394: Local Real Estate Market Data Report, Altos Research with Mike Simonsen

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It is my pleasure to have Mike as our guest today. He is a real estate analytics pioneer. He's the founder of Altos Research. I've been following their work for a long time. They do a great job. He also has a background in software, in data, has an interesting story about how he got into this business because he just found that people knew so little about market data in real estate. And you know, that's one of the things I've always said for years is that this is a very fragmented market, a fragmented business. All real estate is local. Everyone's got their own little different ways of doing things. And one of the reasons that there's a lot of opportunity for small investors is because it is fragmented. It's hard for institutions, institutional players to play in this world, although they've been doing that more and more, as we know. And I always say embrace the fragmentation, but it is getting less fragmented with companies like Mike's and other players just helping us sort of understand the market better. And without further ado, Mike, you're coming to us from the Bay Area. Welcome. It's good to have you.

Thanks Jason. Nice to be here.

Yeah, it's really good to have you because I've been following your work for a long time and you know, I guess the million dollar, well, the trillion dollar question actually is where's the market going, Mike? Are we overvalued, on the verge of a crash or is this just going to keep on going for the next three to five years?

So what we do at Altos Research is we track every home for sale in the country every week and we check the changes in prices and the new properties that are coming on. And there's, it's just rich with signal and by tracking that, it allows us to see things immediately. And we track through Friday, we published on Monday. And where traditional real estate data is like months old by the time it reaches three months. Three months old, right. Or more. And so what I like to do is what I can say right now is in the data Right now, we can see things like organic levels of demand. We can see where supply is. We can see how the first half of 2022 is setting up very clearly. And in the data right now, all signs are showing low supply and high demand already in there. So that means where's the market going? Well, you can see the main part of 2022. The main buying season of 2022 is already set up to be super strong. It may not be as crazy as this year, but all the sides are strong.

Mike, before you go on, I just want to talk about where your data is coming from. Okay. Because I think that's really important. What you said at the beginning was that you track every home for sale. So this is not the type of data that some of the other surveys use that are tracking, you know, homes through the years. Right. And really, you got to peel this onion back a lot, folks. I mean, there's a lot here. So let me just give you some examples, right? Depending on what index you're looking at, you know, Case Shiller, which I think is ridiculously overrated because it's 20 markets, and three quarters of those markets are what we call cyclical markets, the high flying markets. And our investors like to invest in these boring linear markets that have really good cash flow and more stable prices. So whatever. But, you know, are you tracking when, you know, one home sells and then the same home sells again? Is that showing you what the appreciation is? Or you're just tracking like every sale and lumping them all together. And you also don't know if that home that resold was remodeled on a resale, which it commonly is. Right. So it's just a lot of stuff to know here. A lot of stuff is your data, Mike, MLS data. Is it just from all the MLS feeds?

So what we do is. So what happens is when a home gets listed on the mls, it gets like blasted all over the place. And we just track. We have a database of every home in the country and we say, oh, that one's for sale right now at this price, and that one's for sale at this price. And so what's interesting is by watching the active market like that, you see a house gets listed today, it gets. Maybe it gets an offer in December, it, the sale closes in January, and then you might hear about that in February or maybe March or March. Yeah. And so but I can tell you right now what's going on. And any given house may be over or underpriced, but in aggregate, the sellers and the listing agents know exactly where to price the homes. And so in aggregate, the, the list to the sale price is very close. So in the super booming hot markets, the sales price may be, let's say it's 105% to list. In the cold markets, it's, you know, cold times, it's like 95%.

So, meaning that the list price is, you know, a million dollars and the house sells for 950.

