Aug. 1, 2022

Shasta County Market Update - August 2022


Click Here to watch Josh's video blog for the month of August.


From the Desk Of Josh Barker

Dear Clients,

Talk of a market correction has grown louder as home prices have softened and rates continue to remain high. The reality of the market shifting to a more normal and balanced market is unfamiliar to many. Home buyers, home sellers and real estate agents that were not in the market prior to 2012 have little experience with market shifts. It is important to recognize that the market all of us experienced over the past several years was a reflection of abnormal buyer demand fueled by tight home inventory and low interest rates. The long term fundamentals in the real estate market are sound but adjusting to the higher interest rates will be challenging. This month we will discuss some of the hottest topics trending now in our local Shasta County Real Estate Market. As always, if you have any additional questions, please feel free to respond to this email or contact our office at 530-222-3800

Have a wonderful August!

Josh Barker


Home Sales For July 2022

Home sales for the month of July finished at 227 down 27.7% compared to the month of July 2021 when home sales finished at 314. The reduction in year over year home sales was anticipated as the pandemic related purchases that were prevalent last year have all but evaporated. The past several months have also experienced notable declines in home sales month over month largely due to the higher interest rate environment. 

Home Inventory July 2022

The current number of active homes for sale is averaging 818 up 32% compared to last year when home inventories averaged 619 for sale. Home inventory for sale over the past month has remained fairly stable with 17% fewer homes coming to market in the month of July 2022 compared to July 2021.

Buyer or Seller Market?

The term "absorption rate" is often used to describe the overall perception of the market. Currently the market would take 2.8 months to sell off the existing housing supply based on current demand compared to last year when it would have taken 1.92 months. Typically 0-3 months supply of homes is considered a sellers market. Whereas, 4-5 months supply is considered a neutral market and 6+ plus months supply is considered a buyers market. Clearly the absorption rate is currently climbing which suggests that days on market as well as home pricing may become softer in the future.

Home Showings are Down

Home showings have typically served as a good indication of overall buyer demand. Recently, many home sellers and agents are reporting a significant reduction in home showings. The sales reports referenced above reflect the overall conditions. Collectively, special attention paid towards accurate home pricing, home preparations and home marketing will have the most positive impact on home sales.

Mortgage Interest Rates

Mortgage interest rates have experienced the largest disruption this year reaching a high of 6.5% in recent weeks. In January 2022 mortgage interest rates averaged 3.22% for a 30 year mortgage compared to today's rates of approximately 5.25%. For every one percent increase in the mortgage rate, a home buyer's purchasing power is impacted by approximately 10% when utilizing financing. Since the majority of home purchases in Shasta County are financed, mortgage rates play a major role in affordability and overall buyer demand.

Below are a collection of slides that correlate with many of the topics discussed in this mid-year review. If you have any additional questions regarding this market update or have additional real estate questions please feel free to respond to this email or contact our office at 530-222-3800




Learn more about Josh Barkers 5 proven steps to selling your home by visiting 

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Make it a great August! 

Josh Barker

P.S. You can view all of our past real estate market updates by visiting

Posted in Josh's Blog
July 19, 2022

Josh Barker Real Estate Podcast #9

🏠💰Home Value Tool➔

Find Rent Data - 💵🏘❓

Frequently Asked Questions

What is a real estate market correction?

Typically a real estate market correction is when home values change by 10% or more within a short amount of time.

Are mortgage rates high right now?

Mortgage interest rates have increased from a low of 3.07% to an average of 6.125% in July 2022. For every once percent increase in the mortgage rate, purchasing power is impacted by an average of ten percent.

Is the real estate market going to crash?

The number of homes selling each month is slowing down compared to the sales volume of last year. If inventory continues to grow while demand remains constant or reduces, prices could expect to soften.


The transcription is auto-generated by a program and may not be accurate to the conversation. In order to ensure you get all the information from the video properly, you must watch the video.

Joey: Okay, it's been a little bit. I'm here with Josh Barker.

Josh: Hello.

Joey: I missed last month. Last month, Mike Medley was in here. I saw that.

Josh: Yes, he was. Yeah. We did miss you, Joy. I'm really glad that you got to come back and visit again, so.

Joey: I like to... I saw Mike, and I immediately said. You know what I loved is that he brought up the fact of the capital gains tax law change in the late '90s and how that 'cause I brought that up, and other people like Glazer were like, "No, maybe that had an effect." I'm like, "That had a huge effect. Look at the average time people had a home now."

Josh: Yes.

Joey: I mean, they were just flipping hot every 24 months, and that... Can you imagine if they did that with the stock market? They're like, "Well, if you hold a stock for six months, you can sell it." I mean, that would immediately...

Josh: It would change the investment pattern.

Joey: It would change it huge, huge.

Josh: Yeah. And I did that for housing, and I think that was the perceptive or the perception that Mike was sharing, and it was a good perspective.

Joey: I thought so too.

Josh: Yeah, I liked it. And it did. It changed the volume, for sure, and it gave a whole another avenue for investors. For those who don't know what we're talking about, just go back to our previous month's market update podcast, and you'll see an interview that we did with Mike Medley, a 30-year broker, been in Redding a long time, and really shared a really cool story about the real estate market. So I've got a whole another set of facts that are kinda hitting the ground right now this month, though, huh?

Joey: Oh, big time.

Josh: Yeah. I'm watching all the realtors around there kind of start talking about it. Finally, it's like really becoming aware of what's happening.

Joey: So like some of the things that are happening, I mean, this would be episode three or four in a row where we said interest rates are rising, but they've actually come down a little bit, right? I mean, didn't I've seen some lenders I'm on a couple of their email threads and they're like, "Hey, interest rates came down a half a point... "

Josh: From 6.5 to 6. Yeah.

Joey: I've been even high 5s, which historically, if you said, "Hey, you can get a home loan in the 5s," that people would be like, "Oh my goodness."

Josh: "Compared to what?" Right?

Joey: Yeah, compared to historical. It's just that we've come out of when interest rates have been below 3% for mortgage rates? Ever?

Josh: Yeah, exactly. And maybe for our listeners, maybe that would be a good thing to talk about today first, is just the misconception around what the Federal Reserve is doing and how it's having an impact on the mortgage interest rates. You know what I'm saying?

Joey: Yeah, the difference between the feds do something to the rate, but what does that actually do to mortgage rates.

Josh: Right, right. When they move their rate up, why is that not necessarily transferring directly over to the mortgage market? And so like you're hearing, and you're probably going to hear by the end of this month, that inflation was at, what? 9 point...

Joey: One?

Josh 9.1%, which isn't good, if anybody's wondering, at the targeted numbers...

Joey: For year high?

Josh: Yeah, for year high. And the target numbers are in the low 2s, and so they feel like they've got some runway now to raise that discount rate up even more now, and so they're looking at raising the Federal Reserve's interest rate by up to 1%.

Joey: It's huge.

Josh: It is huge. I think it's gonna be. For most of the experts out there, they're saying between three quarters of a percent and 1%, so I think you can debate all you want on those two numbers, but it's probably one of those two numbers. Either one is a lot of pressure on demand because as interest rates go up, it has an impact on what people can buy or how much they can buy or what they can borrow and those kinds of things.

Josh: Anyhow, on the mortgage rate side, why you're seeing rates actually coming down is that it has a lot more to do with mortgage-backed securities. So six months ago, the mortgage-backed securities, they were reducing the number of mortgage-backed securities they were purchasing, and that meant that the private market had to step in and start buying these mortgage-backed securities, and that's where their interest rates went up almost overnight, It felt like, right?

Joey: Yup. Oh, it did, fast.

Josh: I mean, yeah, the 30-year mortgage's almost doubled pretty much in the last six to eight months, and a lot of that's because the Federal Reserve stopped purchasing mortgage-backed securities at the same level they were. That caused the private market to step in. The private market said, "Hey, I'm not gonna buy mortgages at 3.5%, but I will buy 'em at 6, right?" And so, the interest rates have gone up. So even though the Federal Reserve will likely be moving the rate up, the Federal Reserve rate up, it doesn't necessarily mean that mortgage rates are going to go in lockstep with it. So if they raise the rate 1%, that doesn't mean that mortgage rates are gonna go from 6% to 7%. They might go up a little bit because of that impact, but it has much more to do with how many people buy those mortgage-backed securities. Does that make sense?

Joey: Is it still just the private sector buying them?

Josh: For the most part, yeah. Yeah.

Joey: Is there any news on the government buying them at all?

Josh: No. I mean, I don't know if there's any kind of policy that they're discussing at this moment that might change that, but right now, no, they're continuing to tighten their monetary policy, they're reducing the amount of mortgage-backed securities that they purchase, the private market is still having to step in to buy the difference. But you gotta remember, these guys were making nothing six months ago, so the fact that they're actually getting a return now by buying these mortgage-backed securities, the private market doing that, they don't have a lot to complain about. And I think that a lot of them feel like this higher interest rate environment probably won't be that long, and so they'll be the one sitting there smiling all day long with a nod at six or 6.5% or whatever it might be when mortgage rates drop back down to 5 or something. You know what I mean? So I think that some of the investors are looking at it that way.

Joey: It's too bad that there weren't regional interest rates. You know what I mean? Because I was just thinking about like, somebody could say, "Hey, you know what, I wanna get a loan in the Redding Market, because I think the Redding Market is still a very good market, even though it slowed down a little bit, it's just when you are full throttle in a car and you're going as fast as the car can go and suddenly you let off a little bit, now you're only going 80% of the maximum speed of the car, you're still moving fast, but not as fast as you were. So we just came out of arguably the hottest market ever, interest rates below 3s, people moving here, and we're still not getting replenishment of inventory. In your last market update I watched, we're still considered a seller's market. Well, wait, 2.1 months, right?

Josh: Yeah, so no, really, the low 2 is what he's... Joey is talking about the overall supply relative to demand and the absorption rate. So, anything up to a three months supply is considered to be more of a seller's market, and then a four to five-month supply is more of a neutral market, and anything over six months supply is considered a seller's market. And right now, we're at like 2.1, 2.2 months supply currently, and that means we're still a seller's market by definition, although I think everybody would agree that we're trending quickly to a neutral market. Inventories today are like 715 total residential units for sale currently, and the numbers aren't out yet because it's not the end of the month, but it's probably going to be 250 to 270 or so for total pending for the month, which will be down again from the previous month and certainly down by 30% or more over last year. Yeah.

Joey: Yeah. But that's to me, that just came out of the hottest market ever...

Josh: It did, yeah.

Joey: I'm still bullish on this market in comparison to other things that are happening.

Josh: Yeah, no, I agree.

Joey: But, I was on a radio show where we were talking about... And they said... It was opinion. But it was like, "Hey if you don't own a home, you absolutely should be buying a home." Because of the things they talked about, they talked about the increase in rents over the last 24 months in the local market.

Josh: Oh yeah.

Joey: And those were escalating. They were crazy. Now, if you were talking about, "Hey, I own 10 residential homes, and should I purchase... I have some money. Should I purchase 11 through 12?" That's a completely different conversation than, "Hey, I'm renting a two-bedroom, one-bath house for $1650 a month."

Josh: That's unbelievable.

Joey: And that's the kind of numbers that you're hearing. So it was stuff like that. So I was like, "No, I still would be very bullish." And the other term that was brought up was the whole... 'cause I love this term. Is that you marry the house and you date the interest rate. You find your home now, you get settled, within two years... We are technically in a recession. So at some point, the 1% is to try to slow down inflation, but fast forward 12 months, 14 months, I have to think that that's going to be... Experts think that it's going to flip-flop a little bit. Okay, interest rates got high, we cooled off inflation, and now we have to bring the interest rate back down. And if you are locked in your house now... I still think... I think there's a big correction because things were just going... They were ramping up so fast. And... But this... What's the... Still the average price of a home in Redding sales last month versus a year ago?

Josh: Well, the median sales price right now is hovering in the high 370s, low 380s. But here's the deal, prior to the pandemic, we were probably at... The median sales price was in the 280s, 290s.

Joey: Exactly.

Josh: So the challenge that we have right now is that pricing got pushed up so high with low-interest rates and pretty high demand from relocation and all those other things, pushing the demand up. But you have the average or median sales price pushing up into the 400s, but that was based on really low-interest rates that allowed that to happen. Now that rates have went up, you've got buyers that are qualified down here, homes that are being... The asking prices are up here. And somehow, these two things have to reconcile. Either pricing has to come down, or the amount of inventory has to be reduced, or wages have to go up, and rates have to come down. But something has to happen in order for these people to come together. And if that doesn't happen, then what you're going to see is inventory will be price reduced, and to that point, we got D. R. Horton now, which is a national home builder. I think they say America's number one choice or whatever. And...

Joey: I think that's McDonald's.

Josh: Oh, that's McDonald's.

Joey: Think they're the ones that say that.

Josh: A billion served.

Joey: Yeah, exactly.

Josh: Yeah. So, but it's a good company. I'm not talking about the mechanics of how they run their show, but I think they make good sound business decisions. They're, I'm pretty sure, publicly traded, certainly professionally managed. And you've got homes that were priced in the high fours, and we just saw today price reductions on an average of close to 10% on a lot of different products for that particular developer in the city... In Redding right now. So there's a development over on the west side of town that they have about 43 lots or so, and they've already gone in and started price reducing these homes, and they've only been on the market for a few days. So they're not messing around. They're realistic about what the market's doing. And to that point, I was saying, you got asking prices for homes here, buyers qualify down here, and something has to give. And in this case, in the example I'm giving you, the seller gave, the seller decided to bring that price down, and now the buyers, I would imagine, are going to start purchasing because they're going to be reflective of what a buyer can afford. And you're going to see that, I think, going forward as a theme until we start to find that new equilibrium, whatever that might be.

Joey: So I wonder though if that correction where the average price will be in about four or five months...

Josh: The median sales price?

Joey: Yeah, the median sales price, because it might come off a little bit off now, but still, as you said, pre-pandemic, it was almost $100,000 less.

Josh: Yes.

Joey: So even if it comes down like 20, $30,000, you still... Look at that.

Josh: Still have a big gain.

Joey: Yeah, look at that, monstrous gains.

Josh: Yeah, it's still a gain. And that's an optimistic viewpoint to see, and I totally agree with it in terms of Redding is still... We're not over-developed. We're certainly not over-supplied. We live in a state that's a pretty cost-prohibitive new construction kind of state, and so we don't... Typically, California doesn't over-build. And there are other states in the country right now that have been over-building, and I think that as things start to constrict and the demand starts to die off, there's going to be some pretty large inventories. I'll give you an example. I've got a good friend of mine that lives in Phoenix, Arizona. And, I have these numbers, or I'm going to try to get them the best I can. But my recollection of the conversation was, and this is a Remax agent out there, he said, 9000 units, 9000 units, I think it was 120 days ago for sale in Phoenix. And then, just two weeks ago, 18,000 units were for sale.

Joey: Wow.

Josh: And so, their inventory has already doubled, that's going to have a corresponding effect on value because unless demand paces with the supply, the only thing to give in that equation is going to be asking prices. So, you look at Redding. I don't think we're immune from that. It'd be foolish, I think, for somebody to say that we were...

Josh: I do think that if you look historically at the recessions over the last, I don't know, 30, 40 years, with the exception of 07, which is Funny Money, a really bad time for policy for financing, most of those recessions, they slid in the housing market, and It was a six to eight month. Little blimp where things got soft for a period, and then they just started to move up again, and I wouldn't be so surprised to see something similar. History doesn't necessarily repeat itself, but I think they say that it rhymes. I would agree it's probably going to be something similar to that coming out of this, and for a lot of buyers, just to think about it, would you rather buy a housing bubble, which was probably what we were dealing with, potentially running into if we didn't stop, or would you rather be buying in a recession, and when you know that pricing probably is more suppressed than it normally is, and that means there's an upside to the equation longer term.

Joey: Now, with a national recession, there is a definition of two quarters with negative GDP back to back. Is there a definition? Is there a formal definition for a real estate recession?

Josh: No, I think it probably trends along with similar lines they use... That they had one figure in that, as they say, if it changes the value of the asset by up to 10%.

Joey: And based on what you just said with D. R. Horton on reducing there, that's kind of one of those...

Josh: Because recession means nothing to a buyer or seller of a home. What matters is correction, not recession. So a correction typically is defined as something of 10% is considered to be a correction, whether it'd positive or negative, it would be a correction, and in this case, we're all contemplating a correction in the negative sense, and that's if pricing were to drop up to 10%. It would be defined as a correction at that point from most economists' perspectives.

Joey: I'm going to put you on the spot.

Josh: Go ahead.

Joey: Is there the median price over the last... Since January to now, do you have any idea like what that's... A medium price got down 5% overall pushing D. R. Horton out of the picture...

Josh: Maybe in sales price it's dropped down approximately 10%, I think if I were to look at...

Joey: Okay, so then there you go, so that is...

Josh: That's only the median sales price, so it's not necessarily on selling prices, and again, median sales prices for everybody, that median sales price is actually the middle number, so if I had 100 numbers on a piece of paper, number 50 would be the median sales price alright? And an average sales price, if I were to take the collection of all hundred of those and then combine it, then divided it by a hunter, that would be the average. So when I talk median, I'm talking about that middle number where half the transactions were done for less and how the transactions were done for more.

Joey: And then within that, there's gonna be segments that there's... The lower end of the segment is probably not gonna see that reduction because you cannot replace inventory, you can't afford to build a $1000, or excuse me, a 1000 square foot house in the city of current customer... Can you build it for under 300 roots when you talk about permits and the purchase of land?

Josh: A house that size?

Joey: A 1000 square foot.

Josh: Yeah, that'd be really difficult.

Joey: Exactly, so you couldn't build something for 300,000, so any of these houses that sold in the high twos and some of the neighborhoods, I think they didn't see a reduction, they're not gonna see it's the house maybe that were like you said, listed at 500 D. R. Horton is bringing it down to 450, the 650 down to 610, stuff like that. So even within the market, there are sub-markets and segments.

Josh: Absolutely, the lower-priced homes in the marketplace are gonna have a little bit more... They're going to be more insulated to a market disruption because the demand is naturally higher on those points where they get pressure is coming in directly, so when Higher price properties begin to readjust their prices down, that it says Has a compounding effect all the way down the price segment.

