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 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 local real estate needs please like rate review subscribe to the show to this episode anything like that you can do to support it that's all I ask I know that there are people out there that are listening that have never done that or that are watching that have never done that and I would appreciate if you guys could just take 1 second to just hit the little like button or the subscribe button as well either one of those things will do the trick I am very excited about this week's episode I'll be honest with you guys I'm not always excited about my content sometimes it's just content that just has to happen right sometimes I feel ill prepared to record an episode you know I've been doing this weekly for six and a/2 years and I believe in that six and a/2 years I've only missed two weeks and it's not easy to produce and I'm not trying to say what was me but it's it quite frankly it's not easy to be that consistent but this platform requires that level of consistency because of the way the algorithm works with podcast and what not if you if you start skipping weeks you get destroyed the algorithm and I'm not gonna do that so I'm gonna continue to provide for you guys this weekly content and so I hope you appreciate it but this week is an episode that I am particularly interested in in discussing with you guys particularly excited about because I want to look at and I want to really focus on the main thing that is driving what's happening in local real estate right now in Greenville real estate and you guys know this is probably true in other markets but this is a Greenville show and so we're going to be talking specifically about the dynamic here in Greenville we've talked a lot about how new construction and what's happening in the world of new construction in in the upstate of South Carolina how big of a driver that is but there's an even bigger driver that it kind of ties in there they're interconnected but there is a bigger driver here and we've talked about this a lot but we're gonna be looking at it from a different perspective and that is how much more expensive it is to purchase a home from the standpoint of your monthly payment now versus several years ago like we're constantly talking about OK the median price has gone up x amount over the previous few years mortgage rates have gone up x amount over the previous several years but those are very abstract like what difference does it make if you had a 3% mortgage rate versus a 6% mortgage rate right what does that actually translate to we're gonna break that down right now as it turns out and so what I did was I basically I went back to basically the last time that like mortgage rates were at their lowest roughly speaking which is 5 years ago all of this data is based on mortgage news daily and so I'm simply regurgitating data that they provide which is aggregate data obviously that's it's not gonna be the same for every single person not every person locked in a rate that was identical in 2021 and the current rate that Mortgage News Daily is telling us it is out there that's not going to be the same for anyone either right these are just aggregates their averages all of that so just keep that in mind you always need to talk to your mortgage lender if you want to actually know what your rate would be but if we go back to July of 2021 rates were roughly five years ago the average rate per Mortgage News Daily was 2.99% at that time the median home price per Infosparks which is great data that the Realtor Association provides for us the median home price was $265,000 at that time in July 2021 today as I'm recording this I'm recording this actually this is a an evening episode because we have company coming over tomorrow and honestly it's just a it's just a packed week I have several closings this week several things I've got to do a ton of meetings and so I was like you know what if I don't record this tonight I'm not gonna record it at all so anyway I'm recording this on Sunday September 27th in the evening and as of this moment Mortgage News Daily says the average aggregate rate for a mortgage for a 30 year mortgage is 7.43% if I look on Infosparks the median home price is 320,000 okay so the mortgage rate is you know more than double what it was in July of 2021 the median home price is up what's that fifty five thousand in in that five year period of time so what exactly does that mean when we're actually talking about monthly payments well let's look at that and I'm going to keep this really simple we're not going to include taxes or insurance just the principal and interest and I'm going to go with the medium prices without any sort of reduction for down payment so all these numbers will be as if a person was getting a loan with no down payment which by the way you can do there are multiple options to get loans with no down payment if that's something you're interested in most people don't do that but there are several avenues for accomplishing that just FYI it's not that's not this isn't a completely facetious scenario it's but it is not the main scenario that happens this is something that you know we're doing this as an exercise alright so we just discussed in July 2021 Mortgage News Daily said the average rate was 2.99% the median home price was $265,000 per Info Sparks that would result in a monthly payment again not including taxes and insurance of 1,000 one hundred fifteen dollars and eighty two cents okay that sounds low because the world has changed the past five years and you know understand again that that the actual number would be higher in real life because unless you put a very large down payment which in this scenario in this scenario they're not they're not putting any down payment you would also have taxes and homeowners insurance baked in as well so that would up the number by a few hundred bucks so what