032325- Home Solutions Podcast

Episode Transcript

Speaker 1 (00:02):
Good morning, and welcome to the Home Solutions Show. This
is your host Andy Keel with Epic Realty and I
am joined today with Jerry sunt Cross Country Mortgage and
we have some market data and some interesting week with
interest rates and some other things to talk about today.

Speaker 2 (00:21):
How are you doing today, Jerry Amy, I'm great, Thank
you well.

Speaker 1 (00:25):
Welcome back to the show again. And I wanted to
start this one off with just some market updates and
what's happening with our February data and just catching everybody up.
We've had some guests the last couple of weeks, so
we're a little bit tardy in reporting our market data,
but we have that for you today. So this is
from Tucson Association of Realtors the MLS of Southern Arizona

(00:51):
Market Activity Report. I've just wanted to cover some highlights
and kind of get a feel for what's going on
in the market before I get into the data, though, Jerry,
what are things feeling like for you out there? And
you're like me, you're in the mix of this every
day and originating loans, and what's the what's kind of
the feel out there?

Speaker 2 (01:11):
You know what? It's the same as it is every
March there is this is one of the busiest times
of the years. You know, the market's awakening from the
slumber of winter, and you know, and that's some of
the numbers we're about to go through are gonna are
going to show that, Like you know, March is always
much higher sales than February, which was much higher or

(01:33):
much higher sales uh than January, which which were much
higher sales than than December. And as we see as
we head into the big spring buying season April, May, June,
and July, things are going to continue to improve. We're
going to see more units for sale, We're going to
see shorter days on market, We're going to see slightly
higher purchase prices. So and this is just the normal

(01:56):
activity that we see every spring. And this seems to
the trend seemed to stay intact.

Speaker 1 (02:03):
Yeah, So when we were reporting this data out for
January in February, there was a few things that were
showing up that were as I said, one month does
not make a trend, but they were starting to look
alarming isn't the right word, but they were looking like
we were pushing more towards a buyer's market. I guess

(02:24):
was the proper way of saying that, And the data
is starting to shift back the other direction a little bit.
And one of the key factors I mean by that is,
again I wish I could visually share some of this
with the audience, but of course we're radio, so it's
a little hard to do. The one of the key

(02:45):
factors that I really like to look at is how
many months of supply of housing is available, and last
month we were hovering just below five months, of which
five months is kind of a key factor because that's
generally considered a neutral market. When you're in that five

(03:08):
to six months of supply, that's considered not a buyer's market,
not a seller's market, but a neutral market. And we
were edging up towards that with just under five months
of supply in January, and in February we have now
four point two six months of supply, or nineteen hundred
and thirty new listings hit the market.

Speaker 2 (03:27):
Yep, so we're absorbing. So we've got a four month
supply is basically what we have now.

Speaker 1 (03:32):
Yeah, so we're absorbing some of the houses and available
properties that came on the market, as we would expect
in a spring market. So what what happened in February, Well,
our market pricing edged up a little bit. Now we
have our average price has gone from three hundred and

(03:53):
sixty five thousand to three hundred and seventy one, one
hundred and forty dollars, has edged up a little bit
just in that one month. We've had some increased sales,
so we've gotten some more inventory on the market, but
we've also sold a fair bit of that inventory, so
our supply is down a little bit. So again, medium

(04:18):
sale price for two soon. I'm sorry not for twuson,
but this is for the greater MLS area, which is
a much wider area. But three hundred and seventy one thousand,
one and forty dollars is the median sales price now
in this larger market area. And of course this goes
all the way down to No Gallas and all the

(04:40):
way up into Casa grand and all the way out
to the New Mexico border. So this is a fairly
wide range of data.

Speaker 2 (04:48):
It's a wide swat.

Speaker 1 (04:49):
Yeah, so this includes a lot of other things, but
it's a pretty good gauge of what the market is doing.
And of course, the other thing that I liked looking
at is the average sales price, which is four hundred
and fifty thousand, And of course that's because you get
the couple of higher end homes, you know, a million
pulling the above a million, pulling the average up.

Speaker 2 (05:11):
Well, we have a little over one thousand units cell,
is that right?

Speaker 1 (05:17):
Yeah, so we had a little over one thousand units.
I believe one thousand and fifty six is the number
I'm looking at here. My data is a chart with
one color over another, so it's a little hard to read,
but looks like one thousand and fifty six. Yeah, so
one thousand and fifty six sales in February. Our volume,

(05:38):
our sales volume four hundred and seventy six million, which
is actually up ten point two percent year over year.
I think that's kind of interesting. A number of sales
is they're saying is up five percent from the previous
year too. So it's looking like we're getting into what's
starting to be a fairly healthy spring market season. And

(06:00):
our days on market, the average days on market are
down a day from last month, from fifty from fifty
eight last month to fifty seven days on market this month.
Average median days on market is up one. We've gone
from thirty four to thirty five days this in this
last month, so the time is basically holding steady, not

(06:23):
not anything rapidly changing.

