070223- HOME SOLUTIONS PODCAST

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Episode Transcript

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Buying a home and selling a homeshouldn't be stressful. Renters, homeowners and
investors in southern Arizona worked with theWin three team powered by e ESP Realty
because they match buyers with sellers likethe e harmony of real estate buying or
selling. This is where you'll findwhat you are looking for. This is
Home Solutions on K and ST.It's the WIN three team powered by EXP

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Reality. Now, Bob zach Meyersbecause I'm going on the Date Display show.
Good morning, and welcome to theshow. I'm Bob zach Meyer of
e XP Realty. I'm joined byJerry Sunt of Cross Country Mortgage. How
are you Jerry? Good morning,Bob. I'm doing great. Happy by

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weekend? Yeah, happy fourth toyou. It sure went fast, isn't.
It's June's over. We're halfway throughthe year already, man, we
are halfway through the year. Thereis some new news that got a lot
of attention this week, Jerry.And there was actually a article that came
out by market Watch and the titlewas why airbnb owners are about to sell?

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So that's interesting is because the airbnbs. Everybody you know has airbnbs,
and I stay in them. Youstay in them. I mean they're really
good value. But many Airbnb ownerswill soon be forced to sell their properties,
resulting in a housing bus that couldbe on par with the two thousand
and eight subprime crisis in some cities. And what grabbed everybody's attention was this

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chart Jerry and staggering when you lookat the chart and it basically shows the
number of listed properties back in twentysixteen, on the entire MLS across the
United States was one million, fourhundred and forty two properties. At that
time. In twenty sixteen, therewere a total of one hundred and eighty

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eight thousand Airbnb properties. And thisis Airbnb and vrbo vacation rental by owner,
so basically short term rental properties.There was one point million homes for
sale one hundred eighty eight thousand homeson short term rental. Now the number
of homes from sale has dropped bytwo thirds. We are at five hundred

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and fifty four thousand. The numberof short term rentals in the United States
is nine hundred sixty five thousand,three ninety one and worldwide it's over two
million. But across the US twiceas many homes for rent on Airbnb as
there are for sale on the MLS, and when you look at what the

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ratio used to be used to beabout twelve percent and now it's two hundred
percent. His premise is that youknow this is going to change. They're
soon going to be forced to selltheir property because of that glut of properties.
And I actually saw something a fewweeks ago on the news Jerry that
the Phoenix airbnb market during the superBowl this year, during the Super Bowl,

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which you went to. You gotinvited by your company president as one
of the top producers in a crosscountry mortgage to go to the super Bowl,
and that was quite an honor.Anyway, the airbnbs and Phoenix at
that time were less than half occupiedduring super Bowl week. Interesting, and
that certainly indicates that there's an oversupplyof airbnbs on the market. And I

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have two articles about that this week, and I just we always like to
share both sides, and anytime there'san article, it's a person's opinion.
However, when they start putting outdata in facts, that's where you and
I get very interested because I runmy whole business based on market data and
I can see trends coming, andactually for those that attended my conference last

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October, I had a slide thatsaid, we are going to see the
supply of homes increase as the peoplewho bought vacation homes start selling them and
giving them back when the economy getstight and they have to make a choice
of where they're going to spend theirmoney. And also in fewer people are
able to travel, so therefore theairbnb rentals are going to go down.
This is an interesting article. There'sa into amount of data in it,

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but the top places that have declinedby airbnb rentals Monroe County, Pennsylvania.
The average airbnb rental there used toget in May of last year three thousand,
five hundred twenty nine dollars a month. Now it's making sixteen hundred and
sixty nine dollars a month. Thatis a fifty two percent drop in revenue.

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How many businesses, Jerry, doyou know that could lose fifty two
percent of their revenue and still beprofitable. Yeah. Also it depends upon
the margins, right, how ifyou have thick margins, then you're you're
able to withstand that kind of drop. You know. I look at it
as if I just am looking atthis from the simplicity standpoint. If someone

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borrowed three hundred thousand and they boughta house last year, and their mortgage
payment is over two grand a month, and they're only bringing in revenue of
you know, twenty four to twentyfive hundred a month, then you know
you're only making You're still making fourhundred, five hundred dollars. That's basically
what people you know, My understandingis when you're doing, when you're looking

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at Reynolds long term, is thatyou want to be making two fifty a
door. Is that about right?Well, it depends on how much money
you have tied up in it.And honestly, two fifty a door is
very difficult to find in today's market. I mean five years ago, when
you could buy a property that wouldrent for twelve hundred dollars and you could
buy it for two hundred thousand,that would be pretty close. Well,

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we don't have two hundred thousand dollarproperties anymore. As a matter of fact,
we barely got one hundred three hundredthousand dollar properties. And what used
to be the one percent rule,which will you take the cost of the
home and one percent of that wouldbe monthly renten so you would make basically
twelve percent in gross rent a yearbased on what you paid for it.

