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19 Jan Ep. 50 2019 Market Update
In this episode, Realtor Adam Kruse and Realtor Shannon St. Pierre give their 2019 market updates and predict what the market will look like this year. Is it better to buy a house now or wait until spring? Also, Mortgage Broker John Charlton of USA Mortgage gives his Mortgage Market Minute update.
Email questions to PODCAST@HermannLondon.com
WHAT’S INSIDE
:30 Mortgage Broker John Charlton of USA Mortgage gives his Mortgage Market Minute update on the rates and predictions for home prices for 2019. Contact John by calling 314-517-0262
1:49 Adam Kruse and Shannon St. Pierre introduce themselves.
2:35 Will interest rates and home prices go up in 2019?
2:45 There were 4 interest rate increases in 2018
3:18 Interest rates were 18% in 1980
4:05 Will there be less buyer competition if home prices rise?
4:15 Is it a buyer’s market or a seller’s market in early 2019? What is housing inventory in early 2019?
5:30 Did only turn-key houses sell fast in 2018? How well did outdated houses sell in 2018?
7:10 How does Adam use the words “pretty” and “updated” when describing homes?
8:10 Are there more savvy buyers who are willing to wait for a good deal?
8:45 Are wholesalers charging too much for homes lately?
9:28 Is rehabbing homes starting to become riskier?
10:30 Does giving a credit instead of replacing and updating things like carpet and paint work when selling a home?
12:00 Can you go into the carpet and paint store and just ask for the most popular color?
13:09 Has the strong economy translated to real estate?
14:30 Why haven’t Adam and Shannon sold their latest investment houses yet?
16:00 Should Adam wait for the market to crash before buying more investment properties?
16:30 What are Freddie Mac and the Realtor Association’s predictions for 2019 and 2020?
17:10 How much have home values appreciated in 2018 and how much will it increase in 2019?
18:05 Will builders build more higher end new homes in 2019 or will they need to be more moderate?
19:49 What countertop is in the highest demand as of 2019?
21:00 What part of St. Louis will have the most new homes built in 2019?
21:28 What is in-fill when it comes to real estate?
22:00 What is a spec as it refers to real estate?
23:30 If you are looking to buy in 2019 should you get your rate locked in now?
23:59 Contact Shannon at 314-583-0070 or Shannon@LivingTowerGrove.com
TRANSCRIPTION
Adam: live from the rooftop of the Hermann London real estate group in beautiful downtown Maplewood is the st. Louis realtor podcast with your host Adam Kruse
John: hello this is John Charlton of USA mortgage I got all day you got 60 seconds so this is your mortgage market admit it 2019 it’s here we could talk about China we could talk about government shutdowns we could talk about Trump but we ain’t got time for that so let’s talk about two things that you need to know about the mortgage market in 2019. 1). interest rates today probably right around 5% what’s gonna happen this year most forecasters are saying we should see about a point 5 percent increase in interest rates over the course of 2019 so what does that mean same house same price by day now versus buyer in the in the air it’s gonna cost you more on a monthly basis at the end of the year if only it was gonna be the same price because here’s point 2). prices are gonna rise prices are gonna rise starting probably in the spring with the spring market everybody’s outside they love it they just want to get out and buy a house right and that’s gonna affect how much that house cost at the end of the year which means double down prices up interest rates up house costs are gonna be much higher by the end of the year you need to contact me I got answers to your questions John Charlton three one four five one seven zero to sixteen so that’s your mortgage market minute peace
Adam: welcome (2) everybody to the st. Louis realtor podcast live from the offices of the Hermann London real estate group a beautiful downtown neighborhood Missouri I’m your host Adam Kruse and this is my co-host
Shannon: Shannon sink here
Adam: Shannon st. Pierre we’re excited to be here today and today we are going to talk all about the 2019 market update Shannon you’ve been looking in your crystal ball right
Shannon: somewhat
Adam: somewhat and we’re gonna try to
Shannon: reading
Adam: reading
Shannon: economic reports
Adam: oh boy I hope you have the good statistics for us today
Shannon: not necessarily
Adam: well then you bring the statistics I’ll bring my crystal ball and we’ll make a great podcast out of it what do you think
Shannon: let’s do it are we
Adam: we’re gonna talk about the de markets hot right
Shannon: right
Adam: but are we gonna say anything about what John Charlton saying which is that interest rates are going up and he thinks prices are going up what’s that gonna mean
Shannon: so that is true so in 2018 we had four rate increases so mortgage rates went from close low you know close to for a little over four almost to five percent so then for 2019 that they anticipate another couple mortgage rate increases so that will they think by the end of the year for it’s five and a half
