041325- Home Solutions Podcast

Episode Transcript

Speaker 1 (00:02):
Hi, and welcome to the show. This is the Home
Solutions Show with your host Andy Keel and I am
joined today by Jerry Sunt with Cross Country Mortgage and
our very special guest, Bob Zetmeyer.

Speaker 2 (00:15):
D Hey, Jerry, morning Bob.

Speaker 3 (00:19):
It's great to hear that. Boys.

Speaker 2 (00:21):
It's good to hear you guys, and see you again.

Speaker 1 (00:24):
Well, we invited Bob back to talk about a couple
of things, but probably most importantly, let's do a market.

Speaker 2 (00:32):
Update, all righty, So in Tucson, the numbers just came
out this week for the March sales. And normally March
is going into the year a little better in February,
which is a little better in January and then April May,
and typically it peaks out in June. And we've been
seeing the last couple of years where it sort of

(00:54):
peaks a little bit early. And this March we had
twelve hundred and forty five homes sale and all of
the Tucson MLS twelve forty five. What's interesting is there
were two one and one new listings that came on
the market. So the number of sales from last year

(01:15):
is down by five percent, but the number of new
listings on the market is up by thirteen point three percent,
and so we're now the question is is the MLS
doesn't differentiate was this property listed before, and how many
of those twenty one oh one you know, new listings
are actually relisted where they canceled the old listing and

(01:37):
started in another one just to kind of diminish the
days on market. If you do that within thirty days
of canceling, it's going to continue the contiguous days on market.
You have to actually pull your property off the MLS
for thirty days to get a full reset on the count.
And it still wouldn't matter if anybody looking at Zillo
is going to know how many days it was on
the market and when you took it off and when

(01:58):
you put it back on, so it's not as invisible
it used to be when you And that's why last
fall we were telling people, you know, I don't think
it's wise to list right now, just because nobody's looking
and everybody thought rates were going to fall, and it really,
you know, hasn't happened by very much. And even though
the overnight rate of the bank fell, what's the rate

(02:21):
on the street, Jerry, I don't want to steal your
surprise from the second segment.

Speaker 3 (02:25):
Well, it's been a roller coaster this week, the biggest
roller coaster that we've seen since, you know, the very
start of the pandemic or two thousand and eight. Yeah,
but mortgage rates are are just below seven percent, so
it definitely increased from the turmoil from the tariffs pleading

(02:45):
over into the bond market and into the NBS market.

Speaker 2 (02:51):
So you know, the bottom line is median sale price
in Tucson in the month of March was three hundred
and sixty seven thousand. That's average Joe's home price. The
average sale price, which includes the multi million dollar houses,
four hundred and fifty five thousand dollars. So again, our
MLS size goes all the way to Globe nearly up

(03:15):
to cast Grand, down to Nogallas, all the way out
to Douglas, I mean, so it's a huge area. I mean,
way bigger than they used to report before, even though
there's not a lot of activity in those outlying rural areas,
and you can see it when you look at the
sales by area. A lot of those areas in the
whole month of March had two sales, So it's you know,

(03:37):
a kind of noise level when it comes in the
grand scheme of things. But the biggest thing is, you know,
home prices in the median home price back in twenty
twenty four peaked at three hundred and seventy five thousand,
and that was in May of twenty twenty four, and
we are at three hundred and sixty seven thousand. So
does that mean you're home fell by eight thousand dollars?

Speaker 1 (04:00):
Are not?

Speaker 2 (04:00):
Necessarily it means what people are buying fell by eight
thousand dollars. And a lot of people, you know, think
that means prices are dropping, and they are. I mean,
I would say still even though I I a lot
of people laugh at me. I think the best tool
out there that shows the market is the Zillo z

(04:23):
estimate history. If you go and find your home, look
at it on Zillo, scroll down to where it says zestimate.
There's a little hyperlink, a little blue link you can
click on and it will show you the ten year
history of your home and a lot of houses. Are
you seeing a slide go on? You see this big
jump up that happen in twenty twenty one and two,
and then it's been sort of a slide since twenty two,

(04:45):
not a fall by any stretch, but just slowly, slowly
kind of dropping down. And meanwhile wages are marching on
and going higher. So I think if I had the guests,
I would say probably at the end of next year,
just in time for midterm election or actually, yeah, we
just had elections in yeah, next year, so in twenty

(05:06):
twenty six, the end of twenty six, I think, by
my calculation and sort of projection, I think that the
prices of homes should get closer to match what people
can afford. Any thoughts on that, Jerry and Andy?

Speaker 3 (05:23):
You know, I hadn't thought that far in the future, Bob,
And it brings up a very interesting concept of if
wages continue to increase and values stay static, it will
be affordability will be coming back in vogue. And part
of that is also due to interest rates, right, they
are expected to come down later this year and into
twenty twenty six. Now we've said that for the last

(05:45):
couple of years, but it does seem the momentums moving
that direction. So yeah, that is I think that makes sense.

Speaker 1 (05:54):
Yeah, And I've said many times I don't have a
crystal ball, and I never will. The closest thing we
have in this market to a crystal ball is and
I've always called this the crystal ball indicator that you've
taught me about, Bob. That's the market absorption rate, which
we can talk about a little bit. But the long
term I still have a bit of a more positive outlook,

(06:20):
just because I know for sure we still have a
supply issue of housing in this country and especially in
certain areas, and I think that will be the longer term,
bigger driver. But we have a lot of short term
chaos going on that could really change things in the
short term. Personally, I'm still buying properties. I'm far more
selective about what I'm buying.

