Record Low SFR Inventory (LA 1685)
Record Low SFR Inventory (LA 1685)
Transcript:
Steve Butala:
Steve and Jill here.
Jill K DeWit:
Good day.
Steve Butala:
Welcome to the House Academy Show, entertaining real estate investment talk. I’m Steven Jack Butala.
Jill K DeWit:
I’m Jill DeWitt, broadcasting from the Valley of the Sun.
Steve Butala:
Today, jill and I talk about record low single family residential inventory. Record low housing availability.
Jill K DeWit:
Since we are sitting in the Valley of the Sun, the Phoenix Metro area, let’s just say, it’s been nuts. COVID nuts. There was a lot of sales, a lot of transactions, a lot of stuff, available things, just moving hands. And then I’ve noticed very recently and we’re through the holidays, so we’re past all that. There’s just not a lot of inventory. And the days on market are still like record low. So I want to talk to you about this, because I’m like, and I have a list of questions that I would like to hear your answer, and I’m sure you would like to hear his answer on.
Steve Butala:
Before we get into it, let’s take a question posted by one of our members on the landinvestors.com online community. It’s free. And don’t forget to subscribe on the Land Academy YouTube channel and comment on the shows you like.
Jill K DeWit:
Luke wrote, “Any tips for building an online presence? I was staunchly anti-social media for years.”
Steve Butala:
Me too.
Jill K DeWit:
“And now it’s coming back to bite me when sellers search me on Google and find very little information about me.”
Steve Butala:
Yeah. Same with me.
Jill K DeWit:
I have a buying. Well, it doesn’t, they find Janelle.
Steve Butala:
Yeah, we’re past it.
Jill K DeWit:
Yeah. “I have a buying website, LinkedIn and a few other socials, but most haven’t been indexed by Google yet. So it doesn’t show up in the search results. Also, if anyone wants to add me on LinkedIn, by all means.” That’s cute. I get a lot of LinkedIn stuff like that and I’m pretty much, like sure, let’s connect. Yeah.
Steve Butala:
Here’s how you solve this permanently. And I didn’t like this either in 2011 ish. I was just never, I didn’t, I had no usernames on any of this stuff at all. And I forced myself because I realized, I was one of the last people to get a cell phone, by the way. That’s where I was mentally and still am in a lot of ways. But you have to make this mental shift and hopefully this will really help between using Facebook to talk to your graduating high school class, which is how I was using it in the beginning, and it was the most annoying, like I don’t want to … I don’t care.
Jill K DeWit:
Like who had a baby.
Steve Butala:
Yeah, I don’t. I mean, I had a blast with all of my friends in high school, but that’s over. So I don’t need to know. And some people do. And that’s what social media really is for. Even these kids now, I watch how our kids use it and it’s very much like that times eight. And so that’s why they call it social media, not business media.
Steve Butala:
If you use, you have to make this mental change, social media for your company and inform people about where you are traveling to look at land or whatever you’re doing that day, that might be interesting in a couple of sentences or one picture about buying and selling land, you’re going to knock it out of the park. You’re going to, one entry, is what you need across to all those platforms every day.
Steve Butala:
And you put it in your calendar. Maybe it’s at 5:00 at the end of the day and you’ve taken a picture of yourself or maybe whatever content you think is meaningful and hopefully unique, then you will do incredibly well. But you have to start somewhere and five years from now, it’s going to be five years from now anyway. So if you have all those entries in there, you’re going to get indexed and everybody’s going to get it.
Jill K DeWit:
So that’s a mom thing, five years from now. Or I don’t know if it’s a mom thing, that I feel like it’s like one of those few sentences that I go back to. They just have this like nails on a chalkboard for me.
Steve Butala:
Really?
Jill K DeWit:
It’s not you. Yeah. That’s one of them. The other one is you can sleep when you’re dead. I’m like I just kind of don’t need to hear that anymore.
Steve Butala:
That doesn’t make any sense.
Jill K DeWit:
I agree.
Steve Butala:
But five years from now, it is going to be five years from now.
