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 realtor right here

in the Greenville area 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 and please

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comment any of those things I'd

appreciate all of those things

in fact I'm so dedicated to the show

that it is 10 o'clock at night

on a Monday night and I've had a long

day it was a Monday it was a big time

Monday for me

but I really really wanted to get

this content out actually this content

for this week's show started as a

a post that I was gonna do on social

media and then my post got really long

and I was like this is a podcast this

isn't just a post like nobody's gonna

read this and so

I decided that yeah heck yeah I'm

just gonna go ahead and actually make a

podcast out of this rather than continue

to create this super long social media

post about something that I'm nerding

out about that most people won't even

read and that will probably get demoted

in the Facebook and and whatever

other social media platforms

algorithm because it's so long

but I've been thinking about recently

about

what is going on in the real estate

world because there are we talked about

this before they're kind of two

competing camps right now in the real

estate world the one Camp is the data

oriented Camp that's like hey there's no

data out there that would indicate that

we're going to experience any sort of a

real estate crash anytime soon and then

there's another camp that is just kind

of vibing on oh yeah a major crash is

about to happen just wait it's gonna

Happen and there's not a whole lot of data

for them they I saw one recently so

there's this account pretty well in an

account it's not a terrible account but

on Twitter called unusual whales they

post a lot of interesting stuff on there

but they're very much in the you know

real estate crashes coming camp

which I disagree with them on that

for the time being at least

but they you know will find things

out there that support what they believe

so they like found some I don't remember

who it was of Moody's or or someone

that had put out there that within

the next so many years at 40 of all real

estate will be owned by institutional

investors that is insane it hasn't you

know it's usually around like two and a

half percent of residential real estate

is is owned by institutional

investors for it to go to 40 would be an

unbelievable development even if that

happened in the next 50 years that would

be an unbelievable development

so anyway my point is that there's

a data oriented camp and then more of a

Vibes oriented Camp I like to be more in

the data oriented Camp which if

you're if you're looking at data there's

not a lot of data that would indicate

that a crash in real estate is coming

but we know that crashes do happen it

does they do happen and you know I've

said that we experienced a real estate

recession some would argue that we're

still in it some would argue that we're

out of it

that happened last year when when

mortgage rates

suddenly skyrocketed up

but what we didn't experience was any

sort of climactic price drop we didn't

see any depreciative environment and

that took a lot of these doomers as

we'll call them that are looking for

a real estate crash that caught them by

surprise they really really thought oh

man these rates are going up it's gonna

be awful prices are going to come way

down they're going to come I saw some

people I don't know why this 40 number

keeps floating around in different

contexts but I saw some people say real

estate's gonna go down 40 percent prices

are going to go down 40 in the next few

years well that didn't even happen

during the Great Great Recession so

so that would be a pretty tremendous

development if prices went down 40

percent a lot of people would be very

happy you know who'd be really happy the

ultra wealthy would be really happy they

would be the ones that would really

really benefit they would just be

buying up real estate everywhere

so I am I don't want to see that

happening happen because that will

disproportionately that that would be a

major recession that would

disproportionately hurt the the least

wealthy people in the economy and would

disproportionately help the

wealthiest people in the economy and I

don't want to see that happen

but as I already eluded crashes do

happen we do see sometimes economic

events that cause prices to go down and

so it's worth thinking about

okay so the data would not lead me to

believe that that's going to happen like

anytime soon right but is there

somewhere in the data that we can come

up with a time when it might happen and

so I started to look into this

and so the the predominant discussion

right now is all about mortgage rates

and here's what I keep seeing these

doomers saying I keep seeing them saying

on Twitter and whatnot that

if rates don't go down the real

estate Market's gonna crash of course

they said that last year too and it

didn't

I've seen some say oh yeah rates are

going to go up to 10 12

could could happen I don't think

that's gonna happen

you know I don't know why people are

wishing that on the economy

but I've seen people make that claim

and so then they go from that

conclusion again they're just vibing

that's there's no indication that that's

gonna happen the FED has not given any

indication that they're going to do that

this is all just based on Vibes but

they'll say Okay rates are going to

Skyrocket even more it's going to

completely cause the housing marks to

crash and yes the housing market we have

seen very directly the past three year is

the level of demand is directly

proportionate to mortgage rates

mortgage rates are low demand skyrockets

mortgage rates go high demand drops okay

but with regard to what's happening in

the mortgage rate world and we've I've

had other shows about this

the FED obviously pulls the the

puppet strings when it comes to mortgage

rates but the FED is giving mixed

signals on interest rates right now

and I think it's

a reasonable assumption I I don't know

what's going to happen next year but but

it's certainly within the realm of

possibility that rates will remain near

their current level well into next year

Well into 2024.

