All Forum Posts by: Alex Fenske

A little over 15 years ago, in the late spring of 2009, I was a brand spanking new real estate agent coming off of a miserably failed real estate investment venture. I was also a catering server, restaurant server, and bouncer (lol). I was broke enough that I couldn't afford rent at my apartment, but fortunately my landlord didn't notice, thanks in part or in whole due to some substance abuse issues.

Anyways, when visiting my mom in the neighborhood where I grew up, I had noticed this construction van at a house on our street. Driving around the neighborhood over time, I saw the same van at a few other houses. I wanted to see what these guys were up to, so I pulled up in front of a house where it was parked, on Arquilla Dr, got out and knocked on the door. The guy inside was named Alex; he wasn't the owner, but the contractor. He gave me the owner's number (Jeff) and I called him on the spot, hoping to be able to offer my services to help him find and sell more homes in the neighborhood. He had already been working with another agent for some time, but he was willing to give me a shot.

Over the next few months I earned the spot as his go-to agent, selling him one or two homes a month and helping him find tenants after the renovations were complete. We did that for about 3 years until Jeff informed me he'd fallen behind on property taxes, and all of his lenders called the loans due. He had no choice but to begin selling off the portfolio. I started listing the homes one by one as they became vacant, and we were doing okay with getting them sold - in 2012, that was no small task.

Jeff called me one day and asked me for CMAs on the next few properties that would be coming up. After I sent them to him, he asked if I would want to buy one of them. I literally laughed through the phone at his suggestion, because I was broke, in debt, and in every way and unqualified borrower, and the lending environment in 2012 was probably stricter than it had been since the invention of the 30yr mortgage. Nevertheless, Jeff told me he thought I had a shot with this bank, and that I should go down and meet with the president. So I did.

As it turns out, the bank had a problem too. Every bank at that time had way too many non-performing assets on its books. So on one hand, they couldn't afford to take on more NPAs. On the other, the prospect of short-selling the homes didnt look so awesome either. Their solution was for me to take over ownership of not one but five homes from Jeff's portfolio, all of which I had sold him and subsequently leased.

Despite my being patently unfinanceable, the bank president placed a bet on me because I knew the homes, I knew the tenants, I knew what I was doing, and I was rabidly hungry. They financed 100% of that transaction, and I took on a huge loan - a huge risk for a broke guy like me. Even one vacancy or non-paying tenant could potentially be a major problem.

And yes, there were vacancies, and non-paying tenants, and major problems. But I stuck with it. I racked up debt, at times putting expenses like property taxes on a line of credit. I learned how to do many repairs myself, I showed all the homes myself, and I made it work. I took no money from the cash flow (when there was any) and I never made a late payment to the bank.

This fall, nearly 12 years after the bank gave me that house, and over 15 years after I knocked on that door - after evictions, vacancies, insurance claims, and never taking a dime out of it - I sold that house and placed all of the proceeds in a 1031 exchange. Today, I used those proceeds to purchase a 5-unit commercial retail building without coming out of pocket at all. Four of the five units are occupied, and starting in month one, this property will cash flow substantially more than the house I sold to buy it. After I fill the last vacancy, the building will generate as much cash flow in one month as its predecessor would have generated in a year.

There are so many other stories whose origins are with that same knock on the door, but this one's already long enough. I hope it inspires someone who has been afraid to get started or questioned whether they should stick with it. I've found over and over that it's worth it. It isn't get rich quick, but it is get wealthy slow.

In the interest of candor, there are a few things you should know. First, the amount of learning I did since that moment 15 years ago cannot possibly be overstated. And there's so much more I don't know yet compared to what I do know. Second, this is definitely the highlight reel. I merely made mention of some of the challenges I faced, but those challenges cannot be overstated either. While they only took up a word or two of this story, they took up months and years of my life for which I earned nothing and lost much, at least in the short-term. Finally, and most importantly, no one succeeds alone. The list of people who helped me - took a risk on me, taught me what they knew, showed me an example of what not to do, gave me their time, believed in me, and even those who questioned me, broke contracts with me, owed me money - is innumerable, and I'm grateful to every one of them.

Today was an exciting day, and there will be more like it in the months ahead!

I'm starting to hear more chatter about this mysterious "wave of foreclosures" that was a frequent claim/projection back in 2021, which didn't happen then, and by all indications is not going to happen now.

