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 Greenville South Carolina 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 please I'm a realtor that's what I do I don't make money from this podcast I make money from selling real estate and so I'd appreciate if you guys would do that with me and as well even if you never do that if you're listening to this content please subscribe right very simple whatever platform you're watching or listening on you can just subscribe hit the little button and if you could leave a rating or review that would be much appreciated as well we have a few things going on right now real estate has been in the national headlines lately and for good reason and by the way before I get into all of that I apologize for in case I sound sick it's because I am sick I've got this thing going on in my throat in my nose it doesn't affect me as much during the day but it majorly affects me at night so I'm gonna have to clear my throat like I just did a few times I might have to take a few sips of water I'm I've got Sudafed in my system whatever that is supposed to do seems to be working okay and tonight actually shortly after I finish recording this I will be going to Columbia South Carolina for the South Carolina Association of Realtors Leadership Academy told you guys a little bit about this in the past but I'm one of 15 realtors here in the state of South Carolina is going through this program that's basically designed to help us become more involved in the local state and national real estate association in various capacities giving back to the to the industry in in a variety of ways so I'm very excited about that it's our first retreat and our first sessions this week so that should be great couple other great realtors from the Greenville market a few from Spartanburg that I know as well and then a lot that I don't know between the 15 of us so it's gonna be a really fun time really looking forward to it and hopefully I will learn how to be an effective leader in the in the local state and national associations but to hone in on what this episode is about there's been a lot of headlines lately with what the president has been doing specifically with regard to he announced that he wants to ban institutional investors from buying single family homes I don't want to make this episode about that I just want to say I don't think that that's going to have the effect that a lot of people think it will have long story short institutional investors own less than 5% of single family homes that are out there now that's not a Greenville number that's a nationwide number but I would imagine that Greenville is pretty similar to that there are some markets where institutional investors and what I mean by that is these large corporations own more single family homes than others Greenville's not one that really stands out in this regard now everyone knows an aunt or an uncle or a friend who got outbid by an institutional investor we all have a story like that that's the exception that proves the rule in my personal opinion they are not making a big splash there have been times where they've made bigger splashes in the past currently they're not making a big splash in the Greenville market and here's what happens most of the time when institutional investors purchase real estate they purchase it to convert it into rental properties and so rental supply goes up and the you know the supply of housing for sale goes down here's the thing large corporations own a tremendous amount of the rental supply I don't know what the exact number is but it's a it's a large percentage of the rental supply that's out there so when we ban institutional investors if we were to ban them we would disproportionately hinder the supply of rental real estate right they would basically stop being able to purchase single family homes I'm sure they'd find some loopholes but let's just theoretically assumed that it worked they stopped buying single family homes what we would see is the rent market for single family homes would start to get a lot more expensive that's a transfer of wealth from renters to landlords that's what this proposal would do and it wouldn't help housing affordability right because they only own 2 to 3% of single family homes that are out there if you add 2 to 3% of single family homes to inventory it doesn't change a whole lot right that's not going to move the market I mean we've seen inventory go up you know by various metrics here in Greenville 400 to 500% the past few years and that has had an impact prices are still going up so if it's gone up 4 to 500% the past few years what's another 2 to 3% going to do it's not going to do anything this is a populist proposal not a fan of it I understand that most people are gonna disagree with me I put it on social media most people did disagree with me and that's to me fundamentally a misunderstanding of how the economics of all of this works and that's what populism is right populism is basically catering toto talking points and to ideas that people that aren't actually in the game of analyzing these ideas think is a good is a good idea I don't know if that I worded that right but basically populism let me say it this way it's when you get non experts opinions on something and then basically crap policy according to that opinion versus what the experts say you should do which is usually a boring thing it's a lot more exciting to say oh yeah we're gonna ban institutional investors that sounds awesome but when all the experts are saying and they all are that this isn't going to help then that's why it's a populist proposal now additionally we had crazy Sunday night Fed Chair Jerome Powell released a 2 minute speech basically condemning the Trump administration because of a a lawsuit or multiple lawsuits that are being brought against him against the Federal Reserve with regard to the renovation project and other things that they're doing over at the actual Federal Reserve building he basically said that Trump