Of all the emerging trends, this is my favorite

I’m as tired of talking about COVID as anybody else in the world, but I’ve got to bring it up because it has fueled two trends in the real estate market. One is that everybody is moving up the real estate ladder due to low interest rates and the boost in equity the market has given them. I am seeing far more sales over $1,000,000 in the past year. Some of these buyers are wanting to get into their favorite neighborhood and a lot of them are wanting a place in the country.

The other trend is scaling back. Many people just want a more simple life and/or are into the F.I.R.E. movement…..meaning Financial Independence Retire Early.

I’ve been wanting to scale things back myself the past few years…….including myself since I was so overweight. Here’s my story. I think sitting around the house during the lockdown got me thinking about it more.

I grew up in the 80s. I’m a Gen Xer. I wanted the American Dream just like everybody does. I never considered myself all that materialistic. I knew stuff wasn’t going to make you happy if you were not already happy. I viewed stuff as icing on the cake of life. I have had a good life. I married when I was young and still am happily married 30 years later. I had great kids who I love in a way they will never know until they become parents. Life was and still is good. I thought stuff would make it better. As my real estate career took off, I got the chance to do a lot of things I couldn’t before, some of them I never thought I would do. I took nice vacations. I had a big house in a prestigious neighborhood (that was very outdated because I hate remodeling a house while living in it.) I was able to collect cars and waste a fortune on them. I was able to write 5 digit checks to one of my favorite charities.

The more stuff I had though, the more stress I had. Stuff needs your attention. Stuff needs maintenance. I started realizing that this stuff I thought would be fun to have was actually making my life worse. My friends would tell me to hire people to take care of my stuff for me. While that saves the time of doing it yourself, telling somebody what to do and then checking that they did it still takes a little time and mental energy.

As I was considering upgrading my Porsche 911 S to a 911 GT3, I realized that better stuff wasn’t the answer. Why? Better stuff is still stuff. Remember, stuff needs your attention. Stuff needs maintenance. So, I jumped off that train and decided that I only wanted stuff in my life if it made my life better. I still have far too many cars and I think it is time to let a couple of them go even though I really enjoy them. I just think my life would be better with less since good stuff is still stuff.

Those are the two trends I am personally seeing with my clients. Most of them want to get the biggest and best house they can afford and others are wanting less house than they have had. I’ve personally done both so I get the appeal of each one. It’s fun working with both of these type of buyers since they are both getting what they want.

What would it take to crash the real estate market?

A lot of people subscribe to the “What goes up must come down” theory on markets. I don’t. I tend to just use that one when describing gravity.

For real estate, we have only really ever had prices go down twice in the history of tracking such stuff. Once was the Depression which caused ALL markets to go down, and the other was the Great Recession which was largely caused by bad mortgages that were toxic to the stock market. Neither time actually had anything to do with just the real estate market.

Today’s market is probably the healthiest it’s been in a long time. Prices are high due to supply and demand. Sure, low interest rates help but not as much as you would think. People acclimate to interest rates. I remember bragging about getting 6.625% on my first home when all my homeowning friends were over 7%.

When people on Youtube or those who write for the news look at the real estate market, they tend to not look at the whole picture. I am sure you have seen headlines about how all the people in mortgage forbearance would crash the market once they got foreclosed. Didn’t happen. All those people who needed to sell had enough equity to sell and avoid foreclosure. What about all the Baby Boomers who would leave a huge void in the real estate market as they sold their homes and went into retirement homes or to reside on the other side of the Pearly Gates? No mention of the youngest generation of buyers entering the market who would keep the wheels of the whole market greased so everybody can move. Years ago I described this like a baseball game where the bases are loaded. The Player on 1st base wants to run to 2nd. The Player on 2nd base wants to run to 3rd. The Player on 3rd wants to run home. What needs to happen in order to keep all those Players moving? For the Batter to hit a home run. The first time buyers are the most crucial element of the market. Without them, no homeowner can part with their old house in order to move up to their next one.

Everybody knows how Supply and Demand works, right? Let’s apply it to real estate. Most people involved in selling or buying will be doing both. Most sellers are also buying. Most buyers are also selling. That means there is no net gain or loss in the supply/demand ratio regardless of the market. This is why the supply/demand ratio got so bad during the Great Recession-You had so many foreclosures where the previous owner did not reenter the market as a buyer. Other than in such catastrophic times, the only people who are doing one side of a sale are first time buyers or those who have passed away or are going into some form of assisted living. Historically there have been more first time buyers than there are those who are exiting the market permanently. (I am excluding those well off enough to purchase second homes since that is a smaller market and we are not in a big area for that like Florida or any other vacation destination.)

So then, what would it take to tank the real estate market if it has nothing to do with real estate? It would take something terrible to happen with the economy…..meaning something bigger and broader than just the real estate market that is like a Tsunami and wipes out everything in it’s path. Let’s hope that doesn’t happen any time soon!

I took my own real estate advice and bought a car

I’ve been wanting to get another car for a while now. Anybody that knows me knoooooows I am a very sensible, practical guy in all aspects of my life other than when it comes to cars.

This year was probably my worst. I mean, I should probably make a YouTube channel about the stupid decisions I make when it comes to cars. I don’t keep them long. I spend a lot of money fixing them up then get bored and sell them for cheap.

