Hey, I'm Steve Volkers and it is the next month. And we started talking about sort of financials and what's going on in the real estate market in West Michigan, but also sort of nationally what's playing out, which then becomes local. So every month Kevin and I are just recording this video.

And so this might be a long one. I don't know. Cause it's just really my rambling and the stuff I find in my head just it's about the finances this time about, uh, what's happening in the marketplace. So I've got a couple of stories, and data to back that up. Um, last month, if you missed it, we did talk about sort of the inventory and where I felt that was coming from. Mostly, it was based on new construction, right? So there's a new construction lack, um, with supply chain issues and just costs. We talked about that, but this month, uh, sort of overview or conversation that is being talked about consistently is interest rates. 

Interest rates became the new topic or the new conversation over the last 30 days for our buyers and for our sellers that become buyers…you name it. So we're going to talk a little bit about the last interest rate sort of spike, which was similar to this spike, what came after the fact, and then where we could take some of that historical knowledge and try to apply it to sort of current market situation or what to look forward to over the next three to six months, based on this new interest rate hike. Similar to what happened at the end of 18, the beginning of 19. 

So it's kind of fun data. Yup. I do nerd out on this. Thank you for participating with me. It gives me a chance just to really spend some quality time and create some talking points that we work with our clients on throughout the month going forward.

So I've got a whole bunch of data here. Uh, some of which I made up and figured out, uh, with the Googles and just recorded. Interest rates. The other Kev throws together this really awesome packet, which will lock and load and throw up on our website. And, um, we can email it to you as well. If you want to just drop your email below or give me a thumbs up that you want the data, we'll make sure that it gets to you.

Um, let's get into it. So I want to talk interest rates, interest rates are the biggest subject matter right now, and our industry and are going to be over the coming couple months for sure, into the end of this coming year. Um, they're equaling two big situations for us. Right? Number one is lenders are really starting to struggle to hit their volume and their units, right. So they're increasing interest rates based on inflation, right? The government is so we've got an inflation issue. So they're trying to tamper down the inflation issue by increasing interest rates. But it's also just causing a really big affordability conversation in West Michigan here where our wages are not increasing anywhere close to what interest rates plus inflation are equaling.

So we're really going to start seeing a tightening down of the market situation with our buyers specifically in the affordability conversation. So we had that just yesterday. The client was prepared to write $30,000 above asking quite a bit for a home and then come to find out. After we sent the person back to the lender to get requalified with a new interest rate, there were two issues.

One is the interest rate, which took the affordability down by $30,000. So let's say she was going to make an offer for 300k and had approval for 300k, just a monthly. Now she's only approved for 270k. And then also the amount down that she was going to put down is, um, gone up as well. So it's a, it's a number of situations which are really then all of a sudden making buyers start to pause and say, can I even afford to buy right now? And what is out there? How long do I wait? And can I wait it out? All of those kinds of questions. 

So, um, we've got that interest rate spike, which is creating an affordability issue. Also speaking with a lender, um, at a closing a couple of weeks ago, and they mentioned that their organization had already forecasted 30% to 40% less loans out of their company this year compared to last year.

But that was with. Uh, thought process that we would have a four and a half percent interest rate by the end of this year, not a 5% interest rate already going into the spring market and an inventory sorted issue that we're having. So they're now recirculating and thinking that they might be off by almost 50% of loans.

So you think of all the mortgage professionals out there and think that they might be 50% less units than they were last year, which last year was their height. There, there are lots of people at two and a quarter, 2.5. Like everybody got a mortgage last year. Right. But 50%. So it'll be a really interesting playout as we go.

So, uh, I just pulled up the graph, which is the 30-year fixed mortgage rate average in the United States. Right. This data is readily available, obviously, and the 30-year fixed right now is just over 5% or just below it, right around that range. The last time we hit, that was November of 2018 folks. So November of 2018, if you see here, the graph came up and we hit that.

What happened for anybody that was in the business in November of 2018, we've had a lot of real estate agents get in since November of 2018, but any of us oldies that have been around. What only four years still remember that time it's slowed down incredibly. Right? So the buyers all got a little bit excited. They weren't sure if they could afford, we had that affordability conversation. And it's interesting. One of the graphs that Kevin pulled out that I have here goes back that far and you know, it shows I'm trying to pull it up here.

Let's see 2018. It showed we, we hit like a really big, low in inventory that year at that same time point. So what happened? Yeah. So 2019, and 2018. Uh, for a six-month period, after that 5% growth, the listings to sales just went down significantly and our inventory went up. So we were down to 1.7, 1.5 months of inventory. All of a sudden for that stretch, we were back up to two, 2.2, 2.3 in February, March, April of that time period. So if you use history as an example, we could potentially say that going forward. We could see some listings that don't sell an inventory, go up. Um, just this weekend, we're hearing of that situation, right? 

Where there's only six offers on a house, only five offers on a house, or they had the deadline of Monday offers due. And they hadn't gotten any offer and the due point was five o'clock and at 4:45, the agents is calling everybody saying, I don't have an offer. Like what's going on. Why don't I have an offer? And so I think buyers are really not sure what to do at this very moment. Um, do they hold out for interest rates coming down? Probably not the smartest move. But there is going to be a push to pull of like how much more should we pay for a house, you know, at what point are we overpaying or have we reached this point where we're going to plateau for a little while?