Speaker 4 (06:42):
However, and Andy, did that change over? Did that become
more acute over the last few weeks with the turmoil
with terras or you know, are you more cautious now
than you were a month ago? I'm curious about that
because it's you know, things have been abruptly change in
the past month.

Speaker 1 (07:02):
Ironically, I take a very very simplistic approach to this.
We jokingly just say it's fifth grade math, and what
I mean by that is I don't care about the macro,
and it's not about whether I'm fearful or well. Interest
rates play a huge part, don't get me wrong. But
if I can go in and buy a property with

(07:24):
twenty five percent down based on the current interest rate
and make a particular profit, I will say yes and
buy the house. It's that simple. But I have a
particular profit margin that I need to hit. In my case,
it's typically five hundred dollars, but there's a few factors
involved there that go a little beyond that. But can

(07:44):
I make my net profit that I'm looking for. If
the answer is no, I just pass. So it's not
as scientific as you might think. It's it's well the
property work. If the answer is yes, I'll buy it.
If the answer is no, I'll pass. There's not like
some major factor going into that except for the interest
rate and my payment calculation.

Speaker 2 (08:06):
All right. You know, we're in a cycle. Every summer
we have more sales. Every fall, it slows down, it
bottoms out in December and January. So last March we
had one thousand, three hundred and fourteen homes close, and
this March we had twelve hundred and forty five homes closed.

(08:28):
We're about seventy five short, which is about two and
a half houses a day less than what we sold
a year ago. So we peaked last summer at thirteen
one hundred and ninety five homes in April, and then
it got up in May to fourteen and sixty seven

(08:50):
homes that sold. That was the highest all last year.
And what's sort of interesting when you when you look
at these numbers year over year, the dollars per square
foot from last year to this year is too twenty
eight last year, two hundred and thirty two dollars a
square foot this year, so four dollars a square foot.
More So, when you think of that, well, my home

(09:12):
went up four dollars of square foot, how could the
price have fallen? That goes back to our point that
the price didn't fall the amount that people are paying
what they're buying. It's not that your home, felu. Your
home went up four dollars a square foot. So if
you have a four hundred and fifty thousand dollars home,
which is the average sale price four fifty one sixty

(09:33):
eighty nine, and it went up two bucks a foot,
and it's a you know, a twenty five hundred square
foot house, you made five dollars or five thousand dollars
on a four hundred and fifty thousand dollars investment. That's
not a lot of money, not a lot of way
to return. And especially for those that have rental properties

(09:54):
that are barely breaking even on the rent, right, you know,
the rent isn't enough to pay the debts service and
the taxes and the insurance and the maintenance and repairs
and vacancy. And you know the whole reason your owner
rental property is for the appreciation. Well, guess what you're
not appreciating. You're one percent if that in appreciation.

Speaker 1 (10:15):
Yeah, And I think, just to say it another way,
is based on what I'm seeing here the price per
square foot, the property values are still edging upward a
little bit, but the buyers are shifting a little bit
towards the lower end of the market. Is that a
good way of saying it?

Speaker 2 (10:30):
Yep. And a lot of people are just staying put
because they have a very affordable two to three percent
mortgage and they're just hanging in there. And the people
that have to buy are choosing the lower priced homes
and we're running out of them. That's why the median
is still climbing because there's fewer and fewer low price homes,
which pushes everything higher. So it's kind of a deceptive thing.

(10:53):
Oh look, the house prices are rising, that must mean
the market's in a very strong position, and it's not.
It's actually the best buyer's market that we've had in
I would say fifteen years. I mean, it hadn't been
this good since the foreclosure deals that were out there
in twenty ten.

Speaker 1 (11:11):
Yeah, we're definitely seeing more of a shift to buyers
getting concessions, getting better pricing. Definitely would agree with that statement.

Speaker 2 (11:20):
And Andy, the one thing that I would tell people
is you don't want to chase the market down. So
if you look later on we're going to talk about
days on market. There's still a whole bunch of houses
that are selling in the first week or two on
the market. But if you price them right, they'll sell immediately.
If you price them too high and say well, i'll

(11:41):
lower the price later, I'll lower the price later. We've
had this happen on a couple of properties where that
we lower the price based on what other homes were
for sale, and they saw that our price lower and
they lowered theirs even more. And every time you go
to do that, you're chasing someone else lower and lower
and lower. It's better to just come out and hit it.
If it's sort of funny. If you get multiple offers

(12:03):
on it, now, all of a sudden, the controls back
in your court and you can direct whether or not
you know, you know which one you're going to accept.

Speaker 3 (12:11):
So it really is, it's all about it's got to
come back to the gate priced right from day one.

Speaker 2 (12:17):
Yep, it looks like we're out of time, guys.

Speaker 1 (12:20):
Yeah, well we are running a little low on time.
So this is Andy Keel, this is the Home Solutions Show,
and we will be right back. Good morning, and welcome
back to the Home Solutions Show. This is your host,
Andy Keel with Epic Realty, and I'm joined today by

(12:40):
Jerry Sunt with Cross Country Mortgage and Bob Zachmeyer of
exp Real Team. Jerry, would you like to share your
number for the audience.

