Josh Barker Real Estate Podcast #20

Find Rent Data - 💵🏘❓

Transcription of the Podcast Episode #20*

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: Well, anyway, it is July. What is the day? Is today the 14th, I think?

Josh: I think it's the 14th.

Joey: July 14th?

Josh: Yes, it is.

Joey: So we are, tomorrow is the Ides of July?

Josh: Yes, it is. That's right.

Joey: You know, what's funny is.

Josh: How do you know all that trivia? That's crazy.

Joey: How do I know, the Ides are always the 15th.

Josh: Well, I know, but you just remember it all. It's pretty impressive.

Joey: Well, thank you.

Josh: You're welcome.

Joey: I'm a plethora of useless knowledge or something like that and an inability to use proper vocabulary.

Josh: It depends on who you're talking to, I suppose.

Joey: Yeah. I'm great at parties. You know, what's funny is you have a sheet in front of you.

Josh: I do.

Joey: And we got this great presentation. I think it was yesterday.

Josh: Yeah, we did.

Joey: And it just, it was. So there's this tool that you guys have that shows you, "Hey, look, this is the market. This is appreciation." It'll go in, and you'll pull up an address, and it pulls all this historical data for like the last five years and says, "Hey, look, this is the median home. This is the median income. This is how many renters are there." It kind of projects. And all the numbers are like, "Hey, look, you do not have enough inventory for Shasta and Tehama County, like not even close to meeting inventory needs right now, let alone what's coming." Because people are graduating high school and graduating college, and people are still retiring and moving here. So all the pressure of people is not leaving this place. Where we live, people are not leaving. People are coming. We have immigration, right?

Josh: Right. Yeah, and family formation.

Joey: Yeah, and family formation. There's incredibly low inventory, and all the projections say whatever term you'd use. No, I know what to say. The demand is going up faster than the supply could possibly be replenished.

Josh: Yeah, the replenishment rate is too low.

Joey: Yeah, and so all this gloom and doom and articles are written, and oh, it's cats and dogs sleeping together and all this stuff that we're about to Armageddon. The fact is, no, this real estate market is, I don't know if the term healthy is what I'd say, but it's not like, "Oh, your house is going just to collapse. You're just going to lose all your equity."

Josh: The fact pattern is very positive here in Shasta and Tehama Counties. And it's pretty solid throughout most of the state too. I think what we're brushing on there is like, okay, when people talk about a housing market crash, it's like, okay, well, and we've discussed this before, but it's like, what causes that? And so, what you're talking about here is that we have a report that's got a collection of a lot of different pieces of data put together. And it's interesting, I didn't tell you this, but I ran this report for Nashville, Tennessee, I ran it for Boise, Idaho, and I ran it for Austin, Texas, and the reason why is I wanted to see in comparison our market to the markets that a lot of our folks have moved to over the years. Those areas are the ones we hear the most, right?

Joey: Those are the big three.

Josh: Yep, and boy, is the story different. So let's dive into Shasta County first, and then, what we'll do is I'll expand, and I'll talk to you about what's happening in those other markets I just mentioned. All right?

Joey: Sounds good.

Josh: So what Joey is touching on right there is we're looking at, like, okay, well, what has been the appreciation in the market? What's the expectation for appreciation in the future? Because if you're saying the market's going to crash, that would mean appreciation will go down next year, right?

Joey: Exactly.

Josh: And so then we have to evaluate, okay, well, what are those factors that can have an impact on value? So here's one for you. Generally speaking, the median home price in the county right now is $358,451, according to all the MLS data. The next thing to look at is how much appreciation we have had for the last five years. Last five years, it's averaged 7.6% per year. And so, some of those years might have been higher than that, and the last few years might have been lower.

Joey: But that's the average per year.

Josh: That's the average per year. Thank you. Yep. Based on this report, the projection for next year is 4.42%.

Joey: Okay. That slowed down a tiny bit.

Josh: It slowed down a tiny bit. Headwinds of interest rates being higher.

Joey: Huge impact.

