[Music] Hello everyone and Welcome to another episode of Selling Greenville your favorite real estate podcast here in Greenville South Carolina I'm your host as always Stan McCune I'm a realtor right here in the Greenville area and 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 if you're looking for a buyer agent listing agent or just want to talk about real estate just let me know all my contact information is right there in the show notes and if you like this show if you get something out of it I'd appreciate if you guys could subscribe to make sure that you don't miss future episodes and please also if you're using spotify or apple podcast please leave a five-star rating and just type up a short little review I just appreciate if you guys could do that that just supports the show I have a very targeted audience here so every s single review every single rating goes really really far because we only get a few hundred hits on the show per week because of of how targeted my audience is so every single time one of you guys leaves this show a rating or review it really goes a long way and it really means a lot for me so I would appreciate that this past week oh and by by the way I should before I even get into this I think my voice is going to hold up for this this but I was at a Christian concert singalong event last night and I've got I I feel like my voice is pretty much shot it's holding up pretty well at the moment hopefully it will hold up for the rest of this but it was not in good shape last night following the concert that was a blast by the way if any of y'all are into Christian music we have a lot of Greenville is known for having just massive churches we just have huge churches everywhere I was up in the Blue Ridge area of Greer over the weekend and I passed by you know just randomly another just church that looked like a college campus like they're just everywhere but anyway we have we have plenty of of interesting you know Christian concerts that happened here in fact the the people I was sitting around were from Alabama and the Coastal Carolina region and there were people from Canada that were there it was just it was insane to me cuz I drove 10 minutes to it and I didn't even realize it didn't even occur to me there' be people coming from like out of state to see that that event but it was a it was a lot of fun but it did take a toll on my voice so I I apologize for that I'm going to do my best here but last week I attended a an annual event that we have here in Greenville this is the first time I've gone to it but it is a housing market forecast and it's it's really geared towards homebuilders in the Greenville area and it's performed by I believe his name is John Hunt he is over at Market insight and they are really a a a firm designed to help home builders kind of figure out what to do next they're really analyzing the market for a long time now they have a great track record of anticipating Trends and seeing what's going to happen happen in the future kind of before anyone else is able to and they do this housing market forecast I believe every year here in Greenville I've heard of it for for the past several years and basically they're just looking at okay what happened the past year what do we think is going to happen the next year and how does that affect real estate particularly from the standpoint of home builders but this event was open up to Realtors as well and so there's a lot of good information for those of us just in real estate generally not merely those that are homebuilders so I I jotted down several notes I found it very interesting and I found a lot of helpful things from it and I just kind of wanted to open the notebook for you guys for what they what we talked about and just kind of what stood out to me in general so first things first a lot obviously a ton of what we talked about was inventory related right because everything in the market is about supply and demand in real estate we call Supply inventory and so that was a massive topic of discussion because inventory obviously went insanely low during the pandemic it has come back up and so there's a lot of like okay where is it now and where's it going and we've talked about this a lot on this show but it was interesting to hear it from an Outsiders perspective because this is a person who is studying Greenville and was delivering data about Greenville but he is not in Greenville he's not in this market right those of us in this market our perceptions can kind of be skewed by what we're seeing anecdotally whereas someone outside of this Market just looking at the data his opinion is not going to be skewed so he was simply saying what the data said didn't matter to him you know what we were experiencing as Realtors or what we feel like we're experiencing as Realtors or home builders here's what the data says and what the data said on inventory is it's still very very low less than three months of inventory no matter how you slice it or dice it less than 3 months of inventory throughout the entire state of South Carolina and of course in Greenville and as we've talked about before we typically consider 6 months of inventory to kind of be that line between a buyer and a seller's market that's that's where we see kind of a flat market now I did say I believe it was my last podcast that maybe we need to rethink buyer Behavior with regard to months of inventory because it seems like buyers are now shifting their Behavior to inventory being a lot less but them treating it like it's a lot more it feels when 3 months of inventory feels like a ton of inventory when we've had two straight years of less than two months of inventory I don't know I don't know what to say about that 6 months of inventory right now like if we went to to that I don't think it would feel like a flat Market I think