Josh: So if a 500 becomes a 450 or 450, then becomes a 400, or 400 becomes a 350, and then 300 and 250, and it just kind of pushes it is way down there that way. It doesn't come as fast in the lower end. For sure, it's a much slower process, and it comes back a lot faster, too, because more people can afford it at that price point. So when the market shifts and gets more positive people going into the market, as you bring new buyers into the market, they tend to purchase at the lower price point when they're new buyers into market. And so the other part that we're gonna have a challenge with for a short period of time, it's just gonna be the move-up, move down, move sideways transactions where I already own a home, I need to sell it to go buy the next one, not a lot of that's gonna go on right now because they're sitting on a mortgage at three and a quarter percent who wants to drop off that and go buy a house at 6% right?

Joey: No, yeah.

Josh: And so we're gonna have that issue at the moment, but once we get through this transition, you could see move up, move down, move sideways buyers in addition to new buyers coming into the market, in addition to a fairly low home inventory, because a lot of builders won't be building if they're concerned about pricing. And so you can see real quick how this actually could run up really fast once we make it through that small recession, a correction that we're looking at.

Joey: And I think there are two other factors that are really driving this too, that I don't know if we've ever seen before, and one of them is a shortage of labor, and the other is the supply chain disruption, and I don't know... I don't know the first one. That's a whole different discussion, but the second one I've seen like... I have a friend in roofing, and OSB went, it went... It was like 37, it went up to 120, and then it came down to 41. And they went to... I mean, it's all over the place, so I don't know how much of the supply chain disruption is like, "No, it'll level off, it'll be okay, it'll come back," or it's like, "No, just materials just aren't going to... Those prices... You'll never see all those material prices again." Right?

Josh: Well, to think we're going to go back to pre-pandemic pricing across the board of... I don't believe anybody is saying that that would be the case, I think there will be some markets that are just out of lack of supply, the pricing is artificially high right now, and once that supply is replenished, that's going to bring the prices down. Lumber is probably one of those where there's some disruption, but there's a lot of speculation, lumber runs a lot like oil, there's a lot of speculators in lumber, so they buy a lot of futures in that too, and the over-pay and then they hold on it for a while.

Josh: And so you're going to see some shifts in that market probably, but I just read a Kiplinger letter which is a pretty good economic forecast. They were talking about the freighters and the cargo ships that are coming across the oceans delivering products and goods and services over to us. And when they're coming over right now, the cost for that shipment now has dropped dramatically. I think it's down anywhere between 20 and 25% and 50% of what it was. Now, it's still two to three times higher, though, than what it was prior to the pandemic, that's how much they were gouging people, and that was really, really having an impact on the cost of goods for the United States. But you already see in the cargo ship, and cargo ships pricing is dropping now to the point where I would imagine in the next 6 to 12 months, we probably will have a more competitive price across the board. Where the real issues showing up in the supply chain now is in the Midwest, where you got all these rail cars now sitting with all the product sitting on a rail, and the warehouses are still full because the economy is slowing down, and these guys that have bought all this stuff, they're kind of slow to go pick it up from the trains.

Josh: So now that's that new problem right now, is clearing out those rail cars.

Joey: Sounds like any new TV reality show.

Josh: Well, you know, it just reminds you of traffic, how many times you've gotten traffic, you're stopped, and all of a sudden when you get past it, you're like, "What happened? There's no accident, there was nobody here, and then they're like," Oh, well, a half hour ago, some guy cut across four lanes and took the exit, and that slowed everybody down, and you're still experiencing all of that, that... What's that?

Joey: The Accordion effect.

Josh: The Accordion effect, right? So I think that's playing into that, but I think supply is catching up, and I would not be surprised if our Inflation numbers right now are at 9.1. I'm hopeful that that's the peak, and then we'll actually start to see that number begin to drop.

Joey: Well, that's the official number. I'm trying to find...

Josh: I agree.

Joey: Sights were only gone up 9%.

Josh: Yeah, no, I get it. I don't disagree. I think that that number is baked, but as long as they stay consistent with what they're baking that with. I'm saying that if 9.1 is what it is now, I'm hopeful that that number will be lower in the future.

Joey: And what about labor? That would be the other big one.

Josh: Yeah.

Joey: All of the trades are... It takes a while to replace those two. They're also something that you just don't flip a switching, okay, we... We got 100 carpenters and 100 plumbers here. No problem.

Josh: Yeah.

Joey: And that one's a tough one too...

Josh: Yeah, the labor one's going to hurt, and...

Joey: I think those are big tailwinds.

Josh: Well, I see labor's a head wine, actually.

Joey: Really?

Josh: Yeah, I do.

Joey: Or cause you're thinking of buyers...

Josh: Well, when I'm thinking on labor and new construction and things like that, is that right now they were competing for labor, driving the cost up. Right? And so, I guess on the cost of the home, I could see it going down.

Joey: That's what I meant.

Josh: But I'm thinking about the people that are going to get the conversation by their foreman and their superintendents and their employers that are saying, "Guys, girls, sorry, but our wages are gonna have to get back down to a more competitive pricing." I'm concerned about that. I think some deflation in terms of wages and the construction field or a possibility.

Joey: Really?

Josh: I do. Yeah.

Joey: Okay, I see. I was thinking the opposite. I was thinking that all of the people I know still have such a struggle to get labor.

Josh: Well, that's still an issue right now.

Joey: So they have to pay a good way.

Josh: But six months from now, if there's nothing to do... You know what I'm saying?

Joey: Okay.

Josh: Well, no, nothing, that would be a huge extreme, but if there's less to do, but you still have a lot of labor available to do it, you might make a decision that "Hey, I'm gonna do that job for a little bit less."

Joey: This stuff is so complicated.

Josh: I know.

Joey: Can we just go back to, like sorry. Or we're in...

Joey: Monopoly or just like I'll roll the dice and went in on Baltic, I'll pay you, I got 60 bucks.

Josh: Well, I think the cost of new construction will be lower in the future.

Joey: Okay.

Josh: I do. I think that's the bottom line. And it'll be a combined effect of the supply chain catching up, access to materials that like refrigerators and appliances that slow things down, and labor, I think light labor could soften a little bit. I hate to say it, but I think there's a possibility. That's the case.

Joey: Well, as some of you know, it's all of these things go up and come down, so it's just a matter of timing it and how long they're up for and...

Josh: Yep.

Joey: Down and everything like that, so the interest rates are supposed to be raised a point at the end of the month. I'm not really sure. It'll probably increase mortgage rates, though, but not to the extent...

Josh: A little bit. It won't be a lock-in step with it. Yeah, I don't think you're going to see a lock-in step rate gets raised by 3 quarters of a percent, so the corresponding mortgage rate jumps by 3 quarters of a percent. I don't see that. I see that if the rate goes up 3 quarters of a percent, maybe the mortgage rate goes up a quarter percent, which still sucks, I'm not saying that's a good thing, but I don't know if it's going to be lock-in step with the fed.

Joey: If the other decides we're talking all about supply and the effect on the supply, but talking about demand, are you seeing less buyers into the market?

Josh: Oh yeah, for sure, I would estimate it around 20% right now, reduction and demand overall right now. This is leaning towards why our inventory is growing a little bit. We definitely see an impact on demand showing up in the numbers now. Our sales report last month reflected it, this month at the end of July as I said, we'll probably be off roughly 20%.

Joey: Wow. And is this making seller nervous a little bit?

Josh: Sure it is.

Joey: Because we're used to just like...

Josh: Well, you couldn't be wrong if you're willing to wait. Right? So if you're listing your home over the last 18 months and, let's say, you over-priced it by 5%, just wait a few months, and you'll get your price, right? Where today, if the market does shift and you don't price it correctly on day one, theoretically a month later, you might be doing a price reduction, and that's a huge difference from what it was six months ago.

Joey: I'm seeing a lot of those, that internal real estate traffic words, there is a lot of subject line, price reduced, price reduced, price reduced. A lot of that could have also been that some of the listings I would see 'em. Now we talked about this about three or four episodes ago, where I was like, "Wow, more power to you, that you got your agent to list it at that," and they were flying off the shelf, but it caught up. Whatever they thought it was, hey, just let's go to... As you said, 5% higher. We'll get it. Now, now it's important to price your home right.

Josh: Well, it always depends on the market. Different markets require different approaches. So if you know you're in a rapidly approving increasing market, if you price a little bit higher than the existing inventory, you're probably going to be okay. But that's not a good practice when the market is flatter shifting because days on the market from a buyer's perspective is a concern. So here's an example. For years, sellers asked me, "Does a price reduction look like I'm desperate?" And that's a good question to ask. Our experience has been because we've asked buyers this very same question for years, and what we've seen is a bit more of a pattern is what we've learned that price reductions are typically internalized from the buyer's perspective as motivation. Sellers are motivated. That's why they drop their price. Days on the market is typically interpreted as there's something wrong with the property, and so a seller has to make the decision, "Do I look motivated by changing my price, or do I look like there's something wrong with my home by sitting on the market forever?"

Josh: Right? And neither one is a good option. I'm not suggesting it is, but you have to look at that and make a realistic assessment of what you should do.

Joey: How many... I don't know if you know this stat right now, but days on the market are the average because that's obviously climbing as well, right?

Josh: Not as much as I would have thought. Actually, it was in the, I think, in the mid-high 70s this last month. In the last month's market update, it'll probably be in the low 80s now, so it's trending where it's growing a little bit, but it's not a huge difference yet. And partly because we don't have a massive amount of new homes coming to a marketer or resell homes come into the market. Like in 2007/8, as Mike said in his podcast last month, we had overnight just massive amounts of inventory just being dumped under the market. That's not the case right now. We have a very conservative introduction of new inventory to the market every month. So I think we've almost run out of time. Is that Marcus? Two minutes left? So, everybody who is watching, you got a two-minute warning. We'll have to put up with us for two more minutes.

Joey: Red zone. Red zone. Okay, so the bottom line is, yes, the market has come down a little bit. You said you're seeing 20% less buyers in the marketplace.

Josh: Yep.

Joey: In 2022, you'd say there's about a 10% reduction on average of the median price. Again, the right in the middle of the thing. But it still... I think these numbers are all off of the highest fastest market, so these are still... As you said, the inventory It's 2.1. The replenishment rate is 2.1. It's just considered a seller's market.

Josh: Yep.

Joey: And we have to get up to six months before we would consider that a buyers market.

Josh: Yeah, and you still have to think it this way, you're either renting or you're buying. If you're renting, pay 100% interest every month when you make your payment 100% interest. You're not securing an asset over the long term to appreciate. You do not have the tax savings for home ownership. You're not being able to kind of control what you want to do with your property when you want to do it. You have no real protection over somebody evicting you. Versus owning a home and having the benefits of all the things I just talked about. So it's a tough decision to make. I would really finish off by saying if you're thinking about buying a home and staying there for a short period of time, don't. Don't buy one right now. If you're thinking about staying for a period of years, two, three, four, five, six years, you want to stay longer than that, I think you're going to be in good shape long-term, so in case... I think we're almost finished up, but...

Joey: Before we go, is there any resource somebody could find online that would show the average increase in rent and renting versus it just being antidotal where you're talking to people like, "Yeah, right." Is there something like that? Does that exist?

Josh: is something I think will provide some insight into that.

Joey: Yeah, because I would like to see the number over the last 24 months because I think it would be shocking.

Josh: Yeah, yeah,, I'm pretty sure, is the one. I've got it in our previous market updates on our website, You can watch the...

Joey: I'll link to it when we publish this.

Josh: That sounds great. Let's do that.

Joey: Okay, thank you for your time, Josh. As always, I appreciate it.

Josh: Always Joey.

Joey: If you guys need a real estate agent, give Josh a call.

Josh: Hey, we're here to help. Thanks.

Posted in Podcasts
July 1, 2022

Shasta County Market Update - July 2022


Click Here to watch Josh's video blog for the month of July.


From the Desk Of Josh Barker

Hello everyone, 

First and foremost I hope that all of you are off to a great start to your summers! This month's market update is one of the more impactful reports we have delivered in the past year. Please take a moment and review the information. Some of this information is factual based and some of the information is opinion based. If you have any additional questions, please feel free to respond to this email or contact our office at 530-222-3800

Hoping your Spring has been off to a great start!

Josh Barker


Interest Rate Increase

The Real Estate market is shifting. Mortgage interest rates have doubled in the past 6 months from a low of 3.125% to a current average of 6.25% mortgage rate impacting affordability by nearly 30%. The mortgage rate increase was designed by the federal reserve to target housing and reduce buyer demand. The actions taken by the federal reserve have succeeded and in the coming weeks and months the national real estate market will shift. This market shift will be different from the great recession due to one critical point among others…This market shift is intentional and designed to bring down the current inflation of 8.6%. Once inflation reaches an acceptable nominal range it is likely the federal reserve will enact policies in an attempt to stabilize the market and resume a targeted growth rate.

Home Value Expectations

In the coming weeks and months the housing inventory will likely continue to rise as home prices remain stubbornly high and out of reach of many home buyers due to higher interest rates. Eventually, home prices will likely begin to soften as motivated home sellers take the actions necessary to price competitively and sell. Once the market shift begins to normalize, the median sales price (currently 385k) will reflect a balance between pricing, wages and the then-current interest rates. The median sales price prior to the pandemic in July 2019 was $284,000 when interest rates averaged 3.8%. It is unlikely that the median sales price will reach the previous level referenced. However, mortgage interest rates combined with availability of financing will be the largest contributing factors to the future median sales price. 

Home Sales

Homes sold in the month of June finished at 288 closings down from the 368 closing in the month of June last year. This 21% change in home sales is largely due to the increase in mortgage rates. This trend is projected to continue as affordability has become a strong headwind on monthly home sales.   

Home Inventory

Active homes for sale in the month of June finished at 710 properties up from 539 properties for sales at the end of June of Last year. This 31% increase is largely a result of slower home sales combined with a small increase in home sellers entering the market.

Absorption Rate

The absorption rate in Shasta county is currently measured at a 2.39 month supply up from the 1.7 month supply available in June of last year. The absorption rate is a good indicator of supply relative to demand. A 0-3 month supply is typically a sellers market. A 4-5 month supply is considered a neutral market and at 6+ supply is considered a buyers market. Although the current absorption rate reflects a sellers market, the trend is changing quickly. 


Below are a collection of slides that correlate with many of the topics discussed in this mid-year review. If you have any additional questions regarding this market update or have additional real estate questions please feel free to respond to this email or contact our office at 530-222-3800




Learn more about Josh Barkers 5 proven steps to selling your home by visiting 

Learn more about Josh Barker's proven ideal investment formula by visiting

Check the average value for your home instantly by visiting


Make it a great July! 

Josh Barker

P.S. You can view all of our past real estate market updates by visiting

Posted in Josh's Blog
June 14, 2022

Josh Barker Real Estate Podcast #8

🏠💰Home Value Tool➔

Frequently Asked Questions

Is the Redding California housing market going to crash?

A housing correction is typically considered to be an adjustment in pricing that exceeds 10%. As interest rates increase, pressure on affordability grows which could lead to a reduction in home sales.

Is there a housing bubble in Shasta County?

Many asset classes have experienced excessive growth over the past several years as the result of an increased money supply. As the money supply tightens, it becomes more difficult for many asset classes to continue to grow in value.

Are prices going to go down in Redding, CA?

Home prices have been on a consistent growth trajectory since approximately 2011. Recently, mortgage interest rates have increased to a level that has put pressure on affordability. Home purchases are projected to decline as more people find it difficult to purchase a home at current prices.


The transcription is auto-generated by a program and may not be accurate to the conversation. In order to ensure you get all the information from the video properly, you must watch the video.

Josh: Alright, so I'm here with my great friend and real estate broker extraordinaire Michael Medley. Hi Mike?

Michael: Hi, Josh.

Josh: How's it going, bud?

Michael: Good to be here.

Josh: I'm glad you're here. I'm glad you're here. We're kind of shaking up the podcast this month, a little different than what we normally do, mainly because of your experience. You've been doing real estate for how many years now?

Michael: About 30.

Josh: About 30 years. And interesting for our listeners and viewers out there, Michael Medley is the person responsible for getting me into real estate.

Michael: So I'm sorry.

Josh: Apologies. Exactly. So it was... What year was that, that you and I started working in 1990. What was it?

Michael: 1999.

Josh: 1999?

Michael: Mm-hmm.

Josh: And really, the thing that I remember most about when I first got to meet you is that you were running a company where it was pretty forward-thinking, you had an administrative team, you had a sales team, and you kind of really understood that you needed to be really proactive with your approach to real estate so, which was pretty refreshing at the time because it wasn't like that in a lot of the offices.

Michael: It was very unusual, but I had... Coming from my parents and my father, we had an idea of where it was going.

Josh: Yep. So what Mike's referring to is that Medley Realty had been here since, I think, the '70s, right?

Michael: 1972.

Josh: 1972?

Michael: You're correct.

Josh: And then you had taken office over in the '90s.

Michael: '94, '95.

Josh: So you've been doing this since you were born?

Michael: Don't... Don't remind me.

Josh: It's been a while so, but... And a nice shirt, by the way.

Michael: Oh, thank you.

Josh: I like that. Is that salmon?

Marcus: It has a good salmon color, yeah.

Josh: It's got some salmon going on.

Michael: Got that going for me.

Josh: Good for you. So for everybody else, let's dive right into some things. I think I wanted to do this podcast just to really lean into your market knowledge. You've been around a long time, you've seen markets that have gone up and down and sideways and everything in between, and that kind of experience, I think, would be valuable to a lot of our listeners and viewers because if you haven't lived it, it's kind of hard to really describe it, so... What year again did you jump into real estate here in Redding?

Michael: '92.

Josh: '92?

Michael: Mm-hmm.

Josh: Would you mind... Just describe for our listeners what the feeling of the real estate market in the early '90s was?

Michael: Early '90s, we were going through a transition. If you guys remember that we had the Gulf War in '91, the markets and the... There were the bank issues that were going on right before 1989 and 1991...

Josh: Well, there were savings and loan issues that were happening out alright.

Michael: Yeah. And so there was a transition that was going on, there was an adjustment around '92, '93 of the price of around 20% down, there was still a lot of new construction that was going on at the same time, property on Shasta View, for example, was selling for about $119,000, 1700 square feet.