Speaker 2 (06:26):
It's funny, you know, Andy, I've done this side analysis
for for a long time, and it's but that I
do about four percent of the marketplace for southern Arizona.
That is the number of units I close on a
monthly basis, And if that holds true, then like in
the month of for the month of March, I think

(06:47):
we're going to see about twelve to thirteen hundred units
or sold versus the just over one thousand, thousand and
fifty six for February. And we'll see if that trend continues.
But it's pretty you're right, between three to four percent
of all the units sold in Pema County is what
I do in volume, and I think that's going to

(07:08):
show that, Hey, volume is going to increase in March
and probably stay the same in April. Yep.

Speaker 1 (07:16):
So you know, we're off to a pretty healthy spring
season here. So if there was some blips on the
radar last month, I'm not seeing them this month. New
pending listings were nine hundred and twenty six pending, which
is up a little bit from last month eight hundred
and ninety three new listings in February fifteen hundred and

(07:40):
seventy five, which is actually down from January of last
month eighteen eleven. What does that mean in the grander
picture of things. I want to go back and look
at January and February of last year twenty twenty four,
just for comparative for comparison's sake, January of twenty four

(08:02):
we had thirteen hundred and ninety five new listings hit
the market. January of twenty twenty five we had eighteen
hundred and eleven. That's a pretty significant jump.

Speaker 2 (08:11):
Wow.

Speaker 1 (08:12):
And then February of last year twenty four we are
at fourteen hundred and twelve and this year at fifteen
seventy five, which is looking at this graph, it's down
a bit from last month, but it's still up from
the month before, so I would consider this healthy. We're
getting more inventory on the market, absolutely, so that's a

(08:33):
very good thing in my opinion. We're starting to see
a little bit more in the way of townhomes and
condos hit the market too.

Speaker 2 (08:42):
And any you know, I know you work with a
lot of investors. Are you seeing our investors that do
flips right, not buy and hole, but flips. Are they
becoming more active?

Speaker 1 (08:56):
I'm I'm not really seeing the flippers become more active.
I think the good ones are are still holding steady.
And what I keep hearing out there is it's just
so hard to find anything that that works.

Speaker 2 (09:15):
That meets our numbers right that.

Speaker 1 (09:17):
Yeah, yeah, and yeah, Actually I'm gonna rabbit hole here
for a moment because flippers. Flippers kind of had a
have a bad reputation out there, and in many cases
it's it's not deserved and I just I kind of

(09:39):
want to go through the math of that for just
maybe a moment with because great example, we just purchased
a property or went to contract and a property. I'll
touch on that more more in a bit, But actually
I'm going to refer back to a property we worked with.

(10:02):
I think we sold it back in December or so
of last year. It was a property we picked up
for I'm going to be off on my numbers by
a bit, but close enough. We bought it for around
two hundred thousand from a wholesaler property on the south
Side Newer subdivision. It was a nineteen nineties build, and

(10:24):
it was a pretty rough house because the owner had
passed and there was some there are some dogs that
were in the house, and the dogs kind of tore
up all the drywall because there was nobody there to
feed him. Don't know what happened there, and don't want
to quite frankly, but we purchased this house that was

(10:45):
pretty tore up for that very reason, and we bought
it for two hundred thousand, and we bought it from
a wholesaler and we ended up selling it for two
hundred and eighty thousand dollars. I was like, hey, that's
a pretty good deal, right. We lost nine thousand dollars

(11:06):
on that house, and that was because we had a
couple of surprises that came up. We reasonably believed that
we were in the We had the numbers pretty accurate,
but my general contractor on that one, we had a
key miss there. We thought we had a working air

(11:27):
conditioning unit and we didn't. That was a that was
about a twelve thousand dollars booboo. And we had a
roof there that we thought was in good enough condition,
but it wasn't. So between a new roof and a
new air conditioner. All of a sudden, our pricing got
blown out of the water.

Speaker 2 (11:44):
Wow.

Speaker 1 (11:46):
So for the folks out there that beat up on
the wholesalers, it's not as simple as just the math
of Hey, we're buying it for two hundred, we're putting
twenty thousand into it, or thirty thousand into it, we're
selling it for two eighty, and there's all this profit.
There's just so many more costs involved carrying cost, utility fees,

(12:07):
loan cost, real tror fees on both sides buying and selling.
So there's there's so many more things involved with trying
to price out a flip than just you know price,
you know, sale price A minus purchase price B minus rehab.
It's not that simple. So anyway, we're coming up on
a break, so we will be back with the Home

(12:28):
Solutions Show after a few messages. Hi, and welcome back
to the Home Solutions Show. This is your host, Andy
Keel with Epic Realty, and I can be reached at
five two zero five three nine nine five nine one,
and I'm joined again with Jerry sunt Cross Country Mortgage

(12:49):
and Jerry, would you share your information for the audience please.