Josh: Yep, having a huge impact, and it's likely the largest contributing factor that I can see. Here's where it gets really fun. Household formations. Now, people between the ages of 27 and 35 are not currently in a home they're solely personally responsible for living in. So, in other words, they're living with their parents still, or they have a roommate or doing something else. And what the expectation is that there'll be 2254 what they call family formations this next year.

Joey: In Shasta County?

Josh: That's correct. Shasta County.

Joey: Okay. Makes sense.

Josh: Of those, they're saying that up to 1440 could, if they choose to, purchase a home.

Joey: That's an ominous number, but let's keep going.

Josh: Well, and where they're getting that is they're saying, based on the median income, if you were to put a down payment down, this is just how many people could buy out of that group. The actual number of homes being built in the next year is projected at 373. So you have 2254 people that are going to. Because they already exist on the planet, right? They're already here. They're saying that they will transition into housing or rentals, one of the two, but they need to get into a house that they're not currently in on their own. And 373 are being replenished in the market right now.

Joey: Exactly.

Josh: That's a massive, what we call a delta, massive delta. And in fact, we need to catch up on the amount of housing units needed that that's the question that we have to ask is, well, how could a market crash if that's the case? Interest rates could go up to 20%. So, let's go ahead and throw that one on the table. That's possible. I'm not saying it's probable, but if it did, what would the corresponding effect be? Nobody could afford a home, right?

Joey: That would be, yes.

Josh: Okay. All right. So, the other thing would be, I suppose if everyone at the same time decided they would just put their house on the market and leave the state. Because that would be another way because you'd increase the housing supply, see, because what this report doesn't account for is that if I have a home and I'm selling it, and I'm buying a home in the same market, that's a neutral transaction, you created a piece of inventory and you took a piece of inventory.

Joey: Exactly.

Josh: Net zero. So what this family formation of 2254 is speaking to is they need to start taking that housing. They're going to be over the next year.

Joey: Got it.

Josh: And again, 373 new units are coming to market.

Joey: And correct me if I'm wrong, but it's also not taking in any immigration rate.

Josh: Oh, no. No. Nothing.

Joey: This doesn't have anything to do with people from San Francisco or Los Angeles or Fresno or Bakersfield or San Jose saying, you know what, I'm going to sell my house for $920,000 and then I'm going to move somewhere like, I don't know, say around Lake Shasta.

Josh: There you go. There you go. Not even close. So now, let's go over to Austin, Texas, for a minute. So I looked up Austin, Texas. It was Travis County. It was the county that I pulled it up in and looked it up. I can't tell you what the family formations were. I can't remember the number, but I can tell you that the number of housing units being built exceeded by thousands compared.

Joey: To family formations.

Josh: To family formations. And so it showed that it's oversupplied with housing, which Texas has done. Like the oil boom and bust and all the stuff, it seems like Texas does that a lot. But in Nashville, it was super tight. Housing formations were very close to the replenishment rate. And so, for that reason, their appreciation was projected to be around 1.5% or something. Austin was negative, less than a percent.

Joey: Can you short-sell? Can you short a town?

Josh: I don't know, man. But if you're going to do it, I guess there are ways to do that. And the other spot that I said that I looked at was in Boise, Idaho, the same thing. The family formation greatly exceeded the number of new housing units coming to market.

Joey: Okay. So that's still going to be a good market.

Josh: Well, no, what I'm saying is that I'm sorry, the other way around.

Joey: Flip it. Got it.

Josh: Yeah, there are more homes available.

Joey: Was it a huge number, or was it like a 5% type thing?

Josh: Like 10 to 15% more.

Joey: Okay. Which is a considerable number.

Josh: It is still a considerable number.

Joey: Yeah, but it's probably not Austin.

Josh: Right. And those are considered headwinds. When we have all these discussions around headwinds and tailwinds, those are headwinds. We have more supply.

Joey: Of course, you got a lot of supply.

