19: What the current market is looking like for 2019! Featuring Dave Karrick with My Home Group

Welcome to the Purpose Driven Real Estate podcast. This is where passion meets purpose in an ever changing real estate market. I'm your host, Steve Valentine, former real estate agent turned real estate entrepreneur, speaker and guide to all things real estate. And this is my co host, paige tons, former D1 college athlete turned real estate adultrepreneur. Whether you work in the industry or you are a consumer of real estate, with each episode we intend to raise the bar in our industry and show you the purpose behind every piece of real estate in your life. What's up everybody? Hey everybody, I'm Steve Valentine and we're back here on the Purpose Driven Real Estate podcast. Actually, my very first guest on the podcast is a longtime friend and might as well be family, Dave Carrick. This guy has been selling real estate since I was in junior high. He's lived through some pretty good markets. We've done quite a bit of business together, living through the REO business together. And so Dave, welcome. Give us a little bit of your background besides the fact that you're old.

Thank you, Steve. Yes, I started as a full time licensed agent in November of 1984, spent probably close to 32 years with realty executives, I think seven of those years as a co franchise owner and am now currently with my home group.

Awesome. So I thought we'd deliver this end of the year message as we get ready to go into 2019. And I thought nobody better to discuss the market right now than my friend Dave, who's been in the business a long time and again has seen a lot of different markets like I have. And I thought we'd just kind of talk about what's going on in 2019, what to expect, and kind of both of our opinions on what we're seeing and where we're going. So why don't you start us off, Dave? Where are we heading?

Well, I think we're most likely transitioning back to what I would call a per se normal market. We've been obviously in a market where sales have been very strong, appreciation's been very good, and I don't see those dropping off tremendously. But I think with rising interest rates and rising home prices, we're getting into a period where things are slowing down some. I think we'll be heading more towards what I would consider to be a neutral market where we've been in a heavily weighted seller market as of recently. So I would consider more of a normal market. I think the problem maybe with the understanding of that is the way the Arizona market has gone historically. We haven't been in a lot of normal markets.

Yeah, it's been probably, geez, it's probably been almost 20 years. I mean, I think the last time we were in more of a normal, stable 60 to 90 day time frame to sell your house in that lower price range was probably back in about 2000, 2001, which I was still wet behind the ears. You had already had 20 years on me then, but that was really before the roller coaster happened.

Agreed. Yeah, definitely. I would say late 90s, early 2000s were probably the closest we've seen to a normal market probably in the last two decades. Yeah.

Because it's always interesting when you hear people that, you know, we've been spoiled by the interest rates being in that 3 to 4 range and now that it's into the 5, mid 5, even 6. On investor stuff, I mean, I remember in 99 interest rates were 7.75%. That was when I bought my first home. And obviously the affordability of the house was a little different back then. So you know, $100,000 house at 7.75, your mortgage payment was $1,000. A little different when the house prices have doubled. So obviously the interest rate is going to make a little bit of an impact going forward.

Absolutely, yeah, no question. I mean just, I mean low interest rates breed home appreciation typically and vice versa. But yeah, I think it's a matter of people just adjusting to it. I think the overall economy is going to be very strong next year. I just think we're going to see just a little bit of a transition in the real estate market from what we've seen. But that's going to also create different opportunities for people.

Sure, let's kind of jump into some of the opportunities as we look at the market. One of the things that I do with the Limitless project is really teaching agents to understand opportunities, but also the people that might have been waiting to purchase rental properties, those types of things. I believe there's going to be some opportunities for people to jump back in or consider the real estate investment. Even though there's some turn in the market when it comes down to. Because whenever it starts to soften, we typically find some more motivated people or people that have to make some moves that may not have to at the end of the day.

I would agree completely. I think the buyers that are looking for potential rental homes, rental properties, investment properties, there's going to be more of those opportunities that could arise in this coming year. They might not have as much competition from users, buyers that were users Living in the properties as we have had. So it's definitely going to create some more opportunities.

Users.

Users.

Sorry, you bunch of users.

Users.

That would be the owner, occupant buyer.

That would be the owner, occupant buyer. Correct.

