The 2023 Market Showdown: Which Area Offers Investors the MOST Opportunity?

Dave:
What’s up, everyone? Welcome to On the Market. I’m your host, Dave Meyer. Joined today by Henry Washington, James Dainard, and Kathy Fettke. How are the three of you?

Kathy:
Great.

Henry:
Doing good.

James:
Fantastic, fantastic.

Dave:
We have a great show for you today. We’re going to talk all about some of the regional differences in the housing market right now. As you probably know, there are huge differences from market to market, state to state, and each one of us is going to represent one region of the country, and we’re going to talk about some of the strengths, weaknesses, tactics, and strategies that work within each of those regions, so definitely stick around for that. But first, we do have a bit of housekeeping. If you listened to episode 100, you know that we did a bit of a contest. We asked everyone, all of our faithful listeners to share their favorite On The Market episode, and if they did that and screenshotted it, there was a winner going to be announced, who gets to pick a host to have a coaching call with?

Dave:
We do have a winner. The winner for our contest is Dominic Grosso, whose favorite episode was number 97, which is basically me just rambling about the dollar dominance, and reserve currencies for a while, but that was his favorite episode. I actually really enjoyed making that. Congratulations to Dominic. We’ll have to have you pick one of our hosts for a coaching call, and thank you for listening to On the Market, all of you who participated in it. We really appreciate it.

Henry:
I’m sure this was in no way, shape, form or fashion, rigged that the person who won picked an episode that Dave just talked the whole time, and Dave picked the winner, right?

Dave:
I mean, dude, it’s so weird. The only ones that were nominated were just me talking all by myself. None of you. No one even mentioned any of you guys in any of that.

James:
That’s because we’re just your backup dancers, Dave.

Dave:
No, not at all. Actually, we got so many different ones. It was pretty awesome to see how many. Just everyone had a different favorite episode, which I think is this time we’re doing something right. Right.

Henry:
That means we’re doing good.

Kathy:
Yeah.

Dave:
All right. Well, congrats to Dominic. Before we get into our regional discussion, we are going to play a little bit of a game to test everyone’s knowledge of the housing market right now, because things are changing so quickly. I’m going to have you guys guess some housing market stats. They’re pulled from the NAR report, National Association of Realtors, reflecting on March 2023 data. Just so everyone knows, we are recording this in May, but good quality housing market data is usually like six weeks in the past, so that’s what we’re looking at here. All right. I don’t think you guys know these questions, so I’m going to start with an easy one. James, what was the median home price for existing home sales in March of 2023 across the entire country?

James:
I actually know this. I’m thinking it’s around 440.

Dave:
440, okay. Kathy?

Kathy:
I already know this, so I’ll have to pass. I would be cheating.

Dave:
All right. Henry?

Henry:
Yeah. I was going to say about 423,000. That’s the number that popped in my brain.

Dave:
Okay. Well, you both shot high. It was actually 375,000, so it’s actually come down a little bit. I think it was close to four, when it peaked last June, and then it’s come down. That is pretty good. Actually, Henry and I had a conversation. He was talking about how the combination of slowly declining home prices, and modestly declining mortgage rates have steadily improved affordability in the US since October, which is encouraging.

Kathy:
Can I just make one comment

Dave:
Please.

Kathy:
When I started investing, it was 124,000. That was about 20 years ago, but the median price was 124,000, so it’s really almost tripled. I want people to really get that, because lately, there’s all this talk that inflation is something new. Guys, it’s not new. It’s here. It’s here to stay. It’s been here, and just in the time that I’ve been investing, which granted, okay, two decades, shut up. But with that-

Dave:
You brought it up.

Kathy:
You’ll be there too someday. Just at a time when they weren’t talking about inflation there, these home prices almost tripled. That’s why, I’m on a rampage to let people know, if you don’t get in the market, it’s going to just keep getting harder. It’s not going to get easier.

Dave:
That does seem to be the case, for sure. All right. Our second question, going on our theme of the regions of the United States, what percentage of home sales occurred in the Western region of the US in March of 2023? Kathy, what do you think?

