[00:00:00] : owning a home is still the american dream, but it comes with plenty of emotional and financial challenges join real estate broker Ron Evans each week as he shares the latest industry and local real estate market news through interviews with other agents and industry professionals. If you're confused about today's real estate market or just want to understand the home buying and selling process. This show is for you, here's your host, Ron Evans, Hey, welcome back everybody. This is Ron Evans and you've reached my real estate 101 show. It's available on YouTube as you can see as well as anywhere that you can listen to a podcast, you can get it in multiple formats going to get started right now. But before I do, I just want to remind you, if you could please subscribe, ring that bell. So you don't miss any new episodes, I would really appreciate it. And if you want to catch up on previous episodes or just wanna re educate yourself and kind of listen to trends of what's been going on, Check out this playlist up here. It's got all the new market information that goes back through 2021 up to now. You can get caught up and you can kind of follow along with what's been going on. But let's go ahead and dig in tonight. Tonight, I'm going to be talking about an article that came out in fortune and this came out just the other day. It's titled Homebuyers buckle up for another brutal spring housing market and the reason I want to talk about it is because, well we're at the end of january things have already been brutal and we're about to head into spring, you know, by the end of february, that's going to be when our spring market kind of kicks off or should kick off. Um and then by March we are full on into spring. So you need to be prepared if you're looking to buy a home or maybe even looking to sell a home, you want to kind of listen to see what the home buyers are gonna be going through right now so that you can be prepared on what to deal with with them. So let's get started as you know, when I bring up an article, I typically go through and I read it with you and I kind of digest interject my own information and then um if I get any comments or questions left after the episode, I will hit them up later again. It's Homebuyers buckle up for another brutal spring housing market and this comes from fortune. It's usually around this time of year, with the holiday season firmly in the rear view mirror that home buyers and sellers alike begin to make their way back into the market. That is totally true. Everyone usually takes a break in december into the first of the year and then we hit it, that will continue to pick up each week until March arrives at that point. The industry is busy season, known as the spring real estate market will be off to the races. But this year there is more unease than excitement coming from the home shopper side of the equation. For one thing last year's spring housing market, which was arguably the fear assistant history is still seared into the collective memories of unsuccessful 2021 home shoppers. If you've been paying attention on all my other market updates, you will know that this is true. We've been comparing trends from the three years, pre pandemic two, When the, we had the lockouts or lockdowns, excuse me. And then kind of came out of them and had a delayed selling season and then firing off into 2021 and how crazy all of last year was. That's what they're talking about here. So to understand how far the deck was stacked against the buyers last year, let's just look at the data, the number of homes for sale last spring hit the lowest level in more than 40 years. You've heard me talk about this, this should not be new Bidding wars hit an all time high with 72% of homes That were bought in 2021 having multiple offers. That's crazy. And the frenzy saw home appreciation climbed to the highest level in tabulated history. Now here in Orange County 2021, we realized, uh, anywhere between 18 and 20% gain in appreciation for one year. Typically like clockwork. If you look at the history of Orange County, we run at about a 5% gain, which still outpaces the rest of the country. It's usually around 3 3.5% nationwide. We went from the five two, We're expecting another 8-10% this year in 2022. This is part of the problem. No problem for the buyer, not necessarily for the seller because you like that appreciation. But all this goes into that equation of what makes this a row bottleneck. Let's continue. That raises a question. Should home buyers expect to find a spring housing market in 2022? That is friendlier when compared with 2021. After all, the rate of home price growth over the past year Up 19.1% between October 2020 and October 2021, that's a national number. Just can't be sustained forever. Or can it might some people ask housing supply Yet an indication of what the housing market will look like during the early months of 2021, we looked at the one metric housing economist repeatedly told Fortune last year to watch heading into the spring market housing inventory At the height of the spring 2021 bidding War Bonanza, the number of homes for sale was 43% below pre pandemic levels. Given that demand side of the market is unlikely to back off much, there's simply too many millennials aging into their first home. Excuse me. There are simply too many millennials aging into their first home buying years. The supply side Ak inventory will dictate with the spring 20 two 20 2022 housing market will look like I am tongue twisted tonight. Mm hmm. Kind of decipher that and give you some real numbers. We've talked about it before Going into 2021 in the middle of pandemic. There We had in Orange County we had about 3500 homes for sale. If you go back to the three years prior to the pandemic, we kind of eliminate 2020 because it's skewed all the numbers. But if you take the three year aggregate Prior to the pandemic, we were at about 6800 homes for sale at the beginning of the year. We were about half of that starting in 2021. And we read about a third of that starting this year, we had less than 1000 homes available to sell or to purchase or sell in Orange County. Uh January one of this year. Yeah, that's the inventory crisis that they're alluding to here. They just didn't give any raw data on that. So to be blunt the latest reading of housing inventory levels doesn't look good for would be homebuyers as of december, there were just one million homes listed for sale on Zillow down 17.5% from december 2020 and down 37.8% from december 2019. So they're going back to pre pandemic and comparing it to know When there were nearly 1.7 million homes for sale across the country. This means the housing market is tighter right now than it was heading into the hyper competitive 2021 Spring housing market, there's a great graph, check this out. You can kind of see this goes back uh 2018, 2019, 2020, 2021. You can see the rollercoaster nationally of what the housing market typically looks like and it coincides with what I talked about for us locally here in Orange County. As the 2021 Spring market came to a conclusion last year. Industry insiders helped inventory levels would begin to rise through the summer and fall inventory did finally