Jill K DeWit:
That’s true.
Steve Butala:
That’s a really roundabout way of saying, and I’m not saying this about this topic, but you’re lazy. Five years from now, it’s going to be five years from now. So don’t be lazy and do this stuff you’re supposed to do to be where you want to be.
Jill K DeWit:
Exactly. But you do need to, you know, here’s the big picture and why this question came up is because people do look you up and you want it to tie together. So, whether you’re buying a property or selling a property, they want to make sure that is this guy legit? Before I send him money or before I go down this path, I want to make sure that this guy’s really in the business and he’s who he says he is.
Jill K DeWit:
And with a 30 second Googling of you or looking on LinkedIn or Facebook or something, it’s just like, there you are. So you don’t have to, even if you don’t have that many posts, but just you’re there, you’re visible. It all ties together. Even if you have your day job. I see a lot of people do it really well where they say, by day, I’m this. And then I’m also, my little family business is investing, land investing and that’s all anybody wants to know.
Steve Butala:
It’s just so frustrating about social media for people like me or people, I’m just going to say it, people my age. You turn on any social media venue, even the good ones like LinkedIn, and there’s so much terrible stuff on there.
Jill K DeWit:
Noise.
Steve Butala:
Just stuff. Who got married and where they bought their wedding dress. You know? And that enrages me. I’ll be honest. The more you get into social media and you look up stuff, especially on Google, and all these social media environments start to log what you’re interested in, the more the stuff’s going to pop up that you’re actually interested in and all that noise will be gone eventually. And so it’ll all just be, if it’s all land and that’s all you’re doing, or GPS units or whatever those algorithms believe you might be interested in because you’re always talking about land or you’re always showing pictures of you, you’re now entering XYZ county sign, looking at land or whatever you’re discussing. It’ll develop a great algorithm for you. So, when it pops up on your phone, it’s like, I am interested in the 40 acres in Wyoming. And so it’s hard to, in the beginning, it doesn’t know what to do.
Jill K DeWit:
I understand.
Steve Butala:
I don’t know what Jill looks at on this topic right before she goes to bed, but it’s really funny.
Jill K DeWit:
Thank you.
Steve Butala:
Funny, funny stuff. Like I think Jill might use this for high school friends.
Jill K DeWit:
Not for high school friends, but other friends. Yes.
Steve Butala:
Today’s topic, record low SFR inventory. This is the meat of the show.
Jill K DeWit:
You know what it is? I’ll tell you what I do. A lot of my social media stuff is my support group and my personal friends in my life that were like, what are you working on? Or look, oh, yay. Congratulations. Where are you guys? What are you doing? That looks fun. That kind of a thing. It’s very sweet and nice. We all … That’s how we connect and give each other hugs.
Steve Butala:
All I know is that it makes Jill happy and that’s all I care about. And that’s the truth.
Jill K DeWit:
Yeah. Thank you.
Steve Butala:
I don’t know what you’re looking at, but you don’t end up upset by it.
Jill K DeWit:
So today we’re talking about this inventory. So we were driving around the other day and I said, I turned to Steve and I said, “Have you noticed, is it just me, but all of a sudden lately …” One of the other things I do is laying in bed, falling asleep at night, is I sit in troll real estate sites, looking for not only like stuff we own, but other up and coming areas and just to see what’s happening and I’m looking around going, huh? You know, we’re through the holidays. We’re well into January. This is a good time. People like, all right, list the house. There should be a plethora of inventory. And I’m like, it’s not there. And I’m checking.
Jill K DeWit:
So it started with me looking in our sweet area, just around Phoenix. And I’m like, huh, this has been a hot, hot area for a while. Everybody’s been talking about how many people are coming here from all over. And I’m like, if we’re down, I’m guessing this is a good reflection of the rest of the country, so it’s widespread and I’m looking around.
Jill K DeWit:
So the conversation I turned to you was, “Have you noticed this?” To which you said, “Yeah. I did notice to.” Which I said, “We should talk about this on the show.”
Steve Butala:
Yeah.
