Buyers Return as Lower Rates Hold, Trump Trades Federal Land for BIG Housing Bet

Dave:
Today we’re diving into the housing market headlines that are dominating the news. I’m your host, Dave Meyer, and I’m joined by our expert panelists, Kathy Fettke, Henry Washington and James Dainard today. And together we are bringing our hot takes on key headlines, including utilizing federal lands for housing development and the steadily lowering rates that we’re seeing. These are the headlines making the biggest impact on the market today, and we have a couple others to share with you as well. Welcome to On the Market. All right, Henry, you have the honor or perhaps punishment of going first. So tell us what news story you’re bringing here.

Henry:
Well, yeah man, I went with the click bait, so earlier in the week, and this article comes from Newsweek. I’d heard that President Trump had a plan for addressing the housing shortage and affordable housing, and that plan would be to utilize federal lands for housing development. Basically, the administration has launched a task force and that task force is led by the Department of Interior and the Department of Housing and Urban Development, the department to identify underutilized federal lands that would be suitable for residential development. So taking a look at land that the federal government owns and seeing if they can develop housing in those lands. The strategy would go for locating, identifying the land, and then to partner with the government developers, nonprofits, construction companies, and apparently anybody else who would want to get on board to build housing on these lands. And some of the options they would look at would be either selling or leasing or transferring that land over to the parties that they partner with, with the goal of expediting the availability of affordable housing.
I’m saying all those terms because us people who have been in the real estate business know that it’s very difficult to expedite permits and approvals and building and why This is interesting to me, political beliefs aside, back when we had an episode where we talked about what we could do to address affordable housing, one of the things that I brought up at that time was to say that if this problem is to get solved, it’s going to take the federal government working with the local governments, working with home builders and real estate investors. All of those parties need to be able to work together. They all have to offer something to each other in order for this to get addressed properly. I believe builders have to be incentivized to build affordable housing. That’s why they don’t build it because it’s not as profitable. It’s building something a class, but if there is a way for them to be profitable either by making profits on those or by getting the land free so that there is more profits on the backend or by tax benefits for building in these areas and this is a viable solution, it sounds like that’s what would happen in this scenario, but we all know it’s not always going to be that cut and dry, but that’s kind of what made me look into it.
Yeah, some of the positive impacts could be that you do get an increased housing supply, you get economic growth in those areas because you’re going to have tons of new jobs coming with the new construction, plus a lot of these government lands are in not as densely populated areas, and so you won’t be able to just build housing. You’ll have to build other infrastructure and amenities that people need, which would also bring more jobs. Plus it could reduce the cost of housing because more supply should impact the cost of housing. Right now,

Kathy:
I love the idea, the practicality of it is a whole nother thing, and one of the lines in this article says the federal government owns about 640 million acres of land, so that would create a lot of housing.

New Speaker:
But

Kathy:
Then it says, much of which is not suitable for housing

New Speaker:
Due

Kathy:
To environmental regulations, the nature of the terrain and other restrictions. I’m born and raised in the San Francisco Bay area and everybody knows it’s one of the most expensive places in the country, but a lot of people don’t know that just an hour away, there’s nothing but land.

New Speaker:
There

Kathy:
Is so much land surrounding the San Francisco Bay area. Why on earth is it not developed? No one wants to live out there. I mean, even Stockton, California is just outside of San Jose, one of the most expensive, most populated areas that you can’t get people to move out there because it’s an hour commute and there isn’t transportation. So I agree with what you said, Henry, unless you put a whole city there and there’s jobs and there’s schools and there’s infrastructure and there’s things for people to do, ain’t no one going to do it. We’re trying to actually do that. There’s a group of developers trying to develop this vast land between Sacramento and San Francisco.

Dave:
I heard about that. Yeah. That’s like a tech paradise they’re trying to build, right? Yeah.

Kathy:
They can’t do it. They cannot get it done. Granted, it’s California

New Speaker:
And they have a lot of money

Kathy:
And they have a lot of money,

Dave:
A lot of money behind it. Yeah.

Henry:
It’s interesting that you say that though because when you dig deeper into this plan outside of just this article, part of the plan is to establish what they are calling Freedom Cities. They would develop up to 10 new cities termed Freedom Cities on these undeveloped federal lands, and it would look to transform those areas into thriving communities. So it’s Its in the plan. So it’s basically done, right?

Kathy:
Oh, it only takes 30 or 40 years, so that’s perfect.

