KGCI: Real Estate on Air - The Economy & Client Considerations

Episode Date: July 24, 2025

Summary:Navigate the complexities of the current economic landscape and its profound impact on your real estate clients. This episode delves into key economic indicators like interest rates, inflation, and employment data, revealing how they shape buyer and seller decisions. Learn essential strategies for real estate professionals to educate, advise, and proactively support clients, ensuring they make informed choices and thrive amidst market fluctuations.Bullet Point TakeawaysUnderstanding Key Economic Indicators: Discover how factors like interest rates, inflation, employment rates, GDP, and consumer confidence directly influence mortgage rates, property values, and overall market demand.Educating Clients with Transparency: Learn to be a trusted advisor by providing clear, honest, and timely information about market trends, potential risks, and available options, helping clients set realistic expectations.Adapting Pricing & Negotiation Strategies: Understand how shifts in economic conditions, such as a move towards a buyer's market, require agents to adjust pricing recommendations and sharpen their negotiation skills to secure favorable outcomes for their clients.Personalizing Client Experience: Recognize that each client has unique needs and concerns in a changing market. Tailor your communication, provide customized resources, and actively listen to their individual goals to build stronger relationships.Leveraging Technology & Data: Explore how CRM systems and market analytics tools can help you track client interactions, manage leads, monitor economic data, and provide data-driven insights to clients, enhancing your professional credibility.Topics:Real Estate EconomyClient Considerations Real EstateEconomic Impact Real EstateReal Estate Market TrendsReal Estate Agent AdviceCall-to-Action:Ready to expertly guide your clients through any economic climate? Listen to the full episode on your favorite podcast platform and empower your real estate practice!

And welcome to another edition of the Nerd Agent podcast. I'm your host, Luke Pedersen, with my brothers and fellow nerds here. The Vikings are undefeated. Millie slept through the night for the first time since she was born five months ago. Josh said he's feeling very motivated. I'm feeling motivated today. Sam Darnold is exactly who they thought he was in 2018. And all is right with the world.

Or we maybe played the worst team in the NFL. All I can say is Kirk Cousins was like, darn. And Kirk Cousins is bad. Can we recap, though? I don't know if you guys watched it, but Kirk Cousins gets the, I was texting you guys about it. He gets the end of the game.

I still kind of love Kirk by the way. They are down 16 to 10, I believe, and they are at their own 30-yard line with 30 seconds left. What is check down? Checks down for seven yards, not far enough to the outside shoulder, and the guy gets tackled inbounds with no timeouts left. And then, and then spikes it,

and then gets sacked to end the game. It was the most epic Kirk Cousins ending I've ever seen. Okay. Yeah, we'll see if we're any good and we play a real team here. Sam Darnold is the truth. Vikings are undefeated. We feel great today.

I bet Holden's already calling for JJ McCarthy to get traded. For sure. And we're going to put you to sleep with some economic talk. We're going to talk about the CPI, PPI data. Should we put a poll on the next one to see, like, would you rather us talk about the Vikings or the economic data? We actually could be pretty good talking about the Vikings. We just don't know really anything about anybody past, like,

maybe the quarterbacks and wide receivers. No more than that. Do you know that the deep? defense and all that stuff. A little bit. Every guy. Josh knows more. But we're going to talk about the economy next week. The Fed is meeting. Correct. I think it's next week. I think you're correct. And they're going to have, you know, obviously give some sort of speech for that. And so we want to talk about what you could expect from that, what they're going to talk about. And then also how this might affect all this news, all these reports. CPI releases tomorrow. CPI's tomorrow, but the Fed's meeting

next week. Oh, sure. Yeah. How this could affect what your client should do through the end of the year, For example, I was talking to Asia there today about listing a house in November and versus February, what that will look like. So we wanted to get into that. To start, can you give kind of a rundown on what those last reports looked like last month? It was the lowest, I think Josh just said it, lowest private payroll increase of jobs since 2021. That was the most recent release. Yeah. So pretty wild.

