The I Love CVille Show With Jerry Miller! - Xavier Urpí & Alex Urpí Joined Keith Smith & Jerry Miller Were Live On “Real Talk With Keith Smith!"

Episode Date: November 20, 2024

Xavier Urpí, CIO of Emergent Financial Services, & Alex Urpí, CEO of Emergent Financial Services, joined Keith Smith & Jerry Miller on “Real Talk With Keith Smith” powered by YES Realty Partners and Yonna Smith! “Real Talk” airs every Wednesday and Friday from 10:15 am – 11 am on The I Love CVille Network! “Real Talk With Keith Smith” is presented by Charlottesville Settlement Company, LLC, El Mariachi Mexican Bar & Grill, Fincham & Associates, Inc., Free Enterprise Forum, Intrastate Service Co and YES Realty Partners.

Good Wednesday morning, guys. My name is Jerry Miller, and thank you kindly for joining us on Real Talk with Keith Smith, a special edition of Real Talk with Keith Smith here on a Wednesday. We will have our regularly scheduled Real Talk with Keith Smith on Friday at 10.15 a.m. There is so much, so much news in the real estate ecosystem that we had to include a special show this week. And we have two gentlemen of fantastic intellect, fantastic client management skills, fantastic just perspective on the world. And no, it's not me. No, it's not Keith. It's the Irby's.

It's definitively not me. We have the Irby's in that. He used the word intellect. Didn't he use the word intellect? I think he used the word intellect. I think so, yeah. We'll go to the studio camera. I should include Judah in the mix. So there's three, three of the five here. Judah Wickhouse, director and producer. I think he, yeah. We'll go to the studio camera. I should include Judah in the mix.

So there's three, three of the five here. Judah Wickhouse, director and producer. I think he's intellectual. Oh, I know. I'm including him. I did not include you and I. Yeah, it was the Earpies and Judah. We were not included.

Matter of fact, we just get up and leave. That's the first time I've ever been called intellectual. I feel so good. I should come here more often. Xavier and Alex, I just absolutely love the Earpy family. Honest, trustworthy, they execute on what they say they're going to do. Emergent Financial Services, a name you can trust. Gentlemen, it's a Wednesday morning, and right before the show, I don't know if you want to touch on this.

We had some breaking news. You want to touch on it? This is their time, but we can touch on it. I'll let you break it, and then we'll take a dive into it. This was – and it's not – it wasn't our news to break. We're just relaying it to the viewers and listeners. The Phoenix Association of Realtors, which is one of the largest and most influential association realtors in the nation, recently released as of this morning that realtors, folks that buy and help people buy and sell real estate,

they do not have to pay the dues anymore to the local association, to the state association, or the national association to have access to the MLS. Wow. I mean, this is a pretty significant – the dominoes are falling here. So we want to talk about financing. We'll take a dive into this here quickly. So those who have been listening to the show for a while, we've been talking about what I call the next shoes dropping, which is the dismantling of the trifecta. So to understand our world, currently as it stands right now, to access what I'm looking at right now, which is Paragon, the MLS, I must belong to three other, three associations. It's a national, which is NAR, Virginia Realtors,

and then the local association. So what Phoenix is saying, you only have to belong to their association. And if you read the article real quickly, they're charging you a 249 fee for the year, which then gets you access to the MLS. I'm sure there's additional MLS fees and stuff like that, but it gets you access to it. But what they're officially saying is you do not need to be part of these other things. There are three. I believe it's three. There may be four. Well, I want to offer some clarity here.

They've offered a price point for the local Phoenix MLS that is significantly lower in membership fee. So they've created a new tiered pricing structure. So this 249 is significantly lower than what the other association was. Yeah, so they're calling it. Oh, they've got a title here. Hang on a second. They're calling it MLS Choice is what they're calling it. And if you click on it, it goes into the specific thing.

You have to have a license, I suspect, right? Currently. Can I just join in and say I want to see all the MLS? That I don't know because I have to read it. I can tell you in the state of Virginia, having access to the MLS, I think it's just a matter of paying it. Okay. To actually conduct business in the state of Virginia, you must have a license.

Okay. You must be licensed. So accessing and looking at the MLS is one thing. And again, this just happened this morning. So we have to take a deeper dive into it. Think about that. You could conceivably access the agent notes and the back-end details of what realtors are doing to buy and sell property in Phoenix without having a real estate license. This is significant news here.

Yeah. I mean, I guess as a buyer or a seller, if you're in the market, you have some information. Yeah, you have some information. You still may use an agent. So I'm actually reading it right now, the MLS choice. You must, in order to have access to it, you must be a licensed... Is that definite?

Okay, because some of the articles were alluding that may change. I don't know that. I'm just reading what the rules are for the MLS choice. But the big thing here is, and you guys are in the world, right? When the commission lawsuit lost, right? I've been saying for a long look for the next big shoe to drop, which is this dismantling. So you have this, right, Phoenix? Alabama's doing the same thing as the state level.

And I believe there's either three or four lawsuits that individual agents are suing NAR. And they're saying this and then you've got DOJ in the mix that and I think you know the rationale is that it's unfair that I'm required to belong to these associations in order to get if this is a good thing or a bad thing is a different story right right right but the reality of it is and and to Jerry's point, all these organizations are now going to have to start resetting their value props.

Exactly. The value add for what they offer. If I'm paying it, and I'm going to end up working on a poll, which hopefully somebody who's smarter than me can help me, that kind of asks the general question in my industry. If I'm in the industry and I'm given the choice,

would I choose to be part of all three? Would I be none? Would I pick one over the other? But everybody was laughing at me that I think by the end of this year, this trifecta is going to go away and this has only proven that. So thank you for sharing that. Absolutely.

Kevin Yancey, welcome to the program. He highlights the New York Times investigative article on the National Association of Realtors that documented obscene spending by its C-suite and by volunteers. Volunteers of NAR were being paid hundreds of thousands of dollars, access to NAR's corporate credit card. They were buying $500, $600, $700 bottles of wine, tickets to plays. The C-suite of NAR, one of the guys, had country club memberships, car allowances, and even allowance for a pet sitter for his Chicago apartment.

