[Music] Hello everyone and Welcome to another episode of Selling Greenville your favorite real estate podcast here in the lovely Upstate of South Carolina I'm your host as always Stan McCune realtor here in the greater Greenville area and just a reminder you can find all of my contact information in the show notes if you need to reach me for anything at all but especially for your real estate needs that is where you can find my information and I'd appreciate as always please subscribe to the show and whatever podcast app you used or let me know if I'm not having this episode feeding into your favorite podcast app it should be in pretty much all the major ones but just let me know if it's not for some reason hit the Subscribe button so you don't miss any future episodes and please also just hit the festar rating and go ahead and just leave a short little review just to get the word out there to people so that we can continue to grow the show I enjoy doing this for you guys but I am busy it's it's pretty hard for me to fit this into my week so that's just an encouragement to me to keep going with the show I don't have any plans to to stop anytime soon but the encouragement certainly doesn't hurt so please go ahead and do that you guys that those of you at least that listen to this show Fairly regularly which I think is the majority of people that listen you might have remembered at the end of the year at the end of 2021 I had a show an episode on the cost of waiting and basically I looked at the way prices were increasing year on-ear I looked at the way economists predicted that mortgage rates would increased and I I basically said okay here's what it costs to buy a home now and here is what it will cost to buy the same home a year from now and then compared basically between Rising mortgage rates between Rising home prices kind of gave somewhat of an idea of how much more expensive it would be to to purchase a home just waiting a single year well it turns out that I was I was right at least for for now obviously it appears that was right but it appears that I didn't take it far enough because here we are 3 and 1/2 months after I recorded that episode and the cost of waiting in just 3 and 1/2 months has been unbelievable mortgage rates have gone up much quicker than anyone any of the experts predicted that they would home prices and appreciation has not slowed down at all now I let me before I get further into this let me say this all right this might be the kind of thing where I record this and then at the end of this year it's like well maybe it does revert back to kind of something more similar to what my prediction was at the end of December right because we could see mortgage rates drop maybe appreciation starts to tail off I mean we don't think I I don't see any way in which mortgage mortgage rates can continue to go up and prices will continue to Skyrocket at some Point people will just have to drop out of the market first-time home buyers will just have to drop out of the market we'll have to see some decrease in in demand we're seeing higher rates of Builders pulling permits right now so that's usually an indication that we're about to get more Supply into the market will that make a dent into the supply issues I don't know we talked about the supply issues last month when the GG Market stats came out I was correct in my prediction for that one as well well if you guys remember often times I'll go through the market stats and the month's Supply is usually inaccurate and I predicted that it would be close to or perhaps less than one month it ended up being they just came out with the stats for the month of March it ended up being exactly one month of Supply that's insane that that is going to go up it has to go up the question is when when that does go up we should see a a little bit of a tapering of appreciation is our homes going to you know go into price decline there's no indication that's going to happen from the standpoint of the supply and demand Dynamics we've talked about that ad nauseI'm not going to get back into that but the point being that right now as we stand it it's it's worth discussing how different it is to buy a house now than it was three and a half months ago and I hope when we take a step back at the end of this year that we find that it didn't continue at this same Pace over the course of the entire year of 2022 because it does reach a point at which you really can't people can't purchase that first home given the way the economy is and obviously we don't want that to happen we want people to be able to purchase their first home in their 20s we don't want people to have to wait until their mid to late 30s to be able to afford their first home so let's talk about the beginning of the year the beginning of the year we had basically a median price for a house in the greater Greenville area according to the GG Market stats was 280,000 that was that was the median in January of 2022 and now that was a big jump from what it was in January of 2021 which is just 237,000 that was a an 18% increase year onye for those two January numbers we discussed that before 280,000 was the median purchase price in January the median now is $295,000 that is an increase of I believe about 5% yeah 5.36% increase in 3 months now I don't know exact it'll probably continue to go up here in the month of April this is all as of the end of March so we saw between January between the end of