Rate Cuts Back on the Table as Inflation, Housing, and Job Market Cool Off

Dave:

Well, the Fed finally cut rates this year is now actually a good time to invest due to less competition in the housing market. We’ll cover this and more on today’s episode.

Hey everyone, and welcome to On The Market. I’m your host, Dave Meyer, and with me today’s the whole crew. We got Kathy, Henry, and James, which means we have a headline show for you. This is the format where we bring you four headlines from the news cycle and discuss how investors should be using this information to make better investing decisions. In today’s headline show, we’re gonna cover first what is going on with the Fed and if we’re ever going to see rate cuts or a reduction in inflation. Next, we’ll talk about competition and inventory in the current housing market, and if this is a good time for investors or the average home buyer to snag a deal. Third, we’ll talk about how a record number of Americans have no mortgages at all and are buying cash even in this market. And lastly, will cover a surprising housing market metric that is seeing an increase in activity month over month. But before we get into any of this, Kathy and James, can we please give Henry A. Little round of applause really quickly because Henry’s book real estate deal maker just came out. Henry, congrats man. We’re super proud of you.

Kathy:

Yeah, best headline of the day. <laugh>, thank you very

Dave:

Much. I was hoping that instead of a headline show, we could just sit here and you could read some excerpts from the book for us. And we’ll just, Kathy, James and I could just shut up the whole time.

Henry:

Everyone gather around as we go over chapter one, <laugh>. Thank you so much guys. I appreciate it. I’m super excited.

Kathy:

Oh man, I can’t keep that book in stock. I have it out on my counter. People come by, they grab it. I gotta order another one, so I just need to get a whole box of ’em. It’s such a good book, Henry, really, really great. Thank you.

Dave:

Well, you can find more information about the book and purchase it on BiggerPockets, but as Kathy said, and I can attest to, and I’m sure James would too, excellent book, amazing topic, super relevant for today’s investing climate. So definitely go check that out. Congrats again, Henry. And with that, let’s jump into our first headline.

Our first headline today reads The Fed meeting may Temper Mortgage Rate Relief brought by the Morning’s Cooler than Expected Inflation Data. That headline comes from Redfin, and if it doesn’t really make sense, let me just explain it quickly to you because it’s basically a reflection of a very big economic Newsday that happened on June 12th. First in the morning, inflation data was announced and inflation came in a bit cooler than expected. It’s not like it went down a lot, it was relatively flat except the core CPI, which excludes food and energy costs went down to its lowest level since 2021. So still, it is still higher than the Fed wants it to be, which is at 2%, it’s about 3.5%. But this was a positive trend in inflation data. And then later in the afternoon, the Fed announced their interest rate decision for June, which was to keep rates the same, but at the same time, they released something called the Summary of economic projections, which shows what they think is going to happen in the near future. And that revealed that the Fed expects to cut rates this year still, but down to just 0.25% just one rate cut coming in 2024 with further rate cuts in 2025. So that is what this headline was talking about. So let’s jump into this. Kathy, I know you are as equally weird as I am and look at this fed stuff all the time. Were you surprised by this?

Kathy:

Uh, you know what, <laugh>, I just will be surprised when the Fed is not making headlines. <laugh>, I really look forward to that day.

Dave:

Oh, you and me both

Kathy:

<laugh>. Uh, so it was great news to see that inflation is slowing. It was great news to see that job growth is slowing, which, uh, came out the week before. Um, these are all signs that would lead to the Fed eventually cutting rates. We already have seen the European unions or the u European Central banks cutting rates. Uh, the us you know, usually, usually these central banks need to be in step with each other. Uh, so there’s a lot of pressure on the Fed now. Like, Hey, look, the data’s there, it’s time to cut. The Europeans are cutting their rates, uh, when, when are you gonna do it? And it sounds like they still wanna see a little bit more job loss. I, I hate to say that, but it sounds like they wanna see unemployment increase a little bit more to about 4.1% terrible news for people that might lose their jobs, but they, they seem to think that would be the thing that brings inflation back down and will get them confident. So, ah, good news, bad news. I, I don’t know. What is good is that the 10 year treasury did come down a little bit based on the inflation coming down, and hopefully that translates into lower mortgages.