Josh: So for people listening to this, the so early '90s off of Shasta View, because there used to be a dead-end on Shasta View, people don't know about where that big circle is on the way to McConnell Foundation, that wasn't there. There was a dead-end right after Ravenwood Subdivision. You couldn't even drive past it, and what was the name of the builder in there again?

Michael: Donlin.

Josh: Donlin. And so those homes, the early '90s, were being built by Don, and what were they selling for?

Michael: Anywhere from $119,000 to $136,000.

Josh: $119,000 to $136,000, and that was the early '90s?

Michael: Mm-hmm.

Josh: What did it look like by like... You've described to me before, and I'll let you share it, but you were saying there weren't any major swings in the '90s. What did it feel like?

Michael: Well, we probably had adjustments depending on the interest rates, probably 5% up or 5% down...

Josh: On value?

Michael: On value, for the next eight years.

Josh: So you're saying that pricing at that time was closely tied to what the interest rates were doing?

Michael: Mm-hmm.

Josh: Okay.

Michael: And supply.

Josh: And supply? Okay, it was the market... Were there homes selling in a high volume, or what was the volume like?

Michael: I think it was probably very much an average volume. There wasn't enough push to actually create appreciation and dwindle the supply, so we had a consistent market. It may not have been something that you could see consistent appreciation for.

Josh: Yeah, yeah. So it was just normal, a normal market. So it kind of went up and down a little bit, based on the time of the year, what the demand was versus the supply, and what the interest rates were doing?

Michael: Yep.

Josh: Okay, got it. So when did that all Kinda start to change?

Michael: Probably around 2001, we started to see a movement in price point, we saw an adjustment, maybe about 15-20%, more sales that were going... Taking place, and it started synergy where we started to see the listing of the lending institutions. We started to see... Flex pays interest only, things of that negative ARM loans. That was really in 2003 and 2004 that we started seeing that. But that created our first really big boom that we saw in 12 years.

Josh: Right, so I remember that part, just coming into '99, not knowing anything, in 2000, not knowing anything anymore, really, you were like pouring into me, sharing with me everything you could, and I don't think I recognize what the market was at that time, it just kind of felt like the market, I remember seeing houses up in Country Heights for $145,000-150,000, $100 bucks a foot was kind of like the standard price per square foot at that point when I came in the market, interest rates were probably 9% on an FHA loan. Does that sound about right?

Michael: I'd say 8 or 9%.

Josh: Yeah, it was right in there, I think. I remember some friends of ours, I still fuss with them today, that I think I remember they got a rate at 9% on an FHA for a $110,000 home in 2000. Like early 2000, like 2000 in January, February, or something.

Michael: It seemed to me that there was some adjustment going down to about 6 to 6 1/2 at that point, but...

Josh: Yeah, I'd have to look and see. Yeah, I don't remember for sure, but the... What I do remember, though, is that it was kind of a slow, steady growth going into 2003, it kind of felt like things were moving up, but they weren't moving up too fast. But then, like you said, something happened, the mortgage brokers and lenders started changing loan programs. They started loosening the availability of financing, right? And that's when we really saw an increase in buyer demand. That's when we saw a lot of the investors coming in, right?

Michael: Mm-hmm.

Josh: Do you remember what that... When do the investors really start flooding the market?

Michael: I would start in probably 2000, late 2003, '04, '05, and probably at the end about '06.

Josh: Yep, yep. And I remember seeing that too. It was like probably around 2003-ish, I think is, when I started really realizing, wow, there are people that are like... They're buying into these subdivisions, new home subdivisions. They're buying in the 1st phase when the prices first were set for those, and then by the time they got to the 2nd phase, they're already up $50,000. And those folks that bought those were selling them, then, right? In the 2nd phase. They were selling the 1st phase homes.

Michael: There was supposedly about 40% of the purchases that were going on at the time were speculation...

Josh: Yeah.

Michael: Investors.

Josh: Yeah, so... And what Mike's leaning to there was that 2003 and '04 and '05, we started to see an increase in investor participation. And the numbers that we remember at the time it felt like it was probably about 40% of the investment was... Or the purchases were investors or non-owner occupied or speculation.

Michael: Yep.

Josh: Yeah, and it was... I mean, definitely... And builders were all online at that time, too, right. So they were all trying to supply the market.

Michael: We had three or four major builders for our area that were going gung ho, but there was also... You had the change in capital gains loss in early 2000 that took place where you had a one-time exemption before, where it was 125,000 over 55 that you could write off. When they changed the guidelines to 250 for a single...

Josh: Single person.

Michael: Or 500 for a couple. It sort of set off this motion. That basically carried us till today.

Josh: Yep, so in the late '90s, the federal government came out with the capital gains exemption. If you were single, up to 250,000 of the profit would not be taxed if you lived in the home for two years or more within the previous five years. And now, all of a sudden, they were using this as a wealth-building tool, and people were buying and flipping and doing all the stuff they could do just to bring wealth by doing that.

Michael: Every two years.

Josh: Yep, exactly so that we... I remember seeing that too. Let's talk for a minute about what the loan started doing. By 2003 and '04 we also started to notice some advertising. Remember that? There was some advertising from lenders about different types of loan programs. What did you start seeing at that point?

Michael: It was confusing. I was more of a traditional kind of agent where these types of loans really didn't make a lot of sense because the expectation was you had to have a certain amount of appreciation. In Redding, we usually had... From 1972 till today was probably about 7%, 6 1/2% over the life of that. But these types of loans, because they're using reverse amortization, flex pays interest only. You had 100% non-owner-occupied financing. You had stated income 100%, which is all... They're not Freddie Mac and Fannie Mae guidelines. Let's put it that way.

Josh: Yeah, not anymore, for sure not since the Dodd-Frank bill. So a lot of these had what we call balloon payments, right? And so what Mike's kind of talking about is that in '03, '04, we started to see lenders loosening the lending guidelines. We started to see buyers actually responding to that and wanting to use interest-only or negative amortization loans to purchase. And the big reason is that they could get a bigger house for the same monthly payment. I remember having conversations with people and saying, "Here's the 30-year mortgage, and you're going to buy a home in, let's say, Quail Ridge, right? And that would be a neighborhood that would reflect a value of, let's say at the time, maybe $200,000 for a bigger home in there. Then, if they were to use interest-only or negative amortization, instead of buying a $200,000 home same monthly payment, they're gonna buy a home for $300,000 instead. And that put them over in... Securely, it put them over in the Country Heights subdivision with average selling prices of 300,000 or something.

Michael: Or even Silver Creek or something like that.

Josh: Or even Silver Creek or Copper Creek or something like that. Yeah, so... But the point is that with 30-year fixed home mortgages, they could buy a home for 200. But if they were willing to go to an interest-only or Neg AM loan, they could buy a house at $300,000. But there was a fixed payment for only a short period, and there was going to be a sunset to that or a balloon payment at some point. And do you think that had an impact on value?

Michael: Oh, absolutely.

Josh: What did it do?

Michael: Well, you had people who would normally not be able to afford a certain price structure, pushing that up exponentially. And a lot of those people were using these flex pay. And the flex pays, you could say, "Okay, I have got a house in Silver Creek, it's Oatreal and Shiham it's 2400 square feet, I can make a $1000 a month payment, or I can do interest only at $2200 a month."

Josh: They could just choose?

Michael: Yeah, sort of either or you can go principal and interest, so their normal payment would have been about 24 to 26.

Josh: Alright, so help me understand this. So they're buying a really nice home in Silver Creek, and for $400,000. If they had the option of making the regular principal and interest payment, or they could make an interest-only payment, or they can make a negative amortization where they're just... Are they just tucking that onto the back of the loan?

Michael: Yes, they are. And so, each month, there was an increase in principle.

Josh: Every month, that house had a larger debt on it.

Michael: And so the only way that made sense is that we saw a certain amount of appreciation in the market. So if we had 7, or 8, or 9% appreciation...

Josh: Then, they could still sell the house.

Michael: Sell the house and get out.

Josh: But if it doesn't go up...

Michael: That's the problem.

Josh: That's the problem. So let's look at 2005 and 2006. I think that most people if you look back now, I think the technical month was like the fourth quarter of 2006 is when they started to see things start to really, really peak up. Would you agree with that?

Michael: I would say that. You could see that it was more coasting probably that last quarter.

Josh: Okay. What happened? In your opinion, what ultimately happened that caused the market to shift?

Michael: Well, you can only push up for a certain point, and then if there's not that normal appreciation, these people who were buying were buying with no money or limited money down, so there was no investment into it. And so it was very easy for them to step away if this investor if 40% of our investments. If they had zero money in the game, well, then they just walk away from it. And so that started to cascade and started to... Yeah.

Josh: And start to happen. So I've heard people say that too, that essentially, value got pushed up as high as it could go on the flex pay. [chuckle] One of the interest-only in Neg AM, like the values, went as high as they could go, and it started running up against affordability, but this time it's running against affordability on bad loans, not on a regular 30-year fixed loan.

Michael: Absolutely, which...

Josh: And that's where things started to slow down. Right?

Michael: Mm-hmm.

Josh: So let's speak to them for a minute for our listeners about what did the inventory look like? Did we have more homes available than there were buyers to purchase them?

Michael: Yes.

Josh: A lot more?

Michael: Yes.

Josh: Were we oversupplied? Do you believe in how many houses we had as a community and country?

Michael: Yes.

Josh: Versus how much was actually buying, is that different than today?

Michael: Absolutely 100%. I believe we were sitting around 1700, 1800, and 1900 homes on the market at one point. And we had, let's say we had 200 transactions at that point.

Josh: Yeah. Mike's talking about something. We as a company reviewed this earlier this week, and we were looking at 2006, and then we looked again, I think at 2008 or something or 2007, and there was a huge jump where we had like maybe 500 or 600 homes for sale, and a large sales volume of 300 and 350 homes a month or whatever it was. But a year later, a year and a half later, it was at 1700 homes for sale and sales volume down to about 200. Does that sound right to you?

Michael: Yeah, it's what I remember.

Josh: The big change that happened was is that when the investors pulled out, right? I mean, when the investors stopped buying, which was 40% of the transactions or purchases were investors, so if the market is no longer going up, I would imagine the investors all stopped purchasing.

Michael: Absolutely.

Josh: So overnight, 40% of transactions went away?

Michael: Yeah.

Josh: Yeah. And then when they went away, the inventory spiked because nobody was buying those homes anymore?

Michael: And the programs... There were subdivisions that were coming online at that point.

Josh: Oh, that's a great point. So they had... We had builders that were still aggressively bringing up housing units, and the market was beginning to shift.

Michael: I love contractors because they're always the optimists.

Josh: Optimists. Yeah, they're optimists. You gotta love them.

Josh: Yeah, without them, we wouldn't have them. So thank you. With that, they are they're kind of stuck. They have to finish a house they think probably won't likely sell for what they're going to have into it because of the changing market. And some of them might have been at a point where they may be stopped, which is why we saw some subdivisions where there were just slabs. Remember that?

Michael: Absolutely.

Josh: I mean slabs in the neighborhood, no sticks, no framing nothing. They just stopped right there in the slab.

Michael: And just the cost, there was no way to sell and make a profit at that point. A lot of those subdivisions turned over.

Josh: Yes. So let's talk about that then. So investors pulled out what we think was about 40% of purchases. Interest loans and Neg AM loans became a thing of the past because lenders immediately took those loans off the table.

Michael: Frank Dodd.

Josh: Right, yeah, they're the Dodd-Frank bill. So now it's tightened the money supply. Right. And you got fewer buyer participation, and it sounds like a recipe for a market correction like you wouldn't believe. That's what it did.

Michael: It was something that I think a lot of people didn't expect. And then the bonds on the secondary market, not knowing how it affects the world, created an even deeper hole.

Josh: That's right, yeah because people were... Lenders would fund the loan, and then they go and sell that note to a school teacher union in Zimbabwe or something so that we had this stuff going everywhere.

Michael: It affected every country, even small little school districts.

Josh: Oh, yeah. Well, I started hearing the word derivative.

Josh: And I'm like, "Derivative. What's a derivative?" I mean, now I'm sitting there trying to research all of this stuff back then, trying to figure out, "What's going on." And one thing was for sure. The housing market was grossly oversupplied relative to demand. Prices were pushed up to an astronomical number based on really bad loan practices. And now, those loan options were being removed from the market. And it sounds like it was just a recipe for a market correction like we have never seen in terms of value. I think it was called the Great Recession for a reason, and real estate was really the shot across the bow.

Michael: Absolutely.

Josh: Yeah. Okay. So let's fast forward then now we're sitting around 2010, 2011, and 2012. We're beginning to eat up a lot of that distressed property. What did that look like back then?

Michael: It was still a lot of inventory. But it was a lot of short sales, a lot of foreclosures. A lot of those loans that were becoming due from 2003, 2004. And these people couldn't refinance because the home had depreciated to a level where they were upside down. Yeah. And so, at that point, we had a start that focused on short sales and, well, a lot of foreclosures.

Josh: And then, what year do you think that we started to really see the return of... 'Cause I think it was... I mean, people were buying the whole time. One of the things that we did on our report a few days ago was still having 180 homes selling per month, even though 2007, 2008, 2009, and 2010.

Michael: There are always people who need to buy and sell.

Josh: Yeah, there were always people who needed to buy and sell. And so we saw a transaction still happening. So it was thought that it's all going away tomorrow obviously, it didn't really look like the case when you look back to what has happened before. When do you think the investor returned?

Michael: I think they're... The smart guys were coming in around 2010, and 2011. But we really started to feel it in 2012.

Josh: Yeah, so 2010, 2011 some of the savviest investors felt like, "Okay...

Michael: That it hit bottom.

Josh: "It's a good time to get in." And then, by 2012, Maybe some people were beginning to realize that this was a good time to get in. By 2013 everybody knew it was a good time to get in, and people started buying. Hey, Marcus, real quick, how much time do we have? Are we good on time?

Marcus: Yeah, we're.

Josh: Okay, how much do you have right now left with then?

Marcus: About 10 minutes.

Josh: I just want to make sure we budget out for everybody.

Josh: 10 minutes. Thank you. So okay. We got 2010-11, and some of the savviest investors are coming back into the market. They're beginning to strip away some of the inventory because at that point, how many homes do you think we had on the market about that point?

Michael: What about 2015? Probably around 1900. Yeah.

Josh: About 1900 or so by 2010-11, somewhere in there. And a lot of it was vacant. A lot of it was either foreclosed or short sales, not all of it, but that was a lot of the inventory.

Michael: And I think by 2015, we were at 700... Excuse me, 1500.

Josh: Yeah. So it started to trend down. But savvy investors come back 10-11. They start stripping around at the inventory, '13 or '12, '13 people really start to get the word market's probably bottomed out. We started to see our average sales price start to creep up a little bit by '14, and it was just...

Michael: A slow 3 or 4% appreciation until 2018.

Josh: Yup. So we started to see in 2012-13, we started to see inventory going up. I'm sorry, the inventory is starting to go down, and the valuation of homes is starting to go up. Some investor participation is at a much larger level than it is today. I mean, right now, we're probably sitting on how much investors do you think?

Michael: Probably 10%. I think that's the number that people's...

Josh: Yeah. Maybe not recent in the last couple months, but I would say over...

Michael: No. Over the last year.

Josh: Last year. But back then, probably in '10, '11, '12, '13, what do you think the participation of investors was then?

Michael: I think it was probably 30%.

Josh: Quite a bit. People were going after value.

Michael: These are not the investors that were looking for a quick appreciation. They were more long-term investors. They were buying these under Freddie Mac and Fannie Mae guideline loans. They needed 20 to 25% down. So it was a completely different beast than we saw on 03,04 and 05.

Josh: Yeah, 03,04,05, I mean, you could borrow money out of your own house, five or 10% down, and go buy an investment property or something.

Michael: And you could make a stated income and do zero money down on a non or occupied. Crazy talk.

Josh: Gosh, that's crazy. No wonder it got like it did. So now you look at okay 2015-ish '16, we're still going up. What happened somewhere around '17 and '18? I think the market began to plateau a little bit.

Michael: It felt like we were going through our transition, which would've been our normal cycle.

Josh: Our normal cycle?

Michael: Yeah. Since '72, since we've tracked, we normally see that six to seven, eight-year transition where you cascade up, move up, and then there's an adjustment.

Josh: Yep. So when people talk about real estate cycles, they normally refer to seven, or eight-year cycles?

Michael: At least in our area. Yeah.

Josh: We were cycling up since like 2010-11, and so by 2018, we started to feel like, Hey, things look like they're plateauing a little bit. And I can remember that. I remember having conversations with people being like, "yeah, I can feel something." But what happened that changed that?

Michael: Well, we had our bad luck became good luck, so to speak. We had the Car fire that took place. We had the Paradise fire, where we lost about 1200 homes to the Car fire. I can't remember... The Paradise, what was it?

Josh: 28,000 housing units.

Michael: 28,000, and all those people had to find a place to live. And so at that point, we weren't building houses at any high level. I think when we were doing that, it was probably 80 homes. So 100 permits were being pulled a year.

Josh: Yeah, it was low.

Michael: Yeah, it was super low. Yeah.

Josh: I remember reading reports for that, the city of Redding. So for our listeners, new construction in the city of Redding was probably less than a hundred housing units per year for many years from like 2000, well, 2010, it was probably less than 50, I don't know. But by like '14, '15, '16 up through like 2018 before the Car fire, it was probably a hundred or less a year. So it was not significant by any means.

Michael: No, it wasn't. We were definitely in a resale market.

Josh: Yeah. We were in a resale market. You're right. And so fire hits 1,000, 1,200 homes here locally, 28,000 in Paradise, collectively, we've got a big issue. We've got a huge amount of demand coming out nowhere, but we had a lot of inventory. So what happened? I mean, what did our prices do at that point?

Michael: They still kept adjusting up.

Josh: Was it significant, though? We had a lot of inventory back then, so.

Michael: I would say it was pushing up maybe 6, 7%. We didn't see the big adjustments until probably that last episode with COVID. Yeah.

Josh: With COVID. Yeah. So fires came in, and they obviously had a big impact. We had a huge amount of construction boom here locally, obviously, because of that.

Michael: The replacement of insurance money. We also had that with the roofs that had to be replaced because of the hail damage. There was something like 30,000 roofs.

Josh: That's right. We had a storm that... A lot of contractors have been busy the last few years.

Michael: And when Redding has always boomed since the '70s, '80s, '90s, and 2000s, it was all based on construction booms. This was our bad luck became our good luck.