James:
And that’s the problem. To build a city, there’s so much infrastructure that has to go in and they have to go through so much bureaucracy, the environmental, everything that it just takes forever. Those things are great, but they’re not a solution to what we’re trying to solve right now, which is more affordable housing. And there’s some land you should never build on and it doesn’t matter even if you get it for free. I mean, I will say we got a lot one time for $15,000, and this is in a great neighborhood of Seattle. It was in Beacon Hill, these are view lots. We had views and we built three single family houses on this lot and we ended up making about $32,000 on all three houses total.

New Speaker:
The

James:
Combined sale on that site was about 2.8 to 2.9 million. And you still barely

Dave:
Made

James:
Money. We barely made the real estate commissions were higher than the profit. And that’s the problem with this stuff. They throw mud at the walls. This sounds like a good idea, but there’s no logic and hopefully they get people in there that really understand building and how do you systemize it? And I think the real solution is they have to almost make a government building department or something where the margins are fixed. You’re going to build this house for this cost and you know exactly what it is and not get the proposal from the builders. Because I remember reading in California too, when they were building those little houses for ADUs for homeless, they were spending $500,000 on these things.

Dave:
800? Yeah, it was like 8 32 or

James:
Something. Yeah,

Dave:
$800,000. These are

James:
Crazy.

Dave:
I mean, my general sense is sort of we live in a capitalist country and capitalist countries tend to be pretty efficient at identifying the places people want to live and work. Commerce is going to be logical. The places that cities have developed are places where there are natural resources and where there are navigable waterways and where there are highways and infrastructure that go through those places. And so it sounds great to build an entirely new city, but you kind of have to wonder why no one’s built their in the many hundreds of years that they’ve had the options to build there. Sort of like Kathy was saying outside San Francisco. So that I think is one thing. The other thing, if you pull up a map of federal land, it is all in the western half of the United States. There’s very, very little of it in some of the more expensive parts in the southeast and in the northeast and in the Midwest, I would venture a guess that over 90% of it is from Colorado West.

Kathy:
Wow,

Dave:
Wow. Yeah. So I don’t know that necessarily makes it bad, but it’s just something to consider as well that it’s not evenly distributed throughout the country. So I think it’s the right idea to start looking into these things. We’ll see if it actually yields anything valuable here. Alright, well great headline Henry, and we will definitely keep covering this. If it does start to take off and they start acting on this, this is going to have huge impact on the real estate industry. So we will definitely be covering this one. Let’s now move on to our second story here today. Kathy, let us know what you’re looking at.

Kathy:
So mine is news that comes out every month, but I wanted to share it. It’s from the National Association of Realtors, their existing home sales, and in February it accelerated 4.2%. So this is good. That means more homes are selling and I think that has a lot to do with interest rates coming down a little bit. I mean even I think at one point it was 6.4%. That’s pretty fabulous considering mortgage rates were in the sevens not too long ago. It just kind of shows how sensitive real estate is to mortgage rates. And as many people have predicted, as soon as rates go down, there will be buyers flocking to the market. A few of the other stats that are interesting, seasonally adjusted annual rate is 4.26 million homes trading, selling. And a lot of people think the housing market stuck, but 4.2 million homes were sold. It’s still 1.2% less than a year ago, but I just wanted to make that point. The median existing home sales price rose 3.8% from February of 2024 to now. So that’s the 20th consecutive month of year over year home price increases. This is

Dave:
Surprising.

Kathy:
Totally. And then inventory of unsold existing homes climbed 5% from the prior month to 1.24 million at the end of February. So that’s about three and a half months supply that’s getting closer to normal, still not where it I guess should be, but that could also be part of why there’s more sales. If there’s more inventory, there’s more to choose from. There’s more of an ability to negotiate. It becomes more of a buyer’s market and buyers are getting smart and going out and taking advantage of that. Lower mortgage rates combined with a little bit more increased inventory if mortgage rates continue to come down. I don’t know that inventories are going to continue to climb, but that has been a theory by some economists that if we can get more inventory on the market, we’re going to have higher sales. And look at that we did. And higher home prices as well.

James:
I’m actually not that surprised by it. It’s like there’s so much pent up buyer demand. We do a lot of listings, so typically we’re listing like 200, 250 homes a year that are all renovated new construction. And so we get to see the bodies coming through. And I can say right now, even with everything going on, the amount of bodies coming through listings and not everyone is writing offers, but I mean things are selling. We’re still selling things for more money for sure. And the investors I am talking to, things are taking longer to sell. There is more inventory, but things are still selling. And most of the people that I’m talking to that can’t get their properties sold, they listed it higher than their performer was just because of recent comps. So they’ve already got appreciation and sometimes they’re listing like 20 grand more on a 200,000 house. Well, that’s a 10% increase that you saw during your renovation on that

New Speaker:
Pricing.