Dave:

Yeah, that is good. It was at about 4.4, 4.5%. The yield on the 10 year treasury, it’s down to I think about 4.2. We are recording this on the 18th of June. So, uh, that is a positive sign. It should offer some modest rate relief. And frankly, I, I’m with you Kathy. I I’m not really surprised here. I thought when people were betting that the Fed was gonna cut rates six times in 2024 was very ambitious. Uh, and the reality is that they’re gonna keep changing this. Like they’re, they’re telling you what they’re thinking today, but as rates change, as inflation changes, the labor market changes, they’re gonna keep updating this. So I wouldn’t hold my breath that what they say that they’re gonna do right now is what’s going to happen a few months down the road. James, does this just mean business as usual for you? Because although we don’t know exactly what’s gonna happen, it does seem a little bit more clear about what’s going on. Like one cut, two cuts. We’re, we’re now like, at least narrowing the band of possible outcomes. Does this make it easier for you to run your business?

James:

Uh, not really. <laugh>,

We, we won’t,

We won’t increase rates drastically. They do it the most drastic increase we’ve ever seen, or they’re predicting six rate cuts and now there’s one. So I mean, the good news is, is now they’re predicting one rate cut. Does that really mean six

Dave:

<laugh>? Is this some like reverse psychology opposite day kind of thing going on?

James:

Well, it seems to be the opposite goes each time. Um, you know, we do pay attention to this. It is business as normal and it really comes down to our core underwriting when we’re looking at information like this. Um, at the beginning of the year when we heard six rate cuts, and I didn’t think six rate cuts were gonna happen, but I thought maybe three towards the end of the year, it was about how are we buying our deals? What do we think? Like how much margin are we expecting? And you know, the better the economy and the better, you know, the lower the rates, the better for the housing market. And if we think that’s coming, we’re gonna underwrite deals a little bit differently, um, on the short term because it, it’s if we think we’re gonna time it right, timing is everything. Um, and you can really do well.

And so we do pay attention to it, but that’s just also building that into your performa. You shouldn’t buy that way. It’s just, it, it, it, it adjusts our tolerance for risk. Um, you know, it’s no matter what, it’s a risky endeavor. But if we’re flipping a house and we think rates are gonna be lower by the time we go to sell it, I might buy that deal a little thinner margin. Um, but all this data, it’s all the same to me. It’s, it, there’s been no consistent information and no one has hit it, right. Every forecast is always wrong. Um, I will say I don’t think it’s a bad thing that they’re only cutting rates maybe one time and it might go to zero times because we’ve seen this massive rate increase and the real estate market really didn’t do a whole lot. It did, you know, in the short term for six months it came down and now we’ve leveled back up or the median home price is even higher. So I’m just not too concerned. Um, and I think if they do start doing six rate cuts, we’ve probably got problems in other areas that are gonna cause issues anyways.

Dave:

Yeah, like we always say, you know, you get rate cuts that comes with a bad economy. So, uh, there, there, there’s definitely a trade off there. We’ve hit our first headline, but we have three more after this quick break while we’re away, make sure to hit that follow button on your favorite podcast listening app so you never miss an episode of On the Market.

Welcome back to On The Market. Let’s get into our second headline, which is that competition and the housing market is cooling off. Here’s why this comes from CNBC and the key points you need to know are that this article, and they are pulling data, Zillow shows that new listings, that’s the amount of homes that are actually put up for sale in a given period, jumped 13% year over year in May. And the total inventory overall homes on the market rose 22% year over year. This is happening, this increase in supply is happening at the same time when buyers are shying away from the market a little bit as interest rates stay high and they’re not coming into the market at the same rate to match that increased supply. And so what we see is a less competitive market, and you can measure that in a bunch of ways. But one of the ways this article does is that 62% of homes listed on the market in May had been for sale at least 30 days without going under contract. So that is pretty interesting. That means a lot more homes are sitting on the market. So Kathy, let’s throw this to you. Does this concern you? Do you think there’s gonna be price declines? Do you see this as an opportunity or what’s your read?