The market was anticipating, I think, 165,000 jobs at. And I think it was 140 in change. if we know anything, it actually wasn't 140 in change, and it's probably going to be a number much lower than that. For those who don't know, they've been adjusting that. They've been revising downward for the last six to eight months. And we talked about it on the podcast. I think that they revised the yearly one by 800,000 jobs last month.

So either they've been off in their numbers or we're just getting inaccurate information or I don't know what it is, but it was certainly lower than the expectations. And that's led to, again, on your topic. of the Fed meeting that's led to the consensus in the markets changing a little bit. And a lot of traders trading as though we may see a 50 basis point cut next week rather than a 25 basis point cut. Most folks were anticipating, I believe, September, October, November all to be 25 basis points.

But now we're seeing some calls for larger cuts. And I think the inflation numbers tomorrow are going to probably be, and they'll be out by the time this podcast gets posted, are going to be super interesting. to see. Yep, absolutely. So, and then if you're, once again, if your first time listener, just to give you perspective here, what we're trying to do is look at the different inflation indices and the jobs reports in this conversation and say, what is the Fed going to likely do with the overnight rate? To be clear, and we just reiterated this with our team last week, the decrease that's coming in the overnight rate or likely coming in the next meeting is

not necessarily going to mean that the 30-year mortgage rate is going to change. They tend to be correlated to an extent because when the overnight rate changes down, then the 10-year bond typically trades down, which then trades the 30-year mortgage rates down historically. But right now, we've already seen mortgage rates start to come down under the guise that we're going to see decreases in the overnight rate. But as that expectation of 25 points or 50 points changes, if things come back, look at, making worse than, it depends I define worse, but worse in the jobs report, lower in terms of inflation, you're more likely to see a larger cut, which then would lead to a larger drop within interest rates because it would be outside of the realm of current expectations.

So what we're trying to do is essentially sum up what is happening with these reports, what we think is going to happen with these reports, and then based on what happens with the reports, how that's going to flow through to mortgage rates, because that's ultimately what everyone's buyers are going to hear. So not to. And try and allow you to hear us talk about it so you can catch even one tidbit that you could, if someone asks you about interest rates, have something a little bit better than interest rates are getting better. Or the Fed's going to cut rates, which means mortgage rates are going to get out, which is just generally inaccurate. Tidbit to make you sound a little bit smarter. And another key point there, I think it's like they price in like what the next three to four

meeting potentially changes. Depends on what they're thinking. It's more based on what they're thinking. It's more based on what's been said, right? So they try to, like, similarly, they're doing what we're doing, right? You're trying to read the tea leaves. You're saying, I'm seeing this trend. I'm hearing this information. I'm listening to the Fed chair say this. And they've also spit out their forecast, right? So they've given their expectations of what's going to happen in the future. And therefore, I think bonds are worth this. Mortgage-back security investors are just trying to make money. And so the ones who are the smartest that know how to read the data the best and make the best predictions are the ones that make the most money and the ones that lose the most money or don't

make as much or the ones that aren't paying as much attention, right? I think one topic we could talk about at some point would be that mortgage-back security market because what's fascinating to follow, and I'm not going to get way into it, but it's the, I believe it's five-eighths of a point is how those ranges work on the mortgage-back security market. And so it's mortgages that are from six to six and five-eighths. And so when you're seeing points being paid by your clients, you're often seeing them paid and getting into an eighth of a point situation because it's really beneficial to jump into a new mortgage-backed security market because it's more liquid. So investors are more likely to push buyers into certain buckets. So it'd be an interesting

topic for us to go over sometime. Yeah, for sure. I think the one really interesting thing that's going on in the economy right now that we haven't talked about yet, what we have, but not on the podcast, is that the two-year and the 10-year bond yields, their relationship is very, very, very very important to the health of an economy. So each of the last five recessions saw leading up to the recession, right, whenever the guys out east, those six guys get together, right? Whenever those six guys got together. Have they ever met?

Weren't they supposed to meet? They should be meeting. I met their meeting weekly just to determine if they can set a time when they said it's a recession. Whenever those guys get together. Yes. The date that they mark for the beginning of the recession, which, again, It happens often.