James:
And so it’s kind of looking at the reality of actually what’s going on. But I mean there’s enough buyers, there’s still low enough inventory of good product that people are absorbing it.

Henry:
I just put a house on the market maybe two days ago, and this one we listed at 3 85, so it’s higher than I typically do. And I’d say we’ve probably had 10 showings in the last two days. So there’s people that are out there looking,

Dave:
Damn, that’s pretty encouraging.

Henry:
Yeah,

Kathy:
We have subdivisions in Oregon, in Bozeman, Montana, in the Reno area in Florida, and all of them are, they’re seeing increased sales, increased offers. This is just a notice I got from our project in Florida. It’s huge. It’s been going on for a long time, called the marada 16 net sales for the week. We had 129 net sales in March. So just That’s amazing.

Dave:
So it sounds like we’re seeing Seattle, Arkansas, or all over the country. This is sort of a trend. I’m wondering if this is going to continue or do you guys think it’s just kind of like people are excited because rates dropped and now they’re jumping in and it’ll level out? Or do you think we’ll see some momentum in this direction going forward?

Kathy:
Yes, that combination, lower mortgages, warmer weather and higher wages, not in slightly lower inflation.

James:
I mean it’s the seasons, right? Timing is everything in real estate when you’re selling, it’s always good. Right now, typically July hits a wall in a lot of spots and we’re going to see a slowdown and it should not be a surprise just what happens. And I don’t think it’s going to be as much the economy, it’s just it’s the seasons of slowing. But we listed a house in West Seattle recently, and we listed for 1.5 million and we sold it for 1.7. If you have the right thing, everybody is jumping all over it. And so it’s just, you really got to put it into the plans, price it accordingly and it will sell.

Dave:
Awesome. Well thank you Kathy for bringing us some encouraging news with this story. We do have to take a quick break, but when we come back, James is going to shatter all the good times and tell us about five home types that are expected to plummet in 2025. Hey, stick with us. We’ll be right back. Welcome back to On the Market. I’m here with Henry, Kathy and James talking about news and trends that are shaping our industry so far. We’ve talked about President Trump’s plan to see if they can build new affordable housing on federal land. We’ve talked about a sort of unexpected increase in existing home sales. Now, James, I think you’re going to bring us back down to reality a little bit. I saw the URL, you said around before this recording, tell us what article you want to talk about.

James:
People are starting to get stressed about the stock market. There’s a lot of recession headlines floating around. And then this one had that keyword that got my attention was plummet, was in there. It says five types of homes expected to plummet in 2025, including condos and urban apartments, older suburban homes, certain luxury properties and vacation homes in second homes in cities that have high unemployment. And the reason I really brought this article in is, I’m sorry, this stuff is a joke to me and I have a reason why I am saying that, but it’s like as the stock market comes down, all these things happen. We have tariffs, there’s going to be all sorts of articles like this, and it’s really important for us as investors to stay levelheaded and focus on the data. Not things like this, because I’m looking at this article and they’re going urban and condos. Okay, yes, I know there’s a lot being built, but you know what? There’s a very huge lack of new townhome permits being issued across the nation right now. There’s actually going to be a huge gap in inventory in there. And so I actually think that’s one of the best product to be buying and development right now because there’s going to be lower inventory there.

Henry:
Also, we lack affordable housing. That’s what that

James:
Is. It just doesn’t make sense. Or the older homes, older homes are more affordable and they typically sell for quite a bit under renovated homes, but they don’t plummet in value. I’m not buying homes cheaper and cheaper and cheaper because older we buy ’em based on what they could be restored to or what the mechanicals are. And so it doesn’t have a lot of logic behind it, and I think it’s important for everybody as these headlines come out to really dig into are they trying to get your attention or not?
The things I do think there is opportunities in and what these things can help you get your brain going in is the luxury market and the secondary home market. Those are areas I’m looking at as far as opportunities. I was digging into Lake Tahoe the other day in California and I was looking at some properties that you could buy for $260 a square foot, which is below replacement cost. And these things were built in the nineties and I’m going, okay, there’s good value there and good long-term upside because it’s a place that everyone wants to go. There’s higher rents. You can actually short-term rental it, even though I’m not a short-term rental guy, I might do it up there. And I do think secondary home markets, your Lake Havasu, your lake Tahoes, your ski mountains, those areas, they will have opportunity because the rents keep going up and the cost of mortgage and the cost of rates until they come down. It’s not enjoyable to look at buying a secondary home when you’re putting in your mortgage cap. I’m like, Nope. I’d rather go on a cruise every 60 days.

