New podcast episode!

In the latest episode of our podcast, “Rise Above the Ranks”, we do a quick 15-minute wrap-up of what we’re experiencing in the market. Let’s just say… there was A LOT to squeeze in.

We’ve seen some insane sales recently. The other day, we closed a deal where we had to fight off 17 buyers for – get this – an $8 million teardown! We’ve been in this business a long time, and it never ceases to surprise us.

But there’s a reason why the competition is so fierce. We have a big inventory problem. We also have a lot of sellers who just don’t think it’s a good time to put their homes on the market.

In this edition of the newsletter, we go over several reasons why the market is so unusual right now. However, that is, after all, one of the thrills of working in this industry–we never know quite what to expect (…well, except The Blueprint in your inbox every Tuesday and Friday).

Happy reading!

– James and David

All-cash home purchases continue surge

All-cash home purchases reached their highest level since 2014, according to Redfin’s analysis of financing trends. The report also said that:

  • 33.4% of U.S. home purchases in April were made in cash, up 30.7% YoY

  • The typical buyer’s down payment fell -18% from last year, one of the biggest drops since the start of the pandemic.

  • The percentage of buyers using FHA loans has surpassed pre-pandemic levels

  • Jumbo loans, once the primary way to purchase expensive homes, have become less prevalent now.

Our take

It doesn’t surprise us one bit that all-cash deals are up since mortgage rates are also up. What catches our eye is how real estate is now competing with bonds. The buyers who can pay all-cash for a home may think twice about buying a home because they can now spend that same amount on investments (such as bonds) that benefit from higher rates. This is good info for us agents to know.

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D.R. Horton and Pretium sign massive deal

D.R. Horton, the largest homebuilder in the U.S., signed a $1.5 billion deal to sell approximately 4,000 completed and partially completed houses to Pretium Partners. As one of the largest investors in residential housing, Pretium is accustomed to buying from builders. According to Bisnow, the company owns about 100,000 houses nationwide, as the demand for single-family houses has outpaced many Americans' ability to afford them.

Our take

There is a narrative out there that big investors aren’t interested in residential real estate right now. As they say on our side of the pond, that’s pure rubbish! Yes, rent growth has slowed in single-family homes, but only in high-priced tier-one markets. In lower-level markets, rental growth is twice the pre-pandemic rate. Sure, big investors aren’t exactly jumping headfirst into the market right now but, as this deal shows, their interest in residential real estate hasn’t waned at all. They're just biding their time, waiting for mortgage rates to drop before they pounce.

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The hidden cost of homeownership

Homeowners are paying an additional $14,155 a year, or $1,180 a month, when they factor in “hidden” costs associated with utilities, property taxes, insurance, and home maintenance. That number comes from an analysis from Zillow and Thumbtack, which listed the top 10 metros with the highest hidden annual costs of homeownership:

  1. San Francisco, CA ($22,791)

  2. New York City, NY ($22,776)

  3. Los Angeles, CA ($22,347)

  4. Seattle, WA ($20,915)

  5. Boston, MA ($20,879)

  6. San Diego, CA ($18,978)

  7. Austin, TX ($18,401)

  8. Chicago, IL ($17,880)

  9. Miami, FL ($17,862)

  10. Portland, OR ($17,681)

Our take

This is an extremely useful report. Use it to help buyers, especially first-time buyers, learn about the full range of costs before they make an offer. We’ve seen many surveys that show, when it comes to buying a home, clients need the most help in understanding the financial aspect of their purchases. Set yourself apart by being a genuine and knowledgeable advisor in this area.

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The news that just missed the cut

Foundation Plans

Advice from James and David to win the day

We’re back, baby! After a short hiatus, we just dropped the latest episode of our real estate podcast, Rise Above the Ranks. This week, we discuss the overall state of the market, while focusing on three particular trends catching our attention.

Low Inventory – We typically deal with very high-end real estate, yet even we’re facing the pressure of having low inventory. At the beginning of the year, there was a mass of sellers rushing to avoid the “mansion tax,” but now things have slowed. Inventory really is low, and it’s genuinely affecting the pace of sales.

Plentiful Buyers – Although inventory is low, the number of buyers out there is overwhelming. In our last sale, we had to ward off 17 other offers to close the deal. SEVENTEEN! We luckily came out on top, but the competition was fierce. Whatever the challenges of our current situation, buyer interest in homes, whether high-end or not, hasn’t waned one bit.

Creative Financing – High rates truly are causing sellers to stay on the sidelines. In the episode, we detail how to use creative seller financing as part of our pitch to get homeowners in the game. Getting creative with financing is an absolute must in our current market. Otherwise, you risk losing a deal or potential listing.

Listen to the full episode here.

Just in Case

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

Source: Rocket Mortgage

That’s a wrap on this edition of The Blueprint!

Remember: each day is a gift and a new opportunity to lead the life you want and to become the person you want to be. The mistakes and missteps you’ve made in the past don’t define you. Live as intentionally as you can and be ruthlessly focused on the goals you’ve set out to achieve. You can do it!

Thanks for reading, and we’ll see you back here on Tuesday!

– James and David