The big celebration centennial episode, so let’s discuss…the coming “bad” market! Bad for who? Today, David Sidoni discusses how to navigate a changing market when you are a first-time homebuyer, and figure out if bad is bad or bad is good.
What Happens When We Go Into A Bad Market? 100th Episode!
Spring 2022 Housing Market Update For First Time Home Buyers
Welcome gang, 100th episode. It’s time to party and celebrate. Hell no, that’s not what you come here for. Let’s talk about How to Buy A Home in 2022 and 2023.
What is happening, my How to Buy A Homies? Welcome to my centennial episode. It is time to get you educated, empowered, and fearless in your home buying plans and process. Let’s crush that confusion. There is so much that we have gone over. I am going to be a little reminiscent in this episode, but most of all, I am also going to be a lot thankful for the 100th episode. I am going to be very thankful to all of you out there for all your support and, most of all, for letting me know this is helping you and understanding that we are making a difference out there. I cannot do this without you.
Reaching A Tipping Point
Before we get all the reminiscent mushy stuff, I am going to give you what you came for, which is information. After all, it is called How to Buy A Home. Let’s dive right into the mid-spring 2022 big housing nugget of information for you. The market is hitting a tipping point. I am not saying it is snapping, crazy, and is completely going in the other way. I am just saying it is slowing down. Is it going to tip over and slow into an actual decrease in prices this summer, next summer, or in a couple of years? That is tough to say because there are so many opposite economic factors working against each other.
It is an insane time if you study the economy. If you do, then I know you are sitting by yourself. Here is a thought from our old pal Uncle Larry, Lawrence Yun, the Chief Economist from the National Association of REALTORS. He says, “The worst of the housing shortage is ending, but market equilibrium between supply and demand is still some ways off. Builders are responding to higher mortgage rates and are chasing rising rents with fewer home buyers and more renters being forced to renew their leases.” It sounds like anybody out there. Do not worry. We are going to work out a plan.
Uncle Larry continues, “Even before the rising interest rates, apartment vacancy rates were at historic lows.” You know what that means. Rents were accelerating. “Some degree of a return to the office is also fueling back to the city living where high rises are concentrated. The homes for sale inventory in March was essentially still at an all-time low with less than a million homes on the market.”
Before the pandemic, we had 1.5 million homes on the market. Do the math on that. What does that mean? We are down 1/3. “Even as home sales look to trend back to pre-pandemic levels, after the big surge of the past number of years, inventory will not return to pre-pandemic conditions. That means home prices will continue to get pushed up even higher in the upcoming months, albeit modestly, given the supply and demand imbalance.”
First of all, kudos to Uncle Larry for using the word albeit so well in that sentence. The albeit that he was talking about is albeit modestly. We are at a tipping point, but that tipping point is slowing down, not depreciating. We are going to talk about the projections, the interest rate spike that has created this minor slowdown. Remember, this is slowing down from a scorching hot bananas market to a cuckoo market. It is less insane, which means that it is a little less competition, but it is still incredibly competitive. Prices are still going up. They are just not going up to $100,000 from the house that was sold down the street.
I want to help you interpret the news that is going on because anytime there is any change in the housing market, suddenly we see headlines like this. They are going to read, “Housing finally stops insanity. Unaffordable housing finally hits reality. Home prices dropping.” If you go back and look at history since World War I, if you average the ups and downs, the average house goes up in appreciation by about 4% to 4.5% a year over a 7 to 10 year period, no matter what that is in history. Since we went up 19.5% in 2021, and then we kept going up 3%, 4%, and 5% so far in 2022, it is going to go down, but it is going to go down by comparison. It is slowing how fast it goes up. The arrow will be pointing up, just not up as sharply.
If that was confusing for you, go back to Episode 92, where I talked all about that stuff, when it comes to the headlines that you are going to be seeing, scary sells. The interpretation of this scary headline, “Housing is going down,” those headlines that are out there interpreting them, what it means is that they are still increasing, just not at these unsustainable insane numbers. Do not be fearful, be enthusiastic and excited. Let me remind you of something the great investor guru, Warren Buffett, said, “When people get greedy, be fearful. When people get afraid, get greedy.”
I am not telling that I want you to start thinking of homes as an investment and start flipping them for profit. I am telling you exactly the opposite. Recession and bad housing market headlines are going to get all the clicks because the information is being put out there that the average Joe or Jane homeowner who owns a house already is concerned about the economy and the value of their home. When you hear recession, do not get all salty and let that news slow you down on your home buying plan. Remember that news is for the home sellers, the people who own their houses. In this crazy new renter’s market, where it is skyrocketing, for most average renters, the best time to buy instead of rent was yesterday.
