[00:00:02] Speaker A: The Michael Hatfield Re Max team presents real estate and more.
[00:00:07] Speaker B: Bay Area real estate is different than in all of America. And why? What's up with homebuyers? What's on sellers minds? How is the market and much, much more.
[00:00:18] Speaker A: Now here's your host, Michael Hatfield.
[00:00:22] Speaker C: Well, welcome to the real estate and more show. I'm so glad you're here with us today. We have an exciting show that's planned and includes the Federal Reserve being out in Jackson Hole, Wyoming, for their meeting and what was said. We're going to talk about the new home builders and what they're saying moving forward as well as their progress. Something that happened during this recent couple months is a revision to the jobs and the home building and everything else kind of plays games with what we're looking at. So I'm glad you're here with us. And, wow, so much is happening ahead of our 2024 election. So to help me out today, I have my partner, Nancy Hatfield. She's going to have her thoughts on everything that's going on. So welcome to the show, Nance.
[00:01:09] Speaker D: Thanks, Michael. Thank you. Nice to see you as always, Michael. I understand the Federal Reserve has a meeting in a very nice place in the country each year. Where is that?
[00:01:23] Speaker C: Well, the Federal Reserve every, I guess it's August, they go out in the middle of the country, Jackson Hole, Wyoming, the fly fishing capital of the world, and they meet with other central bankers as well as other citizens and people that have knowledge, and they talk about what has happened. These are the smart people. They get out there. I don't know how much fly fishing they're doing, but I know that it's a great mountain setting to hang out. So if we're to believe what they have to say, then it's because the, the area has some really great fly fishing, don't you think?
[00:01:59] Speaker D: Sounds good to me. Let's go.
[00:02:01] Speaker C: Well, Nancy, when I first started at the airline, I had a classmate who made a big deal out of making flies for fly fishing. And he really, it was very much on his mind all the time. He would go back from a class if it were ground school, and he would work building these little fly fishing things. I guess it's more of a therapy than anything else. And then he would always talk about going to Jackson Hole and the wonderful Flydenne fishing that they have around that locale. And interestingly also is the fact that the Federal Reserve has been meeting in Wyoming since 1978. And they first started to meet out in the middle of nowhere, and then they changed that to Jackson Hole because it was just a little bit too remote for them. I guess there's only so much trout that you can can you can catch. And I would submit the objective is for, in this case, for the Federal Reserve meeting out there in the middle of nowhere. I would think it's for stodgy bankers to get out of the vault so they're not so stodgy. What do you think?
[00:03:11] Speaker D: I guess that sounds interesting. Back in 78 is when they changed their location. Right, right. Okay, interesting. So let's go on. I'd like to know, what did Chairman Powell end up saying or whispering to everyone, and how do we interpret that?
[00:03:29] Speaker C: Well, that's always a very good question. I recall back when I was with the airline, we would go through Jackson hole on a stop, and then we'd go on to another destination. But during the time of the Fed meeting, there would be all of these high dollar business jets sitting on the tarmac there in Jackson Hole for this incredible meeting. And I guess a lot of things actually went there. In this year's meet, Chairman Powell actually had the opportunity to let the world know that he was finally gonna do something, gonna do something about those interest rates and what level of reduction is still in question. It's still a seesaw. We never really know what they're going to do. We don't know if it's going to be 0.25 of a percent or 0.5 of a percent. And some of the world's financial people are whispering a half a point or more, but I don't think so. I think they're going to be very cautious with any rate improvements that they have going forward.
[00:04:35] Speaker D: So remember that federal reserve rates, prime rates cuts, do not necessarily transfer. Right.
Apples to apples to the mortgage rate sector, and that the powers that set the mortgage rates can bake whatever they think may or will happen into mortgage rates.
[00:04:54] Speaker C: Well, that's always true.
It's hard for the old normal Joe just to get out there and say, well, I'm going to go ahead and borrow on this house and pay more than I think I should pay for the rent of the money to buy the home and have a really great mortgage on the home. And so a lot of people, they just hesitate and don't take that opportunity as an opportunity. But in my view, they should probably just go ahead and buy the home. Take advantage of the interest that you have in having your own home, have a, taking advantage of the tax benefits that you have, as well as making money in the Bay Area while you sleep through home appreciation. What say you?
[00:05:45] Speaker D: Well, I think that's kind of interesting to, I mean, there's so many things we can talk about here anyways. So what about going back to, like, this week's Friday?
Give me an example of, like, a credit union. You know, what they're doing.