Nice. Yeah. And I do think that no matter what market we're in, I mean, even over the last couple of years, as has been a good market, it's still always a good time to invest, obviously, if you're finding the right deals. And I think there's always going to be people that aren't necessarily motivated, but maybe their homes are not in that perfect condition or, you know, a lady I met the other day, she'd been there 40 years, she had sold real estate. She knew her house wasn't competing with the houses down the street, and she didn't want to go through the process. So it's not that she's desperate, but what she wanted was just something simple. So let's talk a little bit about, you know, the market going forward. You know, a lot of people, you either love it or you hate it, or you're just going to get used to it being around when it comes down the industry changing with what I call the zoo, which is Zillow now buying homes in certain zip codes. And you've got offerpad and Open Door, who've been here, you know, in The Valley since 15, you know, still providing a consumer a great simple experience. So how do you think that's going to impact going forward as far as the industry goes?

Well, I think for just the typical realtor out there, they've got to have, like you say, solutions. They've got to have different possibilities for their buyer or, excuse me, for their seller, other than just listing their home on the market. They've got to have, you know, possibilities of maybe purchasing the home or having someone that would purchase the home to make them competitive with these larger, you know, obviously Internet buyers. Right? Absolutely.

I think you have a lot of the consumers as well, really looking at some of the simple ways to sell their home and move on to the next because, you know, some of those solutions that I provide, that you provide, that some of the tech companies provide, are simple solutions where, you know, the actual net price going into it. You don't have to go through a lot of the rigmarole of inspections and different transitions in the process and things falling apart. So it gives people a comfort level. And I think that that somewhat changes our market a little bit because as homes sit on the market longer, those types of solutions may be more looked upon or more weighted heavily when it comes down to the consumers.

Well, sometimes, I mean, it's obviously a convenience factor, but sometimes that convenience can even translate into more money for them because they may take a little bit less money selling the home as a convenience, but they can make that up on the other end, depending upon if they're trying to purchase something and they have a timeline for that, or might even be taking the money and investing it somewhere else, they can easily make up for maybe the small amount that they gave up for the convenience factor. You got to look at the big picture. I think a lot of people look at those situations and say, well, they could have sold their home more retail, but maybe. But also the convenience. What was the convenience factor worth and what are they doing with the money? Because they obviously could be making more money than what they may have, the small money that they had given up for convenience.

When you look at last month's report, you still look that just the change in the seller's market as far as percentages go, you're still seeing under 250. You're still seeing a 52% seller's market when it comes down to it. So it's still a very healthy seller's market in that. I think one of the things that really impacts when you start looking at, you know, we had this conversation before we went on is the price reductions. We're seeing more of, but I think it's more people having to get realistic because I think when the market gets hot, would you agree that people tend to shoot for the moon?

Yeah, absolutely. I think it's going to take a little while. I mean, we've probably really just seen this, what we would call maybe a slowdown. Again, we've talked about it just being a transition back to a normal market just over the last three or four months. So it's going to take people a little while to learn that they need to be more realistic with their pricing and adjust to that. So you make a very good point with that. The price reductions that we're seeing now, I mean, are they really price reductions because the market is forcing them, or are they just price reductions because people overestimated the values on their properties? So, absolutely.

I think the other thing too, when you get into this price range and some of that stuff, couple of things for the consumer to really think about, because I know a lot of people bring it up, is that, well, maybe you should just stay in your home and do the renovations and kind of go through that process. One of the things that I've talked very heavily to Wendy, my wife, about on the. The construction side, I was actually floored the other day. We were going through one of our properties that we're repurposing right now. And I think the consumer is real important too, when they're making those decisions to really get some solid costs on what renovations are going to cost. Because we've seen a. In the last six months, we've seen a 30% jump in material costs alone. So you're trying to look at some of those homes that have been remodeled versus staying in your home. Keep in mind that the renovation piece might actually be more expensive than you initially thought from a couple years ago.

Absolutely. And I think a lot of people, if they haven't gone through the renovation part, they don't realize the inconvenience. And also just being able to find a good, stable, reliable contractor, because I think there's a shortage of those out there right now.

Yeah, I mean, that's got to find.

The right people to do the work.

