What’s REALLY GOING ON With the HOUSING MARKET? (It's Crazy) | Episode 92

In 2021, more than 6 million homes sold in the United States. That was a 15 year record high. Well, the public got wind of that and suddenly in the first four months of 2022 here we've had a new gold rush. It's been a new dot com boom, a new bitcoin surge, a new NFT collectible grab, or it's like a limited edition sneaker drop. And it seems like it's impossible to attain that thing that you're trying to get at a decent price because the competition's bananas and the prices keep getting driven up. Well, that's what's happening with first time homebuyers and they're all running around acting like it's Black Friday, shopping at Walmart, breaking down the doors at 5 o' clock in the morning. But is it finally starting to change in the favor of the buyers? Let's find out. If you want to stay on top of the housing market, hit the like, smash that subscribe button, ding that notification bell. We're giving you all kinds of market updates every week on the how to buy a home YouTube. What is up? How to buy a homies. Good to have you here. I'm David Sidoni and yeah, I'll say it, I'm a first time buyer expert. I'll flex on that. I'm cool. I'm one of the few, if not one of the only experienced agent that has taken the time to get out here and give you guys all the information that you need to help you succeed. I've been through several market ups and downs and because of that, that's why I started. Today's episode was very important. One of the ones I went through was the biggest crash and rebound in real estate history. That was 2007 and 8. Going all the way into 9, 10, 11 grossness. Oh, it was bad news back then, but I'm here bringing my 16 years of experience to all you folks out there and mixed with my intense, burning, nerdy desire to study the market history and then regurgitate it all to you. Researching the trends, following the data and trying to make sense of the insanity that's happening out there right now. What I'm finding out is there's like three kinds of listeners out there for you. You're in three different categories right now. You're either new to the game and freaking out because you're hearing crazy stories and you're totally confused. You've been planning for a little while and you're getting ready, but now you're freaking out. Because you're hearing crazy stories and you're totally confused. Or you've got all your plans in place, you're ready to pull the trigger, you can't wait to make this happen. But yeah, you guessed it. You're freaking out because you're hearing crazy stories and now you're totally confused. Well, I wish I could unconfuse you all with one simple graph or chart or statistic. But a lot more goes into the housing market ups and downs and the supply and demand than just, you know, one little piece of data. So without the hype, without the fear mongering, without the drama, here comes a whole bunch of real estate data to help you guys decide what you need to do moving forward. I am a super real estate nerd. Yes. I am the coolest 52 year old, balding, gray hair man in the world right now. Slap that all together. And boy, he's just got one hunk of like smoldering hotness, right? And I've always been very excited about this real estate stuff. I'm like more interested in this than I am in my kids lives. Kidding, kidding. You should have seen everyone's face in here. Well, let's take a look at what's happening right now. So far we have complete data just for the first two months of 2022. And this is why I did this episode. I've got that data and I also have some boots on the ground intel from listeners and unicorns. And that's going to be for the next two months. For those of you calendar deficient, that would be March and April. So I've got the January February data. We're going to talk about March and April 2. Let's see if we can figure out where all this is going. 2022 started with a huge rush on homes. The stories were everywhere. Demand at an all time high. A large majority of homes getting the bidding wars and they were going well, you know, well over list price. I've got tons of stories. Listeners have tons of stories. Your friends and family probably have tons of stories. So how about some facts and data from the numbers peeps? The S and P Case Shiller Index that came out with the data in the first two months of 2022. Just got that. Now who the hell is S and P Case and Shiller Index? There's a nerds who gather all this data or data, I don't care how you say it. And they make the reports for people like me who live such fascinating lives. George, I don't know how to say this last name, I want to say Ratatouille, but it's just R A T I U. So. So George Vatui, the manager of the economic research for realtor.com, he said this. He looked at the Data and said, quote, Today's S& P Case Shiller Index highlights a housing market experiencing a renewed sense of urgency in February as buyers work through a small number of homes for sale in an effort to get ahead of the surging mortgage rates. The imbalance between strong demand and insufficient supply pushed prices 19.8% higher compared with one year ago, unquote. Now, one of the other stats that came out is a big stat that they use to summarize the overall housing market, and that's the new construction. And they look at both what they call housing starts, the ones that are getting ready to get built, and the sales. And it's kind of funny since resale homes are actually usually a majority of the market, not the new