it would feel very much like a massive buyer Market because of how dramatic the shift is but maybe as we ease into a a higher inventory type of of framework for lack of a better word as we ease into it maybe buyer behaviors will kind of return back to the norm I don't know like I said in my last podcast it's hard to to really know if we're going if we're just entering a new normal or if we're going to see things somewhat return back to a pre-pandemic norm right now I'm operating under the assumption that we are experiencing a new normal nonetheless even within that new normal framework we still have very low inventory and regardless of buyer Behavior we need more more inventory for the demand and and and so there are kind of two things to look at right how this all feels because that's an important detail right when I'm working with Buyers like how do they feel how do how do sellers feel like that actually that's not really quantifiable right but it's a very important detail because if sellers feel pressured then they're going to do certain things if buyers feel feel pressured they're going to do certain things if nobody feels pressured then that impacts Behavior so we have to look at that but then we also just have to look at the sheer data of supply and demand and what does that tell us and from a housing perspective looking at it just from the data not looking at it from these anecdotal how people feel John Hunt let me double check to make sure that's the that's the guy's correct name one second here I need to pull up this chart that he sent me yes John Hunt with via search and Market Insight John said when when you're looking at this data there is no question inventory is low having less than 3 months of inventory it is low really it needs to be for for people to feel like there is enough housing there needs to be six months of inventory and I will say from this there is a very clear standpoint where I think that all buyers would agree with this even if like I said there is kind of this weird element of buyers treating this Market a little bit more like it's a buyer Market than it is but here's where it's definitely not a buyer's market there's just not a whole lot of choices out there if you're a buyer right now where you feel the low inventory is that okay I'm looking for such and so house and it doesn't exist it's just not out there that's the problem and there's just not a whole lot of homes coming for sale maybe you're treating it like a buyer's market but you're not actually seeing the fundamentals of the market being a buyer's market which is when it's a buyer Market there are tons of options available you can choose from you know for an example when I was looking for a house during the Great Recession every single weekend my wife and I would go out and look at houses and we would have up to 10 houses to look at every single weekend like that is insane imagine those of you that are you know thinking about buying or or in the process of looking at houses or whatever the case may be imagine if there were 10 eligible homes per weekend that you could look at that are just on the market that's that's what a buyer market look looks like nobody has seen anything like that in in a decade basically but well over a decade at the this point m so what we need is something in between those two extremes and that would be basically getting to six months of inventory if we did that overnight that would be a System Shock and we would really like I said it would really feel like a buyer Market even though there wouldn't be the full options of a standard buyer Market but right now I feel like we're in a good place where where we're inventory has gone up enough to give buyers some more options but hasn't gone quite to the extreme where where people just are flooded with options sellers don't know what to do because there's way more competition than there was before and so where we are right now I think is a good spot although what John Hunt did indicate is that you will we we're going to continue to see low levels of inventory for a a long time and I I've told you guys this multiple times because we're all looking at the same data here there's a lot of reasons to believe inventory is going to stay low for some time it's highly unlikely that we'll reach that point of six months inventory I just I just don't see how that could happen barring some kind of a major major global economic event and so we're at we're at less than three months of inventory I'm sure we'll get above 3 months at some point but at the moment it's looking like it's kind of plateauing and that was what that was what John Hunt with Market Insight saw as well from his perspective now one thing that he pointed out that I thought was helpful because I always was curious about this because I look at that there are numbers about housing data that the government issues the the US government will issue and frequently I actually had someone that I respect on on social media one time when I said about inventory levels being you know really low that they need to go above 6 months of inventory to be a buyer Market he posted a graph that showed that was a US Government graph that showed inventory levels were above 9 months and I've seen these before as well and it it never made sense because I'd be seeing one graph published from one publication that said 2 and 1/2 months of inventory and then the US government saying that we're at 9 months of inventory like what's going on there well John explained it very succinctly and that's that the government includes a lot of a lot of homes in their inventory numbers that not that aren't actually homes yet specifically homes or or permitted but not started homes in other words when home builders have gotten permits to to start a home but haven't actually started a home yet those are