Adam: it’s so interesting to talk to people about interest rates right because there’s always the person who brings up yeah but in 1980 the interest rates were 80 percent right and then there’s the people like me who are like but I remember when I got a loan for six and a half percent rate
Shannon: my first house was six six and a half
Adam: so even though rates are going up that to us that’s about normal
Shannon: in the big picture they’re still very low they’re still very low
Adam: but then there’s going to be people we presume that are saying oh my gosh they’re up that means the markets worse that means I don’t want to buy or I can’t afford to buy or
Shannon: well so then that stir because there you do have the increasing mortgage rates coupled with the fact that housing prices are still expected to rise not a lot but still increase this year in 2019 [???] those two together what you end up having is less competition there because first-time homebuyers will be kind of squeezed out of the market as the (2) affordability that was there in the past is starting to be squeezed a little bit more
Adam: so do we consider ourselves in a buyers market now or a seller’s market
Shannon: I think it’s we’re gonna have
Adam: somewhere in the middle
Shannon: I think yeah I think somewhere in the middle I wasn’t able to really get a great picture and it seems like we’re just in the transition where the inventory will catch up this year and that’s pretty much what a lot of the reports say as well is that in years past the inventory has been very low now moving forward in 2019 some of that inventory or low inventory is going to catch up and there will be more on the market
Adam: okay so some people who follow us or who follow other Realtors they’ve gotten tired probably over the last year of hearing Realtors talk about inventories low call me if you want to sell your home right and we were talking about months of inventory in the past and stuff like that
Shannon: which was extraordinarily low at the beginning it last year
Adam: right and now we think that’s gonna go up so here’s what I saw I saw and this is what I think will continue happen I saw homes that were updated they’re nice you know a young family or whoever can walk in there and go this home is pretty
Shannon: right
Adam: those homes would sell and they would sell fast and they would sell for top dollar is you are saw
Shannon: what price point
Adam: well I guess kind of
Shannon: anything under
Adam: under 300
Shannon: ok
Adam: but I mean just in general a pretty house would sell fast right
Shannon: yeah
Adam: and then there was houses that were outdated that would sit kind of I saw that at any price too unless it was outdated and priced for an investor
Shannon: yes but right now the may the markets been shifting a lot throughout last year we started talking about the market shifting in April I mean somewhere around there and it was slow to start shifting and I think we did definitely I it at the beginning but do you feel like it’s totally shifted now
Adam: I don’t think it has the we still have multiple offers coming in on some listings right you still have I still have buyers that are unable to find homes that it would be a good fit for them
Shannon: right
Adam: and so a shift would mean we’d be going and looking at 10 homes every weekend and can’t find anything or can’t decide there’s too many options and now we’re still sitting in a there’s not enough option situation
Shannon: right I think it’s a very odd I set back the last couple months trying to figure out what’s going on so a lot in City more specifically the so I’m talking about the city they’re either the hump goes on the first couple days with it being on the market if it’s relatively updated priced well or it sits there and I’ve seen a couple rehab sitting there
Adam: pretty ones
Shannon: pretty one
Adam: I’m using the word pretty because the word updates I think it can be confusing for some people I had a client who we kept saying the home needs to be updated and he’d go I just put in a new furnace I’m like okay but the carpets he’s like that all the feedbags is outdated and he’s like okay I just got really good sighting put on the house and free no one cares all the stuff that they should care about they didn’t care about and the carpet colors and the you know the handles on the (2) hardware on the cabinets they cared about
Shannon: right
Adam: so when you say updated you mean pretty
Shannon: yes
Adam: okay
Shannon: in in some cases to rehab didn’t where it’s modern finishes it was you know mostly gutted finished out very pretty on trend finishes and they’ve been just sitting there
Adam: oh they are they up all day I’m sorry are they overpriced
Shannon: well I think so I think that the mentality that you can get this top dollar is not necessarily the case anymore I think homes move if they’re somewhat pretty or even somewhat too pretty and price right but it has to be priced right no I think the days of over pricing and getting what you want are gone I think you have a the buyer today that or savvy buyer and so and they’re willing to wait so the number one they’re savvy number two they’re willing to wait