Speaker 2 (12:52):
Of course five two zero three, seven zero six.

Speaker 1 (12:58):
Great and uh. Before the break, we were talking a
little bit about the market updates, and I went on
a little bit of a rant with flipping homes and
the cost of that. I was mentioning one that we
worked with last year and how it's not as easy
as it seems, and I think that was kind of
the message I just wanted to get out there that

(13:19):
you know, it's not as simple as just if you
have a house. And I've had many clients over the
years that it seems like the math is simple. It's like, well,
I know the house is worth three hundred thousand when
it's fixed up, and it's going to cost you, what
like thirty thousand, forty thousand to do it, so you

(13:39):
should pay me. You should pay me to fifty to
sixty for it. It's like, that's not how this works.
We've got loan costs, we've got closing costs, we've got
realtor fees. Even me as a licensed agent, there's there's fees.
I mean, I'm assuming that I'm going to be working
with another agent, and I have a commission to pay

(14:01):
out even if I'm not charging myself one So there's that.
I mean, there's a lot of fees carrying cost involved,
so I don't.

Speaker 2 (14:10):
Know, right, Just as like you mentioned on the last one,
on the last segment, where an AC unit we thought
was working is not working, or a roof that we
thought was stable is you know, isn't it needs work?
That can be twenty thousand dollars in additional charges right
off the bat.

Speaker 1 (14:28):
Yeah, exactly. And when we did this one, we priced
it to try to make a fair profit given her time,
money and effort that went into this. We were just
hoping to make about fifteen thousand dollars on this flip,
and we ended up actually losing over nine thousand on it.
So it just goes to show one little booboo can
really really really change the numbers. And it's not as

(14:50):
simple as just oh, you know, it's worth three hundred
and thirty thousand to fix it up. There's so much
more involved than that. So yeah, but that what's happening.
We had a lot of movement last week with interest rates, Jerry,
what's happening with interest rates?

Speaker 2 (15:06):
Well, you know, the Federal Reserve met and they did
not change, They did not lower or raise interest rates.
They kept steady as predicted that they as expected, but
it was more the information and the speeches after their
meeting that really moved the market. And so mortgage rates

(15:27):
did improve after the Fed met, but it was not
due to you know, them lowering interest rates or something
like that. What it was is that they made an
announcement that was really big, and that is you know,
for ten years, we were doing what was called quantitative easing,
where the Federal Reserve was buying our own debt, our

(15:48):
treasuries and our own mortgage backed securities to try and
keep yields lower and to keep interest rates lower for mortgages.
And that took place from two thousand and nine all
the way through the pandemic. Basically, you know, there was
a couple of years where they said we're going to
not do that, but then immediately they went right back
to it for various reasons, which is why we saw

(16:11):
ultra low rates between two thousand and nine twenty twenty two. Well,
they have been doing what's called quantitative tightening for the
last three years, which is they're running off all the
debt that's on their books and they're selling it into
the marketplace. So now if you are an investment bank,
or you're a country buying you know, government, the US

(16:34):
government debt, which is Grade A the best out there.
You know, you're having to absorb a lot of supply
because not only are we issuing new treasury debt, but
also the Federal Reserve is running off their books. So
it's just a lot for these these companies or these
institutions to buy. Well, the Federal Reserve came out and

(16:55):
made the announcement that they're going to slow down the
amount of runoff on their treasuries, on their ten year
yields basically, and this is a really big deal. They
were selling twenty five billion a month and now that's
going to be reduced to five billion. So that means
they're going to keep more on the books, which will
help mortgage rates. And as we've been saying for the

(17:17):
last couple months, that cautiously optimistic that we're going to
see lower interest rates as we go into the summer,
and again it looks like that is going to happen.
And now you can ask, well, why is the Federal
Reserve not going to be selling off or having runoff
of all these treasuries, And it's because they're a little

(17:39):
worried about stagflation or the economy slowing, and for this reason,
they want to do what they can without lowering interest
rates because they don't know what tariffs are going to
do to you know, how tariffs are going to affect inflation.
So this is another lever or another measure to be
able to lower borrowing costs in the over the short

(18:03):
term without lowering the Fed Funds rate. And I believe
that we are going to see lower interest rates over
the next few months with it, which is such welcome news.

Speaker 1 (18:14):
Yeah, and just for clarity on this, because I've never
gone in and been like a big bond buyer. But
when the Federal I don't even know when the what
is it the Treasury or whoever auctions off these these
ten year notes and or any of.

