The Science of Flipping - Seller's Power Predictions In The Real Estate Market

Starting point is 00:00:00 So what you need to keep doing is you need to keep your head down, you need to continue to market to motivated sellers, you need to keep in the game of marketing because when you do that then you create opportunities and then you can maximize these opportunities. That's what's going to be a game changer. Yo, yo, what is up, everybody? Welcome back to the Science of Flipping. I'm Justin Colby, and I'm going to give you some data points that recently came out from NAR, National Association of Realtors, talking about the real estate market. There has been a lot of buzz. If you look all over the internet, everyone's talking about the great reset.

Starting point is 00:00:54 But as a real estate investor, what I really, really care about right now is how is this market going to change? Is it going to change? So I'm going to talk about a little bit of the data that I've been able to research and how that might affect us as real estate investors. Now, NAR is saying that the listing percentage actually has gone up by 8%. Now, that doesn't really move the needle. The reason why I say that is they also will go along saying that the listings are down about 13% as year over year, meaning last year in 2021, we are actually 13%

Starting point is 00:01:28 less listings right now in April than we were in 2021. So an increase of 8%, but we're still down 13%. That's a net negative, people. The reality is that stat sounds encouraging as if there's going to be a lot more inventory coming to market, but the reality is it's still down greatly even from last year, which really didn't have a whole lot of inventory either. Now, if you are just listening to this on iTunes, I'd love a five-star review. If you're not yet watching this over on YouTube, make sure to go to youtube.com forward slash Justin Colby. Make sure you subscribe and give me a like.

Starting point is 00:02:04 I want to see to youtube.com forward slash justin colby make sure you subscribe and give me a like i want to see the engagement if you're interested in things real estate all things real estate investing flipping wholesaling buying and holding make sure you are giving this a like now with that said i want to tell you a couple more data points that i actually found which was really quite interesting in the sense of you know what the, right? So the attitude of this article here on the National Association of Realtors really was this idea of homeowners being more realistic with what we'll sell, right? And that they are actually not going

Starting point is 00:02:36 for these crazy ultra high prices anymore. This was the tone that the article was really talking about. Now, as a real estate investor, you and I both know that it has been insane. It is so hard to even find a seller who's willing to be even somewhat realistic of the value of their home. They think that they're going to get an extra 10, 15, 20% higher than their neighbor, let's say. And for someone that talks a lot to sellers that quite literally are motivated and their home is in distress, these people still won't take a reasonable number just to help the process go because they just believe because the market's on fire, they should get an unrealistic number too. Now, the key about that, NAR quotes that quite literally that there has still been

Starting point is 00:03:25 a 2% above asking price nationally. So nationally, every home that sells on the MLS, they're getting a 2% increase above that on average. Now that's insane because all the homeowners and all the realtors are listing these homes already 5% higher, 10% higher than they realistically should be listing. Now, why is all this is what you should be thinking about. Why does this matter to you? How is this going to affect the economy? Well, one of the points I want you guys to be thinking about here is the hedge funds and iBuyers are still heavily buying. Now, see, they don't care about what the bank is doing with interest rates. They don't need the banks. So understand that this whole cycle in

Starting point is 00:04:13 this data that is coming up now about, you know, there's an 8% more listing. There's 8% more listings, I should say, this month in April than the past, which is still actually down from a year ago, right? 13% less listings from a year ago. It's kind of newsworthy, right? They're trying to create something, but they're not mentioning the fact that all the hedge funds are still buying at incredible rates. All the iBuyers are still buying and they're willing to pay top dollar. So when they then reference the fact that on average, there's 2% higher purchase price than the listing price. So if the home was listed for $100,000, it'll sell for 102. If it was listed for 200, it'll sell for 104. If it was listed for 300, you know, 306, et cetera, et cetera, right? You see where I'm going here.

Starting point is 00:05:05 Now, that doesn't really matter because the reality is the people who are buying a lot of homes don't use banks, right? They're not worried about the interest rate on banks. They're moving the needle. They're moving the market because they can pay more than everyone else because they're not worried about an interest rate going from 2.8 to 4%. They don't care. So that is something you as a real estate investor should really be thinking about when you're hearing this data is what is actually happening. Now, layer on that the fact that there's been several articles over the last six months or so talking about how the builders, right? We're talking about this inventory shortage here. The builders are now building to rent. They're

Starting point is 00:05:52 building to actually hold. Now, not all of them, and it's not 100%, but when you have major players that will help the supply chain open up, but they're actually going to keep it themselves, and they're going to actually turn it into a rental. Again, not as much inventory. And now here's the thing. There has been a lot of, you know, first time home buyers coming into the market because the interest rates were so low and their parents and parents' parents were telling them they should buy a home. And rent increases have been incredibly fast and rapid in, you know, making rents in most of the areas, you know, not worth it and buying a home being a better sound financial investment. But the reality is, you know, if someone can afford, you know, well, the way I'll say it is this. Someone like myself, whether I got a 2.8% or a 4%, I'm still going to buy the

