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good afternoon I'm John Schink from Deerwood Realty and I wanted to go over something that has been percolating in the back of my mind for a while now and I think it's something that's being overlooked and I don't know why I don't know that there's a Sinister I don't think I don't know that there's people in the in the back um you know pulling the strings of the puppet or I I don't I don't think that actually would be a Marinette but anyway um I did want to go over uh this uh this I want to go over the narrative and then I want to show you what I think and then want to put the two together and see if it makes any sense and if it if it does that's great and if it doesn't then it's one video that I I didn't do well on which add added up it's it's no big deal so let's get to it the first thing I wanted you to see was this article this came out on like MSN or something and uh it says you know House Hunters have been have lost 71,000 in buying power since last summer well that doesn't sound good right so but why did they lose the 71,000 in actually it's for money I don't want to not credit somebody so why did they lose all right so then I was like okay let's let's look at the narrative it says home buyers purchasing power is rapidly slipping away as mortgage rates continue creeping up according to new analysis in fact someone with a $3,000 monthly budget can now only afford a $429,000 home compared to a $500,000 home one year ago and so this was written in um August of this year so this is the narrative right home affordability has been impacted and is terrible because mortgage rates are high which like as I work in the business of helping people buy and sell homes it's not not intuitively the way I feel it says historically High mortgage rates Rising prices and low inventory are making it especially difficult to purchase a home right now so in this line there is a little hint of what might be the issue but it's not it's not produced I'll I I I don't know why it's it's kind of avoided it says the estimate which comes from real estate broker refen uh reflects a $71,000 loss in buying power since last August yet another blow to long-suffering us home buyers who have been dealing with unfavorable market conditions or circumstances since 2020 and that's true it you know I had people in like 2019 that were like should we just give up should we just stop looking um and then I'm not worried about the data too much but it says the outlook for home buyers I thought this was interesting because this was in August it says it's been a rough few years for Americans trying to buy homes pandemic induced migration and the ensuing home buying frenzy pushed prices way up in 2020 okay so now there's another reason for prices to go way up resulting in bidding wars between buyers who could still afford to compete for property just as the market started showing signs of cooling in the summer of 2022 the Federal Reserves inflation busting rate hikes now he little little hint but they don't just come right out and say it so we'll just keep going pushed even more buyers out of the market as homeowners locked into their current mortgages okay this High mortgage rates have edged home sellers out of the market too creating an even greater imbalance between supply and demand now buyers are contending with a nightmare Trio of historically High monthly mortgage payments historically high prices and historically low inventory is sellers

Retreat that's the narrative that's what you've been hearing over and over and over again there's an imbalance might have been created by the FED we don't know and then says per recent reports from Real Estate Marketplace Zillow the typical home is now valued at almost $350,000 and values are expected to grow 6.5% over the next

year so I just want to I just want to just kind of get right here and think about this for a minute so we are told that um the the reason why uh the reason why affordability is gone is because mortgage rates are high right that mean that would be the general I'm not I don't hope I'm not you know straw Manning or anything the general consensus amongst those people that write these articles is that's the reason but I've been talking about something for a long time and uh it seems like there's never a way to to bridge the two so let's just look at this other little tweet a very simple tweet it says I got to get there it says all the headlines say that inflation is now 3.7% but what they fail to mention is that this is building on years of inflation 3.7 inflation is building on 88.2% in September of 2022 and 5.4% in September of 2021 this means that inflation since September of 2021 has been nearly 20% furthermore even if the rate of inflation is falling prices are still Rising many people confuse disinflation with deflation even with disinflation which we have now prices are still rising and I think that is the answer I think I think we've been overlooking inflation in the affordability debate and I think that um I would like to believe that the people that watch my videos are probably probably pretty sharp for the most part I I I've seen some of their comments but it's the inflation part of it is is tricky for instance because it's destroying your purchasing power it it's it's it's different than home affordability in a way let me try let me try and do it this way if you've got a $500,000 the traditional argument is you get a $500,000 house and you have a 2% mortgage rate it's probably more affordable right than an 8% inflation rate okay but what if that $500,000 house okay is um is inflation adjusted that $500,000 house just with inflation eating away with it is like 540 $550,000 now so you've lost that you've lost that the the purchasing power is down because your value of your money is down okay and you say well we're going to fix the inflation problem we're going to get back to the Target of 2% yeah that's great however like as the as the Tweet mentioned you're up 20% so just getting down to 2% is not is not helping that's why this is such a mess you know I don't I in in some ways I don't understand why it's so obvious to see the effects of inflation in some things and not in others so so if you look at the grocery store right I mean you say you buy a thing of bananas right now the bananas are more expensive than they were two years ago and you say well that's inflation okay and you don't go into the supply and demand uh of bananas right I don't think anything of it um another space where inflation seems to be hidden in my mind uh tax revenues tax revenues seem to go up right but but it's inflation you have you you have people making more money but the money's worth less and then similarly in housing what like what a h people say the housing Market's going to crash I've been I don't even understand I mean we can Define what a crash is okay but ex but you have to explain to me how you're going to have house prices dramatically decline in a short period of time okay that's what we're going to go with for a crash with inflation which has eaten up the buying power okay not affordability the buying power your dollar has gone lower you you the the ability to buy something is lower now than it was three years ago and so how is that going to be reflected in home prices going forward um it's it's going to be uh it's going to be almost impossible to to to get that number right okay they have like inflation adjusted pricing they have all this stuff but but what's happening is the affordability um the affordability narrative is is beating out the inflation narrative at this time and so uh what I would just say to to everyone is like look pay attention to how corrosive and evil and bad inflation is make sure that you put it first in your discussions with your family and friends and maybe we can get an understanding here that that you know printing off you know millions and millions and millions and billions of dollars and just handing it to everyone is is is really really affecting our ability to to buy things our dollar is just not going very far anymore and it you know the price of the home because of inflation is going to stay higher for longer you may say well if people stop buying you know like okay what happens if Market forces come into play and people stop buying homes the home prices will go down right well in theory yes right but but that's still not accounting for inflation it's still not for instance you know like just think of it this way a $300,000 home in 1980 I I'm pretty sure is not worth $300,000 now I I mean that would get you a shack right now in most parts of the country and and it would have been a you know it would have been a mansion so just just keep that in mind there there's not a whole lot you can you know do about it but just don't overlook the corrosive effects of inflation as we go forward in the housing market as part of the conversation about home affordability that's all I have for you today I hope I hope it made sense you know I don't know but I tried um thank you for watching thank you for listening and I'll catch you on the next one