That was the president, the CEO of the organization. And who knows? That may have been negotiated in their contract. We know how that stuff goes. The point here is the real pivot in the industry is this, not the commission thing. In the industry, in the state of Virginia, this whole buyer-broker thing was a law since 2012.

So none of that should have been new to anybody. But this is going to be pretty interesting going forward. So, you know, look, a couple of things. Welcome to the new world. I think there's a lot of changes coming across the board. I tell you, I feel sorry for guys like, I feel sorry, but folks like Woody Fincham, who's one of our great sponsors here, who's now the treasurer of CAR,

and Josh White, who's the incoming president, and Amanda Spagoni is the 26th. And I both told them publicly and privately that, you know, you were about ready to have to really, this is going to be a hard next 12 to 24 months for them. But what should I do with my money? Oh, that's right. You do handle it. I forgot.

Emerging financial services. Let me rephrase that. What should we do with Yona's money? Yeah, because I know what to do with your money. Yeah, yeah, yeah. You know, this was about it. It's called bicycles. Oh, yeah, yeah.

There is that. There is that. I haven't. I haven't. Oh, yeah. Why don't we start with an open-ended question for the Earpies here. What do you guys see in the market? Tailwinds

and headwinds, what do you see? So, I mean, I think the important thing to realize here is that we're just going to see I think historic changes in the new administration really from the perspective of taxes, tariffs, regulations, laws.

And you guys just mentioned something that happened in real estate, right? And so I think we're going to see that happening across the board, right? So you have to take a step back and say, well, exactly how is that going to impact the markets, right? And being that it's somewhat to an unknown exactly what's going to happen, right, you need to take a exactly what's going to happen, right, you need to take a step back and try to figure out what is the best position to be in in the markets right now, given what you think the expectation is going to be, right?

Nobody really has a crystal ball, so nobody knows exactly what. But the fact that we already know that some of the change, I mean, one of the things that you have to consider is the fact that, you know, corporations aren't going to be increasing their taxes to 28 percent like the previous administration was looking at, right? So from a perspective of a corporation, you say, I know where I stand, right? And therefore, from that perspective, they know what they have to do. Well, you can divide almost into you have things which may happen but are not definite, and things which you now know are off the table. Corporate tax rate increase, off the table. Tax on

unrealized capital gains, off the table. Not going to happen. What makes you feeling so confident about that? The way this administration ran their campaign made it perfectly clear. And you think there's enough in the House to make The way this administration ran their campaign made it perfectly clear.

And you think there's enough in the House to make this happen? No, the thing about those things, they would have taken the House, Senate, and presidency for the other party to make those things happen. So none of those is theirs. In other words, you'll never get the House, the Senate, and the president to all sign off on a corporate tax rate increase when they've all said they want the opposite. You'll never get all three of them to go for an unrealized capital gains tax when all three of them have run on the opposite. In other words, those are things that are off the picture. But to your point, there are things such as tariffs. Okay, to what extent would we see them?

Because you might have the presidency in favor of it, right? You might have, would you have enough votes in the House? Would you have enough votes in the Senate to implement certain things, right? Do they even, does the presidency even want them, or are they negotiating tools, right? We can sit here and say, okay, he ran on tariffs on this, tariffs on that. At what point, if the Europeans come back and say, well, what if we made this deal for you in exchange for no tariffs? Does the president say, well, OK, that works? That happened last time around.

Well, it's already happening now, right? I mean, so the minute that the new administration or Trump got elected, the Europeans immediately called and said, OK, let's – we need to start talking about the possibility of us buying gas from you. Yes. Possibility of us buying gas from you. So the whole point of tariffs is that on day one, you're going to go out there and say, by the way, China, you got 60%, which is what he said, right? 60% tariffs on everything we import, right? That's just not going to happen. We all know that. These are basically, they're ways to begin to negotiate. It's gamesmanship. Yeah, just to see what we can get.

And I think that's the whole point. The whole point is that we don't know exactly what the impact is going to be, but from a perspective of economics, I think no matter what happens, I think it will be an improvement in our economy. And so you have to prepare for that, and you have to say, given that, where are the best places then to begin to invest? And those are the things that we're looking at. So I want to throw this big question out, and you guys dive in.

Fed lowered the rates a few months ago. And those are the things that we're looking at. So I want to throw this big question out, and you guys dive in, right? Fed lowered the rates a few months ago. Everybody thought the 30-year was going to come down. It didn't. I was of the opinion it was going to go up. I believe it's still going to go up, the 30-year mortgage. Technically, why do you think it didn't go down? Well, very simple.

So let's be clear here. So when the Federal Reserve changes interest rates, it impacts short-term rates. I mean, the three-month T-bill, the six-month T-bill, it doesn't impact anything greater than go from 9 to 7, you know, we're still probably above 3% on inflation. If you're still above 3%, there's no reason why the 30-year and the 10-year is going to drop in interest rates. Now, the 10-year at the beginning of the year, remember, was about 3.9%, right? It went all the way to about 4.7%. And actually, you know, we looked at that and said 4.7 seems a little high. So we actually strategically bought some and then sold it once we had a particular – we had a target rate of returns when we hit that we sold it. Now it's about 4.4%.

4.4111 at the moment. There you are. Perfect. Thank you. 4.4% right now. 1.111. Look at 1.111. Look how good you are.

So my feeling is I would agree with you. I mean, literally the minute that Trump got elected, stocks rallied for a short period of time and interest rates went up, right? Because two things were, as Alex mentioned, there were two unknowns that became known. That is, no corporate tax and two tariffs, right? And tariffs are inflationary. But we sit back later on and say, well, first of all, he's not president yet.

You know, he hasn't taken office. We've still got a good, you know, two months before that happens. And we don't know exactly what he's going to do. So I think basically interest rates came down a little bit from there. So, again, there's just a lot that is going on. Now, with all due respect, we've inherited inflation. Anytime you have the kind of deficits that we're running in this country, it's inflationary.