Speaker 2 (18:33):
The five year notes, notes to your notes.

Speaker 1 (18:36):
Any of any of the notes. But it's basically a
bidding process. So the the amount of the note is
always going to be the standard amount they're bidding the
interest rate, So less availability tends to mean there's going
to be more competition, and they bid lower interest rates,
which is I think what you're getting at is this
is what pushes the interest rate down. When you've got

(18:59):
more buyers competing for these same notes that we don't
have as many to sell. The market doesn't have as
much dollar volume to absorb, so there's more competition over
the interest rate, and they're bidding down the interest rate.

Speaker 2 (19:12):
If I'm taking and when we've had treasury auctions over
the last three years, if the auction does not go well,
meaning let's say they're auctioning off I don't know how
many billions of dollars of ten year treasuries and they're
doing it at a four point two five yield or rate,
and let's say there's not enough buyers to buy all

(19:35):
the debt that we're issuing, Well, then you have the
government has to offer what's called the term premium, which
is driving the interest rate higher. For getting people to
buy that term premium is really important because we've been
seeing that term and we've been seeing a lot of
auctions needing term premium to get buyers to buy the debt. Well, hopefully,

(20:01):
if we have a lot less supply come on the market,
we won't need that term premium anymore, which again will
help mortgage rates and treasure yields come down. And if
you look and I know we're not supposed to be
a stock show or a bond show or anything else.
But when you look at the stock market here today,
it's had a pretty rough year so far twenty twenty five.
The bond market actually has I think it's up three

(20:24):
percent so far this year round numbers, so you're seeing
fixed income beat stocks for the first time since twenty twenty.
You know, we'll see if this trend continues. But how
it affects real estate is as we head into the
spring buying season, seeing mortgage rates get down to the
six and a half, maybe possibly low sixes. I'm going

(20:47):
out on a ledge there, but if we see mortgage
rates continue to drop, it really will help the buyers
because it helps with affordability and I'll bring down those prices,
and it will allow so many people to be able
to refinance that have been not able to that are
stuck with this rate of seven percent to eight percent

(21:09):
or higher, to be able to refinance to a reasonable level.
So I'm very optimistic of what the next few months
bring if this trend continues, And as you know we
do every week, I'll let you know if the trend changes,
but right now, it seems that now it's not happening quickly,
but it is. We are seeing slightly lower mortgage rates again.
Hopefully this trend will will continue over the next few months.

Speaker 1 (21:31):
Agreed, we have a little bit more time left in
this segment, So I'm just going to revisit some of
the market data here for the last couple of minutes. Here,
what are some of the some of the other key
factors that came out here in in the month of February.

Speaker 2 (21:45):
So what about I always, you know, Andy, I always
love to hear about the high end market only because
it fascinates me. And it is like, how many units
are on the market in the you know, million dollars
to two million dollar I haven't heard there was a
twelve million dollar home for sale and Tucson, which I
got to go look and see if that's true. But

(22:07):
you know, it's always interesting what kind of inventory is
out there and what price points.

Speaker 1 (22:12):
Yeah, so I'm looking at the there's a chart here
that is the buyer demand by price range, and then
it's kind of enough to give us a delta, which
is that, you know, the change over the last period.
The first thing that jumps out at me on the
other end of the spectrum. You mentioned the over million
dollar but I'm looking at the up to two hundred
thousand market seventy sales, which is a down nine point

(22:36):
one percent. And I don't know if this is month
over month or year over year, And I'm not particularly
surprised by that, because I don't know if you've tried
looking at anything under two hundred thousand lately, but it's
usually not in the prettiest of condition.

Speaker 2 (22:50):
No, I have a few buyers looking in that price point,
and again it's it's a diamond in therough, right, They're
just not what's out there is there's just not much.

Speaker 1 (23:00):
Inventory going to the other end of the spectrum. What
really surprised me here is the delta for the six
hundred to six hundred and ninety nine thousand dollars sale prices.
There are sixty sales, which is up fifty three point
eight percent. And again I'm not sure if this is
year over year a month over month, but is this significant, Well,
sixty sales were starting to get to a number of significance,

(23:26):
But that tells me that's up literally what probably twenty
nine sales the previous time period. That's a pretty significant jump, absolutely,
and then as we start getting into the over million
dollar homes varies a little bit. There's looks like forty
seven homes over a million dollars sold here, and overall

(23:48):
the volume is up a fair bit, so that over
million dollar home market is still chugging along pretty well
by what I can tell by this data here.