We had one in 2020 that was kind of pushed by the pandemic. But before then, it was 12 years prior to that. So it's been 16 years since an economically-driven-driven recession happened. And what happens with those bond yields is leading up to it, the 10-year yield actually goes underneath the two-year yield. So it means that there's more demand for long-term stuff because they're seeing the short-term looking like maybe it's not very good. the investors that is. And as they start to flip over, once they flip,

the recession marking start date usually is fairly quickly thereafter, like six months. We just had this week, I believe, the first time since all of this craziness has happened, that they actually held and they closed and the two year closed under the 10 years.

So they're no longer inverted right now. They're really tight on the spread, but they currently are not inverted. So the two year is trading below the 10 year, which means that traders are saying, we're getting into the recessionary part and it's going to be over, you know, sooner. Sooner, right? So once we get through that, that's how that trading starts to happen.

So they actually did, I say, uninvert or de-invert or whatever you want to say. But they've been inverted for quite some time and they actually inverted close to like the most in history during this process. How long they were inverted for. And the depth of the inversion was like it went up over a point. And so that's what that's what we were talking about last week was the potential of it saying it was a recession, what have you, having jobs growth be lower than it has been in a long time and how that affects clients. So I want to talk about like, what are you advising clients on? Let's say you had someone looking to, again, I have someone finishing a new build.

Should they sell their house in November? Should they sell their house in February? What are the conversations like with those clients? I think I try to be very clear with clients to say I have expectations of what I think is going to happen in the future. But for the last couple of years, we've seen things play out in a way that was a little less predictable than had been in prior periods. So my crystal ball is a little bit cloudier than it has been historically, right? When rates went up, I was very clearly saying rates will go up,

but the level to which they went up exceeded my expectations. When rates started coming down, they came down, they've been coming down faster. than I kind of expected they would. Right. When they clipped eight, you were like, okay, this is, we're in for a longer period of higher rates and they clip down fast.

And now there's, at least when we're looking right now, it seems that rates are going to continue to come down from where they are today. Because all the signs right now are pointing to, okay, poor jobs report, inflation's kind of at the lowest point since 2021 and year over year. Like, it seems like they hit the economy hard enough that they got inflation for the most part corralled,

but they hit, it's so hard that maybe it's actually going a little bit into recession, so they're probably going to have to course correct to try to bring it back, which would suggest rates will come down. So, but the extent, if they're going to go to five or if they're going to stay at five and a half or if they're going to be at six, it's hard to say exactly where that's going to be. So I tell people, have the expectation that rates will come down. That will lead to some more buying power if you're a buyer, but it also will lead to some more competition amongst other buyers.

and your goal should be to buy a house at the time that is right for you and your family at a price range and a bracket from a payment standpoint that is comfortable for you and if for some reason you get some extra benefit because rates get hit with a sledgehammer and go down to five then take advantage of that when that time comes but don't go into the process anticipating that and overextending yourself on the front end right don't don't buy the top of a price range at a monthly payment that makes you feel uncomfortable with the expectation that you'll be able to refi out of it in the future because we've just seen that that hasn't played out quite as clearly as I think a lot of people were saying earlier in this process.

On the sell side, it's kind of the same thing, right? Don't wait to sell a house for three months because and make yourself uncomfortable for three months because you're trying to time the markets, just like investing. Timing markets is very difficult to do unless you're a significant, you know, Warren Buffett, for example. So when you can move the market yourself. If it's not impactful to yourself, like I would tell a seller of November versus February, if it doesn't matter to them when they sell the house, like it doesn't impact their financial state or when they move,

like they don't care, then sure, maybe waiting until the spring will be a better time for them. But that's more seasonality, in my opinion, than necessarily. And I think the advice I gave Luke is I often talk to clients who are considering when should I sell it of I know probably what's going to happen right now. Yep. And also, if you're standing here in September and you're thinking November versus February or January, whatever it is, you also have to factor in, we still have two months until November. So what happens in October probably may impact that. We don't need to decide right now. We can do all the things that we want to do or try to do our best to get it ready.