We sat in these two very chairs during COVID, and I believe it was you that said that at some point this bill is going to come due. Yeah. Just too much money chasing too few goods. Exactly. during COVID, and I believe it was you that said that at some point this bill is going to come due. Yeah. Just too much money chasing too few debts. Exactly. And so as long as the only way out of this malaise is really to begin to cut deficits, right? And it doesn't mean we have to, you know, we don't have to go back and eliminate oil debt, because I think that's almost impossible at this point in time. But we can't be running deficits every single year, because if you run deficits every single year, yes, you're going to be running up against the fact that it is inflationary. And

two, the amount of interest we're paying right now is close to about $800 billion. That becomes a runaway trend. Say that number again. $800 billion. That's just the interest. Just the billion. That's just the interest. Just the interest. That's just the interest on an annual basis. That's just a lot of money that's wasted. So why is the 10-year going up?

Why is the 10? I have a theory of it. So it's a 4.112 now? No, no, no. It went up to 4. It went down. It's 4.407. So it went down.

No, no, no, no, no, no. It went up. It went up. The arrow's up. I can read it. I can read it. The It's 4.407. So it went down. No, no, no, no, no, no. It went up. It went up. The arrow's up. I can read it. I can read it. The arrow's up. But why is that going up now?

So, again, I really truly believe that the market is still expecting an inflationary period over the next six to 12 months. Could it be also I'm putting money in it because I'm betting on the economy getting better? Could that be a reason why I'm putting money in there? Well, if the economy is getting better, right, then short-term rates come down, and that's what you bet on. It's hard to bet on the fact that long-term rates are going up. Long-term rates, the economy is doing better. It's not really going to move that.

It's really inflation. In other words, if the economy is getting better because people are borrowing, which is what's happened also, if people are going to borrow just like the government borrowed in order to buy products, and those products aren't available to that magnitude, yes, we're going to see more inflation. Credit card debt is at an all-time high. Yes, it is. Some obscene number, right? It surpassed a trillion and it's now passed. It's greater than it was in 08.

It's close to 1.19. Jerry and I... You want to jump in? No, no, no. I'm enjoying this. I love when they come on. Jerry and I are having this debate back and forth about 30-year mortgage rates, right? And if 30-year mortgage rates

come down to a certain number, some people say 5.8, some people say 5.6, some people say 6 or whatever, that inventory is going to pick up. But is everyone that had low rates now is willing to... So what is, in your professional opinion, right, what is it going to take to make that rate go down? What has to happen to get from nearly 8, right, because

if the 10, if we're saying the 10 is tied to the 30, right, as the 10-year climbs and the 30 climbs, so how is this all going to happen to get us down to below 6? You know what I mean? It's a phrase. It's two, well, there's only two components. There's the spread between the 10 and the 30, so the, basically, whatever the market sees as the additional risk of going to the 30-year mortgage over the 10-year treasury would have to shrink. Or the 10-year itself goes down. But that only happens if inflation expectations go down. And then I think the key thing, though, is it is inflation expectations.

So if inflation, let's say you had this 2% now. 2.6% was the last one. And you get 2, you get 2, you get 2. You keep getting 2. But the market says, well, I think in the future it will no longer be 2. It'll come

down a little. That's what determines the rate. So it's not today's inflation. It's what does the market expect inflation to be in the future. So unless that expectation changes. And neither you nor Xavier think that expectation is going to change. Not without new information. Well, let's be honest about one thing. The minute the Federal Reserve said that their goal is for 2% inflation, I sat there and said, why? Why is it 2%? Why can't it be 0?

Why should we have inflation period? Once you put it to 2, you know it's going to be higher than that. Second of all, without any doubt, if you're trying to produce more in this country as opposed to importing, it's going to cost more because

labor is more expensive in this country, right? Eventually, that evens out. Plus, potentially shrinking the labor pool. Yeah, exactly. Yeah. And I mean, eventually, that evens out. But in the short period, all that is inflationary. And I think the markets look at that.

So is two now zero, right? Is two now the new norm, right? Is that what you're saying? People are now getting used to that? I mean, that's that rate? Well, I think it's basically what it's been for. So it's interesting. I saw a chart yesterday that showed what the expectation or people's view on inflation is.

Economists versus people. You saw the same chart, right? Economists, it goes up and down. But people, ever since back in the 70s, it's always high. It always goes up. Nobody ever thinks that inflation is better today than it was yesterday. That's the point I'm trying to make. So,

if that's a reality, then I'm buying my bread today instead of tomorrow, right, because it's going to be higher tomorrow. Put it in the freezer. Don't leave it out. Thank you. So, your take is we're not going to see tomorrow. Put it in the freezer. Don't leave it out. Thank you. So your take is we're not going to see

a lower rate environment anytime soon. And then a follow up on that would be how that applies to real estate. Real estate is just not moving. Homes are very long in the tooth now. Certain pockets are moving. That ivy pocket is moving. But you look at my old stopping

grounds and you've got houses that are priced 25%, 30% lower than what was trading during crazy times, and they are not moving. People are staying on the sidelines. So, you know, realtors that are watching the program here are asking this question. If the rate drops, then we could see deal flow come back. When can we get to a rate drop scenario so the deal flow returns? So as Alex said, there's two components to a mortgage rate, which is the rate of the 10-year, how that applies to the 30-year mortgage, and the spread, the spread between the mortgage rates and treasuries.

And the spread is what investors. So as an investor, I go out there and buy a mortgage, whether it be a Genie Me or Freddie Mac, whatever it may be. That spread was almost at all-time highs about six months ago, right? So you sit there and say, why is that, right? And part of it is because one of the things that you look at as an investor is, how quickly can I get my money back in the mortgage, right? And so you want that because especially if you're buying a mortgage at 99 instead of 100 and somebody begins to prepay their mortgage rate, I'm getting 100 back, right, instead of 99. So I'm making a point there very quickly, right?

But that spread being that it's all new, I mean, the low mortgages, the 2.5%, 3%, 3.5%, they're not going anywhere. Nobody's prepaying that, or I wouldn't recommend anybody prepay that, right? So it's not until you get now into the higher rate mortgages that people will begin to say, this is worth it to me, right? In order for me to buy, you know, I'm buying a 6%, 5.5%, 6% mortgage. You're not getting 5.5%, 6% because there's expenses beyond that, right? But as an investor, that's what I'm getting. And to me, now it begins to be appealing and appetizing to buy. And Xavier and Alex, you guys did a really good job explaining it.