Josh: Well, and this goes back to, remember, in 2007, we were in that situation. We were very similar to Austin. We had way more homes that were already built and available for purchase than we had family formations. And that's what put us out of whack, and that's why home value has dropped so quickly because we had way more homes available than people who lived in them. And that's just not the case today. So, taking this topic to a little conclusion, you have to ask yourself, what could cause the market to crash? And again, interest rates going up rapidly could do it. Not probable, but it could happen. And then the second one is if everybody decided to put their homes on the market at the same time and leave town because if they put their homes on the market at the same time and bought in the same market, that wouldn't change anything.

Joey: And considering that, I don't know, I think you know this percentage off the top of your head, is the number of people that have one of these killer interest rates right now, and the chance that they're going to sell their house with a 3.25% interest rate to get a 7.25% interest rate potentially. There's got to be a major pain point pushing them to do that. It's got to be.

Josh: Yeah, you would think that, but I got some bad news this week, man. Yeah, I'm not happy about what I'm hearing, and I don't think it's necessarily going to be a huge group, but I've been talking to some of the local mortgage lenders who are telling me that these property owners are actually refinancing off of a 3.25% 3.5% interest rate.

Joey: Wait, you're going to have to explain that. Say again.

Josh: There are local lenders right now telling me that they have borrowers who are refinancing their homes off of 3.25% and 3.5% percent interest rates.

Joey: Meaning they've got 3.25%, but they're going to go get a 7% interest rate on their house?

Josh: Yes.

Joey: What?

Josh: Credit cards. Because the interest rates have gone up, some of these folks are stuck with credit card debt with higher interest rates. And so it's less expensive for them to finance that at 7% over 30 years than to pay whatever the rate is that is higher than that.

Joey: Mini bar prices, 22.99% type thing. That is awful. That breaks... That hurts.

Josh: That sucks.

Joey: And now I know why. I thought you were overacting. I was like, "Wow, you're really going with this." It's Jim Carey style. You know what I mean? But that hurt me to hear you say that.

Josh: It hurts. Well, it hurts me too 'cause you think about the person that has to relinquish that really low-interest rate for that reason, and it's like, "Man, that's a tough choice to make." It's probably not the wrong choice. You've got to find a way to take care of it, but it's still... And again, I don't know how big of a number this could turn into, but I have multiple lenders, not just one, telling me that they are doing loans like that.

Joey: Two things went through my head. Number one was how I felt when I heard that an athlete is bankrupt within five years of making $140 million in the NBA or something like that. Always like, ah, why do they not have a financial advisor, somebody in their life?

Josh: Don't give them all the money at once.

Joey: Dude. Yeah, you tend to think.

Josh: Give them a rule like you have to wait till you're 35 or 45 or whatever.

Joey: And the second thing that went through my head is our conversation that we were having before we started filming. Joey's not going to buy a boat. You just helped me make a choice. No boat for Joey.

Josh: Joey asked me before the video. He said, "Hey man, I'm thinking about buying a boat. What do you think?"

Joey: And Josh is a marine sailor, so you got... If you know Josh, you know he loves boats.

Josh: I love sailing boats.

Joey: Yeah, love sailing.

Josh: I love the water.

Joey: Christopher Cross style.

Josh: That's right. That's right. I like big water, though. I like Shasta Lake. It's fun. I can go up there on Saturday, but I like the open ocean.

Joey: I don't want anything where sharks are.

Josh: Oh, come on, man.

Joey: Come on. You know what? The second my butt gets in the water, I hear violins.

Josh: Oh, you're scared?

Joey: I wouldn't say scared. Why did you have to jump right to scared?

Josh: Because it's fun.

Joey: How about being cautious? How about being cautious?

Josh: Well, we'll go with that then.

Joey: Frugal, pragmatic, perhaps.

Josh: Well, in case you don't know, I've been around a lot of sharks. I could tell you this right now. Don't back down. That's all I can say.

Joey: Oh, okay.

Josh: Yeah. Be there, stand them up, look in the eye, put your hand out, and they typically go away.

Joey: You just walk up to that bear, and you box his ears. You're like, oh, you're an expert.

Josh: Sharks are a lot like dogs. Seriously, if you have a wild dog, you take off running. What's the dog going to do?

Joey: Oh, yeah.