Adam: okay so if you have a home you you’re a rehabber you buy a house for whatever price because the wholesalers now are asking more than four homes and they used to
Shannon: Yes
Adam: you buy it you rehab it and then you just think hey I can pretty much offer whatever because I’ll market so hot what they’re finding is no I can’t do you think that if they would have lowered their price by I don’t know 5% or 10% or something like that then not only the home would have sold but maybe they would have been in a multiple offer situation and gotten that higher dollar I liked it should they have priced at lower and then it would have been bit up or
Shannon: yeah I think that if you just start lower and set a time to get the top dollar and just oh it’s better to have it move even if you don’t get multiple offers
Adam: Yeah
Shannon: but that’s the other thing that a lot of the reports are saying is that the rehabbing investment side of things is starting to become riskier as well and I’ve already seen that
Adam: yes so by the way that’s one of the one of kind of our calls to action from our listeners here today are our viewers I guess is we want them to call us have us come over to their home and give them ideas and feedback on what they should do to update their home to sell instead of just making their own kind of guesses and stuff right because
Shannon: right because to your point some sellers go I’m gonna put on a new roof I’m gonna put in a new furnace but don’t touch the kitchen or lighting fixtures or the things that make a home feel extraordinarily dated
Adam: yeah
Shannon: and then they get and then they want top dollar because they have a new roof a new furnace a new AC or something of the sort [???] what yes and outdated lighting fixtures so they’re i they could have saved I think sellers can save an extraordinarily amount of expense and headache they consult with an agent to figure out what buyers are looking for and
Adam: I hear people a lot they say I don’t I’ll give a credit for new carpet I don’t want to put new carpet in because what if I choose the wrong carpet and what I see is that doesn’t work the buyers walk in they see your nasty old carpet and they walk right back out
Shannon: right
Adam: so what we would say call us we’ll help you with that kind of stuff right
Shannon: right and I think that that’s a double-edged sword because I think that that a valid point from the seller is I’m gonna choose the wrong color no matter what even if it’s neutral that neutral beige over that neutral beige in defense versus doing the (2) credit but then yes sellers especially Millennials depending on the price point of the home they don’t want to you know they want to be off into the home
Adam: but just throwing it out there if you’re if your wall colors are really bad and you spend let me say $1,000 to paint it all to a neutral agreeable gray or something like that
Shannon: which is actually color [???]
Adam: yeah can we agree that you will get probably at least $1,000 more for the house then you would up if you would have left them bad even and who cares that they come in and paint him a different color
Shannon: yes now in that yes so I think that when you’re talking in terms of something like the carpet neutral new carpet is still better than old carpet with a credit
Adam: and then you think and I know we’re kind of getting off topic here right but I’m curious in your opinion is there anything wrong with walking into the carpet store or wherever insane give me your most popular carpet
Shannon: I need some I think people should I tell people go into the dance or ask them what the trend the trendy gray is
Adam: so wide make your own decision like just let them tell you what everyone’s buying them
Shannon: yeah with the yeah something neutral because you’re selling your house they’ll point you in the right direction
Adam: okay
Shannon: it doesn’t have to be a painful process choosing colors
Adam: so in this upcoming market for now at least we think that there’s still going to be multiple offers on properties if they’re priced well and they’re updated
Shannon: I don’t know
Adam: I mean I’m seeing you now still so I can’t imagine that’s gonna go away and what we printed part of the market
Shannon: I think it depends on the area
Adam: okay so we’re gonna break down the hot markets on area and area time of year pricing and updates
Shannon: yes
Adam: okay what are some of those statistics you have for us
Shannon: so overall when you look at things what’s been I think what what’s interesting about the reports now is that the state of the economy is very very strong so we have a very strong economy we have very low unemployment probably one of the lowest in decade or two it’s at a very low point but it doesn’t it doesn’t it’s not translating into real estate yet which i think is interesting
Adam: what do you mean but so the strong economy is not translating into real estate
Shannon: right so when you have that strong economy you would automatically think real estate is gonna be really great it’s gonna be hot I’m gonna be you know
Adam: but hasn’t it been hot
Shannon: it has been hot but now that the economy is becoming strong now you’re saying the real estate market slow down
Adam: how does that work
Shannon: I don’t know that’s like [???]