And I've never been able to do it well well to explain that the 30-year mortgage is really market driven right it's not what what other things happen is what people are willing to buy into that nobody's picking that number it's correct it's more it's driven by the market and how the market feels and if they feel it's going to go forward but to Jerry to Jerry's point I've said it enormous numerous times last on Friday, first 10 months of this year versus 2016, we are 17% to 18% below in the volume. So we're doing 17% to 18% less deals versus 2016. We're almost 40% versus 2021, which is the peak, which was the peak of it. But the question

is, will, you know, and this is what, this is a crystal ball, high level question. If we get, in your opinion, if we get back to sub six, will there be more than 60 houses on the market right now? Now, one piece of information, one piece of the puzzle that we're not even discussing here, right, is that in the old days, remember, you also had mortgages that basically were, you know, targeted off short-term interest rates, right? The short-term interest rate was so low, right? We haven't had that, of course, because, you know, if short-term interest rates are five and a half, six percent, there's no way to add a premium over that, right? If short-term rates continue to drop, then there may be a situation where somebody says, yeah, I'm willing to buy a teaser for one year and then off prime because I know that

rates on the short and the low, right? And that will, I think, improve the market. Now, whether that happens or not, but I mean, we know for sure that the Fed's cutting rates. I don't think they're cutting in December. I think they're going to put it on hold only because, again, there's a new administration and they're trying to review this. But there's a possibility that those rates will continue to come down a little bit next year. Which would then bring the 30-year down. No, no, it's not the 30-year.

I'm talking about they're lowering the short term. The short term, the 10-year may stay where it is, right? Because right now the three-month T-bills are 4.4, the 10-year is 4.4. We have that flat curve, right? If the short-end goes down, then you can start manufacturing short-term mortgages again, mortgages that have the, what do they call it? The arms. Arms, yeah, just rate mortgages, right?

And there's a market that is basically dead for about three years. So to your point, anybody who goes out there and look, look at a 10-year arm or a 5-year arm versus a 30-year, the spread's not that. The percentage spread isn't there. Isn't there. It's almost the opposite. Yeah, why would you pick the arm? The arm isn't inducing you to get in if you already can't afford the 30 rate when they're flat. If short-term rates drop and the arm is now more enticing,

maybe you get in when you wouldn't have before. Well, unless you're looking to close it out in five years or something like that and all that. But to your question, Keith, I mean, definitely to the extent that we know for sure, right, there are people, and we know because we have people that come in with these numbers, there are people who are sitting on homes with mortgage rates of two and three quarters, three percent. Zero. It's over half of American homeowners. Exactly. So undoubtedly, there is a number where if rates come below that.

But where are they going to go? But that's the issue, right? Even if your house was sitting on a huge gain, you're sitting there saying, I have a two and three quarter percent mortgage. I have to live somewhere else when I sell this house. So when I don't do that, even if I'm downsizing something, I'm sitting there and I'm paying six, seven, eight percent, right? I'm paying a mortgage that's too high, the rate. So there is a number at which that math begins to make sense for people. It's obviously not the rates we're seeing now, the 30-year rates, but there is a number at which that math begins to make sense for people. It's obviously not the rates

we're seeing now, the 30-year rates, but there is a number where people say, okay, the gain on my house plus me off-sizing, which is in theory, right? You're not going to take the gain on your house. I made this decision in June. And you switch. And you make the flip. And that's when you see more

inventory. Otherwise, the only way I would see it happening is you run into the classic. So you've got two sides to that. Not only have I been in the house for five, and we can take a look at charts to do this, but five or ten years or whatever it is that I was, or three years ago when I was at 2%, I've also got an appreciation, which then I can turn around and use that money to buy. To do something else. But the appreciation, the problem is you can't, you'll never make the switch

if you're going to lose all your appreciation because of the higher rate. At some point, you're like, okay, I still come out of this ahead and I made the move. The only other alternative is you run into the same thing that, you know,

that you've seen in other inflationary recyclables with durable drifts and stuff, right? In other words, at some point, you simply have no choice. At some point, you get no choice but at some point you get a new job somewhere else you have been in this house for just so long that you're like you know what maybe i'm not going to be better off by making the switch but i have no choice now but to make the switch that you see this happen with other durable drifts like cars and stuff granted

a house is different story entirely but at some point you're like i'm not buying a new car it's too expensive i'm not buying a new car. It's too expensive. I'm not buying a new car. It's too expensive. My car broke. I'm buying a new car. Right? So you're like,

I'm not selling my house. I have two and three quarters. I'm not selling my house. I have two and three quarters. I got a new job somewhere else. I'm selling my house. I think they call that what? Diapers, diamonds, divorce,

diplomas, and downsizing is what he's referring to. Those are the five Ds. So one of the reasons why, you know, if given the choice personally to stay in NAR, not stay in NAR, I would stay in NAR because of the data. I love their stats. I love their data.

Now, one can argue if there's this true dismantling, which I think is going to happen, then their data is going to suck, right? Because they're not going to have, you know, that's part of the argument of keeping this all together because of the data is that. But it's 88, according to NAR, 88% of all the sales so far this year were for some sort of lifestyle move, right?

Which is it's diamonds, diapers, divorce, downsizing, and death. Oh, death. Which is very weird. We're spending most of our listings lately, a hard percentage of them, but the last two. A lot of divorces and a lot of deaths. But the baby boomers, little by little, we're – Why are you looking at me for?

Because you're the host here. I mean, you're the guy I've got to talk to, right? Yeah, he's talking. And I'm the old guy. Wait a minute. You're Keith Smith from Real Talk. So I've got to talk. But, I mean, let's be honest.

I mean, baby boomers are either downsizing or, little by little, we're going to be – Least of all, I do. Looking for different real estate. You know, what you were talking about, Alex, an entire industry is pretty much in the balance on those rates dropping. It's probably what some folks have said to the low fives to get folks off those 2.5% and 3% rates that they secured during COVID. Because at that point, it's the scales of justice. Do I weigh the hundreds of thousands of equity against the higher rate? And a lot of folks have said it needs to go to the low fives.