Right? That's exactly right. Okay. And so some house may sell for 800 and one might sell for a million two, but in aggregate, they're very close. So by looking at the asking prices now, you know exactly where the market is because the, you know, the sellers in general know exactly where they want to price their house. And some are overpriced, and some are overpriced. But. And so that's just the price that we can track. But we can also track the changes in price. So the, you know, in this active market data, we can see that 35% of homes have taken a price cut. And guess what? That's normal. When the market cools, it's maybe 45% or 50% are taking a cut. When it's hot, it's 20% taking a cut. And so, like, watching percentage of homes with price reductions is a powerful leading indicator of where transactions are going to be in the future. It's like, if I want to look at a market like Jacksonville, Florida, and I can say, you know, what's the demand? Like, there is demand cooling off. I can watch, for example, price reductions and see if it's cooler than normal or if it's cooling off or if it's accelerating. And so that's why. And these are for houses that haven't even sold yet. And what happens is if there's no demand, the sellers in general reduce their price a little bit. And so that's a signal in all this active data. So that's what Altos does uniquely. That's why we can tell you right now what's going on. And in data that if you're looking at the traditional approaches is say, what did it sell at and what did it sell at before? And that that traditional approach is useful for maybe evaluation, but it's super lagging. It's a smaller sample size. You know, four houses sold, but there's 40 on the market. So, like, there's what, what we do uniquely in the world is we watch this active market. And so therefore we can see, like, I can see exactly where the world's going.

Okay, Mike, this is Great. So why don't you share your screen and let's take people through this so they really see it and understand it. Now also, if you're listening to audio only on the podcast, of course this is on the YouTube channel, so check it out there. Please try and explain the graphs in case someone's not looking at them. Okay. For sure. And I'll try and help you with that, too. Okay.

Okay, so. So Altos tracks every home for sale in the country. And this is a chart here of home prices. And while we're looking at the active listing, home prices. So as of this week, the median price in the US is 380,0004.59. And that is up 10% year over year.

And that's a list price.

That's list price. And what happens is it is highly correlated to where the sales price is going to be in several months. And so it's. It's like exactly the view I want to see. I don't want to see the sales price because that's what happened years ago on a given property. You want to know the sales price when you want to understand the market. I want to look, if I walk into the market right now, this is what the market looks like.

So there's a difference between understanding the market and understanding a specific property.

Yes.

Yeah, right.

That's right. So we'll look at some reports, some local market reports, and the way to read those is if I'm an investor and I walk into Jacksonville, Florida, right now, I will see these hundred homes, and they're priced here. It's not what sold last month or three months ago or repeat. It's like, this is what the market looks like right now. And that's what we're doing here. So one of the advantages you get is that you get all these leading indicators. One of the stats that we like to track is the price of the new listings. So these are the properties that got listed this week, Each week. And what happens is because the sellers and the listing agents, they know how many home, like they know how many multiple offers were last week. They know how many people are walking through the open homes. They know where the demand level is. It's what the economists call wisdom of the crowds.

Right. And they're the crowd they're going to price that in. Exactly. In other words, look at, I used to be in traditional real estate. I did that for 19 years and then sold that company to Coldwell Banker. Right. And understanding that, that it's always a fight between the listing agent and the Seller. Right. The listing agent wants to get a well priced property that's going to sell in a reasonably quick time. The seller wants to get the highest price ever. And you know, they're always way up in fantasy land so you got to get them to be a little realistic. But those agents are more likely to be more liberal in their pricing and let the sellers take more control if they know that everything's been getting multiple offers that every time they hold an open house a zillion people come through. So, so that price information has, there's a lot of signaling in there.

So that's right.

Signals.

Yeah, yeah. And so what you get to see, so in, in the chart here, there's a, there's two lines. A light colored line is the price of the new listings. And what you can see is at the inflection points it, it jumps faster because these are the new listings and like the beginning of this year, if you remember, in January.

By the way, Mike, can you point your mouse to your.

So oops, here we go. Is. Do you have my mouse pointer here?

I can see it, yes.