When it comes to the recession, a recession does not equal a housing crisis. In the last 6 recessions, housing appreciated 4 out of 6 times and only dropped 2 times. Once in the 1990s, that drop was less than 2%. The other drop was the recession that had everyone so scared because it was so fresh in their minds. It was partially because, if not majorly, of the malpractices in the housing market. That is why that one was so terrible for housing, and the numbers are so awful. Understand the full data and know the pre-recession housing run-up. Know that 4 out of the last 6 times, we did not go into recession. This is nothing like the one time we dropped big time. It is not the bubble like the last time. It is not going to burst or crash like the bubble in 2008. It is going to be slow and correct.
When Bad Is Good For You
In the other four recessions, housing prices increased by an average of 5.55%, weathering storms and protecting renters in volatile markets. Owning a home is your best hedge or safety net against inflation. You get a fixed monthly payment, tax benefits, and forced savings account using a monthly payment you already pay as a renter, but it goes to you instead of going out the window. Headline number two, “Bad housing market.” Remember what I have been telling you since Episode 1, back in March 2019. The system is rigged against first-time home buyers, and the entire real estate industry is so slanted towards the sellers that almost all of it is geared towards people who already own a home.
The information is not out there for you. The information is not designed for you. The adjectives are not designed for you. They are for the sellers. When you hear the real estate news, they are talking about them, not you. That is why I have put out 100 of these bad boys to start the revolution and give you, the first-time buyers, and the correct interpretation of the headlines. A bad market is like my boys who run DMC and say, “It is not bad meaning bad but bad meaning good.” Bad is bad for sellers. That is good for you.
Remember, real estate is clueless about your power as a group, and they ignore and mistreat you. I am in the minority. I am going to sound like the crazy man scientist screaming at the city council meeting. This is the way it is because the real estate industry is broken and run by greedy and lazy people who think that listing homes and selling homes is the best way to make money. All the news is geared towards the sellers, and bad for them is what you are going to hear in the headlines. Bad for them can be good for you. All the Wall Street folks and the rich ballers believe in what Warren Buffett said about being fearful when people are greedy and being greedy when people are afraid. What does that mean? Think about it. It means to sell high and buy low. That is all it means.
Regular old folks, the average people without a trust fund and supporting them in piles of money to invest, end up getting greedy way too late when a thing has run up for years, and they have had enough time watching it to go, “I am going to jump into that.” They do not have piles of daddy’s money to invest. They have to spend their time working to make their money, and because of that, they do not pay any attention to the market trends. By the time they hear about the things that are these great deals going up and up, that is when they decide it is hard for them to jump in and get what everyone else got. That is where they are getting greedy because they think it will keep going up, or worse, they think it will last forever. It is not.
When things go down, that is when they freak out because they cannot afford to lose anything. They sell to avoid more losses before it is going to keep dropping. They would never buy them because they think, “Why am I going to buy something that is going down?” It is because they do not have a real grasp on the understanding of the history and the long-term data. Things always bounce back. The people with the money who could afford to ride out the bad time do not stress out when they are buying something going down because they know what is coming back. That is when they buy.
When things are up, the people with the money, that is when they sell. They do not even need that asset anyway. To an average Joe, who has been seeing prices go up for a while and due to FOMO, they decide to jump in at the exact same time as the rich folks are selling. See how it works? That is why in real estate, when the market is described as bad when it is bad for sellers, that is bad for the average Joe homeowner. If things get bad and you play the long game, understanding that it will come back bad is good for you.
Setting Up The Right Way
That is the end of my thesis on bad being bad, not bad being good. Bad is good for you. That is how it works. How is that for a celebration of our 100th episode? There’s a whole bunch of statistics and data and remedies and a crap cavalcade coming your way soon. I hope that you read my constant message. No matter how you see this going, no matter what situation you are in now, there is one thing that I can guarantee. If you rent for a while, either by choice or by circumstance, yet your plan is to give up someday renting, and you want to buy a home, there is one guaranteed tip to help you make money in the long run. Plan with a pro now. The more planning you do, the more options and choices you are going to have, no matter where the market goes.
The more you plan, save, get educated, and get guided by a pro, the more options you will have. Someday after you buy a home, you are going look back on this and go, “Sidoni was right. The options thing is a big deal.” Trust me. I have heard this from hundreds of clients and now thousands all over the country. I know it does not make a lot of sense to you, but this will be something you will be talking about. You are going to want options. Those options are going to help you get the right loan, the best deal, the right view house, or it is going to get you more shiplap than you could ever imagine. You get more of that if you plan and set yourself up the right way. Options equal better for you.