is the medium purchase costing now on a monthly basis so 320 thousand dollar purchase at a 7.43% interest rate that comes out to $2,222 and seventeen cents basically exactly double the monthly payment of what the median home cost 5 years ago additionally because the price point of the median home is substantially higher in 2026 than 2021 that means that the homeowners insurance and the property taxes will also be higher so the monthly payment gap is even larger than that well north of two times the cost on a monthly basis of what it was in 2021 and here's the kicker and that's really really important to understand these are all medians and averages in other words the home that cost $2,222 a month in 2026 is at best the same home that cost $1,115 a month in 2021 and you could make the argument that the inventory out right now is actually worse than what the inventory was in 2021 at the very least many of the homes that are you know now versus then at the very least and this is logical they are five years older and have five years of more wear and tear and a lot of homeowners haven't done much updating to their homes the past five years from what I have seen and so you're literally paying double from five years ago and in the best case scenario are getting a similar home that was half that cost in 2021 it's crazy but let's take this one step further let's talk about first time home buyers in 2021 most first time home buyers aren't buying the median home they're buying something cheaper than that and so I went back and looked at my personal closings in 2021 with first time home buyers and a lot this it's crazy to go back even five years and see how many of my transactions were like 180,000 175,000 wild and these homes were livable and so that was what a lot of first time home buyers were buying homes at that price point few in the low two hundreds price points and so I didn't want to like average that out I just kind of wanted to pick a number that was just kind of round and so let's just say for the sake of argument that the average first time home buyer in this area was paying $200,000 for their home in 2021 and let's also maybe just bump up the interest rate a little as well from that 2.99% since you know first time home buyers sometimes don't have the credit history etcetera to get the lowest rate so let's assume that their rate was three and a/2 percent which honestly a lot of first time home buyers were doing even better than that back then and so I'm kind of padding the stats here to make the difference from 21 to 26 not look as extreme as it actually was if you factor in that all right so we're at a 200,000 dollar price point and a three and a half percent mortgage rate that comes out to a monthly payment of eight hundred ninety eight dollars and nine cents again if that shocks you that's how much the world has changed in five years now let's say to tease out this scenario that the first time home buyer back in 2021 they're now at the point where they've started a family they're ready to get their step up home they need something larger something with a bigger yard maybe more of a family oriented neighborhood whatever that means and so they need they were a first time home buyer five years ago now they are the traditional step up home buyer this is going to be in order for them to actually step up they're going to have to go above the medium price point and I would say conservatively in the upstate of South Carolina you're talking about a 375 thousand dollar home now depends on what you know there are some cheaper areas if you go down to like Anderson and Lawrence County you might be able to do a little bit a little bit cheaper than that but generally speaking like the step up home at the very least has to be about $375,000 and that's me being very conservative because really for the most part a true step up home from what I see that's on the market would require a purchase in the 400s but I don't want to get too carried away here like I said there are some you know some counties are a little bit more affordable than Greenville and Spartanburg so perhaps you could go with 375 and actually get a meaningful upgrade from the home that you purchased for $200,000 in 2021 a three hundred seventy five thousand dollar home at a 7.43% mortgage rate cost two thousand six hundred four dollars and ten cents a month that is nearly three times the monthly payment that we just talked about for the 200 thousand dollar home in 2021 that was eight hundred ninety eight dollars and nine cents we just went from eight basically not let's just call it nine hundred dollars we just went from $900 to 26 dollars nearly three times the monthly payment and again this is a home at best is marginally better than the home that they bought in 2021 barely a step up this my friends is the entire game when it comes to Greenville real estate all the first time home buyers during Covid they're just they're stuck they cannot triple their mortgage payment just to go from three bedrooms a one car garage and a point one five acre lot to four bedrooms a two car garage and a point two five acre lot it doesn't make sense to triple your mortgage payment for that small of an upgrade for the vast majority of people now I believe it was last week I discussed how the 200 k to 400 k price point is just no man's land right now and this is a big reason why you really need to get above 400 k for the most part for the next home to truly be a step up but now we're getting close to talking about you quadrupling your mortgage payment so really and again we're not even factoring in the fact that homeowners insurance and taxes are going to be substantially more expensive also the millage rate in in counties has gone up since then so the property taxes are for sure going to be substantially more expensive the monthly payment these are conservative numbers for 2026 so really in my opinion there's really only two scenarios where a first time