Okay, so this is the, each low point is January and this January we had super abnormally, seasonally strong demand. And you can see that the, the new listings price jumps very quickly, faster than the overall, about a month before the overall market. So in January and February, the overall market turns in February to March and then the sales, the traditional data is turning in March and you're seeing that in April. And so this is why the fastest thing to see here is the early leading indicator is this price of the new listings. That's where the data is getting, where the crowd is getting first. So if you wanted to, for example, test your hypothesis, you say, I, I think rates are rising and as rates are rising, I think consumers are going to, they're going to. Demand is going to back off. So what you could do is you can watch the price of the new listings and you can see for example, as, as sellers, as listing agents say, wow, there was no offers on that house last week and I've got another one, I'm going to price it at a little discount. It shows up here in the price of the new listings very quickly. So what we can see right now is that the price of the new listings has stayed elevated this fall because demand has stayed elevated this fall. And that's also why we can see that the newly listed properties are staying priced aggressively now so that their transactions that happen in December and January, we already can see that their prices are going to be elevated. If, if they were taking discounts now, we could know that January, that transactions that happen in the future are going to be, they're going to be at a discount. So we can already see it in the data right here.

Okay, so what we can see in the data is that the market looks like it's going to remain very much a seller's market, very much a strong market. Right?

That's right.

Okay.

In the data. And we can see that already and this and the active market data really is the six month window and there's some of the signals that might be 12 months window and, but, but then beyond that, then you have all kinds of other economic situations that you have to pay attention to. Like does do interest rates climb or you know, does a recession hit? You know, those, those that, that aren't built into this data yet.

And by the way, your data includes, it's an MLS feed, so it doesn't necessarily include new homes from builders.

Right, that's, that's a good, that's exactly right. So in general, the new construction will be outside of our data. The stuff that side of our data are things that aren't publicly known. So we're actually not MLS members anywhere. It's all our own analysis, is all our own data. But it is like the properties that get listed. But if you, if you have to go to the builder to get the price of a property that's not yet built, that's going to be outside our data set.

So that might be an issue. In an area where you've got a massive amount of new homes, you would know a little less. And the reason the builder data is probably not going to help you anyway is because every builder price is pretty much a big lie. You can't actually buy a house at that price. It's like, you know, it's not even a loss leader like they do in the auto business. When you want to buy a car, they don't even have that house at that $300,000 price that they say they have it. You know, by the time you pick a lot and then you put in any options that anybody would want, it's another hundred grand.

Right? That's exactly right. The other thing though that we can observe over time is that in those new construction markets, the price of the existing properties in aggregate moves very tightly with the price of the new property. So you have housing demand and people are shopping for existing stuff and they're shopping for new stuff. And if they're not shopping, everybody's taking a Discount. So you can use them as a proxy. You can use the demand indicators in the ALTOS data to understand what's happening with new construction, too. And a lot of homebuilders are our customers.

Yep.

We can move on to inventory. This is really the big story of the last few years.

Yeah.

Inventory over the last decade, at this time of year, normal levels of inventory, there'd be over a million single family homes on the market right now. And we currently have 384,000 homes.

So basically, Mike, we have about one third of the typical inventory. Now, listeners and viewers, I want you to just get the impact of that. Right. Think about if you walked into the grocery store tomorrow and one third of all the shelf space was empty, or no, sorry, one third was full and 2/3 were empty. That's the market we're in now where we only have one third of the typical inventory. It's truly. Yeah, it's astounding.

And Jason, you know what's interesting is it's actually a testament to the success of your audience. What's happening and this. So we have a chart here of seven years of inventory. And if each year peaks a little bit lower than the previous year, the reason that is is because as investors, and most of it is individuals with one to four properties, a lot of times it's, I'm buying my next home and I'm keeping the first one for investment. And I do that because rates are so low, I can afford two mortgages. But each year we're taking, we've been taking about 10% or so out of the resale stock and turning it into rental stock. And it's been happening for a decade. As we came out of the last crisis, rates dropped super low. And it was a, it's been a really good time to buy and own single family homes.

Yeah. So. So the investor market has expanded dramatically. Of course, the institutions are playing in a very big way now. But in the, compared to the overall market, though, for buy and hold single family rental homes, they're still not that big a deal.

They're still like 5% of the market.