construction. But the economists, they love to use the new construction stats because it involves larger economic factors. Because you've got the companies build the homes, and those companies, a lot of them are publicly traded. So the stockholders are going to be able to take a look at those numbers. So they have to put them in big, fancy spreadsheets. It's also taking into account labor metrics and the macro data bundle all together. And then they stick it and show it to everybody. Well, the first thing to talk about is the median price. Now, the median price is the price right in the middle. It is not the average of homes sold. I mean, you know, why not? Why use the average like everyone else? You know, we have to do things in a weird and confusing way. Why? Because it's real estate. It does have a reason, though, that actually does make sense. The median is good because it prices it smack in the middle. Takes everyone and says, this is the middle. Now, it's not an average because they don't want to use an average. Because when you add them all up, you divide by the total number of homes. And, you know, if you do that, they have to take into account the ridonkulous uber mansions at the top of the list. If you put all those numbers in, it would totally skew the data. I mean, if Elon Musk built a $300 million home, the averages would change like crazy. So the median sales price of a new construction home sold during March 2022 was $4,336,700. That's up from February's revised Estimate, meaning in February they had an estimate that they thought it was going to be $421,600. And they revised it because when they saw how crazy it was getting, they bumped it up. But even the revision ended up being low. And instead of it being the 421600, when they revised it up, it still landed at 4:36,700 even they couldn't keep up. The experts had no idea how much things were going to shoot up in a month. Meanwhile, if you're old school traditionalist and, and you really want just the average sales price, the average sales price was 523,900. That was up from February's estimate, which once again was revised and it still surpassed it. So again they were surpassing the experts original guess and then surpassing their revised guess, which is $508,000. And it went up to $523,000 in just a few short weeks in 2022. That is a fast moving market. Speaking of Elon Musk and his $300 million house, I actually just heard the other night on TV on some talk show that he doesn't own a home.

In fact, I don't even own a home right now. I'm literally staying at friends places. I, if I travel to the Bay Area, which where most of Tesla engineering is, I stay in my, I basically rotate through friends spare bedrooms.

Elon Musk just stays with his friends. Isn't that the weirdest thing? So being be on the lookout for my new podcast, how to buy a Home. Unless you're a bazillionaire who just likes to crash on couches of his other bazillionaire friends. So the numbers are bat guano bonkers. In January and February, just two short months, we saw rapid increases. Dallas, that market jumped 2.9% in appreciation in January and February. Remember, the average full year's appreciation, that's the prices going up, that's only about 3.5%. So that's almost an entire year's worth of appreciation is just two months. And that is immediately following 2021, which that year had a 19.5% rise in prices in the 12 months before these bonkers two months. So for those of you out there are mathematically challenged, the average year sees prices go up 3.5%. Last year in 2021 prices went up 19.5%. That's an increase of 557% over the usual average. So so far in the beginning of 2022, we've still been going up from last year's 19.5%. So why are we just looking at the stats year by year and cutting them up like that? What does the, the calendar based on lunar orbits have to do with appreciation? I mean, I don't think the economy is based on, you know, the New Year's Eve parties. When you put it all together and you think about what's going on, it's nuts. In Only the first two months of 2022, Dallas went up in price 2.9%, Denver went up 3.1%, Los Angeles 3.2, Portland went up two and a half percent, San Francisco went up 3.7, Seattle went up 4.4 and San Diego, the finest city in the world, so they say, went up 4.4%. But that's just the last two months. If we take into account last year and we forget that lunar calendar, add it all together, add 19.5% to that and create yourself a 14 month calendar. And this means major metro areas have gone up 22 to 25% in 14 months. We're also not talking about what happened the eight years before that where the housing market went straight up without any drops. So this is a 10 year climb and it's eventually it has to subside. And many thought that we were just going to keep going up through all of 2022 and then just, you know, go up at a slower pace for the next couple years. But now that the lunacy of January and February 2022, the data's in. Plus we're going to combine some funky economic changes. Some crazy things have happened. I'm here to report something pretty darn interesting. While home prices are going up, here's an interesting juxtaposition. Stat. The national association of Realtors is reporting a decline in the existing home sales in March. Existing home sales, not the new homes, but there's a decline in the number of homes being sold. The report went on to say this is largely a result of, you guessed it, rising mortgage rates and inflation. This could be, could be the beginning