Shout Out Homies!
Let’s celebrate some victories with over half a million downloads and hundreds of people just like you reading, learning, and using the tools, the tips, and the techniques from this show that got started by an angry old man in his kitchen and dining room in the middle of the night. We have, dare I say, started a little revolution of the people getting what they deserve. I want to do a big compilation of all the victories that have happened since day one and give some shout-outs to the people who heard, “You can do this,” and then they did it.
I consistently hear from many of you that you enjoy reading from the other readers about all their stories. I want you to see that with the right guidance, this is possible. Let me share some of the feedback I have gotten from some of our rock star audiences. There are some warm fuzzies in here, but also some wisdom nuggets. It is not going to be all cheese. We have got hundreds of these great stories that have come in, but to celebrate my 100th, I just picked a few. Here is a DM I got from an OG Homie, Gino.
Gino originally hit me up in 2020, but he DM because he told me that he heard my cussing rant on all the haters in another episode, and it cracked him up. He gave me a 2022 update. Before we get to his update, let’s go back to the beginning. January 21st, 2020, Gino wrote in and said, “Hey David, I started listening to your podcast a week ago. It was awesome. It was very informative and fun at the same time. I used to think that I had everything I needed to know to buy my first home by just saving and a good credit score, and I am good to go with shopping houses. I was wrong. I just finished all the episodes that you have in your podcast. It flooded me with more questions.”
“I was confident before I came across your podcast. It hit me with all the real-life stuff that you put out there for free. I felt nervous because, as you said in your podcast, I am about to make the biggest financial move in my life. To cut to the chase, I was afraid to contact you because maybe I am not ready or maybe I do not know what to say, but I want to man up and do the first step of buying a home, which is to send you an email. I need your help.”
That was back on January 21st, 2020. We have reduced the fear for him. He manned up and then bought a home with only a 3.5% down payment. In this DM, a couple of years later, he said, “I kept listening to your podcasts. I refinanced my home, locked in a 3.3% mortgage rate, and removed my PMI, all that only in one year after owning it. My property has appreciated a lot. It all worked perfectly, like you said, back in 2020. Magical.” The fact that you signed off with the word magical is rocking, Gino.
That was one of the early ones. Here comes another one, “Hey David, we closed on our first home last Friday. It does not seem real. None of it would have been possible without you and your podcast. It has only been five months since I even thought about owning a home. A few weeks of bingeing you in my earholes and a week or so of consolidating all the info into a Cliffs Note version for my fiancé, we created a unicorn bubble and floated into homeownership.” That is awesome. I got to tell Madison that.
They continued along, “We got the keys a few hours before closing to do a final walkthrough and started the small renovations the next day, planning on moving in. Thanks for being awesome. I still listen to your podcast so I can sound smart to my friends when they have questions. Thanks again, Alex and Tiphani.” This is my favorite. One of the reasons I put it in here. They added a PS, “PS, you need shirts that say, ‘I am Sidoni’s How to Buy A Homie.'” Feels a little possessive and weird, but I am still down with the idea. I love it.
There are good lessons there, but the t-shirt idea is the best part of the whole thing. Maybe stickers. Should I do merch? My swag is brainpower. Speaking of that, I chatted with someone else who is brainy, Margarita. My gal, Margarita, worked with unicorns for a while and asked all the right questions. Her unicorn one day finally looked at her and said, “What is the deal? It is like you went to graduate school for buying a home.” That was awesome.
Here is another great celebration from our 100th episode, “Hey, David, Brian and Diana here. We want to let you know that we had our offer accepted for our dream home. We are over the moon with excitement and cannot wait to close, which with our unicorn agents and lender will be May. We had our meet and greet with our unicorns on April 2nd. We locked with the lender a week afterward. Our offer was accepted on May 2nd.”
“In this market, we had an offer accepted one month to the day of meeting our agents, three weeks of looking at homes, and we will be closing earlier than normal. We are extremely humbled to be in this position, and we still think we are dreaming. While we know this could not have been possible without our unicorn bubble, we owe this all to you. None of this, our bubble, will be possible without you.”
Is that my new title? The bubble maker? I will take it. “You have no idea how much you have impacted our lives. We looked at 12 houses, and on our 4th offer, we hit the jackpot. It is a gorgeous home along the river with a backyard you could have played a pickup football game in. While we still have to close, it would mean the world to us if you could spread our message across the country in the world. Nothing would be more satisfying than giving a real-life example of how it is possible to buy in this market with not only a unicorn bubble but also reading every one of your blogs to all the Homies out there.”