Jill K DeWit:
So I wrote some questions and I’m really kind of curious, like should we be worried?
Steve Butala:
Should we be worried?
Jill K DeWit:
Mm-hmm (affirmative).
Steve Butala:
No, no. This is all, 98% of what I’m going to say on this whole episode is positive.
Jill K DeWit:
Okay.
Steve Butala:
No, we shouldn’t be worried.
Jill K DeWit:
Okay.
Steve Butala:
This is a great opportunity to buy real estate like we all do and sell it in one of the hottest markets there ever was and might ever be.
Jill K DeWit:
That’s good.
Steve Butala:
At least at our age.
Jill K DeWit:
One of the things I think about is … One of the three things my parents taught me that I remembered, that was really good, but which is really good advice. They always say don’t buy something until you sell, like a house. Don’t buy a house. Sell your house, then go buy a house. Last thing you want to do, and we watch a lot of people doing this, is put your primary residence under contract. Now you’re running around going, all right, we got to find something in a week.
Steve Butala:
Gosh, you didn’t want to do that in this market at all.
Jill K DeWit:
Right. That was my thought. I’m like, wow, because you’re going to just be buying something bad. You know? Or you’re stuck. I watched my parents. They did that well. They sold their house in Laguna Hills, moved into an apartment. They were moving to Texas, moved into an apartment and lived an apartment for about, I don’t know, like a year and a half. I’m like, “Is this your life now? You’re just going to have storage places in this cute apartment?” They’re like, “Oh no.” But they waited until they found their dream house and they did it right. You know? And it was the right price and the right house and everything was good. And I always thought that was so smart.
Jill K DeWit:
So I’m like, gosh, when there’s low inventory, sometimes people are like, oh, oh, what do we do? It’s almost like you want to hoard what you have, but it’s not necessarily what you should do. You just get smarter, I think, about your decisions.
Steve Butala:
It’s very hard to get in the head of a regular consumer, a regular family of four, who have regular jobs and children in the public school that is nearest to where their house is. And that’s the vast, vast majority of the people in this country.
Jill K DeWit:
Right.
Steve Butala:
They’re not thinking about real estate. They’re not thinking about days on market. All we do is talk about that and think about that. If you’re listening to this show, you’re not a normal person either.
Jill K DeWit:
Congratulations.
Steve Butala:
You are real estate obsessed.
Jill K DeWit:
Yeah.
Steve Butala:
Like Jill and I are real estate obsessed to the point of it’s ridiculously unhealthy.
Jill K DeWit:
It’s true.
Steve Butala:
And so, yeah, I track days on market and inventory and we read about it all the time. And every time we get in the car, one person’s on the phone looking at housing prices. And it’s just not healthy at all. It’s not normal.
Steve Butala:
So, but if you’re a regular decision maker, you’ve got jobs and somebody gets a job transfer. You don’t know all this stuff is going on. You have no idea that there’s low inventory. You put your house up, because you call your sister-in-law. You put your house up for sale. It sells that day. Your sister-in-law is an idiot real estate agent so it’s listed way too low. Sells really fast. And then wherever you’re going, you look to buy a house and you’re stuck.
Steve Butala:
And so there’s three things in play here that are causing this, and these are all positive. Again, this is all positive. Not negative. If I sound negative, I don’t mean to sound negative. This is all in our favor as real estate investors.
Steve Butala:
Most recently, and most importantly, regular interest rates. Well, inflation is rampant right now for a lot of reasons and it’s affecting real estate mortgage rates. And so, it spiked, from like the highest one period to period spike since in like 21 years. It went from 3% ish to about 3.45% for a 30 year fixed more mortgage. So anybody who’s thinking about buying a house, pull the trigger, even if they didn’t like the house. These have huge effects nationally when these statistics happen. So that pushed inventory way lower, even lower than it was before.
Steve Butala:
Number one. Number two, all the houses that were going to be renovated, the renovator snapped them up. Number three, hedge funds and pension funds are involved in buying real estate now. Not a lot. Maybe 1% or 2% of the entire population of houses, but they are. So they’re buying houses, maybe irresponsibly buying houses, in my opinion.