And until rates get there, you're talking about an industry that's stuck in quicksand. Except unless you're in the right location, right price, right features, right condition. So those things, and I've been saying this long, that's where you've got to have pros at the table. That's when a trusted advisor matters. Here's a question for Keith. The units sold in 2024, what year the amount of units we've had sold in 2024 for years past?

I can't go back in. That's the reason I'm using 2016, because my data gets screwy from back 2016 because they changed their formatting, and I don't trust it. But we're 17% to 18% below 2016. So you can extrapolate that however you can. I just can't go back to data any prior to 2016. I still go back to the point, even if I'm at 5.5%, or if I'm back at 2%,

where the hell am I going to go? 2% is never going to happen, folks. If you have a sack of money, you can figure some things out. So what's going to happen is back, if it gets down to a certain number, and we don't figure out a way to increase inventory... All the prices are going to go up.

The prices are going to go up. The prices are going to go up. We're going to be back into multiple offer situations. I would argue where the market is right now, and we can look at it individually, some markets are flirting on buyer's market, and it's a location-driven situation. Some are big time in the seller market. Whereas back in the unicorn years, if it had four walls and a roof, it was going to sell. Now, we always thought, we talked about this before and obviously, you know, times change and markets do change. But the one thing we always said was,

as a buyer, you also have to sit there and say, and of course, location, location, location is so important to real estate. But if there's an area you say, this is where I want to live, and every single year I go back and it's higher, right? You get to the point where you say, do I bite the bullet now? Yes, I'm paying, you know, whatever, 7% interest on mortgage, but I can't refinance, I can refinance my mortgage, but I can't refinance the price of a house. So am I willing to say I'm buying it today, I'll suffer through high interest rates with the expectation that sometime in the future, whether it's two years, three years, four years, five years, I can refinance. If I get into the house, the property that I want,

and I've stopped my inflationary climb in sales. So we can pick out another thing, but from 2016 to now, car footprint, we've jumped 75%. You want to hear a crazy stat? 75%. From 2016 to 2024, car home values.

2016, median value. All inventory types. $275,000. 2024, median value, all inventory types, $275,000. 2024, median home value, $480,000. 2016 versus 2024. And this puts it really into perspective. In 2016, the median family household income according to HUD, $92K. Now, $124K. Now, 124K.

So the whole... Home values and double wages. You're talking about AMI. Area median income. So the point is, you're going from 275 to 480 in home values where family household income is a median only 92 to $1.24. And you guys would know this. Though we're doing all this, salaries aren't matching.

That's what we're just't matching no wages are not keeping up with particularly i mean inflation in general but particularly with inflation in certain industries of which one is real estate so um i've heard this before back to food i'm sorry i mean you know think about it housing rent and food is where salary is not keeping up with inflation. Yon and I have been using a plenty C bill because we work a lot. This is a friend of ours, friend of the family that they do prepared meals and all that stuff. I found out it's actually cheaper for me to buy the prepared meals than go to Whole Foods or whatever and shop. It comes in frozen. I put it in the thing. It's

really good stuff. Now, we're two people, right? It makes life a little bit easier than a whole family. But expense, it's just crazy. It is crazy. And that's one area where I think inflation may look different going forward than it did in the past, only in this sense. Tariffs are inflationary, but they're inflationary for the most part on imported goods. To the extent that your milk, your dairy, your eggs are produced in America, you're not seeing... Now, there are secondary effects,

but the primary effect is not as though a tariff is being slapped on your eggs to increase their price. The tariffs are looking, so we may be, you're still going to see, you might see an inflationary environment, but it might look a little different than what we've been accustomed to where food has outpaced core for years. I was going to say, the other thing one always has to remember is that

inflation is what I call sticky. So in other words, we had an enormous rise in energy prices, right? And so everybody said, oh, wow, you know, I'm now paying a lot more for gas, oil, et cetera. I got to charge everybody more for that, right? Now, all prices and gas prices come down, but they don't reduce their prices. They stay steady. Brother, I was just going to say that. Well, hold it. If gas and fuel goes back to a buck, I'm pretty sure prices aren't going to come down.

No, no. So let's assume inflation comes down, where somehow or another magically, I was looking at a report that our dear friend Dr. Yoon from NAR and a bunch of other folks, they're predicting by the end of the second quarter we'll be below six. Dr. Yoon has, in respect of what he does, has been historically wrong. Okay. I would not want to. Sitting wrong all the time.

I would not take his stuff to Vegas. That's all I've got to say. Right. It's like what, the Jim Cramer reverse index that's on Twitter right now? Dr. Hewn is that. And I understand he has to look at it from the lens of an economist tied to an association. So maybe it's skewed in that capacity. And I would lean on Dr. Lisa Sterven's data long before I do that.

But the point that I wanted to bring out was is you know we're if we get down to that magically number you know I'm you know it's some supply and demand if I don't have any new product and I'm working on some slides for Friday's show and Jerry and I talked a little bit about this on last Friday I'm just looking at new construction attached in Albemarle County this is new construction attached versus new construction, excuse me, existing attached. And I'm just looking at a volume of sales. In 2020, there was 210 new construction sales versus 339. 2021, there was 187 new construction, 439 existing. 2022, 155, 319. 2023, the numbers reversed.

310 new construction versus 262, and we're now right at the first 10 months at 268 versus 218. Why is that? So back in 2021 to 22, all these new projects in Al-Markani started hitting. And by the way, when we look at the numbers, you find the numbers start stabilizing between existing and new construction. So more inventory

stabilized the market a little bit. There's a substantial increase, but they're not double-digit increases. They're normal 3-6% year-over-year type of stuff, which I think is a healthy housing system on it. So I'm of the belief if we can figure out how to get more,

it could stabilize the market a little bit. I think Jerry looks at it a little bit differently. I look at it completely the opposite. I don't think the voting population wants any more houses built. I'm of the perspective overdeveloped. I would like to see infrastructure prioritized before we consider adding density. Because kids are learning in trailers in schools. Drive down Pantops.

