SOTM 55: How Long Will Home Values Surge?

August 27, 2020
Despite the pandemic, home values—and sale prices—surged through the second quarter of 2020. But according to EasyKnock CEO, Jarred Kessler, a lasting real estate slump could hit as soon as October. Listen to today’s State of the Market podcast and find out why this wouldn’t be such a bad thing for most real estate agents. You’ll also get an update on the foreclosure moratorium set to expire on August 31st.
Listen to today’s show and learn:
  • Kids return to school [2:28]
  • An update on the foreclosure moratorium [6:22]
  • EasyKnock CEO predicts market will slow as soon as October [10:22]
  • The only city where home values declined in Q2 [14:54]
  • Cities where house-buying power decreased the most [16:00]
  • Strong sales for new homes in July [17:47]
  • Urban exiles fuel suburban housing boom [19:37]
  • Advice for agents: work harder [21:10]
  • How to break through your goals.
  • Plus so much more.
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Aaron: Real Estate Rockstars, this is Aaron Amuchastegui, I am coming back to you for another State of the Market. We are in today, I’m recording this on August 26th and my week has been a little bit different than the last time I recorded. Me and my family have started on a cross-country RV trip. I’ve been talking to a lot of you guys on social media as we have been making this journey.

We started in Austin and we went up through Oklahoma and over into Missouri and Iowa, and right now, I’m in Omaha, Nebraska, and later in the week, we will be in South Dakota. Today, I’m actually recording this in Jeff Cohn’s office up in Omaha, Nebraska. He has been a guest a couple of times on the show at his new kwELITE training center up here. It has been really cool to see Omaha.

One of the State of the Markets that I want to start with which is non-real estate related, but something that I have been experiencing and I wanted to share is it’s been really wild to start, just go into different cities and different states and see how different everyone’s life is right now. What I mean by that is when I was in Austin, the news in Austin was pretty grim. We’ve been going through a lot of coronavirus stuff, a lot of coronavirus regulations, and everything is closed and people have to wear masks outside and people are very worried about what’s going on.

The news that I was seeing in Austin was that everyone was feeling like that everywhere. Now, we’ve seen real estate sales within Austin, and we’ll talk about that a little bit today. As we went into different states, what we saw what’s on the news wasn’t necessarily true. If something that’s part of the news that maybe people aren’t hearing everywhere is there a lot of kids right now that are back at school, that are back at school in a classroom.

Some of those kids are required to wear masks, other kids are not required to wear masks. It depends on the city and where you are. I’ve heard that in North Atlanta, kids are back at school. In Southern parts of Atlanta, they’re not. In Missouri, kids are back at school. In Omaha, Nebraska, kids are back at school. That’s important. That’s important to know that in different places, life is going on differently because as we’re trying to figure out what’s going to happen in your own market, it’s important to know what’s going on throughout the country. It helps us stay centered and focused on some of the bigger stuff that could be happening.

We were amazed, we went into Tulsa, Oklahoma, and I tell you what, in Tulsa right now, if you’re one of our listeners from Tulsa, you know what I’m talking about, there’s like no pandemic happening in Tulsa right now. We went out to eat, it was not a big deal. We went out to a very cool park called the Gathering and there were hundreds and hundreds of kids and families out there talking, and people were shaking hands and meeting people and having fun. That was not stuff that we were seeing in Austin.

As you listen to this, I just wanted to tell you that the world out there is different in every city and different in every state, and the good, happy news out there is not making it on all of the news. If you’re in one of those places where it is very strict right now and it feels hopeless or it feels like life might not be getting back to normal sometime soon, they’re places out there where life is normal, where people’s new normal is the same as normal was back in January or February, and that’s been very exciting for me to see.

We’ll continue to share more of that on my journey as I record some of these State of the Markets on the road. I’ve had a few of you guys reach out to me that I might even try to record one of these State of the Market interviews with you live as I come to your city.

Pat: Let’s jump right into the news. Last week, I talked about an article on POLITICO and that article said, “Hey, FHA foreclosures are going to have a moratorium extended through end of the year.” Now, when I talk about that last week, there was only one company that– one news source that had that, and that was POLITICO, and POLITICO said a major person in the White House told them that.

