\n<\/p>\n
Interest rates<\/strong><\/a> are up<\/strong> yet again, even after multiple Fed rate cuts in 2024. What\u2019s happening, and how long can this last? <\/strong>Bond investors worry inflation is here to stay. This concern forces bond yields\u2014and mortgage rates<\/strong>\u2014to grow. Can Jerome Powell and the Federal Reserve do anything to ease investors\u2019 minds or do we have a long road of high rates ahead of us?<\/strong> We\u2019re getting into it in this headlines show!<\/p>\n Don\u2019t let rising rates stop you from building wealth; we have more stories that showcase an optimistic future outlook for <\/strong>real estate<\/strong> investors<\/a>. From an incoming commercial real estate<\/strong><\/a> recovery <\/strong>that has been multiple years in the making to sellers finally submitting<\/strong> to the market and putting their homes up for sale<\/strong>, it\u2019s not all bad news going into 2025.<\/p>\n One natural disaster-ravaged state<\/strong> finally puts its foot down and forces insurance companies to write policies<\/strong> in risky areas. Is this a much-needed government intervention, or will this shift the burden of high insurance costs onto investors and homeowners? We\u2019re sharing our opinion in this episode!<\/p>\n Dave: Henry: Dave: James: Dave: Kathy: Dave: Kathy: Dave: James: Kathy: Henry: Kathy: Dave: Kathy: Henry: James: Dave: Kathy: James: Kathy: James: Kathy: James: Dave: Kathy: Dave: Kathy: Henry: Dave: Kathy: Henry: Dave: Henry: Kathy: Dave: Kathy: Dave: Kathy: James: Dave: James: Dave: James: Henry: James: Dave: Henry: Dave: James: Dave: James: Henry: James: Henry: James: Henry: Kathy: Dave: Henry: James: Kathy: James: Kathy: James: Dave: Kathy: Dave: Henry: Kathy: James: Dave: Help us reach new listeners on iTunes by leaving us a rating and review! It takes just 30 seconds and instructions can be found here<\/a>. Thanks! We really appreciate it!<\/p>\n
Why do treasury yields keep surging? How are homeowners ensuring against more and more extreme weather? Will 2025 be a pivotal year of recovery in commercial real estate? And what are new listings doing as we kick off 2025? Hey everyone, it\u2019s Dave. Welcome to On the Market, the Real Estate News and Economic Show where we like to have fun while keeping you informed. And we\u2019re starting our year off with our first headline show, which means that Henry, Kathy James are all here. Thanks all of you for joining. Henry, how was your holiday?<\/p>\n
It was really good, man. I got little kids deals, so the magic of Christmas is a real thing, so it\u2019s super fun.<\/p>\n
Oh, nice. Glad to hear it. James, I know you just got back from Japan. How was it?<\/p>\n
It is amazing. Tokyo is a phenomenal city. I got to say, it blows my mind how clean that city is. You walk around, there\u2019s no garbage cans, but there\u2019s no garbage anywhere. And then we hit some of the best powder snow I\u2019ve ever seen. So overall, Japan, 10 out of 10 for visiting<\/p>\n
Kathy. Meanwhile, you were just looking at great snow because you were trying to ski, but the whole resort was on strike.<\/p>\n
Yeah, yeah, you could look at the snow by standing in a two hour long line.<\/p>\n
Lovely.<\/p>\n
So I was just looking at James photos instead of Japan and putting that on my bucket list.<\/p>\n
Well, I\u2019m glad to have you all back. Hopefully everyone listening also had a nice holiday season and a happy new year. We have had a few episodes come out, but this is the first one we\u2019re recording here in 2025. A lot has happened over the break, so we need to get on top of all of these headlines. So let\u2019s jump into them. James, what headline did you bring for us today?<\/p>\n
So the articles from MarketWatch, and it\u2019s titled Treasure Yield and 2024 with the biggest yearly surge since historic 22 route. So we ended 2024 with bonds kind of jumping in that last month, which isn\u2019t great for what we\u2019re forecasting rates for. And I think, Dave, you\u2019ve been talking about this the last 30, 45 days, like, hey, that rates may not go down. And I think a lot of us, especially about this time last year, I thought rates were going to be a lot lower going into this year. I thought we were going to be in the low sixes, maybe even high fives by the middle part of 2025. But it is not looking so much that way. The bond markets jumping everywhere and they\u2019re blaming the bond vigilantes, which I had to research a little bit. And basically they are financial bullies that seem to throw their weight around, they throw their money around and they can move the bond market around.