The first graph below from the St. Louis Fed shows the delinquency rate on residential single-family mortgages, and proves there's a way to spin this data to show that delinquencies are increasing rapidly. But when I share that the low point on that visual is 1.700% of mortgages, and the high point is 1.730%, maybe the context makes a difference.

Speaking of context, consider the second picture showing the delinquency rate over the past 33 years. You'll then see that delinquency rates are:
- At their lowest point since 2006
- Historically on the low side of normal
- On an overall downward trend for the past 4 years

In fact, excluding the artificially propped-up mortgage market of 2004-2006 during which delinquency rates were slightly lower than they are today, bottoming out at 1.41% in 2005, there are fewer mortgage delinquencies today than at any time in the past 33 years.

By the way, when these scant 1.73% of homeowners become delinquent on their mortgages, they overwhelmingly have the equity to be able to sell the home at a gain if needed. Per CoreLogic, only 1.8% of all mortgaged homes are in a negative equity position, and the average homeowner across the US has $311,000 in equity.

If anyone has contradictory data, please share. Otherwise I'm (again) declaring this theory way off.

 Thanks for sharing this!

I didn't know there was a QBO app so that's definitely something for me to look into. Great suggestion!

For those who manage 3+ flips at a time, I'm curious what bookkeeping software you use and how you keep all the expenses properly matched to each property. 

I use QBO for my corp books and Stessa for my rental portfolio, and I have a bookkeeper who manages those systems. We used Stessa for the flips last year, but as I've increased the number of flips, tying expenses to the appropriate project has become a bear and I'm wondering what others do. Contractor payments, online orders, card swipes at home improvement stores, utility payments... When these payees are shared across all projects, it's a mess tracking what expense goes to which property.

What's the simplest/easiest way to do this?

November 2023 Housing Market Update: No inventory growth in sight despite high mortgage rates
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Supply – record lows and falling
- There were 10% fewer homes listed this October compared to last, the fewest in any October on record.
- There are 27% fewer homes for sale than there were last October.
- Fun fact: In no month this year has inventory crossed above 18,000 homes, but prior to this year, there were only 3 months where inventory was ever below 18,000 homes – all in 2021, of course.

Demand – downward trend may be ending?
- Pending contracts were down only 2% from last October. This trend appears to mark the end of demand’s 2-year freefall.
- October closings were down 22% compared to last year. Declines in closed sales have not tapered off yet, but based on contract activity, I expect to see this closed sales flatten out soon.

Supply/Demand Relationship – seemingly perpetual seller’s market
- Seasonally adjusted housing supply still stands at 1.8 months, unchanged for two full years since November 2021.
- Seasonally adjusted median days to contract fell to 9, virtually unchanged since July 2021.

Prices – rising again
- October was the second consecutive month of seasonally adjusted price appreciation, with prices rising by 1.7% compared to the prior 12 months.
- October prices were up 7.3% compared to last October, the third consecutive month of 7% growth.

Mortgage rates – highest reported in 20+ years
- Today’s (11/7/23) 30yr fixed averages 7.46% after peaking over 8% for the first time since October 2000 and then dropping a half-point in the past 7 days. Again, we note that prices are coming back 7% over last year at the same time mortgage rates are the highest they’ve been in over 20 years.
- FHA/VA loans are way lower, 6.82% as is the 15yr fixed. ARMs are priced out of the game.
- Last week the Federal Reserve voted to keep the bank overnight borrowing rate steady at 5.25-5.5%, rather than raise it, in light of encouraging inflation news. They meet again in December and are not discussing any potential for decreases, only holding steady or increasing.

What to do?
- Sellers: Low supply persists and it’s perking up prices, now 3 months in a row. I still recommend pricing against active listings more than closed sales, especially with seasonality in effect.
- Buyers: I’m confident in stating that you will find a home bought today is more affordable than a home bought tomorrow. Make your move!

Here's my monthly market update - sorry I'm a bit late posting this one as we're already nearly half-way through September! 

Supply – record lows, contradicting seasonal norms

- There were 15% fewer homes listed this August compared to last, the fewest in any August on record.

- The number of homes for sale remained roughly flat from July, down 33% compared to last August and still hovering around record lows. There are fewer homes for sale than there were in January, when normally there are 20-40% more homes for sale in August vs. January.

Demand – still soft, but moderating

- Pending contracts are down 7.6% from last August, still consistently down year-over-year but beginning to flatten out at 2013 levels.