Speaker 3 (12:50):
Of course, five to zero three seven zero nine seven six.

Speaker 2 (12:55):
And Bob as well, sure, five to zero three four four.
I'm sorry, I haven't done this in quite so long.
I'm gonna give you my cell phone number five two
zero four zero four three seven four four I've had three,
one four sold. Now I can remember it, but I
had that for fifteen years and it was very easy
to remember. It's a Google Voice number. But the only

(13:17):
place I ever used it was on this show, and
I haven't done the show, so loner, I forgot it.
That's funny.

Speaker 1 (13:23):
Oh, that is funny. So before the break, we were
talking a little bit about the market. Let's continue with
the market.

Speaker 2 (13:29):
Update, sure, so you know, the next thing to look
at is, Okay, we know how many houses is sold.
We know that it's fewer than last year. We know
that the pendings are not the pennings, but the new
homes coming on the market are higher than last year
by thirteen percent. But how many houses are versus town

(13:49):
homes versus condos are are selling? And how many are
there out there for sale? So of the forty five
hundred and seventy eight active listings on the MLS right now,
and keep in mind that there was a time in
twenty twenty two that that number dropped below one thousand,
So we are coming up on five times as many
homes on the market as we had back in twenty

(14:11):
twenty two. So that in itself should tell you there's
five times more houses for sale, and the number of
homes that were sold back then was like twenty two
hundred and we're at twelve hundred, so a lot less
homes being sold and a lot more five times more
houses for sale. So it's definitely changed into a buyer's

(14:33):
market from a long term, you know, twelve or fifteen
year sellers market. But there's three thousand, seven hundred and
thirty six single family homes out there for sale. The
average price of those homes six hundred and thirty four
hundred and ninety seven dollars. You know, the median is
three sixty seven. The average home out there for sale,

(14:55):
single family is six thirty, almost twice what the median is.
So that you know, illustrates for very well that we're
running out of low priced inventory, and there's you know,
the higher priced homes are really taking over. The average
town homes three hundred and fifteen town homes on the
market median price of a town home or the average price,

(15:15):
I'm sorry of the town homes three hundred and eighty
one thousand, and condos two hundred and fifty one condos
with an average price of two forty one manufactured homes
are higher than condos. Two forty nine is the average
price of a manufactured home, and there's two hundred and
fourteen of them out there. And then mobile homes. That's
anything built prior to July fifteenth, nineteen seventy six is

(15:40):
a mobile home. Anything built after that as a manufactured home.
And that's when they came out with flood standards or
how thick the walls had to be. They quit the
two inch walls and the polybutylene plumbing and the and
aluminum wiring. But there are sixty two older mobile homes
and the average price of those is one hundred and
seventy thousand dollars. So for you know, an old prior

(16:05):
to seventy six mobile home, the average is one seventy.
A condos two forty one, manufactured home is two forty nine,
town home three eighty one, and single family six thirty.
It's crazy. So days on market is something that also
they report one number for the entire mls. You could
do days on market for neighborhood, you could do days

(16:27):
on market for property type, you could do days on
market for price point. I mean, there's so many variables
that affect days on market. But the good news is
days on market actually fell from last month and January.
January was fifty eight, February was fifty seven, and days
on market for the month of March for fifty five.
But when you look at the that's all the homes

(16:51):
listed for sale average, and then when you look at
the median days on market, it's actually twenty eight. So
that tells you that a lot of homes that were
good deals old right away, and the median was twenty eight.
Of the homes that Dentist sell there, you know, it doubles.
The days on market double would be fifty six were
at fifty five. So interesting, Yeah, I mean, but again

(17:13):
you could slice and dice that so many different ways,
based on what kind of property it is, where it's located,
what price point it's in. I mean, it's just all
kinds of variables there. But the days on market for
prices under two hundred thousand dollars, we have seventy eight
properties last month that closed under two hundred thousand. Days

(17:34):
on market was forty one days. So now, Jerry and Addy,
what would logic tell you that the lower price has
the higher demand because more people can't afford it. You
would think that that would be the lowest days on
market of the entire cart. Well, it's kind of interesting,
is it's the highest days on market of all the

(17:56):
homes that sold. The less than two hundred thousand were
forty one days on market. When you go to two
hundred to three hundred, it was twenty six days on market.
When you go to three hundred to four hundred, to
jump back up to forty, and then thirty three and
twenty six and seventeen. When you get to seven hundred
to eight hundred, it's that twenty days on market, eight

(18:16):
hundred to a million, sixteen days on market. Now, granted
only thirty five homes were sold, but this is again
a testament to pricing it right. When you price it right,
it will sell one million to one point two million.
Twenty one home sold in an average of five days
on market. Shocking more people buying two hundred thousand dollars

(18:39):
homes and one point two million dollar homes.

Speaker 1 (18:43):
Yeah, that's shocking to me. Five days in the market.
It's actually a decent sample size. There's twenty one sales
with a median days on market of five yep, yep.

Speaker 2 (18:53):
And then when you go higher, you know, like one
point two to one point four it's nineteen days on
market for seventeen homes sold, and then higher than one
point four in above thirty total sales twenty one days
on market. But it's still all those high end houses
are less than half of what the two hundred thousand
dollars homes are.

