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Welcome to the Deerwood Realty Show. I'm John Schink, founder and managing broker of Deerwood Realty in St. Louis, Missouri. We have ourselves a new home buying affordability index created by NBC, of all folks. I didn't really picture them as big data people, but they threw their hat in the ring. I wanted to go over this with you and see if it would be any help in your home search.

Here it is: how hard is it to buy a home right now? The new NBC News Home Buyer Index measures the market. Well, that would be nice, right? Or you could just talk to your local real estate agent. I mean, that's kind of where I'm at, but anyway, let's get to it.

It says, why is it so hard to buy a home? Home prices have far outpaced middle-class incomes, mortgage rates are above 7% for the first time since 2002, and three out of ten homes are sold above listing price. So, is that answering the question why is it so hard to buy a home? Well, none of these factors fully compare the variety of challenges buyers nationwide face in the current market. The conditions on the ground can vary widely across state and even county lines, and you know that's the ultimate downfall of any sort of national index. We've got such a broad economy that you really have to think about real estate as local.

To better capture how housing market conditions shift at the local level as comprehensively and as close to real time as possible, we're introducing a new monthly gauge: the NBC News Home Buyer Index. Now look, it's not going to be in real time if it's monthly data. I provide monthly data on 60 submarkets within the St. Louis area, and those numbers can vary widely depending on how many homes are sold in a particular area. It's just not ever going to be in real time, I'm sorry. I know a way you could do closer, but you'd have to spend so much money on the data that it just makes it kind of unlikely.

The Home Buyer Index, which NBC developed with the guidance of real estate industry analysts, a bank economist from the Federal Reserve Bank of Atlanta, and other experts, is a number on a scale of 0 to 100 representing the difficulty a potential buyer faces in trying to buy a home. The higher the index value, the higher the difficulty. So if it's zero, that's totally affordable and everything's great; if it's 100, you can't buy a house in that county. Hopefully, you've followed me long enough to know there are vast problems with that whole idea.

Anyway, let's just go. It says, a low index value of 10 suggests better purchasing conditions for a buyer: low interest rates, which is odd because for the most part interest rates are pretty much the same across the United States. You're going to get different quotes within a submarket, but that's one thing that doesn't change. Ample homes for sale, fine, I can see that. It says one of the 50 least difficult places to buy in the country with low scores on scarcity, cost, and competition. Well, maybe there's a reason. I can tell you, without being a jerk, East St. Louis would probably have plenty of homes available for purchase right now, but I don't think you want to live there. No offense to the people; I lived in downtown Detroit, so don't come at me. I'm just saying.

A high value closer to 90 suggests extremely tough conditions, which can result from intense bidding, high insurance costs, or steep jumps in home prices relative to income. Your high insurance costs are coming from places like California, where they are just exploding. That isn't the case so badly in the Midwest right now. It's gone up, but not that much. Prices are soaring in Coconino County, Arizona, making it one of the 25 most difficult counties to buy a home in. Five years ago, it was ranked number 300, but the median sale price has increased 81%, nearly twice the national figure, which is still 40%.

The index measures difficulty nationwide as well as on the county level in counties where there's enough home buying data to make informed assessments. The national index presented below captures the big picture market and economic conditions that affect home buying across the US. It's at 82.4%, which seems high. 87.3% on the cost, 72.4% on the competition, 84.8% on the scarcity, and 72.7% on the economic instability.

Let's look and see what those numbers mean. Cost: how much do homes cost relative to incomes and inflation, as well as how related expenses such as insurance costs are changing. Competition: how many people are vying for a home and how aggressive the demand is, measured through observations including the percent of homes sold above list price and the number that went under contract within two weeks of being listed. They're actually using days on market and using 14 days. Percentage of homes sold above list price: I've always thought that's kind of a valid number. If you're consistently seeing homes selling for more than they're asking, that's a pretty strong market.

Days on market: that's always been a little bit wishy-washy. Some people are on the six-month supply idea, where if there's a certain number then there's this much level of supply, and that goes over six months. I don't think that's valid in 2024. But two weeks is also kind of short. If it's a good market, you get the house under contract the first weekend. For example, if I have a home coming to market, I'll probably put it as coming soon as soon as I get one picture of the outside. That gives me 21 days before I have to put it active. When I make it active, I can say active but no showings until Friday. Normally, I'd make it active on Monday, and then you'd have the whole week to schedule showings on the weekend. If the housing gods are good to me, the house would be under contract at the end of the weekend. That's three days that it was actually on the market, but it would be reflected in the data as seven.

