[00:00:11] Good afternoon.

[00:00:12] I saw this article and I thought should probably do a video on it. I’m going to do a little bit more of a deep dive than I normally do on stuff and we’ll just see how it goes. Let’s get straight to the article. The headline, home inventory is climbing even faster than this time a year ago. And to me this isn’t like a real big shock. This isn’t something to be concerned about because we’ve had, over the past two or three years, we’ve had a great market for sellers. Okay? And we’re kind of at the end it’s kind of petering out now. It’s petering out amazingly because of affordability, because of stupid high rates. But they’re going to get worse. So maybe we’ll see even more inventory in the future. But let’s get into it says available inventory of homes for sale is on the rise in late September, which is very unusual for this time of year. In fact, inventory is growing faster than this time of year ago. So let’s go over that. So just at least in the St. Louis market from about the end of March to the end of August is when everybody seems to list their house and where everybody seems to move. And then it starts getting slow in September and then throughout up until the end of March, things are kind of grim. The stuff that gets sold during this time is usually like estates is usually job transfers and divorce and the inventory itself, the quality inventory. So like move in ready stuff, not nearly as much. Not nearly much. So basically you look at five houses and maybe one of them is a house that you’d actually want to move into at the asking price. That had been true for the longest time up until the last couple of years when things just went crazy. This is a demand driven slowdown because new listing supply is still running 9% to 10% fewer homes for sale each week than this time last year. We’re seeing fewer new sellers each week. But inventory is building as homeowners or homebuyers wait to see if mortgage rates will come down to make purchases more affordable. So what he’s saying there is that the Fed, through raising the borrowing rate, we’re now at about 7.5% on a 30 year fixed that is causing fewer buyers to come to the market to make purchases. That’s the demand of the housing market being blunted by the Fed.

[00:02:42] Fewer new sellers also means that inventory can’t grow too much. The real trouble develops when demand drops and supply surges. And that’s what the classic crash is that everyone tells you is going to happen. I don’t see a crash. I don’t see it. I see a gradual stagnation of home prices, maybe a little drop in home prices over time, but I really don’t see this 30% crash overnight. I just don’t see it.

[00:03:09] And fewer new sellers also means the inventory can’t grow too much. That’s right. The idea is that people are locked in at that two and 3% rate and don’t want to move. I mean, they will not take another mortgage at this.

[00:03:26] That’s I agree with that. Normally by this point in September, available inventory is declining slightly each week. It’s late in the summer, so normally new listing volume drops as the last few sales of the peak summer months are concluding. Now, what’s interesting to me is this is true for where I live in St. Louis, Missouri. I don’t know about mean, I would think people would buy houses all the time. The weather’s great, maybe not during the raining season. But again, I would think that they’d always have a robust market. I would think that inventories would stay pretty stable.

[00:04:01] But it’s not true in St. Louis. I do agree with that.

[00:04:04] The fact that inventory grew by nearly 2% this week and last week is telling of how homebuyers are reacting to the highest mortgage rates in over two decades. Well, it’s kind of simple. Like, look, if I want to buy a house and what I want to buy is too expensive on a monthly payment, I’m not going to buy it at that level. And as much as I hate that the economy is set up this way with cheap credit in the United States, that’s the way it’s been. I mean, it’s been that way since I was born in the 70s. We get by on cheap credit and when it gets expensive, then everybody’s toast. And right now it’s expensive. So it’s a problem.

[00:04:43] Then it goes into the pending home sales continue to lag. New pending sales each week continue to run ten to 15% below last year’s pace. If you follow the National Association of Realtors when they published their existing home sales report each month, you know that the latest report for August showed a sales pace of only 4 million seasonally adjusted annual home sales.

[00:05:03] So it should not be a surprise that pending home sales have slowed. Okay. Given the rates. It also is an unsustainable I feel like it’s been unsustainable for the past two years to have the amount of growth we’ve had in pricing and in payments just could not go on forever. And I think now we’re starting to see the results of that. We can already see in the Nar data that there are no signs of improvement for the sales count through September and October. The home sales that are in contract now will close mostly in October. And it’s not hard to imagine that next month’s seasonally just home sales data from Nar will come in under 4 million. So a lot of people are having fun online showing how many real estate agents there are per houses listed and it’s ridiculous. And it also shows how many real estate agents there are in the United States. That’s also ridiculous number as the supply of homes to sell is less and less. There will be fewer real estate agents.

[00:06:02] I knew this. I’ve planned for it. It still hurts the wallet, but I suspect for the next two years or so, not going to be nearly as many calls as I fielded in the past two years. And that’s just the way the economy works. Unfortunately, there are now 344,000 single family homes in contract to close in the next couple of months. That’s 14% fewer than last year and almost 30% fewer than September of 2021. Again, it was going to happen at some point. Home sales are limited by the decreased demand, of course, and they’re also limited by the various low supply of new listings. You can’t buy what’s not for sale. And this goes to my argument that was in a video previously, that, look, if you’re going to build single family homes for rent, you’re not increasing the home supply, okay? Because people can’t buy them. They can only rent them. And it does not do anything to solve the supply problem.

[00:06:53] We’ve been talking all year about market being supply constrained. Right now, sales are limited by declining demand from still climbing mortgage rates. So that’s his feeling.

[00:07:05] I’m not against I mean, the mortgage rates are a problem.

[00:07:11] N ow, I’m not one of those people that says, look, just drop the mortgage rates and everything’s going to be fine. I think that there’s kind of some structural damage in the economy and we’re going to get hit no matter what.

