Josh: So, hey, guys, welcome back. Welcome back to another episode of Accelerated Real Estate Investor. Today, I have my good friend Daren Blomquist on the show. Daren is the executive vice president of Market Economics at auction dotcom. Many of you know, auction, dotcom, massive platform that auctions and sells properties, but they’re also a massive data aggregator. And Daren is essentially their economist. So in this episode, which, again, if you hear the audio portion, which is great, try to go find this on YouTube so you can also see the slides, because Daren and I have about eight to 10 slides that we’re going to share. And what we’re going to talk about today is primarily the different levers that are being pulled, which is forcing the residential market to continue to be on fire, to continue to grow, to continue to have price appreciation. Some of these levers that you’re seeing right now is, number one, interest rates. Interest rates have gone down about 19 percent, which is making mortgage payments go down, which is making them more affordable, which is resulting in higher prices.
Josh: Secondly, you’re seeing that wage growth is happening about four to five to six percent wage growth. So people are making more money even in the middle of the pandemic. So as they make more money again, they can afford a slightly larger mortgage payment and in turn can afford a larger, more expensive home that’s forcing prices up. Number three, the foreclosure moratoriums. So foreclosure moratoriums are still active on all government loans. But you’re going to see how Daren evaluates and shows how some of these foreclosure moratoriums literally completely stalled out foreclosures just one quarter ago. And you’re going to see that foreclosures starting to happen. They’re starting to be processed, but we’re still 70 percent below the pre pandemic levels. So foreclosures are not happening, which is also forcing prices up. Also number four right now, there’s just one million properties across the entire United States that’s actually on the market, according to the National Association of Realtors, just one million.
Josh: OK, that is an all time low for as long as the National Association of Realtors has been tracking these stats, the one million properties that are on the market is the least amount they’ve ever had in our country’s history as long as the NRA has been tracking these stats. So, again, you have all time low inventory, which is pushing property values up. So there’s all this data and more in this latest episode of Accelerated Real Estate Investor with me and Daren Blomquist. You’re going to love this episode. Take a listen.
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Josh: So, hey, guys, welcome back to Accelerated Real Estate Investor, I am excited to have Daren Blomquist back on with me again, VP of Market Economics at Auction Dotcom. And we’re going to have an amazing conversation around what’s going on with the real estate market, primarily residential market, what’s going on with existing sales, what’s going to supply, what’s going on at the man? I’m sure you’re all asking yourself, why does the market just seem like it keeps going up and up and up and people are competing for deals, competing for properties? You probably have a lot of the same conversations. Same questions I do to the guy that I rely on for that data. Is Daren Blomquist at auction Dotcom. Darren, thanks so much for joining me yet again on accelerated real estate investor. How are you?
Daren: Doing well. Thanks for having me. It’s good to be here, Josh.
Josh: Yeah, absolutely. So just real frame real quick, if you’re hearing this on a podcasting platform, whether it’s iTunes or SoundCloud or some other podcasting platform, and you’re catching only the audio, make sure that you jump over to YouTube to watch the full video, because Darren does have some amazing slides to share with the data that we’re going to discuss. So it might just be a little easier to digest if you’re also watching the slides. And so, Darren, let’s jump in. Let me just have you kind of bump through some of these slides. Let’s right away start talking about affordability and existing home sales and this kind of things, I guess, before we even jump into those slides, Daren, high level. What’s going on with the market? What’s your thoughts?
Daren: Yeah, I think the market is, just as you alluded to a second ago, is just outperforming everybody’s expectations and including mine for sure, out of a recession and a pandemic. The initial thought is that’s going to hurt demand in the market, but it absolutely has not. And a lot of that is due to the stimulus brought in from different government sources, including lower interest rates, which the Fed has an impact on. And then, of course, the stimulus bills passed by Congress. And so that’s broad. And that coupled with the fact that we were already going into this in a very low inventory environment, has the housing market on fire. And hopefully it’s a fire that’s that will stay under control.