is doing this for political motives that he wants lower mortgage rates lower interest rates and that he's not going to back down to to the president I don't know what to make of that I don't think that Powell his legacy is going to be mixed I don't think he's done everything perfectly I also don't think he's been the worst Fed chair that we could have had and the reality is that Trump has put a lot of political pressure on him and has made no mistakes about that now are these subpoenas and what not that the department of justice is doing is Trump directing them to do that maybe not directly indirectly maybe again I I'm not a fly on the wall it would be surprising if Trump's not involved in some way because he's been so critical of Powell and even went to that renovation project and criticized him more about how much they went over budget so it does seem like this is connected in some way to the president's campaign against Powell but really really unprecedented for the Fed chair to call out the president in in such a brash way and particularly odd for Powell to do this he does not tend to relish the spotlight and some people are already speculating that even though his term as chair is over this year oftentimes at that point people would leave the Fed altogether because they can make more money if they're not operating as a Fed president or governor but some people are now speculating that he might dig his heels in and he might stay on he can stay on for another couple of years as one of the voting members of the Federal Reserve even if he's not the Fed chair which would hurt the president right Donald Trump wants the of the Federal Reserve to be a low rate Federal Reserve he doesn't think that they are currently there that the current Fed funds rate is too high he wants it to be lower and maybe Powell just decides you know what I'm gonna stay on because maybe he's petty maybe he just wants to stick it back to Trump I don't get the impression that that's the case but that would certainly be something that people would assume but he may also just feel like this is my obligation to the American people is I don't think that rates should be higher and I need to be in there in order to be a dissenting voice from anyone that that disagrees and thinks that rates should be lower so that's very interesting as well but out of all of these things the thing that is the most impactful in the in the short term is that Trump announced that Fanny and Freddie would be Fannie Mac for Fannie Mae Freddie Mac would be purchasing $200 billion worth of mortgage backed securities and this was announced I believe on Friday and immediately investors started repositioning assets with regard to bonds and mortgage backed securities and we immediately had an instant result on mortgage rates the result is that mortgage rates actually did very very briefly go into the fives at at least according to Mortgage News Daily and their aggregate mortgage rate it went down to 5.99 before it got reprised and then went a hair above a hair above 6 yesterday at the end of the day I'm recording this on January 13th on January 12th it ended at 6.01 today it's at 6.07% these are all numbers that are lower than we've seen in several years almost three years and that's you know again if you're a real estate buyer or seller that is a good thing right that really we need one of two things to happen when it comes to mortgage rates and ideally a combination of both we either need them to come down to help with affordability issues or we just need them to stay kind of constant and not be so volatile there's been so much volatility right you know just a few years ago they were in the twos and threes then they went all the way up to eight and then they kind of went up and down and then they've been more or less on their way down for the past couple of years but we've had some bumps along the way if we can stay in this environment where they remain in the low sixes for just a period of time and we don't see crazy volatility that would that would really be helpful for the market as a whole because that would that would help people to have the confidence of like okay this is it like these are the lowest rates we've had in a few years maybe I can maybe I can now afford the home that I'm looking to buy and so this was actually a pretty savvy move by the president this is different than quantitative easing this is a one time thing it's almost like a it's almost like a one time stimulus injection but not one that's going to cause the market to go just bonkers but it was something that did have an immediate impact on mortgage rates and if we could see mortgage rates come down into the fives and stay in the fives that would potentially have a huge impact and so I actually looked into what would be the impact on the Greenville market what is the impact on the Greenville market when it comes to mortgage rates and if you're looking on YouTube I'm gonna actually share with you guys some people are gonna hate this and if you do I'm sorry maybe you weren't loved as a child enough you didn't you know your mother didn't show you love didn't hug you enough or whatever but this is ChatGPT you can enjoy looking at all my different my different searches and different things I'm just gonna put it all out there you guys cancan draw your own conclusions from my searches whatever I don't care but I use chat GPT to analyze a bunch of data and to produce a nice chart that isn't perfect but it's gonna show us some things that's helpful so here is the if you're if you're looking at this you've got red is the number of closings in the Greenville market yellow is the median price blue is the average 30 year fix rate mortgage per Mortgage News Daily and green is month supply of inventory OK so if we're looking at blue 30 year fixed rate mortgage you see this goes back to all the way back to 2,012 so this is 2,000 18 they topped out and again the numbers on here are not going to don't pay attention to the numbers those are they the chat GPT