Cashing in

Earlier this week, I (David) had the opportunity to sit down on The Over Ask Podcast by Broke Agent Media. In that interview, we got to talking about my money management (or lack thereof).

In this industry, we have the opportunity to earn a lot of money, fast. For me, that meant I had the opportunity to spend a lot of money even faster! My first 10 years in real estate I completely splurged. Food, random stuff, subscriptions, anything and everything! I was just reckless that whole time, and ended up using every commission check to pay back my AMEX bills. We had sold so much real estate, but at that point, I had little to show for it.

A few years ago, I ended up hiring a business manager who really helped me get my finances in shape. He helped me stick to a budget, which seemed horrible at first, but actually didn’t end up being too hard to follow.

I share this story as a cautionary tale. In real estate, it’s so easy to grow your lifestyle as fast as you grow your business. But, if you grow too quickly, you might end up more broke than before you started! Take it from me: when you set a budget and stick to it, you’ll be so much happier. Peace of mind is much better than a piece of A5 Wagyu.

- David

Fannie Mae’s latest market predictions

The economists at Fannie Mae have made a major adjustment to their home sales forecasts. Not only do they expect home sales and refinances to continue declining through 2023, they also believe a soft recession is on the horizon. Here are their updated predictions:

• They now predict a 7.4% decline in home sales this year (up from 4.1%)

• They now predict a 9.7% decline in home sales in 2023 (up from 2.7%)

• Refinances are expected to make up only 32% of mortgage lender activity in 2022, down from 58% in 2021

• They expect GDP to decline 0.1% in 2023. That’s down from an expected growth of 2.2%

Our take

Overall, this is good news. It means the market is finally normalizing. These predictions are yet another reason to get out there and get to work while there’s still strong demand and great opportunities. As prices keep going up and rates rise along with them, it will become harder for your sellers to sell. Now is the time to close as many deals as you can!

Why foreclosure risks remains low

Many experts are wondering if another foreclosure crisis is on the horizon since inflation, interest rates, and home prices are all on the rise. But today’s housing market is much different from the market in 2008. The latest data suggests that, while the market may be cooling, the risk of widespread foreclosures remains limited. Here are some reassuring numbers:

• Right now, borrowers have a record-breaking $11 trillion in tappable equity, up 34% YoY. That’s a significant cushion if home prices fall.

• In 2007, there were over 13 million outstanding adjustable-rate mortgages, which become risky when interest rates rise. Today, there are only about 2.5 million outstanding ARMs.

• The average borrower credit score today is at a record high of 751, compared to just 699 in 2010

• Less than 3% of mortgages are currently past due, fewer than before the pandemic

Our take

Today’s market really is so different from 2008. These days, so many buyers are in a better position. They used cash, paid sizable down payments, and locked in super low rates. It’s good to see solid numbers that back up what we’ve been saying—the market may be cooling, but it’s still in a great, stable place.

10 cities first-time buyers should consider

In a recent study, Bankrate ranked the best cities for first-time homebuyers. They scored 50 metro areas based on home prices, job opportunities, inventory, crime rate, and overall wellness. The 10 cities that top this list all have one thing in common: they’re among the most affordable large metro areas in the country.

Here’s the Top 10:

1. Pittsburgh, PA

2. Minneapolis, MN

3. Cincinnati, OH

4. Kansas City, MO

5. Buffalo, NY

6. Richmond, VA

7. Cleveland, OH

8. St. Louis, MO

9. Hartford, CT

10. Milwaukee, WI

Our take

First-time homebuyers often need more guidance when making that first purchase. Information like this can help. It lets them know which factors, of the hundreds (possibly thousands) out there, they should be focusing on. Even if your clients don’t live close to these cities, you can help them look for comparable spots in their area.

Schematics

The news that just missed the cut

• 5 summer trends to brighten bland bedrooms

• How real estate is changing around the world

• What private landlords really think about the rental rate boom

• Before and afters of the Lake Tahoe home that sold for 3x what the owners paid

• The housing market right now, explained in six tweets

• Even financial expert Suze Orman says real estate is still a buy

Foundation Plans

Advice from James and David to win the day

There’s no question that the market is shifting this summer. Here are two key ways you can use the new market dynamics to your advantage right now.

1. Start negotiating. At this point, buyers are beginning to have more room to negotiate on price or contract terms. Use your best judgment based on your local market. In many cities, you might find sellers who are willing to compromise.

2. Look through expired listings again. Every time the market gets tough, a whole wave of agents give up and leave the industry. That leaves a huge opportunity for the agents who stick it out. Dig through the expired listings in your local MLS to look for clients whose agent may no longer be in business. They may still want to sell, and you could be just the agent they need!

Want more actionable insights? Check out David’s recent interview with Broke Agent Media.

Q&A

You ask, James and David answer!

We’ll be back next week with another answer to a real reader question. Submit yours here!

Just in Case

Keep the latest industry data in your back pocket with today’s mortgage rates:

Try to take the weekend to decompress. It's officially summer. Don't look at your phone for a few hours. Work is important, we get it, but sometimes a reset is needed. See you all on Tuesday.

- James and David

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