Starting point is 00:06:45 home I want, right? So it will slow down some of the people and I will always make this argument. Most people out there buying homes, most shouldn't be buying homes. And I know I'm going to get all you online paper tigers who are going to rip me one for all, you know, you need to own your home for X, Y, and Z reasons. But understand most people aren't in a financial position to really afford the home. They just see that they can pay the mortgage payment. So they think they should buy it because the interest rates are low. That's the most people. If you're not that person, I'm not talking to you. If you can afford a home at 2%, 3%, 4%, or 5% interest, and you can afford the interest payments, and you can afford the property taxes,

Starting point is 00:07:30 and you can afford the interest, and you can afford the maintenance, fine, I'm not talking to you, right? But most people shouldn't be, right? They're doing it because that's the thing to do, right? Everyone's been taught that from ever. That being said, those people are getting weeded out by higher interest payments. Well, good, right? Because I don't really believe that those people should be doing it just to

Starting point is 00:07:51 skim by to say they own a home, right? You should be financially sound enough to be able to cover that with plenty left over, right? So this whole sky's the limit thing that realtors and homeowners have basically been preaching over the last year about what they could list homes for, what they could sell them for, and the sky is the limit. There's really no limit. This is going to be crazy. It's starting to slow down a bit, but the reality is this. There is still such a huge supply and demand issue that you still can't even find anything, even if you can afford the properties. And what's happening is people that would want to buy something in a more affordable price point, they're having to try to stretch themselves into a higher price point. That's why articles are

Starting point is 00:08:37 showing that, you know, multimillion dollar listings and luxury sales are going crazy right now. Manhattan or New York specifically, this Q1, luxury homes in Manhattan and in New York are going like gangbusters. They're going crazy because people are pushing up into a higher price point in the point that they, there's nothing for sale at the lower level, right? So here's why this all matters to you. If you are a good real estate investor, it actually doesn't matter to you. A good deal is a good deal, right?

Starting point is 00:09:13 Now, if you are a well-rounded real estate investor and you wholesale and you fix and flip and you buy and hold, then you should be doing all of those things, right? Not every property is going to be a great flip. Not every property is going to be a great flip. Not every property is going to be a great wholesale. Not every property is going to be a great buy and hold. Not every property is going to be a great short-term buy and hold. Airbnb. But if you know the exit strategies, you can go out there and find yourself a good property. You just need to know how to go find those individuals, right? And likely it's not going to be heavily predicated on the MLS. Now here's one thing I'll tell you for sure. If you work with realtors, you will get deals. Now it's not what you think. I don't mean by just making offers on the MLS per se, but making sure that realtors

Starting point is 00:09:57 know you're looking to buy. And if they ever come across a property that isn't quite listable to call you first, that's how you can actually start working with realtors and then your performance on that deal will lead to those agents actually calling you when they do have listings or when a listing isn't selling because of one, two, three reasons. Now, because you've been able to do good by them one deal,

Starting point is 00:10:19 they'll actually continue to call you. And that's how you can really build a nice little pipeline of deals through realtors, some on market, some not on market. The point being is this little blip of, you know, more homes on market isn't going to change the supply and demand issue. It's not going to change the fact that builders are buying and renting. It's not going to change whether, you know, Blackstone or Open Door and OfferPad. None of that changes for us. What you need to keep doing is you need to keep your head down. You need to continue to market to motivated sellers. You need to keep in the game of marketing

Starting point is 00:10:56 because when you do that, then you create opportunities and then you can maximize these opportunities. That's what's going to be a game changer. NAR talking about 8% increase in listings, that doesn't move the needle, especially when they're comparing it relative to nationally that there's 13% less listings nationally than there was a year ago. So it's irrelevant, right? Now everyone else talking about interest rates, inflation, that's a very real thing. We are going through a lot of inflation. Interest rates are going up for the Fed to try to figure out a way to subside this inflation. But those that can't afford these homes are going to continue to buy the homes as long as there's something to buy.

Starting point is 00:11:40 So I don't believe it's going to have this flood of inventory coming anytime soon. Could there be a little bit more than we've seen over the last year? Maybe, but you're not going to have six months supply, which is essentially like a normal market is when there's six months or more supply, right? Three months or less, you are definitely in a seller's market. It is crazy low supply. When you get to six, starts to even out. If you start to get to a year, now we're talking about there's too many homes on the market. It's a buyer's demand now. Now we get to get them to go lower their prices, etc. That's the real big takeaway. Now, if you haven't yet, make sure you're giving this video a like. Make

Starting point is 00:12:22 sure you're subscribing. Make sure you give me five stars on iTunes. And I'll see you guys on the next podcast episode. Peace.

The Science of Flipping - Seller's Power Predictions In The Real Estate Market

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