and again I read a lot of doomers

claiming that there will be a housing

price crash that happens

but I really don't think we're there

yet and I want to go ahead and and I'm

gonna if you're looking if you're

watching on YouTube I'm going to screen

share

give me a second here wife figure out

how to do this

I should know how to do this because I

do it all the time all right

I am screen sharing if you're

watching on YouTube if you're not I'll

just explain to you what I'm looking at

we're looking at the average 30-year

fixed rate mortgage in the US

according to the Federal Reserve the St

Louis feds numbers that they come out

with very useful resource these numbers

are always a little bit lower in my

opinion than than what they are in in

real life

but nonetheless is a helpful

resource goes all the way back into

the 70s so

I'm looking at this and and I'm I'm

mostly interested in the past 20 to

30 years what has happened the past 20

or 30 years so here's the the reality of

the situation we have rates hovering in

the high sixes low sevens right now and

that directly correlates to what we saw

really

historically going back if you and we've

we've talked about this before but if

you go back before the Great Recession

before the the world financial crisis of

2007-2008 and and after that rates were

in in the sixes and sevens that was a

very common thing to see in the 90s and

early 2000s so

we can say I mean that was basically

what mortgage rates were for like a

really really long time they've only

been low in recent years so if we're

going to assume that rates being in

let's just call it the sevens is going

to crash the housing market we need to

also look at well what what has it done

in the past right what has happened in

the past when rates were at the level

that they that they are right now

now

the data that I have

in in front of me at the moment

is only going back to 1998 but in

1998

looking at the Black Knight home

price index

back in like I said back in the 90s

and early 2000s we saw a rate

environment that was a mortgage rate

environment that was similar to what we

have right now where rates were

in this six is seven sometimes Eights

what was happening then in terms of home

price appreciation home price

appreciation then fluctuated between

five and fifteen percent now the 15 per

year that was right before the great

financial crisis that's inflated but if

we go back to the late 90s

it was in the five percent per year

range that's a very healthy number right

prior to the pandemic when things shot

up home price appreciation was just a

hair below five percent and so if we

look back historically again I prefer to

be looking at data and not to just be

basing things off of Vibes

I'm not a I'm not a big fan of of

basing anything off of Vibes

we need to

accept the reality that for a long time

there is a high mortgage rate

environment that did not result in home

prices going down what happened in the

great financial crisis that's a whole

nother thing and you know I'm sure that

there will be some people that'll argue

well

yes the rates were higher back then but

there were also looser lending

standards a lot of the looser lending

standards happened more in the in the

mid-2000s okay that wasn't as prevalent

in the 90s and so we have to Grapple

with the fact that it is you know

there's a lot that is different now than

what was in the 90s obviously but we

need to Grapple with the fact that

historically speaking we have

experienced a world where

rates were where they are now and where

home prices still appreciated at a rate

of five percent now if you're looking at

the chart that I'm that I'm sharing that

I hope that I'm sharing

I'm I'm using Zoom here on on my

recording and it's not the the

perfect thing to do

I will be improving that at some

point I just need some time to get there

but you can see that we've had a huge

drop off where right now the the most

recent number that Black Knight has is

point eight percent you're on your

appreciation

so we're not even anywhere near five

percent at the moment but I I suspect

that that will or at least there's a

very good chance that that will

continue to to rebound here

and so here's the thing here's where

I'm going with all of this

we know that rates mortgage rates

obviously play a large role in the

housing market they play a massive role

in the housing market

but

and this is just common sense this