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Well, now, if you buya three hundred thousand dollars home, you
need to make thirty six thousand dollarsa year in order to hit the one
percent rule, which would be threethousand dollars a month. And we're making
half of that, like sixteen hundredinstead of three thousand. Oh sure,
but that's for people buying today.You know, all of these numbers that
we're looking at are for people whobought, you know, over the last
five years. Sure, so theirdebt service is going to be way lower

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for most, for you know,probably the majority, their debt service is
gonna be way lower than if someonebought today. So that's what I'm saying.
If that if these numbers, yes, the revenue is dropping because demand
is dropping, but it all dependson what their debt services and what their
payment. Because hey, if inPhoenix, if the average rental per month
is twenty nine seventy nine, butif someone's got a mortgage payment of two

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grand, they're still making nine hundredbucks a month in rent, you know,
in profit, Well, don't forgetthat. With Airbnb's you have to
have all the cable TV channels,you have to pay house cleaners, you
have to have lenin's, you havewire and tear on furniture. You have
a lot of things that are typicalrental property doesn't have. So even on

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a rental, you're paying taxes,insurance, maintenance, repairs, and vacancy,
and typically, unless it's not separatelymeet, most tenants pay utilities.
But let's talk about a couple ofmarkets we do know about. The number
two biggest drop in Airbnb rentals isLake Havasu, and Lake Havasu went from
thirty nine thirty to two thousand andfive dollars, So that also is over

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fifty percent drop. I know myuncle lives in Lake havas Who. I
go out there for a couple ofweeks every year. I was just there
over Christmas, And the cost ofhomes in Lake Havas who was actually higher
than it is in Tucson. Imean you can't find properties there for under
three hundred thousand. So yes,to your point, the people that bought

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them at their low interest rates,their payment didn't change, but their revenue
just went from thirty nine hundred dollarsto two thousand dollars, so in the
revenue guard got cut in half.And then we go next Arizona. City
in the line is Phoenix. Betweenthere is Kalispell, Montana, which ironically
my uncle lives in Callispell and comesto Lake Havasu in the winter. Times

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the number two and number three areasworse for airbnb, which he doesn't do,
but that those are the second andthird worst than Austin Severeville, Tennessee,
which we're going to talk about later, and then Phoenix. So Phoenix,
the average Airbnb rental a year agowas five thousand, six hundred and
sixty one dollars. That has droppedout to twenty nine hundred and seventy nine

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dollars. There are probably a lotof people who did buy during COVID for
Airbnb, a lot of California peoplethat needed a place to land and they
didn't sell their house yet in California, thought well, let's go get something
in Phoenix and we'll just airbnb ituntil we're ready to move. Well,
now the problem is they can't selltheir house in California because the high interest

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rates made it unaffordable for anybody tobuy and they have this place in Phoenix
and now their rent just got cutin half. Actually, Phoenix is down
by forty eight point two and Phoenixis on here twice. There's Phoenix Maricopa
County, and then there's a greaterPhoenix area Penal County, and the Pinal
County is down forty two point sixpercent, the Maricopa is down forty eight

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point two percent. So any anyway, then the good news is no Tucson
on here anywhere to be found asfar as the top twenty five places in
the United States. But it's allover the map. Yeah, no,
So, I mean it's so peopleare So the demand for airbnb rentals is
going down? Is really what themessage is here? Right? Well,

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you know, whether they're not travelingas much or they're choosing to stay in
hotels or whatever it is. Butthe demand for airbnb, the prices that
they're getting on a daily basis ormonthly basis, is coming down, right,
So then how far does it haveto drop where they say, you
know, this isn't worth holding anymore. I'm going to sell the house because

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you know, I get prices they'restill at you know, close to all
time highs, So Jerry. What'sinteresting is this has been popping up on
several of my friends and investors,and pages on Facebook have been post and
some people are saying, yes,Airbnb is down so much, I sold
on my airbnbs, and other peopleare saying I haven't seen any change,
and some people I've actually said mineare higher than they were last year.

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So you know, just like thereal estate market, it's site dependents,
it's local, it's always been local, and it also affects price point.
But the biggest shocker if you lookat this chart, you know, this
is the Phoenix chart, the samething as the national chart that I'm talking
about right now. Back in twentysixteen, there were two thousand and seven

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hundred and twenty eight airbnbs and Phxtwenty seven hundred airbnbs. There are currently
seventeen thousand, six hundred and sixtynine airbnbs and Phoenix from twenty seven hundred
to seventeen thousand, and then howmany homes are for sale in Phoenix seven
thousand, eight hundred and four,So there are ten thousand more airbnbs than

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there are homes for sale in Phoenixand plains. Why the super bowl.
Half of them were empty. Youknow, it's just a very saturated market,
is really what it boils down to. Again, I look at this
as welcome news because the one thingthat we need is more supply homes on
the market exactly. Whatever the driver, other than unemployment, that would be

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the one bad driver. But otherthan that, you know, there's you
know, it's just a checks andbalance system. Active inventory is continuing to
decline nationwide. The median home priceis actually down point nine percent, posting
the first yearly declined since twenty seventeen, and the home shoppers now have slightly

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more homes shop four point nine percentlower price. But the inventory fourth month
in a row is now seven pointone percent higher than it was a year
ago, and the number of saleshas slowed down. Still a very very
tight market, especially on the lowerprice properties, and we will talk about
where we think the market's heading whenwe come back. I'm Bob Zachmeyer of