Josh: He's going to chase you down, right? It's the same thing with sharks. So, I'm not advocating that. I'm certainly not like the shark entertainer, but I'm not as scared of them as I was before I spent a lot of time sailing. I am curious to know how we digressed to that. So the next thing to talk about a little bit is the commercial real estate market side.

Joey: Please.

Josh: Interesting report that came out. So the Federal Reserve had a lot of auditing on commercial banks recently, and I was a little bit nervous about that. I was like, "Oh man, are they really gonna go in there and tighten up the credit on them even harder?" What they found was that they think that they're extremely resilient. The banks are more resilient than they expected, that they could take, and the number was crazy. They said they could take up to 40% valuation losses on real estate assets on the commercial paper side and still be solvent.

Joey: So, as long as they weren't leveraged in crypto, they're okay.

Josh: Yeah, I guess that's probably true.

Joey: 'Cause those are the banks that I think really ate it, where they were all leveraging crypto, and they were. That VC space, right?

Josh: Yeah, and that's not what they're talking about here at all.

Joey: Yeah, no, you said real estate?

Josh: Yeah.

Joey: You said real estate assets.

Josh: Yeah, commercial real estate. Now, I understood them to say that they will ask that they keep more capital on their books. And so there will be a few policy changes for banks over $250 billion or so that they have in assets. They're going to be asked to keep a larger capital to reserve.

Joey: That's good.

Josh: And where this ties into this conversation is that commercial real estate is still important because if, as you're having, as we talked about, family formation and the housing demand, well, there's demand for more doctors and there are more dentists and there are more insurance agents, there are more lenders, there are more real estate offices, there are more accounting services and you need more construction.

Joey: Makes sense.

Josh: You know what I mean?

Joey: Yeah.

Josh: So having access to the capital to facilitate those things, it's pretty important.

Joey: My mind's... Oh, sorry. Go ahead.

Josh: No, you go ahead.

Joey: I was going to say, when you were saying that my mind's going through a few years ago, you'd go around town and I felt like you'd see some unrented commercial space. But I was thinking about this the other day because I went by a few places that were empty and they weren't empty anymore. And I wanted to know how the commercial inventory is. It doesn't seem like there's a lot. A few years ago, it felt like there was.

Josh: If you've got commercial office space right now and it's been maintained well, and it's got a decent floor plan to it, that's pretty accommodating for a lot of different tenant classes, and you're in the infill areas of the City of Redding or what have you, I can speak to that for now, and it's improved, most importantly, it's improved, you're not going to have a lot of vacancies and there's not a lot of vacancies.

Joey: That's a good sign.

Josh: It's a very good sign. Now, there's another story, though, for large commercial spaces that are vacant right now because now.

Joey: Warehouse or?

Josh: Well, not even the warehouse. We have a lot of retail downtown that was built out with those multi-families above it.

Joey: Oh, you know, I never go down there. That's right.

Josh: Yeah, and it's a beautiful space. I mean, gosh, I couldn't imagine it'd be wonderful to see a couple of really cool tenants go in there. But because it still needs to be improved, you have to find a tenant with the capital reserves to go in there and make the improvement. Even if you partner with the landlord, some considerations must be considered. And so there's some vacant office or a vacant commercial space right now that needs to be improved that is sitting. But I can speak to the stuff that is improved. For the most part, it's already at lease out, which is good. Yeah, it's a good sign—a couple of other things that are happening right now too. The state of California is very proactive. Most of it, I think most people have heard that the state is actually pushing on counties and municipalities to allow them to split up property to add additional dwellings onto those properties. Are you familiar with that?

Joey: Well, the ADU thing, and the City of Redding, they have some floor plans. They said if you'll choose these... I mean, they're trying to drum it up. They're trying to get people to do it.

Josh: They're trying to streamline the process, right?

Joey: Yeah.

Josh: So, we've been researching that here in the office and just trying to get a feel for, okay, when we're representing our clients out there, what's that impact going to be? Because we get questions like that from buyers and sellers in the market, what will that impact look like? And so, when we went through the study on it, I came up with a lot of the homes that were built since 2000. It's very unlikely that a lot of those will have the potential to have ADUs put on them. And the reason why is because the space, that most of the space was utilized. You know what I'm saying?