Yeah, there's. There's no doubt. I mean, that we have a shortage in labor and we have a shortage in contractors and experienced people when it comes down to the renovation piece. And that's, that's where a lot of people get in trouble is, you know, hiring their brothers or those types of people to do that type of stuff when they're not skilled. When it comes down to it, absolutely.

I think you have to have realistic expectations as you're talking about when you go into that, if you're going to stay in the house and remodel it, you need to make sure that you know what the numbers look like. You need to make sure that you've got somebody that's going to finish the work. Quality, timeliness, and you've got to be prepared for the inconvenience.

Yeah. How many times have we heard clients that gave deposits to contractors that never completed, never finished, never showed up? So just keep that in mind if you're thinking about renovating, to reach out for a referral, something of that nature, because it's going to be really important and of course, extremely important to know your numbers. And I think, you know, the other question, Dave, is what do you think about luxury market right now? I'm looking at the stats. I mean, what do you think that looks like going into the next year with the interest rate changes and things?

Well, I think the market almost breaks down into two sectors. You mentioned earlier about the price range of 250 and below. Still being a seller's market, I think that entry level market is probably not going to adjust as much going into this year as the rest of the market, because I think there's still going to be a shortage of quality homes that are priced right at that 250 or below mark. But as you rise up into what you per se call the luxury market, obviously those price ranges will differ depending upon what area of town you're in. But I do see some slowdown in that market, obviously, just because I think that those prices have increased quite a bit over the last few years and I think there'll be some softening up of that also.

Yeah, I think obviously the interest rates and the jumbo mortgage obviously have a huge impact on that price range too, because when you're getting a loan for 8, $900,000, when there's an extra point or two involved, it changes things substantially when it comes down to the luxury side of things. So if you're looking in the luxury side, it's probably, you probably have a good inventory to choose from when it comes down to it. When you're looking into, you know, whether you're selling or buying, that that 300 to 500, 600 range is really borderlining on, like you said at the beginning, a very normal market where, you know, you might have a little bit of options, you may be looking for the most motivated seller. What would you say if we're talking to a seller right now that's in that price range of that, you know, 300 to 600 range? What kind of advice would you give them at the end of the day if they're gonna put their house on the market in 2019?

Well, I would say two big things. One obviously would be price. There needs to be a lot of discussion, a lot of research about where that price needs to be, because I believe that price needs to be done correctly up front. Because if it's missed or if it's done incorrectly, then it could end up obviously costing them money in the long run with having to do reductions.

Right. I think, you know, it's always interesting when you go in to meet with a seller or talk to somebody about selling and you're looking at prices based on getting things accomplished for them. And yet sometimes they want to push the market. But I think when you push the price and you're not realistic, you know, either based on condition or timing or location of the property, whether it's outdated or updated, you potentially miss a pool of buyers in that timing. And I think the other Thing that I really try to reiterate my appointments with people when we're looking at the selling side is once you get past certain days, you know, you get to 30 days and you wanted to try it high and now you start reducing, you miss the emotional trigger, which is always funny. You know, we've worked with buyers for so many long and how many emotional triggers happen when they see the days on market? Oh, it's only been on the market seven days, it's a good price. I need to jump on this. And I think that we miss that mark a lot of times with the listing prices if we don't hit that emotional mark in that first 30 days. Because let's be honest, I mean, price is everything. And if it's priced based on its current condition, again, updated or outdated, it's gonna sell in that 30 to 60 days. Now some people might have a difference of opinion of well, if it's a 90 day market, then I'll put it on a certain price and I'll just wait it out. But, but the buyer may not always be there and you're kind of waiting for that.

Correct. And I mean statistics show that the longer it's on the market, the less likely you are to get your list price right. You know, so definitely by, you know that and you know statistically again, you're going to get the most amount of interest in that first 30 days. Yeah, obviously if you have it on the market 60, 90, 120 days and make some major reductions, the interest is going to obviously increase again. But you could have made a smaller reduction in your initial list price before listing it and come out ahead. So it's really, you know, there's just going to have to be, I think, more emphasis put on that initial list price. I think this market we've been in the last couple of years, there's been, you know, there's been some room margin for error and people have been able to still sell within that 30 day time frame. But going forward, I think it's just, you know, walking into an appointment, you just have to be, you have to have the data, you have to have done the research and be able to make a strong case to show your seller what needs to happen and why it needs to happen if they want to sell within a reasonable amount of time for the most amount of money.