- August closings were down 14% compared to last year, less of a year-over-year drop than last month which may indicate the early stage of a flattening in this metric too.

Supply/Demand Relationship – stable, seller’s market

- Seasonally adjusted housing supply still stands at 1.8 months, virtually unchanged since November 2021. The longest supply I could find in any individual MLS area was 5.2 months, meaning all areas are in a seller's market.

- Seasonally adjusted median days to contract remain at 10, steady since July 2021.

Prices – flat, possibly trending back upward

- August median sale price was up 7.6% compared to august 2022, the third consecutive month-over-month increase after 6+ months of slight decreases, and the largest increase in this trend.

- Seasonally adjusted prices are still flat, as they have been since August 2022, but with three consecutive month-over-month increases we may see the longer-term trend turn back up.

Mortgage rates – higher

- Today's (9/6/23) 30yr fixed averages 7.21% after briefly spiking to 7.49% in late August. Aside from that spike, rates have been somewhat stable in the low-7s for the past 90 days. FHA/VA loans are nearly a half-point lower, around 6.8%. There 5/1 ARM averages 7.0%, with the 15yr fixed around 6.6%.

- Multiple Federal Reserve members have indicated they plan to hold the Federal Funds target rate at its current level (5.25-5.5%) at their meeting September 19-20. Inflation is reading 4.2% and wage growth is moderating, so the Fed is expected to “hold” for now but will institute another increase in November if any of those trends reverse.

What to do?

- Sellers: The advantage is still yours, but pricing is flat. Price, prep and stage aggressively as you do need to compete on price.

- Buyers: I’ve been repeating myself for 2 years about the unlikelihood of housing affordability improving in the near-term. Now, despite mortgage rates persisting above 7%, prices are actually showing signs of increasing. The fundamental drivers of supply and demand still indicate that buying sooner will almost certainly be more affordably than waiting.

Welcome, David!

 Chicago Southland Homes is my team/brand, but the information covered is for the entirety of the Midwest Real Estate Data service area.

More records set while certain metrics haven't changed in two years!

Supply – record lows, contradicting seasonal norms
- There were 26% fewer homes listed this July compared to last, by far the fewest of any July on record.
- The number of homes for sale remained roughly flat at its all-time record low, down 39% compared to last July and down even compared to June, which is abnormal.

Demand – still softening, but moderating
- Pending contracts are down only 3.2% from last July, the smallest decrease in this figure in quite some time. Pending contracts have been on a steady decline since May 2021, but after the last 3 months it appears to be flattening out – albeit at 2013 levels.
- July closings were down 24% compared to last year. I expect this metric will begin to flatten out soon because it trails Pending Contracts.

Supply/Demand Relationship – stable, seller’s market in MOST locations
- Seasonally adjusted housing supply still stands at 1.8 months, unchanged at 1.7-1.9 months for nearly two years, since November 2021.
- Some – but not all – areas that saw supply as high as 6-9 months (certain communities on Chicago’s South side) are back down under 6 and trending downward.
- Seasonally adjusted median days to contract remain at 10, steady between 8-10 days since July 2021.

Prices – flat
- July median sale price was up 4.3% compared to July 2022, the second consecutive month-over-month increase after 6+ months of slight decreases.
- Seasonally adjusted prices are still flat, as they have been since August 2022.

Mortgage rates – higher
- Today's (8/2/23) 30yr fixed averages 7.13% and has hovered just above or below 7% for the past 60 days. FHA/VA loans are around 6.8. There 5/1 ARM gets you a paltry discount of 0.18, and a 15yr fixed gets a 0.65 discount.
- The Federal Reserve increased the overnight borrowing rate by 0.25 at their July meeting as expected, bringing it to its highest level (5.25-5.5) since 2001. Markets are split on whether there will be further increases this year. After peaking a year ago at over 9%, inflation is down to 3%. The job market is still tight.

What to do (besides contact us for personalized advice)?
- Sellers: The advantage is still yours, but pricing is flat. Price carefully and you'll still sell quickly.
- Buyers: Tough love moment. If you’re waiting for affordability to improve by any significant amount, you might die holding your breath. Interest rates will continue to fluctuate and, yes, will at times be lower than today. But there is so little inventory and enough pent-up demand that any dips in interest rates will add fuel (more buyers) to the fire. Major change will need to take place to drastically increase the number of people selling their homes, and there’s no sign of what (or when) that might be.