Joey: Makes sense.

Josh: So, yeah, you're going to have a hard time converting an RV parking on the side of your house into an ADU.

Joey: Exactly.

Josh: You need a bigger lot to accommodate it. And so what that does is, it has your eyes kind of shift to, okay, well, then what is gonna be available? And I think about western ranches on the east side of town. So those are some larger lots. They still have city services and utilities for a lot of those.

Joey: Is that Western Ranches at Alta Mesa down at that end, Rancho, in that area?

Josh: Yep, down at that end.

Joey: Yeah, they got some big... Those houses have big lots.

Joey: Big lots.

Josh: And some of those areas over there. And don't panic if you're watching this and you live down there, and you're like, "Oh no." But those are the types of lots with city services already available. So you've got city sewer, city water, city electric. Not all of that down there, by the way, is on city sewer because some of it's on septic still. But a lot is on the city services, and the lots are large enough to accommodate an ADU.

Joey: Yes.

Josh: And so, when you guys are wondering, well, where is that going to be possible? Just think about properties that were developed probably over. That is older than 2000, about 2000 or so. Because back then, those lots still have a lot more space available on them, and I think you'll see a lot more ADU development on those. I mean, I don't want to speak to specific neighborhoods and bring any major concern to it, but I do think that this is going to be one of the multiple solutions to the housing supply, is that you're going to see more and more people doing it.

Joey: Yeah, but it's going to be like a drop in the bucket type thing. Do you know what I mean? You saw the numbers there. We had a disparity of over 1100, right? No.

Josh: Yeah.

Joey: Over 1000, right?

Josh: Yeah.

Joey: By the way.

Josh: By this report, 1100.

Joey: 1440. I have to go back to my trivial knowledge.

Josh: There you go. It's right there.

Joey: The year the Gutenberg press 1440.

Josh: How do you remember this stuff?

Joey: because that's just 1440. I just remember that's like the Gutenberg press, right?

Josh: That's unbelievable to me.

Joey: That's why when you said it, that's why that number stuck out. Anyway, I can see that happening. But it's not like 1000 ADUs are being put in.

Josh: Right.

Joey: You're talking like what, maybe 80, 90.

Josh: Well, yeah.

Joey: I mean, it helps, but...

Josh: Everything helps. Well, there's no one solution anymore.

Joey: No.

Josh: Because the problem's too big. It will take a collection of a whole lot of different ideas and initiatives, all being executed at the same time, that will solve it.

Joey: Can I tell you what I think will play a factor?

Josh: Please do. Absolutely.

Joey: Okay. Because I'm arguably a futurist. I think what we're going to have is we're going to have modular homes. And I'm not talking about traditional manufactured homes. What we're going to see is we're going to see these, like what Elon Musk was working on. We're going to see these modular homes that come in. Apple, Tesla, and people like that will make these smaller homes that are just like the space age.

Josh: You mean like prefab where they move them... Like they develop in a factory and then move them on site and then drop them off the pods?

Joey: Yes, but they're not like the ones that were... They're going to be different. They're going to be very space aged, very forward, smaller minimalism.

Josh: I agree.

Joey: Almost like something you'd say like, "Oh that looks... "

Josh: There's a company in town. It just hasn't quite gotten there, but they're. I think they're building a factory right now. They're speaking to well over 100 employees.

Joey: Really?

Josh: Yeah, that they're going to bring in.

Joey: More pressure on the housing market. They're going to bring in 100 employees.

Josh: Yeah, exactly. Yep, that's going to bring in more households. But yeah, so it's a prefab. So you have these large factories. You build a floor plan and a house basically, and then the only thing you have to do on-site is just develop the site and set up the footings. And then you come in, and you drop this pod down on top of it, and if you're a two-story, you drop a pod down and then you put the next pod on top of that. And they're already built out. They're already got all the rooms and everything else on the inside. And so, most of them get inspected in the factories, and so, there are inspections that are taking place there, and of course, there are the inspections on-site just to make sure things are connecting right. I agree. That is likely a direction that we'll go. Well, here is a question. Is that more likely than the 3D modeling on-site?