shouldn't come as a shock to anyone

what plays a bigger role in the housing

market is the number of buyers right

we've talked about this so many times

supply and demand these are the two

things you have to look at in order to

keep your your analysis away from

just being Vibes oriented you need to

look at supply and demand

and so when demand is high that's going

to push buyer activity that's going to

push prices up that's just the way it

happens and so what is the reason for

the insane activity that happened during

the pandemic it wasn't just a weird

pandemic bubble this was actually a very

predictable thing that happened and that

was that my generation the Millennials

came on board during that time were a

massive generation I'm gonna pull up

here

U.S population by age and you can if

you're if you're looking at this graph

online you can see that Millennials are

a huge generation and so when we kind

of came online now I I've been a

homeowner for for a long time but

a lot of Millennials only became

homeowners since the pandemic there's a

variety of reasons for that I'm not

going to get into that right at this

moment

but the reality is that what

happened was a very unique thing

typically we have one or two generations

that are the major buyers of real estate

at one given time but what happened and

what is still the case today what

happened when Millennials came on board

and what is still happening right now is

that we actually have three generations

of Americans that are major major

players in in the home sale market

right now major home purchasers all

simultaneously and I don't know if this

has ever happened I'm not I'm no

historian

but it's definitely unique by modern

day standards

so what basically what we had was we

had

Millennials coming on board but

simultaneously Gen X in a lot of

ways started buying later than than

many generations are also a smaller

generation and which you can see on on

the chart that I'm showing

they're smaller than Baby Boomers and

Millennials just in general

but the gist is that Gen X

has been very active they they are in

Peak or or just past Peak buying age but

still a but still heavy heavy on on the

purchasing side of things

but what's also unique is that baby

boomers those that are roughly

retirement age at this point have been

much more active in purchasing than what

we typically see for retirement age

people and this is a result of a lot of

different things one one is that the the

idea of downsizing and I've seen this

directly in my business downsizing has

almost gone away by people of retirement

age they don't want to downsize you know

what they want they want a place where

their kids can come over where their

grandkids can come over they want to

have room that is the way the the it is

now that's very different back in you

know what your grandparents or or you

know if you're listening and you're a

baby boomer perhaps your parents a lot

of times they didn't care so much about

having grandkids over they would have

toys in their house they wouldn't do any

of these things that now are just kind

of an expectation for for

grandparents today

and so the other thing is that you

have baby boomers chasing their children

right because what happened is a lot of

you know my generation for instance

and some of Gen X as well they couldn't

afford to live where they grew up they

couldn't find a job where they grew up

maybe they didn't even want to live

there where they grew up for whatever

reason anyway and so they had to move

all of a sudden parents find that all

of their children have moved all over

the place and now these children are

having grandchildren and most parents

or most people grandparents want to

be near their grandchildren most of the

time and so

we have baby boomers buying a lot more

real estate again because they're

moving at a season of life when

traditionally people haven't moved

typically again your grandma she

probably was living in the same house at

the end of her life that she had been in

for the past 30 years no longer is that

the absolute Norm we see a whole lot

more of the of people that are

towards the end of their life they have

made a fairly recent real estate

purchase and so we have three

generations

simultaneously making a lot of real

estate purchases and I find that to be

extremely interesting and what's

particularly interesting is that baby

boomers are sitting on the largest