[00:07:24] I cannot see the level of credit card debt continuing, especially as they raise the rates, because the credit card payments are going to be more. Plus, student loans are starting. This is October, so they’re starting again, resuming. For thousands of people, that takes money away from the ability to pay credit cards or for new houses or for anything. So it ought to be very, very fascinating to see this unfold. For a while earlier this year, demand was exceeding supply in residential real estate, and you could measure that demand. With the price reductions curve improving each week as mortgage rates lurched over 7% to their new eye, suddenly there are fewer offers. I agree with that. 7% seems to be the tipping point. It just seems like once it hits seven, everything kind of stopped. So if you go to 8%, just think it’s going to stop even more.

[00:08:14] And home price reductions are climbing again, with 37% of the market taking a price cut. That’s more than any recent year, except last year at this time, which is kind of interesting because I don’t remember, I think that this is a national number and I don’t think this is a local number. Prices did not, did not.

[00:08:30] There were not 37% of the listings did not have a price cut in St. Louis last year. Price reductions are accelerating now, which bodes negatively for future sales prices. Well, I’ve always said, look, if you’re going to list your house, you should price it right.

[00:08:47] The chances that you’re going to get multiple offers are much better if you price it right than if you price it too high. Human nature, though, that greed. It just gets to people, and they want to get the most amount of money that they can. Nothing wrong with that. But they are unrealistic because they only see their house in the marketplace in a particular area, and they’re not really well versed in how that house really kind of compares to the others around it. Most of the time. A normal balanced market will have 30% to 35% of the homes for sale that have reduced their asking price in recent months. That’s a normal market. And I still think that’s too high. I do. But my philosophy has always been list that thing for what you think it’ll sell for and then go for it. And I don’t normally have to do price reductions.

[00:09:33] I’ve never liked pricing things out of reach for the market. I’ve always thought that was kind of ridiculous. Price reductions are accelerating now, which bodes negatively for future sales prices. But you know, that’s sales prices. That’s not units sold. So should there be a lowering of asking prices, that will cause more transactions so we can see more units sold? And again, as a real estate agent, I want transactions. I don’t really care about the price, okay? I want transactions. At the end of the day, I want my buyers to get the best price possible for the house they purchased, and I want my sellers to get the best price possible for them to sell the house. But if it’s $1,000, either way, it doesn’t really affect me. It really doesn’t. I just need transactions. And so that 4 million number is very important to me.

[00:10:30] Remember, the slope of the line captures how many properties are taking new price cuts every week, and this slope is increasing now. Well, I’m a little bit suspect because I have this house, this in South City that I’ve seen listed. It finally went under contract today, believe it or not. They’ve been on the market for four months, and they’ve cut the price $60,000. I went through the house. It was a terrible house for that asking price to begin with. The agent listing agent should have been shot for even proposing that. But I know what happened. That agent wanted to get they were buyers, okay?

[00:11:03] She wanted to get those people into that home, into that new home, and then not worry about selling their other home. Now they got a $50,000 shortfall at the minimum. We don’t know what the house is going to go for, actually, that’s going to be about 30 days from now. So those people are going to be hurt financially by their real estate agent and bad advice. What we see now is that year over year, price gains are barely positive, and that is showing the issue of supply.

[00:11:30] The fact that you can have home prices continue to go up with what I would call headwinds of 7% mortgages shows that things are wild. An alternative argument could be that inflation is that 1% the effects of inflation or your purchasing power. I haven’t seen it put out there very often, but you just got to understand how vicious inflation truly is and how bad it has been since I think it was at least was it two years ago. I was saying inflation is not transitory. Once you get inflation, it is a hard thing to contain and it just wasn’t great. The comparison is getting weaker, not stronger. As our current mortgage rates deteriorate, there are fewer offers and those that do happen are doing at a slight discount each week. Last year at this time there were big price discounts being applied, so our October comparisons may get slightly easier, but I sure haven’t seen any signals of price strength. Now, I did not see big price discounts, I’ve seen new home builders discount mortgage rates, but I have not seen asking price decreases and I’ve not seen like for materials and things of this nature for new construction. The prices of those houses are still high, at least in St. Louis. However, it’s important to note that while buyer demand has backed off this fall, there’s still no sign of any surge in new supply coming in the market. And it can be very easy to focus on the negative momentum. That’s right. Unless you’ve got supply coming in the market, you can’t have prices go down. People on the fence should also know that while their competition is lessening, there’s no sign of an inventory flood. That may be an important factor in their home buying decision. So I showed a house, like I said, this weekend, already under contract. Most of the time. If it goes under contract the first weekend, it’s going to be at asking price or above.

[00:13:21] Last week I showed a house that was an absolute dog in Kirkwood and it managed to get an offer on the first week. I’m anxious to see what happens with that home because I believe it will go back. I will believe it go back on the market. It was a dump, and the fact that some agent thought that was a good thing for their buyer to buy makes me question my profession like you wouldn’t believe. So anyway, with that, I’m going to head on out. What do you think is going on with the housing market? I mean, we’ve got a little rise in home inventory and to me it seems like we’re all within the trends.

[00:14:00] It’s not very out of whack.

[00:14:04] Things were going to have to come down at some point in time. Prices were going to have to come down and we’re going to be seeing that as we go through the fall and winter. Of 2023. With that, I’m going to head out. Thank you for watching. Thank you for listening.

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