Yeah. But they're getting, they're getting bigger. Okay. So, you know, it's something to watch for sure. But that's more than ever before. So in other words, a lot of these properties are being taken out of service to buy and hold investors, and that's also limiting the inventory. Now, Mike, I want to, you know, speaking of that, before I forget, I want to throw a prediction. Okay. That I've been making for About a year and a half now. Tell me if you think this is true. I think that the low interest rates we've had are actually going to lead to a further housing shortage, because three years from now, five years from now, let's assume interest rates are probably going to be higher. I think that's a pretty safe bet given how low they are now. They don't have anywhere to go but up. You know, people are not going to want to let those properties go with those cheap mortgages. They're just going to want to keep them. So I think this bodes well for the home improvement business and the remodel business and the add an extra room business, you know, add on to your house business, because people are going to be more likely to stay put. Or like you said, they're going to keep that existing home that they're occupying now as a rental because that cheap mortgage is going to be just impossible to duplicate.

It's going to be cheap forever. So I 100% agree, and I've been talking about this same phenomenon, and you can see cheap rates that have been getting cheaper in this inventory chart each year. For example, the one time in the last six, eight years that rates rose was in 2018 from like April to December of 2018. And what happened was you can see that the beginning January of 2019 started with slightly more inventory than the year before. It's the only year in the last decade that that's been true. And that's because for that eight months, rates rose and it was a little more expensive to own both properties to invest. And so a little bit of inventory built. And then this year in the last 18 months, rates tanked and it was a really good time to have the second property to own the investment property. And so people went in droves during the pandemic. And so I in our. We don't see any signal except if rates climb, we can expect a little bit of new inventory. If rates climb and stay persistently higher for several years, maybe we get closer to back to the, the old way.

But everybody, the interesting thing is about that is the inventory that will be the new inventory would be new construction from builders that don't turn those into build for rent. Right. But also, you know, again, you have that problem of people not wanting to give up these mortgages. So people in financial hardship. Yeah, they'll have to give them up. People that just don't want to be an investor, you know, they'll give them up, but there's going to be a big incentive to hold on to your house.

There are.

And that's why I think these low interest rates are so toxic and dysfunctional to the overall economy. It's kind of like this. I mean, look, you live in the Bay Area, right? So you understand rent control. Okay. And one of our team members lives in San Francisco and he and his wife rented this place, a Victorian, I think, in 1996. They're now renting a place that is worth well over $2 million for about, I think, 2,700amonth or something. Okay. They're just not moving. Like, these people are just never going to move. They cannot duplicate that deal anywhere else. So what that does, though, is is it makes the market dysfunctional and stagnant, you know, because there's no sort of clearing. Right. And repricing of stuff. It's just very unusual. And I think that's part of this interest rate problem.

I think that's exactly what. And we can see it in the inventory. We can see the inventory decline as rates have declined. It's been more and more common. One of the other things, Jason, that'll happen is as rates climb, let's say rates, mortgage rates, climb to 5%. Now, one of the phenomenon of investors has been if rates are 2.8 and I buy my second home, it's really a good deal to keep my first one. If rates are 5 and I buy my new home, I maybe can't make two payments. So even though I had a really good deal on the first one, I might give it up to make my new 5% payment. So you'll get a little bit of there, but you will. Yeah, but just a little bit. Right. Americans have a real, really good deal on. On their mortgage. It's also why in California, you may, if you're not from California, may not realize this, but California, because of Prop 13, your property taxes never go up.

Yeah.

So that's like a massive rent control for the whole state of homeowners. And as a result, California per capita has the lowest available inventory per capita and therefore the highest price. And it gets. It's a direct. And it's. It is it.

Prop 13 started in 1978. Howard Jarvis did that. And we'll see if it can last because they're already attacking that, as I predicted they would, and they did to some extent just last year or the year before. But again, I think that's going to be progressively. I posit that if California never had Prop 13, the prices would have never risen the way they did in California. Prop 13 helped buoy the California market for decades.