Speaker 3 (19:13):
Interesting. That is strange.

Speaker 2 (19:15):
I'm telling you. I think the higher end houses are
much less dependent on the economy. It's people that are
actually catching money out of the stock market and paying cash.
We're seeing a lot of that. We've seen that for
the last several years, and especially up until this week.
You know, I haven't heard how much Warren Buffett put
back into the market during the lull. But I just

(19:39):
saw a lot of people their proof of funds was
coming from Morgan Stanley. So I've been doing this a
very very long time, I mean twenty five years. I've
never seen as many proof of funds coming from Morgan
Stanley most of the time, as well as Fargo Chase
for Bank of America. Interesting, so, Jerry, I mean, I

(20:00):
guess you wouldn't if they're paying cash. You wouldn't see
in the loan business or did you like quote rates
to people and they just said, you know what, I'm
going to go pull my money out of stock market instead.

Speaker 3 (20:10):
Oh, I mean people, that was the thing for a
long time. It's not so much anymore. I mean, when
we lose six trillion dollars in a few days, it
makes people.

Speaker 2 (20:20):
Pause, Right, Yeah, wasn't that crazy six trillion dollars vaporized?

Speaker 1 (20:27):
Yeah, it's been it sure has been a wild ride.

Speaker 2 (20:30):
So yeah.

Speaker 3 (20:31):
So, I mean I think that I haven't seen that
much lately. But in twenty twenty three, that was definitely
a thing when rates were rising. They're like, well, wait
a second, I was pull money out of a stock
market because if people have made so much money in
the stock market during twenty twenty one, twenty two, and
twenty three, twenty four was another great year, but towards
the end of the year that became less and less

(20:54):
because the big gains people had in the mag seven
was definitely starting to dissipate. It's starting to go down
because that those that where so much wealth was created
was starting to slow. So people were then starting to
take out mortgages again.

Speaker 2 (21:12):
So when we look at the price point the houses
under two hundred thousand, There are two hundred and eighty
six listed for sale. Last month we sold seventy five,
so that's just over a quarter of those homes that sold,
which is a normal market. A four month supply of
homes is a normal market. When you jump up into

(21:33):
two hundred and three hundred one thousand dollars, then there
are six hundred and seventy homes for sale and two
hundred and fifty seven of the six hundred and seventy sold,
and that puts it at thirty eight percent of those
so I mean higher again that the sub two hundred
thousand are way less absorption rate. Thirty eight percent of

(21:54):
the ones two to three hundred thousand dollars were absorbed.
When you move up three hundred to four hundred thousand,
got four hundred homes exactly, that's sold out of thirteen
hundred and two, which is a thirty percent absorption rate.
And then when you go to four to five hundred thousand,
it goes back to about a quarter. You have eight
hundred and twenty four homes between four and five hundred

(22:15):
thousand listed for sale and two hundred and sixteen of
them sold, So you know it's it's sale kind of
a quandary like why are those super cheap houses?

Speaker 3 (22:24):
And then you know the answer, guys, I think editing
below two hundred thousand is functionally obsolescent or is you know,
maybe it's a mobile home right where you can't get
traditional financing.

Speaker 2 (22:38):
And my thought was that they were you know, remember
I told you the MLS expanded, and it's all these
rural places out in Mammoth and there you go and
Douglas and everything else. And I think it's people during
market shortages are forced to go live further away and drive,
you know, an hour to work every day. But when
when there's a you know, five times more houses on

(23:00):
the market for sale than there we're before, you don't
have to do that. And I think those properties, the
rural properties, are suffering.

Speaker 3 (23:06):
Yeah, that's probably that's the answer.

Speaker 2 (23:10):
But even the one point two to one point four million,
there's seventy nine available homes, twenty of them sold last month,
so we're right at twenty five percent of those homes
being sold. But it's when you get to the type
of residents that's where it shows up. The town homes
are not selling it anywhere close to the same clip

(23:31):
as homes are as single family homes are and or
any other type. I mean, single family homes is always
and personally, when I invest in notes and own the
loan on a property, that's the only thing I invest
in is single family homes. I don't invest in multiplexes.
I don't invest in manufactured housing or condos or town homes.

(23:53):
I just do single family. It's the highest demand product,
and I want the lowest price that I can get
to get the higher demand. But after this, I'm thinking, Wow,
I don't think I want to invest in these, But
I bet you anything if if you could analyze these
numbers that a lot of those properties are out in
rural areas.

Speaker 3 (24:09):
Yeah, makes sense.

Speaker 2 (24:11):
So Andy, you got looks like we might be coming
up on a break here.

Speaker 1 (24:14):
We're coming up pretty close. I'd like to get to absorption, right,
if it's in there.

Speaker 2 (24:19):
Okay, Well, they're right, they don't. Actually they post the
numbers sold in the number listed, but they don't do
the right You have to calculate it, and that's kind
of what I was doing as we've running along those numbers.