Daren: But that’s I think that’s the concern is are we adding too much fuel to a fire that’s already strong? Because you have these underlying demographics that were already in favor of the housing market in terms of millions of millennials who are hitting homeownership age coming into the pandemic. And then you had builders who had been very conservative in the wake of the last recession and building. And so you had strengthened in demand, lower supply, and then you throw on some gasoline on the fire and in the form of even lower interest rates and stimulus checks. And that that has created what we’re seeing here. And it’s a. It’s a raging fire. Hopefully it’s not a dumpster fire, but right now it’s good for most people, I think.
Josh: Got it. Fantastic. So let’s talk about this issue of low inventory. So let’s kind of go from high level to more of in the dirt. Tell us a little bit about what’s happening with inventory and home affordability. Obviously, as prices go up or affordability gets very difficult. So what is the data telling you around those topics?
Daren: Yes, just looking at the NAR data, which we have in the slide here for those who are listening and can’t see. But the inventory was already, before the pandemic, going down. We were seeing back in January and February 2020 year over year declines of 10 to 11 percent in the available inventory of homes for sale. So that was already going down. But now we’re at, that’s accelerated. And we’re now down to in February, a 30 percent year over year decline in the number of homes available for sale compared to a year ago. And we’re down to one million homes listed for sale on the market, which is a record low for the entire scope of the time, and has been tracking this, which goes back decades, I believe. And then the days to sell is 20. 20 days to sell on average, which is also record low. That 30 percent drop in inventory is a record high and that 30 percent drop. And so all of these record numbers leading to supporting the fact that there’s just what your listeners know on the ground to be true probably is that there’s just not a lot of inventory available to buy. And that is certainly sparking concerns about affordability because that’s pushing up home prices.
Josh: Yeah, yeah. There’s all this talk around affordability. And how do you continue to make home prices affordable for the average American? It is difficult because even if you’re a builder looking to build affordable homes now, the price of lumber is up three or four times what it used to be. And how do you build affordable homes for people when there’s so much cash in the system that it seems like everybody can afford a home? And interest rates are also still hovering at all-time lows. So people’s mortgage payments are low and it creates a substantial challenge, I guess, for both policy makers and for banks and for community leaders to just have homes and things that are affordable. I mean, I can’t believe how many homes I’ve heard that are selling for twenty five percent more even a year ago than what they thought they would get. It’s just in houses that have 30, 40, 50 showings in the first weekend and 10 offers over asking price. It’s just wild. So tell us about the affordability treadmill, kind of comparing people’s home price appreciation and their monthly payment. Obviously, the monthly payment, which is what most people bank on in their budget, why is that so important in determining affordability?
Daren: Yeah, at the end of the day, the home prices going up is one piece of affordability. But really, at the end of the day, for someone who’s buying a home, most people, at least unless you’re paying cash, it’s how much is that monthly payment and how much what percentage of my income is that? Can I afford that? And interest rates tied into that. And so we’ve seen. Home prices accelerate back in back in May of 2020 right in the in the aftermath of the pandemic declaration. Home prices are only up two percent in February of this year of twenty twenty-one, they were up 16 percent, which is just crazy. And I think most people would agree that’s unsustainable. But because interest rates at the same time are down, mortgage rates are down 19 percent, your monthly payment on a mortgage is only up six percent. So affordability isn’t as bad as you might initially think when you see that 60 percent rise in home prices. But. It is the stimulus in the form of lower mortgage rates is designed to stimulate demand, which it certainly did.
Daren: And I call this a treadmill because it’s kind of like you have those two levers on the treadmill or two, two things that you can control, which is the incline and the speed of the treadmill. And the thing is, if you consider if you consider mortgage rates, the incline and home prices, the speed is what we’ve seen with mortgage rates going down as we’ve lowered the incline. Oh, so we can run faster. But then the faster you run, the faster the pace of the treadmill speeds up. And so it’s hard to really catch up with affordability. And what’s happening is those monthly payments are starting to go up, even though interest rates are down. And so they’re up six percent. And if we look at the next slide shows, then that six percent rise in your monthly payment on a medium-priced home that’s up six percent year over year. Wages are only up five percent year over year.