For decades. Yeah. It's nuts because you think about how beneficial it is to me personally, but to my kids, they're screwed because they can't buy. And it's funny because that's what's tricky. You have to vote to get rid of this massive tax break because it just destroys the market for. For anybody who wants to buy in the future. It's really a tricky space.

A lot of tricky, dysfunctional stuff, for sure. Okay, so we know that inventory is only about one third of. Of what we consider normal, right?

Yep.

So we're missing two thirds of the inventory in the market. But how high can that push prices? It's so interesting because we don't know what the upper limit is. Nobody does. Right. You know, is it going to be that Midwestern markets or Southeastern markets that are inexpensive now are going to someday have the kind of prices that, you know, Hong Kong does? Right. Or Singapore or London or Paris? You know, I mean, how bad can it get in terms of the prices?

Yeah, that's a good question. I don't know where that is. I do know that, you know, you can look at affordability in terms of the payments that people make. And the payments that people make, you know, are. Are more a function of interest rates, mortgage rates, than they are of the price itself.

And they are low.

And they are low.

You adjust payments for interest and inflation. Real estate is actually quite cheap in a lot of places.

Yes. Yeah, exactly. And so I don't have any ability to predict interest rates. I say, you know, I bought my first house in 1996, and I locked in my rate at eight and a quarter because I was afraid rates were going to go up. I bought my next house in 2001, and I locked my rate in for 30 years at 6% because I thought rates were going to go up. And I keep locking it in, and I like. I don't know where they're going to go. It feels like they would go up, but. But who knows? You know, that's interesting. But, you know, the other side of that is the demand coin. And, you know, I look at the millennials, who are the biggest population group ever.

Yeah.

80 million hitting their peak earning and buying years. And that's got five years of growth to happen. So we're in this low inventory, low supply, high demand for five years at least. And then that question is, what are the other things? Like, do mortgage rates climb? Does that tamper? Do we hit some kind of big recession? Does that tamper Demand, all of those variables have yet to be seen.

Yeah. And so just to add on to your comment, the oldest millennials today are about 40. Okay? Millennials aren't so young anymore, folks. Okay? They're about 40. And they will hit their peak earning and spending years in about six years. So that. That's the leading edge of the millennial generation right there. And after that, I mean, if we don't create more supply, we have problems. The real estate market really does have a serious imbalance, doesn't it?

It sure feels like it does. There's. There's some good signs in construction that we've got some new construction coming to. It feels like we're finally not under building, and we'll end up. See what. Where that takes us in the future.

Okay, what else do you want to show us? More charts?

Yeah, we can do more charts. So I mentioned price reductions. So a lot of times when I'm talking to a broad audience like yours, there's at least a group of folks who are waiting to invest till the crash comes, right? And so one of the leading indicators we can see is the percentage of homes on the market taking a price reduction. In general, nationally, you can think about that as a rule of thumb is 35%. So 35% are. These are the sellers who want too much, or sometimes it's strategic, sometimes it's accidental. But they overprice may take a cut before they sell, about a third as the market heats up, then it's maybe 25%. And so you can see each year this range where the market trends. And as. As the year starts, price reductions are low transactions happening quickly. As you get closer to the fall, people start cutting their price to move the home. You can see the highest point in here as it was at the end of 2018. That's when mortgage rates were rising. And all of a sudden, some people were caught by surprise, and so they cut prices. So sellers were caught, like, demand weakened a little bit. And you can see it in price reductions. 2018, 37% with price reductions. The year before, it was only 33%. So you could see where that happens. So if you have a hypothesis that demand's about to crater, and I think if demand craters, then I'm going to swoop in with my cash. One of the leading indicators you can watch are price reductions, and you can watch demand cratering. So. Or in. And last year, we had this craziness where the cycle never happened, because in the fall last year, there was way more demand than was expected, right? And so fewer people had to cut prices. Then this spring, we had the craziness. And so by, by April 30 or mid May, only 15% of the homes had taken. Needed to take price reductions. Normally it's 35, only 15%, only the really wackiest ones that were.

And is that, is that like per week or what? What is that?