Speaker 2 (23:57):
Now in February, I will say that my spectations again,
I'm going to forecast that the million dollar plus range
is going to slow down because remember, by the end
of February, the real corrections in the stock market, it
hadn't taken place, so it's really you know, the big
corrections started happening beginning of March. So I look at
the sales in February. You know, I think the high

(24:20):
end market or luxury market is very much tied to
how the stock market is doing. Right, If the wealth
effect is in place and the stock market's doing well,
you're going to see, you know, the million dollar press
market do well. But if you have a pullback, which
we've seen in the stock market, my guess is that
the luxury market will pull back a little bit over
the coming months.

Speaker 1 (24:40):
YEP, I tend to agree, and with that we're coming
up on a break. We will be right back with
the Home Solutions Show after these messages. Hi, and welcome
back to the Home Solutions Show. This is your host
Andy Keel with Epic Realty, and I'm joined again by
Jerry Slunt with Cross Country Mortgage. And in the previous segment,

(25:01):
we were talking a little bit about interest rates and oh,
all kinds of different things. What the market's doing in February.
I wanted to talk about a little bit. This leads
into an article that I ran across in Yahoo Finance
that caught my eye last week. It simply says wire
home prices so high. We were talking a little bit

(25:23):
about on the break, we were just looking at the headline.
We can kind of come to a conclusion, and the
conclusion with any market is supply and demand. But let's
see what this article has to say. I kind of
thought this was fun because it starts off by talking
about an article that was released on May eleventh, nineteen
seventy eight. The median selling price of a house hidden

(25:43):
all time high of forty four three hundred dollars in
nineteen seventy six. Fast forward four and a half decades
and the median price of a home is now over
four hundred and nineteen thousand dollars. So wirehouse price is
so high. And again I'm pulling from a Yahoo Finance
article here, I'm paraphrasing a bit. There's no two ways

(26:05):
about it. America has a supply issue regarding affordable homes.
By affordable, we're talking about entry level homes designed for
the first time home buyer. First. There's a lot a
long standing leg and building. There was a notable slowdown
in housing starts in the wake of the financial crisis
in the early two thousands. During this period, the market

(26:27):
was flooded with foreclosure properties, and supply has far out
paced demand. In reaction, the builders were reluctant to forge
ahead with new construction projects catering to first time home buyers.
Now it's kind of flipped around. We really need those
homes and they're not there, says the author of this article.
In January of twenty twenty four, nearly half or forty

(26:49):
seven point nine percent of homeowners with the mortgage backed
by Fanny may Or Freddie Mack had an interest rate
of three point five percent or lower.

Speaker 2 (27:00):
Almost half. Wow.

Speaker 1 (27:03):
Yeah, so that tells us quite a story.

Speaker 2 (27:08):
It's the prosen effect.

Speaker 1 (27:10):
Yes, yeah. So at the same time, the average interest
rate of new thirty year fixed rate mortgages is six
point six percent, So that's a three point one percent difference.
According to the article, which I completely believe, three hundred
thousand dollars mortgage. The difference there is five hundred and
eighty dollars a month between today's six roughly six point

(27:33):
six and the three point one they're quoting, I'm sorry,
the three point five difference of three point one percent
in this article. So big, big difference just on a
three hundred thousand dollars home. Then they go on to say,
what if there's a recession. If a recession comes in
and rates drop, we will see some softening and prices.

(27:54):
Yet with this scenario, we think there's still the same
outcome because if the rates drop from today's six point
five percent to something like five percent, that continues to
feed the demand. And we've been talking about that a
lot on this show, Jerry, where you know, if we
start seeing the rates, I really think five percent would
be that pivotal number where a lot of people would
suddenly consider selling that house. With the three point five

(28:19):
percent loan one hundred percent agree.

Speaker 2 (28:22):
And there's there's been lots of studies already done on
that that that five to five and a half. Whether
it's that psychological you know that oh you're in the
mid to low fives, or is it that the payment
differential isn't all that great. Something about that is what
would get people to move and sell their house it

(28:42):
has a three percent mortgage on it for a five
percent mortgage. The other thing about this article that you
know it doesn't really touch on, but we have a
tremendous amount of debt in our country right now. A
lot of people have put money on credit cards, and
so even they were keeping their spending habits the same

(29:03):
from the as they were in the pandemic, even though
the money wasn't there to support it, so debt rose,
and I get calls all the time. I get probably
five to ten calls a week for people looking to
do an equity line of credit. They know they are
tapped out on their credit cards, but they do not
want to give up their three percent mortgage rates, so

(29:25):
they're willing to pay eight percent on an equity line
of credit or nine percent or whatever to pay off
that credit card. Debt, and when you look at that
and you think, well, when will those When will people
just do a cash out refinance get rid of all
their credit card debt? And I don't think we're that
far down the road. So if rates get to below six,

(29:46):
I think you're going to see a lot of people
doing cash out refinances.