So, uh, my just 2 cents in it that I've told everybody is I think once we have an interest rate spike, like we're seeing, and I've been saying that for the last six months or last year. Once we get to this five, 6% interest rates, we will hopefully settle down into a period where we can get inventory to come back up and settle into a eight to 10% growth. Instead of what last year, Kev, I think you showed it was like 15% growth last year, right. And 15% just again, is that an affordability issue? If you increased prices by 15%, over the last three years, you increase interest rates. And then everything fricking costs way too much money. Like everything is expensive, all of a sudden, right? You've got gas as your primary, but you name the thing. You're paying more for it. Right. I saw a Facebook post from a real estate agent yesterday. They got, uh, they got vanilla, pure vanilla locked up at Meyers is $25 for a little pure vanilla. They got locked in a case. Right. So things are expensive. 

So anyways, What's going to happen. We'll hopefully see some inventory increase maybe, or just a stabilizing of pricing that we're not needing to do, you know, 10, 20% above just to get the house. Um, this is fun data folks. We'll throw this stuff up(on our website). It's just some key pointers, right? Um, one is last month we were 125 units off. So even the stuff I'm talking about, we're still in an inventory shortage, right? So there's still a supply and demand prices are still going to increase till the point where the demand and the supply sort of even out or nowhere near that. So all the agents that post a, you know, prices are going to increase by now. That's true. They are. I'm just telling you, there's going to be some leveling out in my opinion as we go along.

But yeah, we're off 17% in, uh, average, um, units so far this year compared to the five-year trends. So 17% off where our 270 less sales so far this year, that's a big number to be at the beginning of the year. That much, that much off. The interesting part is anybody that's making money on volume is not hurting themselves. The volume actually is up, which is the amount of money paid, right? So you've got units and volume units. One house to house three house volume is the total of a hundred thousand or 200,000 or 300,000 for that house. So even though we sold 270 less homes, compared to last year, that money is made up by how much we had to overpay or pay for those houses, whatever those values are. Right. So that's just fascinating to me, um, on how that trend works. 

We're also another trend that we consistently are asked by our buyers is how much more do I need to pay over the list price? Right. Okay. It's listed. 300,000. Can I write three 10? Well, you know, right now, um, the average price, um, in February was 1., a 104%.

So basically add 4% on to any list price. And that's traditionally what you're going to be paying. We got up to 1.6 in the height of last year, this same time. So you're, you're trending in the same way. Going to go up. And I always say that it's interesting how, um, we go up that much, but then usually we level off, right? So this is spring, spring market hits. We're going to go up by 15%, but some reason we're pro we probably are up 20, 25% last spring. And then we ended up at 15 same thing as sort of pulls back. Um, this is, yeah, that month supply of homes for sale was definitely up during that, uh, 19 period that I was talking when interest rates were climbing.

So much good stuff here, Kev… new listings. We did have an influx of listings last month, right? Kind of a we're we, you know, we were at 700, 600, 600, which is normal, but then we went up to 1,119 listings in March was a pretty good increase. But even though that's an increase, if I do that line across for all the other March months, it's still a hundred units off. So it feels like all of a sudden, wow, there's things coming, but it's not.  

So, uh, to wrap this up, buyers' ability to buy is getting tighter with interest rates and just that house costing more. They're starting to get a little frustrated. And so I think we might see a point over the last, next 30 to 90 days where some buyers are just going to reassign their leases, that they know what they can get. Hopefully then they're going to save a little. They're going to hope that those interest rates simmer down or settle in, and that maybe there's a deal to be found later on. Um, I don't think there'll be a deal to follow. I think it's going to continue to increase. Hopefully, we just level off. 

Um, the other thing is just, uh, we've helped a number of buyers. This. Uh, look outside of the area they really were looking for originally. Right. So let's just say they wanted the city house for 250 to 300. They were outbid by 20 other people. We started looking at other regions with them and they found some really nice houses at good values. Right. So like we, we put two together in Zealand in the last couple of weeks. Right. Um, nice houses. Yes. They had to pay over for those houses still, but bigger houses. And they're like, hey, it's not a bad drive coming in and out. It's right off the highway. So let's try that for a period of time. And then, you know, a couple of years from now, then we can move to the next house. 

Um, listings. I talked to Paul from our brokerage just this morning and I told him. Uh, Hey, if you've got a listing coming, put it on the market soon, I think getting it on the market over the next 30 days is going to be a benefit for your sellers. You're going to make more money because all the real estate agents in the world are, most of them aren't doing this stuff, right.

They don't know where the market is. They don't remember 2018. They can hardly remember them next, last month, which is true for me most of the time until Kevin gives me the data. Um, so, uh, they don't understand. So we're going to see agents continuously bumping prices, but their buyers are going to start saying I can't afford. And with less buyers, less push of those escalation clauses going straight up through the moon. Right. So if you are a seller and you're like, oh, should I sell now? Or should I. Two months from now or a month from now, I would tell you, get it on the market while the market's still all churning and excited. And before, if we get an interest rate and again, get up to 6% in a month and a half, that's going to completely blow up. What we've got right now is calm things down. So if you want the most money, try to get it out there, here in the next couple of weeks, I think you're going to be a benefit from selling sooner rather than holding onto it to hope that you bike a bunch more money as the spring market hits.

That's a lot Kev. There's a lot. That's a lot. Okay. We'll end it. Thank you. I'm Steve Volkers this was like 20 minutes or something probably right? Ariel. Yeah. 15. Woo. This is a new record cab. I'm still jabbering. Thank you for tuning in. If you made it all 15 minutes, I'm proud of you. I don't know if I would.

Thank you.


Posted by Admin Volkers on
Email Send a link to post via Email

Leave A Comment

e.g. yourwebsitename.com
Please note that your email address is kept private upon posting.