Kathy:
There’s one thing I do agree with on this article, and it really is just condos in Florida, and that has a lot to do with the, if you guys remember the collapse of that building, I think it was called the Surf side. And since then there’s been a lot of new regulations and that’s really increasing dues and fees for people. So I’d be kind of nervous about owning an older condo in Florida. I think the newer ones are built better.

Dave:
Special assessments. Crazy. Yeah,

Kathy:
They’re crazy. Yeah. Yeah. That’s one thing I just really don’t like in general about either townhomes or condos is a special assessments. You have zero control over that.

James:
No, and I think it’s about just digging into that, for example, luxury market. I do think the luxury market is going to decline.

Dave:
I agree.

James:
I do believe that. And inventory’s up in the United States luxury homes for sale year over year. There’s 15% more inventory right now, which that’s a harder absorption rate. It is expensive,
But also as an investor, that doesn’t mean I’m not going to look at opportunities there and it creates more opportunities even though in my brain I think luxury markets coming down, I’m seeing tons of inventory pop up everywhere. I just gotten contract on the most expensive flip I’ve ever purchased and I’m going to be trying to sell it for $10 million and I feel very confident in my numbers. And so it’s just about breaking it down, what are you trying to do? And then if there is luxury coming down, that’s a good time to maybe get some of that stuff on sale. Wow. When you think something’s going down, look to buy it and don’t look to avoid it.

Dave:
Well, I think these are articles, they just miss the second half of the sentence. It’s like luxury properties, but you need to say the market that you’re talking about, like Kathy said, condos, yes, there are markets where condos prices are going to go down, but you have to say which market because there are other places. If you look in the Northeast, condos are going crazy right now. The values are growing by double digits.

Kathy:
It’s the only thing people can afford.

Dave:
Yeah, exactly. And then I do agree with the luxury home second home thing because that actually, if you look at it as kind of correlated to the stock market, and since the stock market is down right now, a lot of the people who would buy a second home or a luxury home are heavily invested into equities. And so when those things decline or there’s less confidence in the stock market, those pull back. So I agree with that, but as James said, there’s certain markets where it’s going to do great. So I think this James is right, great example to sort of get your head spinning, but don’t just read the headline and draw broad conclusions about what this means for whatever market you’re looking in particular. Alright, we’ve gone through three of our stories. I have one more for you when we come back from this short break. Stay with us.
Hey everyone. Welcome back to On The Market. I’m here with James, Henry and Kathy talking about latest news and trends. We have one more story for you. I’m sure you guys all saw this. Well, Kathy and James, I know as real estate agents, I’m sure you saw this in particular, the news is that Rocket Mortgage is buying Redfin for about $2.4 billion. And I think you guys know I love Redfin because they have a great data center. They put out really good news, but they have been struggling a lot. They’re public companies, so you can go and see that they’ve had trouble turning a profit for several years. So it’s not all together. That surprising to see that Rocket is buying them. James, let’s start with you. As someone who has a brokerage and is an agent, do you think this is just another example of these low cost models that every couple of years everyone talks about these low cost new ways of buying and selling homes and they never seem to work. Is this just another example of it? Are people going to stop trying or do you think it’s still a reasonable idea?

James:
No, I always feel like there’s the low cost and then it doesn’t quite dominate. They thought it would because people actually want to service

New Speaker:
And

James:
Then they go, okay, that’s not quite there. So now what we’re going to do is we’re going to make the superpower team of low cost. Let’s get the mortgage company and the real estate. That’s all low cost and let’s see how we can add this in and we’re going to make it so cheap that people have to use it. And I’m all for shopping it out, getting the best price, doing your thing, but you have to have a certain experience when you’re going through those things. If I got the cheapest type of loan originator and the cheapest broker combining their superpowers, I might have a bad buying experience

New Speaker:
And

James:
The communication could fall. And I deal with a lot of sales on the listing side. And when you’re dealing with a mortgage company that’s just snapping out stuff and they’re just trying to push it through and they shopped that rate and then your deal gets all sideways. I mean, I’ve definitely seen buyers earn us money for sure. But I just think this is another thing. I’m not too concerned about this as far as a real estate professional.