There’s a new article that came out today, and this is from Bloomberg. They’re saying, it’s something totally opposite, it says, “Trump’s executive order on evictions likely won’t prevent any evictions or any foreclosures. It says it promised action on behalf of renters that were vulnerable to the federal moratorium or evictions and foreclosures first passed by Congress under the CARES Act.”

It said, “Saturday, his executive order, doesn’t renew the federal moratorium on evictions, it doesn’t authorize any new action on evictions or foreclosures at all. It just tells the leaders of agencies to try and to look for existing options.” I guess I just wanted to put that article out there to say right now, there are still a lot of things happening and news sources put the headlines out as if they are certain.

What I would like to say right now is, right now, no one is certain if they’re going to be any more foreclosure moratoriums extended. Right now, they are set to expire in five days. As foreclosure moratoriums are set to expire in five days, there are foreclosure auctions scheduled on September 1st in Texas. The number of postings hasn’t gone up yet, so we’re going to see if after that moratorium expires that a lot of people will start posting again. I do know that everyone should hear, there are record numbers of investors out attending these foreclosure auctions in Texas. There was a concern in the news of, will foreclosure sales be valid if people aren’t going out there or if there’s restrictions to only 10 people?

I tell you what, in California and in Texas and in Nevada and the places where we have people reporting to us the numbers, there are record numbers of people attending foreclosure auctions and say, one of the things that we actually provided a letter and we’re sending it out to some of the Congresspeople in Texas as I just try to explain, what a lot of people don’t know when it comes to foreclosure extensions is most of the people getting foreclosed on right now actually have equity in their house.

That also means when that house sells, if they owe a hundred thousand dollars on their house, there’s a very high demand. Investors are paying more than they ever have for stuff. That house might actually sell at auction for 120,000. That extra money after the lender fee goes to the person who used to own it. They owe a hundred and they’ve got lenders fees on it and sells for $120 at auction, they’re going to get a check for $15,000. Now, in a lot of cases, you request that from their lender, but they’re entitled to that overage amount.

They’re entitled to that amount. The longer they postponed a foreclosure moratorium, the smaller that overage amount gets. Postponing foreclosures actually hurts borrowers in the sense that right now they have equity, if the foreclosure happens today, they will get a check for that amount, and if it continues to get extended, they won’t. That’s one of the things that we wanted to point out so much.

There’s also, especially, when it’s vacant abandoned housing, the people have moved out of a long time ago, by postponing that foreclosure, it’s not helping anyone. That is an opinion part of the news. The reason I wanted to share that with you is the news part is that there are talks about whether or not they should be extending or not. That was a letter that we sent out to some of the people that make decisions in Texas because we thought it was important for them to realize that sometimes when people get foreclosed on, they also actually get paid and I think a lot of people don’t understand.

They get paid the difference between what it sells for and what they owed, and every month that it gets extended, that goes down a little bit. That was a Bloomberg article. Again, check Trump’s executive order on evictions likely won’t prevent any evictions. We will see if any new laws happen. Right now so far, there has not.

Another one, this is a new thing that’s out there, there’s this company called EasyKnock. EasyKnock, they’re going through, and they’re marketing to people about selling your houses article. An Inman, a technology article says, “EasyKnock CEO predicts lasting pandemic and dew slump to hit this fall,” so many US regions are experiencing a surge in real estate market but Jared Kessler believes it will be short lived and the market could start to slow as early as October. Let’s dig in to this article a little bit.

He said, “The founder and CEO of home leaseback company, EasyKnock, thinks the current boom times in the housing market are just temporary and the coronavirus pandemic may ultimately spell years of trouble for real estate. That’s something that a lot of people have been concerned about since it started but the market has been performing so strong, it’s hard to see that.

When I look out in Omaha, Nebraska right now, in Omaha, it does not look like there’s any pandemic, looks like business as usual. We went into a restaurant for the first time and no one was wearing masks, there was no rules, there was no sanitizer, we just got to sit and have dinner with other people it was really a crazy experience. Who knows how the real estate market will treat people in Omaha.

Kessler made the comments while speaking with Inman to discuss the near future of real estate as well as their fundraising success. EasyKnock announced this month that it raised an additional $5 million as part of a series B funding round that came from financial tech, so it’s a lot of different real estate tech companies, I can’t believe that EasyKnock has raised over 215 million in debt-equity financing, with all these different people going out there.

