[Music] Hello everyone and Welcome to another episode of Selling Greenville your favorite real estate podcast here in the upstate of South Carolina I'm your host Stan McCune realtor right here in the greater Greenville area as always you can find all of my contact information in the show notes if you need to reach out to me for any of your real estate needs or just a chat about the Pod you know I'm always cool with that and just reminder as always please so that you don't miss any future episodes please subscribe to this podcast please leave a quick little fstar rating if you like it and if you could just take 15 seconds to leave a short little review that would be great that encourages me to keep producing content we've been doing it now for almost two and a half years and let me say it's not easy to do every single week I'm busy so if you guys could just go ahead and and do those things to encourage me and to get the out there to to more and more people I would appreciate that today I want to do hopefully a short little episode on just kind of what I'm seeing we're in obviously a transitional period with the market there's a lot going on a lot of Rumblings of recession interest rates going up although they kind of plateaued for a little bit but then the FED recently had notes that were released that indicated that yes they do and in to keep pushing rates up so we know that that's going to continue to happen and obviously all of this you know and then combined with just the costs of everything due to inflation going up this is definitely having an impact on the housing market so I don't have yet the the greater Greenville Association of realtor stats for the month of May so we don't know exactly how the month of May shaped up but what I can tell you is what I'm seeing on the ground and I'm going to start so so this is all anecdotal but this is based on what I'm seeing some numbers that I've run and then just kind of what I've been reading just generally speaking from others that analyze the market so here is kind of what I'm seeing price reductions we are seeing a lot more price reductions than we have in a long time and unfortunately there's not a good way to pull this data it's it's extreme it would be extremely tedious I mean it would take me I don't know 5 or 6 hours to really be able to accurately track price reductions and how they're happening and how frequently and when they're happening and all of that but just anecdotally as I am just tracking what's happening we're seeing a lot more price reductions and that's basically an indicator not of prices going down again I keep hearing people say this do you think prices will go down or people say get ready prices are going to go down that's not what is happening when a price reduction happens okay here's what I am seeing right now we have historically well I shouldn't say historically in recent history the past year year and a half two years we have seen record rates of appreciation particularly the past year the last time the greater Greenville Association of Realtors produced their Market stats was for the month of April of this year and we saw about 20% appreciation year on-ear April 2022 versus April 2021 that is a tremendous amount of appreciation so here's what happens people are they they might not know exactly in their mind oh it's 20% appreciation but in the back of their mind they're kind of operating under that assumption combined with the fact that other you know Realtors and and real estate professionals they kind of have that in the back of their mind as well and so what happens when when the market shifts right now and and you know it's it is Shifting and so those numbers that 20% we may never see that for a month ever again for the entire Market that's a that's a tremendous number people are just getting blindsided by that and so they're kind of assuming oh my home went up 20% in value the past year and then putting it on the market for that well in reality the market has shifted now and maybe their home only went up 10% in value that's still a lot of increase in value that's still a lot of appreciation but not 20% and so they overpriced their home because they are basing it off of the first quarter and perhaps even the second quarter of this year or or early second quarter of this year because we're still in it but now things have changed it's not quite you're not quite getting that type of appreciation and so we're seeing those price reductions happening because sellers are banking on a level of appreciation that is most likely over again I'm very curious to see what what may indicates but I'm thinking that may is is going to be down year on-year appreciation quite a bit from what April was now we're particularly or I'm particularly seeing price reductions with companies that have been buying up properties and doing like cosmetic flips like big companies like open door and offerpad and these are companies that they they really came onto the scene the past two years and apparently they've been doing quite well recently but I think that they have just been getting lucky based on the market because I've see the prices that they purchase these properties for and then they you know within a few months they just put new carpet in there put new paint and then put it on the market I've been seeing what they've been paying for these properties and they're they're not paying a whole lot if at all below market value but they're anticipating within 3 months that the property will have gone up 5% in value and then they're banking that percent and you know and basically hoping that they've added a little value with the Cosmetic stuff that they've done those are the companies I I mean I can't tell you how often I look at a price reduction and it's one of those two companies in particular open door and offer pad and what they're doing is is they're C they're trying to sell their services to what we call or they're they're basically what we call an i buyer they're selling their services to people that are just like you know they just don't want to go through the hassle of listing their home