Kathy:
Oh. Yeah, I do not know that one. Okay. I have to guess. I am going to say a third.

Dave:
Okay. 33%.

Kathy:
Such a bad guess.

Dave:
Henry?

Henry:
I’m going to go with 16%.

Dave:
16%. James?

James:
17.4.

Kathy:
What? Oh.

James:
I don’t know why.

Dave:
Did you see?

James:
No, that just did-

Dave:
Did you just see?

James:
No, that just popped into my brain.

Dave:
I was about to say Henry was so close, but then James, you just totally won up to him. It was 18%, and you just said 17.4.

Henry:
You just one dollared me, $1 rob.

James:
I promise you, that was a total guess.

Dave:
Go buy a lottery ticket.

Henry:
Totally, pull that out.

Dave:
All right. Well, Henry, I’ll give you a chance to redeem yourself, because this is a play into our regional conversation. We’re just talking about the volume of home sales, and where home activity, and purchasing is going on right now. Let’s talk about the South, which is what Henry is going to be representing. What percent of home sales were in the South in, I don’t know, March of 2023? Is that what we’re talking about? Yes.

Henry:
I’m going to go with 37%.

Dave:
Okay. Kathy?

Kathy:
Oh, guys, I’m obviously just really right on on this one. I’m just going to follow Henry, and say 31.

Dave:
All right. James, I’m giving you another chance to one up Henry, or Kathy.

James:
23.4. I think it’s closer to 40. I did it wrong.

Dave:
It was 47%.

Kathy:
Wow.

James:
That was my guess.

Dave:
Half of the-

Kathy:
Oh my gosh.

Dave:
… homes sold in the United States in March of 2023 was in the South. Comparatively, the Northeast was just 12%, and the Midwest was 23%.

Kathy:
I forgot the migration, man. Everybody moved to Florida, and Texas.

Dave:
Yeah. It doesn’t seem like it’s slowing down, even though home sales on a whole are a fraction of what they were about a year ago. Then the concentration is still in the South. We are going to get into these regional differences in just a minute, where Henry’s going to be representing and sharing some information about the South with us. Kathy will be talking about the Midwest. I will be talking about the Northeast, and James will be talking about the West, so you all can get a better sense and understanding of what’s going on in each of these regions, and how to adjust your strategies and tactics accordingly. But first, we’re going to take a quick break to hear from our sponsor, and then we’ll be right back.

Dave:
For our regional discussion, we are going to start with me. We decided we were going to go East to West, for some reason. I think Henry said something about Oregon Trail, so that’s what we’re going to be doing. We were going to start in the Northeast. Basically, I wasn’t exactly sure what states belong in the Northeast, so I just made this up. But I picked, what I did in the analysis, I picked New Hampshire, Vermont, Maine, Massachusetts, Rhode Island, Pennsylvania, New Jersey, New York, and Delaware. I think that’s New England plus. I don’t think New York, New Jersey, and Delaware are technically New England, but I threw them in, anyway. Basically, what we’re seeing here in these nine states, and it comes into about 56 metro areas is what I looked at. This is a spoiler, we’ll have to confirm this. I think the Northeast probably has the most stable, or maybe even the highest growth potential of any region in the United States right now.

Dave:
The indicators suggest pretty strong growth for the Northeast right now. What I’m seeing is, of the 56 markets that I analyzed, 46% of them are up year over year. That represents a very large percentage of all of the markets. When you look at inventory, and you’re trying to understand what’s going on in the future, is inventory going up? 95% of the housing markets in the Northeast still have inventory below pre-pandemic levels, and the average days on market is 32%, which sounds like a lot compared to the last couple of years, but is a relatively normal level. Before I go on, I’m curious what you think, just based on those stats, how would you evaluate the Northeast as a housing market region right now?