One of the things they’re seeing right now is there’s a high demand of trying to get people to sell their house direct before actually going to an agent, but that CEO, they have a lot of funding, they’re doing a lot of research. They’re actually predicting that the market could start to slow in just the next couple months. Why would I give you an opinion piece on just somebody that owns a technology company? I think really, because they’ve raised a lot of money, and they have some of their own research teams.

We used to tell people to invest in Homes or Home Depot. Back in the early ‘2000s, once a Home Depot went into a town, they had a belief that that town was about to hit a big building boom. Sometimes you can follow the trends of other companies as you make yours, you don’t have to spend a whole bunch of money on research, you can check companies that are spending that money on research.

Here’s an article from Inman. It says, “This is the only city where home prices declined in the second quarter.” That’s interesting, home prices have been going up anywhere. Would any of you guess where it is? We talked a little bit about this last week, home prices in the US spiked 4% year over year in the second quarter, increase in every single US city, except San Francisco, that’s a baffling thing to me. Prices increase in every single US city, except San Francisco, we talked about that last week, the exodus from the city for a variety of reasons.

It’s from you know, tech, being able to work from home now from people realizing that living in a city isn’t fun during pandemic times and a lot of different policies that were happening inside the city. Right now I have to get into the opinions of why that’s happening. There is an absolute fact right there, their prices increase in every single US city except for San Francisco. Last week, I shared the statistic that inventory is actually doubled in the last year in San Francisco. More people are trying to sell there than trying to buy there.

Similar article says, “It became more difficult to buy a house in these cities in June, but for different reasons.” As prices continue to skyrocket, home buying power is diminishing and the majority in the nation cities. Home buying power means the prices go up faster than people’s income or interest rates or things like that. It says, where is affordability declining, the most year over year? It says, “In New York City, real house prices a measure of single-family prices throughout the US, adjusted for impact of income and interest rate changes, increased by 29.2%, while house-buying power declined by 16.8%, so if you live in New York, buying power went down by 16.8%.

Even though normal house price appreciation here actually was less than some other cities, the big drop and house-buying power saw the greatest annual decrease in affordability. That meant prices went up in New York but incomes did not go up to match that and so less people can afford a house in New York that live in New York than could previously. Affordability is a big thing. If you want to see all of your statistics on here go to Inman, check out the article it’s in, “In markets and economy today became more difficult to buy a house.” As you look at it, you can see a lot of different places.

To Austin Texas is 10% less affordable than it was, San Antonio 9% less affordable than it was, Sacramento California. Places that are more affordable than they were, this is baffling to me, where affordability is declining the most, Las Vegas Nevada is the most affordable on that drop. Go check out that chart, really interesting statistics out there. Here’s some good news out there in the real estate front. New single-family home sales show housing had a blockbuster month.

New single-family home sales climbed 36.3% year over year according to data released by the US Census Bureau. Sales of new single-family homes popped in July. Now, everyone has said July has hit absolute records. One of my business partners, David Osborne, he has a bunch of Keller Williams offices and on a podcast recently said in May and June, they had declines and then July was their biggest July ever, everyone has seen that.

Here is new home sales are no different. Sales of new single-family homes popped in July climbing 36.3% year over year, and 13.9% month over month. The median sales price of new homes sold in July clocked in at 330,000. All inventory represented a four-month supply. This new home sales data completes a blockbuster month for the American housing market. They say keen buying interest and tightening supply have ensured that housing market has rebound stronger.

One of the things that happens, new home sales are sold before they’re finished, so they’re sold before their true inventory, for the most part. Now, they’re market sold but people go ahead and buy them while they’re just getting built. The reason people pay attention so much to new home sales is if there’s not as much stuff on the market, that’s when new home sales flourish. When demand is high and supply goes down, new home sales are out there.

Right now we’ve been told in so many markets except for San Francisco, the inventory is down there aren’t many houses available on the market. As that happens, people get pushed into new homes. What’s nice is the ones that actually, get into contract in July, they won’t close until August or September so new home sales are strong right now in July. We’ll see how they continue over the next few months.