Daren: Now before February, wage growth was actually outpacing that growth in the monthly payment, right, and so that was spurring this rise in home prices because people were I mean, of course, this is very, generally speaking, broad-brush. But on average, across the country, people were making earning more. Their earnings were going up faster than a monthly payment on a median price home. And so we can buy we can afford to buy a home and it’s more affordable than it was a year ago. But that did change in February, where that six percent rise in the monthly payment has outpaced the average hourly earnings, which is up five percent. So I think if we see that that’s an important milestone and if we see that continue, it’s an early indicator that we will finally see a slowdown in home price appreciation in the coming months.
Josh: Yeah, well, I guess a common man’s interpretation of this. The way I’m reading this Daren is home prices are up, but again, the price is what you paid for the home, let’s say it was four hundred thousand and now it’s four fifty or it’s eight hundred thousand, now it’s nine hundred is the price of the home. But it’s all relative to how much can we afford. And if our hourly earnings are going up and then our payment is going down or the payment is staying about the same because interest rates are down and that kind of hit to the actual wallet every month is about the same or even going up a little bit. That is allowing home prices to continue to rise because the monthly payment, which is what most people budget off of the reduction in interest rates has is worked in their favor and their hourly earnings has worked in their favor, allowing them to pay more. And that’s why prices are going up. And then you sprinkle more. More of that dust that just keeps the fire burning, whatever they call that stuff, the fact that there’s no inventory so people feel like they have to almost like in a chaotic way, outbid a neighbor, a friend for the home because there’s no supply to work off of.
Josh: You’ve got three factors, really, supply, income growth and interest rate decline, which to me seemed like those three factors, all working in the favor of pushing prices up to me. Again, people are like, what do you think this is going to continue? I said, well, the data is the data, numbers don’t lie. And to me, that all makes absolute perfect sense of why prices would continue to go up. And if these things continue, then prices will continue to go up. Right. And I think what will happen and I told my wife this just yesterday, Daren, I said, look, I don’t think there’s going to be this all of a sudden when these eviction and foreclosure moratoriums are over. I don’t think there’s going to be a massive amount of foreclosures. I think it’s going to go up. But I don’t think there’s going to be this two thousand, eight, nine, 10 situation because people are being bailed out by increasing home prices. So even if they’re going into foreclosure default, it’s not like 2008 when there was tons of foreclosures, defaults and prices were coming down. This time there’s very few foreclosures relative right now we’re going to talk about here in the next couple of slides. But people are being bailed out because their home prices are going up. So they can refinance, they can sell, they can work out a loan modification. They’re just not going to be this this crazy amount of foreclosures hitting the auction steps and short sales like there was in two thousand nine. I just don’t see it. Maybe the data will tell us otherwise, but I just don’t see it right now.
Daren: No, absolutely. I mean, there is most definitely a backlog of foreclosures that that actually is contributing to this market craziness that we’re seeing because that inventory has not hit the market. And it will we do believe it will eventually hit the market. But it’s it’ll be much it won’t be the huge wave that we saw back in twenty-two thousand eight to your point. And you don’t have that huge wave hitting on top of already bloated inventory. Back in 2008, the builders had overbuilt. So even if there is a somewhat sizable wave of foreclosure inventory, it’s almost like the market will eat that up for breakfast, so, yeah, like a brick wall, it’s hard to envision that having a at least nationwide having a huge impact on. Home, you know, having a hit on home prices with the size of inventory that we’re talking about there, and we’ll talk about that in a second more. But yeah,
Josh: What’s happening with home price appreciation relative to REO auction sales, it’s the right side of your screen there. Yeah, it looks like a REO auction sales are going up even faster?