James:
Well, the livability, and affordability has been driving that pretty heavily, from what I understand. I think there’s definitely still growth. I mean, what we’re seeing is the affordability markets, the ones that, I mean, I guess it depends on what segment of the Northeast you’re really talking about. The more affordable quality of living, small towns seem to be growing rapidly still, but I think you got to really break it down into submarkets. I think they’re going to continue to grow, because what we’re seeing is affordability is in high demand. I mean, if 46% of all the sales are happening in the South, well, the median home price is a lot lower in the South. Those Northeast markets have been on the same pricing, they’re going to have the same growth potential as well.

Henry:
James, I couldn’t agree more, because when I was doing this research, what I was seeing is, I looked at yearly data and I looked at a monthly data. When you look at the monthly data, most submarkets across the country are seeing home values increase, even slight levels. When you look at the yearly data, when we get to talking about the South, I’ll talk more in detail about that. You can see in the south, and the suburbs, and the more rural communities that values have gone up. If you see that trend playing itself out across the Northeast, you’re finding it… I think it’s a good opportunity to go, and you look at properties that are surrounding some of these major cities, and you can get in now, and then start to see, and start to get a benefit from some of the increases that are happening slightly month-over-month.

Dave:
One of the things that I’ve noticed is that when you look at the Northeast, obviously, it’s a big region. As per James’s point, a lot of the rural areas are, they’re not rural, they’re cities near more rural parts of the country, are seeing the strongest growth. When you look at places like Portland, Maine, or Burlington, Vermont, or Concord, New Hampshire, they tend to be performing a little bit better. Actually, Rochester, New York, where I went to college has a median home price of about $207,000. That’s a little bit more than half of the national average, so talk about affordability. Rochester is the number one market in the whole country, for something called the sale-to-list ratio, which basically is how much over asking price, properties are going for. In Rochester, they’re still going for 7% over asking price. That’s like what everything in the West was doing during the middle of the pandemic. There’s still markets in the Northeast that are affordable, in the less densely populated parts of the Northeast, that are still in full-on bidding wars.

James:
I think it comes down to, it’s that common sense affordability. If you play the impact on rates when median home prices are a lot lower, right? You’re looking at a mortgage rate that’s 7% today on $250,000, that’s a payment of $1,600 a month. At 5%, it’s 1342. In the consumer’s mind, people have been spending money like crazy the last two years. It’s just $250 more a month for your payment, whereas if you do it on a $2 million house, that’s a three to $4,000 a month more increase. These affordable markets are just grabbing people, because it’s that perception of money, or perception of what they have to spend. Even though it’s a percentage of income when you’re working in those areas, it’s still that hard reality that I have to pay $3,000 more a month for this house in a more expensive market, whereas in a cheaper market, 250 bucks doesn’t really seem like much. You can cut out your DoorDash, and get it there. It’s just one of those things where I think those markets, that’s why the markets are driving.

Dave:
Your DoorDash is only 250 bucks a month?

James:
No, my DoorDash is out of control.

Henry:
Whoa, whoa, whoa. Cutting out DoorDash. Let’s all leave.

Dave:
Yeah.

Henry:
Whoa. Come on. Let’s make some real sacrifices.

Dave:
You cut out a lot before that. Well, one of the interesting dynamics here is, obviously, the affordability level of some of these, I’m not going to say they’re tertiary cities, they’re not as common cities. We’re not talking about New York, and Boston here, but a lot of the other big cities in the Northeast, like Philadelphia are relatively affordable. For example, Providence, Rhode Island, and places in Connecticut are all relatively affordable. But what seems to be really driving some of these price bidding wars, and keeping the prices up, this is a national phenomenon, but I think it is most pronounced in the Northeast, is just the lack of new listings. This is how many people put their properties for sale. I look this up in Burlington, Vermont, there the amount of new listings was down 68% year over year. 68%.

Kathy:
Wow.

Dave:
It’s just unbelievable. Even last year, when there was very few things on the market, if there were… For every three homes that were on the market last year, there’s now only one of them, and that’s true in Concord, New Hampshire, Portland, Maine, Allen, Pennsylvania, Bangor, Maine. All over the place, we’re seeing this really interesting dynamic. Of course, things could change, but the way the data reads right now is that these parts of the country are going to have a very hot housing market this summer.