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exp Realty. You can reach meat five to zero three one four sold
or also Bob has the houses dotCom and Jerry Sun at Cross Country Mortgage
can be reached at five to zerothree seven zero nine five seven six.
That is Jerry's personal cell phone.He's very good at returning calls and you

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can't afford to navigate this market withouthim. But when we come back,
we have some other interesting things totalk about besides Airbnb. Rental revenue declining.
Inventory in the United States is continuingto decline, and that is keeping
the market very active and prices goingforward. We have all kinds of information

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coming up after the break, andI look forward to just to speaking here.
Then there's just two sound Home Solutionson Nst and we'll be back right
after the break. Thanks for listening. Teammates buying and selling homes easy.
He'll do the work so you won'thave to stress. This is Home Solutions
with the Wind three team powered byEXP real to Day. Here's the Win

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three team leader, Bob zach Meyer. Good morning and welcome back. I'm
Bob zach Meyer of XP Realty.I'm joined by Jerry Sunt of Cross Country
Mortgage, and we are talking aboutAirbnb, the short term rental company that
started in two thousand and nine andhas caused a tremendous shortage of inventory.
That's actually where the inventory started.At the same time the hedge funds started

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buying up for closed properties. Airbnbstarted turning them from homes that people lived
in into hotels. People still livein them, but on a short term
basis. So in effect, whatit's done is it's taken homes off of
the for sale market and off ofthe for rent market and turn them into
homes that people are renting as ahotel. And right now they're seventeen six

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hundred and sixty nine airbnbs and Phoenixcompared to seventy eight hundred and four properties
on the Phoenix MLS. And thatis just unbelievably low. I mean,
if you go back ten years inPhoenix, there were thirty thousand homes on
the market at any given time onthe MLS, and now there's seven thousand,
eight hundred. But believe it ornot, there is a worst market

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in the United States, and thisis Severe County, Tennessee. And this
is where Dollywood is. You know, going out there for vacation, the
weather's cool and everything. But inSevere County Severe sev I e R County,
Tennessee, Gatlin Birds is the maincity there. There are eight thousand,

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six hundred and seventy nine Airbnb properties, eighty six hundred and seventy nine
while there are only eight hundred andseventy homes for sale on the MLS.
Yeah, I mean that's a tento one ratio of Airbnb to homes for
sale in that market is also veryoversaturated. The vacancy has increased substantially.

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We're more interested in arizonas in Phoenix. There's this massive seventeen thousand airbnbs,
and they did a heat map wherethey put everyone on it and gave it
a color, and the more thereare in one congested area, it makes
the color darker and darker and darker. And there's basically four heat spots in
You got downtown Phoenix, you haveScottsdale. North of Scottsdale, you have

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Paradise Valley, and south of Scotsdaleyou have Tempe, so right up and
down that north south Port or youhave the Scottsdale tem Paradise Valley than the
downtown. But the western area,they say those airbnb's won't be as effected
because they're just not as much competition. And it's not that anybody's losing,
you know, they're mortgage mortgaged init change. But what's happened is the

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oversupply of market has reduced the amountthat they can get for a monthly rent,
and that is actually causing a lotof people who start to sell their
airbnbs. And there was actually achart here of places selling off airbnbs.
The chart is for Nashville, andthis is the vacancy for apartments. So

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the apartment vacancy in Nashville, Tennesseea year and a half. At the
beginning of twenty twenty two, thevacancy rate in Nashville was four point one
percent and now it's eight percent,So the vacancy rate has doubled. Jerry,
when you own a rental property andit's vacant and it's not renting,
what do you do with your rentprice? You got to drop it?

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You got to drop it. Whatdoes that do for the comps of everybody
else's rent price that they're going toprobably end up having a drop as well.
So the vacancy rate doubled. Eightpercent of the properties out there are
not occupied, they're empty. Sothere's three things happening right here, and
this is kind of this article isa really good data point, But why
is there a shortage in the firstplace. The first thing that happened was

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the foreclosures happened starting in O eightall the way to twenty twelve. And
during that time, we never hadBlackrock come in and buy up a bunch
of Tucson, But American Homes forRent was actually the biggest company that came
in and bought properties by the thousandin Tucson. And they just announced for
the first month since the Great Recession, because they're constantly updating their portfolio and

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saying these properties aren't as effective,so let's sell these and go buy some
more. And so they've been growingtheir inventory and they actually all collateralized that
rental income and went out and boughtmore houses instead of selling them when the
prices went high. But for thefirst month, they just reported that they
actually last month sold more properties thanthey bought. So they're starting to feel

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the heat. And I think yougot Airbnb properties coming back on the market
in places that are oversaturated. There'sother markets that aren't oversaturated, but that's
going to add to inventory. Nowyou've got hedge funds that are holding thousands,
tens of thousands of houses that asrents go down, they're not making
the same rate of return. They'regoing to come back on the market.