and Open Door sends me all the time May offering to buy my home and they'll give me range of what they think my home is worth and then tell me is flexible terms all of that so they're doing that all over the market and and I I think that they're going to have a rough second half of this year because we're already seeing a bunch of price reductions and I think that they're going to get caught with their pants down when the market shifts I mean Maybe not maybe they they are smart people and they're ahead of the game but just based on what I'm seeing I have a suspicion that those profit margins that they have been making the past year or so are going to shrink tremendously they're probably going to have some some major layoffs and and the like in the second half of this year I'm also seeing and this is the the first time I've seen this in a long time so this is when I got an email about this and my my eyes popped out of my head I was like okay now I know that the market is is definitely shifting Builders are lowering their prices and offering realtor incentives so you know Builders will offer Realtors a commission traditionally it has been 3% as the market has gotten hotter they've shaved that off in a slow Market they will offer 3% plus bonuses plus realtor bonuses well we've not seen that in a long time with a few unique exceptions but recently we have been seeing that I have seen Builders sending me emails builders that have been some of the chinesta some bonuses and whatnot while lowering their prices that is a big shift that you know again I've not seen that in quite some time so to me that's a major indicator okay we're entering into into a new phase here and honestly it's a phase that I welcome I'm tired of Builders being chiny not just with Realtors but but also with with my clients it's it's you know they don't have any motivation in a very hot Market to do a good job because they can do whatever they want to do so all of these things I think are positive developments overall so what are we seeing and what am I seeing specifically on the ground in terms of with my buyer clients still and with my sellers still multiple offer situations on desirable properties and that's at every price point but it's particularly in the under $300,000 price point because almost anything that is in like TurnKey condition that's below $300,000 is highly desirable right now there's just not enough inventory in that in that segment of the market and so we're still seeing a bunch of multiple offer situations when it comes to those types of properties and properties well above 300,000 again if they're good properties they're going to get multiple offers and this is what people don't understand this was during the Great Recession as well I was not a realtor during the Great Recession but I was trying to buy my first house during the Great Recession and I experienced firsthand there were tons of multiple offer situations during the worst time of the worst recession of my lifetime and so there there are always going to be those C circumstances for certain properties right now we're still seeing on a lot of properties now where it's different is where there used to be you know half a year ago there might be 20 offers on a given property now we're seeing more like five or six and so the multiple offer number I should say the number of offers being received is lower and so what that then means is that there are other properties that would have gotten three four five offers on them are now not going into multiple offer situations they're just getting the one offer and that's it I actually saw a situation the past week I predicted this I predicted that we would be you know going into a period where there would be multiple homes that came on the market all at the same time that would that would kind of fit the same criteria for what buyers are looking for and buyers would all gravitate towards the one home and leave the other exposed and then that would be an opportunity for someone to be like you know what the home that everyone else is going towards and creating a multiple offer situation on I can get this home without out a multiple offer situation because everyone else is is competing for this other one I I saw that exact scenario play out this past week and so these are the types of things that buyers need to be aware of is going to happen and that needs to you need to be able to adapt your strategy as a real estate buyer in this market now I looked at the number of closings that we had for May I wanted to see what what's going on in terms of like how many of these are cash how many of these are financed of the ones that are financed what type of financing are people getting because that's an important detail I I my gut told me there was a lot of cash still floating around in the market but that was something that I wanted to verify and sure enough I was right of all the closings in the month of May which was in so I should clarify I went into MLS I selected the residential button and or the residential option and I just left It Wide Open so that will include single family homes condos mobile homes and a handful of other similar properties but I didn't want to differentiate between all of those I just kind of wanted to keep it open-ended and that's what I looked at with those parameters we had 1,562 properties that were sold in the month of May of those 26% were bought cash 26% over a quarter huge number absolutely huge number that means if you get a multiple offer situation more than likely one of those offers is going to be cash right because if you get four offers you I mean in theory at least a quarter of them are going to be cash because a quarter of closings are cash that's a little simplistic way of thinking about it if you're a mathematician you're probably trying to gouge out your eyes right now but that's a very simple way for me to think about it could be again if you're a mathematician you're probably thinking there might be multiple cash offers because they can only accept one offer at a time yes and you would be right so that's why I think you know generally