Kathy:

Well, there are some areas that are seeing price declines, uh, in the areas that we’re investing in. We’re not seeing that, but it, we’re seeing unusual activity. That’s hard for me to explain. Like, I’m here in Utah right now at our development and we’re having more activity than we’ve had in like four years. Really? Oh my gosh. We’re selling homes like every week. So I, I thought that we were gonna be in this project a lot longer, but, and these are high priced homes. They start at 2 million and which is low for Park City, but high, you know, they’re expensive. So, uh, and they’re not cash buyers. I thought, you know, a lot of Park City buyers are all cash ’cause they’re rich, but our neighborhood is the more affordable one here and it’s, it’s selling. So I can’t explain that. Um, I, in Malibu it’s the opposite. It’s, there’s a lot on the market and things aren’t selling unless you are Beyonce or like the tech industry is moving there. They’re, they’re spending a hundred million dollars on homes. I don’t think they care about price. Uh, but in, in the markets our cash flow markets, um, we’re also seeing an enormous amount of activity investors flocking in. So at least in my world, it seems to be a positive, maybe because there’s more choice, more inventory. Uh, I can’t explain it.

Dave:

It is weird because you would think that there would be some consistency, at least across price levels like, you know, luxury, you know, that luxury would be the same or that, but it really seems to be different tiers and different markets are, are performing completely differently. James, what are you seeing in Seattle?

James:

You know, in Seattle we’re, we definitely seen a a, a cool down, but that doesn’t mean things aren’t selling. Um, you know, at the beginning of the year we saw this kind of hot market like 2022 hot where people were just flying back in the door. I think it was based on that information that the Fed said they could cut rates six times. People were just trying to get secured in a house and that it’s more, they were thinking that housing prices was gonna explode towards the end of the year they wanted to get in now. And I think a lot of this is really just mental with the buyers. It’s, it’s really, it doesn’t have to do a lot with facts and uh, and interest rates right now. ’cause the rates haven’t changed that much in the last six months, but the amount of buyers and what they’re doing fluctuates hot and cold rapidly.

Um, even with this, this report coming out with the Fed, that could actually bring more buyers into the market from what we’re seeing on the trends. Um, but I think a lot of this is just kind of hyped. They’re hyped headlines. Like if you look at days on market, what they’re saying is, Hey, things are taking a lot longer to sell. Things are increasing. But if you look at 2021 average days on market, were 37 days in a really healthy market, 37 days. Today’s market we’re at 47, 2024 rates way higher than they were before. And so things, they’re taking the same amount of time to sell, it’s just the stuff that isn’t selling is way overpriced or people are really pushing the price. Like in Newport Beach, I’m seeing things sit, but they’re also hitting record sales numbers. These are not the, these are much higher than they were in 2021.

We’re seeing homes that we’re trading at $1,600 a foot, which is a lot of money, now they’re at 2000 a foot. And that’s a huge increase. And what we’re seeing is there’s kind of no man lands in the gaps when we’re selling. You know, like if it’s affordable, close to the median home price, things seems to transact fairly well. If it’s very expensive, they seem to transact very well because there’s a lot of cash. People are paying cash for those. It’s kind of that middle market. You know, like I was looking in Newport the other day, this is gonna sound big, but it’s like no man’s land, 6 million to 8 million

Dave:

<laugh>. That’s no man’s

James:

Land. That’s no man’s land.

Dave:

I would love to be stuck in that no man’s land

James:

<laugh>, but if you’re three to 5 million sells quick. And then if you’re like 10 to 15 million with some novelty sells quick. And so it’s really about whatever market you’re in and going where is no man’s land and it what is not transacting? And that’s really that kind of medium, high price point where people are still financing. And when you’re financing on a couple million dollars or a couple hundred thousand dollars more, it makes a much more bigger impact to your monthly hit. And and that’s really the data. I don’t really, I’m not too worried about the headlines and the days on market. I’m going, okay, what product am I looking at buying and what is moving and not moving? And there’s a, there’s a sweet spot in every market. And you know, I think right now, yes, things are taking a little bit longer. We’re going into a summer market, which is always slower, at least in the Pacific Northwest.