Here is an article, next one is back to Bloomberg. We’ve talked a lot about Prashant Gopal’s articles for the last few months, that he says, “Urban exiles are fueling a suburban housing boom across the US.” The last couple of weeks we talked about people leaving the cities and here’s the article that just says, that in some of those suburbs, we’re seeing huge changes. Homebuilder, Jimmy Provedi sales haven’t been this strong since the last decades housing boom.

Since 2005, his home turf, the Inland Empire, 45 miles from densely populated Los Angeles. It’s at the center of a suburban land rush. People are moving to the suburbs, armed with the lowest mortgage rates in history, and wanting to get away from the urban centers, they are settling in. As you see this chart on here of existing single-family homes in the Inland Empire, their sales, the median price.

The median price there is going up like crazy. January, 2019, there’s 354,000. Today, 420,000. It’s like a 25% increase in the median price there over the last 18 months. That is huge. If you look at the chart too, it hasn’t really gotten steeper since the beginning of the year, but in April, it was 390. Now, it’s 420. It did go up almost 10% in a 3-month period. They got April through July on there.

Down to our last article. I guess that was my last one, but when I search real estate inventory, there are so many things in Google out there right now, so many articles across the country. You see this everywhere. We talked about July being crazy. We see a headline that says, “Pandemic. Lack of inventory brings bidding wars to the Valley. Low inventory helps drive up Bakersfield home prices. Real estate market makes come back in July thanks to the demand in Portland, Oregon. Home selling fast in Northeast Ohio because of low inventory and high demand.” These are all articles that came out in the last eight. It’s a feeding frenzy.

Palm Springs real estate inventory, historic low. Report shows record increase in San Francisco real estate. That’s the only one that went in the wrong direction where now they have an increase in available stuff. Housing market strengthens amid tightening inventory. That one is in Kansas. Humboldt County real estate, prices soar as inventory dries up. What does that tell you? There’s a lot that tells you that it’s stuff that everybody’s been talking about.

Right now, it is tougher to be an agent though. Many of our agents, many of the people who got on the pie graphs are absolutely crushing it. I want you guys to know, I also know that when demand goes down, when inventory goes down, prices go up. That means less houses are selling. Most of our listeners out there aren’t doing 100 transactions a year or 50. You guys are trying to do 5 or 10 or 20.

I know in this tightening market, sometimes, it can get a little overwhelming. When there’s less inventory, it’s much harder to get that deal. You need that one or two deals. What I would say is right now, as summer is ending, we’re going into these areas where some people are saying, “The market is about to be a lot more difficult.” The best thing about the market when it gets difficult though is your old fashion hard work and going out there and working hard for your clients. That’s when it pays off the most.

During really strong markets, everybody looks brilliant, everybody looks great. It seems like it doesn’t matter if you’re putting in the extra effort or not, that someone else is getting your listing instead. People weren’t interviewing multiple people. They were just hiring the first person they talk to. Get on your game and go out there and try to get more deals.

If you need help trying to find ways to get deals, we have a huge resource page that we put on the hibandigital.com website. Go to hibandigital.com. Click on resources. We’ve got a bunch of affiliates.

These are paid ads too. These are people that we’ve tested. This is an advertisement on there. Those are people that are trying to help people buy houses in one way. It’s how to go find your own leads, how you use some of our software to go find your own leads. Go check some of that stuff out. Even if it’s not going to be ours, look at other stuff. We saw record-low pricing right now for Rebus University if you’re trying to learn how to get a listing.

Right now, if it’s hard to get listings, maybe it’s worth going and taking a look at some of our classes out there. If you aren’t going to up your game by going to any of our resources or Hiban Digital agents, what I’m telling you right now is go up your game. Go find a place somewhere that you can go figure out. Go find other agents in your office that you want to learn from.

As the market gets tougher, as the market slows down, if there is price decreases, we’re going to see inventory go back up. We’re still going to have demand out there. The people that are having a tough time getting three or five deals done a year, you guys are going to have that opportunity to come back out. There’s pros and cons to a crushing market. When prices are going up and inventory is going down, a lot of people are very happy that there aren’t as many houses to go around for all those agents out there.

The good news if prices do slow, like what the easing-up guy says, and inventory does go up a little bit, there’s going to be more of an opportunity for all of you to find a deal. Sharpen your knives right now. Get your tools ready so you can go out there and get the deals. That was our state-of-the-market real estate update, August 26th. I can’t wait to talk to you guys next week. Thanks.

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