Economic instability: market volatility, unemployment, and interest rates reflecting the broader climate in which home shoppers are weighing their decisions. That seems a little wishy-washy to me. Unemployment rate doesn't factor in too high with market volatility or interest rates. When interest rates are being cut, that's usually a sign that things aren't going very well economically. Maybe it's the wording.

Improvements in market competitiveness and the broader economy have eased somewhat within the past year. Do you really believe that we're in a better economic position than we were last year or the year before or the year before that? I just don't see it. Inflation is eating everyone's lunch.

Let's look at the index: the difficulty index right now. You can see up here in 2022 it's been very difficult historically. Let's just go with that. It's been pretty rough on people. This represents 279 million people, 84% of the US population. While the index doesn't measure some challenges specific to certain groups, for example, the obstacles people with lower credit scores face buying homes, don't have lower credit scores. It wouldn't be helpful for the difficulties entrenched in being Black and buying a home. Why would that be in the index? Capturing what home buying is like in many rural communities is harder to see because the data used in analysis leans towards higher population counties. Therefore, systematic gaps affect low population counties, leading them to be underrepresented. So if you don't live in a county with a lot of people, you're toast. Not going to help you at all.

I can search for a county or just go to the map. Jefferson County is 73. I can tell you it's difficult to buy a house in Jefferson County, probably more than 73. St. Louis County at 67.2, that's garbage. Go out to Webster Groves on a nicely priced home, and it's going to be a lot harder than 67.2. St. Charles County 73.1, again, go out there right now and try to buy a house. Texas: not sure where Austin is in Travis County. In Florida, it's in the 50s, 50s, 70s. Brevard County, not sure about Miami.

That's the article. I had some questions, so let's get to those. I'll do the questions a little different today, see if you like it better.

What is the NBC News Home Buyer Index and how does it measure the difficulty of buying a home?
It's an index designed to show the affordability of a home in comparison with the rest of the United States by county. It really doesn't matter; if you're out there, you'll figure these things out.

How do different regions across the United States compare in terms of home buying difficulty?
If it's based only on the county level, you're likely to get highly skewed numbers. For example, St. Louis County has homes that are multi-million dollars and some that are less than $100K. Many places are no different.

What are the main factors contributing to the high home buyer index value?
High interest rates, inflation causing high asking prices.

How do high mortgage rates and rising home prices impact potential home buyers?
It should have slowed the pace of home sales dramatically over the last year or so, but it hasn't. That's my cause for great concern.

In what ways does the availability of homes for sale affect the housing market?
Limited supply should allow prices to go up. The question is, what is the real supply that isn't currently being eaten up by investors in the single-family home market? If those investors weren't there, would there be a more affordable housing situation? I believe the financialization of the single-family home has caused a very damaging situation for those people that just want to buy a home to live in and aren't looking at

it as the most important financial decision they'll ever make.

How does economic instability such as employment and market volatility influence home buying conditions?
It depends. The article mentions that everything is great economically, but I don't think people really feel that way. High unemployment should crush the housing market, but maybe it won't. With interest rates, I thought when they were above seven, we would see a slowing of the home buying market, but that didn't happen.

What can buyers do to navigate the challenging housing market effectively?
Buy a home according to your needs and when you feel like you can settle down for years. Don't treat your primary home as an investment. If you look at the value of your home every day, every month, every week, it will drive you crazy. Be strong financially and don't have your payments be 40% of your total income.

How might changes in economic policies or interest rates alter the home buyer index in the future?
We should see changes in the availability of homes which could lower or raise the index depending on the policies enacted. Who's going to step in and fix the mess that is the housing market? It sure isn't the Realtors' fault. I'm not out there watching people write 15-30 offers for a house; that's ridiculous.

Are there any signs that the housing market conditions might improve for buyers soon?
Yes, I can see signs where conditions might improve for buyers in some of the boom-bust areas in the United States like Florida and Austin, Texas. There are pockets where prices have started to go down.

What are the implications of the Home Buyer Index for sellers and real estate professionals?
I don't think there's any implication for sellers and real estate professionals. The data presented in its current form is way too broad to matter to someone who is selling their home. Real estate professionals are likely going to use their comps and experience in the marketplace to put together a plan to sell the house quickly and for the most money possible given all conditions. I think this index has been created so that NBC has at least one story they can write about home affordability every month when the data comes out.

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.