I did notice it came about a month earlier than it typically would. Usually we start seeing it slow down end of June. We saw it slowing down at the end of May. And so, um, it’s just a little bit different. But every year’s always a little bit different. And I think it’s right now a good time to buy deals. We bought more deals this last month than we bought in any other month this year because as it slows down, investors kinda get a little spooked out. Buyers are a little bit on the fence right now. So it gives you a really good opportunity to get deeper discounts.

Dave:

All right. So Henry, tell us what you think are, are you concerned that this trend of rising inventory is going to increase to the point where we might see more sellers than buyers the first time in whom knows how long?

Henry:

No, I was looking at the data for my local market on this. And what we are seeing is that yes, there is a slight uptick in homes going on the market, but our buyers pool has remained steady. And our days on market is below what we would need far below what we would need for it to be considered more of a buyer’s market. Um, and so if you look at, when we dig into the homes that are selling, what we’re seeing is that sellers still have this, I don’t know if it’s like this post pandemic, I want to get as much money as possible, like for my home thing. But when the homes that are priced aggressively and done well, they’re multiple offers. And under contract within 30 days, the ones that are taking longer to get under contract are properties that were priced a little more aggressively.

Even if they’re done well, if they’re priced more aggressively, they sit longer. And then what you start to see is the, uh, the price drop comes in and they do one or two price drops and then they go under contract. So the homes are still selling, but people are just, they’re aggressively listing their homes still. And those are the ones that are starting to sit. And we’re looking at this because what I wanna know is when I’m underwriting my deals, how conservative do I need to be so that I can list my home so I can list my home not aggressively. So I can list it, uh, as not the top price per square foot in the neighborhood that I’m selling that home in, so that I can set myself apart and make and take advantage of the few buyers that are out there. And if there’s less buyers, I want my home to a, b super desirable and b, be priced less than maybe some of the competition. Because if I have better finishes, better quality, and a lower price, it increases the eyeballs I give on the property. And so we track these things, but none of this is alarming to me. Like to, to me this seems healthy.

Dave:

I think it’s worth mentioning that this is Zillow data and a few days, I think after this headline and this story actually came out, they released a new forecast and they are now predicting that nationwide home prices will drop 1.2% from May, uh, 2024 to May of 2025. And I know everyone likes to hate on Zillow, but they were actually probably the best forecast last year. They were very close in 2023. And so I think it’s worth noting that they are at least expecting the trend to continue that new listing supply is gonna increase. Buyers are not gonna come back into the market in a commensurate level. And we might see, I mean, let’s be honest, 1.2%, I don’t know if you even call that a correction, but I’d say a flattening of home prices from where they were expected to be. But that’s kind of what I was expecting at least over the next year or so. Is something flat. Kathy, were you expecting something different or more growth?

Kathy:

Just depends on the market. Yeah, I mean, uh, with our San Antonio market and our teams there, we’re just seeing prices go up. There’s a lot of reshoring happening in that in the Midwest and uh, and it’s busy, busy, lots of job growth. So we’re actually seeing prices go up. ’cause even in Texas, they can’t build fast enough to keep up with demand.

Dave:

I’m surprised by that. ’cause I actually saw that, uh, in the Zillow forecast at least. I think the biggest declines were in Louisiana, but then followed by Texas. Um, but I guess it’s, you know, Texas is so big that even within a state, there’s obviously a lot of differences between metros.

Kathy:

Yeah, and Florida was on that list too. And we know that Florida is growing, so it’s, it’s, it is confusing. But I would say it’s just little pockets. It’s pockets where, uh, maybe prices went up too fast and people paid too much and now they’re coming down or there’s job loss in that particular area. But overall, there’s definitely areas in both Texas and Florida where prices are going up.

Dave:

For sure. And you know, one thing is for me as a long term, more buy and hold type investor, a flat market sounds fine to me. You know, like if, if it’s flat because there’s more options of different things to buy, that actually sounds like a great opportunity because I’m not counting on prices going up in six months or 12 months like a flipper might. James, would that change your calculations about, you know, how you go about underwriting or flipping? If if in fact the market is gonna stay flat for 12 months or two years?