of a return to some sense of normalcy. Wait, what, what, what's going on? Are we actually getting back to normal? Well, let's talk to some of the smarty pants. Danielle hall, chief economist@realtor.com said' the combo of high inflation and the Fed's efforts to tame it pushed mortgage rates higher and reined in housing demand. Even though the Fed only adjusted the target for short term rates by 25 basis points in March, shifting expectations for more hikes in the near future future. That caused mortgage rates to surge nearly 1%. That's about 91 basis points over that one month. And that was because the investors realized that Russia's invasion of the Ukraine would not derail the Fed's plans to raise short term rates. And of note, February home sales, that tally was revised higher and now shows growth from one year ago. But the March figures, the number of homes sold, it actually was down 12.6% from one year ago. Looking ahead, with mortgage rates and rents both climbing, this year's movers are staring down higher costs whether they choose to rent or buy. The median sales price of new homes continues to climb up 21.4% to $436,700. Now the builders, they're trying, they're trying to ramp up the entry level supply. That's homes priced under $300,000. But they're still lagging way behind last year's pace, meaning the homes are likely a viable choice for fewer first time homebuyers. Only one in seven new homes sold in that entry level price range in March compared with 3 in 10 that sold in that range one year ago, unquote. And Jerry Conter, the chairman of the national association of Home Builders, Nahab, he said this, quote, growing affordability challenges are slowing new home sales and taking a toll on the housing market. Mortgage rates jumped at nearly a full percentage point between the end of February, March. And builders continue to face escalating construction and development costs which are putting upward pressure on new home prices. On quote. So I get it. Look, lots of buyers, the jumps in prices and the mortgage rates, they translated into what only could be called sticker shock. So I get it big time. For median home prices financed with a 30 year loan, the monthly payment is $550 higher than it was just one year ago. And that, my friends, hey homies, that's a 46% jump which absolutely dwarfs the 19.5% increase in the housing prices, which also, by the way, you have to include the fact that we have an 8.5% raise in inflation. This is so many numbers. How many people out there just want to go, Edward scissors, hands on me and come at me and chop me into little pieces. I don't care. This stuff is good for you. It's like your vegetables. And look, the other thing that's going on with the market right now, it could be easy for sellers to sell, that is true. But a lot of them are hearing about the difficulty to buy and then they see this new math and they decide, you know, What? I'm just going to stay put. And then when that happens, the vicious cycle continues and we do not get the desperately needed inventory. So while prices shot up in January and February, the real estate markets experienced such a rush of changes over these months that the inflation going up to 8.5%, mortgage rates going up almost a point in just a few weeks that we are now starting to see things affect how many homes are being sold. So like I said in one of the other episodes, it's not going to crash, but we're seeing some cracks in the skyrocketing prices. So all this is going on at once. And at the same time, we have a strong labor market driving wages and inflation higher. We've got tight inventory, we've got supply chain disruptions, and we got a war in Ukraine and interest rates at an 11 year high. Some experts are skeptical about how much longer the growth that they'd originally forecast could continue because we're in an inflammatory environment right now. We have the rising mortgage rates and we have the inflation and there's other macroeconomic impacts. They're saying that as we move through the housing market, we're starting to see signs of, oh my gosh, I'm going to say it, cooling demand. I haven't said housing's cooling in so long. Don't get too excited though. Many buyers are deciding to take a step back and reevaluate their budgets and timelines. The slowing down and the moderation in transactions could mean the markets seem to be stepping back from the overheated environment that we had last year. Last year was nuts. That being said, keep this in mind. The beginning of a return to normalcy. The beginning. So what this means is on the insanity scale of 1 to 10, 10 being the craziest, most insane thing ever. Well, guess what, we were at a 10, so it's slowing down. But gang, we're still at a 9.95. So it's going to be a battle for the rest of the summer of 2022. So if you didn't get into Walmart at 5am on Friday and risk yourself getting trampled to death, you're well, what happens? Well, well then you don't get the big screen TV for 200 bucks, right? So the risk reward, you avoided death by stampede, but you also missed the limited supply of those gigantic savings. So now you might be able to get in the store and it's probably easier for you to get what you're looking for, but you're going to end up paying a higher price for it. Zillow's been keeping up with this. And they say that there are fast changes happening right now. And they downgraded their three month prediction. They do these three month predictions and they did March, April, May, and they downgraded it. I don't