amount of retirement cash in human

history now I'm talking about as a

collective generation obviously there

are not every single baby boomer has

tons and tons of cash but as a

generation they're sitting on the

largest amount of just kind of cash in

general in human history I think I have

a slide somewhere

okay now we'll have to we'll have to

come back to that I think I have a slide

somewhere that that maybe depicted

that

if I find it I'll show

it to you guys

but basically well what I can show

you is this one and and this is a

really fascinating data point is that

in so far in 2023 39 of buyers are Baby

Boomers and that is the highest number

they actually eclipsed for the first

time since the 2014 basically they

eclipsed Millennials and became a bigger

home buyer than Millennials why because

they have cash they were not impacted by

mortgage rates going up to seven percent

whereas My Generation tends to not have

the cash the seven percent interest

rates really hurt our demand so now

we've seen I and I mean this is like

unprecedented to have the

basically the oldest generation we still

have some of the what they call the

silent generation that are are still

with us today but baby boomers make up

the largest demographic of of those of

retirement age and they are the

predominant buyer of real estate right

now

and that is really an incredible

an incredible thing when you think about

it but this is all contributing to all

of the demand that we have we just have

a tremendous amount of demand from

three different Generations

simultaneously

as I said though like the broader

economy sometimes crashes real estate

also crashes and and it is likely to

at some point in the future we just we

don't know exactly when but it will

happen at some point we will see an

environment when prices go down that's

just the reality of of how markets work

so how can we without just relying on

Vibes actually try to determine when

this will happen and I think that there

is a very very simple answer in a lot of

ways and it is when the baby boomer

generation becomes less of a force by

2029 the entire baby boomer generation

will be at or past retirement age so

that keep that keep that date in mind

the year 2029 basically the end of the

decade

and I also heard recently I couldn't

find this data but I heard it on a

podcast that's it's a good podcast that

I was listening to that by I believe

five years from now so 2028 2029 around

that same time the average baby boomer

will be 80 years old which tends to be a

big milestone for Less real estate

activity and will and that will be felt

even more with Baby Boomers being more

active than retirement age people in

the real estate market

now that will also again talk about 2029

that will also coincide with Generation

X Gen X being at their traditional late

50s early 60s okay we're we're staying

put at the moment we're not making any

major changes

we're right on the cusp of retirement

maybe they made a bit of a downsize when

they were empty nesters maybe not again

the downsizing thing is not really a

thing anymore so we're finding more

people that are are in that situation

I've got a hair in my face that's

driving me crazy

I think I got it

we're finding more people that would

traditionally downsize aren't

and I already alluded to that

but in a lot of cases I think Gen X

will find themselves empty nesters and

will be looking at it like well I don't

want to downsize I don't have

grandchildren yet

I'm gonna wait until the grandkids

come around and you know that's going to

be well past 2029 that gen exters are

generally speaking grandparents

and just based on how all these

Generations are playing out

well so we've got essentially by 2029 we

should see a big drop off in baby boomer

activity we should see and by the way

I'm gonna pull this up here

age by generation I'm not going to go

through this but but just in case you're

in case you're watching on YouTube

this will kind of help you to to

conceptualize all of these things so

so we're going to potentially by the

end of this decade see Baby Boomers and

Gen X

basically I don't want to say disappear

from the real estate landscape but

become not a big story in the real

estate landscape Millennials will be by

far the dominant Force at that point but

what about Generation Z gen Z well the

oldest gen zers in 2029 will be 32 years

old currently the average age of a

first-time homebuyer is 36.