Josh: Yep. I got the contractors really busy.

Michael: And they were able to charge top dollar, which created them spending it in our marketplace. So it was a trickle-down effect.

Josh: Yup. So contractors making money is a good thing, and then they start spending money in the economy, which is even a better thing and ultimately creates more stimulus for our local market. So how much time are we left with up there, Marcus?

Marcus: I'll let you know.

Josh: Great. Thanks. So with that, we're looking at it going okay, well, contractors are starting to build homes now, outside of the Car fire issue where they're building homes now, and they're being able to build 'them for a profit. And so now would you say that there's a lot of new homes relative to demand right now being built?

Michael: No. I think we are underdeveloped for what we need.

Josh: I think you're right. I think we are too. I think that we're still probably short on housing. Well, if you look at the absorption rate at just over two months, the supply of homes for sale.

Michael: 2.15.

Josh: Yep, 2.15. There's just not a ton of inventory, so the builders right now have not oversupplied the market. Would you agree?

Michael: Not at all.

Josh: This is a lot different than in 2005 and 2006.

Michael: Well, the difference is the cost and effect and the available loans that allow people to buy things they probably shouldn't have. And today, it's still Freddie Mac and Fannie Mae guidelines, meaning they have to qualify and have a certain amount down. They have to have a credit report that's 640 or higher, so certain things must be followed. So with that... That's probably the biggest problem is our demographic. If we have the average family makes $55,000 a year. Still, the numbers are older, they're showing $42,000, $44,000 a year, but the expectation over the last year it's gone up.

Josh: Yup. So the interest rates then, I mean, when we look at it right now, and if I have to summarize this for our listeners because I tried to... I wanted to give you to give them that history lesson of what it is. It's what that market looked like before. But right now, new construction is still way short of what it was in 2005 and 2006. So we're not sitting on a huge amount of inventory that exceeds demand. Interest rates right now are averaging, probably close, let's say close to 6% just for this podcast. Would you agree that home valuation will likely be closely tied to the overall inventory relative to demand and what interest rates are doing?

Michael: Absolutely.

Josh: I mean, those are the two major factors?

Michael: One is supply and demand and where we are with it. And the next is affordability.

Josh: Yep.

Michael: And so, being that these homes, these interest rates, have increased to a point where, from December to today, you're probably spending 30% more on the same product per month.

Josh: Yep. Per month.

Michael: And you add that to the other costs, with inflation that we're dealing with, it's pretty rough.

Josh: Yep. I agree. I think Warren Buffet talks about it and has said it best over the years that interest rates serve the value of an asset like gravity. So, as the rate goes up, the gravity on an asset's value gets pulled down more, and the gravity grows. And then, the lower the rate, the less gravity, and the more the asset's value can go up.

Michael: Yep.

Josh: So, right now, would you say that home pricing, because rates are going up, is probably more stable than they were prior to the rates going up?

Michael: Absolutely.

Josh: Okay.

Michael: Absolutely. But because we have that, again, supply and demand issue, as long as that supply stays at this level or maybe even slightly above, we're not going to see any big changes or corrections in price point because there's still a huge need with the rental market being what it is today.

Josh: Right. I couldn't believe it. I was talking to a guy yesterday, he's getting married, and he and his wife, or soon-to-be wife, are out shopping for an apartment, $1000 a month for them.

Michael: Were you getting married, or...

Josh: No, no, no. A friend of mine.

Michael: Okay.

Josh: And he and his bride, or soon-to-be bride, went out shopping for a one-bedroom apartment, $1000 a month for the one-bedroom apartment.

Michael: I'm seeing some numbers at which I'm shaking my head.

Josh: Yeah.

Michael: I mean, we see homes in Mary Lake, 1900 square feet, going for $3200.

Josh: Yeah, that's just crazy to me.

Michael: And again, our demographic, what the area can afford is probably $1800 a month as being our top, and that's now our average, which was from three months ago.

Josh: So, really, we're short on housing units, period.

Michael: Yep.

Josh: So, if interest rates go up, it impacts affordability, which puts pressure on value. You have a hard time appreciating when the cost of the purchasing and mortgage goes up, right?

Michael: Mm-hmm.

Josh: Buyer needs more money. But with the housing shortage, it's still going to be challenging for the values to go down because the demand's too high.

Michael: You have to have more products come to the market, pushing the prices down.

Josh: Yeah, I totally agree. Well, Michael, thank you very much for taking your time with all of us today. I mean, the value you bring to a conversation because of your experience is huge. So, for all of our listeners out there, I hope you enjoyed the conversation, and we'll talk to you guys soon. Thanks a lot.

Michael: Thank you.

Posted in Podcasts
June 2, 2022

Shasta County Market Update - June 2022


Click Here to watch Josh's video blog for the month of June.


From the Desk Of Josh Barker

Hello everyone, 

Happy June! I hope you are all enjoying the warmer temperatures as we edge closer to summertime. We are seeing closings down from last month and a higher interest rate environment. We will be discussing why that is, and the transitions the real estate market is currently making. If you have any additional questions, please feel free to respond to this email or contact our office at 530-222-3800

Hoping your Spring has been off to a great start!

Josh Barker


Home Sales

Home sales for the month of May finished at 286 closings down from 326 closings in May of last year. The 12% drop in home sales year over year is largely a reflection of the recent decline in out of town relocation purchases as well as the higher interest rate environment. This trend is expected to continue as the real estate market transitions away from a pandemic related, low interest rate environment to a more balanced. 

Active Listings

Active listing in the month of May Averaged 642 up from 528 in May of last year. The 21% increase in home inventory has been a welcomed change for many homebuyers that were struggling to locate home to purchase just one year ago. The number of homes for sale continues to trend up slowly in the local market. 

Absorption Rates

The absorption rate (the total months supply of homes for sale) is currently averaging 2.15 months supply, up from the 1.7 months supply of homes available for purchase one year ago. This 26% increase in the housing supply relative to current demand is a good indicator of overall housing performance. Typically 0-3 months supply of home for sale is considered a sellers market, whereas 4-5 months supply is considered a neutral market and housing supplies that exceed 6 months are typically considered a buyers market. The current housing supply of 2.15 months suggests that the local market is considered a sellers market overall.   

Average Sales Price

The average sale price for a home in the current market is $437,000 up from $393,000 one year ago. This 11% increase in the average sales price year over year is projected to level off as interest rates strip away at affordability in the coming months. The last 30 days housing performance suggests home prices are already beginning to level off as the number of days on market is extending and price reductions for some homes is becoming more common. 

Interest Rates

Mortgage interest rates have continued to climb in recent months as Inflation continues to exceed 8% and the Federal reserve continues to raise rates in an attempt to control affordability and wages. In addition, the Federal reserve has decreased the amount of mortgage backed securities purchased putting a heavy lifting on the private market and sending mortgage rates higher. Currently mortgage rates have been hovering around 5.5% for a 30 year fixed mortgage. The stability of mortgage rates in the coming months may prove to be challenging as the Fed battles inflation and the private market has to pick up the slack in the bond market.

Bottom Line

The current housing market has both some headwinds and tailwinds to reconcile. The headwinds of higher interest rates and diminishing buyer demand will likely put a halt to robust home appreciation. However, the tailwinds of overall low home inventory relative to demand combined with an already existing housing shortage problem makes affordable housing challenging. In the coming months keeping a watchful eye on mortgage rates and the supply of homes relative to demand will likely serve as a good indicator of where the housing market heads next.  

Below are a collection of slides that correlate with many of the topics discussed in this mid-year review. If you have any additional questions regarding this market update or have additional real estate questions please feel free to respond to this email or contact our office at 530-222-3800



Learn more about Josh Barkers 5 proven steps to selling your home by visiting 

Learn more about Josh Barker's proven ideal investment formula by visiting

Check the average value for your home instantly by visiting


Make it a great June! 

Josh Barker

P.S. You can view all of our past real estate market updates by visiting

Posted in Josh's Blog
May 25, 2022

Josh Barker Real Estate Podcast #7

🏠💰Home Value Tool➔


The transcription is auto-generated by a program and may not be accurate to the conversation. In order to ensure you get all the information from the video properly, you must watch the video.

Joey: So we're back again.

Josh: We are back again.

Joey: It is May.

Josh: It is May.

Joey: It is May, right?

Josh: It's May.

Joey: This isn't Russia, is it Danny?

Joey: It's May, and there's still... So many of the same topics that we were talking about last time are still flowing forward, like interest rates. They're still in the fives, gone up. People are freaking out because they're so used to, almost, free money; now that money is not free, they're, Uhhh... But we also still have low inventory. And so we have those headwinds and tailwinds battling right now, but people are trying to... Like, "What should I do? What's the market gonna do?" One of the big concerns that people aren't talking about is what's the difference between purchasing and renting? They're really concerned about interest rates and buying, but they're wondering, "Is the market gonna continue to appreciate? And should I hold out?" What are some thoughts on that?

Josh: Well, I mean, it's kind of a... It's a pretty big question. It'd be really hard for our listeners or viewers to follow this without looking at a graph or something that... The example I could give you is, take a house right now, for example, a $400,000 home, right? And let's say that the appreciation of this 18-20% stuff that we've seen over the last couple of years, that's not consistent, that's not gonna happen. Let's just use a number that we can agree on, let's say that it appreciates at 3%. Which is 5% below inflation.

Joey: I think conservative, I think that's a conservative number.

Josh: And I think most people would agree. Let's say you took a $400,000 home. Next year, it's gonna be $412,000 based on that example. Year after that, it's $425,000. Year after that, it's $440,000. Year after that, it's gonna be $465,000. Within...

Joey: It compounds fast...

Josh: It does compound fast.

Joey: It compounds really fast. In just four years and all of a sudden...

Josh: Exactly. Eight years in, you're well over $500,000.

Joey: Exactly.

Josh: That person that bought that property has an equity in that home of at least $100,000, at year seven or year eight, somewhere in there. And that's real impact of appreciation. But here's where the spread really kicks in. If you rent right now, rents right now are projected to go up about 5% a year, every year going forward. And so that means that over the next five... Let's say the next eight years, rents are gonna be up, let's say 50%, when that happens.

Joey: They're gonna climb faster than 3% appreciation.

Josh: Right. So let's fast forward, that person is trying to decide between renting and buying, let's push them out eight years from now. The one that bought probably has well over $100,000 of equity...

Joey: 25% equity.

Josh: Plus they don't have the increase in the monthly living expense because they have a fixed mortgage on their home. The person that rents has no equity, and that person is paying probably up to 50% more in rent at the very end, and if you look at the difference, the delta between those two, it's probably $100,000 or $200,000 difference between the two decisions. And so again, I know it's hard to listen to it without actually seeing the graphs, but what I can say is that, do the math. It's expensive not to own a home, long-term.

Joey: The other thing is that so many people that talk about this, they get put in two groups. One group talks kind of like a day trader, they talk about, the stock market. They talk in these 30-day, 90-day cycles. Real estate is not a 90-day cycle, it needs to be more about what you just said, "Hey, let's fast forward five, eight years." And the other thing is you may not have a 401k, but you will have a place where you lay your head at night. Right?

Josh: Oh. Yeah.

Joey: So I just think that people get caught up in that really short term, "Yeah, well interest rates are really high, and I saw the market collapse 14 years ago." It's like this market is nothing like that market.

Josh: No, in fact we should probably talk about that for just a minute. I think we've talked about in our previous...

Joey: We have.

Josh: Podcast, but just for a few listeners that... If you looked at 2006 or 2007, and that's arguably the peak of that last market. You had well over 50% of purchases were non-owner occupied, they were speculation types of purchases. Now, today, it's less than 10%.

Joey: And that's a huge number.

Josh: Huge difference, huge difference. Second thing is, is that back then, negative amortization loans or interest-only loans with balloon payments were the common types of loans that a borrower would use. They were using risky loan products, artificially low monthly payments that were all going to reset within three years, and they're gonna be paying twice as much for a mortgage payment. Whereas today, people are buying on typically 30-year fixed mortgages, where there is no balloon payment and there's not gonna be any major increase in their monthly payment. And so that's another massive difference. Back then in 2006-7, a lot of purchases were using what's called 'stated income,' meaning they weren't even showing a bank statement. They weren't showing anything to qualify, they were just literally saying, "This is how much money I make." And the lender said, "Okay, no problem," and they gave them a loan. Today, no, no, no, no. Proof of employment, tax returns, bank statements, and sourcing all your income.

Josh: Right now, the mortgage credit affordability index right now, it's really low. Meaning that it's pretty tight and difficult for people to get financing compared to 15 years ago. A lot different. The markets today are very stable. And so even if the market slides in terms of demand because of interest rates going up, which we all fully expect is gonna happen, people are not qualifying now that were qualified six months ago. When we see that happen, we're just not gonna see the same shift in inventory. It's just not gonna be the same as it was before.

Joey: Another thing is that, the people that are saying, "Hey, interest rates are kind of high, I don't know if I wanna buy now," you have to think about a couple of things. Number one, if you're gonna wait for interest rates to come down, you're gonna miss out on the appreciation of the market, right?

Josh: Yeah. Yeah.

Joey: Number two, when those interest rates come down, that 3% that you're talking about, it'll be more than 3%. Because every time the interest rates have gone down, appreciation...

Josh: It causes buyers to go up.

Joey: It does. The other thing is if you purchase now... I was talking to a lender the other day, I won't name anybody, but he's a really smart guy, and he was telling me, right now he was saying, he was telling people, "No, go ahead and get the higher interest rate in a couple of years, 'cause we are gonna probably go into a recession, there's probably no way to avoid it... Feds are gonna to be force to bring those interest rates back down, you can always refinance then."

Josh: Yeah you can.

Joey: So normally, you know, lots of times when the interest rates were in the high twos, people were saying, "Hey, look, you should buy this rate down." And now they're saying the opposite it's, "No, no, no go ahead and go with the higher rate."

Josh: Yep.

Joey: You don't wanna pay the fees. Why? 'cause you're probably gonna refinance in 18 months when the feds do bring that interest rate down.

Josh: Yeah.

Joey: And you're gonna have picked up that appreciation.

Josh: Yep.

Joey: And there's no inventory in the market. That's a big thing. That's easy to glaze over.

Josh: Yeah.

Joey: But it's powerful is that it is very, very hard to replenish inventory.

Josh: Oh. Yeah.

Joey: Very hard.

Josh: And especially in California.

Joey: And it's not getting any easier.

Josh: Not any easier right now. I think we're sitting at 1.98, almost two months, supply of homes for sale. And for our listeners and watchers out there, what it means is that if nothing else comes up for sale, it would only take two months to sell off the existing inventory. That's how low the inventory is right now. And that's right now. I mean, we're in the middle of spring, we're supposed to have more inventory right now and going through summer than we would at any other time. It hasn't been the case though. We haven't seen this massive jump and really, I think what it is a part of it. A contributing factor would be is that so many people purchased with such low interest rates that they're literally looking around going, "I don't wanna give up my, you know, two and three quarter percent interest rate."

Joey: Yeah.

Josh: So they're hanging out in their homes, which, hey, I get it. Congratulations. But that is having an impact. New construction, it's not, it's not a huge, meaningful impact here in the community. I mean, we're getting some new construction and I'm certainly not complaining for what we're getting now, but we're still grossly under supply compared to what the demand actually could be or is. And I don't see that changing anytime sooner because the cost for construction is super high, cost of land acquisition is still high, development costs are super high. So, you know, it's just, we're gonna continue to be in a really a housing shortage, you know... Not just nationally, but locally we're, we're still at a shortage too.

Joey: So two of those major contributors, one is labor.

Josh: Yep.

Joey: I mean, anybody who's talked about, "Hey, I need some things done in my home."

Josh: Yep.

Joey: I mean, beyond just the general contractor, all the contractors are under-staffed.

Josh: Oh, totally.

Joey: Yeah. And that's not something that you're just gonna replenish overnight.

Josh: No. No.

Joey: That's gonna take years.

Josh: No.

Joey: And the other piece is materials.

Josh: Yeah.

Joey: Now I don't know with all of the supply chain disruption. I don't know if it's gonna get pegged back up, you know.

Josh: Yeah.

Joey: And, but it just doesn't... Not like I'm plugged in, but I don't see where like all of a sudden it just catches up in the supply chains. Everything's great and prices just plummet for, you know, materials, lumber. I saw this great photo that tried to show the cost. How much a thousand dollars of lumber would've... You could have purchased. I think it was like 16 months ago versus today it showed two pallets.

Josh: Yeah.

Joey: And one was huge and one was tiny. Like to give you an idea physically...

Josh: Yeah. What it's doing. Yeah.

Joey: What it's doing, you know, that eight and half percent inflation. It's a lot more than that with building materials.

Josh: Oh yeah. Well the, I mean inflation right now, obviously, which is why the feds are saying, Hey we're looking at raising rates again. I mean, right now we're in May. They just came out with the report early this month that said that the inflation numbers, I think were at 8.2 or 8.3 which means the fed is likely gonna raise those interest rates sometime this next month at another half a percent another half a point. For our listeners out there right now our interest rates are averaging about five and a half to five and three quarter. That kind of tends to be what the rate is. It's bouncing a little bit right now as the markets are trying to find themselves. But that's kind of the general idea of five and a half, five and three quarters. What interest rates are now for a 30-year fixed mortgage. When the fed raises that rate, we're fully expecting to see interest rates in the low sixes.

Josh: You know, that's a... That's the next increase that we're expecting. It's gonna have an impact on affordability. It's gonna have an impact on demand. We are going to eventually see the housing market stop in terms of the demand. It's gonna start to get killed off by the interest rates going up. We're expecting that. But what I think people need to think about though, is that it doesn't necessarily translate into lower sales prices. What it's gonna do is it's gonna eliminate demand, but there's not a lot of supply in the market. And so if that supply doesn't jump relative to demand, if that supply doesn't continue to grow rapidly as a result, then prices aren't gonna move that much. You know, it's only if that inventory relative to demand really starts to grow. That's really the only way we could start to see prices... Prices, softening. You know what I'm saying?

Joey: Yeah...

Josh: But there's...

Joey: And I still think... Sorry to interrupt, but I still think that Redding is a... Unique, because it is one of the last areas in California...

Josh: Yeah.