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And then you've got all the peoplethat bought vacation rentals, not to Airbnb,
but for a second home, andnow those homes are going to come
back on the market as people arehaving to make decisions based on inflation.
They all their other bills went up. They've got to get rid of something
because their income didn't go up asmuch as their expenses did. And the

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biggest bleeder that people have is asecond home. You only use it at
most a couple of months out ofthe year, but you have bills for
all twelve in the months of theyear. So the number of bacon homes
for rent in the US is nowin the largest fifty four counties, it's
at seventy eight thousand, nine hundredand forty five bacon homes that are for
rent, and that in March oflast year, that number was forty two

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thousand, it's now seventy eight thousand. Now we've been talking about ability,
affordability, affordability, and you knowwhat's happening, Jerry. A lot of
people are actually moving back in withtheir parents because they just can't afford to
live. And that is studying thetone for these vacancies. So is the
sky falling in No, it's not. Is there an oversupply of airbnb in

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major markets, yes, that correctionis going to come back as much needed
supply on the market. Is thatgoing to crash the market? No?
Is it going to help the market. Yes. So this is like you
said, this is very very goodstuff. Well, when we keep talking
about inflation, right, and youknow, if that's going to raise two
more quarter point heights this year,when is inflation going to start coming down?

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The biggest categories for inflation are belteredhousing, rents and purchase, and
then also you've got auto and thenenergy, which you know gas and oil
and so forth, and so thoseare really your big factors. And whatever
we can do to bring those pricesdown the better. And if more homes
come on the market, either aslong term rentals or as for sale,

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that is going to help bring downinflation. And I mentioned there are a
few places that the airbnb revenues areactually the same or slightly higher, Washington,
d C. And Milwaukee, Wisconsin. And it's really funny. I
was in Milwaukee actually presented to theKenosha, Wisconsin Investors Club just two weeks

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ago. And I ran numbers inMilwaukee, and the statistic that stuck with
me is in the last two yearssince COVID hit, Milwaukee County has lost
sixteen thousand people. And because theywere locked down, they left the county
a place like Arizona, where weweren't as restrictive on will moving around and

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being forced to stay home. Weactually gained inventory and gained a bunch of
Airbnb's. The number of airbnbs inMilwaukee during this last two years went down
by fifteen percent over COVID. Sothat's why their their market values aren't dropping
because they have less. Airbnb's notthree times more airbnbs than they had or

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actually we're it seven times more inPhoenix. So I don't want to beat
Airbnb the all the way. AndAirbnb is not going away. It's not
a meltdown and the whole market's goingto suffer. This is going to bring
back some of the inventory that hasbeen missing off of the market for over
a decade is going to start actuallycoming back. And I think that's a
very positive sign. Absolutely. Theyou know, the question is when will

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that happen? Right? You know, it's we're all kind of speculating,
and yes, so it is true. People are not traveling as much nationally
as they were last year. It'sfunny international travel is way up, but
national travel is down. And that'swhere Airbnb really you know, that's for
nat we're thinking about. You know, national travel. People are just going

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within the US, so their numbersare down. When does the percentage of
short term rent drop enough where peoplesay, Okay, I'm just going to
long term rent this or sell it. I don't know what that break even
point is, but you know that'swhen you're going to see some of these
short terminals convert into other whether itbe long terminals or sales. Right,
and I believe the people that boughtearly at the low interest rates are definitely

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going to be able to long termnent your properties. But that means they're
coming on the for rent market,not for sale but for rent, which
will cause I wouldn't want to saya glut, but it will definitely affect
rental prices a little bit where they'regoing to be more supply less demand,
and so that's going to affect rentals. The house is coming on for sale

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are going to affect the availability ofhomes on the market anything under three hundred
thousand. I don't think you couldgive us enough homes under three hundred thousand
to supply the demand that we have. So the low, low price homes
that where airbnbs are going to bea welcome relief, probably not affecting the
prices at all. It's the homesthat we're on the higher price into the
scale, and we're going to talkabout that after the break. But you

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know, we talked all about airand so I want to give AIRBNBA their
fair shake on this. Actually,this is a quote from a company spokesman.
The data is not consistent with ourown data, they told market Watch
in an email. We said duringthe first quarter earnings, more guests are
traveling on Airbnb than ever before,with nights and experiences booked growing nineteen percent

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in the first quarter compared to ayear ago. Despite signs of weakening in
some airbnb markets, the US consumerdoesn't seem to be deterred from vacationing this
summer as spending appetites continue. Asurvey by Alliance Partners released last month predicted
total vacation spending this summer will exceedtwo hundred billion dollars, which is ten

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percent higher than last year, thirtynine percent higher than twenty twenty one,
and one hundred and eleven percent higherthan twenty nineteen. So there's another side
to this equation, but data doesn'tlie. While the housing supply problem is
a national issue, solving it isa local one. The most housing cost
burdened households are not just in coastalmetros with high housing costs. Some of

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the nation's most significant chousing cost burdenedhouseholds are in less offensive metropolitan areas like
Fresno, Charlotte, Las Vegas.Even many smaller metropolitan markets like El Paso
do not have a housing supply thatis affordable for large swaths of their population.
So how do you solve that locallywhen the rate pretty much are national

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Well, we have there's three waysto solve that. There's only three solutions.
One is wages need to go up. People need to be paid more
at their job. Two prices needto fall, or three borrowing costs mortgage
rates need to fall. Those arethe only three solutions to that problem.
The high unemployment will actually drive wageslower, right, Well, so that