Right. I think the other thing too, in the price ranges across the board with some of the creative pieces that sellers might want to consider and same thing with agents as far as giving some advice to Sellers is thinking about if we're especially in those entry level price ranges where a seller might be able to attract more buyers if maybe they're willing to, you know, obviously if it's within its value and appraised type situation is there's some creative ways and you and I have lived through some different markets where sellers might be able to offer to do some buy down or some additional closing costs or something of that nature. In fact, do you remember, geez, it might have been even during the REO days we were getting a lot of FHA contracts with 6% which was including a down payment and closing costs. You remember those?

Absolutely, yep.

I think some of that rather than more concessions or rather than reductions, it might be more beneficial to some sellers or to have the advice to maybe consider some more concessions in order to attract more buyers. Would you agree?

I would completely agree because it's not always, I mean as long as the price is in the range, like you said, where it's going to appraise, sometimes offering something I wouldn't say out of the ordinary, but a little more creative would definitely be the way to go. I can recall a time in the late 80s where FHA were doing what they called 3, 2, 1 buy downs, where let's per se, the interest rate were at 10%, you would have the first year at 7, second year at 8, 9 and then it would graduate up to 10%, thus allowing buyers to qualify at a lower rate and make the homes more affordable. I don't think we're obviously going to see any of those in the near future. But like you say, contributing towards closing costs, potential down payment programs, et cetera, could be helpful.

When you work with a seller at the initial visit, do you go through that conversation with them to prepare them that hey, most of the buyers in this price range are going to be asking for closing costs?

Absolutely. I mean if you're looking at listing a house, I would say that's 300 or under or at least FHA max loan limits and below, there's a good chance that you're going to get an offer and the buyer is going to ask for concessions. Now whether they need to pay those concessions or not will dictate how long it's been on the market. If you had multiple offers, you know, a variety of things, but I always prep them that they could potentially pay up to 3% in concessions. That way when the offer does come in and it has a concessions, it's not the first time they're seeing that again, it's just preparing your sellers so there's no surprises. So when you have a conversation with them or when you are negotiating an offer, there's already things that you discussed with them previously.

Yeah, without a doubt. And when you look at some of the loan limits, I was just actually looking it up real quick. I know the loan limits are getting ready to change a little bit with fha. I forget what the new one is, but I know that conventional just went from 454 to 480 something or other.

Somewhere in the 480's which is good.

Because obviously that takes. Takes away from the jumbo type loans when you can go up in price a little bit.

Yeah. And FHA is going to, from what I've heard, move up to. I haven't seen the numbers, but I think right now we're, I want to say 275, 279. Somewhere in that range is the max. And they're talking about raising that as well.

Yeah, I think we're actually at 281.

Yeah, a few years ago we were at, I think FHA was as high as 350. And then they changed that and that.

Really took it down. It really hurt.

Yeah, it really hurt the buyer, you know, the sellers that were in between that, let's say 275 and 350 range. Because all of a sudden they had a form of financing and the most, the easiest form of financing, sorry, the easiest form of financing available was taken off the table.

Sure.

And at that time, also correct me if I'm wrong, the conventional loans, the guidelines were still pretty strict on them too, as they've loosened up some in the past, probably two or three years.

So hey, because you're here, I think it would be, you know, we'll finish off with this because I always find it interesting because, you know, mentoring under my dad who had been in the business for 40 years and my dad lived through, you know, 18% interest and all the loan crisis and all the changes in economies and all those things. And we've seen, even though we've seen the prices go up and down in the last 20 years, we've never seen the interest rate have the impact on the market that it will going forward. You know, so I always look at it because I like the creative side. You know, I like to draw different boxes when it comes down to it. So walk me through something that might have been creative back in the late 80s when we were getting into higher interest rates that helped either sellers sell or buyers buy. When things seem to be out of reach.