Joey: Before you leave. You know, everybody's leaving. No, not everybody, a tiny percentage is leaving, but a lot of people are leaving the major cities and coming up here. And so LA can see a decline, San Francisco, San Jose, they can see declines and they have where Redding has continued to grow.

Josh: It has.

Joey: Because we are somewhat of an anomaly, within the state where even though the state might be going down, this area is going up.

Josh: Well that report that came out of it, I think it came outta Stanford I think it's the Hoover Institute in Stanford, but you know they determined, you know, what, the number one reason for people leaving the state of California was, and it wasn't politics relative to what some people might have thought, but it's... It was actually just affordability.

Joey: Yeah.

Josh: So like, you know, LA, San Diego, Orange County, San Francisco, you know, the Bay Area overall. You know, costs for homes there are extremely expensive, right? Redding relative to all of those things was very inexpensive. And so... And we continue to be less expensive than the rest of the state and we have a beautiful place to live. So we're still seeing people, like to your point, coming in from those locations. Those are our feeder markets, they really are. Those are the markets that tend to see... We see the greatest amount of influx. It's not people moving from outta state, moving to Redding. It's people from inside of the state and bigger cities that are moving to Redding. And we're seeing that a lot.

Joey: Along those same lines I had a head hunter reach out to me in regards to a position with a company in the Bay Area.

Josh: Yeah.

Joey: And one of the things that caught my attention was they said they wanted me there two days a month.

Josh: Two days a month?

Joey: Two days a month. So this is... And this is a larger company, but it was just looking for... It doesn't matter.

Josh: He didn't know who he was talking to

Joey: But.

Josh: Two days a month.

Joey: Well, think about, think about that for a second. It's like, okay, you have to be in San Francisco.

Josh: Yeah.

Joey: Two days a month.

Josh: Yeah.

Joey: I mean, that suddenly makes... It opens up that range. You don't have to be in San Jose and Mountain View and commute in.

Josh: No, you got a lot more options.

Joey: Yeah. That's like you fly in for two days a month.

Josh: Absolutely.

Joey: Right? And so I think you're just gonna... I think that's one of those contributors and we've had a few. I don't know if we talked about it on this podcast, but when we... When Adam McElvain was... He ran for City Councilman and he had a couple of just fantastic ideas and I haven't heard anything about him. And it kind... It bums me out. But two of 'em, one of 'em was the high-speed internet. To have the City of Redding actually be an ISP. And the whole idea was like, Hey, if you can offer a high-speed internet, this isn't like, yes, you can watch YouTube at home. This is...

Josh: This is like really high speed.

Joey: Really high speed. And we have all the infrastructure for it and there was grants for it. But it would make Downtown one of those hubs where companies would move. Companies that have like 15 employees, 21 employees, all engineers, all people making pretty darn good money.

Josh: Sure.

Joey: Mid one hundreds, Maybe a little bit higher. Like we said before down the Bay Area that's not a lot.

Josh: No.

Joey: You're making $150,000 a year you're sharing an apartment with somebody. You're making $150,000 a year here you're easily a purchasing...

Josh: You own have a home.

Joey: You own a home, and a nice home. And so that was a project that's kind of ancillary to the hey, two days a month that kind of thing. The other big thing that I remember him... I am hijacking this podcast, but the other big project that he talked about that I thought was... Building a major solar array outside the city. We're the second sunniest city in the United States...

Josh: Take advantage of it. Yeah.

Joey: Right? And his tagline, I don't know if he made this up was, "It's the dam of the future." Right? Shasta Dam was huge built REU on Shasta Dam. But anyway these kind of projects that kind of... That was kind of anecdotal. That, Hey, more companies are saying, "You know what? If you can just be here a couple of days." That's the kind of stuff I see as pressure. That's why I don't see Redding, not like I have a crystal ball. I don't see Redding coming down. I see it leveling off like you said. I think 3% is a very conservative number. And it's kind of a cooling off after we did have that 20%, I think it was even more than that. And we had it compounded over years.

Josh: Yup. Well, and it's... It is... And I think just being sensitive those two are in the market now they have been in the market. So I was talking about this with our sales team this last week. And I said, there's two different groups of people that you're gonna run into now in the market. You're gonna have the group of buyers that have been in the market for like four or five months since, haven't bought a home yet. And all they've seen over the last four or five months is what they could qualify for or the type of home they were able to buy four or five months ago, had they bought it back then. And compared to what they're able to buy today, they're just watching that diminish. And so they're pretty frustrated. And understandably so. They thought that, "Hey, I could take my time, find the ideal home." And then all of a sudden interest rates start going up. And now this person feels like, "Wait a minute. I can't... What I was gonna get to enjoy for a monthly payment is gonna be up 50% of that now."

Josh: And so it's frustrating and I get it. But there's another group of people. These are the folks that haven't been in the market in Redding until recently. The interest rates that... The way they are today, this is how they're shopping for homes today. They haven't seen it any other way. And so for that group of buyers, this isn't a huge shell shock for them. They're pretty excited. And if you're wondering, well, who's still buying homes? It's a lot of the people that are buying homes right now are people that are just now coming into the market, who haven't been pre-exposed to the lower interest rates that they had. And the relationship to what that could buy you in the market here locally. Does that make sense?

Joey: Totally.

Josh: Okay. And so we're seeing that playing out right now on Main Street. And so we're really talking to folks about... Like we talked about earlier in the podcast, which is as frustrating as it might be. Just think through this for a minute, if you wait longer, if you wait years longer before you decide to buy it as a result of this short-term issue that we're running into with the likely recession, like you said coming. Think about what that cost might mean to you. Based on the example I gave.

Joey: Well, I was thinking... There was this business coach I was listening to the other day. And he he talked about some of the qualities of people that succeed at a high level. And one of 'em was he said, "Their ability to forget, their ability to immediately focus on the next move and not get caught up in.

Josh: In the stuff back there...

Joey: The failure or past or setback. Yeah, exactly. And so that to me that's kind of in that same vein of like, "Hey look, November 2021 is gone."

Josh: It's gone.

Joey: Don't... Take that interest rate quote you got, you throw in the trash it's done. That's behind you. That's the play behind you. And when he was talking about that, I thought about Tom Brady. Because I remember seeing an interview with Tom Brady about it. He was like, "I'm onto the next play."

Josh: Yeah. Can't do anything about the last one.

Joey: So it's like saying things like, "The past, it's done." So it's, where are you right now? What does the market look like now? What do you think the market's gonna look like in six months? Do you think suddenly there's gonna be huge inventory and no demand? Do you think interest rates are gonna drop down to 4% by November? Nothing tells us that. But if you lock-in now a year and a half, two years from now, at some point, those interest rates will come back down.

Josh: Sure.

Joey: And even if they didn't, you're locked in a lower interest rate now than if you wait six months and buy and they're at 6 1/3. 'Cause that's where it's going. That's a trajectory.

Josh: Oh, it is. The rates are looking like they're gonna be in, like we said, in the sixes here in the near future. At some point the housing market will break. My guess is around 6 1/2% mortgage rates will push the market and then translate into a recession. Because housing represents something like 17, 18% of the overall economy. It's a big number. Once the housing market gets hit by the higher interest rate and starts to really slow down. I think you'll start to see that ripple effect across the rest of the country in terms of all the other different markets. So if that turns out to be the case once we move into a recession, the Federal Reserve won't have necessarily the same pressure. Because with a recession, you kind of usually assume that you're gonna start to see your inflation falling down too. And at some point that supply chain that we keep talking about, at some point it's gonna begin to catch up.

Josh: And that's really gonna put that inflationary number in a more reasonable level. And then at that point the Fed won't feel the need to raise rates more. When they start to feel like, "Hey, there's proof that the inflation's slowing down." And when they do that like you said, that's when they'll start to maybe even try to help pull us out of recession by bringing those rates down again. Here's the question, housing. Let's just say it was flat. Let's say it is what it is today when we're in a housing recession. If the Fed starts dropping the interest rate in order to stimulate the economy again, what do you think that'll do to home prices?

Joey: Well, They're gonna go up.

Josh: They're gonna probably go up, right? And they're gonna... They're gonna go up in correlation with how fast that rate goes down. And so for folks that are out there shopping it's like you said, it's okay that the rate's are higher, take the home. And when the rates drop, refinance to the lower rate. But if you don't wanna be in a situation where you're falling behind on your equity that you're gaining over time, both from appreciation in the market, paying down your mortgage balance, and then compare that to renting where rents are going up, it's a still... Financially, it's a pretty darn smart move, I don't see too many experts that would boo-hoo at that too much. Housing is not like the stock market... What did the stock market do over the last couple of weeks...

Joey: It's been tanking big time.

Josh: Big time housing market hasn't...

Joey: Crypto has been tanking, big time.

Josh: Right and it was all that fake money stuff, helicopter money falling out of the sky, it went right into Crypto, It went right into the stock market, and that's why we had these nice bubbles there. Housing market didn't do that. It didn't do that.

Joey: I'm trying to remember the other day, I was talking to my financial advisor and he was telling me about a stock, I won't say it, but it was trading at about a quarter of its high...

Josh: Oh well. Wow.

Joey: Right, and he was like, "Oh, I think it is value." And I said, "What's the PE ratio?" And he was like, "Hold on, 37." And I was like...

Josh: Hold on, our listeners don't know what the PE ratio is.

Joey: Price to earnings ratio, so that means for every share, how much money do they make versus how much it costs, right? So if they said, well, there's a billion shares and they made a billion dollars, and the stock was trading a dollar, you're like, "Oh, the PE ratio is one to one." which never happens by the way.

Josh: Right.

Joey: But you would be like, "Oh okay, I bought the share for a dollar 'cause it made a dollar." And so then it dropped down 75% of its high value and it was still trading at 37 times how much they were actually making.

Josh: Which is really crazy. Is what Joe is saying on this...

Joey: That is insane like, like I'm a stock guy, but I remember I first started reading stocks 23 years ago, and PE ratios would be like 13, for high PE ratios.

Josh: 15, 17...

Joey: Those would be high PE ratios. Now though the tech world, it's just the PE ratios are insane.

Josh: They're not... Well, it's not attached to reality anymore.

Joey: At all. Not at all.

Josh: It is because there's so much investor participation in the stock markets.

Joey: So much emotion.

Josh: Yeah, well, and every time they print money every single time, it always does the same thing, it flows into a couple of areas, and typically it's gonna fall into the stock market somewhere as a result of that. And we've printed so much money over the last couple of years, there's no such thing as a free lunch. Right, so we're all paying the price now for that free money with inflation, and every household now is gonna have to deal with it, everybody's talking about the gas prices and everything else, and that's having a real impact... And if you wanna draw that back to real estate, fuel prices are having an impact on the more rural communities around Redding. The values of homes are having... Are being impacted in some manner because of the commutes getting longer. So if you live in... If you work in Redding and now 30 minutes away... You are and living, 30 minutes away from your office in Redding now it's no longer as attractive as it was before, because the cost of fuel now is $6 a gallon. While when you thought about doing it before, it might have been $2.50 a gallon, $3 a gallon. You know what I mean? So we're having some impacts from that indirectly too, with like fuel prices.

Joey: So to recap it... Yes, interest rates have gone up, but Redding has very, very low inventory. It's gonna be incredibly hard and slow to replenish that inventory, Redding is a destination for people to move to, people are not leaving Redding, you may have a... "Oh my friend moved to Idaho, what are you talking about." For every friend that moved to Idaho, there's two or three people that moved from San Jose, Stockton, Roseville, to Redding so...

Josh: And people moving back, I've had friends move back from Idaho... I have had friends move back from Montana, and I'm not boohooing any of those locations, but everybody thinks the grass is greener, and then they go and they look and they go, "Wait a minute, so it's the same green grass I had before," you know so...

Joey: Well, I'm not gonna say any names. But We have several friends that moved east of here, and every one of them... It was hard for... We get on calls with them, and they don't wanna flat out admit, but you could just hear it when they would talk about ice storms and weather.

Josh: Tornadoes.

Joey: And I was talking to one of them the other day, and I won't say who. And I won't say where, but there's a TV show based on where he moved. And he said, "People here just don't care." and what he means is... They don't bath. They don't care. They just don't care. And he goes, "At first it was kind of cool 'cause there was not this pressure," he's like, "But at some point you're like... "

Josh: I wanna care.

Joey: You have been wearing that shirt four days in a row, you need to go... He just... And it was a buddy that... I mean... He left California and he shook his fist when he left, and he was like, "Man, California is so awesome." I was like, "Why?" I was not gonna be like, "I told you so." I was not gonna rub his nose in it, and I tried to support him, I'm like, "Hey man... "

Josh: It's tough. If you're chasing kids around the country and you wanted to be around the grandkids and all that stuff, I totally get all that. I mean, family, you wanna keep the family together, that makes total sense. And you know, kids might be chasing work and then... Then the parents start chasing the kids so they can be around the grandkids, I get all that. If my wife and I were to leave Redding, it would probably be because we were chasing grandkids somewhere, I'm sure of it, that would probably be with the only that pulls us away. And it probably wouldn't even pull us away full time, it would just be a potion of the time. Because Redding at the end of the day, when you think about the fact that we are surrounded on three sides by just majestic mountains, that we have lakes that most of the time have water in them, we have... We would ski just an hour away from home and get to the coast in a couple of hours and have a great weekend, you can go down to the city if you wanna go and to experience the city and the people... We live amongst some of the coolest people in the country.

Joey: That is a bold statement, Josh.

Josh: I believe it though, I really do. And they're awesome people. I can understand why people from the Bay Area or Southern California, they come up here and spend a couple of weeks with us and get to meet some of our residents up here, I'd fall in love with this place too, so... Yeah, I'm definitely biased, but I also think that for those of our folks that have left the area, it wasn't because of Redding that they left, I would say they left because of the state of California.

Joey: Taxation and things like that.

Josh: And they were frustrated about other things, and that's a part of the equation, I'm sure. But at the end of the day, man, this is a great place to be, so you can cast me on it. I appreciate the time today. Again.

Joey: Likewise, man.

Josh: I always have fun rapping with you a little bit on this stuff.

Joey: Likewise.

Josh: But for all your listeners out there I hope you guys have a great May and we'll talk to you guys next month.

Joey: Sounds good. Thanks, Josh.

Josh: Yeah thanks.

Posted in Podcasts
May 2, 2022

Shasta County Market Update - May 2022


Click Here to watch Josh's video blog for the month of May.


From the Desk Of Josh Barker

Hello everyone, 

I hope your spring is off to a great start and you are all enjoying the beauty of Shasta County in this season. Like the temperatures as we approach warmer months, we are seeing a rise in new construction in the area. Mortgage rates have risen and we're seeing a slight slow down in home sales. This month we will discuss some of the hottest topics trending now. If you have any additional questions, please feel free to respond to this email or contact our office at 530-222-3800

Enjoy the beginning of spring!

Josh Barker


Home Sales

Home sales for the month of April finished at 267 closings down 13% compared to the 307 closing in the month of April last year. The slow down in home sales compared to last year is largely due to rising interest rates and the transition from pandemic related purchases to a more traditional market.

Home Listings

Home listings in the month of April finished at 586 properties for sales up 25% compared to the 466 properties for sale in April of last year. The slow steady increase in home inventory is projected to continue as more homeowners make the decision to move forward with plans that were on hold during the pandemic. 

Interest Rates

30 year mortgage interest rates (currently 5.5%) have climbed steadily in recent months as the federal reserve raised interest rates while at the same time reducing the amount of mortgage backed securities they purchase. These two Federal Reserve policy actions are projected to continue as the Fed continues to take actions to reduce overall inflation in the economy. The Fed is expected to increase interest rates again this month by approximately .5% which could increase the 30 year mortgage rate to an average of 6% by the end of May. For every 1% the 30 year mortgage interest rate increases, the average borrower's purchasing power is reduced by approximately 10%.  

Rental Market

The rental market in Shasta County continues to remain extremely competitive with rental rates rising on nearly a monthly basis. In the year 2020 the average 3 bedroom home in Redding averaged $1,394 per month. In 2022 the average 3 bedroom home in Redding averages $1,783 per month, an increase of approximately 22% according to

Home Price Expectations

After last year's large home price appreciation averaging 18% according to Zillow, this year's expectations are expected to be far less.  The median sales price for a home for a home in the month of April averaged $375,000 up 7.5% compared to the median sales price of $349,000 in April of last year. Home price appreciation is beginning to cool off after a massive run during the first half of 2021 and is projected by experts to climb by an average of 6% in 2022. The two largest contributing factors to pay special attention to are rising interest rates and the overall home inventory relative to demand. These two factors will have the largest impact on future home prices. 

New Construction

After what many would consider to be a major new construction boom in Shasta County, things may be changing. In July 2018 our local market experienced a massive fire destroying over 1,600 buildings and damaging many more. Several months later, Paradise California, a small community approximately 1.5 hours south of Redding had a massive fire destroying nearly 19,000 homes. In 2019 the city of Redding received a massive hail storm damaging many roofs on Redding's east side. Collectively, these events triggered a massive construction boom that was eventually pushed into hyper drive as a result of the housing boom related to the Pandemic. To learn more about what changes may be coming to the construction industry stay tuned for our next podcast in the middle of this Month. We will be diving into the topic and you will not want to miss it!  

Below are a collection of slides that correlate with many of the topics discussed in this mid-year review. If you have any additional questions regarding this market update or have additional real estate questions please feel free to respond to this email or contact our office at 530-222-3800



Learn more about Josh Barkers 5 proven steps to selling your home by visiting 

Learn more about Josh Barker's proven ideal investment formula by visiting

Check the average value for your home instantly by visiting


Make it a great May! 

Josh Barker

P.S. You can view all of our past real estate market updates by visiting

Posted in Josh's Blog
April 14, 2022

Josh Baker Real Estate Podcast #6

🏠💰Home Value Tool➔

Frequently Asked Questions

How does balloon payment work?

Balloon payments are established dates on which the remaining balance of the loan is due in full.

Are balloon payments a good idea?

Balloon payments should be carefully considered and are not the ideal loan instrument for everyone.

Are balloon payments a good idea?

Balloon payments should be carefully considered and are not the ideal loan instrument for everyone.

How fast do mortgage interest rates change?

Mortgage interest rates change on nearly a daily basis.

What is the single most significant factor affecting the real estate market?

Availability of financing, minimum credit score requirements, and interest rates have the largest impact on the real estate market.

What happens when interest rates hike?