[00:06:00] Speaker C: For instance, it's 6.1% in most of the credit unions that are interested in 30 year fixed mortgages. That's what they've been popularizing and saying that this is the hottest rate in town and that is a very good rate. 6.1% is, despite what everyone says about inflation, I think that it beats inflation by a considerable amount. I think we have a lot worse inflation than maybe, than what's being reported. And we're going to talk in a moment or two about what is reported and what has been reported as opposed to the recent Bureau of Labor Statistics and their amendment and revisions that they have just done. So I feel, you know, we're ahead of that 7.72% 50 year average at 6.1%. It's most certainly a step in the right direction as we look to revitalize our mortgage market and hopeful buyers, the ones that actually want to buy a home, because right now a lot of the buyers have just said, you know, I'm going to just sit on the sidelines. And I say, no, no, but sit on the sidelines until they get a rate that they think, okay, well, this will be okay. But I don't see it quite that way, do you?
[00:07:19] Speaker D: We've had conversations with buyers more recently about the rates and saying, you know, just look at it. What do you want? Do you want to buy the home? Can you afford to buy the home? Does it make sense to buy the home? And you've encouraged them to go ahead and do it and then refinance over the years as rates change, because they will change, you know, and that's been good advice. And they've been able to now have homes and are all very happy because of that. And they didn't wait just for that perfect interest rate.
[00:07:51] Speaker C: Yeah, the interest rate is much less of a factor, in my view, in the purchase of a home from a financial aspect than when you compare it to the tax benefits you have, you know, being able to depreciate the structure and then you've got the long term capital gains. And, boy, I sure hope that we can keep that long term capital gains in place moving forward through this next coming election. By the way, coming up in the next two weeks of September is a more economic data that is to come out. And with that data, it'll give the feds a bit of power to hopefully reflect and do something more with the interest rates than what they've been doing. Because as far as the real estate market, this interest rate being at the levels that they have been, which I can say is certainly higher than the buyers expect, has been a real problem for buyers. So I'm looking forward to those first two weeks of September and we'll hear more about the Fed's current reflections as they look back on what they've done and looking forward to what they will do. Interestingly, as I mentioned, mortgage rates and treasuries have already priced in a 0.25 rate, in my view. I don't know how you see it, Nance, but the upcoming economic data needs to not say anything too wonderful about the economy for the Federal Reserve to reduce the rate. If it says the economy is doing really great, then they're not going to do anything with the rates. If they say, oh, well, we've got inflation, this is not as good as what we thought. We're going to increase, decrease the rate. So that's what we're looking for come September. So I just hope that'll happen.
[00:09:41] Speaker D: That's an interesting dynamic.
[00:09:43] Speaker C: Yeah. So just think, should any deterioration in economic outlook occur, rates could improve more percentage wise.
[00:09:52] Speaker D: Well, we'll wait and see, won't we?
So, just released data from the US Department of Housing and Urban Development indicated that sales of newly built single family homes in July rose 10.6% to 739,000 seasonally adjusted annual rate from significant upward revisions in June, according to newly released data. And the pace of new home sales in July is up. I think it's about 5.6% from a year earlier.
After the notably higher revisions for the May and June data, new home sales from January through July of 2024 up 2.6% in 2024 compared to the same period in 2023. So.
[00:10:45] Speaker C: Well, that's pretty good. That's pretty good.
[00:10:47] Speaker D: Yeah. You're listening to the real estate more show real estate market briefing episode. I'm your co host today, Nancy Hatfield. And now let's get back to the show.
[00:11:00] Speaker C: I'm looking at a graph of new single home sales, single family home sales, and it is showing what the new sales are as opposed to what is needed by way of inventory. And it's interesting to see back in 2021 that the new home sales were off the charts. Over a million homes were being sold, but yet the availability was way down below 400,000 available in inventory. Well, I've noticed since then, though, that the graph has moved a little bit from new home sales and now it's moderated towards the new home inventory available for sale. So it's kind of interesting that you say that. And by the way, a new home sale is defined as when a sales contract is actually signed or a deposit for a home is accepted, not when the home is completed. So the home can be in any stage of completion and construction not yet started, under construction or completed. It just means when the actual purchase order was taken by a buyer. Isn't that interesting?
[00:12:19] Speaker D: There could be some disparity in time there, too.
[00:12:22] Speaker C: Yeah. And in addition to adjusting for seasonal effects, the July reading of 739,000 units is the number of homes that would sell if this pace continued for the next twelve months in our nation.
[00:12:37] Speaker D: Interesting. New single home inventory in July charted lower to a level of 462,000, which is down 1.1% from the previous month. Only 16.7% of inventory available for purchase consists of completed, ready to occupy homes. And although this inventory component is up 44% from a year ago, which is significant.
[00:13:05] Speaker C: Yeah, 44% is quite a bit. It is, yeah.
The total new home inventory level represents a 7.5 months supply at the current building pace. That's a 7.5 month supply at the current building pace. The measure of total home inventory is lower. So given a lean level of resale inventory, total home inventory, new and existing, is near a 4.5, which is very, very low.