And so right now the bond vigilantes aren\u2019t really happy with what they\u2019re seeing. They\u2019re bullying the market and that\u2019s why we\u2019re seeing this surge in bond rates. But as an investor, it tells us we got to kind of anticipate that rates may be a little bit higher for the next 12 months and we\u2019re not going to see that rate relief. They\u2019re saying that instead of interest rates being down a point, it could look like it\u2019s just going to be a half point. And that makes a huge difference on performance, how you look at cashflow, how you look at deals, and it\u2019s definitely something we all have to prepare for as investors.<\/p>\n
Being from California, I thought that if we all collectively put out intentions that rates would come down<\/p>\n
If you would, just good vibes<\/p>\n
Putting it out in the universe as we all have. We were being bullies too. It didn\u2019t<\/p>\n
Work. Were you reading that book The Secret over the holidays?<\/p>\n
No, I\u2019m just from California. It\u2019s how we think,<\/p>\n
James, by that definition, wouldn\u2019t you be considered a Pacific Northwest flip vigilante just throwing your weight around, snagging all the deals, nobody else can get, any good ones?<\/p>\n
You know what, I just consider myself a contributor to the economy out not really bowling things around, but I will say after I was reading on these bond vigilantes, I\u2019m kind of jealous if you have that much power. It\u2019s like, wow, you really can move things.<\/p>\n
One of the first videos or blog posts I ever wrote for pickpockets a few years ago is just how bonds rule the world. It\u2019s so boring because people don\u2019t want to understand them. They\u2019re not exciting, but they actually dictate so much of the entire economy. It\u2019s really worth spending a little time understanding. And on that note, I should probably just explain a little bit about what\u2019s going on here. As James said, most people were expecting mortgage rates to come down this year because the Fed is cutting rates. And a lot of times that does correlate to low mortgage rates. But as we\u2019ve discussed many times on the show, mortgage rates are really tied to bond yields and bond yields go up when there is fear of inflation. And that\u2019s what\u2019s going on over the last couple of months. People are fearful that a lot of the things that president-elect Trump is planning to implement will create at least short-term inflation.
And the hope is that that short-term inflation is building a stronger long-term economy, but bond investors really hate inflation. It destroys their returns. And so they revolt against this and they do that by not buying bonds, which means that yields go up. It\u2019s kind of a complicated thing, but we are probably going to see this until there is more clarity about which campaign policies that Trump has been talking about, he\u2019s actually going to implement. Is he going to implement tariffs and if so, how big are they going to be? Is he going to deport a lot of labor from the United States and if so, how dramatic is that going to be? Right now there\u2019s just so much uncertainty that bond investors don\u2019t want to buy government bonds, and that means the government has to pay higher to entice them to buy those bonds which pushes up mortgage rates. So as James said for now, we are probably going to see mortgage rates stay higher than I think anyone was hoping they would.<\/p>\n
Yeah, I mean I am sure the bond investors obviously had a lot to do with this, but I think the person who holds and wields the most power is Jerome Powell. And in December he made some comments that had the bond market react. I really see the bond market as more like a lot of chickens that just react to every sound that the Fed makes. And in this case, Jerome Powell said they might not be doing more rate cuts, and if there are, it\u2019ll be very few. It\u2019s on hold. So the bond market reacted to that because as you recall, it was, I don\u2019t know, six months ago or so, maybe more that the Fed said there would be six cuts or four to six cuts, but the bond market and the stock market interpreted it as six cuts in 2025. And that\u2019s clearly not the case. And that has again, a lot to do with the job market being so strong. So I don\u2019t know, it\u2019s so much that the bond investors are bullies, but that the Fed has so much power in every word that they say<\/p>\n
The market, they had confidence it was like 17% that the rates would cut and the next fed meeting,<\/p>\n
But<\/p>\n