For every one percent the 30-year mortgage interest rate increases, the borrower's purchasing power is reduced by up to ten percent.

How does an interest rate hike affect inflation?

Rising interest rates have a negative impact on consumer demand. Over time, reduced demand can reduce inflation.

What factors affect interest rates?

Investor demand for bonds on the open market has an impact on interest rates.

Who decides the price of a home?

Property owners typically set the list price for a home. Both buyers and sellers collectively determine the final selling price for a home.

How do they determine the value of your home?

The value of a home is typically determined by reviewing national mortgage trends, local sales data, and comparable property sales over the previous 3-6 months.


The transcription is auto-generated by a program and may not be accurate to the conversation. In order to ensure you get all the information from the video properly, you must watch the video.

Joey: Let the games begin. It's Joey Gartin here with Josh Barker.

Josh: Hello, Joey. Thank you.

Joey: So there's been a lot going on this last week. Actually, it's been over the last few weeks, the same topics keep bubbling up because they are like the big rocks. I always as that term used, you hear the rocks, hear the pebbles, right?

Josh: Yeah.

Joey: Well, the rocks that are big are still big and potentially getting bigger, like interest rates are kind of moving very, very fast, and that is a major contributor to our market, whether it's up or down. And interest rates, unless you've been on an island somewhere, you probably know the interest rates have been going up very steadily.

Josh: They have, I think right now, we're at 5.5% on the average 30-year fixed mortgage, and that's up from about 2.9% in the fall of last year, so we're up to over 2% right now. That's a lot.

Joey: It's a lot. It's huge.

Josh: That's significant. Yep.

Joey: And like we said, I think we were talking about it last summertime, the time before we talked about it, that impacts the lower portion of the market much more than it does the higher, and that's your first-time buyers, that's your investors.

Josh: Yep.

Joey: Right?

Josh: Yeah.

Joey: So those are two major buyers in this market...

Josh: Well, I actually know what just happened just recently was that the interest rate on non-owner occupied, so let's say I was an owner who wanted to buy a rental, but the rates now for non-owner occupied are significantly higher than they are for an owner-occupied. So Fannie and Freddie, who purchases these mortgages, typically after they're funded, basically came out and said, "No, we're not buying them, we want the rates higher." And it's in an attempt, I think, to try to push more attention towards homeownership, and so I think that's one of the reasons they made that decision, but what used to be a pretty low, an inexpensive rate for non-owner occupied, that's gone up a lot. So if anybody who's listening to this or watching this and thinks that the rates on an investment property are the same as on the owner-occupied, that is not the case right now.

Joey: They've always been a little bit higher, just like a tiny... Your primary residence, you always get a little bit better, but...

Josh: No, this is significantly higher.

Joey: This is significant?

Josh: Yeah, and without quoting it, I would just say it would be shocking to you and you'd probably wanna check with the mortgage lender.

Joey: So that's gonna slow down. I get that kind of concept of like, "Oh, we wanna help first-time buyers more." And it's like, "Okay, well, then why not keep those interest rates a little... If you can do something with that program to where you keep first-time buyers... "

Josh: Good idea. They disincentivize somebody from using a mortgage to buy an investment property because the rates are higher for it, right?

Joey: Yeah.

Josh: So they essentially, they're doing that. They're trying to reduce the competition for what could have been an owner-occupied purchase. I'm assuming that's what they're doing, 'cause that's certainly what their net effect is on the market, is as you have less investment activity taking place as a result of those interest rates going up because it has an impact on the return on investment. So the higher the rate, the lower the return. The lower the return, the harder it is for an investor to wanna make that purchase. So it's probably working if that's what their goal was.

Joey: Now, we talked about before that one of the big differences between this market and the market that we saw in the early 2000s that collapsed was that we didn't have a huge investment before. I think you were saying it was around 10%, which is very small.

Josh: Oh yeah, no, on the last market update that we sent out to everybody, we actually talked about that in length, is that if you look at what the market was in 2003, '04, '05, 2003, 2004, 2005, and then... The peak of the market was in 2006, and then it started to show some problems, and then it started to decline pretty quickly. Understand, back then we had buyers that would walk into our office that were qualified in a 30-year fixed mortgage, who were gonna be buying a subdivision for, let's say, $300,000. But if they went to a non or to a stated income loan or a variable interest rate or a negative amortization or interest-only loan, now they can buy up to $500,000 for that home, right?

Joey: Yeah.

Josh: And so it's a completely different property, same monthly payment. And that's what was happening in 2004 and '05. It's a big reason why we had the market crash like it did, is because we had a lot of people purchasing way outside of what they really should be purchasing because those all had balloon payments to 'em. Within a few years, you were gonna have to pay the higher payment amount. Whereas today, we don't have purchases like that. Those loans are not available, they're illegal. The Dodd-Frank bill that was written years ago to clean that up, eliminated those types of transactions from being, even being available to the general public. So we don't have that today. Back then, 2005 and '06, you had the 620 and below credit score was a significant portion of the purchasing market.

Joey: Wow.

Josh: Where today, it's a very small portion of the market. So those things are different. And then back then, I think it was 40%-50% of all purchases at the peak of the market back then in 2005, '06, it was like 40%, 50% of it was speculation.

Joey: Wow.

Josh: Yeah. Whereas today, like I said, it's less than 10%. So we have a lot of good things about the market right now in terms of its stability of it. I'm not saying that we're not gonna slow down, I'm not saying that we won't see something... We might even give back some value if rates were to go crazy, but in terms of the stability of the loan itself, people buying homes today are strong credit, good down payments, sourced incomes, and sourced employment. The stability of the market now is way better than it was 15 years ago.

Joey: Yeah. So that, I mean 40%-50% speculation. I do remember people were pulling out equity to buy the second home, 30... I don't hear that very often at all. In fact, I don't hear that at all.

Josh: Yeah, I haven't heard it much either. Yeah, I haven't heard it a lot. If I have, I think I've heard 'em of paying down student loans and paying off other debts and not necessarily what they were doing back in '04, '05, '06, is that they were taking that money out and then go buy the next rental with it.

Joey: Exactly.

Josh: And we don't see that happening at all in any mentionable level today. Yeah.

Joey: So interest rates are going up, that's gonna slow the market down. Of course, we're coming out to one of the hottest markets of all time.

Josh: Yes.

Joey: Last summer was, some of the sales... But I still see, I was about to say that some of the sales I saw were very, very high, but I was looking at some of the listings and they're still even higher.

Josh: Yes.

Joey: So when you say, I feel like there's gonna be a little bit of course correction. And I've never... I've heard people, especially on social media, they'll get mad at the real estate agents when they see a home listed for a certain price and say, "Hey look, their job is to get their client the absolute most that they can."

Josh: Right.

Joey: Now, the home price is determined by the marketplace. It's not determined by the agent. That's why an agent that undervalues the house, "Oh, hey, we got three offers at 20-30 grand over." It's like, "Well, clearly you didn't assess properly," or "Well, it's been listed for 90 days and we haven't got an offer." Again, you assessed improperly in the other direction. So it's not the agent. But I do see some listings that I'm like, "Man, how did that pitch meeting go?"

Josh: Somebody got pitched, whether the buyer pitched the agent or the agent pitched the seller or the seller pitched the agent.

Joey: I'm thinking retail plus 30%, blue-chip player like myself deserves a little something extra, like $10,000 cash in a gym bag.

Josh: Everybody wants more. Well, and to your point, I think that anybody that's listening to this and owns a home or watches it, I think they would agree that they... And they know this too. Everybody feels like their home is worth more. And you want it to be. And then when you get to the reality of it, I think that I always kinda feel like sellers are ultimately the ones that decide what the price is that they list it for.

Joey: Exactly.

Josh: But it's a collection or a collaboration of what a buyer and a seller are willing to do in a deal that actually establishes the market, and that's where the market is. So there's no fault in testing the market. There's risk involved in over-pricing 'cause you could sit on the market for a longer period of time. And the attractiveness of a brand new listing starts to diminish quickly if it sits on the market for too long. So it has an impact on value. So sellers, when they come on the market, it's wise to probably try to nail the value as soon as you can. 'Cause if any... In the worst-case scenario might get competing offers selling it for a higher price anyway. Whereas if you over-price and you miss that window of being the new listing and now you're... The value of that home might begin to diminish in the eyes of a buyer, you could potentially sell for less than what it's worth or what you could have gotten if you would have priced it right out the gate. And so it's always a... Listing properties is challenging. Sellers have a... They're challenged in that. And agents are too.

Joey: It's funny the psychology of days on market. I have... 'Cause I practiced real estate at one point. And when people would say like, "Yeah, I like that house and everything. But look at the days on market. We're gonna... " It's like... Then they watched an episode of Pawn Stars and they're just like, "So hey, let's offer them 50 cents on the dollar." I'm like, "What? What?" So it's a huge psychological factor where there must be something wrong that we're missing. Why has it been in the market so long? It's like maybe it's waiting for you.

Josh: Yeah, you're right. It's interesting you say that because I think that over the years I've noticed that there's a... The days on... Well, price reductions, for example. I've had sellers over the years ask, "Well, the price reduction, is that gonna make us look desperate?" And I'm like, "No, it actually makes you look motivated." So buyers interpret price reductions as motivation. But they interpret days on the market as something's wrong with the property. And so that's been our experience of what we've observed over the years of talking with buyers and sellers. And so that's a pretty big aha, I think. So don't allow days on market to accumulate too much. And the exception of that, of course, would be is if you have an extremely unique property or you're in a very unique price point. Well, then it could take days on market to find that person. So I'm not saying it works for everybody. But for the lion's share of the inventory that gets moved through the market, it should be happening in a reasonable amount of time. And if you're sitting too long, there's probably something wrong.

Joey: And then there's two points in my mind that come out of that. Number one, the importance of a good market... I was gonna say like market analysis. Market analysis. Market overview.

Josh: Yeah, yeah.

Joey: Saying, "This is what we're seeing your home is worth." And it's not an art form. It's actually a science. It's just not everybody practices that science fully. It's like a math problem that's got about 30 variables, but most people are like, "Can we just stop at six variables?" Well, then you might sit on the market or you might have like, "Wow, that sold so fast." You were a little under market. So it's important. Market analysis of a home is super important.

Josh: It is. So what we kinda do in that regard is we'll look at the market from a national perspective first. So we'll look at the overall availability of financing. Lenders kinda refer to it as availability of credit. And then we look at the overall interest rates. Because those two things have an impact on what's happening in your county. And so then in the county, you look at what's overall happening in each price range in terms of supply relative to demand. And then we go one layer deeper, which is to look at what's selling in a particular subdivision or homes that are similar to the one that you're comparing to. And it's that holistic approach that really gives you a really good perspective on what the market's doing. And so like for example, right now, between $500,000 and $600,000, the inventory in the last 60 days has jumped dramatically. I mean, it's up almost 65%.

Joey: Oh wow.

Josh: So yeah, a year ago we had 50-60 homes for sale in that price point by the end of March the last year. And this year, at the end of March, we had like 115.

Joey: Oh wow. The buyers have options.

Josh: Yes. And it's because of those interest rates. So when those interest rates went up, it had an impact on purchasing power by up to, at this point, about 20-25%. So, buyers that were qualified six months ago at two and three-quarter percent, they're qualified at 25% less today. And so that's starting to show up in our inventories.

Joey: That's a huge number.

Josh: It is. It is. I mean, we're still in a seller's market. Our inventories are so tight, that it's not having an impact on value at this point. But because the inventory is growing, days on market could get extended. We could expect to see... If it continues to happen like this, we could expect those prices to definitely plateau. I mean, that first shot across the bow of the Fed raising the interest rate a quarter percent and the corresponding effect of the tapering, reducing the amount of mortgages that they're purchasing now, it's starting to show up in the mortgage market. And I told our agents the other day, I said, "Make sure that our buyer clients in the market understand that what's happening with the interest rates was on purpose."

Josh: The Federal Reserve is actually making an attempt to prevent the housing market from appreciating at the speed that your milk and your eggs and everything else is going up. And they're doing everything they can to target that so they can prevent homes from getting out of reach and having it not be affordable for anybody. Do you know what I mean?

Joey: Yeah.

Josh: There's absolutely the impact of inflation. So if I were a buyer in the market right now, I'd just be grateful the rates are higher because it's that targeting that they're doing right now that's preventing those home prices from going up higher.

Joey: It's about a year ago, I was listening to... I wish I could remember the gentleman's name. I know you'd know who he is. It's like Ali Abdelaziz or something like that. He's a famous guy. Bear Stearns brought him in. And he gave an hour of talk, and he talked about some of the driving factors in the real estate market. And he talked about how after 2007, 2008, because of what happened, there was... Almost all new construction slowed down to almost zero.

Josh: Oh yeah.

Joey: And so there was this glut of people that were coming up, that were gonna be home buyers, but there was no replacement of inventory, and it was gonna hit... It was already starting to hit, but he said it was really... He laid out several factors on why, 'cause we're like, "Why is the housing market going crazy?" We're not seeing those loans where you just pull out the equity, buy the second, pull out the equity, buy the third. Something is driving it, and it was that there were a lot of people that are... Were living at home in their early, early 20s, and they're ready to buy, and there's nothing there. There's no inventory. It hit at the same time as a global pandemic... There's just a lot of factors. Like the pandemic hit it...

Josh: Yeah, and you're touching on like the family formation, even though they may not be forming a family, it's like you're getting out of the basement. And you're having more people wanting to participate in the housing market in one form or another. Because you've got one or two options when you move on when you move out of mom and dad's house. You're gonna go rent and rent with friends or rent by yourself, or you're gonna go buy a house and maybe rent a room to a friend or something. But you're gonna do one or the other. So right now we're over five million housing units short in the country just to meet the existing demand. And right now the population in the country is still growing. So either way, there's gonna be an impact. So right now, with interest rates going up, if our sales volumes drop, which I would say that's probably the safest estimate to say that sales volumes as interest rates continue to go up, if they do, which I think all the experts are saying they will, it's gonna have a corresponding effect on demand. And those buyers who don't buy that home, where are they gonna go?

Joey: They're gonna rent.

Josh: They're gonna rent. And what it's gonna happen to the rents?

Joey: They're gonna go up. They already have.

Josh: Because the demand is going to go up.

Joey: That's right.

JB: And so as the rents go up, now the cost of homeownership or the value proposition of homeownership becomes more attractive because it's like, "Hey, I'm paying $2,500 a month for rent on this place," or "I could buy a home very similar at $2,300 a month." So why don't do that? You know what I mean?

Joey: Yeah, absolutely.

Josh: When I hear all these things about this massive crash, and I'm not here to have a crystal ball, maybe there's some crazy thing that I don't see, but I don't see a headwind that puts us in a housing crash. And the reason why? 'Cause people need a place to live. Reason why? We have five million housing units short. Reason why? Family formation, people moving out of their parents' houses, people wanting to buy rentals, immigration. All of that stuff that's happening is having an additional demand on the existing housing supply.

Joey: Especially with like we talked about in California has... It lost people. We lost, for the first time, a Congressional seat, but Redding is the exception inside that rule where it's like, "No, people are leaving Los Angeles."

Josh: Correct.

Joey: They're leaving...

Josh: Big cities.

Joey: Big San Jose, but not everybody is leaving the state. A lot of them are coming into this area, and we have... It's very hard to replace inventory in the Redding area. Very, very hard.

Josh: Well, and I read an article that wasn't too long ago, I think it was a Hoover Institute if that's the one that's out of Stanford. So don't quote me on that, but I think that's where I read it at. But the number one reason for moving out of the state, and some of these people will probably think it's politics, but what it was on that report was affordability.

Joey: I was gonna say taxes or housing or something. The fact that you make $150,000 a year in San Jose and you're sharing an apartment with three other people.

Josh: That's right. That's right.

Joey: You can't buy... And that's like, "Wait, that's a good pay for an engineer in mid-20s," and so if you have a teleworking and stuff like that...

Josh: Well, and that ties back to my point of earlier with the sales team we talked about a few days ago where I said just, it's a great thing that the Federal Reserve is raising rates. They've gotta do everything they can to essentially try to prevent the housing market from inflating with this inflation we're experiencing right now. They've got to. Because you can't have housing, the value of homes goes up and then drop right away. That's a negative impact on a lot of families, right?

Joey: Yeah.

Josh: So when you're going through this major issue where you have a supply chain disruption, you have probably labor participation, access to the supply chain lines, all these things that are going on that you've gotta be careful with that are causing a lot of the inflation we have right now, you don't want that to transfer into the housing market at this point, because it's probably short-lived. 18 months from now, I would imagine supply chains are probably gonna be, I'm not saying the 100% back to what they were, but they're gonna be much better than they are today. You know what I mean? So if prices start dropping everywhere else, but now your poor house was overvalued and now it's dropped a lot, that wouldn't be good either. I think the Feds are doing a good job. I'd like to see how that impacts the market going forward, 'cause all the experts are saying the rates are gonna blow up a little bit more.

Joey: Yeah, I was thinking about of all the headwinds and tailwinds because you just... You named a lot of tailwinds. All the headwinds and tailwinds in Redding, the interest rate seems like the only real headwind, 'cause our housing inventory is still tiny.

Josh: It's still tiny.

Joey: Like how far are we off?

Josh: Well, right now we're at about 1.8 months supply of housing. It's called our absorption rate.

Joey: That's it?

Josh: Yes, and so for our listeners, what that means is that if you didn't... If no other homes came up for sale, it would take 1.8 months to sell off 100% of the existing housing inventory. Now, by definition, that is a seller's market. So anything up to three months as a seller's market. Four to five months is kind of a neutral market, and then six months and beyond is what's considered a buyer's market. And again, we're at 1.8 months supply. And not every price point's the same. That's the overall number. If you get into that price point at $500,000 to $600,000 and $600,000 to $700,000, and all those things as the price gets up in those higher ranges, that absorption rates growing. It's higher. It's a higher number than 1.8. And in some cases, it's considered to be a buyer's market. The upper-end market tends to be more of a buyer's market. Why? 'Cause the demand is lower than the supply.

Joey: Yeah. And also they're not as influenced by interest rates that you're gonna allow your cash buyers or people that are putting such large amounts down that the interest rate doesn't affect their purchasing power, like it does when you're in...

Josh: It doesn't usually affect the home they're going to buy.

Joey: Yeah, yeah.

Josh: Whether they wanna buy or not, it might. But what they buy not as much.