Daren: Yep. Investors are very bullish, at least using our platform, very bullish about the market. And I think they should be I mean, they think there’s data to support that. And one of the points I wanted to make with all this is for real estate investors. This is this is great news for selling their properties, like you alluded to a minute ago. I’ve talked to many investors using our platform and said. They bought a property maybe right before the pandemic or in the pandemic, and they thought they were going to lose money on it. And then they flipped it and they’ve made more money than they even expected because of these market dynamics that we’re seeing. And so this is this is all pretty good news, especially on the on the exit side, the disposition side of for investors. But on the acquisition side, it is tough because we’re seeing a lot more competition for less inventory on our platform, and that’s resulting in in February.
Daren: Now, these are smaller numbers than the NAR numbers, of course, on our platform. But we saw thirty one percent increase in the average sales price for a property that sold on our platform in February compared to a year ago. And that’s almost twice the 16 percent increase in home prices across the board. And one thing to point out there, though, is it’s still the average price of it on our platform is still. It’s actually crazy to say this, but it’s still much more affordable. It’s still at a discount in a way it’s under two hundred thousand dollars, but it’s crazy that that’s a discount price at this point. So investors are flocking to that because they can find these distressed properties that they can add value to. But it’s pushing the prices up even on those distressed properties.
Josh: Wow. Great, great information. So what’s next? Let’s talk. You said two hundred thousand a second ago. This slide tells us the average retail price of a flipped property is close to two fifty. So, yeah, buying it for under two hundred is a deal. But the average market sale price in twenty twenty, that’s across all homes. Is that right? Is three sixty-four?
Daren: Yeah. That’s average not. I think a lot of times people may see the median price coming out from the NAR. We looked at the average price here which is higher. It skews higher just because your averages are affected by the higher priced homes. But we did that to compare to our platform where we have the average sales price and that to forty-nine. So that’s not the acquisition price of the foreclosure, it’s the flip price. So after you’ve renovated. And flip that property and the two hundred thousand I referenced a minute ago are properties that are bank owned properties, those actually tend to be higher priced. We also sell foreclosure properties at the foreclosure auction. Those tend to those the average price on those is running closer to one hundred thousand one hundred and fifty thousand on those.
Daren: Anyway, people are buying those, let’s say one hundred fifty thousand. They’re turning around. Within six months to a year and selling them for two hundred and fifty thousand. So you’re making this nice profit most of the time, of course. That doesn’t include expenses. But the point I’m trying to make here is even with even those properties being flipped by investors. Our affordable inventory for the housing market at two hundred and fifty thousand, right, versus the three hundred and sixty-five thousand average price, according to the National Association of Realtors in 2020.
Josh: Wow, wow. I don’t know why, but I remember like 10 years ago, the average price of a house is one hundred sixty. One hundred eighty. Now 360. Wow. Wow. I’ve been around too long. I’ve been around too long.
Daren: And the NAR, yeah we’re getting old. I remember when you could buy pop for a nickel.
Josh: That’s crazy. Tell us about rental properties and rental incomes and rental payments.
Daren: Just the same with those, especially considering the eviction moratoriums. Yes, I mean, the crazy thing is we see demand for, we sell occupied bank owned properties on our platform, which we would think that the demand for those would plummet given the eviction moratorium. But the demand for those is actually has strengthened in the pandemic and in the midst of an eviction moratorium. So there’s still plenty of investors lining up to buy those occupied properties, which means you take on an occupant who you may have trouble getting out of the house because of the eviction moratorium, or actually a lot of our investors are very creative and. And we’ll report back to the current occupant or even do a buyback arrangement with the current occupant.
Daren: The point here with the slide is that that when we see the average rents of the properties purchased on our platform that are not flipped, but instead held as rentals. We’re seeing about those are running 20 percent below the fair market rents in the counties where those are located. So, again, we’re trying to make the point to policymakers that and others and banks that. The market needs inventory right now and especially affordable inventory and. Investors by buying foreclosures and either flipping them or. Fixing them up and renting them out are providing that affordable inventory at anywhere between 20 and 30, two percent below the average market prices or rents. So we’re the average rent is about twelve hundred for a three bedroom home for properties that have sold on our platform and then held as rentals. Whereas in those in the same markets where those properties are located, the average rents on a three-bedroom home is fifteen hundred dollars.