[00:13:44] Speaker D: It is low.
[00:13:50] Speaker C: You know, I find it really interesting about all of these guys sitting out there in Jackson Hole, Wyoming with their fly fishing men and trying to get some of the nation's business done. Coming up on our show, we have a us congressman, former congressman, to talk on some of these things, but see what his opinion has to do with our federal reserve. Sitting out fly fishing and poking around our nation's most valuable financial aspects is interesting.
[00:14:21] Speaker D: I think you just want to do a little fly fishing on your own.
[00:14:24] Speaker C: Never done much of it. I was always the kid that threw a sinker and a bobber in the water and started reeling it in. I remember one time with my dad, I was on a river and he was up about 50 yards along this little creek river, and I'm just casting out and reeling back in with a lure. And suddenly I see something following the lure out of the corner of my eye and I look down and it's this four foot water snake. You want to see a twelve year old kid have some movement very quickly. That's essentially what happened.
[00:14:58] Speaker D: And my memories of fishing are getting the fishing hook stuck in your fingers. So there you go.
[00:15:03] Speaker C: There you go. Well, you know, the medium new home price now in the United States is $429,800. It's up 3.1% compared to last month and it is a 1.4% decrease from this time last year. Regionally, on a year to year basis, new home sales are up 5.4% in the northeast, 22.1% in the midwest and 6.1% in the west. New home sales are actually down 2.4% in the south portion of our country.
[00:15:45] Speaker D: Interesting stats, Michael. So anyways, large home builders have grown their positions in numerous key housing markets since the late two thousands financial crisis. Unfortunately, their growth coincides with long term slowdowns in building, permitting and construction productivity, which contribute to escalating prices for buyers and for renters. This is what experts say as an economic tightening cycle slows real estate investment, politicians are promoting policy tools that could alter how homes are built in the US.
[00:16:26] Speaker C: So interesting.
[00:16:28] Speaker D: So we'll see. For more real estate. For more real estate and more shows, go to YouTube at my real talk show. That's ireal talk show. Or you can pick up episodes on www. Dot my realtalkshow.
Myrealtalkshow.com dot.
[00:16:48] Speaker C: Ah, that's interesting. One good reason in my view, that the US cannot build homes fast enough is the availability of qualified workers, people that want to actually work. The last Bureau of Labor Statistics estimate there are 45,000 fewer jobs created than was previously estimated. And this is an August update report. I have this buddy that has a large construction company, not huge, just large, I mean, feeds his family and does really well and has about 40, 50 workers. And he's always saying, I'd like to take on more jobs, we're set up for it, but I just can't get qualified workers no matter what I do. I just have to deal with the people that I have that I know will do a good job, that do great work. And it's hard to find great workers. So once you get them, you better hold on to them because you do not want to lose them. So it stands to reason that a home builder cannot build homes if he does not have qualified workers.
[00:17:58] Speaker D: So good reason to treat your help nice.
[00:18:01] Speaker C: That's it. So this is a big point that you're going to talk about here. Momentous.
[00:18:06] Speaker D: According to the Bureau of Labor Statistics, the us labor market may not be quite as strong as previously estimated. According to the preliminary estimate of the benchmark revision, total us overall payroll employment for the period from April 2023 to March 2020, 412 months was lowered by 818,000, about 5% less than previously estimated. So they've been overestimating the number of jobs created and the August revision caught it.
[00:18:44] Speaker C: Wow.
[00:18:45] Speaker D: I know. Well, Michael, this benchmark revision is actually the largest revision since March of 2009. March of 2009. So that's rather interesting.
[00:18:59] Speaker C: No, I don't like that so much. It makes me pretty annoyed to see that you get all of these numbers and everybody's hanging on these numbers and find out that the reporting isn't right. So then the Bureau of Labor Statistics goes back in and does a revision. And in this case, it's a benchmark revision. Benchmark since 2009, saying that, okay, you know, the payrolls weren't as great as what we reported them to in the stock markets, and equity markets reacted accordingly. And now they come back and they adjust it very quietly. And what I find also is that if they do that quite often, no one has confidence in what's going on.
[00:19:39] Speaker D: Yeah, that's not good. Not good at all.
[00:19:42] Speaker C: Well, take a look at the jobs data. This shows that 2.9 million jobs were created from April 2023 to March of 2024. And now the revision conflicts with that and suggests job growth was overstated by 40%.
No wonder the US cannot build enough houses to house our people.
They're reporting that the payrolls are greater, that there's more jobs than there are, and now it comes out that it's not, not true.
[00:20:17] Speaker A: We're going to take a short break. We'll be right back. Remax.