Joey: So housing inventory is still very low, interest rates have gone up, we've got inflation. So inflation, the interest rate is an attempt to control inflation in the housing, so the Feds doing this it just sounds so counter-intuitive from hearing a real estate broker say like higher interest rates are a good thing.

Josh: Well, if you're not thinking only about yourself. If you're looking at the next generation, you're looking at the folks, you know... I've changed now when I was like 25, 30 years old. I'm like. No, I want the rates at zero, right? Because you're trying to do everything you can to leverage and all those things, but I think as you get older, you begin to realize, you know what? There's a whole lot of other people that are impacted by all the things that happen. So I want my kids to own homes. I don't want to them to get priced on the market. I don't wanna see them have to leave the Redding area because they can't afford to live here. That's what's happened to folks in the Bay area. Let's say you grew up in Sunnyvale, California. And like a year...

Joey: You saw some change.

Josh: You saw some change.

Joey: In your life.

Josh: And a lot of your kids might have graduated from college in the Midwest somewhere, they came back to their town in Sunnyvale, and all of a sudden they can't even afford a home anymore. And so now they're saying, "Sorry, mom and dad, but I'm leaving the state." And you don't wanna put your kids in a situation where they can't afford to live where they've grown up, if that's what they wanna do. So for those reasons, I'd like to see housing... That's a selfish reason but that's what I wanna see. But I think when you look at the housing overall right now, I think you could argue that right now prices are probably still fairly priced for what you're getting... Think about the work and the effort that goes into getting to acquiring a home and building a home and all those things, I don't think we're way out of whack on value right now.

Joey: Well, it's funny 'cause the number, it's... The other day, I was listening to a couple of guys talk and they were... 'Cause it's tax time, right?

Josh: Yeah.

Joey: So people are like, "Oh, my accountant told me I need to buy... " And it was two guys talking and one of them went and bought $103,000 truck. And the other said, "I raise. I bought $119,000 truck."

Josh: Trucks for that price?

Joey: One was a... The 103,000 was a brand new GMC Denali full one tonne, cup holders.

Josh: You spend 120 grand on a vehicle like that, it better do my taxes.

Joey: That was the motivation. And they had cup holders and everything. They're really, really stacked... Windows rolled down. It was really nice. But no, but they're saying that I'm just like, "Wow, if you're willing to pay 100-plus thousand dollars for a truck, not an 18-wheeler, but just the truck that's gonna be hard to park when you go to Costco, like suddenly a house for 380,000, that's three of those trucks."

Josh: No, well, there you go, you're talking about inflation in a major way. And the dirty little secret that probably people wouldn't believe when I say this, but the federal government wants inflation, the Federal Reserve wants inflation. If you were to go right now online and look at the Federal Reserve, they will tell you in black and white, in writing, that their target inflation number is I think 2% or 2.5%, that's their target. That means that if it was at zero, they would want more inflation. And so it's just a variable that they're working with all the time, and clearly we've out shot it now for the reasons we talked about earlier in the podcast, but inflation right now, it's here to stay. And honestly, they want it.

Joey: I was just picturing Charlie Sheen as the chairman of the Feds going, "Winning!"

Josh: Well, they're winning right now. And it's scary for a lot of people, especially for those who are watching this or listening to it and they're on a fixed income. When you're seeing all of these things around you, that your services and your different supplies and your food and all the things that you need just to sustain, and your energy costs, and they're all going up, and you're on a fixed income. Those are the people I feel the most sorry for. If you're participating right now in the labor market, it's not affecting you quite as much because your wages potentially are going up, and they certainly could over time because you're participating in a labor market. Where people are on fixed incomes, that's the sad part of this story right now, and that's a big reason why we need to get that inflation cooled down a little bit. Interest rates are gonna be an attempt to that.

Josh: Federal Reserve's coming out again and said that they're very aggressively gonna raise it again. We have to wait 'til they do it, but that's what they're saying they're going to do. And all of us in every asset class is gonna be impacted by interest rates. And Warren Buffet I think says it best, that interest rates serve as gravity to value. And so when he gives the illustration, when he says, is that as the interest rate goes up, the gravity on value gets stronger and it pulls value down. Does that make sense?

Joey: Yes.

Josh: Alright, so when interest rates are extremely low, the gravity is low, and therefore everything inflates in values. That's why the stock market's been on fire for so long, that's why the housing market's been on fire for so long. It's because the rates were effectively at zero. But now that the rates are starting to move up, it serves as gravity, and it slows down that appreciation piece. And in some cases, it even pulls it down if it gets really high. So the Fed knows this, they know the power they have in their hands and they're gonna be... They're gonna be working towards it.

Joey: So what do you foresee over the... I mean we are in the, this is the time of year that listings come to market, spring. This is when people from Sunnyvale, Los Angeles, Fresno, and Bakersfield come up and check out the area. What do you see over the market for... Obviously, look deep into your crystal ball, Josh. What do you see for the next 90 to 120 days?

Josh: This market's gonna feel hot and strong and powerful, I think, until either the Federal Reserve raises interest rates significantly or we...

Joey: Again?

Josh: Again. Or we get to the end of summer. I think one of those two things, because we're in that cycle side right now, where we have our normal higher demand, where we have more people moving in from out of the area at this time of year. And we really see that strong market every year, all the way through summer, and I don't see this year being any different. The appreciation piece will be a challenge because as interest rates go up, it's gonna have an impact, like I said, like gravity, it's kind of an impact on appreciation in the market. So I'm not saying prices are gonna be anything close to what they were last year in terms of how fast they appreciate, but I think that we could expect to see some decent demand. And then I think by end of summer, the real question will be what will have that impact been on interest rates in the market.

Josh: So the long-term story I think is still strong, because people still need a place to live. We're not over-supplied like we were in 2005 and six when it comes to homes available for purchase, we're under-supplied as a nation. So I think there's better days ahead for the real estate market itself, but we're gonna have a short-term reconciliation and we gotta get through that piece.

Joey: That's what I was wondering if you saw anything in the market that you said the properties, the pricing is... You're very attuned to the market. I look at a couple of listings and go, that seems a bit, like I'm happy for you... Like my neighbors have a house listed, and I'm like, "Man, I hope you get every penny." But I feel like you... This is Fonzie jumping the shark. Like, no.

Josh: Well, and what you have to do is you have to have a short memory, I think, when it comes to value on homes. If I was to take my experience from 20 years ago selling real estate and took that experience in today in terms of value, I'd be underpricing everything, right? Yeah, so what you have to do is get back to what I talked about earlier on the podcast, which is looking at the national statistics, look at the county statistics, and then zoom into that neighborhood and look at what's going on around your neighborhood right now, that's where you're gonna arrive at the most accurate evaluations. Don't be thinking about five years ago, don't be thinking about 10 years ago, because buyers can't buy from five years ago or 10 years ago, they're dealing with what the market is today, so.

Joey: Well, Josh, thank you for your time. I hope people got value out of this, and it's still a seller's market, and if you need a real estate broker.

Josh: I'm here to help.

Joey: Awesome, thank you, sir.

Josh: Yeah, thanks a lot.

Posted in Podcasts
April 5, 2022

Shasta County Market Update - April 2022


Click Here to watch Josh's video blog for the month of April.


From the Desk Of Josh Barker

Hello everyone, 

As the first quarter of 2022 comes to an end, we certainly see changes on the horizon. Listing inventory is trending up, sales volumes are down slightly and interest rates are rising. It appears that the federal reserve is focused on attacking inflation. In the coming months we could expect to see interest rates continue to rise in an attempt to slow down the housing market and curb rapid inflation. In the second quarter we could expect to see higher housing inventories particularly in the 500k and above price ranges. The below 500k price ranges will likely continue to experience strong buyer demand and relatively tight supply. This month we will discuss some of the hottest topics trending now. If you have any additional questions, please feel free to respond to this email or contact our office at 530-222-3800

Enjoy the beginning of spring!

Josh Barker


Home Sales

Home sales in March ended at 325 down slightly compared to March of last year when homes sales finished at 327. The good news is that home sales volume continued to remain strong despite higher interest rates. The not so good news is that many of the home closings in March were based on home buyers that had already locked in interest rates prior to the federal reserve increases. Home sales in April could be a good indicator of the impact of higher interest rates. If home sales continue to remain strong it should be a testament of the impact of overall  low home inventory relative to demand. 

Home Listings

New home listings in the month of March finished at 431 new listings up from the 381 new listings in the month of March of last year a 12% increase. The overall active home inventory is also trending up averaging 527 properties for sale up 15% compared to last year. The most noticeable increase in home inventory is focused around the above 500k price range where inventories are up over 50% compared to last year.

Interest Rates

Mortgage interest rates have risen significantly over the past several months. Currently rates are averaging 4.9% up from the 2.9% available towards the end of last year. For every 1% that the interest rate increases, the borrower's purchasing power is reduced by up to 10%. As mortgage rates increase, there will likely be an impact on home sales in the 500k-700k price first. The largest factor is that home sales volumes begin to slow down significantly in these price ranges with fewer buyers to pull from in higher price ranges. The lower end of the market will likely continue to see high demand as buyers that were qualified at higher price ranges and at lower interest rates begin to purchase homes at lower price ranges with higher interest rates. Unfortunately, we will likely see "would be" previous home buyers in the lowest price ranges priced out of the market altogether as the recent mortgage rate increases push the affordability of homes out of reach.

Home Appreciation

Home appreciation in the year 2022 has been forecasted by experts to reach 7.5% on average and appears to already be trending this way. Assuming mortgage rates continue to rise as projected, home appreciation may level off by early summer. The largest factor in these appreciation projections will likely be focused on the housing supply. If home inventory grows quickly and mortgage interest rates rise quickly we could expect home prices to level off accordingly. 

Rental Market

The rental market continues to remain exceptionally strong. Vacancy rates are already stubbornly low, and with rising mortgage rates the rental market will likely grow even tighter. The benefits of home ownership continue to overshadow the prospect of renting. Although renting a home provides maximum flexibility, the down side of housing inflation and the cost of living due to higher rents is a challenge. Homeownership is not the best option for everyone but should be considered strongly when planning for the future.

Below are a collection of slides that correlate with many of the topics discussed in this mid-year review. If you have any additional questions regarding this market update or have additional real estate questions please feel free to respond to this email or contact our office at 530-222-3800






Learn more about Josh Barkers 5 proven steps to selling your home by visiting 

Learn more about Josh Barker's proven ideal investment formula by visiting

Check the average value for your home instantly by visiting


Make it a great April! 

Josh Barker

P.S. You can view all of our past real estate market updates by visiting

Posted in Josh's Blog
March 18, 2022

Josh Barker Real Estate Podcast #5

🏠💰Home Value Tool➔

Frequently Asked Questions

How much does the interest rate affect buying power?

Typically, for every 1% the 30-year mortgage rate increases, purchasing power is reduced by up to 10%.

How can I increase my buying power?

There are several ways to increase buying power. The first way is to increase monthly income and the second way is to decrease monthly expenses.

What is buying power when buying a house?

Buying power is a person's maximum financial potential for purchasing real estate utilizing conforming means. This factors cash funds available as well as the ability to borrow funds.


The transcription is auto-generated by a program and may not be accurate to the conversation. In order to ensure you get all the information from the video properly, you must watch the video.

Joey: Okay. Now it feels. Now, if I talk about the Ides of March, it feels disingenuine, you know what I mean, not if I repeat everything I said before, but...

Josh: What is it about the Ides of March for you?

Joey: Just, I don't know, I really... Augustus Caesar is one of my all-time...

Josh: Yeah.

Joey: I don't know, historical heroes, just the story, his life and his death. I don't know if a lot of people knows about his death, but to me it's an incredible story of... He found Rome in clay and he left it in marble, and he started Pax Romana, which is over 200 years of peace. So, anyway, and his uncle Julius Caesar set the stage for Augustus, so I don't know, that all... This sticks in my head, yeah.

Josh: This guy was the real. Well, anyway, okay.

Joey: So, it's the middle of March.

Josh: Yes, it is.

Joey: It's the middle of March. Interest rates just went up.

Josh: Yep.

Joey: That was not a shock, I mean they've been telling us for months and months, but there's a lot of stuff going on and interest rates are... It's not just the quarter percent that the feds raised, there are a lot of mechanics in play that interest rates are... What are they this morning if I was gonna get a home loan?

Josh: Just under 5%.

Joey: Which, not long ago they were in the twos, low threes.

Josh: Oh yeah, they were up by 2.8, 2.9 in November.

Joey: And you've been telling us how much even a half a point increase in interest rate, how much that impacts your buying power.

Josh: Yeah, so for every 1% that the interest rate goes up, it has an impact on purchasing power by up to 10%, so...

Joey: Which is huge.

Josh: It's huge. Well, yeah, over the last six months, we've seen basically a 20% hit in purchasing power for the average buyer.

Joey: Which is a major headwind.

Josh: Major headwind.

Joey: It should slow things down a bit. Now we've got a major tailwind, but even that's starting to creep up a little bit with the inventory.

Josh: Yeah, inventory, yeah. So inventory, home inventory on average in the City of Redding wherein the multiple listing service for active residential homes was like 370 two weeks ago. It's averaging about 415, 420 today, so it's slowly... It's still stubborn though, but it's slowly creeping up, but that's why the prices haven't changed because the inventory is still so darn low that we're definitely still in the seller's market. But that purchasing power piece that the buyers are running up against, you know the affordability index, they're running right into that wall right now. And so the next month or two is gonna be pretty telling on what impact that has on the market.

Joey: Especially because these are the big selling months. This is when a lot of the people from out of the area come and check out Redding.

Josh: Yep.

Joey: And I mean these are big sales months for Redding, so there's a lot of... The crystal ball is very cloudy.

Josh: Oh yeah, I mean we're kind of in that chamber of commerce weather right now, right? Between March, April, May and June 'til it starts to get really hot, and we see a lot of inventory come to market over the next 3-4 months from now. The question will be is that as they come to market, will the buyers come to market with them with the impact of interest rates?

Joey: And there's no report that you can get to go, "Oh yeah, this is how many buyers... " This is just flat out a blank space of you don't know.

Josh: Well, yes and no, 'cause not all price ranges are the same. So I think what the interest rates did yesterday moving up a quarter basis point, which was fully projected and expected, and the corresponding effect being the rates on the mortgage rates are going up, but remember, we also had tapering happening. So the federal reserve right now is reducing the amount of mortgage backed securities that they're purchasing while they're raising interest rates, and so you have the shrinking up of availability of credit and you also have rates going up. And so we're waiting to see that private market step in and start buying these mortgages. If they don't, then you're gonna start to see even more impacts on that, but not all price ranges are the same, so like our upper end, that's a more discretionary purchase for a buyer, meaning that I might buy a home at 700 or I might buy home at 800, it really depends on what the home has to offer. But a buyer at 300, normally they're buying up to every penny that they qualify for, because it has a significant impact on the type of home they might buy. You know what I mean?

Joey: Yes.

Josh: So when the rates go up, and let's say you were qualified at 400,000 yesterday or six months ago at 400,000, today that same buyer now is qualified approximately 320,000 today, that's a huge impact on purchasing power.

Joey: And other factors that are involved are things like... That we've talked before, the supply chain, just the ability to build a home, being able to replace inventory below 320,000 is very, very difficult around here. Almost impossible.

Josh: Yeah, yeah, I had lunch about three weeks ago with a builder here in town that does quite a few homes, and we were talking about the... Resupplying the lower end part of the market, and it's extremely cost-prohibitive for these builders because the cost of land acquisition, the development cost, they call it the front foot. So curb, gutter, sidewalks, sewer, electrical, all the stuff they have to do just to get a lot ready to be built on, that cost is pretty much fixed whether you build a home that's 3000 square feet or 1400 square feet, that portion of it still costs the same, those roads costed to the same, the lights costed to the same, the hydrants costed to the same, the water lines, the sewer lines, all that stuff, so they're looking at it going, "The larger the home we can build and still sell."

Joey: Try to get profit, try to make some profit.

Josh: Right. The more profitable it's gonna be and so this is where we're running into this issue that, the lower end of the market is just not being able to be resupplied properly, and that's where most people can afford. And you and I have talked about this before, I'm pretty sure, maybe... Maybe on one of the podcasts, I don't know, but if we went back to the building standards of the early 1990s for homes up to 15, 1600 square feet, and we just did that for three years, you would naturally move all of the... Not all of it, but a significant amount of construction would be moved to those smaller homes because the solar wouldn't be required anymore, some of the insulation requirements wouldn't be there, some of the building methods and standards wouldn't necessarily be there, not that the houses would fall down, none of the other houses in the 1990s are falling down today, they're still good homes.

Joey: Absolutely.

Josh: So if we went back to those standards for a period of time, only up for homes up to 1600 square feet, well now you're kind of pushing the market in that direction. So when they talk about, "We have to solve the housing issue," it's like, yeah, but you have to be willing to give something up to do that. You know what I mean?

Joey: Exactly.

Josh: You have to be willing to give up some of the perfect world scenarios that everybody wants to create to allow for some development that way, but these builders right now, they just can't do it.

Joey: Is that... Are those state, county or city requirements or what combination...

Josh: State mostly. It kind of travels down from the state, and they tell the counties, this is what you have to do, and the cities have to comply with this or they lose certain sorts of funding and things like that. It's all about... The state has leverage over local communities when it comes to funding. You know what I mean? So, "If you don't do what we want, we won't give you the money." And that's the big challenge that cities and counties have. And when you get outside of Redding, when you get outside of Shasta County, you think about the State, you think about Los Angeles and San Diego and San Francisco, those costs almost are negligible because real estate is so insanely expensive.

Joey: It's so expensive.

Josh: So they don't see... To them, they're like, "Why would we take out the need for solar and stuff like that?" That doesn't really impact a brand new home in Los Angeles County.

Joey: No.

Josh: And so they don't get it, so... Yeah. It's... But these people are moving out of LA might wanna move to another secondary market, Redding's certainly one of those. There's a lot of cities like Redding up and down the State, though, that... Instead of leaving the State, they'd stay in the State if they could find affordable housing that meets their needs. They haven't gotten serious about it, in my opinion. If they did, they would have already changed some of that stuff.