After the bond market jumped like this and what he said, now it\u2019s at 11.2% that we\u2019re going to see another quarter point cut. And so he may not be doing more cuts in the beginning part of the year. And so the thing is, as investors, we just have to now anticipate that not go into this, oh, the rates are now going to stay high, don\u2019t buy.<\/p>\n
It\u2019s<\/p>\n
Going, okay, well this is what we see and if we think rates could be a half point lower by the end of the year, then that\u2019s what we should look at at the cashflow. And so it\u2019s really important to pay attention to all that because it tells you how to forecast.<\/p>\n
Well, I\u2019m not happy about this. I don\u2019t want to be right about rates staying higher, but I would like to now take my victory lap<\/p>\n
When<\/p>\n
I railed against the date the rate marry the house. People who have been saying this for years, like, oh, just go buy stuff refinance in a year. No one knows what\u2019s going to happen. This is just a very uncertain time, particularly with markets no one knows. And so yes, you should be buying real estate. I\u2019m still buying real estate, but you should buy it assuming that rates are going to stay relatively high for the next few years, and if it goes down, that\u2019s a bonus. That\u2019s a cherry on top of any deal that you\u2019re going to get. It probably will happen, but don\u2019t count on<\/p>\n
It. You deserve that victory lap. Yeah, you deserve it. Thank you. Thank<\/p>\n
You. So said differently. It sounds like the advice for investors here is you need to buy a good deal based on how it underwrites now and not try to predict future performance based on what we think rates might or might not do. We clearly don\u2019t know. We\u2019ve been saying this for the past year consistently, is that the key to being a successful investor now more so than ever is you have to be very tight in your underwriting, you\u2019ve got to be conservative and you have to bank on what you see happening now and not what\u2019s happening in the future.<\/p>\n
Yeah, that\u2019s perfectly said, and I still think the long-term trend of rates is down, but I think the timing of that is going to be super hard to, alright, well James, you just brought everyone down to start the new year. Thanks a lot. We at BiggerPockets are actually launching something really cool I want to tell you all about. It\u2019s called Momentum 2025, and it\u2019s an eight week virtual series that helps you prepare to succeed in 2025. So we have two basically different things that are going on with this. First, you\u2019re going to get eight weeks of content every Tuesday from two to three 30 Eastern Standard. We have amazing different experts and hosts. I\u2019ll obviously be there, so James and Kathy and Henry, but tons of other real estate educators are going to be sharing their insights and expertise eight weeks in a row. And on top of those educational courses, you\u2019re also going to get paired with other investors in small mastermind groups, which it\u2019s just this great opportunity to share ideas, get feedback, have some accountability.
So these things together, it\u2019s all designed to help you succeed as an investor in 2025. I wanted to share it with you today because it starts February 11th, but actually if you buy tickets now before January 11th, you get early bird pricing which gives you 30% off, so you definitely want to take advantage of that. On top of what I mentioned, you\u2019ll also, if you do the early bird, you get bonus resources over $1,200 worth of goodies, like books, planners discounts on future events. All of it is available to you. So if you are interested in doing this, make sure to buy your ticket before January 11th so you get that big discount. We have more headlines that will impact your investing in 2025 right after the break. Hey friends, welcome back to On the Market. All right, let\u2019s move on to our second headline. Kathy, what are you looking at these days?<\/p>\n
Well, my article is from housing wire in it. The title is California Will Require Home Insurers to Offer policies in high risk Wildfire areas. So this is just an issue across the country, a big issue in California in regards to fires, but we\u2019re certainly not alone in that. What we\u2019ve experienced, and I\u2019m definitely ground zero for fires right here in Malibu, lots of neighbors have completely lost their insurance. Their insurance provider that maybe they\u2019d been paying for 20, 30, 40 years just pulled out. They couldn\u2019t get reinsured, it wasn\u2019t renewed. And what do you do? What do you do when you can\u2019t get insurance? It\u2019s really scary. And so California does have a backup for that, but it\u2019s not that great. You can get our coverage is up to 1.5 million and as you probably know, that\u2019s pretty low for California. It\u2019s not going to cover a rebuild.