included in the government's numbers and that's a really bad thing to include in inventory numbers because that's not actual inventory and home builders will sometimes get those permits and sit on those permits and not start building for a very very long time so if you see numbers out there that say that that there's N9 months of inventory it's probably that data that's including a bunch of homes that aren't actually homes yet inventory that's not actual inventory it's like if you went into a grocery store trying to get eggs right now and we all know that there's an egg shortage at the moment I'm recording this in January 2023 you go into a grocery store and they're out of eggs and you double check with someone there like hey I just want to make sure you guys have are out of eggs cuz I don't see any and they say oh yeah we have eggs and you're like okay well where they're like well they're in the chickens like we have chickens that are going to lay eggs and so we have eggs and it's like okay but I can't buy them no no no you you can't buy them yet because they're still in the chickens the chickens haven't laid them yet that's not having eggs available right but that's what the that's essentially what the US government is doing when it's calculating these inventory numbers it's it's counting the eggs that are still inside the chickens okay so that aside here's some more takeaways that I took from this housing market forecast we talked about the the fact that Investments during an election year really slow down people for whatever reason people slow down well we know the reason people slow down their investment behavior and this includes real estate Investments right before an election so this particularly happens during October November of an election year but here's the funny thing basically what people are doing is they're kind of feeling out the waters they're not sure what's going to happen they want to kind of have a sense of what's happening in the US government before they you know use their hard-earned money to make investments but it doesn't ever change consumer Behavior or investment Behavior after the election and so it's almost like people just want to make sure okay there's not going to be something absolutely insane that happens and as long as nothing absolutely insane happens during you know an election then they just go back to their normal behavior and basically I I mean I don't know what it would take for people to not go back to their normal behavior but it would probably have to be you know basically us electing you know some kind of insane like Neo-Nazi for president or something like that some people might make the claim that we've done that in the past I'm not even going to get into that okay let's not even go down that road but long story short during an election year and and it might not feel like it because it wasn't a presidential election but this past year was an election year and I mean we're now at the point where just about every year feels like an election year but the the fall numbers for Real Estate did appear to go down as a result of it being in an election year and this is not something that I've really talked about very much so far this year but I have discussed a few other reasons why we saw why we've seen a Slowdown this fall but basically it's a three-headed monster we saw the normal seasonal drop in both supply and demand that happens all the time in the fall and winter combined with the election season that also suppressed particularly buyer demand particularly investment demand and then all of that combined with higher mortgage rats also coming together and completing the three-headed monsters so all of these things resulted in things just slowing down dramatically the past 3 months so it'll be interesting to see you know it it feels like all of those things have bottomed out right we're out of the election year so we're we shouldn't be experiencing any more after effects from that we're starting we'll be starting as we get into like late February early March we're going to start ramping up into the busy season of real estate and then a lot of indicators and and since I last recorded this podcast there's been more indicators with people major people in the FED saying that they think rates need to come back down or at least that that there needs to be no more rate increases that for the first time really in a in several months now we're starting to see and and there's disagreement it's not completely agreed upon among fed officials but we finally started to see people major people in the FED saying you know what maybe we've done enough in terms of rate hiking and now it's time to kind of slow down or maybe dial those rates back a little bit so those as you as you know as we've talked about that has an indirect effect on mortgage rates and so as the FED in theory slows down their rate in increases or perhaps even decreases their rates then we'll see mortgage rates go down and so all of these things would indicate that that we've kind of already seen the bottom again barring some kind of major recession and a minor recession I don't think will have a dramatic impact on the real estate market I could see a major recession having having a big impact so we'll just have to see in my b predictions podcast I did a few weeks ago I predicted a mild recession I don't think it's going to have a Major Impact overall but I've been wrong before we'll just have to see um with regard to mortgage rates this was a number that I found very interesting and very helpful um Market Insight predicted that the more the average mortgage rate that disproportionately impacts by our behavior is once we get above 5.25% in other words below 5.25% doesn't you don't see a dramatic swing in buyer Behavior you don't see a dramatic swing of people looking to purchase