The world knows. Everybody heard your story, fast, quick, and easy with a unicorn bubble. There are a couple more stories. They both have some good lessons in them. This one came to me, “Miguel and I received your package and your sweet note in the mail. The fact that someone we have never even met or talked to in person would send such a thoughtful and sweet gift is incredibly touching.” They said they teared up when they received the little housewarming gift for me, “Miguel and I closed on our house. It has been a long journey. Right before finding the house, we were at the point of wondering if we should give up, but we gave it one more shot, trusting in our unicorn and trying to trust the process.”
“Now, we have the keys to our new home. It feels like the stars are aligned. Thanks for everything you do. Thanks for the podcast, the networking, the unicorns, the kindness, the hours, the days of research that you do, and also for caring so much. People like you, there are not many, give us hope that there are still good in the world.” They are going to send me a picture of their new home. That is awesome. Now I am tearing up. This is ridiculous. Ansley and Miguel, thank you so much. You guys did it. I just said some words in a microphone.
One more, I promise this has serious tips and hacks, not just mush, “On April 20th, a great house popped onto the market in the location that we were targeting, and it was priced at $295,000. This price of $295,000 was above our price range. The next day, our unicorn goddess is showing via Zoom because they were still in Portland, and it was hitting up the other agent for information. The agent was going to leave it on the market through Saturday, but they got a strong and clean offer that day.”
That means that these guys had to make some fast decisions. “The house was built in 1893 and only had two owners. They researched the agent for the sellers and the previous owners and got some good information for their offer because they were going to go up against that strong and clean offer. Their big concern is going to be the foundation of the roof. They decided that they would not waive the inspection so that they would feel assured about the foundation. Their escalating offer went up to $311,000. We kicked in another $5,000 to the seller’s closing costs.”
I love that trick. Kick in some extra money for the seller’s closing costs, as opposed to raising your price because it works for the appraisal gap. It keeps the appraisal down, but you are still getting the same net for the seller. Did you understand that? No? There are 99 episodes to go back where I explained it all. They put it in $311,000 with $5,000 back for the seller’s closing costs. After a sleepless night, they learned on Friday morning that their offer was accepted. Better yet, the second-highest offer was $305,000.
They were able to get it because of their escalation clause of only $306,000. “Did I mention that this was the first offer we put on a house? They are all doing this from another city. They flew out for the inspection on April 29th. There were no serious red flags, but they learned the roof was much older than the seller’s agent originally told them before they made the offer. They did not have immediate reserves for a full roof replacement. They went back and forth on whether or not they should back out of the deal. They got a roofer to give them an all-clear assessment of the roof, good shape and still has 3 or 4 years left. We decided to go forward with it. Our unicorn, at that point, because of what was going on, was even able to negotiate back another $5,000.”
They got back the $5,000 they had committed to the seller’s closing costs as a credit for the roof, and then the appraisal came back at $312,000. No gap, no appraisal extras to pay. “We did have some unexpected issues with our lender, but after holding our breath in the last couple of weeks, we heard that our loan application went through underwriting and was approved. Things are looking great, but I have a question. I was hoping to get your sage advice on our home warranties, which are generally a waste of money for buyers to pay. Are they a scam?”
I know it is the 100th episode, and I have given a lot of big cheesy stories, but you did not think I was going to end with just a whole bunch of this feel-good mushy stuff? It is guidance time. Before I answered the question about home warranties, they went on, “All the home appliances are old, and the inspector could not test the air conditioner because it was too cold that day. He could not check it on the day of the inspection.”
“I have not heard you talk much about home warranties on the podcast, but have you heard from first-time homebuyers whether they regretted paying for a home warranty or are glad that they got one? Are there any companies you want to recommend that we steer clear of? It seems like there are two very distinct views of home warranties on the internet. Either they are great, or they are a scam.”
“Also, the moment you fill out a quote, trying to figure out who you are going to talk to online, you get bombarded with phone calls from desperate salespeople. We are trying to make the decision on the home warranty because there is a 30-day no-claim window. We are scheduled to close on May 25th. We are already in the place a bit before we can use it. I am inclined to pay for a warranty because we already have quite a punch list from the inspection, but my wife is more skeptical and has read a lot of bad experiences from other homeowners. Unfortunately, we do not know anyone who has one. I know you are super busy, but if you have any advice, we would love to hear it. Thank you so much for your podcast and what you do.”