So it is. Of the homes on the market now, 30% of them, as of right now are 28% have taken a price reduction sometime in the last 90 days. So have taken a price cut. So it's not like 30% are cutting prices right now. How many of these were overpriced and taken a cut?

Okay, I got it. So just to, just to sum that up for the people who aren't looking at the chart, right, so back in 2015, kind of normal, ish market, 34%. The following year, about 34%, then 33%, about the same, right?

Yep.

And then during that slowdown part, 2018, rates went up and we saw price reductions spike up to 37%.

Right.

Okay, so that's, that's a difference. Now, coming out of the pandemic or the lockdowns, at least we saw price reductions go down to like 26%. So they're way lower. They're about 10 points lower than the prior 36%. But then at the peak of the market frenzy, they were down to only 15.8%, reducing their price. Now getting back toward the normal direction, we're 27%, but still much lower than usual.

Much lower than usual. And if you're in the market right now, you know that that's true, right? That you know that there's still lots of. You know that if you're overpriced now, you're more likely to have fewer bidders than if you did it in April. Like, you can see that. You can feel it. This number is also very local. So I encourage people to. You can go to altosresearch.com and grab reports and look at local markets. So, for example, Phoenix typically has a higher. Is like 45% at its peak because there's more investor activity, there's more outsiders, there's greater inventory per capita, but it still has the same cycle. So when the bubble burst in 2006, 7, 8, you could watch this number climb to 40%, 45, 50%. Half the stock has taken a price cut because there's no organic levels of demand out there. And when you see that, then you go, okay, now that, like, at that Point there's, you know, there's buyer opportunity.

Yeah. So I'll just give you an anecdotal story about that. I'm doing another 10:31 exchange. I had my identification deadline on Monday. That was two days ago. And I literally sent in the form at about 11pm Which I had one hour left. And for 45 days before that, I was making offers, making offers, making offers, offers, everything. I just got beat out on every offer. I couldn't believe it. I finally managed to get two houses under contract. And I was so relieved that they didn't make me pay above full list price. I mean, as if I thought that was a good deal. They made me remove many contingencies or shorten them dramatically. Appraisal, inspection, financing, you know, a 50% down buyer, huge earnest money deposit, still no clout. It's just they don't care. Yeah.

Right. And that's though, slightly better than if you were buying in April of this year.

Yeah, right. Right.

And so. And you can see it in the price reductions data. Right. You could see it in this chart right here. What it says right now is that we're still far hotter market than, quote, normal. Back off the. It says, it shows us that we're back off the frenzy peak. But it also shows us that we, if you notice, we're at the far right end of this chart here. We're ticking down just like we would at this time of year. Which means if you had a hypothesis, for example, that you thought people coming out of forbearance were going to flood the market with foreclosures, not happening. And you could see it not happening. Right. Because if they were there, you, like, people would be. They'd have to cut prices to keep up with them. So it says all of those things. It shows us how we're set up for a strong first half of 2022. Because these are homes that haven't sold yet.

That's true. So inventory low and price reductions not very high.

Yeah, low for this time of year.

Right. And do you track. Well, you don't have any way to track multiple offers on a property. Do you track homes that sell above list price? Well, you wouldn't know that till they close. Right, right.

That's exactly right. So we don't, we don't track things like homes above list price. But here's what you can do is you can see it in this data, right. You can see the same phenomenon happening back in May when it's 15% with price reductions. You know that that's also the exact peak of multiple overbid offers. So they're just tightly correlated. That's another way to look at that. But you can see it here before the house closes. So you can see it earlier in this data.

Right? Very good. Okay, give us one more and then let's go to some local data, Mike.

Okay, so let's look at days on market. So days on market. This is looking at the active market. You know, what we know right now is normally, you can see, Normally might be 11 or 12 weeks this time of year. And you can see a normal seasonal curve. It's later, it takes longer later through just through the holidays than the, than the January. The first quarter comes out, you get new inventory and days on market declines. Last year was nuts. You know, it, it dropped in the fall and stayed low super late. And that was showing us how we were set up for a strong first quarter this year. We had the peak of our Frenzy was only 21 days on market for the whole country.