speaking probably even higher than a quarter of offers are cash so that's a that's a huge number conventional loans which is kind of generally speaking Loosely speaking the most attractive loan product that people see was 55 and a half% of closings FHA was 10.3% VA was 6.1% USDA which is the rural loan program is 1.28% so FHA VA USDA those are all kind of t at the hip those are very similar loan programs those accounted for let's see here 10 16 about 18% so that's rough those are those are generally speaking what first-time home buyers are using that is a a rough percentage and I compared this to April just to see and in April the cash number went up but the conventional number stayed the same and this is another thing that I said in a previous podcast is that the cash buyers generally speaking are competing with the firsttime home buyers so the cash percentage went up in April it was up to 27.6% nuts but the FHA VA and USDA numbers they all went down so the cash buyers are just plucking homes straight straight away from the firsttime home buyers generally speaking I also kind of did a deep dive I was curious okay of the cash sales like what are the price points that we're seeing the most cash sales at because I feel like this is an important detail and not unsurprisingly it is right in the spot where we're seeing the most number of homes listed so you might think okay the most cash sales are going to be for very cheap homes okay yes but the very cheap homes are basically non-existent right now so of homes that were Z to $100,000 that sold for that price that that only made up 7.14 % of the cash sales so again we're not talking of all sales we're just talking about the percentage of cash sales 7.14% of cash sales were to properties below 100,000 in value Adder below 100,000 in value for those between $100,001 and $200,000 that made up 8.23% okay getting a little bit higher now here's the highest one out of all between $200,000 and $1 and $300,000 in sold price that is where the largest of the cash transactions the largest number of them were in that range 200 to 300 not surprising that is where the hottest that that's where everyone's competing right now because those are if you get below 200,000 generally speaking and and again I'm speaking generally but generally speaking those are either properties that are fixer uppers right now or they're in very rural areas or just transitional areas whatever you might say if you go over 300,000 now you're over the the median price point for our area so the 200 to 300,000 price point is a sweet spot 25.3 7% of all cash transactions the month of May were in that sweet spot and then between $3,001 and 400,000 we saw 2.18% so 46 a half% of all cash transactions were between 200,000 and 400,000 so that is that tells you everything if you're looking for a house in that price point you're going to be competing with a lot of cash buyers you need to be aware of that we get I I continued between $400,000 one and 500,000 that only made 12 81% of all cash transactions for the month of May and then 500,000 plus was 15.27% of all cash transactions so I think what we're seeing here is is again in that $ 200 to $400,000 price point we're seeing those are a lot of investors right that's that's where the investors are competing right now and and by the way the way I pulled this really it it did not include multif family we still don't have a whole lot of multif family on the market but this is was primarily unless something was listed kind of incorrectly this would have been pretty much exclusively single family we're seeing a lot of investors targeting single family properties right now because there's nothing else for them to do they need somewhere to sync their cash they don't like the fact that they're losing all of this value to a to inflation and so they need a safe place to put it so as I said before cash is directly competing with first-time home buyers if you listen to this podcast you already know that if you're a first-time home buyer U you have to keep that in mind and that's something that I try to work with my first-time home buyers to to craft our strategy okay here's how here's how we're going to approach this because it's still a very tough Market to be a first-time home buyer in I'll say this there's more uncertainty in the market than I have seen since the very onset of the pandemic it's fun for me to go back and listen to some of my episodes I don't well I I don't really like to listen to my own episodes because I I like most people I hate to hear my voice but listening to those episodes that I recorded right during the heart of the onset of the pandemic you know between you know March April May June of 2020 I I did not know what was going to happen nobody knew what was going to happen is the housing market going to crash are we going to go into recession you know what what exactly is happening here and the what nobody anticipated was that the market would absolutely go nuts and become the craziest sellers Market of our lifetime and so there was a ton of uncertainty and very few people got it right what what actually happened it was just not predictable and I see the market right now like that in in no other way I I should say it's not been like that it's not been this uncertain since back then since very early in 2020 but we're seeing tons of uncertainty nobody knows what's going to happen I read tons and tons of Articles study tons and tons of data both in our local market but also Nationwide and everyone's guessing the past few weeks I have seen two different articles in Fortune magazine that completely contradict each other about our area here in the Southeast one said that our region this region here in the Southeast Carolina Georgia Etc had a very low chance basically a 0% chance of seeing home price depreciation and then I saw just a few days ago another article from Fortune magazine that said that our region this area Carolina's Georgia Etc has one of the highest chances of seeing home prices go down to see actual depreciation in our market so even within single Publications they're having