begin to tick up a bit. That's in that chart. The theory was that as vaccines rolled out more elderly homeowners who were cautious about moving during the pandemic would finally put their homes up for sale. But we didn't see that here, Economists also predicted 20 September 2021, winding down of the forbearance program for homeowners negatively impacted by the pandemic would see more homes come on the market. That was a fallacy. That should have never been pushed by the media. I've talked about it before. People in forbearance today or in this last program have something that people who were struggling In 2005, 2006, 2007 when we had the housing market crash. They have something that those folks didn't have and that's a lot of equity in their home because the prices have gone up, They purchased their homes with more of a down payment, not a lot of 100% financing or negative amortization financing. So it was easy for a lot of these people in forbearance if they did it for the right reasons or the wrong reasons or whatever, or they got, you know, boost into it. Um, a lot of them were able to just refinance their homes, pay off that forbearance debt and get on with their lives and stay in their homes. It didn't create more inventory with it's uh foreclosures, short sales, nothing like that. That was a really big crappy thing that the media tried to do and that and that some economists tried to push was that forbearance was going to help our inventory problem because people screwed up, They screwed up while the number of homes listed for sale did rise, it wasn't due to forbearance, it hasn't been enough to make the market friendly for home buyers. This lack of inventory isn't just clustered into a handful of housing markets either Among the 327 housing markets tracked by Zillow, 254 heavy inventory levels that are down by more than 30% from December 2019, let me repeat that 254 of the 327 housing markets tracked by Zillow Are down 30% in inventory From December 2019 To December 2021. In 54 housing markets, including places like Miami and Fort Collins Colorado-based eight. Housing inventory is still down by over 50 from pre pandemic levels And I told you for us just year over year were down 60%. That's not specifically mentioned in this article, but I'm giving you the data, see this chart, there's all this red, that's where it's down the peach or flesh color and the gray is where it's pretty flat or it's just down a little bit or up a little bit blue. This one little place right here in the whole country and one little place there in texas is blue, that's where there is actually inventory and things were happening in the, in the market there. I don't know what's going on in those two locations but maybe for the next episode, I will try to pinpoint it and we'll talk about it and see if it's something that can be replicated or is it just one off craziness going on in those two little markets. Actually let's talk about interest rates, There is one big wild card right now. It may not be a wild card as much as they're thinking The inflation concerned federal reserve is expected to increase rates several times in 2022. We've talked about this before, they've actually already started. That is already pushing mortgage rates higher As of Thursday, the average 30 year fixed mortgage rate has hit 3.45%, that's up from 3.1% last month and a hefty bounce from the 2.65% rate in January 2021. It's it's already ticked back down. This is a week ago Thursday real time here in January that this 3.45 hit a few days later throughout the end of last week. It did tick back down just a little bit, but we've talked about it before that ah In order for things to really change inventory wise with interest rates, they're going to have to hit 4% or maybe even a little higher than 4% to have any significant meaningful change. And we're not expected to see that Most economists are expecting to be between 3.65 and 3.8% by the end of 2022. Will it help a little bit because it will slow demand a little bit. Um but will it help to the standpoint of really fixing our inventory problem and starting to balance out sellers and buyers? Probably not not not unless it hits for and a quarter maybe. And I don't think anybody's predicting that right now, rising mortgage rates would lock some homebuyers out of the market and could put a downward pressure on home price growth, that's what it's expected to do. But again, it's it's probably going to go up higher than what they're expecting it to go up to really have a meaningful effect. But in the short term, rising mortgage rates could actually make the housing market even more competitive. Ali Wolf, who is the chief economist at Zonda Housing Market Research firm tells fortune that home shoppers who could see this as their last chance to snag pandemic spurred low mortgage rates might begin to pour into the housing market. In the coming weeks, of course, the rush of home buyers in the market was already depleted, levels of inventory would be a perfect storm for another spike and getting worse. Okay, that's the end of the article. Let's talk a little bit. I don't know how many where buyers can actually come flooding into the market. Um This Unless they're just talking about the home buyers that went on hiatus for like 4th quarter Them all coming back at one time on top of who's still in the game right now um, in my area, I don't know how many more homebuyers we can actually handle. All right. Any agent, I talked to all my colleagues, we all have lists of home buyers a mile long that are approved for their loans or their cash or what have you um Again, I don't know how many more can there are out there, but they're saying they're they're thinking that this could be more um in this article, but they would be correct that if it did happen where we had another flood of homebuyers on top of what we've already got in our inventory of homebuyers that would Maybe take the 8-10% appreciation they're expecting this year back up to that 18-20% like we had last year. It's quite possible that it could and it's quite possible that at that point, the Fed would seriously have to look at Going above and beyond 4% with the interest rate to get things to settle down. I don't know, I don't know what's considered a good thing or a bad thing at this point. This has been the craziest part of my career. Um I would love to hear some questions though or some feedback that you have that I can address either in another episode or write to you or have a conversation with you. If you have questions, you can always drop a comment uh in Youtube or whatever platform you're listening, You can send me an email direct. It's real simple. It's real estate one oh one at Ron Evans realty dot com. And you can even text me, I'll take a text message 949, - 9 - 270. I try to get back to people within 24-48 hours, unless it's like a dire thing. Just like, let me know and I'll get back to you sooner immediately. I appreciate you staying staying with me. I appreciate you coming back and listening week after week, episode after episode and I will see you again real soon folks. I appreciate your continued support if you haven't already done. 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