that's the highest number I think ever I

I did a little bit of research into this

and was astonished that number has

skyrocketed in recent years as housing

affordability has gone down so in 2029

the oldest gen ziers will still be on

average for plus because if this number

keeps going up I mean we might see Jen's

ears that without help from their

parents may end up not being able to buy

their first home until they're late 30s

maybe early 40s that's that's insane

we've never had a generation that has

had to wait so long in their life in in

modern history to become homeowners

but they are not going to be a force

in 2029 and so what we're gonna see in

the next five to six years is we're

going to see a market dominated by three

generations I believe go down to one and

that will be my generation the

Millennials

who were born basically between 1981

and 1996. our Peak home buying years the

millennial Peak home buying years will

will be continuing on for basically

the next decade is is what would be

expected

and so what does all this mean oh I

actually I just found the the

information on the baby boomer

statistics that I couldn't find

the slide before so they make up here

before I get into high points I

think that this is interesting Baby

Boomers make up 28 of the population but

they are responsible for over half of

consumer spending that's incredible

and that definitely trickles into the

real estate market as we've already seen

there are almost 40 percent of spending

in the real estate market actually

that slide that I showed you guys

that was the share of home buyers I bet

if you looked at the actual price point

that they are purchasing at they

probably make up over half of of of

spending in real estate if you consider

it from the standpoint of of the how

expensive the homes are that they're

buying

baby boomers control eighty percent

of personal financial assets

28 of the population controls eighty

percent of personal financial assets so

this is going to be a big deal guys this

is going to be a big deal when baby

boomers at the end of this decade drop

out essentially of the real estate

market that's going to have a very very

very big effect there's there's

simply No Way Around It

and and we need to to just come to

grips with that that's the the reality

of the situation and so what does at the

end of the day what do oh sorry I

apologize this is this is from a lack of

preparation I actually really tried to

prepare for this podcast but there's so

much data so many slides that it was

hard for me to to just fully prepare

well here

but I found this interesting the

National Association Realtors came out

with a homeownership rate for those

under 35 under 35 years of age and

there's been a huge there was a huge

drop off before the pandemic now

after the pandemic when there was easy

money we saw the home ownership age go

back up to the the sorry the average

home ownership rate go back up to 39 but

it had been in the low to mid 30s for

the bulk of the post Great

Recession environment

and that and those are historically

low numbers so we're seeing a lower long

story short a lower homeownership rate

for those under the age of 35

now than historically for context before

the the world financial crisis the

average homeownership rate for those

under the age of 35 was hovering around

43. now they're at 39 and that's a high

number for the past few years that's

likely to go back down so home ownership

rate for those under the age of 35 very

very low and like I said gen z may may

find that number to be I mean it could

be insanely low for them okay

so what does all this mean I think at

the very least if you haven't already

figured this out I think it's reasonable

to assume price depreciation will slow

by the end of this decade I'm not saying

prices will go down but I think for sure

we should see prices slow as there are

fewer buyers less demand

but

if when all these things happen we see a

major recession or some other major

negative housing event that happens

maybe a war who knows

we could actually see an environment

similar to what we experienced in

2007 2008 2009 basically through 2012 of

prices actually going down now

usually they they do rebound after time

but that really has an impact on the

market

and it's a very real possibility

you know when when things are already

kind of hanging by a thread and in the

housing market from the standpoint of

basically three different generations

for lying or three different

Generations bolstering the housing

market two of them basically become a

non-factor that's going to have an

impact and yeah if we if if we do see

a major price correction the type that

the doomers are looking for this is when

I would guess that the next crash could

happen is if we have some kind of

recession or something like that that

happens towards the end of this decade

so let the record show

that even though I'm very optimistic

about the housing market I'm not one of

these that says the market can never

correct that the market will never go

down no it it does occasionally go down

I just don't think that the data says

that that's going to happen within the

next year or two

the other thing that we have to keep

tabs on is delinquency rates those are

at all time lows there's not

foreclosures coming into the market or

anything like that anytime soon

so but that could happen there could I

and actually I've heard people say that

they think there might be foreclosures

you know kind of coming more

foreclosures coming on board the Market

within the next five years or so so that

could be very interesting we could see a

major turnaround in the market

happen and by the end of this

decade now will it last for forever no

it never it never does but it could very

well be a thing and if it happens you

heard it first here you were prepared

and you made good lifestyle choices

knowing that that was a possibility by

the end of this decade

and you can thank me later for that

in the meantime I'm gonna thank you guys

for listening to the show please rate

review subscribe comment all of those

things if you need a realtor my contact

information is in the show notes I can

help you in Greenville I can refer you

to Realtors all over the country

and so please that's my only way of

making money through this show so

please go ahead and and and use me

and refer me if you're willing to if you

don't mind my contact information in the

show notes as always thank you guys for

listening in for watching and we will

talk again next time