had to smooth things out and create a baseline but in 2018 the mortgage rates topped out around 5% and so we had a very interesting dynamic that happening there where it was like okay mortgage rates started to go up and then they started to come back down and then you guys know the story 2020 they went way low and then in 2021 they started in particular 2022 they started to go back up now here's what I'm looking at here is that we see you know basically yellow here price appreciation pretty moderate right and then around this time 2020 you start to see a very very you know a much more vertical ascent for the for the median prices that's the appreciation that we saw in the market that's where things went insane for a few years there and that directly correlates with mortgage rates going down mortgage rates went down way way down prices started to go way up and for a time also supply of inventory went up but months supply went down so there is a lot more demand coming into the market than supply now here's where you start to here's where things start to get interesting in may of 2022 is when we started to see the median prices start to even out and so we have seen appreciation over the course of these years but it's been very very mild in comparison to what we saw in 2020through 2022 and even prior to that we've not seen a ton of appreciation again directly related to rates so what happened specifically in may of 2022 rates hit 5% okay and so which is the exact number that we that we saw in in 2018 was the top and look at what happened in terms of the next several months in 2018 prices kind of flatline during that period of time as well and so here is a new thesis that I'm coming up with looking at all this data is that for the Greenville market the 5% mortgage rate is the number that we are looking for and again if you're if you're seeing this on chat GPT the numbers the numbers that are all in here don't apply those are those are just smooth out numbers for the purposes of that chart but the 5% mortgage rate seems to be either an affordability issue or a mental hang up or something specifically in this Greenville market that causes things to really slow down okay and so that is it and it's very convenient very convenient round number that we can look for to say okay if we can get back into the fours we're probably gonna see the market start to take off and and start to flip back to a to a seller's market now here's the thing that we don't really know and that is what how will the local how will our market here in Greenville change coming from high rates down to let's say that we came down to five and a half but we didn't come down all the way to 5%would we still see the market take off because we're coming again from a position of higher rates down to lower rates versus back in 2018 we were coming from lower rates up to higher rates when we hit that 5% number that I don't know because we could see the market do some weird things if again we start to get into the fives and let's say that we end up hovering around 5.8 5.7 you guys already know if you've listened to my bold predictions episode I said I don't think we're gonna see below 5 5 6 5 this year so what if we end up kind of stalling out around 5 7 5 8 something like that would the would it still result in in the market kind of taking off because we just have that five handle in front of those 30 year fixed rate mortgages I don't know there's more questions than answers when it comes to all of this all that I know is that we have some recent we have at least two data points here and plenty of other data that points to it that says that the 5% Mark is a Mark that hurts our local market here that we need to see rates in the 4% range and again these things I always have to say these things cut both ways right some people are benefiting from the market being the way it is right now from the market being a little bit more buyer friendly however it's more buyer friendly at the expense of mortgage rates being higher so is that really buyer friendly really the ideal scenario would be that we wouldn't have things just take off like they did in 2020 that we could have more of that stable 2018 was comfortable 2018 you know if we had a market like what it was in 2018 sellers were pretty happy buyers were pretty happy like nobody was really complaining everyone's complaining right now everyone's feeling the squeeze it's tough it's a difficult time to buy it's a difficult time to sell this is not the most pleasant market to be a realtor in quite frankly and so I don't know what exactly that you know there's never gonna be a perfect number but what would be that number whereby we would not feel like the market is swinging this way or swinging that way or going through all this drama I don't know what that number is but right now as a direct result of the announcement regarding Fannie and Freddie buying 2 billion of mortgage backed 200 billion rather of mortgage backed securities we saw rates come down from about the 6.2 range down into the low sixes that's a meaningful drop right that's you know basically a fifth of a percentage point and you know I saw a lot of people put that in context it's a big deal okay that is a big deal for the market and we'll have to see how it affects you know going into the spring season because here's what happens usually the end of this month the end of January is when we really really start to see things start to pick up my phone starts ringing past clients come out of the woodwork new clients come out of the woodwork fact I'm already starting to see it it's great it's exciting it could it might even get more exciting if we see that five handle return for 30 year fixed rate mortgages so we're long story short the president is going to be looking at housing this year this is very clearly a midterm year kind of kind of thing right I called it populism it is populism the president wants to do things that people will hear in the news and that they'll say that affects me in a positive way and