Joey: Oh, wow! That's great. I'm going to say yes. And here's why. And I don't know what I'm talking about, but that has never stopped me in the past. The ability will be quality control in the warehouse and cost control. So a couple of things. Elon Musk, I'm a big Elon Musk fan. I'm a fanboy. He's made the statement it was something. It was something like this that all entrepreneurs should work in the physical realm. And he's basically saying the day of software is almost over. We've gone through a massive software boom. That's over. So it's getting back into manufacturing, and a couple of other things are pushing on that. A lot of it is this whole thing with COVID, and we saw how these intricate supply chains get disrupted.

Josh: They were completely far out. Too easy to disconnect.

Joey: Yeah, too disrupted. And even with all the political climate we have, I think behind closed doors, it doesn't matter what side you're on, they're going to say, we should have more manufacturing here. Why? The jobs, the cost, the what have you. So the politicians will...

Josh: And people need stuff to do.

Joey: The politicians will fight it out, but behind closed doors, they're like, "Hey, look, wouldn't you like your local group of people employed? And do you really want to " Anyway, okay? So I think you're going to see manufacturing very heavily automated. And so what's going to happen is you're going to get this incredible quality control, and you're going to get incredible features. And if you've been in a Tesla, or if you've seen like Apple's VR that's coming out, if you see... Then there are rumors that Apple's going to move into manufacturing cars. Those same people will push the envelope, and I think they will build homes. They're going to build and be traditionally smaller, but you never know. They might get some that are bigger. They snap together like Legos, but they're going to be incredible. The right way to word this is...

Josh: Technologically advanced. There you go.

Joey: Yes. Thank you so much, man.

Josh: It's a hard word.

Joey: It was like saying anonymous and autonomous at the same time, anonymously autonomous. But yeah, exactly. So I think that's going to appeal to the same generation that's buying Teslas and Apple. Is it going to appeal to the cowboy in Red Bluff? No, he's in the target market.

Josh: It's like, thanks, but no thanks, so yeah.

JoeyJG: But these younger people are going to say like, "Yeah. This is just, you mean I just press it and it goes?" "Yeah, and your car just plugs in, and then the panel's on top, and yeah. And you only... " "Well, how many square feet do I need?" "Maybe like a 4500 square foot lot."

Josh: Yeah, it's a game-changer. Yeah.

Joey: There you go. It's a game-changer.

Josh: So the area that I then to shift this a little bit will be just on the infrastructure itself. Because the City of Redding, for example, has the sewer treatment plant facilities that will have to be, if you're going to do a lot of infills, those weren't designed to accommodate infill at this level. So there will need to be some technology and some investment in those locations, too, to do that. And then you have the power grid itself too. Obviously, the City of Redding's power is incredible. It's very resilient, but as the demand increases on it too, there's going to be that multifaceted sun, you're going to have solar panels and everything else, so.

Joey: Yeah, I haven't heard anything about that project. When Adam McElvain was on the City Council, he was really pushing two projects. One was REU having its own... Being an ISP, Internet service provider.

Josh: Which would've been awesome.

Joey: Oh, it's awesome. They had all the infrastructure, and it was...

Josh: Great idea.

Joey: But, anyway, so that's one. The second thing, and I completely lost my space, man.

Josh: You're good, buddy.

Joey: Okay.

Josh: Well, let me go somewhere else real quick.

Joey: Please.

Josh: All right.

Joey: Thank you. You saved me.

Josh: I saved you. Let me go to another spot real quick because I'm getting this. I'm getting hit on this when it's around interest rates. For those listening, I don't know what the rate is at this exact moment, but this morning rates were averaging around 6.825%.

Joey: So they went down.

Josh: They did.

Joey: They were over 7%.

Josh: It was terrible, man. So, I want just to spend a minute and just kind of talk about this interest rate thing. This is the biggest problem.

Joey: Absolutely.

Josh: Rates are by far our biggest challenge. We already have challenges with housing shortages and things like that that we're playing up against, but when your people go, "Well, when is my house gonna go up in value in a significant fashion?" When rates drop in a significant fashion. You know what I mean?