So anyway, this article, I remember interviewing an advocate for homeowners in the insurance world and he said, don\u2019t worry that this problem\u2019s going to get fixed eventually, and it probably will come through regulation. So we\u2019ll see how this goes. It\u2019s basically, it says the California Department of Insurance unveiled a new regulation this week that aims to increase homeowner\u2019s insurance coverage in areas prone to wildfire in response to the recent pullback in policies. So obviously that means that the costs are going to be passed on to the homeowner and Rich and I actually did find an insurer who would insure the full value of the house, but it was like $120,000 a year. We\u2019re like, no, no thanks. Instead, rich just stayed here during this past Malibu fire and all the guys, all the husbands stayed at least on our street to fight the fire themselves. Like it\u2019s crazy. We\u2019re not insured, which probably isn\u2019t great either. So what do you guys think? Do you think that more states are going to regulate and force insurance companies to provide coverage?<\/p>\n
Yes, banks will.<\/p>\n
I think so. Or states are going to have to create their own insurance policies, especially Florida, California, Colorado, these places. It\u2019s just not economical for insurance companies to run a business there. Yeah,<\/p>\n
Yeah. I mean if you think about, we already have a home ownership conundrum where people can\u2019t afford to buy homes, but now if people can\u2019t get insurance for homes, banks are going to want obviously people to have insurance since they\u2019re providing the loans. And then if people can\u2019t either afford the insurance or can\u2019t get insurance, they\u2019re just probably not going to buy homes. They\u2019re going to go rent where they can have renter\u2019s insurance and that\u2019s going to continue to exacerbate the problem. So I think there will be regulation at some point. There has to be,<\/p>\n
Yeah, so this is a start and it\u2019s not that great, but it\u2019s something it says the rule will require all insurers to do that do business in the state to begin increasing their policies in high risk wildfire areas by 5% every two years.<\/p>\n
I don\u2019t even get it. They\u2019re just basically saying they have to increase the replacement value of the houses.<\/p>\n
No, the number of policies. So this is going to be a slow spread, and I don\u2019t think this particularly is going to make a big difference, but the California Fair plan, which is sort of the backup, which again isn\u2019t that great, it has been completely overwhelmed and was never meant to be the insurance policy that everybody has. It\u2019s what we have, but you can\u2019t get through to them. You don\u2019t even know if you\u2019re covered. They\u2019ve dropped us several times and Rich has been on the phone for hours trying to make sure the policy\u2019s in place, but for me personally, we just had a fire outside our door. Everything\u2019s kind of burned out there, so I got another five years before I have to worry about it.<\/p>\n
Yeah, because all the fuel is already gone. It\u2019s<\/p>\n
Already gone, and like I said, I\u2019m ground zero, so we had firefighters all around the house and they\u2019re like, you\u2019ve done a really good job. You have no trees. So that\u2019s the other thing is we can\u2019t really plant trees by our house, so the price you pay,<\/p>\n
Well, and that\u2019s the thing that you have to pay attention to as an investor is what\u2019s the policies of the state that you\u2019re going to be investing in? Because a lot of this is caused, as far as I know from the insurance commissioner in California, I think they tried to tell insurance companies that they had to standardize their insurance increases and they go, you\u2019re not allowed to increase it more than what we are basically telling you we can do. As far as I know, and what that did is is it made all the major carriers leave California State Farm, Allstate, that the big hitters are not insuring there anymore, and it\u2019s a massive problem because our project in Newport Beach, which hey, we\u2019re in contract on.<\/p>\n
Oh, nice dude. Oh,<\/p>\n
That\u2019s awesome. It\u2019s set to close in nine days. Wow. I\u2019m not going to say the number. That\u2019s awesome. But it\u2019s definitely the most expensive flip I\u2019ve ever done<\/p>\n
About to be the most profitable flip you\u2019ve ever done. Hopefully<\/p>\n
Profit, yes. Return cash on cash. I\u2019m going to break this down actually something to be said about smaller purchase prices.<\/p>\n
Amen, brother.<\/p>\n
Yeah, the returns are, I\u2019ll break it down later, but I got canceled three times on that property for insurance, and it is a complete nightmare and the cost is super expensive. I think for my flip, I paid $42,000 for the year for insurance, and that was my third policy. And so as you start investing in, like Dave said, Florida, California states that are overregulating because overregulation is why they left not just the conditions because overall California, yes has fires, has other things going on, but it\u2019s also the politics are not good and that\u2019s why they all left. And so I think you really want to pay attention to it. It is expensive between the property taxes in California, the insurance cost and the housing costs, it makes it tough<\/p>\n
For sure. Yeah, this is just one of those things where I feel like it\u2019s going to backfire if you\u2019re just increasing regulations where you\u2019re already scaring companies away and then you\u2019re adding regulations that\u2019s going to make it even less profitable for them and they\u2019ll just go somewhere else and then there\u2019ll be even less competition. We\u2019ll see, but I\u2019m not sure this is the right solution. All right. Let\u2019s move on to our third headline. Henry, tell us something.<\/p>\n
Well, this article is from the world economic form. It actually just released today and it\u2019s titled, will 2025 be a Pivotal Year of Recovery in Commercial Real Estate? And it goes on to talk about essentially how many central banks have begun cutting interest rates, which are leading to improved fundamentals and increased capital inflows into the private markets. And that is creating a favorable environment with approximately 66% of global markets entering a buy cycle, which is the highest level since 2016, but it starts to go into specifics with commercial real estate saying why it might be a better year in 2025. Mainly saying that because of the housing shortage that residential commercial real estate will be on the rise. It also talks about how retail is doing really well, and I mean that\u2019s very true. Industrial is also strong. Warehouses and industrial spaces have done really well in the commercial space even over the past couple of years as commercials been on the decline.