Wow. Remember something, what Mike said, this is every house for sale in America. The average on market at the peak market Frenzy was only 21 days on market. Right now it's 42 days. But a normal market is what, 77 to 84 days.

That's right. So normal. That's right, normal. So now you're three months, you're four months in that range would be normal for this time of year. Right. You're like now it's, it's November and you got the holidays and then it goes even up higher because people don't buy stuff over, over Christmas. And you know, and then it finally resets in January. So what this is telling us again is this number is not climbing super fast. So we know that demand's not going away. We know that it's staying unseasonably strong. We know that a lot of in the super bullish markets, a lot of the junk clears out. And so the junk that sits around for a long time is all of a sudden not sitting around. So we can see all of those things that happen. It's one of the other sort of bullish leading indicators for 20, 22.

Yeah. Wow. Yeah, this market is tight for sure. Mike, you were kind enough to share some of your local market data, especially for markets that our investors are buying in. Let's look into that. Remember folks, all real estate is local. Good to look at a national overview because you just get a sense of what's happening. But all real estate is local. So we are looking at the Altos website now.

Yeah. And so you can go to the Altos website and you can get local data. You can run a report and get local data. And we pulled up a few where your, you know, your investors are working in the Southeast. Like I'm not. I live in San Francisco. I don't know anything about Ocala, Florida, but let's look and see what we can see immediately about Ocala, Florida. First thing to know when you look at Alto's reports is we have this market action index. It is at a glance answer, how's the market? It is. It uses supply versus demand. It uses a bunch of uses. We know exactly what the inventory levels are and where it is to normal. And we know demand. We have a bunch of indicators of demand. So this thermometer, this speedometer, when it goes up, that's a hotter market. So right now that's a 30 on this scale is balanced, like a balanced buyer, sellers. And it's a seller's market. Obviously right now it's 64 out of 100 out of 100. And we could look and I'm sure you know, earlier in May it was, it was even higher. Yeah, we can look at. And so each of the data points here, price, price of new listings that we talked about, price was. These are all what if you walk into the market right now, these are the homes. This is.

Okay. So compared to what we were just talking about right Here in Ocala, Florida, 30% of the listings have reduced their price and 6% have increased their price.

Increase their price. So those are flippers.

You know, Mike, when it, when it doesn't sell, you just raise the price.

Exactly, exactly. But you know, that's what's interesting is you can tell that Ocala is a, is an investor market because there are 6% really high. Right. Those are fix and flips, those kind of things that come in there. But let's look down here in the big chart so you can see what's happened to prices over, you know, the last few years in Ocala and, and like continue to just, just fly this year. But if we switch this to our percent with price decreases. So let's look at this number. So here's three years of data. Normally in Ocala, the past few years, here's your 30 to 35% range. And then last year at this time, it was down to 27%. And then in here's April, May 16.

15, 14.5% taking price decreases.

That's right. So 14. That's right, 14%. Only 14% of the homes like you think about all the crazy sellers who overpriced only 14%, had to cut their price to get the deal done. That's increased back in in Ocala and we're at 30% right now. A little closer to normal.

Yeah, right, right. You know what's interesting about that, though is, you know, it doesn't necessarily answer the Compared to what Question. Because of course, the price they set, there's no barrier to that. Anybody can set any price they want, but you have to kind of assume that they've always done that. Right, Right. So when you compare it, historically, people were crazy and wanted ridiculous high prices in 2012, just like they do in 2021. Right?

That's exactly right.

Yeah. Okay.

And buyers know it.

Right, right.

So what that's showing is that, you know, it's at 30% instead of, you know, 34 normally. So that is bullish, but not nuts going into next year. That's actually encouraging to me. Right.

Yeah.

Nuts is a little scary. Here's another thing I like to point out in the Altos data is we do every market in the country, every zip in the country, every city in price range segments. The high end of the market may be behaving differently from the low end.

That's very true.