James:

No. ’cause we buy on as a flipper or just any investor, doesn’t matter if it’s flipping rental. Uh, you know, we buy on cash, on cash returns in anticipations of those. And we use today’s data. And if we don’t ever factor in appreciation, we don’t speculate on our deals, it’s, we’re using the, the, the math today. And if we think that the market could rescind back a little bit, then we just get a little bit wider margin on it. You know, when rates shot up, we were expecting to try to get 16 to 17% return deals on our flips. When the market started doing better, we dropped it down to 14 to 15%. And so you just move around your target. But we always buy on today’s data. And as long as you do that and you just increase your, your margins and decrease ’em in the right markets, you can always stay a buyer. And honestly, I think Zillow’s probably a little wrong. 1.2 might not be big enough. ’cause we saw a huge run up in May on pricing. Oh, don’t

Dave:

Worry, James, they’re, they’re forecasting a bigger decline in Seattle <laugh>, are they? It was more like three or 4% in Seattle.

James:

We timed our deal just right. Uh, but yeah, I I could see it being down 5% may, uh, year over year. Yeah. In Seattle. It, it really could be there. Um, and again, if you think that as an investor get a bigger margin,

Henry:

Absolutely all this is just information to help you make a more informed decision. James is right, we’re, we’re using today’s data. I’m really looking at what’s happened in the past 60 to 90 days and then forecasting my sale price based on that. Because I never want to speculate that I’m gonna get a higher sale price in 20 20, 20 21. We would co we could use the comps at the high end of the spectrum and we would still be low, but now we’re using comps at the mid to almost the low end of the spectrum and that informs our offer. And so, and it’s still, we’re still getting deals. It slowed down for a while because it took the market a little bit of time to figure out that their home wasn’t worth as much as it was a couple of years ago. But now we’re starting to get deals with those increased margins. And so if prices go up, amazing icing on the cake, but we’re never gonna, never gonna forecast based on the top of the market right now.

Dave:

Wise words were never wiser. Words are never spoken. <laugh>, <laugh>, whatever that saying is, you get it. I agree with you, Henry.

Henry:

I’m smart. I get it. Thanks. Yeah, yeah,

Dave:

Perfect wise, very wise. All right. For a third headline, it reads a record number of homeowners have no mortgage. Here’s how it’s shifting the housing market. The key point here is that 38.5% of homeowners right now don’t have a mortgage at all. And just for reference, that’s up a pretty considerable about about 20% since 2010. In 2010 it was at 32%. Now it’s up to 38%. It’s just been steadily climbing. And just so everyone knows, it’s been steadily climbing even before the pandemic. It’s sort of been this like slow linear progress over the last couple of years. But I think one of the interesting dynamics is this isn’t necessarily just from people paying off their mortgages. In fact, in Q4 of 20 23, 33 0.5% of home purchases were made in all cash. James, I think you do this right. So sometimes, first of all, what do you make of this? Do you think that this is a trend that, you know, people are more, people are actually buying and holding in cash? Or are they buying in cash and then just quickly refinancing and just using the cash to basically get, you know, compel the seller because it’s a better offer?

James:

Well, I think it’s a mixture of both. You have some people downsizing and moving outta state when you got these California reload buyers moving out and they’re selling their homes for 10 million and buying in three, four or even less in other states. They’re, they, they could be cash. Um, but I think a lot of it isn’t cash. It’s either hard money or, um, and they’re considering that cash. Like when I write a hard money loan, it’s cash. Mm. Because everything’s waived. We have no conditions and we write that up as cash saying, uh, but we are subject to, to recording a deed of trust. Um, what I have seen a lot, especially in these upper echelon markets, is they come in as cash, but is really disconnected with private banking where they have a lot of assets, stocks with these private banks because they have so much assets with these, these wealth managers that those companies are just issuing them cash to close these deals and it’s wired over, but then they end up refinancing it into a, a permanent mortgage.

And so it’s really just the term of the deal. Um, but at the end of the day, the financing still is, is put in place because, you know, most people are savvy enough. You know, I think it’s a good thing to pay off your debt. I really do. Uh, especially on, you know, I, I like to keep my personal debt fairly low. My business debt’s a lot higher ’cause I use that to make money. But everyone knows if you can borrow money even at today’s rates and you can make a higher return, that’s a smart spread and that that’s what it’s about. Growth you can’t fall behind. And, and so I would say most people are paying cash, but then they refi out or they got this private, this private banking. It’s crazy. I’m like, oh, they’re, how’s someone writing an offer for 10 million cash? Well, they have 50 million in stocks and they’re just getting issued cash.