so he's gonna start doing some of these things and again we've got a new Fed chair coming sooner than later I think it's I think it's this spring that Powell's term runs out that Trump will replace him and then that's going to result most likely in Fed funds rate coming down now if you guys listen to the show you know that does not directly affect mortgage rates the bond market is what directly affects mortgage rates so bond traders have to agree with the Federal Reserve and what the Federal Reserve is doing there's this like this little slow dance that the that the Fed does and that traders do and if traders don't like the solvency of the United States and the Federal Reserve and all of that they might go in a different direction we might see the 10 year yield which is a major factor when it comes to mortgage rates the main factor we might see it actually go up here is the 10 year yield today pull this up for you guys real quick 10 year old as of this moment is 4.169 which is higher than it has been we've had a few prints in recent months that have even gone down below 4 we had that 3.99 print towards the end of November we had a a three point 9 5 print towards the end of October and then they've come back up into the low fours I think that we're going to need to see some meaningful deterioration in the labor market to see these come down into the threes and stay down into the threes and we do have some data coming out this month with regard to the or this week with regard to the labor market and what not but right now there's no indications that the labor market is like getting super soft there's no indications that there's that a recession is imminent and so we may end up seeing the 10 year yield kind of hovering in this like low 4 range for the foreseeable future and if that happens the only thing that that can cause mortgage rates to come down is if the mortgage spread as we call it between the 10 year yield the 30 year fixed rate mortgage if that tightens up and it has been tightening up substantially and this announcement that Trump made about Fanny and Freddie caused that to happen even more what now it's getting to be pretty close to historical norms right now so I don't want to say it's going to come down much further because if it does come down much further it'll be against recent history but it could come down a little bit if traders if bond traders feel better about the economy so it's very interesting right because if the economic numbers come in really good we might see the ten year yield actually go up but we could see the spread between the ten year yield and thirty 30 year fixed rate mortgage go down and if that happens we could still see mortgage rates kind of coming down a bit but there are still there there's still a lot of uncertainty and a lot of hurdles for that to happen and so I still feel very good about my bold prediction that we won't see rates go below 5.65 by the way part of that bold prediction as I said they would go into the fives at some point this year and so I've already nailed half of that prediction right we're not even two weeks into the New Year I've already nailed one of my bold predictions but the latter half of that that they won't go below 5 6 5they're still more or less a whole year left for me to be proven wrong and quite frankly I think I would like to be proven wrong about that I'd like to see what does the market look like at a if rates are at 5.5 now what I don't want to happen is for rates to go down to 5.5 ruin my prediction and then immediately bounce back up to 5.8and and then you know just stay at 5.8 for the rest of the year that would be lousy right for me as a content creator and with all the time that I put into analyzing all these numbers that would be annoying sometimes you can get a one off like that if traders do something unpredictable but I personally I don't see that happening at least with the current state of things but there is a whole lot more that could that could happen and again as I've already said it's a midterm year elections are happening this year some very important elections and this is going to directly impact all of these things we don't know exactly what it's going to do but in Greenville what we are looking for is what the the breaking point the historical breaking point is 5% on a 30 year fixed rate mortgage we'll have to see if we hit it we'll have to see if there's a new breaking point that forms this year maybe it is 5.75 or 5.5 or 5 2 5 we again a lot of the old norms are no longer norms and so we have to track all of that and you guys are listening to this you'll be the first ones to know because I'm going to tell you guys you don't get this content anywhere else right specific to the Greenville market and I love producing this kind of content I love analyze I wish I could have done a little bit more analysis on all of those numbers in that chart I created quite frankly it was hard to do it was not the easiest thing to analyze because these patterns are so micro and it's a lot easier to analyze macro patterns but a lot of these are just little micro patterns that you have to analyze but I feel pretty good about what I did what I did reveal to you guys chat GPT actually did a whole lot more analysis and had some very interesting ideas maybe at some point I'll go back and just see what it thinks you know if some of those ideas were accurate I didn't feel like it was interesting enough or ground earth shattering enough to propose to you guys today but there are some details and some of that data that is interesting but I think the most important thing is that historically we've seen the market flip when rates are either going above or below 5% I think it's safe to say that would happen again if we had that happen this year or next year so thank you guys so much for listening that's all for today's episode please like rate review subscribe please use me as your realtor and my contact information is in the show notes if you want to do so and we will talk again next time!!