I know this one's kind of complicated, but do everything to get it ready so that we have what we have there. And then we can pull the trigger on November. We can go, I don't like it. Let's punt until next year. year. But I also gave him the little tidbit of, okay, but what if you go in February and you could have done November? Well, now you're making your November payment, your December payment, your January payment and your February payment. And let's say it's $4,000. We better be pretty sure, or we got to be betting on the fact that we're making, let's just say it's $4,000 a

month, $16,000 more in the spring, if that's what our plan is going to be. So there's pros and cons of each one of them. But I don't know that I certainly would make that bet right. now with all the stuff that we're talking about. Is the housing market going to be impacted? I don't know. Is the house going to be vacant for four months? Because if so, then you have to come check on it. Then you have to make sure that you still keep the utilities on.

And you have to, there's a lot of complication to your life. If the house is not going to be vacant, you're going to live there for four months longer, then you know, then you're also buying at a time where maybe it's more competitive while you're selling at a time where it's more competitive. So typically my advice is don't wait to try to time a market because there's so much uncertainty that it's usually not necessarily beneficial to just spend extra time sitting. So then on the flip side, buyers, I still think our consensus is that buying in Q4 is going to be a better time than buying in Q1 of the next year.

Yeah, the tricky thing with a lot of my clients is so many of them have kids. And so I already have one that is like, if something perfect comes up, yeah, maybe, but we just got into school. I don't know if we really want to do this during the school year. We might just kick this back up in March or 8. April of next year and try and close in the summer. And I said, yeah, that's a totally understandable thing. And I think like what Josh is talking about, it all comes down to like a lifestyle decision, right? Like if it fits with your lifestyle, it fits with your budget, then there's

not really a big benefit of just waiting things out, especially as a buyer because you actually don't have to take any action to be in the market. Whereas a listing, you know, you got to put your house on the market. So it's out there like it could sell, you know. So as a buyer, just being available to buy something if it fits within your life, your timing, and your finances, I think is always beneficial. I know it's kind of a cop-out response, but again, to Josh's point, like, you buy now and it works and rates go down, then you just get a benefit from that. You wait, and we really don't know. We just don't know what the market's going to be in six months. But today, I kind of have a decent idea. I talked about on my market update that we blast out to agents. Listings are actually down now,

interesting but for months here we've had listing activity well above last year and pending sale activity well below last year so we have less close sales less buyers and more sellers and more inventory now is it a buyer's market certainly not right now but it's still a lot better than it was last year and we're seeing a lot less multiple offer situations and a little bit more open market for folks yeah and i think like i had a conversation with the client last night and i'll probably end up tying this back to like fantasy baseball or something by the end of it but But part of our job is to put a puzzle together for them, right? Every client is different.

So it's hard to answer any question of like, when should I buy without getting an understanding of exactly what that person needs. So like the area that they want to buy a house in is important. And the price range that they're ideally wanting to go into is important. And the things that they need is important. Right. Every time you're working with a buyer, you're looking at putting that puzzle together of like, what is the right answer, right? You try to put all the pieces in the right places. The fancy baseball component I'm tied back to you is like,

every team is different right so i have some teams that i might need to hit home runs i might some teams i might need to steal bases on right but like there's a player that might be a drop on one team that's an ad on a different team right so every person and example and experience is a little bit different same what goes with sellers so it's hard to ever answer you don't ever want to answer a question like is it the right time to buy and say yes because you don't know until you know what is best for answering a question with a question tends to make you look very smart. Right. They ask you, when should we buy? And then all of a sudden, you just start trying to figure out their situation to give the, what sort of situation are you in?

To give the correct advice. And then you drop in simple nuggets about the economy and the jobs report that we talked about today and what the Fed meeting might look like and other pricing in these changes to the overnight rate that then will affect the 30-year mortgages and what that looks like. And pretty quickly, you're going to be considered the expert in the room. Yep. And you're going to beat out their other friend that doesn't know anything. I think to boil it down of both years they're talking about is never answer the same question in the same way for different people. You can't boilerplate anything.

That's all we have this week on the Nerd Agent podcast. And as always, remember, be better.