to find these door knobs anywhere.

Yeah. But a lot of investors and a lot of people are moving into the Midwest for different reasons. And so it's interesting to see what new construction stats.

So the next thing we're going to talk about is millennials. And I did say on the vlog that I was going to be nice. I'm going to try to be nice. So millennials represent the largest share of home buyers in the last five years. I did not expect that. Yeah, I mean, they probably had to ask mom and dad if they could move out.

You know, I told you you wasn't.

Going to be nice because they're living in the basement.

Well, I read it was because they're reaching their 40s. Like, this is the time range. Right.

It's about time to get out of their mom and Dad's house.

Come on.

And I'm just. I'm kidding, I'm kidding. For the sake of comedy. I don't mean that. And so please don't send me hate mail. But the national association of Realtors, that they make up 43% of the home buyers, the most of any generation, up, up from 31, 37% in 2021. And so again, I joke, I'm just joking, but it is the largest generation of homeowners now. And again, a lot of people, gosh, if you would have said that 10 years ago, everyone would have scoffed at you. Now they're, like I said, they're still living at home.

Yeah.

You know, and they were afraid to buy.

Right.

You know, it's the stigma from the 2008. They watched everyone get foreclosed on.

Yep, yep, yep. All right, topic number four that we want to hit on is location, location. So over the last 10 years, location, location, location, you're dark. So over the last 10 years, what does it look like? So some of the things that we researched was pre pandemic 2020. It was expected to be a big home buying year for millennials, because as we mentioned in the previous point, they are just reaching in their first 40s. And so it didn't hit where they expected it to hit, but it did make a big impact. And why? Because of the work from home transition of, you know, offices. Like, our office even was empty. I mean, I won't say empty, because it was quite a few of us that we just love being in the office. So we came anyway and there's like this huge office and then there's like, you know, six of us, and we're all like different parts of the office, so it didn't even matter. But the work from home trend allowed many of the renters who could have formed, could afford homes to buy further out. So what they did is what they bought in the suburbs. Right. Because they didn't need to be close and worry about the commute, time, gas, and all that other stuff. So that's why it actually went higher than they expected. Not what they originally expected, but when the pandemic hit, they thought it would go down tremendously. It didn't go down as much as they expected. And then also the national association of Realtors reported that the largest share of buyers purchased in suburban areas and small towns over the last 10 years. So that wasn't even the pandemic. But I 100% agree that the pandemic really increased that stat. And then Remote work. So this was very interesting because it applies to us. Right. A lot of people who are moving and buying houses, they are finding, like, the place that they always wanted to live. Right. Again, they don't have to be close to their office anymore. They're allowed to be working from home, and so they go to places like Florida. Yes. So, for instance, we are moving to Florida. Right. And maybe you guys don't know that if you're not watching our other podcast where we talk about it all the time, but we're moving to Florida probably end of this year. And mainly it's because I don't want to experience another winter. Do you want to experience another winter?

I'm used to it, so it's no big deal for me, but I would prefer not to.

Yeah. So we're trying to move, and it's largely because we. For us, it was largely because for a long time, our team is able to work on their own. They don't need us here. But the move to hire a CEO really made that, hey, we can move now.

Yeah, right?

Everything's okay here. It was okay before, but now it's really okay. And we do have this flex schedule, so people can work from home. They can work from the office. Again, a lot of our team does like the office. Flip and I like the office. We're here every day that we can be. It's rare that I'm working from home. There's a specific reason if I'm working from home for me to be at home. I really love being at the office. But, yeah, a lot of people are moving to the vacation cities that they thought they would have to wait until they retired. So that was a very interesting stat as well.

Well, except for if you work for Tesla.

Oh, yes.

Apparently, Elon wants everyone back in the office.

Honestly, I love it when people.

I do.

When I see people are working from home, and I'm like, I love you. You have that flexibility. But I miss you.

But I miss you. Okay, so renters. So in 2010, the median monthly rent was $810. In 2020, that median monthly rent was $1104. So that's three. Oh, my gosh, almost $300. A little bit more than three. No, almost $300 difference.

See? Good job.

Aren't you glad I came along? And so the average monthly rent in 2020 was 1164, and the average rent increased despite job losses early in the pandemic. So, again, you know, people were talking about. Because, you know, we do turnkey. We say it's, it's. We like to say that it's recession proof.

Yeah.

Right. Now, we don't guarantee anything. We don't do that. But we always say, you know, when the proverbial shiitake hits the fan, people still need to live somewhere.

Yes.

They need to still pay rent.

Yes.

And thankfully we were, we were very fortunate, you know, with all of the properties that we maintain with our property management company. You know, that was what we were concerned about. Oh, great. Everybody's going to stop paying rent. Right. But they didn't.

They didn't.

No, absolutely. I was blown away at the stats.

Yes. And we weren't the only ones who experienced that. Right. It was across the board. I think a lot of people were fearful that people were going to stop paying rent. Now there were periods of time that they did stop paying rent, but it was very few and far between. And they got, you know, not all of them, but most of them got rental assistance.

Yep, yep. Also, the number of renters went up 9.1% in the last 10 years. Again, that's probably goes back to that 65% of the people that didn't buy again.