January and the end of March so really more accurately that would be closer to two months we saw an increase of 5.36 % in home prices massive jump again we've been seeing between 1 to 2% price increases per month those numbers would indicate that this year it at least to start the year it's actually even higher than that now I will say this you do have to account for the fact that there is a seasonal fluctuation in prices that is just normal there's a variety of reasons for it January does tend to be a quote unquote cheaper month than the spring months so that is part of what's Happening Here it will level out eventually once we once we get past the the busy spring season okay what about mortgage rates again this is a bit of a review mortgage rates at the beginning of the year kind of depending on how you how you looked at it or depending on on what your credit was and what the what the lender was we can kind of say mortgage rates were about 3 and a half% just roughly speaking right now mortgage rates are hovering around 5% which was what a lot of people thought that they would be at the end of this year nobody I I didn't read a single person that predicted that we would be sitting here in April of 2022 with mortgage rates already surpassing the 5% mark for a 30-year loan that is that's happened much more quickly than anyone anticipated some people didn't even think that that I read some people didn't even think that we would cross that Threshold at all this year so that that's a huge increase now mortgage rates are still historically very low that that's a very important point to keep in mind they're still very low historically and and where the rates are right now it's comparable to where they were a few months before the pandemic so I think that it's it's important to keep all of this in perspective that just because it's like oh man you know it it was 32% and and even you know if you go back you know earlier in the pandemic it went down to the twos at one point well th those were anomalies the 5% that we're having now this is more this is more the norm right so we shouldn't blow things out of proportion we shouldn't say oh these mortgage rates are high no they're not high they're just a lot higher than they were 3 and a half months ago that is a 43% increase between between what we had at the beginning of the year and what we have now that is an unbelievable number when you go the way I'm factoring that obviously it's a 1.5% increase in the rate itself but if you 3 and a half% to 5% that's a 43% increase of the the percentage rate so that's insane so you've got home prices going up several percentage points and you've got mortgage rates going up tremendously as well here's what that equates to at the end of the day how what kind of an impact does that make on the the price of the home and and specifically in terms of what you're paying in your mortgage if you read the the introduction I did spoil it a little bit but who I don't I don't care I get to do that right it's my podcast I can spoil it a little bit if I want to the the difference in your monthly payment is a 26% difference now here's how I came up with that number let's say that at the beginning of the year again you had the median priced house 280,000 you're going in with a mortgage of about three and a half% I'm not factoring in taxes Insurance HOA do PMI anything like that we're just talking strictly principle and interest you would have we'll we'll just assume for the purposes of this discussion 5% down so on a $280,000 house that's $114,000 and then again the Assumption 3 and half% interest on your mortgage you come up with a hair below $1,200 per month $1,194 and change per month how does that go up when you have a $295,000 house with 5% down which now now you have to bring $750 more to the closing table because your down payment is now 14,750 and a 5% mortgage rate now your monthly payment has jumped up from $1,194 to $154 that is a an again an increase unlike anything that I have ever seen in my life during this period of time that is nearly a $310 increase and again this is on the same house this is the median house the average mortgage rate now cost $310 per month more than it did just three months ago basically that is it honestly it's sad to to me it's sad and this is one thing that a lot of people don't realize about realtors in theory we get paid more as these as these numbers keep going up at as home prices keep appreciating but our job is is more than just you know getting a higher percentage of commission we have first-time home buyers that are languishing out there that are that are looking for a house and we're having to work extremely hard for them harder than we ever had but but we see this housing affordability and it it it doesn't make any of us feel great at the end of the day we would rather expensive homes be luxury homes for luxury clients for for wealthy clients we don't want our clients that don't have a lot of money to have to be pushed into these more expensive brackets that will potentially result in them not being able to make their payments might result in foreclosures down the line we don't know I have had past clients reach out to say that you know they're kind of in trouble with their mortgage after having come out of the pandemic and and all of that and that kind of stuff that just that makes me sad to hear I don't want to hear that kind of stuff and none of us do to to have an average house go from