One of the reasons we left Keswick, moved Keswick, was my wife was spending two hours plus every day in a car. And most of that time was being spent from Pantops until Keswick because traffic was just snarled. There's parents screaming at school board meetings that the schools are beyond overpopulated and kids, their education is suffering. I'd like to prioritize some

infrastructure before we have more density so if you watched our Halloween episode it was a chicken and egg I got dressed up as a chicken and Jerry got dressed up as a deviled egg which is right up his alley so again it's this chicken and egg thing right and this is this is a big, hard question to answer. I'm just looking at if there's a way we can address Jerry's concern, right, and get inventory going, you'll see prices stabilize. If we're unable to do that and we have a limited pool, all you're going to do is see prices go up. And maybe that's just what it is, right? But, you know, I'm an advocate of more housing, always have been and will continue to be, but

somewhere there's a balance between what Jerry's concerns are. I'm curious to ask you, when you say housing, are you meaning single-family homes, townhouses, apartments, what kind of housing are you talking about? Oh, well, yeah. So I'm an ownership person i think everything we can do to make people own property to build generational wealth right most that's right most people build their generation wealth through property right not through the stock market though some do but for the most part it's from from that so whatever we could do to do that um i could tell you what the market wants.

The market wants single-family detached homes, white picket fence. That's what the market wants. The market is buying attached new construction. Because they can't afford. Because they can't afford the other one, and it's available. And generally the builders are very super,

they have financial incentives. Stanley Martin right now is offering like a four and a half or four and three quarters rate. You know, so, you know, they have the ability to go and do that on it where the general market does. A lot of comments coming in. First, our friend Ricardo Cruz-Duran. Hey, Ricardo. So many professionals on one screen.

This is fantastic. My goodness. Sandra McDaniel, who's watching, who's a stocks and equities trader here, she has this commentary that she's making. She says the mindset of buying a house and then refinancing is not something she's into. She's like, wages aren't keeping up with housing costs. An idea would be to buy and refinance later. I refuse to do this. Instead, we are making the home inside the way we want it, and then we're waiting for prices to go

down. Then she highlights that you could also do this. You could take a HELOC, a home equity line of credit, pay off credit cards, and actually be better off on a month-to-month basis in the present time in your current house. So there's So I'll jump in on that real quick. There's two parts of this market condition that we don't talk a lot about. One is what we just actually talked about. Call ISC, renovate your home, make it so that you can independent living. The other thing, which I was part of the problem, back in the 80s and the 90s when we were building 20, 30, 40 houses a year, every house was independent living. The other thing, which I was part of the problem, back in the 80s and the 90s when we were building 20, 30, 40 houses a year, every house

was independent living. So the people that I built houses for, you know, hundreds and hundreds of houses for back then, they don't have to move. And they're just like, okay, I'm sitting tight. So now you have this lock-in effect, right? You have structures, new single-family level homes that were built in the 80s and the 90s and the early 2000s that they don't have to move. You have clients or owners saying, screw this, I'm going to renovate and call ISC, which only puts more pressure on inventory. I just really think if we get back to a 5% and 6% and only time will tell, I'm not sure you're going to see these huge spikes in inventory. I really don't.

Time will tell. Time will tell. So the only thing I would say, just in comment to that young lady, there's a balance there. So all those HELOC loans, they're about 10% right. So they're not cheap either. But obviously if you have a home that you say, I can renovate, I can make it to what I want it to be, then that's fantastic because that's a lot cheaper than selling and buying something else, right? There's no doubt about that. With regard to, you know, credit card loans, you know, it is incredible. And I see this, and we have literally, and it's just in the last few weeks,

people come in and we go through all their finances, and they're saying, hey, I'm prepaying my mortgage. I said, oh, great, oh, that's good. What's the rate? What's the rate on your mortgage? And he said, 2.5%. I said, you're prepaying, okay. I said, we'll talk about this a little later.

Go through a debt, and they got $3,000, $4,000 worth of credit card. At 22%. I'm saying, so at 22%, you're not paying off your credit card, but you're paying off at 2.5%. So it's just the concept, you know, how people think and how they react. They see this huge amount of debt. I owe $200,000, $250,000 here. I only owe $3,000 here. I'm supposed to look at it from the perspective, like, I'm being really hosed here.

And over there, I can put it in a money market and make money, right? So we had this debate, you and I, right? We did. About prepaying the loan, overpaying the loan. I think I pushed back on Xavier on that. Now, one thing we want to caveat, when we were overpaying our loan at 4%, there was no credit card debt. It was just the overpayment.

No, no, no, yeah, yeah. It was not like choosing to overpay at 4% when you had 19% floating out there. That wouldn't make sense. But Xavier's point is, you know, why don't you pay off your credit card debt and then start paying down your... Well, when he was pushing back against me,

and his point was also very on point, is, like, you can get a better return by putting that overpayment into an index fund. And then you have a better delta there with the index fund. It's the point you were making, which is a great point as well. And the second point was also cash flows. In other words, I never predict the future. Liquidity you're talking about.

That's right. And when you have a 30-year mortgage, I can pay that off over 30 years, right? Something happens all of a sudden. I need a car or I need something or there's a health issue. Emergency issue. Emergency. It's nice to have the bundle of cash that I put, even if I had it in money market or somewhere safe, emergency fund. Right, because you can't go back and say, hey, I prepaid, you know, like $50,000.

Can I get that back? The answer is no. So I pushed back, but we ultimately did what he said to do. I mean, he's not wrong. Yeah, he wasn't wrong. Which is not atypical. I didn't't wrong. Which is not atypical. I didn't like it. That's not atypical.

He is. Matthias is watching. Matthias, a fantastic partner of Today Mignogna. He pushes back a little on Keith. I'm sure he does. Gooden Morgan. He's German. He says traffic studies, Keith, must be conducted before we have any more construction.

Yeah, so I'll push. That's the point I was making here. I'm pushing back on Matthias. So as one who understands the rezoning development thing, you don't get out of first base unless there is a traffic analysis. Well, I will push back on that. I will push back on what you're saying there. A couple of hundred thousand dollars to go into that. The lawsuit that's currently filed against the city of Charlottesville

with the new zoning ordinance has said they did not do the appropriate due diligence. No, no, no, no, no, no, no, no. Time out. That's the opinion of the plaintiffs. Well, the judges rule we can move forward with this. No, no, no. I've researched this in depth in something on Friday and spoken to a lot of people. So what the judge is saying is there's enough evidence to move forward.