know what their actual terms are, but I say they downgraded it from psychotic to just looney tunes, reducing the previous estimate of a 5.9% appreciation. Because these months, March, April, May, they're like some of the hottest months and the prices go up. They thought in just those three months we were going to get 5.9% appreciation. They downgraded it to 5.5. It doesn't seem like a lot, but the fact that they stepped in and said, hang on, that's too much. And in March, they also changed their annual forecast. They did a forecast from March to March of the expected home value growth. They expected it to be 16.5%, but they downgraded it to 14.9%. But don't get too excited. It's still saying it's going to be going up 14.9%. And if that rings true, guess what? The buyers are still come out of the woodwork. The Zillow report said, quote. Driving the downwardly revised forecasts are affordability headwinds that have strengthened faster than expected, largely due to sharp increases in mortgage rates. Further risks to the outlook as well, inventory levels remain near record lows, but they have the potential to recover faster than anticipated, which could lower future price and sales volume projections, unquote. Despite the downward adjustments in its forecast, Zillow noted that such figures would still represent a incredibly competitive market for buyers. We're talking about home value growth at 14.9%. And if that happened, that would make it the highest ever recorded year over year gains prior to June 2021. And their downgraded forecast of all the homes we're going to sell an entire year, they originally were at like 6.1 or 6.2, something like that. They downgraded it to 6.09 million existing home sales for the next year. If that comes true, that's going to be the second highest total since 2006. I don't like speaking out of both sides of my mouth, but I do need to add this thought. If you've been waiting to find out what I really think is going on with the market, guess what? I don't know. No one's ever seen anything like this. But I am officially now saying the guarantees, the for sures they're not quite as for sure and guaranteed anymore. If you hear the data that I'm giving you and you tell yourself that you're going to be guaranteed 10 to 15% appreciation over the next couple of years, which Zillow and a lot of the economists that I've quoted you, they're telling you it's going to happen. I cannot back that thought wholeheartedly anymore. It could very well happen. This could keep going up through 2025 like we talked about in some previous episodes. That could happen. It could be. But there are so many brand new factors coming into play in just these last few months in 2022. The difference between my thoughts that I'm sharing with you and the trolls and the yellers and the doomsday people you see on social media and on the headlines on the news is they're using just the last two months or the last six months or sometimes maybe even 12 months in stats. But the key is I also study the long term history. This two years of fast follows a year last year that was way more at 19.5percent than anybody thought, but that comes on top of nine years of growth before that in both housing and the stock market. Nine years is an unprecedented long streak for both. And then you top that off with historical highs for both of them, the stock market and housing market in last year, the 10th year of this run up. And then we pile two months of craziness that we have the data for now in 2022. And now we get a practically straight up graph this year for home prices, mortgage rates and inflation. If you're seeing people like Zillow do downgrades now, I think that there's a very good chance that we could see more downgrades as we go forward. I do not think it will crash. It will crack and it will slow down from bonkers bananas to just crazy. That's much more likely. Still can't be a crash because the demand is so high, but most importantly the inventory is so low you could drop a million new homes tomorrow and we'd still have buyers for them. This is me telling you with the oddness of recent events, there is a potential for changes of the earlier forecasts and predictions that you have heard as your first time buyer advocate. My advice is don't expect the four year forecasts from 2022 to 2025 that I gave in episode 68. It might happen and if it does, awesome. That's cool, but don't expect it. You have to build a plan not to have that as an expectation, but as it's just a bonus if it happened. Remember that was a forecast from the leading economists before the crazy two months of 2022 happened. This could and should affect your buying decision. Now pile on the gains from last year and add in what happened so far this year and then tack on the nine years of gains before that and your plans they should be altering. If you're thinking about buying a home and you want to move in two years and move up, you never know what's going to happen because things happen so quick. Right now you might want to be looking at a new 2022 plan with some compromises and just be ready to accept the timing that the universe is throwing thrown you into. This is where you are. So don't count on a 25% gains over the next two or three years so that you can move up now. It still could happen, but it's definitely not smart to think that it's guaranteed. But it is still better than renting for most of you out there. I don't know your individual situation, but it's probably still better than renting, even if you're