costing $1,194 per month to costing over 1,500 per month it's staggering and and again most of that increase again if if we're going to be self- serving as Realtors most of that increase is not going to us right because a a huge chunk of that increase has to do with the mortgage rate not with the the home price appreciating really the difference for a realtor between selling a $280,000 house and a $295,000 house not a big difference but the monthly payment is is insane a 26% increase what does that come out to if we extrapolate that over the course of the entire loan so 30 years that comes out to a difference of $541,500 over the course of 30 years that's how much you'll be paying for the $295,000 house at 5% interest over the cour once you accumulate all of the interest and principal together $541,500 versus at the beginning of the year the $280,000 house for 30 years at the 3 and 1.5% rate $430,000 and and change so a difference of $110,000 basically over the course of 30 years now oh and and I should mention we're not even factoring in here that you know that difference of 5.36% between the 295 and the 280 numbers that will ultimately be reflected in some other things like your property taxes that will cause your property taxes once they get reassessed they will be reassessed 5% higher than they than they would have been and so you end up paying more for that as well we're not even getting into that because that's I I don't have time to get all into the Weeds on all of that so it it's just you're you're getting hit from all sorts of angles with the with the way the the market dynamics are right now now the positive is this okay if if we're looking for a silver lining if we're going to have one of these things go out of control between appreciation and mortgage rates I would say the better thing to go out of control is the mortgage rates because there is a possibility they can go down right if we go into some sort of you know market decline that the FED decides tinkering with with interest rates making them go down will be beneficial to the markets then we'll see rates go down I think think they probably will at some point we probably will see them go down you know at least below five I don't know if we'll ever see them in the threes again and I highly doubt we'll ever see them in the twos again for a 30-year rate but it wouldn't shock me to see it in the fours or the threes so people will have an opportunity to refinance potentially I I can't promise that but my prediction will be that those that purchase a home now and they're getting that 5% rate that there's probably going to be an opportunity for them at some point to refinance at a lower rate historically that has at least in recent history has been the case whereas prices traditionally do not come down now we did see and we've talked about this a lot we did see during the Great Recession prices kind of taper off and did kind of go down a little bit as as the glut of foreclosures hit the market and drove prices overall you know prices down but that's really an anomaly at some point we probably will have another Great Recession type of event I don't see anyone that thinks that that's going to happen right away who knows I'm I'm no Economist and the economists are always wrong anyway so we'll we'll let I'll let them just be wrong all the time and and I'll try to keep being right on ear but but long story short generally speaking home home prices do not go down they only continue to go up mortgage rates fluctuate and there are times when they do go down and so all of that to be said I would rather between the two mortgage rates go up and home prices stabilize now the problem is right now home prices are not stabilizing and I don't know when they will I think they will and by stabilize I don't mean again I don't mean going down I just mean not appreciating by 2 half% per month that is an an insane number nobody wants that number now other parts of the country are are going even higher and faster than that and so Greenville is actually a more stable Market than many of the other markets here a lot of the other big markets in the US and for that we can be grateful it it is worse in other places but it's it's still pretty bad here now if you're thinking well maybe I should just wait to purchase until things slow down I think you're you're missing the point right that and I mentioned that because I've gotten that sentiment from some people's like you know what the Market's so hot right now I mean I think I just need to wait what are you going to what are you waiting for are you waiting for mortgage rates to continue to go up are you waiting for home prices to continue to go up there again there's no indicator that either of those things are going to stop even if the market stable izes it will still be more expensive 3 months from now than it is right now again that stabilized Market still means home prices are appreciating and that's driven by supply and demand and even though there are some positive indicators on the supply and demand side we we need a massive shift in order to bring things to the point where like basically home prices are are flatlining that would be that would be a recession level event that would result in that happening so unfortunately and I don't say this because it's self- serving unfortunately I can't encourage any of my clients at this point to wait because I feel like personally without having a crystal ball but just