To the evidence-gathering stage. 100%. Yeah. 100%. But the way rezonings work is you have to do this, and it's not set by the applicant. It's set by VDOT and the jurisdiction on what the rules will do that. So, Matthias, you just don't plop a 500-lot subdivision in there. And also, most jurisdictions require financial impact analysis.

So there's all long processes. You just don't walk in and put 500 lots somewhere in it. The point I'm trying to make is there has to be a better balance between what Jerry's concern is and then what the market wants. But I want to ask Ricardo a question. I know you want to push back, but can I ask Ricardo a question? Sure, absolutely. I mean, there's a lot of comments coming in on this. Okay, well, you go ahead, and then I'll write this down, and we'll ask Ricardo.

Absolutely. The Fairfax Circuit Court Judge David Schell ruled against Arlington County's new zoning ordinance. And listen to this. This in the CBO Weekly today, this morning, written by Sean Tubbs. According to the ruling, Schell's ruling, the building, the stuff that's in the pipeline right now with the Arlington New Zoning Ordinance, this construction can come to market, but it may have to be torn down. Listen to this. Schnell's

ruling will permit several dozen units being built under the New Zoning Ordinance in Arlington, but he warned they may one day need to be torn down depending on how the appeal process plays out. Who wouldn't buy that house? Who wouldn't build that house? Right.

Who wouldn't build it or buy it? And this is currently what Charlottesville is going through right now. Well, and Old Ivy, right? How many units? I don't know if you're familiar with Old Ivy. By St. Ann's Belfield. Yeah. There's 200, what is it, 250 units? That's right.

And it's a student housing builder. Yeah. So the chance of that happening is about as close to zero as possible. Oh, I think she's referring to the judge. The state of Virginia is a property rights state. If it's built and it's up, I can assure you that will never pass the state Supreme Court. There's no way they're going to make you. They would appeal that.

Yeah. To not lose my house. That is not a, they'll say as of such and such a date, you can't submit any more applications. That they can do. My point was that in that area, that street is, there's no way. Yeah, if they did a traffic study. That traffic is already jammed there, an old ivy way. So to Jerry's point, I had.

There's a rock climbing gym coming there too. Or the old Pure Bar location. So to Jerry's point, quarterly I go through blood work and stuff like that. So I had to be at UVA at 7 o'clock this morning. I rarely come in that early in the morning. It takes me from my house to here 27, 28 minutes.

It took me almost an hour because of traffic to come down Route 53. There's these silly things called buses, which I forgot. And they stopped every 10 feet. But to Jerry's point, the traffic at 6.15 in the morning, well, at 6 o'clock in the morning when I left, going in Route 53 was pretty heavy. It's the debate. I mean, let's face it. It's the quintessential problem that every growing community have because what we have is the university is bringing in more people. The area is beautiful.

And some changes in how people do work are bringing in more people. The question is, do you keep building stuff for these people? Or at some point, do you basically say, I don't in more people. The question is do you keep building stuff for these people or at some point do you basically say I don't want more people so I will just let this become so expensive that more people don't stop moving here. So, Jevi hasn't heard this yet so I'm speaking to four different elected officials in four different jurisdictions to a pro-housing to our con on the housing side and we're going to try to do an actual roundtable debate about that and just let them debate that topic out and see where we kind of we

kind of land switch up gears a little bit is there anything from a financial perspective folks should be doing a high level between now and the end of the year? And you also wanted to ask Ricardo. I got it. I forgot it. I'm trying to remember it. Okay, gotcha. Gotcha.

Because he said he's ready. Yeah, Ricardo, my ADD kicked in, and it was a really great question, but I forgot it. I'm sure it was tied to rates in some capacity, wasn't it? It was a pretty genius thing. I just can't remember what the hell it was. Okay, gotcha. Gotcha. some capacity wasn't it it was a pretty genius thing i just can't remember what the hell it was i mean between now and the end of the year one of the nice things about finance is that at least as far as how you manage your savings and your budget a lot of the typical things that people will be able to invest in your iras your off iras you you're you have until april 15th of next year

to get those figured out the key is if The key is if you have a small business and you're looking at simple IRAs, you're looking at 401ks and so forth, those are December 31st deadlines. So if you're sitting there saying, hey, have I matched out a simple IRA on my 401k? Do I need to make some changes there? Did I earn more this year than I expected?

Do I have more savings than expected? can i put more into those things you're going to need to decide that by december 31st if they don't want that if that check doesn't get it there before december 31st they're not going to count it as as a 2024 contribution right so you that's where you have an actual end of year deadline, as far as then your investment mix, I would say that really you just need to not be swayed either by the results of the election or what you think will happen in the month of December. You need to figure this out based on what's your risk level. Now, it doesn't mean you can't tweet some things. Xavier did speak to some tweets that we may see happening.

In other words, what percentage of my equity should be large cap versus small cap? Maybe that's changed. But as far as, oh, should I pull everything out of the market? Should I put everything in the market? We have people that pulled. We know people who pulled everything out at the beginning of Trump phase one and then came to us and said

that wasn't a good idea was it and we're like no and we have people that pulled everything out on January 1st of 2021 at the end of Trump phase one and then came to us a year later and said I probably shouldn't have done that I don't understand what you're thinking

you cannot allow your feelings about how you want to be elected to make you think that the market will crash just because it didn't go the way you want. In other words, you can't make that mistake of saying, oh, the person I wanted to win didn't win. The market will therefore crash because the odds are it's not going to. Yeah. Okay. Right? I mean, I've always said that monetary policy is much more important to the financial markets than fiscal policy. And monetary policy is the Fed, not the president.

You pay attention to the Fed, and you're going to do well. The other thing I was just going to say, before the end of the year, one of the things that we work on, clients that have just regular brokerage accounts, tax loss harvesting, and that means there's an opportunity to literally take opportunities where there's a loss in your portfolio for whatever sector in the market it may be. It's great to be able to take advantage of that, and that really helps your taxes. So the last two months of the year is when you really take a look at your portfolio and say, is there something that I can do here?