Speaker 1 (24:32):
All right, Well, let's talk about that after the break.
And we are coming up on a break, So we
will be right back with the Home Solution Show after
these messages. Good morning, and welcome back to the Home
Solution Show. This is your host, Andy Keal with Epic Realty,
and I can be reached at five two oho five

(24:53):
three nine nine five nine one. I'm joined again with
Bob Zachmeyer and Jerry and we're doing a lot of
market data here and we're going to talk about what
I call the crystal Ball indicator or the absorption rate
here in a moment. But the fact that this is
basically tax weekend before April fifteenth, I wanted to share

(25:17):
a little exercise that I found really really surprising, and
many of them have heard this exercise. If you take
a penny a day and double it every day for
a month, the number you'll have at the end of
thirty days is pretty astounding. I wanted to change that
slightly to a more real world type of scenario. So

(25:41):
I said, if I had a dollar and invested it
for thirty years and it doubled every single year for
those thirty years. At the end of thirty years, how
much would I have. Well, the answer comes out to
if there's no erosion, there's no taxes taken out. If

(26:03):
it just simply doubles, the answer comes out to one billion,
seventy three million and some change.

Speaker 2 (26:11):
And that's just doubling your money every year without tax.

Speaker 1 (26:13):
Yep. And that's just doubling without tax. But then the
next question comes up, what if we doubled, but we're
taxed every year at a twenty eight percent tax rate
for example.

Speaker 2 (26:27):
Don't forget to add four percent for Arizona.

Speaker 1 (26:29):
Yeah, yeah, no kidding. I'll have to change the numbers
a little bit here. But let's just say we have
to get taxed at twenty eight percent, which is effectively
going to be a tax rate for a higher income earner.
How much do you think you'd have at the end
of thirty years based on paying a normal ordinary income
tax on this doubling again without the tax, it's one billion,

(26:53):
seventy three million with the twenty eight percent tax. I
want to take a guess at that, Jerry, what do
you think we'll have after thirty years normally?

Speaker 3 (27:00):
No, no, don't kid.

Speaker 1 (27:02):
Oh, So the answer is eleven million, six hundred and
thirty seven thousand, or basically about one one What is that? Yeah,
one one hundredth of the amount if the taxes weren't taken.

Speaker 2 (27:16):
Out, and everybody thinks, so I'm only tax at twenty
eight percent, but it's really not twenty eight percent because
you lost the compounding on that twenty eight percent every year.

Speaker 1 (27:26):
Right, it's the it's the compounding effect that that's that's
so vitally important. And just for the fun of it,
let's just call it fifteen percent capital gains tax. Okay,
we're investors, so we're going to pay long term capital gains,
it's say fifteen percent. That so if we double it
every year with paying fifteen percent tax, that number is

(27:47):
still one tenth the amount you would make or one
hundred and three million, five hundred and fifty thousand. So
that's that's the impact of taxes on your or on
your growth rate because it just so deeply impacts the
compounding effect. That's why it's so important to look at.

(28:09):
You know, we don't we don't want we don't want
to skirt our taxes. We want to do things legally,
but we want to do everything legally possible to reduce them.
And that's why, so any rate.

Speaker 2 (28:22):
That's very appropriate for the tax you know, the weekend
before taxes are due, but The other thing that you
really should look at, because we do have a lot
of real estate investors that listen to this show, is
what happens if your money during that time wasn't working
ten percent of the time. So there's three hundred and
sixty five days in a year. Ten percent is thirty

(28:43):
six days. So what if you got your money out
of one investment and like there's a lot of people
that do short term lending for fix and flip people,
even though there's not a lot of fixing flippers right
now because they're not selling very quickly. But if you
did short term lending and you get that money back
and it's sitting idle for ten percent of the time,
So again, that's only thirty six days of the month
that your money isn't working. Over that thirty year period

(29:04):
that you just described, Andy, ten percent of the time
is three years. So basically, you lose the last three
years of doubling. Go look at your numbers and tell
me what it is from over a billion dollars to
having three years lost.

Speaker 1 (29:20):
Well three years lost, Uh no, I'm sorry, I don't
have it in front of me.

Speaker 2 (29:25):
I will hang on. So your you had one hundred
percent return on investment. You started with one dollar, right, correct,
and you ended if with no taxes taken out, you
ended at one billion, seventy three million, seven hundred and
forty one dollars, So one billion dollars call it that.
If you took off the last three years because you

(29:46):
lost that ten percent, you actually have one hundred and
thirty four thousand dollars I'm sorry, one hundred thirty four
million dollars, which is thirteen percent of what you would
have had.

Speaker 1 (29:57):
Yeah, so it goes to show the immense power of compounding.

Speaker 2 (30:00):
And keeping that money working all the time. I mean
all the time. You got to have it working always,
and that's why you know the stock market, Oh, it's
going to come back. Well there's two things. It's going
to come back, but you have all the dead time
waiting for it to come back, and then it's going
to come back. On what value dollar? If you would
have lost money in twenty twenty, the value of that

(30:22):
dollar today is eighty cents. You lost twenty percent of
the value of the dollar and plus all the compounding
you lost while you were waiting for the market to
break even. So this is why I invest in real
estate notes that pay me every month. They're consistent. You know,
I get paid no matter where I am. As a
matter of fact, I just picked them our new RV.
We're in Texas getting ready to head home and bring

(30:45):
it back to Arizona. But you know, it's it's a
lot of people were sweating when that market was dropping
over in the last couple of weeks, and I didn't
miss a single wink to sleep. You know, we don't
have anything invested in there.