seeing all the data I feel like there is substantially more risk with continuing to wait than there is with purchasing now even if my prediction you know at the end of the day at the end of the year mortgage rates are are not much higher than they are right now and appreciation leveled off we would still we'll still probably see in the best case scenario you know mortgage rates again around that that five maybe five and a half perc number and median home prices again best case scenario might might end the year at like 310 or 315 something like that and that right now it's at 295 so the optimistic scenario not super optimistic if you're if you're wanting to wait until the end of the year to me I think that there's more risk in waiting and and that's why I mention this now that we've already seen just three and a half months in things are are nutty and we we don't know exactly how it's going to keep going but hopefully will see a little bit of a stabilization just what I'm seeing boots on the ground I'm not seeing it at those median price points now I am seeing some interesting price drops at higher price points at price points in the in the 600s and and 700,000 that's something to monitor it may be that that that market has kind of cooled down a little bit but the market below 300,000 right now I've said this before but it's like trench warfare it is it's crazy it's like open house as soon as the house goes on the market it's like an open house everyone's scrambling for it everyone wants to get inside it bunch of offers it it it's really crazy so that's there it's going to take a lot for that to for that Dynamic to change at the moment I'm not seeing it but people need to be very aware that the homes that they're if if they've been looking for homes for months they need to be aware that that mortgage rates going up 43% that has a profound impact on your buying on your purchasing power if you thought you could purchase a $300,000 house at the beginning of this year you may not be able to afford that house anymore so th those are all things to keep in mind those are all things I'm working through with my clients on I I had a I had a client at at you know more at that below the mediprice point price range that they were looking at homes in and part of what I did when when they started finding homes that they were interested in wanting to put offers in I had to go back to their lender we already had a pre-approval letter in hand but you know what I don't it's not about getting someone under contract it's getting them the house it's getting them to closing I have a super high rate of my clients actually getting to closing both buyers and sellers and part of why I do that is vet things out that's that's how you know it doesn't just happen by accident and so when I saw these mortgage rates going up and I knew we were already kind of at the top of the price point that they had originally been looking at I went back to the lender before submitting an offer and said hey can can they still afford this are we even able to to to make this offer that they want to make and the the lender got back with me and was like yeah I better run this by underwriting and just double check because these rates have gone up have shot up so quickly and so sharply and thankfully we were able to to do that additional step and then that was something that I was able to to have confidence with when we submitted the offer now did I reveal that to the listing agent no I didn't reveal that to the listing agent because they don't need to know anything about what what my client can or can't do we had that pre-approval letter and I don't want to make it sound like they're at the top of their price point which they were but the the listing agent doesn't need to know that and so that's a little insight into the negotiation part of it and a little insight into what happens behind the scenes that usually people don't even know when they're when they're working with me as a buyer agent I don't tell them every single thing I've done in the process and and sometimes that's just because they don't need to know some sometimes it would stress them out if they knew everything but I try to keep the communications streamlined so that everyone knows what they need to know and and nothing more than that unless they specifically request more information but that's where we are right now three and a half months into this year it has been unlike anything that we've ever seen hopefully we see a little bit of a cool down on on the rates going up maybe we see a little bit I I think it's probably going to wait until summertime once people start going on vacation before we see a true slowdown in demand but we'll have to keep tracking it it's it's a fascinating Dynamic and and if you're about to enter the market or if you already are with with buying or looking at buying a home listen we're all in this together right I'm I'm doing my best we're all doing our best we just got to persevere and eventually we'll find something that fits your price point that actually works out that we can actually get under contract and lock in that mortgage rate before they continue to go up that's all I've got for you guys for this week I hope that wasn't too depressing of an episode let me know what your thoughts are my contact information is in the show notes please subscribe rate review the show I'd appreciate all of that and we will talk again right here next week [Music]