I sold a newer Porsche that just didn’t do it for me anymore. I was thinking of getting one of two BMWs since BMWs are my all time favorite cars. One was practically new. The other was an older one. I tend to like older cars better so I went with the older one. After doing some modifications on the car, the engine blew up. It was worth nothing. Meanwhile, used car prices have been going crazy. The other car that was on my radar earlier this year was now worth at least $10k MORE! I really wish I had just bought that car back then. I would have saved the money wasted on the one that blew up and also saved on the other one too…..but no, I took the most foolish route because for some reason I throw out all logic when it comes to cars.

All of this has been really upsetting to me. I mean, I wish I had just bought earlier. I don’t like the current prices of the car I now want. They are hard to find. I don’t even know if now is a good time to buy since who knows what the market will be like next year. Will prices go up? Will they go down??

Then it dawned on me.

I was doing the same thing a lot of home buyers are doing, which was just being paralyzed with confusion and being mad that I should have done something sooner and can’t seem to get what I want now.

What do I tell my buyers who are in this same place? I tell them yes, you could have or should have bought sooner but you can’t go back in time. Yes, it is a frustrating market but it is the only market there is. Yes, prices could go up or down but in addition to usual market issues like supply/demand and interest rates, we now have inflation to think about. Let’s say prices drop. If you have a mortgage, you are paying that loan back with deflated dollars due to inflation so it’s sort of like you are also paying less and less over time. If prices go up, you are also still paying back that loan with deflated dollars so you are coming out ahead.

So, for the first time in my life, I have taken my own expert advice and pulled the trigger on a 2020 BMW M2 in my favorite BMW color, Alpine White. (Sorry for the picture. The dealer is putting on new tires and getting the car cleaned up for me so I don’t have it yet……which feels even more like buying a house since I have to wait to actually get possession of it!)

Should I buy if I know I won’t keep the place for long?

Back when the market was bad, I would always tell people not to buy a house unless they did not know exactly how long they would own it. If they knew they would only be in town for 2-3 years max, my advice was to rent. Same for “Kiddie Condos” too where a parent buys a condo verses renting an apartment or paying for a dorm for 4 years.

Back then the only variable was the housing market. Inflation was flat. Today is a LOT different. The value of the property AND inflation are both variables that are poised to benefit you in this situation. All the major players are predicting both housing prices to continue to rise and inflation to rise in the near future. That’s a double bonus for you and really for anybody buying any asset right now. Buy now at today’s lower price and pay it back with deflated dollars through a mortgage. It doesn’t get any better than that.

Many people seemed to enjoy my last two posts about my weight loss journey. I’m thinking I might include a little bit more stuff that’s going through my mind these days. I’ve gone through a lot of changes and unfortunately I’m now old enough to want to share my experiences and wisdom gained along the way.

Growing up, I always had a lot of anxieties. Sometimes they would be really debilitating. Couple anxiety with a mind that never turns off and it gets worse. I know a lot of people with what is now called high functioning anxiety. I am hoping this helps them.

I think two things helped me out the most.

The first was that I was able to train my mind to separate my perception of reality FROM reality. When I would get anxious about something, I would tell myself “Okay John, this is what you FEEL is happening but this is what is REALLY happening.” It sort of switched my response from being emotional to logical.

Then I realized that most things that make you anxious are either things in the past or the future. We all tend to dwell on either since I sort of feel in general, humans suck at being in the present. If I was anxious about something in the past. Maybe dwelling on some awkward social situation where I worried if I said the wrong thing, I would just try to learn from it and go on, making the next awkward situation easier……because guess what, I can’t undo the past! For future anxiety, I would just try to focus on the present and remind myself again that how I feel about it is totally different than reality and reality always wins. If it was some sort of performance anxiety, I would make whatever I needed to do as basic as possible. That seemed to make it a manageable task. I still do this if I have a super stressful day ahead of me. If I wake up and have to take 3 different clients out to see houses, negotiate a repair list, write an offer, have a closing and otherwise have a crazy busy day, I might just tell myself “All you need to do John is drive around with people and look at houses, make a few calls and do some paperwork.”

I really think like any obstacle in your life, you need to realize YOU can train yourself to control your mind and your responses to things. It isn’t easy and it isn’t quick because you are basically battling yourself. Just slowly do these two thing and you will find your anxiety level decreases.

Why Zillow is selling homes for less than they paid

This may not be news to you, but Zillow got into the business of flipping homes in several larger metro areas. They recently stopped buying houses and are selling many of their homes for less than they paid for them.

If you read headlines or even worse, get on YouTube, you could conclude that the market is about to crash and Zillow knows it.

I don’t think that is why they are selling their homes for less than they paid for most of them.

I think they overpaid for them in the first place.

Zillow’s paper thin profit margins on these flipped homes was based on their data. I have always said you can’t argue with data. Data is always correct all the time. The conclusions drawn from data is not always correct though.

Their data told them what a house should be worth and they paid that for it. While I don’t know exactly what data they use, I imagine it is very similar to the data an appraiser would use such as general condition, square footage, features, etc. Once you have all that, you look at what houses have sold within a radius or within the same neighborhood, make adjustments for hard data differences and then whatever number is at the end of the equation is their Zestimate of value.

What Artificial Intelligence and computer algorithms cannot tell you though is what a buyer will like or dislike about a house. It cannot tell you that buyers tend to not like a backyard that slopes uphill. That they usually don’t like a steep driveway. That there are two Ball Home floor plans all over the Bluegrass that are same size and one of them always sells for more money. That there can be a huge value difference between two identical floor plans within the same neighborhood just due to where it is within the neighborhood. All of these things are subjective.

Zillow has been telling the public that they don’t need a Realtor any more. All you need is them. Sounds to me like Zillow could have used the local expertise that only an experienced realtor can provide.