I responded to them, and the good news is it was a very happy ending. My answer to the question, “Is it a scam?” Hard no. It is not a scam. Is it going to cover everything? No, but let me once and for all put to bed the whole internet reviews on home warranties. There are two distinct views on the internet, great or scam. Get ready because I am going to sound like a crotchety old man. The internet is a blessing and a curse. You can indeed find options that will help you avoid age-old scams, crappy businesses, and greedy, non-caring corporations. That is an awesome power that I wish I had in my twenties, but the internet is also a place for the negative people to thrive and complain about everything as loud and as often as possible.
The imbalance of sad, unhappy, insecure, and crappy people venting online versus satisfied people on the internet is truly inconceivable to me. I love the people who stood it together and are fighting against the corruption and helping each other out with the warnings, but the sad trolls outweigh the satisfied customers by the millions. Haters are going to hate. That is what they do. What is worse is that people that are not happy are out there louder than everybody else. Their favorite thing to do is make sure everyone else knows how miserable they are because they get some sick solace and having randos validate them in their pathetic lives.
Sometimes people do not love their home warranty, and some people may have truly gotten what they were entitled to. I can tell you from personal experience that, in general, those people would not be happy if the warranty replaced their fridge with a solid gold appliance filled with cash and chicken nuggets with a lifetime supply of honey mustard. They would still find something to complain about.
In most states, quite often, in a normal market, the seller pays for the home warranty. The seller pays for it, but they are still finding ways to whine about it. Usually, it is hundreds, not thousands of dollars, which is a screaming deal when you consider that if you have a kitchen appliance or a water heater that breaks, you can usually get one replaced for the deductible.
At the company that I use here in California, the deductible is only $75. Even if you have to pay for it, as the buyer pays for it, instead of the seller in the competitive market, I always recommend my people pay the $400, $500, or $600 and rest easy your first year to giant commitment. Is it going to cover everything? No, but are you going to feel better about having the chance of something being covered? Yes. If you want a good company, most of the time, the buyer gets to decide who they use. Instead of asking the internet how to use it and getting bombarded with all those phone calls, ask your trusted unicorn realtor. We know. It is part of our job.
Here is one little caveat on it. In a year, the home warranty company is going to ask you to renew and wait until you see the price they try to stick on it there. It is usually way more expensive. That is where it gets not worth it. Get the freebie for the first year. Do not expect it to cover everything, but be delightfully surprised if it does. In the meantime, save up an emergency fund and be ready to accept the responsibility of owning a home. Please ignore the sad, pathetic haters. Lesson over.
Before I close out my 100th episode, I have to thank you. I try to live with gratitude, and I cannot thank you enough for the support you have given this show that I started in my kitchen with no idea what I was doing. I read every review, every email, and every text. You have to know that you and your stories, from your struggles to your triumphs, are what brings me the greatest joy. They are what keep me going. I am humbled by your readership and honored to be a voice for the people. The past years have been a struggle for many, and I honestly feel guilty for all of the incredible, joyful stories that I get coming my way when I know a lot of you guys out there were forced to some pretty dark places.
I started this show out of a desire to share the information I stumbled upon while trying to do my job. I wanted more people to get it more easily. At first, I was venting a little bit about all the injustice and the crappy business practices that are going on in real estate. We will let that go. Thanks to all of you for always helping me keep my eye on the prize and making sure that I have got my thoughts on the big picture. Empowerment is a strong drug, and I want to keep slinging it like the biggest dealer in town. I promise to keep bringing practical positivity for 100 more of these episodes and beyond because it brings me so much joy to say what I believe and to know that it can help others. Thanks to you, these crazy little words are doing just that. I had no idea I could do this, but I always knew you could do this.
- National Association of REALTORS
- Episode 92 – Is The CRAZY 2022 Housing Market Changing?
- Episode 1 – How To Buy A Home
This podcast was started for YOU, to demystify things for first time home buyers, and help crush the confusion. After helping first timers for over 13 years, I knew there wasn’t t a lot of clear, tangible, useable information out there on the internet, so I started this podcast. Help me spread the word to other people just like you, dying for answers. Tell your friends, family, and perhaps that random neighbor you REALLY want to move out about How to Buy a Home! A really easy way is to hit the share button and text it to your friends. Go for it, help someone out. And if you’re not already a regular listener, subscribe and get constant updates on the market. If you are a regular and learned something, help me help others – give the show a quick review in Apple Podcasts or wherever you get your podcasts, or write a review on Spotify. Let’s change the way the real estate industry treats you first time buyers, one buyer at a time, starting with you – and make sure your favorite people don’t get screwed by going into this HUGE step blind and confused. Viva la Unicorn Revolution!