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won't fix the problem. I mean, when you have a shortage of a
labor that increases what people are paidand they can afford more. So if
they're trying to stop inflation, they'repurposely trying to cause higher unemployment. And
you know what do we say itwas Jerry three point five. I mean
full employment is five percent, andthat means every able bodied person in the

(25:08):
United States that wants a job hasone. If we're at five percent unemployment,
there's five percent that can't work.So the fact that we're at three
and a half still says that we'reshort on plays. But you know what,
we are coming up on a breakand this is Tucson Home Solutions on
KNST. I'm Bob zach Meyer.I will be back with Jerry Sunt of
Cross Country Mortgage. Thanks for listening. He doesn't want to list your home,

(25:32):
he wants to sell it. Thisis Home Solutions with the Win three
team powered by EXP Realty. Here'sthe Win three team leader, Bob zach
Meyer. Good morning and welcome back. I am Bob zach Meyer of ESP
Realty. You can reach me atfive two zero three one four sold and
I'm with Jerry Sunt of Cross CountryMortgage and Jerry is your go to guy,

(25:57):
if you need a loan in thismarket, if you want to navigate
what's happening with an inventory When there'sa shortage, there's bidding wars, and
sometimes whoever can close the fastest winsAnd Jerry is the fastest closure I know
of in Tucson. And Jerry,how fast can you close alone? Oh?
Eight days? We can close alonein eight days? Eight days?

(26:19):
And then what about your guarantee?What if the rates drop? So yeah,
so it's twenty We have a lotto talk about with indust rates from
where they're going in the second halfof the year. But now we are
expecting mortgage rates to drop or I'mexpecting mortgage rates drop sometime now in twenty
twenty four, which again this wasa big shift from earlier in the year.

(26:41):
We thought it would happen in twentytwenty three, the second half of
the year, and it seems tobe coming off the table. Not unless
you know, something really dramatically shiftsin the economies, mortgage rates probably are
not going to drop until you know, early to mid next year. And
at that point in time, weare offering, you know, I will
pay the lender fees and the titlefees if the loan amounts over two hundred

(27:04):
and fifty thousand, where we'll doa you know, a low or no
cost refinance so that you know,you won't have to keep your your mortgage
in the six and a half toseven range for very long when rates fall.
So hopefully that does happen, althoughthere's no guarantee rates will fall into
the fives, but most economists Iwould say, you know, I would

(27:26):
say a very high percentage or expectingmortgage rates to fall into the fives in
twenty twenty four, that's great news. And so this week, if someone
went in with a twenty percent downpayment in a seven twenty credit score roughly,
what are the rates right now?Jerry? So rates actually are pressing

(27:48):
up again to seven percent? Youknow they were. They started the week
at six point seven five and they'reending the week right around six point eight
seven five, So they increase slightly. And why did they go up this
week? It's funny. It wasall hinging upon the employment data that came
out, and the employment data.Every week they have a report comes out

(28:10):
called jobless claims, and it's peoplefiling for unemployment for the first time or
continuing claims. People filing, youknow, for multiple months, and that
number showed that basically the people filingfor unemployment went down, And it goes
back to the strength of the overall. The underlying strength of the economy is
really really strong. And even thoughthe inflation data that came out on Friday

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was better than expected, meaning inflationis slowly coming down, it's not coming
down at the pace the Fed wouldlike it to. They wanted to come
down much more rapidly. Sure,but it is slowly coming down. But
the employment situation is just very verystrong. So um it is. It

(28:57):
isn't interesting. So that actually pushedmortgage rates slightly higher for the week.
And I really believe now that orI predict that mortgage rates are not going
to be doing much the second halfof the year. I think we're going
to be seeing rates between six anda half and seven for the next six
months. Interesting. So it iswhat it is, and the crisis sure

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aren't changing. And as of theend of June, Jerry, on the
thirtieth of June, we had onethousand, nine hundred and sixty properties for
sale total on the MLS. That'severything nineteen hundred and sixty and I've been
tracking this now for almost two years. In September, first it will be
two years. But if I goback to last year, on the first

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of July, so it's one dayoff, we had nineteen hundred and eight
homes for sale, and this week, a year later, we have nineteen
hundred and sixty homes for sale,so we have fifty two more homes than
we did a year ago. Andthen the interesting thing, I actually charted
this week how many homes sold inthe last week and what price point are

(30:06):
those homes selling for. So thistakes a lot more time to develop this
data, but I went ahead anddid it. So we sold three hundred
and four homes. Since you werelistening to this program a week ago,
we have sold three hundred and fourhomes in Tucson, Arizona, in the
month of June and the fourth thelast week of June. Two hundred and

(30:30):
fifty of those were single family homes. That means time chair are not timeshares,
but condos and town homes. Thankyou. We're fifty four town homes
and con homes, two hundred andfifty condos and two hundred and fifty single
family fifty four condos and town homes. And there are two homes that sold