Absolutely. I've got a perfect example. Probably back again, like in the late 80s, there was a lot of FHA loans out there that were probably at 7 and 8%. And at that time you could just assume an FHA loan with no qualifying. There was a simple transfer fee and the interest rates at the time were about 13, 13 and a half. So Citicorp, which turned into Citibank, had these purchase money seconds that you could do and they were probably at about 12%. You needed 10% down and no qualifying. So basically Citicorp would run an appraisal, buyer would put 10% down and they would get a purchase money second and then assume the FHA first and then they called it a blended mortgage because they would blend the interest rate of the two and that net interest rate was lower than if you walked out and got a new FHA or a new conventional loan. Right.

So that'll be interesting because I know if you look at FHA right now and conventional, I don't believe you can assume on va, but they all have assumption clauses in them. So you have to qualify for it. But you can certainly assume somebody's 30 year mortgage based on your credit and qualifications. So those of you out there that you know, got that FHA loan or whatnot, it might be very beneficial to just look that at that interest rate and that financing could be worth something in the future. So don't, don't be refinancing it and taking the equity out and doing those things when the rates are where they're at. You know, stay put, figure it out from there. But I wouldn't mess with that first mortgage at this point in time. And last but not least, where can the audience find you? Did you finally get a website and some Facebook stuff? Are you still on MySpace?

I think it's the Facebook. The Facebook, yeah. My website is www.carrickteam.com and you can also find me on Facebook under carrickteam.com.

Under Dave the dinosaur.

Caveman. Caveman, that's right.

Caveman, the correct word. So last, last thing you know, Dave, thanks for coming in. Talking about the market, what is, you know, we started off kind of in the reo, that's when we met. So I'm going to let you embarrass me at this point. So tell the audience something. That's a funny story from you and I's past over the last 10 years.

Oh boy. You didn't have me prepare for this?

Nope.

Boy, that's a Good one. I have to think about that for a minute. I mean, there was definitely some funny stories. There were some that weren't funny, but they turned out funny. I mean, there was one where you did remember this thing called the Spartan Race, and you decided to jump headfirst into a mud pile.

Yep.

And I believe you broke your neck. I did. And you were in the hospital, in a halo, as they're called, and you were still working, and I would come and visit you and help you as much as I could, but it was not a funny story. But I think when we look back at it, I think that it showed your perseverance and your dedication. And, you know, you just battled through a tough injury and didn't really let any. As far as work was concerned, we didn't miss a beat. I mean, you were on your laptop in your hospital bed and, you know, we just had someone doing some of the field work while you were in there. Yeah. So. But that's probably one of many things that we persevered through that reo time.

So my funniest memory is the inner tubes in the ocean at Dana Point when we were out at the beach house and you watched me struggle to get myself and a tube with ice cold beers through the wake and out into the ocean.

Yes. And it was perfect because once we got past the wave, we just basically sat on the inner tubes, drank beer, and just looked back at the shoreline of all these beautiful homes along the Southern California coast.

Yeah. I would say, you know, these years, when I look back at it, you know, for me, I've been super blessed for those of you guys that are in the business or not in the business, you know, whatever it looks like, the people you surround yourself with are going to either take away from your potential success or they're going to add to it. And those friends really become family at the end of the day. And Dave has certainly been part of my family, has been there through a lot with me. So I really encourage you to not be. And this is what I learned from my dad, to not be a solopreneur, which means don't lock yourself in a closet, don't not be friends with other real estate agents. I think that I've learned over the years with a lot of different partners that I have in the industry, that they're people that drive me to the next level and they're people that I don't compete with, but we actually work towards the same goals, and that's that all of us can provide the ultimate solution for our buyers and sellers. At the end of the day, it's a whole lot more fun working with the people that you know than the people you don't.

Totally agreed. And you know, everyone has their own style. But as you talk and surround yourself with other successful people, there's pieces you can take or advice you can take from there that you can integrate into your own business.

Yep. Absolutely.

And to create your own style. Yep.

Well, Dave, thank you for coming in and appearing and making the first guest appearance on the podcast. And we hope that this information is helpful for those of you looking to make some decisions in the future. Just make sure you ask the right questions and make sure that you have a plan in place and make sure you do your due diligence on the people that you hire to work with you. At the end of the day. Peace out. Thank you for listening today. If you loved this episode, please share it with somebody you think would also love it or be inspired by it. Without you guys, we can't create more purpose. Please leave us a review and a truthful comment or thought. And until next time, this is Purpose Driven Real Estate.