Joey: Yeah.

Josh: So, right now, we're at 6.825%. Last week we were in the sevens. Every time, you guys, this market hits over 7%, and then on its way to 7.5%, it's like somebody took a baseball bat and just hit the volume of home selling every day over the head. Just bangs it down. And you can feel it, and I can feel it through in the office. Last month, we pended a lot of properties, and then all of a sudden, the rates went up, and that following week, we could see a noticeable shift in demand, a noticeable shift for that whole week. And then now this week, of course, it's resuming again as the interest rates drop back down under 7%. So it's one of those things where when people go, "Well, what's gonna happen with the rates?" It's like, "Well, your guess is probably as good as mine at this point." Before, I was like, Fed's going to raise the rate. We'll still have pressure on the rates. But right now, the Fed is poised perhaps to raise the interest rates at least one more time, and if they do it two more times, and they usually raise it to 0.25%, this might start to have an impact.

Josh: Before, I was like, well, the mortgage rates had already assessed that the Fed was going to raise the discount rate, so the rates didn't change that much when they raised their discount rate. But right now, because I don't know if anybody, including the Fed, knows for sure what they're going to do, this might actually show up in the mortgage rate this time. You know what I mean? So if the rate goes up a quarter basis point, we might see the mortgage rates go up as a result.

Joey: Winter is coming.

Josh: Yeah.

Joey: Yeah, potentially.

Josh: Yeah. So we...

Joey: But see, that's nothing we're in control of. We can't control it.

Josh: There's nothing we can do about it. But as Barbara Corcoran says, is that how you say her name, Corcoran, for the Shark Tank?

Joey: Yeah.

Josh: I saw her in a video the other day, and she says, "Hey, I'm telling you, guys, right now, for those of you that are waiting to buy, I was selling... " Not me, this is Barbara. "I was selling real estate 40 years ago when interest rates were at 19%, 20%." And she gladly reminded us, "Hey, whatever the rate is today, when that rate goes down, those prices will go up." And I'm like, Barbara's right on that one.

Joey: Oh, absolutely. I think the best case scenario is we always come back to segments. Because everything's so generalized and I keep coming back to the renters. And if you can afford a mortgage at this interest rate, buy. Because you're in the perfect spot that when interest rates do come down, you've secured the home price, refinance. And again, we did a radio show this week and we said, a lot of people don't know this, but when you refinance, you don't have to pull the equity out. You can actually refinance and just simply reduce your monthly.

Josh: Obligation, yeah.

Joey: Your monthly mortgage rate, and then you're set. Because the other side of that coin is when those interest rates come down, that is heavy pressure. It's like a pressure cooker. And the second, if you've ever cooked with an instant pot or pressure cooker and you hit that little thing and it p-shh, that's when interest rates drop, that's what. Because the other side of what you said was every time you see interest rates drop, boom, buyers jump. They jump.

Josh: And you can feel it. It's almost like a pulse through the market, boom and you feel it. The other thing I'd bring up before we conclude is that we're almost out of time.

Josh: Three minutes? All right. So, when you look at the price ranges, they are not all performing the same either.

Joey: No.

Josh: No. Even with this example right now, what it's saying here, when I said that it's expected to go up 4.42%, that's for homes that are priced closer to the median sales price.

Joey: Yeah, around $360,000, right? Give or take?

Josh: Yeah, exactly. The $358,000 or whatever. So that's where that expectation is.

Joey: I'm bullish on anything under $400,000. I mean, me personally.

Josh: Oh, absolutely, and I don't think there's anybody in my office that doesn't agree with that one. I mean, no.

Joey: You can't replenish... Unless the modular homes come, and I said they... Although I think they're coming, I think that's years out. You can't replace it.

Josh: Yeah, you can't. And then if you're in the upper end, so if you're a property that's $800,000, $900,000 or above...

Joey: It's completely a different story.