home buyer in 2021 is really able to afford a true step up home in 2026 and you know still be able to stay in a prime area of the upstate right not go to one of these other these other counties that might be quote unquote more affordable and here are the two scenarios in in my opinion maybe there are others let me know you know comment if you comment let me know if you think that there are other scenarios but the two that come to mind for me is either they bought well below their means in 2021 and now they're actually willing to pony up and buy something much more expensive but more suitable to their lifestyle and I have seen this before I had I've had some clients that you know when they were first time home buyers they were super frugal super aware that that you know they needed to be that you know they didn't want to pay above their means they wanted to pay well below their means not even at their means well below and so maybe they're in a scenario now where it's like okay we made the sacrifice in 2021 we don't want to make that sacrifice anymore we're willing to pony up now okay that's one scenario the other scenario which is much less likely is that their income has gone up two to four times what it was in 2021 and that does happen sometimes right maybe a job change maybe you know when they bought their first home they were entry level in in their job and now they're you know middle management or upper management whatever could happen doesn't happen all the time and really for both of these categories I think it goes without saying there's not a whole lot of people that fit either of these categories and so everyone else is locked in and this is what people are talking about when they speak of the lock in effect which has been talked about you know a lot a lot of other podcast shows the media etcetera basically mortgage rates are locking people into their homes for longer than they want to be there because they got these cushy 3% whatever three and a/2 percent rates they can't double that they literally can't afford to buy a better home because the monthly payment is so much more dramatically higher than what they're currently paying to go from 900 a month to 26 and again when you're factoring in taxes and insurance you're probably talking about you know from 11 to probably more like maybe 30 200 again three times the amount no matter how you slice it or dice it it's a huge huge difference and this is causing people to not be able to move unless they are absolutely desperate you know there was a divorce that happened someone died you have to relocate you know unexpected pregnancies that things of that nature and here's the unfortunate part there really isn't any indication that relief is coming anytime soon inflation and or the deficit needs to come down meaningfully for mortgage rates to come down and neither party let's be honest neither party nor the Fed seems to have any answers for how to do that so even though we're seeing the medium price point creep down a little bit we talked about that the past few months that's mostly new construction getting cheaper not so much existing homes and you know the reality is the people living in existing homes with a 3% mortgage rate they have such low payments and so much equity that they usually don't have to sell at a discount they can simply choose to not sell if they don't get the price that they want run into that a few times with a few of my listings that you know we thought maybe we could get a price point it was gonna be close it was gonna be it was gonna be challenging and we couldn't right we were at the upper end for that neighborhood and they're just like I don't need to sell I'm gonna withdraw it turn that into a rental property I've got tons of equity low payment I'm not a forced seller run into that a lot or you run into this too because of the equity that they have they might have you know their home might be might be worth I mean it's gonna be worth substantially more than it was five years ago and then all the payments they've made maybe they've made extra payments you know they might have 30 40 50% equity at this point in time if they need cash they can take out a home equity line of credit and unlock the equity that that they have in that home and so while we might see prices continue to come down a little bit in terms of the those medians that we're looking at I'm not expecting a price crash coming from resale homes anytime soon from existing homes anytime soon because it's like okay where is the crash gonna come from if you don't have forced sellers if you don't have people that are foreclosing on their homes and foreclosure rates are still insanely low some of the lowest we have ever ever seen and not just in Gringo the entire country there's not a lot of foreclosures happening and so where are the fore sellers right it's again it's only people having to relocate deaths that are happening divorces that are happening and often times again they have enough equity that they can make something work without having to just sell a fire sale kind of price for their home so what now not I'm not trying to be depressed or depressing but there's not a whole lot of scenarios that we can come I mean I just said that I don't think either party has answers for this Democrats or Republicans but maybe if there was a substantial turnover in our government in November maybe that would result in policy changes that could help bring down inflation maybe something could happen in the Middle East that could help to ease inflation concerns bring down gas prices bring down you know all of that and then we would see mortgage rates almost assuredly come down because of that but who even knows who even knows what you know let's say that we end the war with Iran but gas prices don't come down because they are you know controlling the flow of oil in that area more than they ever have we could find a scenario where inflation doesn't come down and so I