not going to catch all the appreciation that we've had over the last 10 years. And why should you end up doing this and feel like, oh, why do I have to compromise? Sedoni because you play the hand you're dealt. Life's not fair. And rents are going to keep going up and that's not fair. And the math is going to keep working against you and that's not fair. But guess what? That's what it is. And the home you looked at last year on Zillow guarantee you it's more expensive today. Now that's a fact. That's not an opinion, that's a fact. And it's no fun to hear these facts when I put them together. Hey, this is when the universe got you here. And hey, everything's getting more expensive. That's what happened. You want to fill up your car with gas this week? Guess What? It's probably 30 to 40% more than it was three months ago. That's just a fact. So how do you handle this? Well, obvious statement coming. Think outside the box. Oh, who wants to punch me because I said that? All right, I'm going to give you some out of the box tips. Maybe you're a newlywed, maybe you're a couple and you're looking for a home with room for growing children that you don't even have yet. Okay, well then you don't have to start Thinking about looking into school district because your children aren't going to be ready to do that for, I don't know, maybe a decade or maybe you don't need a yard now instead of getting fixated on the long term potential, especially if you live in an expensive area for you, if you want to live and stay in that expensive area and that's important to you, cool. Then maybe you don't start with a forever home. Maybe you compromise on that and maybe you can stay in what we would call a starter home for a little longer than two or three years. Forever homes are an awesome concept, but for the next few years it's time to swallow the math and maybe put that on the back burner. Sucks to hear that. Sorry to be the bearer of bad news. I'm not. I'm the bearer of real news. I am excited to be able to do this at this point in my life, to be able to share this education because this is something I'm very passionate about. But this is the reality. Tough love, gang. Tough love. We all just lived through some pretty drastic life changing times, right? Past couple of years have been super fun, huh? And you've shown that you can adapt, you can handle whatever the reality of the now is. So guess what? You're buying a house. Adapt again. Don't expect your purchase to be everything that you dreamed of. It's the home you can afford today. It's a stable payment versus a rising rent. And you can save up when you're in this maybe starter home, not forever home because hopefully you're going to be making more money with raises. And you know, I don't know, maybe you have a side hustle selling nfts of me saying you can do this. Okay, next tip. Remember the wish in Wish list. It's a wish. Renegotiate all those things that you said were non negotiable. This could be everything from price to monthly budget to location to requirements that you had that maybe now aren't necessarily requirements to maybe even creative remodeling or knocking down walls. Now again, don't hate me for this one. Maybe it's time to start looking at those fixer uppers that you just scroll through like, you know, some bad date on Tinder that you don't want to look at. A fixer upper. It could be something that will open more possibilities for you to get the necessities that you really want. I know I'm crushing you because I'm killing your HGTV dreams, but hey, trust me, I feel you on that? I am seriously, like, I'm as handy as a penguin. That's me when it comes to home renovation. So I'm with you. When someone says fixer upper, I clench up a little bit. There are some ways to think about this in a different way. Not just be looking for that turnkey. Perfect. HGTV home. Lots of sellers. Right now they're deciding that they're not going to do anything to their home. So maybe you're not going to find the homes that are completely fixed up because they don't have to, you know, they don't have to change an outdated place because the market's so hot. They know it's going to sell. So if you do this, if you open your mind, if you call that that uncle you haven't talked to since your weird sister in law's wedding a long time ago, but he's a contractor, maybe it's time to reach out to some of those people. Can open up your opportunities. The p word for 2022 is potential. Don't forget about the fact that you can see things with potential and there are ways to help you out there if it's something like hauling away trash or doing some silly jobs. TaskRabbit. Awesome. For that, you've also got Angie's List for contractors. And your unicorn team is going to have a dope list of contractors that are trusted with them and their vendors. Not just contractors, but electricians, roof people, pool people, guys that have worked with their clients and that they have reviews and a track record on. Okay, Another thought for making it work. As prices go up and mortgage rates go up, a lot of people really don't want to hear this, but I'm going to throw it out there because I've had some people do it and it works out for them. I want a house. I want a house. I want a house. I want a house. Cool. Your best thing you can afford for all the other things that you want is actually a condo or a townhome. And a lot of people go, dude, if I'm there, I'm going to freak out. I'm going to want to be gone in like two years. Well, a lot of times people say that