Kathy:
Yeah, it’s always confused me why the Northeast was, it was considered affordable, because I would always consider it, like you said, Dave, what exactly is the Northeast? I would always consider it New York, Boston, some of these in the expensive places, how could that be affordable? But everything around it is so cheap, when you bring in Pennsylvania, or the outskirts of New York, and you’ve got this pretty massive baby boomer population that doesn’t have to live in those big cities anymore. They can choose to retire. Not everybody wants to retire in Florida, so there are a lot of affordable places outside of those big cities. What I love about that East Coast area is, it’s very Euro in the sense of travel. You can jump on a train, and be in those cities pretty easily. Just get out of the train, and you’re downtown. You don’t have to drive. We don’t have that in the West very much. It’s terrible. You have to drive everywhere. People can still live in an affordable place, but get into the city with those trains.

Dave:
Yeah, absolutely. The last thing I will say before we get out of here is, there is this narrative that people are leaving the Northeast, and there are certainly parts like New York City has lost some population. I’m not sure about Boston, off the top of my head, but there are parts of the Northeast, especially New Hampshire, Vermont, Maine, that are growing really quickly. Parts of Massachusetts are growing really quickly too. We’re doing this regionally, because we can’t talk about every individual housing market one by one, but what we’re talking about here is mostly the non-New York, non-Boston parts of the Northeast. If you want to know more about the bigger cities, you might want to jump into that. Okay. Henry, let’s move on. Let’s talk about what’s going on in the South.

Henry:
Yeah, man. This was cool research to be able to look at. I mean, it’s surprising, but not really, because when you think about the South, what I did is I looked at home value increases and decreases, and I looked at it from a yearly perspective, and then from a monthly perspective to see what the differences were. When you look at the South, and you look at the values from a yearly perspective, so looking at December 22 to March 23, and I got to cheat on this a little bit, because this is all information from Fortune, where we got to interview somebody just a couple of days ago, and we talked about this. I was looking at that same data. If you look at housing markets, and what it did is, it broke down the zip codes for each state, and then talked about what percentage of the state either saw increases or decreases.

Henry:
Looking at markets like Tennessee, 83% of the state saw prices increase from December 22nd to March 23, 83% of the state, only 17% saw a decrease. When you’re looking at what kind of a decrease, so you’re seeing upwards of double-digit, sometimes, returns, 11, 12, 13% increases, but only single-digit decreases. The increases are much higher than the decreases, and most of the market is increasing. When you look at within these states, which parts of the states are seeing the actual increases, it’s the areas surrounding the major cities. The 16 or 17% that saw a decrease, well, obviously, those were going to be your Nashvilles, and your Memphis, right? Because that’s where most people either move to, or are living, that’s where most of the competition is. You’re not seeing the same increases, but the surrounding zip codes, there was great opportunity there that people took advantage of, and now they’re seeing their property values still go up in value, and you’re seeing home prices on the rise in those areas.

Henry:
Same thing for Georgia. Georgia, 68% of the state saw price increase, and the highest was about 15% increase, whereas only 32% of the state saw price decrease. The highest price decrease was only about 7%. Again, around Atlanta is where you’re seeing that single-digit decline in some of the values. But areas around it like the Macons, and those sub-zip codes around Atlanta are doing really, really well, as far as value is concerned. Texas, same thing. 63 on the increase, 37 on the decrease. In some years of Texas, people saw values increase of 20%, 20, 23% increases.

Dave:
Wow. Geez. Kathy, celebrate it.

Henry:
Florida was the only state in the South that saw the opposite. In Florida, 34% of the state saw an increase, where 66% saw a decrease. I think that has a lot to do with how many people migrated to Florida, how popular it became over that time period, and so you saw the metrics be a little different in Florida. But when you zoom in, and you’re only looking at the past month, so we’re talking February to March data, there were only three submarkets in the whole South that saw a decline in price.

Dave:
Wow.