And so you look down, you scroll to the bottom of your Altos report and at the bottom here is about 190 grand, the lowest 25% under 200k. That's Ocala, Florida. The high end is 600k. And we can look at a few things we can see the high end is these are one and a half, one to two and a half acres, where the low end is half an acre. So you're not going to buy a $190,000 house, remodel it and sell it for 600.

Right.

Because you can't build a lot, but you might be able to go from 200 to 350 because those are the same lot size.

Right.

You could see these are 1300 square feet to 2000.

Right.

You can see the age, what you're buying in that range. And then you can also see the days on market. So the fastest moving stuff in Ocala.

Is 21 days is the cheapest stuff.

Is the cheapest stuff. Yeah, that's not always true. But in Ocala it's true. True.

But mostly I'd say that's going to.

Be true in general, it's true. But in some of the markets, especially some of the investor markets, the bottom, the lowest ones are real junk.

They're the real really stigmatized properties in really bad neighborhoods.

Yeah. And they take longer to sell. And we can look and we might notice that somewhere. What's interesting is when the subprime bubble burst in San Jose, California you could watch days on market. You know, the expensive homes, multimillion dollar homes were going fast or slower than the cheap homes when subprime burst at that time you couldn't get a subprime loan. And all of a sudden that flipped. You could still get $1 million mortgage, but you couldn't get a half a million dollar mortgage because those were subprime buyers. And so at that time we could watch this. The things that were moving in San Jose where the million dollar plus homes and the cheap homes wouldn't move at all. It was really fascinating.

So it also says something about the concentration of wealth when you get to the ultra high end because the rich are definitely getting a lot richer.

You could see it, you could absolutely see it there. So it's a fascinating way. When I bought my house in Silicon Valley in 2001, one of the things I did was I bought the cheapest little old piece of junk, you know, in, in a very expensive neighborhood. And my plan was to remodel. And what I wanted to see was could I go from the lowest quartile, the lowest segment with a remodel to maybe the third segment. And, and then, and we can see, we can track price per square foot at that range. And we can. And so we could see. And what we, what for me, what allowed me to do is say I can add a thousand square feet out of this house. I bought a thousand square foot house. You know, I had a million dollar mort and then I could add a thousand and literally double my money in value instantly.

Right, but that's not necessarily the house in the same school district or whatever, right?

Yeah. In this case it's Ocala. But we can look in the zip code and you can look at and dive down in depth.

Let's look at like you know, Jacksonville.

Or okay, let's look at Jacksonville. So Jacksonville here, it's a 66.

So it's a little busier than Ocala. Ever so slightly.

Yep. And pretty stable from last month. If we look over here, we can see that earlier in the year it was even hotter in Jacksonville.

Like most everything, right?

Yep, exactly. Here's our price decreases is at 37%. So let's look at the trend of price price reductions over time. So like, like Ocala, you normally. So Jacksonville because it's a bigger market and has, you know, more turnover. And normal in Jacksonville for price reductions might be 40 to 45% price reductions. Last year it was 35, 36. Jacksonville's lowest was 21 this year. And now we're back at the 36. So we're back to a hot, you know, it's. It's still hot. It's not insane, but. And, but it's not climbing from here. So we're. We're, like, setting up for a strong, interesting stuff.

Mike, this is fascinating. And I know we could go on this stuff forever because it's so interesting, at least to nerds like us, right?

That's right.

But. Well, the website is altosresearch.com, right?

Yep.

Okay. And you can get free reports on local markets there. Is there anything else you want to share with people as you wrap it up?

You can also go to the Altos Research YouTube channel. We do the national reports every Monday. And so you can keep on top of this data every week. Follow us there. Subscribe to the Altos Research YouTube channel. And especially if you're an investor, if you've got investor clients and realtors, you can sign up and you can put your Altos reports branded for you in the inbox of your clients, your sphere every week. And that's how you really keep them informed. That's how the systems work together.

Good stuff. Mike Simonson, thank you so much for joining us in this wealth of information. We really appreciate it.

Jason's real pleasure.

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