welcome to Deerwood Realty YouTube channel I'm John Schink founder managing broker of Deerwood Realty in St Louis Missouri maybe the headline caught your eye was it clickbait I don't know because I'm serious I uh I want to go over this with you I you know look at real estate stuff all the time real estate residential real estate stuff and I and I just at times I just kind of want to take you along with me for the ride let's get started so I saw this tweet okay and this tweet says simply new house builds are dzing with smaller footprint cheaper appliances floors and countertops simpler roofs no deck in the back note that house quality is a key indicator of whether we're getting richer as a country apparently we're going in reverse and and this is the way I feel this I mean this perfectly captures the way I feel now look I want people to be able to afford homes right I think that's a good thing I think that if home affordability is a good thing however the way it's going is not what I want I do not want this for people okay so let's get into this so all right well so what are we talking about here and I'll show you videos and stuff like that in the future here but just let me get to the article here it says this was out of a um an earnings call somebody wrote this article this was on Wall Street it says home builders in order to sell new houses at a decent clip in this new mortgage rate environment even as sales of previously owned homes have collapsed because sellers refuse to accept reality are using a variety of strategies outlined by Dior Horton its Q3 conference call including mortgage rate buy Downs which we've talked about smaller houses deenz the houses cheaper appliances floors counter shops simply roof no deck in the back and other incentives free upgrades Etc so this goes over at first it goes over the you know what happened with the uh the medium price of single family homes it's it's not that that important in the sales of new houses it says as you can see in the chart below these levels would be nothing to write home about but in the new mortgage rate environment now this was around when it was a little bit higher rates about 8% 30-year fixed on on on a general loan um but the but the new org R environment and compared to the collapse sales of previously owned homes they're decent and document the effectiveness of bringing down payments via mortgage rate buy Downs smaller product Footprints and demonetizing so the home builders are not dumb and so they're responding to the marketplace it's just in a way that perhaps I don't want says home builders have figured out this Market unlike current homeowners who are thinking about selling home builders have to build and sell homes no matter what the mortgage rates are while homeowners who want to sell are clinging to their hopes that this two shall pass and their they're not putting their homes on the market as the national median price after peaking in June of 2022 is on the way down home builders are now aggressively competing with sellers of previously owned houses and they also have to compete with the rental market including newly built for rent single family houses by large landlords and we've talked about that and is that really the American way is that really what we is that really what we we've come to and monthly payments brought down via mortgage rates make a difference and lower price points make a difference the National medium home the national medium price of new houses has been falling faster than the national medum price of existing houses and now they're now very close which is unusual and so then it goes I mean there's I mean you can see that they're close it's unusual normally you've got a buch of a space between a new house and a used house um and then so this is from the uh transcript of the earnings call for Dr Horton says to adjust changing market conditions and higher mortgage rates we have increased our use of incentives and and are reducing the size of our homes where possible to provide better affordability for our home buyers we expect to continue utilizing a higher level incentives and fix schal 2024 particularly rate buy Downs in the current interest rate environment okay so they're making smaller homes so they're more affordable especially given the fact that we've got these terrible I mean relatively High rates the average rate can move quite a bit through the quarter but we tend to stay about 1 to 1.25 points below the market at any given time so right now I should be able to go look for a house I think we were at like 7.05% today maybe it wasn't that low but I should be able to look for something at 6.05% on a rate buy down on a new construction for the first two years if I'm lucky from a new home builder about 60% of our closing about 60% of our closing are used with some form of rate buy down the most in successful incentive we have seen which to me is an indication that the rates are too high okay they're just too high if if an incentive is working that well it means there's something wrong with the actual number our buyers are focused primarily on affordability and for us the way we deliver that affordability is through monthly payment process and that's obviously been a big driver for the rate dry downs but also introducing smaller product Footprints and demonetizing some of the homes a bit and letting people do things to improve their homes after the closing when their financial position perhaps has changed and they can afford a little more so the strategy for Dr Horton apparently is just put in the you know the the lowest of the lowquality products and then hope that the person feels like there's enough equity in the home over time to want to invest in it and make it a nicer home that's in theory over half of our business is first-time home buyers because despite what's happening with interest rates those buyers need a place to live they don't already own a home so they're not a discretionary buyer they're in the market looking at buy versus rent opportunities so if we can stay competitive with the rental market on that front we're going to continue to capture firsttime home buyer market share so basically what they're saying saying is is we can build you something that you would normally find in a rental but it's a single family home and you should be happy about that and I'm not happy about it I'm not just going back to the original tweet note that house quality is a key indicator when we're whether we're getting richer as a country apparently we're going in reverse so then I saw this article on the New York Post it says the company selling tiny homes from 130,000 Sparks critics this is a new affordable housing market so I didn't I didn't mark this one up unfortunately but this is I believe this is the same thing we're going to see a video about it says um lenar is one of the nation's largest home developers most recently constructed a tiny home Community comprised of 350 foot homes in San Antonio Texas 350 sare ft known as Elm Trails each tiny home boast of one bedroom and one bathroom with a starting price of $130,000 it says this two-story home has a smart layout that offers everything you need to live in Comfort