Henry:
The Dallas submarket, and Dallas was really flat, because it was only 0.01% of a decrease. San Antonio at 0.07 in Austin, a negative 0.72% decrease.

Dave:
Wow.

Henry:
Everything else in the South saw an increase in value over the past month. I think this is, obviously, great news for people who bought in the area surrounding those submarkets. But I think it’s also good news for people that did buy in those markets, because I think if and when interest rates come down, and buyer demand increases, the more metropolitan markets will start to see those increases as well.

Dave:
I’m not surprised. I actually made a YouTube video today about Florida, and how Florida… I’ve said this, I think, on the show, every time I make lists like this and rank markets, Florida is always the top five markets, and the bottom five markets. It’s just like-

Henry:
That’s so Florida.

Dave:
… there’s no way to talk about Florida in a consistent way, when it comes to the housing market. Everyone is just ridiculous and crazy, so I’m not surprised to hear that. But I guess the theme seems to be, so far, both in my research into the Northeast and what you’re saying, Henry, is it’s the major metros that are really seeing adverse conditions, where any suburban, secondary, tertiary cities still going strong, as strong as they have been for over the last, maybe not as strong as over the last few years, but are still progressing as you would expect during a normal housing market.

Kathy:
Yeah. I was just in Dallas yesterday, before coming to Tennessee, and to meet with my partner there for our fund. It’s confusing, because a lot of times, you’ll see data for a particular city, and people will interpret that to be the whole area. But what happened in Dallas is, Dallas got really expensive. Obviously, not as expensive as where I live in California, or in Seattle, or Phoenix, but it’s gotten really expensive compared to what it has been in the past. A lot of people just can’t afford to live there anymore, and they’re moving out to the suburbs, and that’s where the massive growth is happening in so many markets, these cities that have been traditionally not too expensive to live in are now, and so the growth is moving out. That’s true for commercial property too. A lot of the office issues that we’re hearing, those are downtown high-rise offices.

Kathy:
But in the suburbs, where you still want to get your nails done, or get that massage, or get the drip thing that Jimmy has, or whatever, anything that you can’t outsource, you got to go, get it done. People who are moving out of the cities also still need those things.

Dave:
I mean, James hasn’t come to him though. James does not drive to his appointments. They come to him.

James:
They advised me not to poke myself, so I just don’t do that.

Dave:
That’s a really good point though, Kathy. We really are talking in broad strokes here, and trying to establish trends. But even within a state, even within a metro, there’s going to be variances, and also worth mentioning that we are only talking about residential real estate here, at least me, I don’t know about you guys, when I did not look at any commercial data.

Kathy:
But it’s just important when you see these statistics to look deeper and say, are they talking about the metro, the area or are they talking about the city? Those are two very different things, and that’s why it gets confusing, because you’ll see Tampa sales down and higher inventory, but just go outside of Tampa, it’s a different story, because again, Tampa got expensive. A lot of people aren’t moving from New York City to be in another city. They’re looking to be in an area where maybe they have a little bit more space, the suburbs, and there’s not a lot of data so much on those suburb areas, the suburban areas.

Dave:
Well, Kathy, let’s just stay with you. What’s going on in the Midwest? How did you define the Midwest, because I don’t even know what that means?

Kathy:
I know, it’s so funny. I’ve always questioned, I’m in Tennessee, I actually had to look it up. Turns out I’m not in the Midwest right now. I was going to say, yeah, I am, but I’m not.

Dave:
Was that South, Tennessee?

Kathy:
Yeah, it’s considered South. At least somebody decided that. I remember, I work with a lot of teams in Ohio, and I always thought that they would be considered Northeast, but they’re considered Midwest, I think, so I don’t know. I don’t know if it’s so much geographic, but again, the headlines can be so confusing, because you’ll see a broad stroke of prices went down. But then when you dive into the regional data, the Midwest actually had sales down dramatically, 5.5% month over month, 17% year over year, which seems to be less than other places. But the median price went up 1.7%, overall, in the Midwest. Again, it’s a big area. Why might that be? Well, I’ll quiz you guys. What do you think the median price of a home is in the Midwest?