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under two hundred thousand, fourteen that'ssold under two fifty, thirty nine that's
sold under three hundred, one hundredand thirty one sold under four hundred,
two hundred and thirty nine sold undera million, and twelve homes sold over
a million. So I took thosesale numbers and divided it by the inventory,

(31:14):
and this is why it shakes out. The two hundred and fifty thousand
dollars range is the strongest in Tucson. It is forty three point seventy five
percent of the homes under two fiftysold in one week, forty three point
seventy five percent in a week underthree hundred twenty nine point three percent,
under four hundred twenty point one twopercent, under a million sixteen percent of

(31:38):
the homes sold, and over amillion six point eight two percent sold.
So out of one hundred and seventysix million dollars, homes twelve sold.
And what's really interesting is this isthe third week in a row that the
inventory didn't change exactly. And theprior to weeks was one seventy seven and
the last three weeks was one seventysix homes over one million dollars, so

(32:00):
we have a pretty consistent rate there, but we're selling less than seven percent
of those homes in a week.You multiply that times four weeks in a
month, that's twenty eight percent ofthe over a million dollar homes still selling.
I mean, I would say that'sa pretty robust market. No,
I mean housing is robust. That'sthe thing going to see. I mean

(32:20):
the number of transactions. I'm guessingor predicting that for the month of June,
which is typically the busiest month ofthe year, YEP is going to
be twelve the thirteen hundred units willbe sold this you know, this month,
which again for a you know,I think last month we sold just
over a thousand, which was lowerthan expected and probably the lowest May we've

(32:42):
seen in the last ten years,but only because we have limited inventory,
right, I mean, that isthe only reason why that number is not
stronger. We don't have more homesto sell, and so we've got what
we got. But it's a it'sa robust housing market. No, I
agree. And actually this week,Jerry, I have a triplex that I'm
getting ready to list on the market, and I just ran comps on it

(33:07):
and said, you know how manytriplexes are there for sale in Tucson.
And if I look at the entiremarket, and this is three thousand square
mile block of all around Tucson,there are a total of eight triplexes on
the market that are for sale thatdon't have offers. The number that do

(33:29):
have offers is for so fifty percentof them are active contingent, there's one
pending, and then there are seventhat have closed in the last three months.
And when you look at what they'reselling for the average gross print multiplier,
So there's lots of ways to runcomps. When you're comping a house,

(33:50):
you're looking at other homes with similarsquare feet and amenities that's sold in
that neighborhood. When you're running acomparative market analysis or a comp on a
rental proper, you're actually looking athow much money it makes because investors are
looking for cash flow, not fora pretty house, and see what the
neighbor paid for theirs. So theaverage gross frint multiplier is eleven point one.

(34:14):
And what the gross frint multiplier isis if you took the gross rent,
assuming you lived in Utopia and youhad zero expenses on a rental property,
how many months would it take andhow many years would it take to
recover the purchase price of the property. So the average priplex that has sold
in Tucsons so far this year wouldtake eleven years to recover just off gross

(34:37):
rent the price of that property.And when you get it closer to the
college you'll find one. There's oneon here that is sixteen actually no thirteen
in a quarter, and then there'sone as low as six point eight nine
years. So it really depends onwhere that property is located. But the
biggest thing is the cap rate.I do not put any stock in that

(35:00):
number because the capitalization rate basically showshow much that property makes as a profit.
But the problem is is none ofthe expenses are real. Either the
seller didn't it give the real estateagent the expenses, or the real estate
agent didn't it and put them.But when you have a property listed for

(35:21):
sale that says it has zero's propertytax, that's not real. And no
matter how good you are, there'sgoing to be maintenance. I mean refrigerators
break and roosts need recoding or recovering, and painting needs to happen. So
I always factor in a hundred dollarsa door per month as a projected expense,

(35:44):
So on a triplex that would bethree hundred dollars a month of expenses.
Very few of these that are listedon here actually have any expenses written
down on the unit. So whenyou when you factor it in, that's
where the cap rate gets really skewedbecause it's I don't have any expenses when
we know there will be expenses.When you look at it from a gross

(36:05):
rent multiplier standpoint, it gives youan idea that you know and it's particular
property I wanted to competent. See, Okay, this is what things are
selling for, and this particular propertymakes one eight hundred and fifty dollars a
month in income if it could getway more than that if it was improved

(36:25):
somewhat. It's dated and it needssome help, and the seller is willing
to do the work, but he'salso willing to carry the loan for somebody
else that wants to do the work, and he would actually prefer to do
that. So if you are listeningto this and you're looking for a fixer
upper project, that may be ableto use some of your sweat equity for
a down payment. He still wouldneed a down payment, but this is

(36:47):
an opportunity to purchase something in thelow two hundred thousand range, like two
twenty five bish with three units onit that I believe could be rented somewhere
in the neighborhood of almost a onepercent rule. Two twenty twenty two fifty
a month would not be out ofstretch at all. So if you're interested
in that, you can contact me. Bob zach Meyer e XP Realty five

(37:10):
two zero three one four sold.I will get more data as we get
ready. He's just getting the lasttenant out and it's going to be completely
empty. And if you're a realestate agent you have a client interested,
give me a call five two zerothree one four sold and I will be
glad to get you in there andhave you take a look at it to
show your client. So we arecoming up on a break. Jerry,