Dave:

Yeah, I just, I just wanna take a minute to explain that. Uh, a lot of financial institutions, like if you were to put your money at Charles Schwab or Ameritrade or, or some one of these things you can borrow against your equities portfolio and usually you can get a quarter of it or a third of it. So like James said, if you had $30 million, like if you’re ultra wealthy and you had $30 million of stock, that financial institution will probably give you essentially it’s kind of like a heloc like a line of credit on that, uh, uh, on that equity. Uh, and so you could take that out, use it to buy cash, because as we all know, or if you’re not familiar sellers in the housing market, really like when you offering cash, because it takes a lot of the risk out for them when you’re a seller, the risks are that the buyer’s gonna pull out because there’s some issue with financing. And so when you offer cash, there is less things for them to worry about. And so that’s what we’re talking about, just so everyone knows just that people are offering cash and then just coming in after they own it and refinancing it later. At least that’s what I think people are doing. I don’t expect that people are holding onto cash, but maybe I’m wrong here. Kathy or, or Henry, do you have any insights on that?

Kathy:

Yeah, I, I just wanna say it’s demographics baby. You know, look at, um, the baby boomers are the second largest generation now millennials are the largest, but we still have to pay attention to the baby boomers and they’re age 60 to 80. Now most people know that, you know, first time home buyer age is 31, 32 on a 30 year fixed rate mortgage, you’re around 60, 65. That’s when you retire. And hopefully, hopefully you haven’t refied cash out and so forth that a lot of people have paid off their home, just like many financial planners have told them to do. Um, they’re not investors like us who maybe wanna use that capital and, and get equity lines and go invest. So they are at retirement age, they’ve paid off their their homes and they can, they’re not in any rush to, you know, sell. So they could put it on the market if that property sells, they can go buy another one all cash or take an equity line out on the property they paid for and, and go buy a vacation property. The, the baby boomers, I believe it’s around, they own about 50% of the wealth or they have about 50% of the wealth in in America. They’ve made a lot of money in stocks, like you guys said. So there’s cash out there. Gotta hug a baby boomer ’cause they’re also going to, uh, you know, there’s gonna be a lot of inheritance <laugh> coming.

Dave:

Yeah, I think it’s important to note, like based on what Kathy was saying and what James I was saying with the private banking that the stock market right now is at all time highs. I know like it’s, there’s obviously challenges in the economy, but it keeps setting new highs day after day. So we did see, I do, i i I don’t know the exact mathematical, but I think eyeballing it, you see a correlation between the stock market and how much of this kind of activity goes on in the housing market when people are feeling flush and they can borrow against their portfolios, the luxury market tends to do pretty well. Now Henry, I want to switch gears a little bit here and just talk about like how this fact that, you know, according to the census, 38.5% of people who own their homes don’t have a mortgage. And so I think that this stat is actually reflective of a lot of people just paying off their mortgage and then sitting it in, homeowners are staying in their homes longer. So maybe that’s why this is going up. But I’m curious how you think this impacts the housing market in general and, and available inventory if all these people are sitting on probably pretty valuable homes but not having to make any payments on it.

Henry:

Yeah, so I I I guess that depends on where it’s coming from. So I agree with both of you. That was actually gonna be my point is I think that this is a mixture of the silver tsunami because if you think of that generation, that generation was more about stability. They worked at one, maybe two companies for their entire careers. They live in the same, my, I think of my dad. My dad still lives in the same house I grew up in. The thing is paid off, right? He ain’t going nowhere. My, you know, my sister and I are gonna inherit it. Um, and so like there’s a, that’s just a generational thing. Younger generations aren’t into the same things. They will move multiple times. They will mo work at multiple companies. Um, and so I, I think this is a, a mixture of that and a mixture of the younger generation having access to more information.