Adam: because prices have been like overinflate like real estate prices been over employment for a few years now so of course we’re not seeing them jump way up
Shannon: well I do think the inventories been really low because people have not been making those moves (2) because it’s been a very insecure economic time for a lot of people so no jobs insecurity so you tend to stay where you are once you have a little bit more security like in this economic environment then you start to feel a little bit more ambitious about selling off your home and moving up say
Adam: okay you know…it is interesting
Shannon: so will get more inventory so then the housing market will slow down
Adam: we will be getting more inventory
Shannon: yeah
Adam: okay I know that I’ve been in a weird position as a homeowner and as an investor over the last year so you know I bought that home a year ago that my family moved into and we planned on living there for six months or so selling it making a boatload of cash and moving on to something else
Shannon: yes
Adam: and we never sold it we couldn’t and it’s not because I couldn’t sell that house is because I couldn’t find another place to buy and there’s a real feel that’s kind of funny to say right like they’re like people are going why didn’t you call a realtor yes
Shannon: but I have the exact same scenario last all right
Adam: yeah
Shannon: so I actually updated two of my bathrooms
Adam: mm-hmm
Shannon: have the intention of putting my house on the market I saw everything on the market
Adam: mm-hmm
Shannon: and we ended up saying that it just didn’t prove one of the reasons to though we were looking for to downsize a little bit so we want something slightly smaller but it would have increased our mortgage payment because we bought and refinanced in 2012 or 2011 one the mortgage rates were historically at their lowest
Adam: so it’s kind of funny to hear two Realtors say this stuff but I mean to be to be fair or sort of Pat us on the back we’re not just trying to make anyone buy a home all the time we do like want people to make smart decisions in real estate right even if that means staying where you are
Shannon: in yes I think that you have to determine why you’re why you’re moving
Adam: okay so I’ve also as an investor have also continued to buy rental properties
Shannon: yes
Adam: but I’m concerned I’m like should I be waiting you know should I waiting you know
Shannon: waiting for what
Adam: for like the market to crash and all the prices so if I’m buying a house now for a hundred if I would wait two years can i buy it for 60 you know
Shannon: I know because they anticipate even in 2024 home prices to slightly increase and inventory still be on the lower end but increase
Adam: so…who’s was they
Shannon: Freddie Mac and realtor Association
Adam: they’re saying that the market is going to continue to increase
Shannon: yeah I think it still pretty yes I think for 2019 2020 both their predictions have said have led to stability versus the crash that I think people have been talking about the last couple years
Adam: yeah it’s kind of weird I’m like I sort of want you know I don’t want to call it a crash but I sort of want it to become a buyer’s market again so I can buy a different home and so I can continue to buy rental properties at a discount but that just means I’ll have to sell my home for less right and so it’s not really good nessus it’s not only good necessarily but yeah what I read is that appreciation in 2018 was 4.7 percent so your house appreciated by four point seven percent in 2018 and they’re estimating that it will appreciate by 2.9 percent and 2019
Shannon: right
Adam: so still good it was not as
Shannon: yeah there’s not going to be a crash necessarily but it’s just not here your values are not going to increase
Adam: okay it was really interesting last time when we did have the crash that what (2) happened I saw was everything was going down and some people were waiting because they just they’re like I don’t want to buy a house yet I want to wait until we hit the bottom but you know they don’t come out and go alright we’ve hit the bottom now we’re gonna start going back up you’ve got a week to go by right
Shannon: right
Adam: people just had to sort of guess and figure that out so I’ll see what happens for that I guess
Shannon: right so new home sales
Adam: talking about those
Shannon: that was an interesting one that I saw on a couple different reports in the past few years new home sales our builders actually were building more higher end homes more expensive homes so one of the trends for next years that builders are going to have to shift their focus to more moderate priced homes to accommodate the higher mortgage rates
Adam: okay so from a st. Louis perspective new construction when I think of new construction and new homes I’m thinking of like outlying areas right
Shannon: yes
Adam: where it’s like
Shannon: yes
Adam: when Howe and they’re moving west or south or whatever but I guess we do see a lot of new construction and kind of like infill and (2) stuff like that like in the Central Corridor in the city and something that people are good with
Shannon: [???] is empty lots
Adam: yeah
Shannon: builders have taken advantage of that built in areas that are in high demand
Adam: and those builders in the last few years have been able to be like let’s just cover the whole thing in granite we’ll just get like top dollar no matter what
Shannon: right
Adam: and you’re saying now we’re gonna see builders going back to actual builder-grade and kind of like lower stuff
Shannon: I think…I don’t know the builder-grade will pass pass muster but I do think that they will make some more moderate choices
Adam: interesting builder-grade won’t pass muster so people’s tastes and expectations you’re saying will still be high even though they’re wanting to spend less
Shannon: I think so
Adam: so will the builders have to figure out other ways to cut cost other than some of these aesthetic things that people care so much about granite countertops
Shannon: yeah I think that they need to get smarter and realized that granite countertops aren’t as in high demand
Adam: [???]