Yes. Right.

And that's the largest that it's been since the 60s. Peace, love and happiness. But since 2010, the national average rent increased by 36%.

Yes. Yeah. I was looking at that graph of the rent increases. And again, even during COVID rents were increasing and people were staying. There wasn't a big issue if you were single family house. So this is a difference between single family and multifamily. Those of you who are single family owners and you have multiple, you can, can relate to multifamily because you have a number of doors. Right. So now it becomes, not that I have one or two properties and both of them stopped paying because then that's 100% of your rental portfolio stop paying. Right. So you have this totally different experience than somebody who's got multiple doors. And again, I know people that have like 300 plus single family residents, so they can absolutely compare themselves to us who have a 48 unit, another eight unit, another 48 unit. And we just love, we really, really love multifamily. The experience is so much different because it's a numbers game. And largely those that have the multifamily just did not see it. But the people I think that are gonna cry are gonna be the people with very few. And if they experience the one, it was like, well, that was the only person you had, or you only had five. So if Half of of them, that was only two. Whereas, you know, the bigger you get, the more you realize. And then inflation. Something to talk about is, you know, in this inflationary environment right now, because it's pretty crazy, the rent is continuing to increase. So not only did it increase during COVID where we didn't, we weren't seeing these hikes in inflation. Even now, rents are starting to increase. And I'm on Mastermind calls all the time and they're like, man, we just boosted our rents X percent and X percent and it's just higher than they've ever been able to. And there's affordability because that's a factor. Right. Tell people when you're about to boost rents for inflation, because houses tend to rise with inflation. That's why we say it's recession resistance resistant and that it's a good asset to be investing in in an environment like this because you're going to keep up with the pace of inflation with the income that you're getting. You know, people are just, we've always said, watch and be aware of your residents. And somebody said this. So we say residents a lot, right? You're going to hear this in a family of companies. We say residents. And there's a couple comments I'm going to make here. Somebody said, listen to the words they say. That's the mindset they have about the people that live in their houses, right. They're calling them residents. It's a different world of how you treat people. And then somebody else said, they're residents when they're paying and they're tenants when they're not paying. And I just started cracking up. But anyways, it was a cautionary tale of, hey, make sure that your residents can actually afford it. Because if you start moving them out, you have to deal with, hey, now you're not getting your income. You're gonna have to turn it and you're having somebody new. So it's kind of that bal. But it's been interesting.

But it was interesting though, too, because my mom lives in Austin, Texas.

Yeah.

And she just had. She told me last month, well, my rent's going up next month. And I was just like, oh, a senior home in Austin, Texas.

Oh, how much?

And I was like, oh, okay. Love you. That's to be expected, especially in big towns.

Yes. Yeah, true. All right. The sixth point. Homeowners have more equity than they ever have before. So that's largely because of what we said at the very beginning of the podcast about where we came from in the Abundance of foreclosures, cautious buyers, hesitant lenders. And now being in an environment where we've got soaring prices, fierce competition. So we were in Texas not too long ago, maybe a couple months ago, and we were talking to some friends of ours that we haven't even seen in a really, really long time. And he was talking about like, seriously, the value of my house doubled like in the last year. It doubled. And we're like, no joke. I mean, and that's, you know, and I think he's Greater Austin area. Austin's just a hotbed anyway. So it's just impressive. And I would say nationally, everybody has more equity than they have ever had before, especially those who, you know, lasted through the 2008 crisis.

Oh, yeah, absolutely. And so I had mentioned that we were going to talk about a little bit of local stats. So Dayton, which is where we're located, we're actually just south of Dayton. It's Centerville, Ohio, but we're Dayton, Ohio and Montgomery county. So. So this area record shattering year in 2021, the number of home sales at the end of 2021 was four times higher than 2011 and April 2022, seeing a lot of stabilization. It's starting to cool off.

Yeah.

And slightly less sales than the year prior. But still the prices have not gone down. The prices are still going up.

Yes, yes, yes, yes. And I think it's over $100,000. So this is. Yeah, this is number eight. This is our last point because I was like, oh, let me say this because I remember researching it. I was like, oh, it's right there. It's number eight. So number eight is national sales prices. What does it look like? So the median sale prices on the national level rose 35%. And this is the point I was remembering is that the over $100,000 house saw the biggest rise. So there's this big proportion of, you know, under 100 and over 100. That 35% is in the greater. So people were upgrading. Right. They found all this equity. And over the last, however much time that this market has really continued to be kind of crazy, you're seeing them grab that equity and then move and prices are just continuing to go. They're starting to stabilize, I think pretty much everywhere. Certainly in Ohio they are. And I've talked to other people. It's stabilizing in many, many places at this point.

You can still get a three bedroom house in Dayton, Ohio for under $100,000.

You sure can.

For those of you out there in those crazy, you can buy four or five if you'd like. That's why. That's why we moved here.

Yes. Yeah, exactly right.

But we hope that you enjoyed this episode of just everything that's happened in the last 10 little plus years ago and just. Just so that we could walk down a little real estate memory lane.

That's right.

But we'd like to end all of our episodes with Invest Smart, Live Happy.

Bye, everybody.

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