Market Update Oct. 23, 2023: Rent Price Fixing, Buydowns Explained & How to win listing presentations

The Texas Real Estate & Finance Podcast with Mike Mills

Welcome, listeners! Your host, Mike Mills, is here with another weekly Market update on the Texas Real Estate and Finance Podcast.

Today, we're zeroing in on the pulse of the market. We'll be analyzing the latest real estate news and shining a spotlight on the high cost of living these days. This in-depth episode promises to give you a clear view of the current economic landscape, providing necessary insights as you navigate through it.

Our main feature story will be the intriguing debate surrounding RealPage. Are they fostering a rental cartel or ingeniously preventing rents from spiraling out of control? We’re delving into the heart of this controversy and you definitely won’t want to miss it!

Curious about interest rate buydowns? We're laying it bare - discussing their impact and why it's important to understand them. Should you use them, are they are good value, and what is the cost? Tune in and we will unlock the secret world of rate buydowns!

But we’re not stopping there! We're also revealing the top five home improvement projects that guarantee a healthy return on investment and attract more buyers for all your potential listings. From minor kitchen upgrades to the magic touch of refinished hardwood floors – we've got the pro tips that you need to get your listing sold off the market in no time.

In this packed episode of the Texas Real Estate and Finance Podcast, we're providing you with knowledge and insights that promise to enlighten, inspire, and guide you whether you're a first-time home buyer, a renter, or an established investor. Don't miss out, tune in now!

Timestamped Summaries:

00:00:09 to 00:00:40] Welcome to the Texas Real Estate and Finance Podcast. I'm your host, Mike Mills, a seasoned mortgage banker in the Dallas Fort Worth metroplex with over 13 years of experience in banking and finance. Today, I'm thrilled to bring you the latest installment of the real estate market update for the week of October 22nd.

[00:00:41 to 00:01:16] Last week, I had the privilege of chatting with Sue Buswell, where we delve deep into the world of credit. We covered topics such as initiating proper credit management for your children, the intricacies of credit score calculations, strategies for managing debt and maximizing your credit score.

[00:01:16 to 00:01:39] Nicole Christopherson, an accomplished Austin-based realtor who has successfully launched the Work Hard Smile Large brand in Texas, will be sharing her inspirational story with us.

[00:01:40 to 00:01:58] Find my contact information in the show notes. Thank you for tuning in, and I invite you to stay tuned in for more valuable insights and updates in the world of real estate.

[00:01:58 to 00:02:23] Today's topics include a brief rundown of the news stories affecting the real estate market, interest rate buydowns, and how to get more listings in the competitive market.

[00:02:23 to 00:02:47] Redfin reported that a homebuyer in the United States must earn $114,000 to afford the median-priced US home.

[00:02:47 to 00:03:07] The median American household income is $75,000 a year. The median price for a US home was $420,000 in August.

[00:03:08 to 00:03:38] The median asking rent right now is almost $2,000 a month. The average new car payment is $740 a month, and the average student loan payments are about $500 a month.

[00:03:38 to 00:03:56] The percentage of subprime auto borrowers 60 plus days past due hit a record 6.1% in September.

[00:03:56 to 00:04:27] According to Redfin, 2023 is poised to end with the lowest number of existing home sales since 2008.

[00:04:27 to 00:05:00] The 30-year fixed mortgage rate increased to 7.8%, hitting its lowest level since 1995. The number of licensed loan officers fell to 89,000.

[00:05:01 to 00:05:39] The REBNY new rules will prevent listing brokers from paying buyer agents. Possible outcomes are buyers negotiating their own fee, buyers going directly to listing agents, or new buyer's brokers charging a flat fee.

[00:05:39 to 00:06:23] Multi-generational housing is growing to combat affordability pressures, with one in five Americans sharing their home with adult children, parents, or grandparents.

[00:06:23] Many multigenerational families live together, but Accessory Dwelling Units (ADUs) provide a practical solution.

[00:06:37] China injects $100.2 billion into the lending market; the US is involved in multiple wars; inflation is high; the housing market is unaffordable.

[00:06:53] The 30-year fixed rate mortgage is now above 8%; affordability issues will persist until 2024.

[00:07:15] High-yield savings accounts offer a 5.5% return; treasury bill yields are at 5%.

[00:07:50] Cash and T-bills have higher yields than real estate and the stock market.

[00:08:21] This is the first time since 2000 that T-bills yield more than the S&P 500.

[00:08:37] Class action lawsuits against NAR affect homebuyers, but another antitrust situation affects renters and investors.

[00:09:19] RealPage, a technology platform, enables landlords to set rental prices using data analytics.

[00:10:08] RealPage's algorithm coordinates pricing among landlords, possibly violating antitrust laws and limiting competition.

[00:10:52] Critics suggest RealPage created a rental cartel, while the company claims to prevent rents from becoming unaffordable.

[00:11:41] RealPage's algorithm helps drive rents higher, contributing to the affordability crisis in the housing market.

[00:12:05] In an antitrust case, competitors using the same algorithm to stabilize pricing can violate the law.

[00:12:44] Renting instead of buying leaves the cost of living in the hands of data-driven software and large companies.

[00:13:07] The two-one rate buydown is often hyped up, but why isn't everyone using it?

[00:13:25] A rate buydown is a strategy to reduce the interest rate and monthly payment on a home.

[00:13:54] Temporary buydowns reduce interest rates for a set period but don't provide real savings.

[00:14:24] Permanent buydowns lower interest rates for the whole loan duration, but the amount is smaller.

[00:14:45] Buying down the rate must be calculated based on loan size and market offerings.

[00:15:11] To determine if buying down the rate makes sense, calculate the breakeven point.

[00:15:42] If the breakeven point is reached within three years, it may be a good idea.

[00:15:59] Anything beyond five years may not be worth the expense due to life's unpredictability.

[00:16:41] Personal approach: prioritize cash by not buying down the rate and using seller-paid closing costs.

[00:17:04] Consider long-term plans and market conditions before committing to a rate buydown.

[00:17:30] Help sellers navigate challenging markets by recommending home improvement projects.

[00:18:02] These projects can sell homes faster and provide the highest rate of return for clients.

[00:18:02] In today's competitive market, sellers need data-driven home improvement recommendations to attract buyers.

[00:18:27] Kitchen refresh offers a 377% return on investment, updating countertops and appliances are cost-effective.

[00:18:47] Refinishing hardwood floors has a 348% return on investment, as buyers prefer move-in ready homes.

[00:19:03] Basic listing prep like painting and updating fixtures offers a 297% return on investment.

[00:19:36] Roof replacement, though expensive, is essential to avoid red flags during buyer inspections.

[00:20:01] Flooring replacement gives a 280% return on investment, as outdated carpets deter buyers.

[00:20:26] Suggest strategic improvements to increase the home's value and attract more buyers in the competitive market.

[00:20:56] Buyers prefer move-in ready homes, so critical renovations are necessary to sell houses quickly.

[00:21:24] Grateful for your attention, the host shares a sports prediction and encourages being the best humans.