And a lot of that is because of lots of side hustle, people starting their own online businesses and needing warehouse spaces because of major companies expanding more into online sales and retail sales online. So they\u2019re needing more warehouse space and industrial space. It\u2019s moved into the food industry with ghost kitchens and people setting up kitchens and doing Uber Eats and DoorDash out of Ghost Kitchens where they don\u2019t have a traditional brick and mortar. So those spaces have been doing very well. And then office spaces, there are a lot of companies that are asking people to come back to the office and realizing they weren\u2019t getting the productivity that they thought they were when people were doing a lot of work from home. And so I think all of those things are good signs for the commercial real estate space. I don\u2019t necessarily know that. I agree with this article at 2025 is going to be the year where things turn around for commercial, but I do think that some of the indicators are showing that there could be some positivity or things moving in a positive direction in commercial real estate. But it also does talk about there\u2019s an increase in niche sectors of commercial real estate such as student housing, self storage, data centers, which is huge for a lot of companies. And so a lot of these type of niche commercial real estate sectors I think are great opportunities for investors within commercial real estate to diversify. What do you guys think?<\/p>\n
I don\u2019t buy it.<\/p>\n
I don\u2019t buy it either. Well, it depends on what you\u2019re classifying as commercial. That\u2019s the thing people make that mistake of it\u2019s going to do bad or good. Well, what asset class are you talking about? There\u2019s a very broad range. I think office is a disaster still.<\/p>\n
I want to buy office. I don\u2019t know how, but I feel like there\u2019s going to be just some absolute fire sales.<\/p>\n
The one thing I do know, the ones that are sitting vacant, I\u2019ve actually been, we\u2019re working on trying to find a new lease right now and get some more space and the thing that you\u2019re always negotiating with is that are available and there\u2019s a lot of subleases that are available and subleases are deals, and so as they\u2019re trying to lock you into this long-term rate, you can use that to negotiate your own terms. But I will say a lot of the guys that did buy, they\u2019re not as leveraged as the buildings I\u2019m seeing<\/p>\n
Because<\/p>\n
They did a lot of 10 31 exchanging or they were parking money and so they can kind of weather the storm. But for the mom and pops office buildings, yeah, I think there could be some pain there. But there is, like Henry said, industrial depends on the location of the retail. Those are great things to buy. If you can get the right buy on \u2019em and they\u2019re in the right location and there\u2019s the right tenant demand,<\/p>\n
It\u2019s the tenant. If<\/p>\n
There\u2019s no demand, don\u2019t buy there. So it\u2019s the path of progress. Where\u2019s it growing? Focus on that and then look for the opportunity.<\/p>\n
It\u2019s similar than with residential real estate and you have to underwrite well and you have to understand who your tenants are going to be and who they aren\u2019t, and then what\u2019s the demand for that product or service in your area. There are absolutely businesses who have to have a brick and mortar to be successful, but do those businesses need to be in the part of town where you\u2019re looking to buy? What\u2019s the competition of those businesses? You really have to underwrite and do a lot of research. Well, in the retail space for commercial, if you\u2019re going to buy one of those assets, I think it can be super risky if the tenants you need already have competition are not wanting to be located in that part of town. You can be sitting on some vacancy.<\/p>\n
There\u2019s going to definitely be opportunity out there because so many commercial real estate investors have had the motto survive till 25 and here we are in 25. And the belief was what I said earlier, it ties back to our first story on the bond market and rates. And a lot of people thought by now that the economy would\u2019ve slowed down that there would be job losses, that all these rate hikes would bring us into a recession. The Fed even said that there would be pain in real estate and it would probably looking at a recession, and here we are moving into 2025 and bond yields have actually gone up and so have mortgage rates and the Fed is now saying they\u2019re not going to probably cut for a little while, cut rates lower, and who knows if things continue to boom, they could even hike rates again, we don\u2019t know.