James:
297,200.

Dave:
Ooh, That’s a big guess.

Henry:
I’m going to go like 192.

Dave:
I was going to go the other direction. I was going to say like 338.

Kathy:
I would’ve probably guessed what Henry said, because we work at so many of those markets, and buying those markets, and it is cheap, but the median price is 273,000.

James:
Buy the lottery, you go.

Dave:
James, you got to go to Vegas right now. Get on the plane.

James:
Who wants to go right now? I need to buy five houses today. I’m on fire with numbers.

Dave:
Chicago skewing the numbers here.

James:
Yeah, probably.

Kathy:
That’s $100,000 less than the national. Basically, Lawrence Yun, the chief economist of NAR, put it really simply and basically said, let me quote, “Home prices continue to rise in the regions where jobs are being added.” That would be the South, that’s happening there, and where housing is relatively affordable. That’s just to sum it up, it’s just those things. When you have an interest rate hike, is it going to… How differently is it going to affect people buying a $100,000 house versus a million-dollar house? Could be very, very different. The people on the West, and the expensive markets, they were already stretched. How do you double the payment? There’s just no way, not a chance.

Kathy:
But could you handle the difference on a $100,000 house? Possibly, not everyone. And then, of course, you’ve got people, these retirees, and people who can work from anywhere who would just love to get into the game, and can afford in those markets. That’s what the Midwest asked for. I’ll add one thing, Muncie was up 8%, and I know Muncie really well, because I’d lost my shirt in Muncie. I had an apartment there that had all kinds of problems.

James:
Why in Muncie?

Kathy:
I know, right? It’s outside of Indiana. It was a deal I should have never done, don’t even want to go into the details. That’s for another day. But knowing that area so well, one of the issues was, we had such a hard time renovating this apartment complex we bought. The city was tough on us. I don’t know if that’s keeping builders out, and that’s why inventory is so low. That’s part of the issue. Inventory is almost non-existent in Muncie. Maybe builders just aren’t going there, because there’s not a huge demand, or because the city council’s been tough on them, whatever it is, inventory is low, and yet people still want to own a home.

Dave:
Do you think also a lot of the development’s not happening, just because the replacement cost, you just can’t build for the metrics? I mean, is there like build costs are still up so much, it’s going to be hard to build in some of these markets? If things are selling for 200, 300 bucks a square foot, it’s going to be hard to build underneath that, and so inventory is going to stay tight in those markets, until the materials keep dropping.

Kathy:
Or until some builder is incentivized to go there. If you’re a national builder, you’re probably not going to Muncie.

James:
It’s just you, Kathy.

Kathy:
Just me.

Dave:
All right. Well with that, let’s move on to our last region for today, which is the West, of course. For that, we’re going to go with James.

James:
I feel like, with the West Coast, everyone is just hating on it like crazy, probably because the last nine months have been a little bit miserable. But I will say that, I think, the West Coast is going to be the comeback kid of the year. There were some very interesting data points. What we’re seeing in all the major metro areas, and actually the weird thing about the West Coast is, a lot of the affordable markets are also following trend with the metro markets, where it’s like, as we’re looking in the Northeast, you’re seeing things, like you said, Portland, Maine’s growing rapidly. And then whereas in Washington right now, we’re seeing the outside like in Seattle, Seattle is down roughly, I think it was about 9% year-over-year coming down. This is right when we were peaking on values right now. In a more affordable area like Spokane, it’s down 11%, so it’s not holding.

James:
That same story isn’t holding true in the West Coast. But one interesting thing, and across the board on all the metro cities, Los Angeles is down 4%, San Francisco is down 12%, Seattle is down nine, these are big drops. When you’re dealing with million to two million dollar properties, that’s a big, big deal. That’s two to 400 grand they can drop, when you start going above 10%. But there’s some really interesting trends that are happening right now. What I think we’ve seen is, we saw in January of 2023, the West Coast peaked in its worst conditions, from what I’m seeing. What we’re seeing is, there’s three major things that have happened from this quarter to where we’re at right now. A, the median home price had dropped the most during that time, across the board. But the biggest thing that I’m seeing, this is a huge indicator, is days on market. If we look at Seattle, or I’m looking at Los Angeles right now, in January, average days on market, the consumption rate jumped all the way up to almost 64 days.