Shannon: people are happy with words they love quartz and actually its prettier than most granite
Adam: I know I’m not a granite lover myself because that I bought granite countertops and I went and the the minute I like signed on the line and paid my check they go okay now let’s talk about maintaining this [???] I’m like what do you talk about
Shannon: right
Adam: other this stuff is indestructible they’re like oh no no it’s a long list of things you got to do it
Shannon: Right
Adam: so there’s better there’s better countertops but so we’re thinking that builders will have to still probably make them look pretty but figure out other way to cut costs does that mean smaller Lots
Shannon: I think that the homes are not going yet smaller homes overall footage
Adam: which is nice I mean it’d be nice to be able to buy a new construction home for less than five hundred thousand dollars right I mean wouldn’t it be great for 250 thousand our buyer to be able to buy one
Shannon: right [???] of maybe selling the house at fit with a finished basement or something unfinished but roughed in with the bathroom that they the new owner could finish out at some point
Adam: and (2) then from your perspective you know not from the paperwork here but what part of town do you think that people will try to be doing building it does it just depend on where there’s [???]
Shannon: so I work mostly in the city as you know but so I don’t see that there’s an area where you’re gonna be able to plop down some subdivision there’s going to sell I think the infill but that’s the extent of what the city could possibly ever offer anyway unless you go
Adam: so real quick what is info
Shannon: so taking an empty lot and building a home so you have you know
Adam: empty or with like some beat-up house on it
Shannon: yeah that’s just going to be demolished and then build at home
Adam: you have a neighborhood full of houses one of them’s ugly or beat up or whatever infill would be tear that down and build a new one
Shannon: right
Adam: or like you see on the hill tear two down and build up a new one… right
Shannon: right
Adam: do those homes usually from your perspective are they spec homes meaning are they building I’m hoping to sell them or are they only building them once they
Shannon: know they are building him to sell them period
Adam: they’re building them hoping to sell them not with a buyer already like on under contract
Shannon: right
Adam: and maybe that’ll change a little bit if they (2) might need to make sure that they have a buyer before they build I saw in Dogtown they this builder built three homes and then listed them for sale you know
Shannon: right
Adam: and I that was one thing that went away quick and the last market decline was he couldn’t even get the funding to build a home and tell you how to buy her kind of thing
Shannon: or I have seen one developer here in the city he’s done several homes of the longest specific street um where he built like two sold them develop another one sold it built another one sold it so it’s no longer let’s go build the subdivision have 12 options
Adam: that is what I would want to do because
Shannon: I think it’s a smart way I don’t know why you wouldn’t do it that way
Adam: as a child of the you know 2008 crash and the guy who’s conservative now because I saw so many people lose it all and a lot of those people who lost it all first was the people who got super aggressive like that like
Shannon: yes
Adam: I can make 50,000 a house I’m gonna do ten houses then right
Shannon: right trying to do things in bulk but it doesn’t end up –
Adam: okay…any other statistics we’d like to share with the people
Shannon: no I think that that’s it kind of overall it’s gonna be I think in an interesting market in 2019
Adam: so we’re not saying don’t buy we’re saying I think what John Charlton is saying is by sooner than later because if interest rates are going up you get your late your rate locked in the better off you’re gonna be right
Shannon: right so I think that that’s the conclusion is that if you’re looking to buy especially within the next year now is the time to make that move
Adam: okay
Shannon: you will save money in the long run for sure
Adam: so let’s tell people how they can get a hold of us how can I call you
Shannon: 314.583.0070 or you can email me at Shannon@LivingTowerGrove.com or you can find me on Facebook at Living Tower Grove
Adam: facebook.com/livingtowergrove
Shannon: yes
Adam: is it www.
Shannon: yes… www.facebook.com/livingtowergrove
Adam: okay… and then we want to people go to our company Facebook Hermann London
Shannon: and don’t forgets the two N’s
Adam: and what most of all what I really want people to do other than subscribing and liking us on YouTube of course is I really want to hear from people right
Shannon: I know I mean people have questions all the time do not use to comment about it all the time you go to a party people like
Adam: Yeah
Shannon: tone of questions
Adam: want what do they want us to hear about what do they who do they want us to interview right
Shannon: [???]
Adam: please either call Shannon our caller us or email podcast at HermannLondon.com and that’s Hermann with two N’s London.com
Shannon: very good
Adam: is that enough ways they can get a hold of us
Shannon: I think so
Adam: thank you for watching thank you for listening and take care