So a lot of commercial real estate investors who have been hoping that this was the year that they would see rates go down and that they could refi as their loans come due and they\u2019re on short term notes where many, many, many commercial real estate investors are having to refi this year and they are not going to be refining into lower rates. They\u2019re going to be refining into rates that are maybe two times what they currently have and that is really hard. So if you are a commercial real estate investor, there are deals to be made out there. I think this is the year that some property owners are going to realize they have to discount prices. I know last year we\u2019re seeing that, but there have been holdouts, right? So if you know how to find the deals, I think this is a year you could do really well.<\/p>\n
I agree, Kathy. I think there are going to start to be opportunities. There\u2019s also going to be a lot of garbage out there right now, which is kind of always the case, but the question to me is what\u2019s going to be the catalyst? Because it feels like there\u2019s this building distress and people are just kicking the can down the road, but there hasn\u2019t been a catalyst yet to force people to sell at a lower rate. Whereas everyone, it seems to agree, every buyer at least I know agrees that prices have not yet corrected to the point where it\u2019s attractive, but sellers have somehow managed to not discount to the rate where people think it\u2019s appropriate to buy. And so something\u2019s going to happen in my mind, I just don\u2019t know if it will be in 2025. I think people have gotten pretty good at kicking the can down the road and maybe it will happen, but it could be 2026. Frankly, I\u2019ve been surprised. I thought the distress would already have happened. I kind of thought we would\u2019ve been in a buying zone now, but they\u2019ve gotten good at avoiding installing, but eventually that\u2019s going to dry up.<\/p>\n
I\u2019m on the same boat as you, Dave. I\u2019m still skeptical regardless of what this article is saying, especially when it talks about some of these alternative sectors when it looks like it mentioned student housing and self storage, and I think college is not on the rise right now. Less people are going to school than ever before for higher education. Self storage. I think self storage is getting overbuilt. I mean I think it\u2019s a cycle where there\u2019s just too much self storage and so I don\u2019t know that that\u2019s going to be the saving grace. I think data centers are a cool idea, but I mean how many across the country is really going to make a difference in this? I just don\u2019t know that these alternative sectors are going to be the thing that turns around commercial real estate. But I have said, and I\u2019ll continue to say, whoever figures out how to take commercial office and convert it to affordable housing is going to make a ton of money because that\u2019s a problem that we have. There\u2019s tons of vacant buildings all across the country. If somebody could solve the puzzle and get all the powers that be to work together with city and local government and with the federal government and with the builders and with the investors in order to turn commercial into residential affordable housing, they\u2019re going to make a lot of money.<\/p>\n
You know what I don\u2019t understand because the reason they can\u2019t convert that is because of the cost of construction. You got to drill through concrete. I mean it is so expensive drill through, but why don\u2019t they just make cubicles for housing? I mean it\u2019s a little weird, but at the same time you just pop \u2019em in, zip \u2019em in. I mean that\u2019s going to be the only way to do it because the cost is way too much to be drilling through. Yeah,<\/p>\n
I think the issue was the bathrooms and water and<\/p>\n
Plumbing<\/p>\n
And so you just have to share bathrooms I suppose,<\/p>\n
But<\/p>\n
They could float it. There\u2019s always a way to float. It<\/p>\n
Seems like there would be a way. Yeah,<\/p>\n
I\u2019ve seen a couple of them pop up recently, but it really depends on the footprint of the original building. Some of them are prime for it, some of \u2019em are not. Personally, this whole commercial recovery I think is one of the more exciting opportunities in real estate on the horizon. I just don\u2019t know. It\u2019s hard to time and we\u2019re not there yet, but when it happens, I think we\u2019ll be a really good opportunity for people. Alright, time for one last word from our sponsors, but we\u2019ll talk about some good news we\u2019re seeing in terms of inventory right after this.