(37:31):
this is two Son Home Solutions onkan St. Jerry, what's your phone
number? Sure five two zero threeseven zero ninety five seven six. So
if you want to get qualified fora loan including investment properties, give Jerry
a call and we will be rightback after the break. This is two
Son Home Solutions on K and sT. This is Home Solutions with the

(37:52):
Win three Team powered by e ESPRealty on K and ST. Here's the
Win three team leader, zach Meyer. Good morning and welcome back. I'm
Bob zach Meyer of ESP Realty andI'm joined by Jerry Sunt Across Country Mortgage,
and we are talking about the realestate market. The supply of homes

(38:15):
in Tucson. We're nearly identical towhat we had a year ago, and
we have some interesting Airbnb stats thatwe've talked about during the first half of
the show. And then here's anothertopic of conversation, and this does not
affect residential real estate, but itdoes affect commercial real estate. And Jerry
has given us a lot of informationabout this, and we'll lean to him

(38:37):
again to get some more. Butthis article came out on June twenty eighth
from Moneywise and the title of thearticle is It's going to be ugly,
So that's an attention grabber. TheCEO of money Wise has issued a dire
warning about US real estate, sayingareas will be destroyed, and again this

(38:58):
is not residential real estate, buthe still likes this one niche what is
it and how to invest in it? So the commercial real estate market is
tumbling for a crash that could beas devastating as the onine crisis, according
to the CEO of a major investmentfirm, Patrick Carroll of Carroll Incorporated,
sounded the alarm about the state ofthe US commercial real estate market in a

(39:22):
recent interview with CNBC. The Party'sover, unfortunately, he said. The
office market's going to be destroyed.Hotels are going to be destroyed. It's
going to be ugly. Let's stopthere, Jerry, and let's talk about
this. Why are hotels and officesdifferent than residential real estate? So hey,
again, this has been kind ofbubbling up over the last year,

(39:44):
and it's because with interest rates increasing. We always we immediately think of when
the Feds raising interest rates the waythey have, and you think, oh,
well, it affects things like youknow, we always think on a
consumer level. We think about,oh, mortgage rates are going higher.
Car, you know, if I'mbuying a car, those rates are going
to be higher. You know,credit cards going higher. But we don't

(40:05):
think about commercial and how it affects. You know, most commercial loans are
short term loans, right, theyare not a thirty year fixed amaterized over
thirty year fixed. They will maybeit's a five, ten year or even
a twenty year loan, but itcomes with a stop at some point where
then the interest rate is reamaterized overnew modern day or today's rates. So

(40:30):
the bank's not on the hook.For most commercial loans anyway, I should
say multifamily loans can be scuritized byFannie Freddie where you can do it can
be amaterized over thirty years. Butwe're thinking of office, industrial or retail
space or hotels. They come withshort term loans and they're on local or
regional bank balance sheets. And that'show a lot of these banks work,

(40:52):
you know, I know in thisart mention, Silicon Valley Bank. So
when we have this five year stopthat I mentioned, it's your loans reamortized
to day of traits. Well,if you have a property that an office
building, and again this is primarilydealing with retail and office not so much
industrial. Industrial manufacturing is still veryvery strong. But on the retail and

(41:15):
office side of the equation, youstill have as we know, and we
talk about frequently, in the officespace, people are working from home.
So you've got office space that issitting vacant where an employer said, oh,
I need you ten thousand square feetand now they only need five or
three And what do they do withthat extra space? And when that lease

(41:36):
comes up, am I going torenew or am I going to go elsewhere
because they need smaller space because alot of employers are allowing people to work
remotely and are not bringing everyone backto the office. Retail same thing,
how many of us have changed ourpatterns where we're buying things online versus turning
around and going to a store tobuy it has become so darn convenient to

(41:59):
be able to buy it where itcould arrive the same day you bought it
from a local store. So Iover and drive to the store is just
going to show up on my doorstep. So retail is changing, so we
don't need as much retail space aswe used to. And with that,
that combined with the debt on thesebuildings coming due and being changed to today's

(42:21):
rates, now the debt service isincreasing. That's why they're saying, oh,
it's going to be destroyed. Isfor these reasons. Hotels, it
goes back to short term rentals,which we talked about the first half of
the show. If you've got amortgage on a short term rental and now
your hotel vacancy is increase and nowit's ten fifteen percent where it used to
be four or five, and nowthat debt service is increasing. Now you

(42:44):
can't run a hotel with a profit. Sure, So delve into this little
deeper. I actually last week wastalking to a group of investors in Phoenix
that own a lot of commercial realestate and invest all across the broad spectrum.
And I asked, I said,is this affecting you? What do
you see in Phoenix? And theysaid, no, you're not going to
see a big downturn in Phoenix whereit's really happy as cities like San Francisco

(43:08):
and New York, Seattle and someof the other major metropolitan areas where you're
seeing the problem. And you know, of course, we've been reading in
the news about about San Francisco alot lately. Right right the biggest mall
just shut down or is closing down. Nords from moved out their anchor,
a lot of office spaces there.There's issues there in the office space.