Dave:
You probably like this as a real estate professional who provides a good service, right? It is kind of validating, I would imagine.

Kathy:
Yeah, I mean we tried this at our brokerage, our real world realty. We used to have all of our agents on commission. And then in California you actually, it’s a fine line. So we kind of did a hybrid where they’re on a salary, but then they get an upside in profit sharing. But in this article, I thought what was so interesting is that the top sellers left

New Speaker:
Because

Kathy:
If you’ve got really good agents, why would they stick with just a salary? They’re used to eating what they kill, so to speak. And if you kill a lot, you want to eat a lot. And you know what I mean? They lose their best agents. And you could see exp is an example in this article of a company that’s been growing kind of doing the opposite of Redfin. And that’s because EXP is really rewarding those top salespeople, having them only have to pay a limited amount of commissions to exp and they get the rest. So when you flip that and say the company gets most of the commissions and you just get a flat rate, you’re just not going to have the fighters. And then you’ve got this set overhead, which is what we’ve experienced. If you’ve got highs and lows, but you’ve got a set overhead, that’s really tough.

Dave:
That’s a good point. It makes sense, right? The Redfin innovation is like they were going to salary their employees, they were going to get health insurance, they’re going to get benefits, they were going to have PTO and all that sounds good, but when you explain it that way, Kathy, yeah, that’s good for maybe a middling or an entry level agent, but the top agents are going to see that as a restriction on their growth.

Kathy:
Absolutely. Yeah. They’re just not even going to consider it. And that brings us to what James says is who are you getting somebody new, somebody who’s just not that motivated. Do they really care if they price it or if they have a sale? So is it good for the client if the agent is just sort of like, I’m going to get paid anyway.

James:
And one thing to know this is the biggest competition for Redfin. This is why a lot of it’s also an issue is in 2020 4, 71 to 74% of brokers did not sell a house in the us. So the guys that really can’t get a listing, any sales guys or gals that get a listing, what do you think they do? They are also offering cheap, more affordable services and discounts. So now you got 71% of the broker pool just throwing discounts out just to get a deal done and you at least get a person that’s actually a salesperson rather than Redfin’s kind of set up more like a conveyor belt, which is not bad. I’m not knocking on it, but the competition’s out there, people are cutting their commissions just to get business.

Dave:
It makes me wonder, I’ve been in this industry for 15 years and for 15 years people are always saying commissions are going to come down for X reason, for Y reason for Z reason. I’m tired of it. They’re not coming down. Maybe they’ll come down a little bit. I saw that after the whole NAR thing, they’re coming down a little bit for the most high end properties, but we’re talking going from a 2.9% average to a 2.8% average. It’s not materially coming down. Maybe this is just the market value and this is what it costs, and if something comes up, we’ll certainly cover it. But to me it just, every time we hear that some new business model, some new lawsuit is going to fundamentally change. It doesn’t turn out to be accurate and the market bears this price and so that’s what people are going to pay. All right. Well that’s what we got for you. Anything else guys? Anything newsworthy you want to talk about before we get out of here? The Fed. Oh, sticking.

Kathy:
Yeah, the Fed held rates steady and now Trump is, once again, he did this in his first term. He’s fighting the Fed, he wants lower rates, will he get it? He got it last time, even when

New Speaker:
Throne

Kathy:
Powell said, Nope, not going to do it. And then the next time he did, I don’t know what happened, but the Fed did not comply this time and kept rates where they are. So that’s interesting.

Dave:
It is. But I think the other thing is that the last meeting, they said they’d probably still cut rates twice in 2025 and that stayed. So they’re still sort of sticking to their expectation. The market wasn’t really thinking they were going to cut rates. This one, I think, what is it, June and September, they’re sort of predicting something like that. So that’s what the market will react to if the expectations going forward really change, I think that will be different or if President Trump gets more involved. That’s a good point, Kathy. That could definitely happen. Alright, well James, Kathy, Henry, thank you guys so much for being here. We appreciate it. And thank you all so much for listening to this episode of On The Market. We’ve obviously shared with you what we think is important going on in the economy and the housing market, but if you are watching this on YouTube, I’d love for you to tell me the stories that we’re missing or the stories that you’d like us to cover in future episodes of On the Market. Tell us what’s on your mind in the comments below. And if you’re listening, just send it to me on Instagram. We will consider anything that you think’s interesting. Thanks again for watching. We’ll see you next time.