Joey: I wonder, because at the same time, you see things like... I think the city of Redding has a big program around these ADUs. They've approved these plans and they've said, "Hey, if you'll build these, they're gonna... " I don't know the exact, but they're gonna waive certain fees, there are certain costs they're gonna minimize. Now, I looked at these ADUs and the designs were pretty intricate. It was like, almost anything the city gave up in fees, it's like you're gonna spend on materials...

Josh: Yeah. So ADUs are like small little houses that you put on your existing property, but that might solve some of the housing. But think about what that means, that means it has to go on a lot that has the room, number one, to put an ADU on it. Number two, you have to have the financial capacity to actually write a check to do that, to have that second or refinance your home or whatever, so that narrows the market a little bit. And then you have, what you just said, which was the cost-benefit of actually building something like that right now because it's still pretty darn expensive. I think it's still a great solution, especially if you have parents or anything else that you wanna have move on to your property, and now the county code and the city code is gonna provide you for you to do that, I think that's great. But is it gonna solve the problem? No, but it's gonna probably contribute a little bit to some of the solution. I think if you wanna solve it though, it goes back to what I'm saying a few minutes ago, change the code for homes up to a certain square footage for the next three years, and have builders having a financial incentive to go that direction with their construction method, 'cause the State talks like they build homes. The last time I checked, the state doesn't build homes.

Joey: No.

Josh: And so what you're asking is the private sector to build homes, and in order to do that, there has to be a cost-benefit because they're not nonprofits, they're for-profit. They have to actually have a reasonable profit for the work they do or they can't do it, doesn't make sense to do it. So, we'll see.

Joey: I think about... So, when you were talking about the segments, different segments are gonna be affected by interest rates. You basically said the lower segment where people are financing to the most that they can.

Josh: Yep.

Joey: Versus somebody buying a $800,000 house, it's... So now they can only buy a $760,000 house, something like that. It's just not quite... It doesn't impact the same. So if you start... You're basically gonna pull first-time buyers, you think about people that buy at that lower end, you're pulling them out, and what you're gonna do is you're gonna make sure they're renters, because what's gonna happen is the investors, the people with money are gonna go, "Oh, okay, well, I can put in a cash offer. I didn't really care about interest rates." And so they're gonna... You wonder how much they'll back-fill in that purchase, 'cause that'll have an effect on the market as well.

Josh: It will. It's... Well, right now, what you were looking at is that affordability index. As rates move up, there's a percentage of the buying market that falls off all together. They can no longer participate because what they do qualify for with rates going up, there's no product available on the market for them to purchase as a result. So, as rates go up, we're automatically losing these people, they're automatically falling off the purchasing side of this whole equation, right?

Joey: Yes.

Josh: Then you have people that are still in the market, but the type of home that they're purchasing starts to change. In Redding, California, and a lot of people won't know our market directly, but if you take a neighborhood, let's say it's a $600,000 neighborhood. And it's a popular neighborhood, a lot of people wanna be in it, let's say you were qualified there six months ago. Well, now, because the rates went up, you can't buy in the neighborhood anymore. Now, you're gonna be purchasing in a neighborhood that's a little bit less, maybe a $500,000 neighborhood now. And so now you literally have to move to a different neighborhood because you can't afford the one that you are qualified in before, and so that's what's gonna happen in the middle market.

Josh: That upper end, again, the discretionary piece there is that a lot of people that buy homes at 800 to a million dollars, they could buy it for a million or they could buy it for 800. That part of it doesn't affect them as much. It's just which home meets their needs the most. And so as rates are moving up, it doesn't have as much of an impact as it does in the other two examples I just gave you. And that's the challenge. And so, if these folks move into the rental situation, and now we have more and more people have to move into rental properties, as a result, 'cause they can't buy, if you have not a lot of rental properties available and you have a higher demand for rental property, what happens to the rents?

Joey: Yeah, the rents go up.

Josh: They go up.

Joey: Yeah.

Josh: Right? And so I was talking to an investor out of LA about this just the other day, they represent a large fund with a lot of investments in it, and they say what they're dealing with is what they call cap compression, meaning that their cap rates are really low. And they can't get the values out of these properties that they want for selling them. And they have some investors in those pools that, at some point they need to sell these properties. The only way to get out of that is they're gonna have to raise rents. And so I think you're gonna probably see the next year to two years, you're gonna see rents actually going up from some of these things that are going on. We have to solve the inventory issue. Bottomline, we have to get more homes out there on the market. We have to stabilize pricing. We have to get it to where people can actually get into homes. We're gonna have a serious problem.

Joey: So besides lowering the requirements to build a home, what are some other things that can be done to help replace that inventory?

Josh: Yeah. Conversations. I told our sales team about this, probably at the beginning of the month, I just said the number one issue, I think, or the number one thing that agent real estate companies can do to get involved in this problem is to have conversations with consumers. If we start talking with buyers and sellers about the benefits of owning a home or selling a home and moving on with your life to the next home, we could start to free up some of this inventory because if more property owners decided to bring their homes to the market, you'd have more buyers, then have the benefit of choosing different homes. And now you can start to create additional transactions which otherwise wouldn't exist, and we have to get this whole train moving again is really what we're talking about.

Josh: And it starts with conversations. We have to get out there in the community. Talk to people, talk about the benefits. Hey, you're thinking about moving into a larger home, why wait? What's the point of waiting? If life is short, life is precious, do you wanna spend your time in this home or would you rather spend your time in the ideal home? Either way, you're gonna spend time somewhere, and so having conversations like that.

Joey: It's like trying to time... People that try to time the stock market or something like that. When I hear these conversations, everyone's like, "Well, the interest rates are gonna do this, and then inventory is gonna do that." And you can't time that. You don't know what's gonna happen. We can see in the short term the feds have said we're gonna raise interest rates, we're slowing down the buying the market, but how far would that go and how long an affect that has. So what I heard was, if you want to do something, then do it now, versus trying to time the market and say, "Oh, well, I know next spring this is gonna happen. Or next summer that's gonna happen." You have no idea what's gonna happen.

Josh: No. And this, when we do this podcast we're jumping onto a lot of different topics. For an investor, timing is pretty important. You know what I mean? You gotta know when to buy and what to buy and how to buy and all those things, but for regular mom-and-pop homeowners, it's kinda like a scale. So you've got on one side of it you have the dollars and cents, making a good financial investment, that's one side of the scale. But the other one is, this is my life, what's gonna make our family enjoy this the most? Bedrooms and baths and square footage and location, and you know, having a home versus not having a home, and so this is the kind of the emotional component. And so whenever you're looking at a homeowner buying something, it's the scale that has an impact on which way you go and what decisions you make. So it's not always about money when it's your home, you know what I mean? It has this emotional component.

Josh: I'll give you a perfect example. My wife and I, in 2005, 2006, we felt the market was about to change. So we sold our primary residence and we actually sold off a lot of our investments, and we moved into a friend of mine's rental that was on the river. And our thought was "Hey, honey, let's just sit here, we'll let the market make some adjustments, and then once it's done doing that, we'll go back in and either build a home or buy a home." And so we did that, we moved into a friend's rental, and the market did what it did, we all know it started to go down. And we could have been wrong in that, but we just thought we were probably right.

Josh: And then what happened was, is that I was in there for like a year. Loving life, watching the market going down. I'm not participating in the market at this moment, so I'm realizing, "Hey, I'm gonna be able to go back in and buy all this stuff here, pennies on the dollar." And my wife comes to me and she says, "Hey Josh, I got a question for you, when do we get to get our new house?" "What are you talking about? The market's still going down, there's no reason to go. This is crazy, we're saving money right now by not doing anything at all." And my wife looks at me and she says, "Well, let me ask you a question. What is the happiness of your family worth to you?" And I was like, "Guess we're gonna go get a house." And so I decided to go build a house because I figured that was where the best value was at that moment, we're still actually in that house, but that was me looking at the scale and going, "Yeah, the numbers make sense to not do this, but my wife's got a good point. Happiness and the family is more important. So we're pulling the trigger."

Joey: I think we're talking about, when I heard you talk, was the difference between someone talking about their primary residence and somebody talking about using real estate as an investment vehicle.

Josh: Yeah.

Joey: You know what I mean? This is numbers. And this is... Don't try to time it if you want a bigger home. If you look at the real estate markets, like the stock market where it has these dips, but it's always climbing.

Josh: It's climbing.

Joey: So it's trying to time those dips.

Josh: If you're in a home and it goes down in value or you're in a home and it goes up in value, if you're in a home, you're gonna receive it either way, so if you're in this house and it's gonna go up in value over time, and the house you buy is gonna go up over time, where do you wanna spend your time? The ideal home while it's going up in value or this home? And the same thing is true unfortunately when it goes down. The only way out of that is if you remove yourself from the market all together and move into that rental situation that I just gave you.

Joey: But I use a car sales term, I wanna sell for retail and buy for wholesale.

Josh: Everybody does.

Joey: Come on. You know what I mean? You give me retail for mine, I'll give you wholesale for yours. Right?

Josh: And you can do that, but you have to be a pretty savvy investor because there's one thing that you can't be tied to, the outcome. Okay? Meaning that you can't fall in love with something if you're an investor, it has to stay on the black and white side of the equation, 'cause as soon as you bring the emotional component in, you stop making the right decisions on this, right?

Joey: Good call. S3: So if you're gonna move into a home, it's really hard to just see that as a black and white thing. Not that you can't do it, we've done it a few times early in our life where we bought a house fully, intentionally, didn't like it, but knew that we were just gonna fix it up and eventually sell it, move into the bigger home. So we can do that, but not everybody's doing that.

Joey: No.

Josh: You know, so you gotta make a decision and really gotta look at that scale, what's more important.

Joey: And so to shift to investors, so people that are thinking about should I release inventory I have? What are some options for them? 'Cause if you sell right now, what do you put it into, where you gonna put that money?

Josh: That's hard. Yeah, so what you can do is you can sell your property and you don't wanna pay the taxes, that's usually the biggest issue. If you've owned a rental for a while, you have the depreciation that you've probably taken off that property during that time that you have to recapture, and then you have either a short-term, if you have it less than a year or long-term, if you've had it more than year of capital gains. And capital gains is both at the federal level and at the state level. So folks, when they go to sell a rental property, if they don't exchange, there's probably going to be a significant taxable event that's going to take place. And so I'll give you an example: If you had a property, and let's just use round numbers, a property that's worth $200,000. And let's say I've owned it for 10 years, so I've depreciated it for 10 years. And let's say that I own it. You know, I bought it for a 100,000 now it's worth 200,000. Okay?

Joey: Okay.

Josh: So I've got about 100,000 of actual profit there too. When I go to sell that property, I get to deduct the fees for selling it. And then I get to, you know, take the acquisition cost. And then you add in depreciation that you've already taken. So I don't wanna complicate this conversation, but let's just say that you have a profit when that's all said and done, 75,000 of profit that now is taxable. Now I have my long term capital gain, depending on your tax brackets. That'll impact this a little bit, but let's just say for a round number it's 35% on 75 grand. Right? I don't know what the exact number is on that, but...

Joey: About 23,000.

Josh: Okay. Somewhere in there. Right. So let's just say you have maybe 50 grand left over now that I get to go invest when and I go sell this property. Right? Which, okay, it's something. And let's go, you put it in the market at 3% or 4% somewhere, I don't know, somewhere. So that's kind of what people could look at as an option. There's other options that are out there too though, where like you can go into, what's called like a DST. It's like a Delaware statutory trust. It's a situation where you take your sale and you exchange into this company. And then you avoid having to pay any capital gains at that time. And so now you have that full profit of a 100,000. That's still getting you maybe 3- 4% return. Does that make sense?

Joey: So what is the DST, does it hold other real estates? Is it real estate to real estate?

Josh: Yeah, they're like a fund, a big one, and you have to be a qualified investor for that, meaning that you have to have a net worth of a million dollars or more, and then also, or at least an income of 200,000 for an individual. I think it's like 300,000 if you're married or something. So it's something, you know, anybody on this would have to just check it out. But these are new things that are becoming available. These are instruments that are becoming available where you can actually sell a rental property. And now you can take the... Exchange it then into a DST. And these are companies that own large, large... That own large amounts of real estate. And then they, you know, they run the performance, it's publicly traded stuff. So it's not like, you know, you're not selling it to your cousin Vinny or anything like that.

Josh: These are legitimate companies and they have to show you performance and everything else. And then, you know, their returns are, you know, 3-4%. You get the appreciation side of it over time. And normally your exits anywhere from, you know, five years on the short end to maybe 10 years on the long end, depending on what you're doing. But the point in this conversation is, is that if I did that, if I exchanged, I get to keep that full 100,000 a profit working for me. If I were to not exchange well, then I might only have about 50,000 right? To go and invest to have working for me.

Joey: Exactly.

Josh: And that's the difference between those two. And then, you know, then there's the normal exchange, which is, you know, you gotta find another property and exchange into it.

Joey: Now both of those are probably like just tax-deferred. Right? Meaning you don't have to pay taxes now. So you're effectively getting a 0% interest loan from the government, 'cause they're like, okay, you owe us 25,000 taxes, but we're gonna wait, you know, wait. And so you just keep going with it, like you said, 10 years.

Josh: Yeah.

Joey: So they've... And you're earning 3-4% on the money that you would've had to have given the government.

Josh: Right.

Joey: So it's kinda like a zero-interest loan. I mean, when you it's... You know?

Josh: Yeah. But there is one caveat to it.

Joey: Okay. There's always a caveat, Josh.

Josh: It's true, let's say you're a married couple and we have that investment and I pass away, now I get to... Now that cost basis gets reset. And so it creates this kind of interesting situation where you get to avoid some of the taxes, because now that depreciation that you already took when it gets reset, the cost basis gets reset. You almost get to start the depreciation piece over again. So, I mean, I'm not the expert on this stuff. I don't want to claim to be. So anybody listening to this, go talk to a CPA about what I'm saying right now because they'll take you in the weeds much deeper than I want to. But it's, but yeah, there's some reasons why people continue to exchange up into bigger and bigger properties because what they're doing essentially is they're moving out that depreciation, they're increasing the amount of write-offs they get as a result of doing that. So there's a strategy behind it.

Joey: There was a couple of builders years ago, I remember when I first got into real estate and they were building homes and then they kept 1031 up and both of them independent of each other, 1031 into they built apartment complexes. And there's a lot of rules and intricacies here. But the idea was that they just kept deferring the taxes. You know, this is all legal, where they just kept rolling the money over and over and over until finally they rolled it into an entity that they said, "Well, I'll never sell that."

Josh: Right.

Joey: And effectively what had happened was instead of all those times paying taxes.

Josh: Yeah.

Joey: They got a 0% effective interest loan...

Josh: Yeah.

Joey: From the government to build really large units. And I think one of them did like five fourplexes 'cause there's... 'Cause what we're talking about is 1031 exchanges.

Josh: Yeah.

Joey: And then the DST is another option and there's, I think there's are some more options. You and I were talking about some.

Josh: Like tenants in common and stuff like that. Of which I'm not a huge fan of, because of the cash, you know, the capital call that you might have on it. And remember like tenants in common is another option, and those were very popular over the last 10, 15 years. But the problem with them is, is that let's say you have a group of like 5-7 people that are in this tenant in common. Right? You pretty much all have to agree on whatever it needs to be done. So let's say that the roof is failing and the choice is to patch it or replace it, right? Well, you gotta get on the same page on that. And so a lot of times tenant in common turn into these deferred maintenance nightmares.

Joey: Yeah.

Josh: Because you can't get anybody to agree to take care of the property the way it needs to be taken care of. And so it starts to go down in condition, therefore in value, and you know, at the end of the day, it's tough. You know, that's a big reason why my wife and I, we've never had tenants in common with anybody because we don't like to have somebody else dictating what we can and can't do with our property. But like those DSTs, you're signing off, I mean you might as well kind of have the idea that you're giving it away to a mutual fund, so to speak, 'cause you're not, you don't have any management over it. You have decision making over it.

Josh: They give you pro-forma based on what they think the returns will be on your investment, and then what the potential for appreciation is over time and you're done... That's it. And that's not for everybody either. And in exchange, you've gotta... You're under a time clock, right? So you exchange... It's gonna go fast, you're gonna have to sell your property, you got 45 days to identify, and you have a total of 180 days to close, so you gotta move forward with it so...

Joey: I think one of the big X factors in all of this right now is because I was just talking to a buddy of mine who has a... He was... There is a project in town that is an approved, I think apartment complex and the land, and he was talking about wanting to sell what he had and move into that project, but the problem was the ability to finish that project in a time that would meet those 1031, so normally... He might have been able to pull that off but with supply chains the way things are it's... You know what, we're sitting here... There's a lot of options. A lot of cloudiness.

Josh: Oh yeah, it's brutal man. I would never recommend trying to do construction and exchange again. I've done it before, but we didn't... It was in 2007 on Hempstead. My wife and I did a reverse exchange where we sold some buildings, we bought a raw piece of property and built two buildings on it in six months.

Joey: Impressive.

Josh: On a reverse exchange.

Joey: Impressive.

Josh: Well, I feel bad for the exchange company because he was the one that had to write the checks on all the draws. It turned into this logistical nightmare for the Exchange Company, I can't believe the work they did for us. It was incredible. We still refer to them to this day because I feel like I still owe them for all that work they did. They were just incredible. But that's... The time constraints that are involved in construction on exchanges is just... It's so many elements now that are out of your control, I would have never have done what I did actually, if I would have known what I was gonna have to go through to do it, I would never have done it again. It's scary.

Joey: And certainly not in today's market where supply chains are still fluctuating, things are still a little bit...

Josh: Yeah.

Joey: But the bottom line is, you have options.

Josh: You do.

Joey: There are plenty of options out there.

Josh: Yep, absolutely. So to sum it up, essentially, the Federal Reserve, did raise the interest rate by a quarter percent yesterday, corresponding effect was rates went up, and we're probably looking at rates right below 5% now, and it might go up higher than that. The Fed also though, did say that they expected to maybe raise rates again multiple times this year, so we're looking at a higher rate environment. The buyers that are affected that we talked about as rates go up purchasing power is affected, so we're gonna be seeing some of that play out, but in any case, for our listeners today, we're just trying to be consistent with giving you guys some good content and... Any other thoughts on that, Joey?

Joey: No, thank you so much, Josh. There's a lot going on and people have questions and hopefully, we were able to answer some of those questions. You were able to answer some of those questions for them. And thank you for that.

Josh: Yeah, thank you.

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