James:
It has trended down to 44 in Feb, so the market is consuming a lot faster. The properties are starting to be consumed. In Washington, this is a huge stat. It ballooned up to 28 days, and actually, 28 days isn’t that long. Most investors should know, the average time to sell a house in the history is 120 to 150 days, so it’s still a healthy market at that point. But at 28 days, days on market, now we are down to an average of 16 days on market.

Dave:
What?

James:
50% of the timing is gone, and we are seeing that in the market. There’s some really good trends going on right now in the West Coast. The home pricing in some of these stats, and these are the one things I don’t like to go to. I like to watch the trends of the stats, but when you’re reading the stats, you’re too late to the game already, and things are already changing differently. A real-life example that we just had is, one of our clients sold a property 90 days ago, within a 10th of a mile that of a property that we just sold, same house, same builder, same lot, same product, exact same finishes. It took them 60 days to sell these properties with a different broker at 599, 90 days ago. We just listed one at 699, within walking distance, and it got bit up to 715.

Dave:
Wow.

James:
Model match products.

Dave:
Oh my God.

James:
The trend, it’s starting to, and these are really good trends. I don’t get trapped on just the median home price, and the percentages, when I’m looking at buying. I’m looking at what is the market doing today? What we are seeing in the West Coast across the board is, all days on market are dropping in all major metro cities on the West Coast. That means that buyers are starting to consume things again. I really think that comes down to more the mindset of the buyers is, the West Coast buyers are a little bit more techy. They overthink things, and they slow down, and now they’re getting FOMO, and they’re jumping in rapidly.

Dave:
James, you mentioned that more affordable cities are not following the same trend as the rest of the country. What is the price point of an affordable city in the West, because from my understanding, everything’s expensive?

James:
Well, in Spokane, Washington, the median home price… Spokane is the next major city in Washington, well, it’s in Eastern Washington, which is not… It’s away from all the big metro. It costs about 40% less than Seattle, on average, but the median home price was at four or is at 350,000 in Spokane right now.

Dave:
Oh, okay.

James:
That was down 8.5% from where it was year-over-year. A lot of these affordable ones are still, I think it’s more of a mindset of a state. They’re going, everyone should freeze, and so it’s like, just because the major metro in Washington is freezing up, it’s freezing up the markets across the board. But they’re all following the same trends. The interesting thing is, the days on market there also did the exact same thing as the major metro cities. The affordable markets are moving with the metro, and those are things to watch.

Kathy:
There’s actually quite a lot of affordable places even in California, but you have to live out of it, out of the cities. All along Highway five, you’re able to find deals along there in Modesto, and probably parts of Stockton, you could go. I think a great opportunity is Chico, California, because it’s got a huge university, but prices are… That’s where my daughter bought her first home for $250,000, just a couple of years ago. It’s not out of reach. I think if you want to buy in a place like California, why buy? It’s cool out in the middle of nowhere, or somewhere, that makes a lot of sense. If you would love to be a landlord in California, where the landlord laws are… That’s so exciting. But it’d be the same in any of those. The West is a big place too. That’s why, even if you cut the country up into four sections, you’re still just averaging cities that are so completely different, because from a big city, just an hour inland could be very, very different pricing.

Henry:
There’s tons of affordability in California. It’s just not in the coastal cities, but you’ve got a whole central valley. I mean, I’m from Bakersfield, I just looked. The median sale price in Bakersfield was 358,000, right? That’s an hour drive from LA. You look at places like Valencia, which is just 30 minutes outside of LA, there’s tons of people living in Valencia, and commuting into LA. That place is growing, and stretching, and you can get a home much more affordably there. You can also look down, you’ve got Fresno and then all the way up into Northern California, Stockton, Sacramento. There’s lots of places where you can find more affordable housing in California, and take advantage of some of these things James was talking about.