Speaker 1 (29:50):
Yeah, I agree, And actually I wanted to talk a
moment about this sidetracking just a little bit here. Somebody
here in my offic just closed on a home equity
line of credit last week and we were chatting a
little bit about that. I think it is just such
an amazing tool that virtually everybody should have one of

(30:12):
these things as a backup plan. And in this particular case,
they used a local credit union to do the home
equity line of credit. Not trying to take anything away
from you, Jerry.

Speaker 2 (30:24):
But oh that's fine.

Speaker 1 (30:27):
What I thought was really nice about this is I'm
just going to call them out by name. It was
with PMA Federal. They ended up getting a just under
one hundred thousand dollars home equity line of credit, and
they're both have good, good credit scores, and it was
a fair amount of equity. But I thought, what was
really nice about this is it was a teaser intro

(30:49):
rate of six point five percent for the first year,
and then it goes to I believe prime plus two
I think was the number they told me, which is
a pretty normal number for a heelock. I believe, right, Jerry, Yes, yeah,
But what was neat about this is they did it
no appraisal, no closing costs, completely cost free.

Speaker 2 (31:14):
But there's always there's not and nothing is ever free
in this world. So then it begs the question what
is the catch? And my guess is is that if
they close the equity line within a couple of years,
they will that there's some sort of pre payment penalty.
There's got to be some catch because to do it
for paying the title fees, title research, the lending fees,

(31:36):
just to do an equity line, there's got to be
some catch somewhere.

Speaker 1 (31:40):
Yeah. I mean, there's no such thing as a free launch.
And I didn't go through all the documentation. It wasn't
my loan, so I didn't go that deep of a diet.
But I was really impressed that no out of pocket
have a ninety thousand dollar credit line that they're working with,
and what a wonderful thing because you don't. That's what
I love about a helock is yes, in some cases

(32:04):
there might be an annual fee to keep it open,
but generally speaking, if you're not using the money, you
don't have to pay the fees. So it's it's a
backup plan in case of job loss or you know,
some kind of an emergency or in our world. And
in this particular case, it's uh, it's someone in my
office that's a pretty a student investor in their own rights,

(32:27):
they wanted to have the ability to have the down
payment money if they saw a really great opportunity come
up for a piece of property. M what a wonderful
opportunity if you have that ability to go out and
get a helock. So, anyway, enough of that particular soap box,
But why don't you kind of circle back here with

(32:50):
the housing prices and supply and demand. And this led
me into a different article here that I ran across.
That's that's titled what home builder stocks are telling us
about the twenty twenty five housing market. And I'm going
to paraphrase this quite a bit. This article goes on
to quote a lot about Lenar, which is the number

(33:14):
two home builder in the United States, And the key
piece of data here that I'm looking at is Lenar's
gross margin on home sales for the first quarter of
twenty twenty five actually hit a decade looking back a decade,
the lowest profit margin they've had in over a decade.

(33:35):
They're down to nineteen percent compared to just as early
as twenty twenty two. Here they were at twenty six
point nine percent. Was they're high And that's the margin
of profit on a home sale. And then I'm looking
at this this stock chart for Lennar and it looks

(33:58):
like it just fell off a cliff.

Speaker 2 (34:02):
Well, and it's not just an our Every home builder
has the same issue. You know, the Wall Street is
worried about what their profits are going to look like.
And part of that's due to tear us. Right if
you're trying to sell home today for four hundred thousand
before it's built, But what's it going to cost to build?
That's a wild card right now, because what's the cost
of lumber, concrete, drywall, What is all that going to

(34:23):
cost in the next three to six months.

Speaker 1 (34:25):
Well, even more importantly, labor, I mean that's a little
bit more fixed, but that's been you know anyone in
the trades lately, I just keep hearing that's such a
challenge that there's just not enough skilled labor out there.

Speaker 2 (34:38):
As well, exactly exactly, So I think that's what's what's
causing all the builders, you know, stock prices to fall.
Is that unknown of what is their profit going to
look like, you know, in the coming quarters.

Speaker 1 (34:53):
Yeah, So I don't have too much time left this segment,
but I just thought this was kind of fun. I
couldn't help but dig a little deeper here. So what
are the five largest home builders in the United States? Well,
D R. Horton is number one, Lenar is number two,
Poulty Group number three, NVR East Coast Builder, which I

(35:13):
actually hadn't heard of. I heard of their affiliates before
looking this up, but they're number four. In Meritage Homes
is number five, So what what have they been doing? Well?
I pulled up in all five of these are publicly
traded companies, by the way, so I just happened to
pull up the stock market information. We look back for

(35:37):
the last six months, the best the best performer was
down twenty three point two percent, and the worst one
was down well over thirty percent. In the last six
months and even the year to date is the best
of the group here is down three point four to
seven percent, which is actually Pulty and NVR. The East