Josh: Really, about $900,000 and above, it's a different story. I mean, you start to sit on six, eight months' supply of inventory. In some cases, it's even harder than that. And then as the price comes down, if you get between $700,000 and $800,000, about four units were sold last month. If you get from $600,00-$700,000, it jumps up a lot higher than that. And as you get closer to the median sales price, it's moving well. So when you think about appreciation in the market, just understand that most of the time, that appreciation average that you hear is likely going to represent where homes that are priced around the median sales price.

Joey: Exactly.

Josh: Yeah. So it will probably be the last one.

Joey: I wanna plant a seed in your head for our next podcast.

Josh: Yeah, go ahead, please.

Joey: Okay. I would love for you to get some numbers on residential multi-family, so four units or less, 2-4 units.

Josh: Okay. What would you like to have?

Joey: I'd like to see those numbers. I'd like to see how inventory, that appreciation stuff because I got to think that they're doing pretty good. Pretty, pretty good.

Josh: Yeah, cap rates could be better. So when we go and research, it'll show you this, but the cap rates are...

Joey: Are cap rates in California good period?

Josh: No.

Joey: No. You go to Ohio if you want good cap rates.

Josh: Right. But, well, yeah, cap rates are a challenge for sure. I'll do that. I'll bring that in next time. And maybe I'll finish with one last thing, is that in the rental market, you guys, if you guys are curious about it and talking to property managers about it, the vacancy rate's still pretty low. There are a lot of family formations. Not a lot of homes are available for sale. People are looking at the rental market as a solution to that. And then, with that, here's the deal. If you take a house that's three bedrooms, two baths, built in like 50 years ago with a two-car garage, it probably rents out for, let's say, $1700 a month, $1800 a month, somewhere in there, if it's a house, detached home. If you bought that house right now, it'll probably cost you $2500, $2600 bucks, which will cost you a month to own that home. And so, my point is that rents are still a lot lower at the moment for that same home that you might buy, which puts some concern in my mind about rent's actually still going up. You know what I mean?

Joey: Yep.

Josh: The rate of rent increases is slowing down, and that's because we're pushing up against affordability, but it's getting tighter. It's crazy. So rental market, if you guys are wondering if it's strong, it's strong. It's still strong. It's very resilient right now.

Joey: Nice. Do I have enough time to recover from my mess up earlier? I remember now.

Joey: So, one of the things I was going to say was, I would love to see us get that project for potentially Redding have a solar array again. Because I think power is going to be a big issue. The other thing is, I think that this is the beauty of a free marketplace. When you give those numbers, you say, well, we will have these issues. What I think is, somebody's gonna look at that and go, "Opportunity."

Josh: Absolutely.

Joey: And you're going to see advances in technology. You're going to see new businesses rise up. And so, I think that's what you're seeing, is, this is a huge opportunity for people to do things like, how are we going to handle housing? And oh, these guys are 3D printing, and these guys are doing these really cool Tesla, Apple-type prefab homes. I think that the same thing is going to happen, it's definitely not sexy, but the same thing is going to happen with waste management.

Josh: Waste. Great point.

Joey: It's there.

Josh: It's there, yeah. And the technology is showing up. The innovation is there. The desire to solve a lot of problems. I think a lot of people are motivated by solving problems right now too, which is really cool.

Joey: I think so too.

Josh: Yeah. It's exciting.

Joey: I think, right now, we really focus on negativity, and, man, I'm so guilty of this. But if you look at all the numbers, if you've listened to a Steve Pinker, is it Pinker or Pinkerman? I can't remember Steve Pinker. You know what I'm talking about.

Josh: Yeah, the talk. Yeah.

Joey: And he's just, he tries to... He has these talks, and people are like, "Yeah". But he just runs through statistics and it's like, man, things have never been better. You have no idea, never been better. Never.

Josh: They've never been better than now. And I would agree with that 110%. If you were to go back 100 years, think about the challenges we had then, 50 years ago, think about the challenges we had then, I mean, yeah, hands down, we're at the moment probably live in living one of the very best times you could imagine, up to this point. And hopefully, it's only getting better from here.

Joey: It will.

Josh: All right.

Joey: It will. Thanks, Josh. I appreciate it, and I'll see you in August.

Josh: Sounds great. Looking forward to it. See you guys.

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