Dave:
Yeah. That’s definitely true. If you look at, there’s… It is true that California as a whole has lost some population. But again, if you dig into some of the regional markets, some of the places in Northern California, and Eastern California, definitely are seeing relatively large increases in population, so similar to a lot of places maybe in the Northeast, a lot of the outflows are from the major metro areas, and are to some of these secondary or tertiary cities that are a bit more affordable.

Dave:
James, I want to get back to what you’re saying just about the West coast, in general, that you think it’s going to bounce back, because that’s a pretty significant thing, if that happens. I wanted to bolster what you said there, based on something Henry and I heard yesterday, or the other day when we talked to Lance Lambert, where he was saying that he felt that the West coast is being generalized together, but he believes that there are certain markets that are in a true correction crash, but markets like Seattle, LA, San Francisco are not them. It’s like Boise, maybe Austin, I think you said Phoenix as well, are the ones that really had this boom-bust cycle, where he was predicting that some of the markets on the West Coast, on the actual coast that are more used to really high prices are going to bounce back quicker, because it’s not as different from the fundamentals of the last five to 10 years, as Boise, and Austin, which have just become completely different places, basically.

James:
I tend to agree with them, and just following these trends in feeling the market activity, obviously. Well, I spent my time in SoCal, in Seattle. Both markets are ripping right now, where they settled down for a minute, and now they’re coming back, and they’re falling. I do think they’re on a comeback. If you look at the median home pricing too, from January one, across all these cities, to now, the median home price of the sales in January, if we’re looking in, they’re all five to 10% lower than in January. Their trending up days on markets are coming down, and so those are the trends we want to follow. Where’s the activity, where’s the movement, and then where’s the bodies? In our showings, we’re seeing massive amounts of people coming through again, 10, 20 people.

James:
Now, they’re not fast to jump in, but the bodies are there. If the bodies are there, consumptions are down. Also, the amount of sales are down 40%, but that’s because inventory is down so much as well. All these things are turning into this mix. The money’s still on the West Coast. People are going to buy it, and it is making its little comeback right now, where I’m feeling it.

Dave:
All right. You heard it here first. I’m with you.

Kathy:
I’ll just follow up with what James just said. Gosh, people just, so many people are sitting on the sidelines. I just want to let you know that coming back from Texas, and looking at the acquisitions we’re doing there that are 30, 40, sometimes even 50% discounts from the prices that they were just a year ago, because these are distressed deals, obviously. These are not deals that a homeowner would buy. They’re what an investor would buy, and the investor competition is not there, because we’re coming in with cash. But I don’t think it’s going to last much longer, so I can’t emphasize enough, don’t wait, don’t wait. There’s the opportunities are there. It makes me sad for people that keep waiting, thinking there’s going to be some massive crash coming.

Dave:
Yeah. All right. Well, thank you all, James, Kathy, and Henry, for all of your research. Appreciate all of your insights, and the time you’ve spent helping to educate our listeners about what is truly going on in the housing market. If anyone has questions about the region you studied or anything at all, where can they connect with you? Henry, let’s start with you.

Henry:
Yeah. Best place to find me is on Instagram. I’m @thehenrywashington on Instagram.

Dave:
James?

James:
You can find me on Instagram, @jdainflips, or jamesdainer.com.

Dave:
Kathy?

Kathy:
Instagram as well, @kathyfettke. That’s a way to get through all the layers. If you go to realwealth.com, there’s a whole bunch of people answering things for me, but you could get me directly on Instagram.

Dave:
Nice. I am @thedatadeli on Instagram. Thank you, three, so much. Thank you all for listening. We really appreciate it. We’ll see you next time for On The Market.

Dave:
On The Market is created by me, Dave Meyer, and Kaylin Bennett, produced by Kaylin Bennett, editing by Joel Esparza and Onyx Media, researched by Pooja Jindal. A big thanks to the entire BiggerPockets team. The content on the show, On The Market, are opinions only. All listeners should independently verify data points, opinions, and investment strategies.