(35:59):
Coast bilders down eleven percent. So the home builders themselves
are feeling some pain here because of what we just
talked about with materials cost and probably labor, and a
lot of these big home builders are also land banks too.
The property they're building on today they bought in many

(36:19):
cases twenty thirty years ago. They plan this stuff out
along into the future. So anyway, that's part of why
we're in such a supply situation here, as we've just
not been building all that much since the crisis back
in our wait. So with that, we are coming up
on another break. This is Andy Keel with the Home

(36:40):
Solutions Show, and we'll be right back, Hi, and welcome
back to the Home Solutions Show. This is your host,
Andy Keel with Epic Realty, and I'm joined again by
Jerry Sunt with Cross Country Mortgage. And in the last
segment we were talking about all various things homebuilders and
why our house so expensive and supply and demand. So

(37:03):
I think that's usually the answer when talking about any
market supply and demand is pretty much always the answer.
But I want to shift gears a little bit this
last segment just talk about a few things that I've
been dealing with lately, and some of this stuff that
just the real world problems that come up that none

(37:26):
of us would ever think of going in. And what
I mean by that is, we recently sold a big
parcel of land that was a big project for our
company for a while. We had purchased just shy a
three hundred acres up in Solo, Arizona. That was about
two and a half years ago, and we did what's

(37:48):
referred to as a five split. The way Arizona Arizona
law works is I'm going to paraphrase this a bit,
but the gist of it is, if you have a
bigger parcel, it's pretty darn simple to break it into
up to five pieces. If you want to do more
than that, it gets a lot more complicated. It starts

(38:10):
then you have to start going into what's called a
public report, and that starts getting very expensive. They start
looking at water usage and all kinds of other things.
Not to say that's not lucrative, but it's a lot
more legwork to do. Compared to the very easy five splits,
So we opted to go the easy route here and
we did this five split again. The way Arizona law

(38:32):
works with land is because there were some bad actors
back I think, going back into the sixties and seventies
that did all kinds of crazy things, and we hear
these stories about how they were selling Arizona lots, like
Will Rogers was advertising these things on TV. But a
lot of these land splits back in the day didn't

(38:53):
have access. There's all kinds of problems. So Arizona started
cracking down with these land splits. And now if you're
going to do more than what's called a minor land
division or a five split, they have to do a
public report. And this is to prevent some of these
crazy things that happened back in the sixties, where you know,

(39:16):
they are advertising these pieces of land and nobody would
ever build them in their lifetime because there's no utilities there,
there's no road there, there's no nothing there. In some cases,
there's not even access. So with our parcel, we did
this and we ended up selling off of one of
the split parcels, a forty acre parcel, and those folks

(39:38):
had the intent of doing exactly what we did. They
broke it into eight acre five eight acre parcels which
they were going to sell off for folks that wanted
to have like a homestead with some horses. Sounded great
in theory, the numbers looked wonderful, but the reality is
we had a rancher up there that effected we thought

(40:00):
that land was his, and we ran into some weird
problems at first. I mean literally, this was going on
for months, and we'd have buyers we'd hear about, and
then they just disappear. Well, we found out our rancher
friend was doing everything in his power to scare off
every buyer that was ever coming over to look at

(40:21):
our parcels, and the folks that bought the forty acres
from us. So it's like, gosh, what do you do
when you have, frankly, a bad neighbor that's scaring everybody away?

Speaker 2 (40:32):
And how are they scaring I mean, what was he
doing to scare every one?

Speaker 1 (40:36):
Well, in some cases he was confronting them and I
wasn't there, so I don't know exactly what was going on.
And in other cases, and we were able to prove this,
he had a caterpillar that he was dragging boulders into
the access point so nobody could actually drive down the

(40:57):
street talk at the thing. So he was like blacking
access at any rate. And I have to give a
ton of credit to both the real estate agent that
we were working with and the buyers of our forty
acre parcels. You know, you start thinking what would you
do in this situation? He started thinking, like the legal aspects,

(41:19):
and I give these guys just a ton of credit.
We solved this problem. And I say we because it
had nothing to do with me. But our buyer solved
this problem by literally selling this rancher. I think it
was the prime piece that he really wanted to for
such a deep discount. They made him his best friend,

(41:40):
and suddenly everything sold up there.

Speaker 2 (41:43):
Yeah right, Oh that's funny.

Speaker 1 (41:45):
So I mean, frankly, they bribed him, but it worked.
I just I thought that was kind of a funny
story because you think about how do you handle those solutions?
And the best one was they found a win. Win said, well,
maybe not the best win for them, but it worked,
so they're happy they got their five eight acre parcels.