Speaker 1 (31:00):
Yeah, And that's why you make a great point there
as well, Bob. Consistency is so very important because we
tend to think in terms of just simple math, and
it doesn't work when it comes to a lot of
the interest formulas. Like for example, if I have one
hundred thousand dollars and I lose ten percent, and then
the next year I gain ten percent, I don't have

(31:21):
one hundred thousand anymore. You're thinking it's still you're back
to even.

Speaker 2 (31:25):
But you're not do that with fifty percent. So if
you had two hundred thousand you lost fifty percent, it
would put you up to one hundred thousand. If the
next year you gained fifty percent, it's fifty percent of
one hundred thousand, you got one hundred and fifty thousand.
And that's what's so deceiving about the S and P
five hundred. All the financial planners that say, oh, look
it's averaged over nine percent since the Great Depression, It's like, well,

(31:47):
that's very correct. If you take each year's numbers and
average them, that's absolutely correct. But don't forget that losses
come off a high number and gains come off alone
number exactly.

Speaker 1 (32:00):
So the numbers matter, and you know the order matters too.
So if you're invested for thirty years and you random
randomly have a negative ten to a positive ten percent
rate of return, if you if you draw those negative
numbers in the beginning and start with a lower amount,
it's a radically different end result than if you have

(32:22):
some big positive numbers in the beginning, because those early
losses compound yep, or the early games compound two. So uh,
you could average ten percent, but depending on your entry point,
that end number could be radically different. YEP. So with that, Bob,
you were going to give us some numbers on absorption rate,

(32:45):
and this is what this is. This is my favorite.

Speaker 2 (32:49):
So of the I'm looking of the properties that sold
last month and month of March twenty twenty five, twenty
six point two percent of the homes under two hundred
thousand were sold. You go to two hundred to three
hundred thousand, it was thirty eight point three percent. If
you go to four hundred thousand to you know, three
to four hundred thousand, thirty point seven percent, four hundred

(33:11):
to five hundred thousand, twenty six point two percent. And
again I don't expect anybody to remember this, and I
don't even need the decimal places, but some five hundred
to six hundred thousand twenty percent, six hundred to seven percent,
one hundred thousand twenty percent, again seven hundred to eight
hundred percent, I keep saying percent dollars, and seven hundred

(33:32):
thousand to eight hundred thousand dollars twenty one percent. Eight
hundred to nine hundred thousand is seventeen point nine or
eighteen percent. And then a million to one point two
million nineteen percent, one point two to one point four
million twenty percent, and one point four million and above
fifteen percent of all those homes sold. So it isn't

(33:53):
like we are in a compared to previous years and
COVID yes, we're way drastically lower on prices. But for
this month, in this time of year, there's only two
numbers in the whole string that are actually three that
are less than twenty percent. You have the eight hundred
and nine hundred, which is eighteen percent, the one million

(34:14):
to one point two which is nineteen and one point
four and above us. Everything else is over twenty percent.
And you know the two hundred to three hundred is
thirty eight percent. And I just think that that is
affordability driving that bus. You get under two hundred, all
that's left us the scraps and or the rural properties
that people don't want, and you know, there's a big

(34:35):
demand on the two hundred to three hundred thousand. And
again they don't segment this by property type like town
homes versus condos versus everything else. But you know, we
sold twelve hundred and forty five homes this March. In
March of twenty two, we sold eighteen hundred and seventy
nine homes. I mean that is a massive difference. Fifty
percent fewer homes than we had, so a lot of

(34:57):
people still have that, Oh I just put my house
on the market. Is going to sell immediately, not so much.
I mean where I think that ship has saled for
most people unless you price it appropriately.

Speaker 1 (35:08):
So what does this absorption rate tell us about what
at least your belief of what's to come in the future.
Do you see things softening up? I think that was
your indicator, But I don't want to put words in
your mouth.

Speaker 2 (35:20):
I think we're going to have a little bit less
total volume. There's a lot of unknowns in the market
right now, and ironically, a lot of Hispanic buyers they
aren't buying right now if they're here illegally and for
fear of being deported. So a lot of the people
that were paying cash and also people that were getting

(35:45):
getting owner financing. And just so you're aware, I mean,
you do not have to be a citizen of the
United States to buy a home here. That's correct, Garry, Right.

Speaker 3 (35:55):
Yep, that is correct.

Speaker 2 (35:57):
But like if you have a a immigrant from Mexico
and they want to get a loan, does it matter
to you if they're here illegally.

Speaker 3 (36:07):
Well, yes, they have to have a visa that allows
them to work here legally.

Speaker 2 (36:12):
Right, because they have to have a job to get
a loan.

Speaker 3 (36:13):
Commute, Yes, correct.

Speaker 2 (36:16):
So a lot of people that you know in the
past might have been able to go out and buy
a property are hesitant to do that now for fear
of being deported. I mean, they would still own the property.
It isn't like if they got deported they would lose
their home, but they would if they'ren't working, they don't
need it, and then they won't be able to make
the payments, so they would have to turn around and
sell it. So but that is a big missing segment

(36:38):
in the private sector right now. With private loans, a
lot of those were being sold to Hispanic construction workers
that weren't likely here with proper credentials.