[00:20:21] Speaker D: And here's Michael Hatfield, business owners.
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[00:21:10] Speaker C: Get help with buying or selling by calling the Michael Hatfield remax support team at 1800 857 63. That's 1800 857 six.
And now back to our show.
So maybe when they review this stuff down in or up in Jackson Hole and they get together with some of our nation's smartest people, they discover this and what do they do about it? I don't know. But I know one thing. In our industry and the housing industry, you cannot build homes if you don't have good, qualified workers.
[00:21:45] Speaker D: Yep, that is for sure. Housing construction employment was also revised downward by 45,000 jobs. That's 0.6% less than the initially reported 8.2 million jobs in place. The average monthly job gains for the construction sector were revised down by 17% to 18,000 jobs in the twelve month period through March of 2024.
[00:22:14] Speaker C: Wow.
[00:22:14] Speaker D: So that's a little confusing.
[00:22:15] Speaker C: You know, as we've just been discussing, CNBC came out and said, you know, us job growth has just been revised downwards in a big way since, and it's the most downward revision since 2009. So there's a lot of debate going about how much signal to take from the 818,000 downward revisions to us payrolls, the largest since 2009. Is it signaling recession? Well, that's something that every one of us has to answer. I would say possibly so. But when it comes to housing, which is my area of endeavor, I would say housing is still my focus. And I would say that the inventory is still light. And the reason that the buyers have not been really coming to the table is because of the high interest rates.
What do you think?
[00:23:13] Speaker D: Yeah, high interest rates.
[00:23:15] Speaker C: Well, you know, if buyers come off the fence with the low amount of inventory, look out. It is going to be one crazy time.
[00:23:23] Speaker D: It'll be like being in the wild, wild west.
[00:23:25] Speaker C: That's it. So tell us about the National association of Home Builders data.
[00:23:29] Speaker D: Right. They came out in August, actually on August 20, and said that there have been solid levels of single family built for rent construction. Single family bill for rent construction. So single family built for rent construction posted year over year gains as of the second quarter of 2024 as builders sought to add additional rental housing in the market facing. In a market facing ongoing and elevated mortgage interest rates.
[00:24:00] Speaker C: Interesting. So builders are building more of the home, single family homes for rent, as opposed to ones that are made for people that actually live in their homes, work from home and produce for our nation's economy. That's the way I read it anyway. How about you?
[00:24:19] Speaker D: I think you're correct when you say that. And actually, according to NAHB, there were approximately, what, 23,000 single family built for rent starts during the second quarter of 2024.
[00:24:32] Speaker C: Wow. Well, Nance, thank you so much for your great data. What a great time we've had discussing the Federal Reserve's fly fishing meeting in Jackson Hole, Wyoming. And how and what they do affects our housing industry is just one industry. And they're high level fishing conferences with their buddies. And the continued seesaw direction that they keep pushing out, it produces pretty much some type of reaction from the buyers or the sellers, but it makes it tough for a buyer that wants to just get in and get a decent rate and purchase his first home. So, you know, I ponder the recent differences in last year's economic data reportings compared to what the Bureau of Labor Statistics has come in and said, hey, guys, this was all wrong. You know, let's wipe off the chalkboard with this eraser and adjust it. And essentially that's what they have done. So on one hand, we've had weak economic data, which gives the Federal reserve a reason to put the rates lower. And now we've got this whipsaw thing that says, okay, well, I'm going to take that back now and say, well, the economy is doing better, so therefore we don't have to drop the rates the next moment. The economic reports in the following weeks, who knows what it's going to do? Who knows what's going to happen? But again, a lot is coming out in September. But what concerns me is when the reports come out and the reports are all out there, and then they come back and they revise it so aggressively and we find that, you know, this percentage is off by 40% or the jobs are short by 45,000. Jobs really affects what everybody is doing in the economy. So if the Federal Reserve big shots can't figure it out and what the prime lending rates should be, how can a simple person that wants to buy a home decide that he wants to go ahead and buy the biggest asset of his life? When it comes to buying a home, though, I think of what our friend and colleague Aaron Merritt says. She says, you know, buy the home and date the rate. And I think that's absolutely the way to look at it. So, ladies and gentlemen, you've been listening to the real estate and more show. I would like to thank Nancy, my life partner, for being on the show, co hosting it. And thank you. Thank you.
[00:27:04] Speaker D: Great to be here. Michael, you've been listening.
[00:27:07] Speaker C: Yeah, thank you. You've been listening to the real estate and more show, our real estate market brief episode. We'll be back in a moment with our next special guest.
[00:27:16] Speaker A: Please remember to go to our new YouTube handle my real talk show. That's my
[email protected]. and touch that subscribe button. You can also find past aired shows at our handle my realtalkshow on YouTube.com dot.