Steve Butala:
Number three. This is huge. Or whatever number we’re on. This is huge. The population, the sheer population growth from the millennial generation is staggering. When you look at just the raw numbers of people turning 30, which is apparently the median home buying age or the most prevalent home buying age for first house is larger than it’s ever been in the history of the world. That generation is massive worldwide.
Steve Butala:
And so all these things together are shoving, and then everybody’s working at home, and that’s only two years old.
Jill K DeWit:
We’re on five.
Steve Butala:
So all these things together are really removing any type of real inventory on the market. And what’s left is grossly overpriced, usually by people like us. So, or like you.
Steve Butala:
So what does this mean for us? Let’s cut to the chase here. When you send letters out, especially in rural markets for SFRs, there’s something that makes that person sign that letter that happened in their life. They’re the people who I described earlier. They don’t care about real estate values. They don’t know. You know what they know? How much they paid for the house. And in a lot of cases, it’s zero, because they inherited it, especially in rural markets and they’ve lived there. Their parents lived there their whole life. They grew up there. And now their basis is zero. And you’re sending them a letter for $250,000. It gets them, and some life event just happen. It gets them really thinking about selling the house.
Steve Butala:
So those life events haven’t changed. What’s changed is the sell side real estate market. So this all works in our benefit. You buy a house for $250,000. Now it’s worth $500,000. And maybe even a year ago, it was worth $350,000.
Jill K DeWit:
Thank you. That was awesome.
Steve Butala:
Was it?
Jill K DeWit:
Yeah, that was really, really great. In my only last note here, as I was looking at this, thinking about I’m like, I hope all those agents socked away cash from last year’s sales.
Steve Butala:
Yeah. And I’ll tell you, real estate agents have never been lazier than they are now. So if anyone who got their real estate license in the last two years, what they’ve learned and it’ll destroy their career very soon.
Jill K DeWit:
Yeah.
Steve Butala:
What they’ve learned is that you don’t have to do anything.
Jill K DeWit:
Exactly. And you do need to do something because it was working in their favor for a while. Like yeah, just get the listing. Sit back and watch what happens.
Steve Butala:
Yeah. It’s going to, well, I’ll list it. It’s going to … This is what’s been going on in California for years and years and years. You buy a house in California. I don’t care if it’s the biggest pile of garbage there ever was. It’s going to double in value in 10 years. Double. The rest of the country is maybe 5% a year, 6%. So some of that is spreading, mostly because a lot of people are moving out of California. And so that’s good too.
Jill K DeWit:
Exactly.
Steve Butala:
But you get to a point where you start to take stuff for granted and I don’t think California now, I’m watching prices plane out in Southern California anyway.
Jill K DeWit:
I’ve noticed a little bit too.
Steve Butala:
So.
Jill K DeWit:
That’s interesting how it’s changing.
Steve Butala:
It’s important to know the market where you’re buying and selling this stuff.
Jill K DeWit:
Thank you. Happy you could join us today. Five days a week. You could find us here on the Land/House Academy Show.
Steve Butala:
As if that wasn’t enough, just now, tomorrow, is Jack Thursday, and I’m going to talk about land, the land deal flow machine and consistency. That’s what you’re shooting for. You are not alone in your real estate ambition.
Jill K DeWit:
That worked out perfect. Thank you. I wanted to … I was hoping to ask you a few questions that would spark this brain dump, if you will.
Steve Butala:
Is that what it was?
Jill K DeWit:
Yeah, but it was good. No, I like that. That is exactly what I wanted.
Jill K DeWit:
Hey, thanks for tuning in. We would love to connect with you by the way on clubhouse. We are there the first and the third Thursdays of the month. Go check it out. Join clubhouse and look for the land investing group. Follow it. Follow us. And you’ll get notified when we’re there.
Steve Butala:
We are Steve and Jill.
Steve Butala:
Information …
Jill K DeWit:
And inspiration …
Steve Butala:
To buy undervalued property.
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