real estate that are you know just dropping out of the market but once you get above 5.25% you see a bunch of buyers dropping out of the market now they can no longer afford real estate and he didn't get into the nuts and bolts as why it's 5.25% I I'm sure that there's a variety of things in there and and a variety of things that are causing that specific number to be what it is but I found that very helpful so I'm going to be tracking these mortgage rates now I I already do but but tracking them to see if they go below 5.25% how that really impacts real estate are we going to all of a sudden see a massive influx of buyers coming to the market if you know at some point this year we see rates go down below that number he also talked about and and I thought that that this was good I already knew this but it was the way he framed it was really helpful you're going to see a lot of news articles in the upcoming months and you probably already have saying that prices have gone down 25% or 30% things like this and these are very disingenuous and and honestly they're intended to deceive articles it's clickbait at the end of the day prices have not gone down 30% prices are not likely to go down 30% what these articles are talking about is the rate of growth slowing down so if you see so for instance if we had you know prices slowed down from a 20% year on-year growth to a only a 5% year on-year price growth appreciate price appreciation that is a and and and you take the the percent differences that's what a 75% slowdown I I don't even know that that that's I'd have to Google exactly how to determine the percent slowdown between 2% but you would see articles let's just say for the sake of argument that that's a 75% slowdown that's not saying that prices have gone down 75% they still went up 5% but in comparison to the year before when they went up 20% year on- year that is a 75% or whatever it is slow down and so those are the types of articles that you're seeing and I've had people tell me oh my buddy who's a realtor told me that prices are going to go down 40% this year well your buddy who's a realtor has taken Hook Line and Sinker the clickbait that's out there it is very very unlikely that prices are going to go down that much is it impossible no nothing's impossible but even during the Great Recession we didn't see prices go down like that like that would be we're talking about like an asteroid hitting hitting the US and like wiping out half the population that's what it would take for prices to actually go down 40% in my my personal opinion so don't take that clickbait understand that what we're seeing right now I'm not saying prices won't go down year on-year and as I talked about I believe last week there have been even normal months where prices have gone down year on-ear just in a standard month just kind of a fluky month where we saw that happen but when you look at year on-ear in the long Trend it always continues to go up in a normal year and that's what all indicators are that we're going to see that happen in 2023 now what is a normal year this was this was an interesting one as well going back I believe it was 47 years the normal rate of appreciation for a home is 4 6% file that away in your mind that'll be helpful I'm I'm definitely going to be referring back to that number at some point in the future because that was a number i' I'd never heard before it was extremely helpful and it it really gives you a sense okay if I'm investing in real estate what can I expect you can expect 4.6% appreciation now that's not the only thing when you're investing in real estate that you get right if you have rental properties you get also potenti if you do it right you get cash flow and if you talk to your accountant probably some some opportunities to write some things off on taxes as well and so U so the appreciation at 4.6% if you're a real estate investor is just of gravy on top of everything else but 4.6% that's the normal and so what John did was he then took that number and then kind of tried to figure out okay what does this being for like what's happened in real estate the past several years right because we've seen like some a couple of years in a row now where we've seen like 15 to 20% appreciation in the Greenville market and that seems scary right you and I'm sure you've seen articles out there saying oh we're in a housing bubble Pro I'm sure you've seen your friends on social media oh we're we're definitely in a housing bubble there's no way things prices you know can't possibly go up 20% year on year it doesn't work that way and he specifically referenced that he saw a lot of Articles basically comparing the market now to what it was in like 201122 well 201122 prices were insanely cheap because we had just come out of the Great Recession and so you know these kids that are writing these articles trying to compare the market now to then they simply they don't know what they're doing they're not comparing correct data and so he said well well when was the market last normal he made the argument that the last time we had a normal Market was 2002 and the reason he felt that way was that after 2002 we started to actually see the housing bubble begin due to you know poor lending practices and all sorts of different things that caused then the market to really start to see insane appreciation that it should not have seen it was artificially bloated appreciation and so so the market between 2003 and 2007 Went Crazy Prices skyrocketed in artificial ways and so 2002 was the last quote unquote normal year so basically 20 years ago then we saw prices Skyrocket and then the Great Recession happened the bubble burst and then prices went way way way way down right in in comparison to where they had been and so obviously since then prices have been gradually going up and then we we see