Speaker 1 (36:49):
Interesting and with that, we are coming up on a
break and we will be right back with the Home
Solutions Show. Good morning, and welcome back to the Home
Solutions Show. This is your host Andy Keel with Epic Realty,
and I'm joined again by Bob zach Meyer with the
XP Realty and Jerry Sun with Cross Country Mortgage. Bob,

(37:09):
we are talking again about absorption rates and some of
the reasons you think the market is getting a little
bit soft. Continue with that.

Speaker 2 (37:17):
Thought, Okay, one of the things that caused a housing shortage.
That's the very get go. And this goes all the
way back to two thousand and nine was Airbnb came
out and all of a sudden, houses were being sold
as hotels and they were taken off of the for
sale market. They were taking off of the for rent
market and turned into hotels. Two million houses in the

(37:40):
United States were converted to either vrbo or Airbnb, or
a lot of owners don't use those platforms, they just
rent them by themselves. Two million houses coming off. Well,
now that the economy is showing, you know, the last
four years is really hitting and people are getting tight.
Travel is down of people that are going out traveling.

(38:02):
And I know a lot of friends that have Airbnb
homes and they've converted them all back to long term
rentals or they're putting them back on the market for sale.
And what's interesting when you look at how many houses
came on the market for sale in January of this
year two hundred and thirty eight, February was nineteen forty seven,

(38:22):
and March was twenty one oh one. So we're averaging
about twenty one hundred houses a month coming on the
market for sale. If I look back at twenty twenty three.
That number was fifteen fifty seven, thirteen ninety two, and
sixteen twenty two for the year. So I mean we
are like seven or eight hundred houses a month more

(38:43):
coming on the market than we had two years ago.
And I think inventory is going to continue to grow,
and this is a positive thing for the housing market.
What we have right now is not sustainable, and you
cannot have three years of double digit growth. You know,
the worst case in the entire nation was up in Idaho.
There was a fifty percent appreciation two years in a row,

(39:05):
and you know for the state, and if you look
at that fifty percent, Let's say you had a two
hundred thousand dollars home. Fifty percent makes that house three
hundred thousand. The next year is fifty percent more, it
makes that house four to fifty. So you took a
two hundred thousand dollars home and turn it to four
fifty and two years. Who in the right mind things
that's sustainable. So I think the market is leveling off.

(39:26):
Inventory is a positive thing and will actually cause for
those fellars. It's not good news. Prices are they're not
free falling, that's good news, but they're not going up,
either they're kind of sliding slightly downward and time is
marching on, or in the third year after the peak
of COVID and wages are increasing, and you know, like

(39:46):
I said, I think it's going to probably take until
the end of next year, right before the midterm elections.
I think everything is going to the housing markets should
be almost in balance, and it's almost like somebody time
that and basically not the current administration. It's a very
much longer cycle than that, but it seems like that's

(40:06):
where it's going to line up.

Speaker 1 (40:08):
Yeah, I want to change gears here slightly. And this
is something that you're uniquely qualified to talk about, Bob.
This is a Yahoo article that came out a couple
of weeks ago, and I've been waiting on it to
have you back on the show. The headline is the
real estate world is fighting over secret listings and the
future of how homes are sold. And I'm going to

(40:29):
quote a couple of excerpts here from the article. Policy
known as clear cooperation requires agents to list homes on
shared databases known as multiple listing services mls within one
business day of beginning to market the properties. The rule
is designed to cut down on what are known as
off market or pocket listings, where a home is for

(40:50):
sale and marketed semi privately to a small pool of
potential buyers. And this took effect in twenty twenty. And
I'm going to go on to quote actually, the CEO
of exp Realty. We take for granted that you can
go to any portal and have a complete and total
data set that's accurate in real time. That only comes
from the cooperative structure we have set up where everyone

(41:13):
shares everything. Then they go on to say that same
CEO thinks his firm, the country's largest by agent account,
would benefit if the policy is repealed, but he'd like
to see it stay in place because he believes more
transparency is better and cheaper for consumers. And then they
go on to say that, well, most real estate companies
are where they fall on the issue, tends to align

(41:34):
whether or not they benefit from the rule. Executives at
Zillow and Redfin, which aggregate home listings from the MLS,
are for it. Compass, a luxury focus brokerage that touts
its access to private exclusives, pardon me, is against it.
And I know, Bob, you have some opinions on this
as do I, but since I'm still in our member
I'd probably am better off not talking about them, So

(41:57):
I would love your opinion on this article.

Speaker 2 (42:00):
So I want to tell you, when you are a
member of the National Association of Realtors, you cannot make
any disparaging remarks about another realtor. That is and they
called it an ethics violation. You know, it's nothing to
do with ethics as far as like you are a
dishonest person, or you cheated, or you embezzled or anything
like that. I have a good friend in Sacramento, California

(42:20):
that actually took a National Association of Realtors statistic that
said the average real estate agent sells two houses a year,
and then she said, well look how many I'm selling
twenty seven houses a month, and she sent that out
and apparently the mailing went out to somebody who sold
two or less houses a year. They put in a
complaint with her with the local Border relators and she

(42:43):
got an ethics violation. And still to this day, if
you look her up, she has an ethics violation. And
it's like they had nothing to do with me. So
I'm just the job of NAAR is to get as
many people to pay dues as possible. That's the job
of them. They've been sued so many times. You know,
the reason we can get at all of the data