(43:29):
Other retailers are moving out and that'sfor a combination of reasons, right and
politics aside. It's just that's whereI think you're going to see the biggest
you know, where you're you're goingto see some some buildings going back on
the you know, on the marketor possible foreclosure is in those bigger metropolitan

(43:49):
metro areas. Sure they quantified ithere. Jerry And says there is a
one point five trillion wall of debtlooming for US commercial properties. The mortgage
that which as you said, ismostly held by small and medium sized banks,
comes due for repayment before the endof twenty twenty five. No lender

(44:10):
is willing to lend because they don'tknow where interest rates are going. Offices
are experiencing a double whammy of misery, and he described the sector's fundamentals as
terrible. After COVID, people workfrom home. The workweek is now Tuesday
to Thursday, so a lot ofoffices aren't even open for five days.
They're only open three and so they'retaking less office space. No one wants

(44:32):
to lend on it, and it'sa disaster. The biggest thing that scares
me about commercial is that there's arenewal and every year that loan has to
be renewed. It could have differentterms than the one I had. I
had a commercial building and when themarket turned down in two thousand and eight,
nine, ten to eleven, thevalue of my property dropped and they

(44:53):
actually wouldn't renew my loan. Theycalled it due. And so that's just
one person. There's uh one anda half trillion dollars coming due that they
may or may not want Tom toreinvest. Yeah, and the one you
know, I guess the silver liningon this is that there is when you

(45:15):
look at the amount of commercial moneythat was spent during the time, and
it was when we say why areyou saying in twenty twenty five, is
because a big boom time was youknow, between two thousand and eleven and
two thousand and fifteen, where alot of where commercial space was just was
was was humming along, it wasit was doing really, really well.
And so all these that was beingwas taken out well. By twenty twenty

(45:39):
five, when it's coming due,I believe mortgage rates will have been and
so you know, the Fed's goingto raise rates two more times this year
and at that point they are expectedto cut next year. I think it's
three times is currently what's predicted tohappen, and so by the end of
twenty twenty four, there'll be alot more color, of course, on

(46:00):
the future. And right now thisis speculation. There's no doubt that I
think some major areas around the countryare having serious issues. San Francisco and
New York are two of the bigones. But you will a year for
now things will look differently because mortgagerates will have come down or bar I

(46:20):
should say, the Federals are fedfunds rates will have come down, and
then commercial rates will have come downand hopefully it won't be the catastrophic falloff
that this article is projecting could happen. Well, well, this is a
guy that wrote this article, wasBeth and Morecraft, and he said,
I talked to one of the biggestlandlords in the world yesterday, which I

(46:44):
probably Blackrock, and what he's tellingeverybody is stay alive till twenty five.
And this is on multifamily properties,because you know, I had said there's
one sector that's outperforming everything, andit's multifamily. He said, right now,
our fundamentals are great. People arepaying rents and the market is healthy

(47:04):
because of sky high property prices andmortgage rates, Renting has become the only
option for a lot of Americans.This has all been a perfect storm for
the multi family business because they havehuge demand and that's the rents are going
significantly higher. So they're buying distressproperties from landlords that are just tired and

(47:25):
they have deferred maintenance. They're goingin with the capital to improve those properties.
Then they can raise the rents onone hundred unit department complex by two
hundred dollars a door, which istwenty thousand dollars a month, improvement in
the rent which is two hundred andforty thousand dollars a year. And Bob
to add to this, and thisarticle doesn't mention why this is not being

(47:47):
mentioned more. I do not know, because I think the big elephant in
the room is student LUNGDT and wejust you know, at the end of
last week, the Supreme Court madethey made their decision that you know,
we're not going to forgive student loandebt. So I know the administration is
looking at different things, but we'vegot this wall of debt that is going

(48:08):
to start being paid on October one, that is going to cut consumers spending
quite a bit, and that Ithink is actually going to bode well to
the for long term rentals and inflation, and it will it'll bring down inflation,
but more people will be renting becausethey're they're now going to have to

(48:29):
budget for those student loan payments whichwe're not budging for today, which I
believe you're going to see a lotmore people moving back to their parents to
start kicking, you know, kickingdown their student loans because the money that
we're spending on rentman it now hasto go to a student loan. And
now parents can always go sign fora child when they want to buy a
house. Is that it is true, it's your funeral, but I'm just

(48:51):
kidding. So um Anyway, that'sa lot of information for today. But
the biggest thing is this is nota two thousand and eight meltdown. There
are definitely parts of the real estatethat are went up way too fast and
are going to be coming back down. The world changed. People don't work
in offices as much as they usedtoo. So this is no different than

(49:12):
when people shifted from horse and buggiesinto cars. The horse industry fell on
its face, so we have toadjust you have to modify and the main
thing is is be diversified and don'tthink that what's happening today is going to
last forever. So any parting words, Jerry, No, just have a
wonderful Fourth of July. And Bob, it'll be great to see you in

(49:34):
person here again. See yeah,I will be back. We are.
Our road trip is coming to aclose. So thanks Jerry, I appreciate
you being online with me and wewill be back next week Sunday on Tucson
Home Solutions on K and ST.Thanks for listening and have an awesome Sunday