this Spike here in the past couple of years now here's what's interesting when you go back to 2002 and you add 46% appreciation to every year let's say you you just assume 4.6% appreciation starting in 2002 and going through 2022 you basically get to the number that we landed at in terms of median prices at the end of 2022 so his argument was that actually what's happened the past couple years with prices all of the sudden skyrocketing in this post you know in this pandemic or post-pandemic environment was actually a proper correction that would happened right before the Great Recession that was an artificial increase of value and then when when prices went down when demand and everything dramatically slowed during the Great Recession that was like an artificial overcorrection and now here we are back where we should have been if we hadn't had all of these ups and downs over all of these years here we are in 2023 seeing prices where they would have been had we just had the market continue at that normal 4.6% rate now is he right I have no idea but it's a very interesting idea it's it's definitely Food For Thought and I don't know we we'll see he's got a very good track record for being right when it comes to this kind of Stu stuff so I think he he deserves the benefit of the doubt but that is there is your argument there that is the most compelling argument that I've seen from just a standard rate of appreciation standpoint that we are not in some sort of a bubble and there's fundamentals behind this it might all sound theoretical but there is actual there are true fundamentals behind why why we can believe that that is an accurate statement that we're not in a bubble that that that demand and prices are where they should be and that's really because the past three years Millennials My Generation have really come of age from a home buying perspective and then you also have the boomer generation which is sitting on the largest stockpile of cash in the history of the US the baby boomer generation has more cash than any generation that this country has ever seen and they are buying up a lot of real estate so we have and and this was also very interesting there was a there's a Common Thread between Millennials and Baby Boomers that we haven't really seen before and that is both of them on average do not have children the baby boomer children have already left and my generation is either not having children or waiting until you know late 30s or maybe even early 40s before having children and so this is what is really driving the real estate market right now is that you've got these two generations that both have a a good bit of money Baby Boomers because they've accured it over all these years and now are empty nesters Millennials because they aren't having children so they've been saving up their money for all these years and now having dual income households and all of these sorts of things and so the market is really being driven by these two generations and of course I wanted to ask I never got around to it what's going on with Gen X right now I I actually heard a podcast a couple of years ago that Gen X actually and and had I had you know an opportunity I I would have discussed this with John it just didn't work out but and and I actually mentioned this on my P podcast after I heard this a couple years ago but that there's actually a phenomenon where gent extr a lot of them never bought their first house for a until the pandemic because of so much hesitancy after the Great Recession they went through that Great Recession Gen X got destroyed by the Great Recession so they saw their their net worth go down disproportionately and then they they in theory developed the skepticism towards housing that led them to get into the cycle of renting for a long time and then the pandemic happened the pandemic did not wipe out housing and so all of the sudden these sleepy gen xers which was what the podcast that I had to listen to which by the way if you want to if you want to know what podcast it is it's called Odd Lots it's a very good podcast just kind of on the economy in general but it also talks about housing occasionally but they called them sleepy gen xers that hadn't bought their first house until you know like their 40s and now they finally enter the market during the pandemic so I think that I think maybe JN actually underestimated the impact of Gen X he basically said that they weren't having any impact or he he didn't say that but he kind of implied that but I think that that's another reason why the housing market has been where it is with all of this demand there's pent up demand that got Unleashed during the pandemic and it's not going away because baby boomers are still going to be buying houses I mean I have several baby boomer clients that are buying investment properties in addition to relocating in addition to buying vacation homes and then you've got Millennials doing some similar things as well and then you got these sleepy gen xers also that are becoming aggressive now with housing and and real estate purchases now that they realize that it they're not just going to see a a housing bubble burst every 10 years and so the fundamentals are there for for the demand continuing to be strong here in the future but when it comes to supply when it comes to inventory we have a we have a problem right and he got into this towards the end of of one of his sessions that I was at where he talked about one of the major problems with the our inventory shortage is that it's fueled by zoning laws and I've actually talked about this quite a bit on this podcast at various times but he really got into the concept of the missing middle if you want to Google that and look that up be my guest I'm not going to get into that too much in detail here but he approached it from the angle of