Welcome back investors. Let\u2019s pick up where we left off. Alright, let\u2019s move on to our last story, which I brought, which is somewhat good news. It\u2019s that new listings, which is just a measure of how many people in the residential market list their homes for sale are up 8%, which means that people are able for the first time in a long time to actually see more inventory. This is sort of the other side of the coin of higher interest rates. We don\u2019t want lower affordability, but it is allowing inventory to recover. We\u2019re not really at pre pandemic levels in most cities yet, but I think this is generally a positive for investors because it means that there\u2019s going to be more deals out there and there\u2019s going to be more opportunity to negotiate with sellers. We\u2019re getting to a more balanced market, which hopefully will increase the number of transactions volume that will be music to the ears of our friends who are agents and lenders and hopefully we\u2019ll just get a little bit less stuck than we are right now. So I don\u2019t know about you guys, but I see this as a positive thing. I know some people see increasing inventory as signs that price appreciation might slow down, but I think more inventory is required for if we\u2019re ever going to get back to a more normal market.<\/p>\n
And what we\u2019re talking about is increasing inventory. I think the gap between what we have and what we need as a country is still so large. So it\u2019s not that we\u2019re going to be at a level where housing won\u2019t be an issue anymore, but increasing inventory, I think\u2019s healthy for the market. I think it\u2019s healthy for investors because it\u2019s going to continue to weed out a lot of the run of the mill investors who don\u2019t do a good job, who are maybe not doing this for the right reasons, who don\u2019t have a good business model, they\u2019re not going to be able to survive because it\u2019s going to be harder. If you\u2019ve got competition, that means you\u2019ve got to do a good job. It means you got to do a good job from start to finish, from how you buy it to what you do to it, to how you market it and put it out there on the market and sell. So I mean I think that\u2019s a positive thing for buyers and sellers.<\/p>\n
From what I\u2019ve seen, even though inventory has risen, it\u2019s kind of just back to where it was pre pandemic almost, not quite. And that\u2019s again looking at a national number, but when you really dive into different markets, it\u2019s a different story. We\u2019ve known for a couple of years now that Austin has too much inventory for example, and then you\u2019ve got other markets that are still just, there\u2019s just not enough and prices are going up. What\u2019s interesting is that everybody comes out with their predictions this time of year and all the big data real estate companies have come out with theirs and Fannie Mae, all the mortgage companies, everybody comes out with their predictions and it\u2019s kind of across the board that in spite of this rising inventory, they expect prices will continue to rise. Not at the same pace that it\u2019s been, but it\u2019s like two, I think I\u2019ve seen two to 4% increase in prices in spite of rising inventory. So we\u2019ll see, but not everywhere. Like I said in Austin, I think prices have gone down because there\u2019s too much inventory.<\/p>\n
It just depends on what the inventory is too.
There\u2019s so much junk in the market where it\u2019s like really you want to charge that much for that house? I think this would be interesting if we had a broker from each state break down available inventory and then fully renovated property. What\u2019s depending on that because we\u2019ve sold after the election, we sold off everything that was renovated, but what\u2019s remaining? There\u2019s more inventory in the market, but I wouldn\u2019t want to buy it not for that pricing. They got to put too much money into it afterwards. I don\u2019t like the inventory stats because I don\u2019t think it tells an accurate story as a flipper or developer, it\u2019s about what transacts and a buyer is. If a buyer\u2019s right now pricing\u2019s at all time highs rates are high, it\u2019s hard to afford a house. They do not want to put more money into a house right now,
And if they can find that house that makes sense inside their budget and they can buy it, turnkey people are still buying that and that\u2019s what they want. We did something, I tested something and it worked very well. We were going in the holiday months, we know it\u2019s slower that time. We listed a house for three days, canceled it, pulled it off market. We just did it to tease it. We listed the house for 50 grand higher than we wanted and then what happened? Foam was burning, Hey, what\u2019s going on with the house? There\u2019s nothing renovated. But we sold it three days later with a canceled listing because the demand, even though there\u2019s more inventory in this area, the demand for a good product was there and it was a fairly expensive house is 1.55 million in an area where they usually are trading one three to one four. And so the right product moves and so that\u2019s why I don\u2019t like the inventory stats because there\u2019s way more inventory in that neighborhood, but not good inventory.<\/p>\n
Alright, well those are our headlines for today. Thank you guys for bringing these. I think we have set it up for a very interesting year. Right now we\u2019re seeing inventory start to climb. Interest rates are staying high. There could be some movement in commercial real estate and insurance costs just keep going up. So we have a lot of the things that we\u2019ve been talking about for the last year still going on and that\u2019s going to give us plenty to talk about over the course of 2025. Well, Henry, James, Kathy, thank you guys for being here today. We appreciate you and thank you all so much for listening. We\u2019ll see you soon for another episode of On.<\/p>\n<\/div>\n