it says in the back of the home I love how it's described the front door leads into an open concept kitchen which flows effort effortlessly into the living area in the back of the home is an owner's Suite which features two closets and a private bathroom upstairs is an open space that can be used for storage Great it says however online critics question whether it was enough and enough for the price on X forly known as Twitter the account Wall Street Silver posted a video with the caption this is the new affordable housing market these are $100,000 tiny homes with no garages being built in the new neighborhood in San Antonio Texas says they want everybody to live in a box the least amount of land possible one person coming in more like a $100,000 jail cell another person wrote and the whole point of tiny homes is that they're only supposed to be $3 to $50,000 Max somebody else explained and to be fair it says there are options for other Home LS including a one-bedroom two bath unit that occupies 660 s ft and is priced at

$163,000

so I mean let's see a video of the of the homes right like that that seems to be good let's uh let's do that now I don't know how it's going to go on I don't know if you're going to be able hear it or anything but he's basically the background music is is uh actually I probably shouldn't do it because I'll probably get copyright so here I'm just going to play it this

way and so there it is and there they are and if you look at the back see the high high power in the back

great and there he just went through the living area now he's in the kitchen there's no refrigerator the reason they don't put the refrigerator in is if you saw it you'd be so small you would never want to live there here's your bedroom that's you know and that's it and then look oh look at all this space my closet is bigger at my house great great oh there's a bathroom upstairs oh look it's it's so

wonderful all right so hopefully we've seen enough of that shout out to that dude for making a a real estate video I should do more of those so

yeah I mean look I don't I don't begrudge anyone for wanting to own their own house I I what I what I think and I and look you can buy an old home a used home for 600 sare F feet in some neighborhoods in St Louis and they're they're not that great it's not it's it's I don't want you to think that this is like never been done before okay it's just I don't like it I don't like it and speaking of affordability we have the the subdivision being built across the street where the lowest prices are half a million dollars and it's 1,200 square ft and I mean who can afford that right so I just as far as the affordability it's it's nuts and I don't want people to have to live in those places now I don't control where people live but I just think that it's America I think we're trying we're being conditioned to want to like want less to expect less we should lower our expectations we shouldn't Reach for the Stars anymore we should reach for the mud and I I don't want to do that that's that's not what I want but yet that's where it feels like we're being pushed is this what you want do you want to live in these houses I mean like say you graduated high school you got no place to go okay is it better than renting I don't know I don't know you don't have much and now now you're buying a house where you know you're going to have to remodel it in the future when you have more equity in the home if you know there is an argument how many I mean you've got a neighborhood full of you know $130,000 houses how's that going to work out long

term I don't know it's just lots of questions not many answers let me know what you think in the comment section I'd be curious with that I'm going to head on out thank you for watching thank you for listening and I'll catch you on the next one