So I have to apologize to Ricardo because I can't remember what genius thing. There's other comments coming in. That's all right. What genius thing, that's welcome to the world of living with Smith with ADD. So it was genius. It'll probably come to me about 11.17

when we're done. The reason I wanted to get that out was as, you know, hey guys, you know, if you're out there, this is the end of the year. This is the time to reach out to your

financial advisors. We love these guys. You guys take care of us wonderfully. And if you don't have anybody looking out of that, it doesn't matter if it's $100 or a lot of money. You should reach out to these guys and look at a plan. Don't let the end of the year pass and then you sit back next year and your accountant's like, oh man, it would have been great if you had done all these things. Yeah, but I didn't talk to a financial advisor until January

and it was too late to do anything that would have to be done in December 31st. Same thing if your accountant in March of next year is like, oh man, you could have taken some losses in your brokerage. Well, you had to do it before December 31st. So always be proactive. Back on some earlier comments, I think

if you go through this rezoning and build a building, I think it's going to be very... The fact that somebody's going to require you to tear it down, I think, is a bit of a stretch. Do you guys think the housing prices will go down? I can emphatically say I don't

think the housing prices are going to go down at all. I wouldn't put money. I mean, it's always where. Yeah. Where are you asking? But, well. You have the year-over-year numbers. I have the year-over-year numbers, but what I wanted to do was to take a look at this new program I have and take a look at different zip codes real quick. But if you just take a look at right now 22902, you know, it's getting close to a buyer's market. There's an Altos research that is what I belong to that helps you with that. 2201, it's right in the middle. I think we've got a better chance of seeing 2% mortgages again than prices

coming down. They'll stabilize, right? They'll go up the normal 2%, 3%. But if you take a look at just to Jerry's point, I can pull it up real quick. So median sales price, closed homes year over year, 23 versus 24, first 10 months of last year versus this year. I don't have the percentages with me. Outmark County right now is at 540.

Last year was at 503. So whoever's smart enough to figure that out. City of Charlottesville was up 532 versus 456. Havana, 360, 352. That's kind of flat. That's kind of a flat area. Green County, 400 by 385, kind of flat. 424 in Louisa versus 403 in Nelson County, which the Nelson County Board of Supervisors,

three of them have asked me to come talk to their board because they don't believe this number. 417,000 is their median sales price in Nelson County. This includes Wintergreen versus 385 this time last year. The big winner is Charlottesville. 352 versus, and these are closed deals. These are not pending.

Crazy guys. Remember, it's like I always say, if you go from nine buyers for every one house, and you go all the way down to two buyers for every one house, yeah, do prices go up as quickly? No. But they can't go down when there's two people for every one house. But to Jerry's point, this is very –

I mean we just had a house in our neighborhood. It's very regional. Listed at one even, a million even, and it traded for 15% above list. In seconds. It went under contract in probably three or four days. Yeah. And it was a multiple offer situation. Yeah.

But I've been saying this, this is more important now than ever, micro markets matter. Yes. Correct. There's a couple subdivisions, a couple of markets that are just sitting. And if you were to take a look at the single-family detached in that subdivision, same square footage, yada, yada, yada, and put it in Albemarle County, to Jerry's point, it sells in a few days. So it's who's coming in, where do they want to be? That's pure location driven.

Pure location driven. Gentlemen, this has been a pleasure. Any closing thoughts for Xavier or Alex? With quite a few folks watching you guys. Yeah, no, I would say that, you know, I'm actually very excited about what's happening here. Only because I think change is always good, and change is what keeps Alex and I awake at night trying to figure out what's the best path forward. But, you know, as Alex said, it's, you know, you've got to stick to your game plan,

and it's only tactically what can you do to really improve the situation of your particular portfolio. And so I think there's, you know, there's good coming. And I think for real estate as for, you know, for the financial markets, what matters is what does your game plan work for you? Not does your game plan work for 10,000 other people out there. Not does my game plan align with what I thought was going to happen or what I care about other issues. Does your game plan in your financial portfolio work for you?

If it does, you need to stick with it. If it doesn't, you need to make some changes. Thank you, gentlemen. Thank you for having us. It's been a pleasure. I wanted to bring in somebody that was an expert and way smarter than me in these topics. And you failed, right? I ended up with you.

The other guy said, eh. So anyway, nice job. You always can tell the New Yorkers in the room. The Friday edition of Real Talk with Keith Smith is at 10.15 a.m. for the viewers and listeners that are watching the program. Ricardo, I promise I will remember this and write it down on a card, so please tune in on Friday. He offered some very compelling commentary

in the comment section on Alex's Facebook page on how you can better prepare yourself for today's lending environment. And he highlights the importance of a credit score, credit history, and paying down floating debt. And he says very kindly, which is a nod to all of us, stay tuned to all the programming on the I Love Seville network.

The content is absolutely fantastic and extremely insightful. A nod to Today Manana right there as well. I now remember it, but I'll save it for Friday. I wrote it down. Do you want a little promo of Today Manana? Well, tomorrow, yeah, tomorrow, Today Manana, we're going to have on... Toughest question I'm asking you right now. I know, toughest one.

Oh, man. Oh, I'm sweating here. Right, no, we're going to have on... So we've got two guests. It's going to be Christine Day from Miss Day Delights. She's a baker. And home baker. And then Chelsea Miller from Beauty Cosmetic Personal Care.

So two more small business owners. I forget who's the host. You'll have to tune in to find out who's co-hosting. Michael and myself. Michael and Xavier. Michael's been doing a heck of a job. Yeah, so it'll be a lot of fun always just to see all the great businesses in Charlottesville. Today, Minyata Guys has been a fantastic champion of the small business community.

They do an incredible job of celebrating entrepreneurs and business owners. Just giving a tip of the cap to these to this family. Keefe's back on Friday at 10.15 a.m. Our show at 12.30. So much to cover, guys. On a full slate of content. A shout out and a thank you to you and Judah for doing an extra show this week. Absolutely our pleasure.

So long, everybody, and thank you for joining us. Thank you.