zoning laws are really preventing the kind of highdensity housing or more like mid density housing that used to be a big part of of the the nation's real estate fabric 40 50 years ago and specifically it was Town Homes duplexes triplexes and quadruplexes what we're seeing right now is a lot of single family homes being built well not a lot but we're seeing single family homes being built and apartments and apartments aren't for every everyone not everyone wants to wants to have an apartment lifestyle and from a single family standpoint with prices going up not everyone can afford a single family detached house and so what and so this is the missing middle this more higher high density but not as high as apartment living where you've got multiple units attached to each other that people can buy or or people can rent and zoning laws have made it very very difficult for Builders to build these types of homes and so that is simply driving the inventory shortage and he mentioned you know what a lot of people don't realize and this is true to this day is that zoning laws inherently have racist Roots okay and he referenced Atlanta used to have basically two types of zoning the city of Atlanta which is a kind of a cousin City to Greenville a lot of what happen happens in Atlanta happens in Greenville Atlanta used to have basically two zoning classifications R1 and R2 R1 was white you could live here if you were white and R2 was black you could live there if you were black that was when Atlanta first introduced zoning that was the basis point that was how they started well eventually the court said sorry we can't do that you can't discriminate on the you know in in your zoning on the basis of race and so then Atlanta said okay so then we're just going to make R1 single family detached homes and R2 apartments and so well guess what R1 th those single family homes were the more expensive ones R2 the apartments they were the cheaper ones and knowing you know what that racial income disparity was in Atlanta they were basically keeping the status quote they were basically saying okay in these neighborhoods that are black we're only going to allow apartments in these neighborhoods that are white we're only going to allow single family homes and so zoning was a bad bill of goods from the get-go a terrible idea I I shouldn't say that zoning itself is a terrible idea but when it was instituted on on a racial footing yes terrible idea and right now it's being weaponized in different ways that honestly if you go to the the the Grassroots of it I think that there's a lot of racial underpinnings with a lot of the zoning laws that are being passed today and I and we're paying for it to this day at the at the end of the day that is something that we have to to Grapple with and that we have to to deal with that is a problem when we have inventory problems and we don't have enough Supply to meet the demand and municipalities are passing increased zoning laws to prevent this type of middle housing duplexes and triplexes and town homes and things like that that would help to bring more affordable housing to people in the middle that's a problem like we need to really rethink this whole zoning thing in General and that was a big point that he made that I thought was really timely and I thought was really helpful and Greenville right now we have a lot of what some of you might know as nimbyism nimi stands for not in my backyard a lot of people they don't want developments happening in their backyard they don't want to see you know the land that their neighbor you know owns a mile down the street sold to a developer cleared out in a big subdivision they don't want that to happen but the reality is that sometimes sometimes we need to take the the big picture on this right do you want your children to be able to afford a home before they turn 45 or not right now I'm concerned that without my own intervention without me having to majorly financially assist my children that the way the things are going that there is just no way that you know I I afforded a home in my early 20s my first home was in my early 20s that was a huge huge thing for me I would not be where I am financially today if I wasn't able to purchase a home in my early 20s I don't see any way that my children's generation will be able to do that without financial assistance from their parents and probably what's going to happen is that the government will kick in the government will be like well you know what we've got to take control of this and then and we've all seen how that goes it's just going to be another social program that will then cause it increases in inflation etc etc we we know where this ends up and so that's why the zoning part of it is important and that's why when you go to those Town Halls tempted to oppose a new development that's going in near where you live maybe take a step back and think about it think about you know what is is it worth it for me to oppose this or would this actually be better for the area and for upcoming Generations if we have more housing in this area from a data standpoint absolutely from a meta standpoint absolutely for you personally I can't speak to that but I do think we need to take into stronger consideration these meta considerations and and as well of course the history of what we've done in this country how we've used zoning to suppress certain people groups and that's still happening to this day so not to end on a negative note but that that's pretty much all I have in my notebook from the housing market forecast and I hope that that was helpful a lot of very interesting things for me hopefully that was interesting to you guys if you have any questions let me know my contact information is in the show notes please subscribe rate and review to the show and we will talk again next time [Music]