articles coming out that completely contradict each other that are all looking at the same data and coming to very different conclusions my belief because that's why you're listening right you're listening to hear my opinion my belief is that we will see a big reduction in appreciation which like I said before it has been in the 15 to 20% range which is nuts right we we've never seen that for the entire Market Market and it's not healthy for the entire Market that's not sustainable so I see a big reduction in that number but do I see it going below 0% in other words do I see homes depreciating in value so a home that in June of 2021 was worth $300,000 and in June of 2022 well let's push it out let's say in October of 2022 am I going to see a home that in October of 2021 was worth $300,000 and then in October of 2022 is worth $ 290,000 I do not think we're going to see that not not yet not yet maybe in the future but it's it's too soon there's just there's still too much pent up demand all of that has to has to get through the pipeline before we start seeing home prices go down and we have to start seeing some for foreclosures happen as well foreclosure rates are still at record lows and I I really don't see how people are going to all of a sudden start foreclosing unless they start losing their jobs that is the one scenario where I can see it happening but then we had one of the highest rates of cash purchases and people putting large down payments which means that even if the market retracts they still have enough equity in their home that they could sell it and not foreclose so to me I'm I'm very skeptical about the the theory that we're going to see home values depreciate what I think we're going to see is something closer to what what we had pre pandemic in the 2019 is time which feels like an eternity ago which was still a sellers Market we had four to five months of inventory based on how Greenville tracks it and our appreciation was was modest but comfortable it was 3 to 7% year onye generally speaking so in any given month your home went up in value 3% 5% 7% something like that only the hottest markets like those in West Greenville ever saw 20% year- on-year gains and and we've we've talked about that in other episodes but but Market wide we were seeing 3 to 7% gains not the 15 to 20% that we're seeing now I think we're going to return to that before we ever start talking about returning to something below 0% appreciation and I've said this before but I'm gonna say it again going from 15 to 20% year on-year appreciation to 3 to 7% is going to feel like a big slowdown and it is that is a big big slow down but that's still not a buyer's market a lot would have to happen for us to flip to a buyer's market and that's still not really prices going down that's prices slowing down that is a big difference I hear people say prices are going to go down no prices are going to slow down that's what I believe I could be wrong like I said everyone's guessing here we're all looking at the same data and coming to different conclusions even within the same news Publications so we'll have to wait it out but this is my prediction specifically for our area here in the upstate so long story short I'm still skeptical that absent a recession or a major war event that we're going to see a buyer's market in the next one and a half to two years I just the data just I just can't see it I just don't see how that could happen unless we had a major recession or a war event bigger than than what's happening in Ukraine right something that involved invasions of you know major allies with the US and Europe something like that or or something that involved the us directly being in conflict that directly impacted us here at home that's what I think it would take for us to see a buyer Market happen in the upstate within the next two years now outside of two years all bets are off that's just way too far in the future to predict what's going to happen once all this demand Cycles through and once we kind of see the Fallout from all of these interest rate hikes from all the inflation's going to happen from the midterm elections that are coming up and and then the continuation with what happens in Ukraine and all of that I think you know generally speaking it it takes about a year from the time people start to go into foreclosure for for foreclosures to start hitting the market and so and and I don't we have very low rates of foreclosures right now so it's like okay if all of if if kind of the worst case scenario happens on multiple levels economically and then a year from now people start going into forclosure a year after that then we'll start seeing a lot of foreclosures hitting the market at that point we could see something that that resembles a buyer's market because the foreclosures usually are a major driver of that but we'll have to see that's that's a long ways out and the right here and the right now what we are seeing is still very a sellers Market but a shifting sellers Market people need to be prepared for that sellers need to be ready don't expect that your your home went up 20% in value if you're selling for this s this summer it did not go up 20% in value most likely you're on year if you try to sell in July or in August or whatever the case may be we're going to see those year on-year rates of appreciation go down but you're still going to make money you're still going to make plenty of money if you sell don't worry it will be just fine it'll just be a little bit more comfortable hopefully for buyers in this market so that's all I have for today's episode I hope you guys enjoyed it just a reminder please subscribe rate review all of those things to help get the show out to everyone we are in I think just about every podcast app so if if you don't if you just kind of click the link that I sent out to you please go ahead and just open up your podcast app and and search for selling Greenville and then hit the Subscribe button and then you'll be subscribed if you need my contact information that's in the show notes as well and I will talk to you guys next time [Music]