because they think condos are smaller. Well, guess what, you're not losing the inside of the home. You're actually kind of losing the outside of the home, the inside of the homes. Lots of the newer condos especially tend to be more spacious, more open concept, more great room, floor plan and just bigger square footage than the homes for the same price in the area. And then if you get the right condo complex, you can get all that other stuff that you're missing with your driveway and your yard and your backyard. You might be able to find some of them that have green areas and green belts. Those can be de facto yards for you. You also might get some sweet pool setups. I've seen some condos with the pool setup that looks like it's something right out of a Vegas hotel. There are rec areas with barbecues and and fire pits. They also have decks and community rooms and gyms and play spaces and tot lots. My favorite real estate word, and lots of them. They actually, you're just giving up a driveway, but you're getting more room. You know where you actually live inside the house. You can also start going to look at alternative neighborhoods that you hadn't thought about. There's tons of info on the interwebs. One of my early episodes I interviewed or I talked to one of my pregnant buyers who had nothing to just a bunch of time at home on bed rest and she found all kinds of cool things on the Internet. But keep in mind, neighborhoods are changing all the time. So you can go in and research and find out what's going on. Another great way to research. Get in your car, drive around, get on your bike, take a ride. Drive a different way to work every day. Try something different. Look at neighborhoods that are adjacent to the neighborhoods that you want. So these are some tips for the dirtiest C word in the world. Compromise. Well, at least that's what my buyers tell me. They tell me that's the worst C word ever because it's already May 2022 and things have gone nuts. So unless you came into some new cash recently and any of those plans that you had a few weeks ago or a few months ago, unless you got a big pile of money, things are gonna have to change a little bit. The good news is you can make things easier by doing what you're already doing right now. Keep listening. I'll keep dropping truth bombs. I'll keep letting you know exactly what's going on. Stay on top of things. Remember, it's just going from 10 to 9.95. I'm not saying everything's slowing down immediately, but you are going to understand that you're going to be paying more. And if that's the truth, you need to believe in the numbers. Go all the way way back to the seven part series on how to financially prepare to buy a home. It's great because you Listen to that. At different times, you get different things stick in your head because you're doing that and because you're researching, because I'm in your ear holes right now. The you're already steps ahead of all the buyers you're going to be competing with. You're in good company with all my how to Buy homies seeking knowledge and succeeding as I sit right here right now, it's May, and in the first four months, how to Buy Home listeners, just in the first four months of this year, in the toughest buyer's market in history, they've already matched our entire numbers from last year for the number of people that had a unicorn hand them the keys. It's incredible. In the toughest market in history, we've already had our entire last year's numbers in just four months. So know that you're on the right path. Know that you're. Again, it sounds like a giant flex, but know that you're getting information from the right source. I stand by what I'm trying to tell you because I'm giving you everything. Who knows, it could keep going up. It looks like it's going to be getting easier for you. You. So I know that it's a little bit of a paradox, a catch 22. I'm telling you, hey, it's getting better, but it's still going to cost more. So I'm sorry for being such a bummer from the very beginning when I started the podcast, that I was always going to keep it real and you can trust me to bring you the real real on real estate. And once you have that information, you digest it, you take it correctly, you can make this happen. If you appreciate this information you're getting right now, as much as I appreciate all of you for listening and writing in and all that stuff, please, please drop me a review if you haven't already on Apple or Spotify so we can get the word out to everybody. Follow me at how to Buy a home on TikTok. Come on, gang, let's get the TikTok going and hit me up in the comments. I haven't seen I'm a homie in my comments at how to Buy a Home on TikTok. Come on, homies, come out and say hi. Check out the YouTube page for the how to Buy a Home podcast. That's the YouTube. And find David Sidoni on Instagram to stay in the game. Remember, 2023, there are three Ps. Patience, Persistence, and perseverance. And then there's the C word, compromise. You're going to need to do some of that compromise so that you can see the fourth P word of 2022 potential. Believe in the numbers. Accept that this is the reality of the new market. Hey, you can do this. And it's not the end of the show. I'm just saying. I know you can do this. Because two years ago, you didn't think you could give up hanging out with your friends every night and staying stuck in your apartment watching Tiger King, refusing to wear pants. But guess what? You did that. And now, okay, this is the end. You can do this.