(43:05):
that I'm spouting. I haven't been a member of NAR
for two years. My wife is a member and she
lists homes. But that gives me the freedom to go
out and not put things on the MLS and sell
them on seller financing and get my sellers more money.
And you know, so the idea andy of this cler cooperation. Basically,

(43:25):
the reason it came out is during COVID there was
a shortage of property. They were had all these agents
that weren't selling any homes and they basically were losing
members because they weren't having it, you know, making any money.
So they came out and said, anybody that lists a
home for sale has to put it up for sale
on the MLS. And I will just tell you I'm
not anti MLS. I'm not anti realtor. I'm not actually

(43:49):
realtors are run. Most of the charities in this country
are you know, volunteers by by this community of people.
So I'm definitely not disparaging the realtors. I just don't
believe that somebody who is in this as a full
time person that dedicates their you know, many hours I
spend on these numbers. I mean, I've got thousands of
hours in the charts that I talk about on this show.

(44:11):
And you know, here's somebody else that does this job
as a part time job and sell a house or
two every couple of years. So basically I have to
If I have clients who are looking for a home
and one of my other clients says, hey, I've got
this house, I mean, I'll make a phone call and
they will come over and look at that house. That
is a benefit to both of my clients because I
don't need to charge as much money and they my

(44:32):
seller saves money, my buyer gets, you know, a better deal.
So I think it is disadvantageous to have this clear
cooperation role. And that's the reason I quit being a
member of the National Association of Realtors.

Speaker 1 (44:45):
Yeah, and I mean, isn't there a big factor that
this isn't about us there, this is about the client's wishes.

Speaker 2 (44:53):
It's always about the clients exactly.

Speaker 1 (44:55):
And if a great example is one that I can
think of as maybe a higher end luxury home that
they don't want a lot of people trapsing through their house,
and if they can get it sold quickly, that's more
important to them. And there's other factors that are involved
than just oh, we've got to throw it.

Speaker 2 (45:12):
In law enforcement. And they don't even have any information
out on the public tax record about their home. And
just nice if you could bring a buyer and let's
look one showing and we're done, let's pick. You know,
you wake up tomorrow, everything's taken care of. This is
what we do with most of our privately financed homes.
We wake up tomorrow at this property. You know, the
last thing you have to decide is what day you

(45:34):
want your check, because you know, we can close whenever
you want to close. The people that sell their finance,
there's very few people that are able to sell their finance,
and therefore the buyers are less apt to ask for repairs,
they're less app to negotiate as much on price. You
have a much better chance of selling your home because
it's a segment of people that very few people service,

(45:57):
and those are the hardest working people in this country.

Speaker 1 (46:00):
Actually, I have a listener question, basically, how important is
marketing when hiring an agent and selling a house or
in this case he's referring to a townhouse.

Speaker 2 (46:10):
Well, it depends. I mean, what do you call marketing?
An open house is not marketing. It's marketing the next
sale for the next agent, the opportunity. You know, it's
very few people have a chance of driving down the
street seeing a sign and knowing that that house. You know,
they don't even know anything about that house. When they're
driving down the street seeing a sign and coming inside,
they haven't done a search for size or or price,

(46:33):
or school district or whatever else they're searching on. So
it's sort of an unknown. The people that buy off
open houses is less than two percent, between one and
two percent of all the sales every year.

Speaker 1 (46:44):
What would you define as a good agent, Bob?

Speaker 2 (46:47):
I would say one of the things that made me
a very good agent was I had Jerry Sun and
I could you know, for my sellers, Jerry can close
in eight days, I can get offers accepted. When I'm
representing a buyer, I should say, because I got Jerry
that can close alone in eight days, that's that's a
huge you know, especially in a slow market. You've got

(47:07):
two offers on the table on a good property that
was listed properly at the right price, and I can
close in eight days and somebody else wants six weeks.
Guess who's going to win?

Speaker 1 (47:17):
Yep. So I think I'm hearing network knowledge, experience yep.

Speaker 2 (47:23):
But the biggest thing is experience because of the negotiation,
especially now representing a seller, You've got to know how
to negotiate because it's a tough field to navigate right
now exactly.

Speaker 1 (47:32):
And then you know, knowing potential pitfalls that could be
coming up because being having the experience to know of
potential problems or limits to amounts of concessions and you know,
like using a Jerry that we can't do this much
at you know, the the limit is x or or
all these different factors that just come with experience and

(47:53):
working with people that are doing this every day.

Speaker 2 (47:57):
But again, having a person that can close on time.
And I'll just give you an example this week, Andy,
I know we're about out of time. This week, we
had a property where the person went to wire their
money and they found out on the day of closing
that they couldn't wire the entire amountain one day. They
had to split it up in two days and therefore
they didn't close on time. I mean, that would never
have happened with Jerry working on the other end, or

(48:20):
even if it was a cash sell, which it isn't,
it would never happen with an experienced agent coaching that person.
But I mean, is it my job to call the
buyer's agent and make sure that they wired the money
as they said they would. And we have a contract
that says they're going to close on this day.

Speaker 1 (48:35):
At any rate, we are definitely coming up on time.
So thank you for spending your Sunday morning with us.
This is Andy Keel with Epic Realty, and thanks for
listening to the Home Solutions Show.