There are more people investing at younger ages. So because the information’s more readily available to them and that is creating the situation where people are getting smart about how they’re buying homes and they’re being able to purchase homes and it gets, it looks like it’s being purchased through cash. But I think those numbers are skewed because like you guys said, people are either buying cash and refinancing or they’re using some other type of financing that is getting recorded as cash, right? And so I think this creates a scenario how I think it impacts the housing market is for people like my father, right? So if you’ve got a baby boomer parent who passes away and the younger siblings inherit that property, if there’s multiple siblings, my guess is that property gets listed and goes on the market. I actually think it might increase inventory because one of two things is either gonna happen, either one of those siblings is gonna move into it and live in it because they get to live in a place rent free or they’re gonna list it and split that money amongst the rest of the family. And so I think that if it’s due to mortgages being paid off, it’s gonna probably be sold and settle the estate of the kids who inherit that property, which could have an impact on increasing the inventory in the market.

Dave:

That’s a great point. Thank you Henry and I, and a great anecdote. I feel like a lot of people are experiencing what you and your family are gonna be going through and it’s, you know, they keep calling it the silver tsunami, who knows what’s gonna happen. But it’s definitely gonna create some interesting dynamics for us to talk about on the show over the next couple of years. We do have to take one more quick break, but we have our final headline about foreclosure activity after this. Stick with us.

Welcome back to the show. Let’s move on to our fourth and final headline, which is about foreclosures. This comes from Adam Data. They’re a very good and reputable source for foreclosure data. And they say US foreclosure activities sees a monthly increase in May, 2024. Just for some context, when you look at the grand scheme of foreclosures, yes they are going up, they’re up 3% month over month, but they’re actually down 7% year over year. And there are big regional differences. States like New Jersey, Illinois and Delaware are seeing the highest foreclosure rates. Meanwhile, other states are less so, but in total, lenders repossessed only about 2,900 US properties through completed foreclosures in May of 2024. And that was down as well. So when you look at foreclosure data, it’s kind of a mixed bag, right? Like some elements of foreclosure, like foreclosure filings are up a little bit month over month, but completed, foreclosures are down. But overall, I think the, the trend here is pretty clear. Things are coming back from the artificially low levels of the pandemic, but they’re nowhere near where they were, uh, even pre pandemic and they’re about one ninth of where they were after the great recession. So I don’t know about you guys, Henry, do you even think about buying foreclosures? Is this even on your radar? I know you look at a lot of deal finding strategies. Is this one of ’em? Yeah,

Henry:

No, I don’t look at foreclosures or pre foreclosures as a, as a strategy to buy properties. Mainly because it’s very oversaturated. Everybody who’s new in the market thinks that they’re gonna go and find a foreclosure at a cheap price and and buy it. And so you get a lot of eyeballs on it and they get to bidden those prices up. Plus you have to be very liquid or have access to capital and you gotta be able to move fast. ’cause sometimes you don’t have much time before a property starts to go into foreclosure and there’s a bunch of additional fees because lawyers are involved. And so it’s just not my favorite type of deal to go after because there’s other deals where you can be a little more strategic, take your time and get a good price as well.

James:

I got one stat that I think’s interesting. Commercial foreclosures, it has a 97% increase. Oh, whereas residential’s been relatively low around it was 3% increase. Yep.

Dave:

Yeah.

James:

So I think it’s a important thing to, it’s hard to get that data, but I found a little bit of it last night,

Dave:

Man. Coming in hot with the good statistics, James. Yeah, that is a very good, good point. Uh, maybe we have to do a whole other topic about this in a future, uh, show because that is super interesting and I don’t have any information to share with you about it, <laugh>. So I thank you for bringing that to attention. Listeners, stay tuned for a future episode where we’ll give you more information about it. <laugh>,

Kathy:

It’s it’s, uh, adjustable rate versus fixed rate. You know? That’s that’s fair. That’s

Dave:

What it is. That’s exactly right.

James:

It’s that investor greed. They got too greedy and then money’s too expensive. Drown the deal.

Dave:

Alright, well, James, Henry, Kathy, thank you so much for joining us today and thank you all so much for listening to this episode of On the Market for BiggerPockets. I’m Dave Meyer and I’ll see you all soon for another episode On The Market was created by me, Dave Meyer and Kaylin Bennett. The show is produced by Kaylin Bennett, with editing by Exodus Media. Copywriting is by Calico content and we wanna extend a big thank you to everyone at BiggerPockets for making this show possible.