don't I am not going to promise you I heard someone say recently that they were told that mortgage rates are for sure gonna come down they are not for sure going to come down I mean you think at some point they probably will but what is that point right that's the million dollar question if people could predict that they'd make a ton of money we don't know is that gonna be next year the year after 10 years from now 20 years from now there was a stretch of time where mortgage rates were 20% now that's not gonna happen now because nobody would be able to buy a home you know if mortgage rates were at 20% back then the cost of homes was like nothing relatively speaking and so it's just a very different it's a very different world that we live in obviously than you know in in the 70s and all of that but that 7.43% mortgage rate and if that continues to creep up because it has been just going up basically for several weeks we just keep seeing mortgage rates going up higher higher again on the in these aggregates some people have been able to find ways to keep their rates low because they've got good credit maybe they're you know doing something with buying down their rate obviously the builders right now I you know there has been a fresh wave from the builders sending out emails to realtors you know 4.99% initial rate 4.5 or 4.49% initial rate you know all these different things that they're immediately trying to take advantage of these higher rates by offering these rate buy downs that they can do and so you're gonna be hearing a lot more of that it's just gonna bolster more demand for new construction in this area and if you're one of those people that you don't like all the townhomes and whatnot being springing up all over Greenville I've got some bad news for you there too that's not going to change I mean if that changes that's gonna be bad for bad for buyers it's just gonna that's gonna result in costs just continue to go up the cost of housing but there's going to be as much demand for new construction now as ever because again they're gonna people are gonna be able to get lower rates with new construction than they can with existing homes but we're gonna keep plugging along here I don't want this I don't wanna end on a completely depressing note I was you know I've been a realtor for 10 and a half years now and I was speaking recently to another realtor very experienced he's been in the business for gosh 20 25 years and I was talking to him how I am personally prepared for a long winter in real estate and by that I don't just mean this winter although I I'm prepared for that too but I mean an extended period of time perhaps several years of a depressed market we've already we're already in several years of a depressed market but we thought that maybe we were starting to pull out of it I don't think so I don't think so and I'm preparing for that long winter and that might not sound like I'm turning and becoming less depressing but I'll say this I'm going to survive and I'm gonna keep plugging away and he will too and the experienced Realtors we've been through a lot of ebbs and flows in the market and those of us who are experienced we're ready for the long winter if that is indeed what happens I just wouldn't plan if I were you on that winter resulting in real estate getting substantially cheaper in the area even if prices do continue to slump due to new construction we can't there there's nothing in the data that indicates that we're going to see a price crash I could be wrong maybe something will happen that I'm not prepared for that'll result in in a price crash but unless foreclosures start to go up that's really the thing you need to look for if foreclosures start to go up that's what will bring the price crash if that doesn't happen I don't see it I don't see it because that's what caused the price crash in 2008 it was all the foreclosures and short sales and all of that if we don't get that then we're in a very different dynamic and we are in a very different dynamic than back then it's a it's different pressures it's different things happening but we will pull through and if you need to buy a home in this market there are ways to get your monthly payment down there are ways to get your mortgage rate down and I'd be happy to talk to you connect you with lenders that can assist you with that as well that can tell you what your options are that's really and I'll be honest that that is what the step is going to be it's going to be me being like okay here are some things that other people have done but you need to talk to a lender about this and they can tell you actually what your real options are and I'm more than happy to do that so my contact information is in the show notes if you need to reach out to me for any of your real estate needs you have questions about any of that please reach out don't send me a DM on social media or anything like that go to the show notes find my phone number that is the best way just shoot me a text call me leave me a voicemail if I'm in a meeting I can't answer I get a lot of spam so it it's hard for me to answer every one of those phone calls especially when I'm out showing houses I try not to answer my phone when I'm in you know in meetings and things of that nature so leave me a voice message shoot me a text message try to avoid sending me a DM because those are very hit or miss in terms of you know I can't check 20 different platforms for messages like that's just not tenable so please hit me up in there I'd be more than happy to discuss any of this with you and to help you with any of your local real estate needs if you like this content please subscribe to make sure you don't miss future content like this I've got a lot planned for the final quarter of this year and I'm very excited about it so I hope that you guys don't miss any of that so please like rate review subscribe all of those good things and I'll talk to you guys again next time!