(42:08):
I think I believe they got them all sold if not,
they're very close to having that done. We're completely out
of the project now. Our new buyer came in and worked.

Speaker 2 (42:18):
Out well, so it's fantastic.

Speaker 1 (42:21):
On a different note, there was a couple of properties
we ended up going to contract with this week that
I wanted to make mention. We were talking a little
bit about flipping houses in earlier segment, and I just
kind of wanted to reiterate to the listening audience that
there's not always a single, one and done best way

(42:42):
to sell your home. We had an interesting situation where
it was a friend of mine, somebody he goes to
church with, and the mom has lived in this house
for many, many, many years. They told me the exact
number well over twenty and a long story a little shorter.

(43:02):
She had a hoarding issue. She couldn't throw anything away,
so it was a very compact house full of full
of things and the sisters. The sister stepped in to help. Basically,
the homeowner had fallen and hid her head and when

(43:26):
they took her into the hospital they found out that
she not only does she have dementia, but she has
terminal cancer. So it was really kind of a sad situation.
So the family stepping up to help, and they were
just overwhelmed because it was, you know, a pretty full house,
and not that it wasn't well cared for, it was

(43:47):
just not updated in probably as many years as she
had lived there. And the family wanted to help, but
you know, how much time and effort can you put in.
They weren't willing to go in and rehab the whole house.
So we came in and made them an offer and
they were happy to move forward with it, and just
a nice win win for all of us there. And

(44:10):
we had another situation where, in fact, we just closed
on that one last week, where it was a house
that overall was in good condition, but for whatever reason,
the owners of the of the home didn't. It desperately
desperately needed a new roof and it just simply wouldn't
go conventional without a roof. So what do you do

(44:32):
in those situations? Jerry? From a from a lender perspective,
If if there's like some clear issue that prevents the
lender from from moving forward with the loan, well.

Speaker 2 (44:43):
You know, you can always do an aescra hole back
and have the work done after closing, or you know,
we can always flip it over to a construction lawn,
and so there is there's again the buyer is more
than likely going to take on a bigger debt or
pay a high rate because of the construction loan. But

(45:03):
you know, the common solution for that is just escro
hold back that the seller will agree to pay for
the repairs after the deal is closed because they get
their proceeds and then the work is done after closing.

Speaker 1 (45:17):
Yeah. So I mean that's also a point I want
to make to the audience is we're solving someone's problem
where for whatever reason they they didn't want to put
a new roof on the house, and we discounted the
property appropriately for the work and the effort that needs
to go into that, and they were happy because they
don't need to put the money out of their pocket.

(45:37):
We're happy because we're getting a fine house that, yes
it does need some work, but we're effectively doing just that.
We have the ability to go in and take care
of this problem, and once we're done, we're going to
have another property that will add to our rent to
own portfolio. Again, the point I'm trying to make here

(46:01):
is when you have the ability to solve someone else's problem.
That's where the magic can really happen.

Speaker 2 (46:08):
Sure, and yeah, and that's that's what makes me successful.
People in real estate successful. Is there able to solve
a problem or think outside the box, to look at
things from a different angle to get it resolved. Because
there are going to be headwinds you run into, you know,
you find a bad roof, or you have an issue

(46:29):
on title where there is a cloud on title. How
do we solve it? You just got to think outside
the box to figure out solutions.

Speaker 1 (46:37):
Yeah, exactly, And that's why just a little creativity in
this business is certainly a really important thing. And you
know sometimes that creativity. We talk about this a lot
in the show is what if what if we did
owner financing from a seller's point of view? That's such
a wonderful tool if that's an option that's open. Is

(47:02):
what if we what if we did a seller finance
note at a fair market rate and offered that to
a buyer. That suddenly takes the repair problem out of
the equation for the lender, doesn't it. Yeah, So there's
always a creative way of doing this. And again the

(47:22):
point is, I mean, there's it's not just call up,
call up your real estate agent and you have to
have a perfect house. We all know that that's not
This world is anything but so sometimes we have to
figure out how can we get a property sold when
it's not perfect, And that's really one of the things

(47:42):
that we tend to specialize in. So anyone out there
that does want some more information on how to do
something like either from a buyer or seller perspective, if
they're looking to buy or looking to sell a house
that's not perfect by all means, please reach out to
me Team Andy Keel five two zero five three nine

(48:03):
nine five nine one, and just one more time here, Jerry,
if you'd like to share your number if anyone is
looking for a loan on a property, yep.

Speaker 2 (48:12):
Five two zero three seven zero nine five seven six.

Speaker 1 (48:17):
And with that we are coming up on the end
of the show. I hope you have a wonderful Sunday
and thanks for joining us. This is Andy Keel with
Epic Realty and Jerry sent with Cross Country Mortgage and
we'll see you next week.