Josh: While some investors are looking for. Again, I think it’s affordability and inventory. They’re looking for affordable homes or looking for inventory. And maybe investors are stretching, buying properties that they might not consider in the past, because in the past, I would almost never buy a property that was occupied because for fear that that tenant would cause a problem. But when there’s no inventory, you will buy whatever is kind of out there. The best of the worst, I guess you could say, when there’s no inventory. And if that’s something you’ve got to kind of reach for stretch four, because that’s your business of investing in real estate. You make that reach if you have to and hold on, because, again, we know that inventory is so low, I think we have a reasonable expectation that properties will continue to appreciate. So even if it gives us trouble in the short term, probably going to be a pretty significant and positive investment in the long term.
Daren: That’s a great way of seeing it.
Josh: Yeah, you bet. So I know it seems like and this next slide we talked about before we started recording that foreclosures are still way down pre pandemic levels, but there’s more activity starting to happen. So tell us what’s going on with the foreclosure auction trends.
Daren: Yeah, just high level. The green here means foreclosure volume is starting to return more quickly. But even in the green and most of the states, we’re still below pre pandemic levels. So if you look at Indiana, for instance, now, that’s actually one of the states that’s come back the strongest at the eighty seven percent there means that in the first quarter of twenty twenty one we saw eighty seven percent of the foreclosure volume on our platform that we saw a year ago in the first quarter of 2020. Or another way of saying that is we’re thirteen percent below year ago levels, so we’re below nationwide, we’re 70 percent below year ago levels. But the grain is generally where we’re starting to see that volume come back. And I think it may surprise people. There’s a foreclosure moratorium, there’s no foreclosures available. Where are all these properties coming from? And the answer is that. The foreclosure moratorium applies to only government backed loans, which is 70 percent of the market.
Daren: But there’s still 30 percent of the market that’s not government backed loans, and then additionally, the vacant or abandoned properties are exempt from the moratorium, even for government backed loans. So you have the vacant or abandoned properties that are still going to foreclosure. And unlike when I was talking about the occupied bank owned properties, almost all of these properties that are going to foreclosure auction are vacant or abandoned, which typically investor would prefer? Some of the things that stand out to me here are that last when we looked at this in the fourth quarter of 2020. We were 80 percent below the levels, now we’re 70 percent, so we’re gradually coming back and states like for Florida stands out because I believe in the fourth quarter it was more like under 20 percent or it’s thirty four percent of year ago levels.
Daren: Now, it was under 20 percent back in the fourth quarter. So we’re coming back in a high volume state like Florida that has a lot of inventory. Even California, which is notoriously. Very consumer protective, we see twenty five percent of your inventory and New York now, New York is still at five percent. So we’re ninety five percent below a year ago levels, but in the fourth quarter was at zero percent. Some of these states, even the states that tend to be more protective of consumers and wanting to make sure absolutely nobody is foreclosed on improperly. And also with New York, you have the court system that handles the foreclosures. So that’s another layer. Anyway, we’re starting to see some movement even in a state like New York.
Josh: Yeah, it’s wild. I mean, everything is still way below pre pandemic levels, 70 percent down. So when you look at the slide, when you see the positives and things like, oh, they’re up they’re up from the fourth quarter for sure, but still way below, again, 70 percent below pre pandemic level. So and Darren and I were talking earlier about how we feel like six months from now, a year from now, when the foreclosure moratorium is lifted and they can process these foreclosures because the inventory is still so low across the board, a lot of people are going to be rescued by the fact that their home prices have gone up. They can refinance, they can do a loan modification. The banks are just not going to be, I think, overly aggressive like they were in two thousand, eight, nine, ten, because banks know prices are going to go up. So banks are not going to be is willing to do short sale on a property with rising prices. And also, I think the banks have got smart to know that they can be a little more strategic when they allow properties to hit the market.
Josh: We all know that banks kept so much inventory off the market back in eight, nine, 10, but there was so much inventory to process, they had to let some of that inventory hit the market. Now they have this working in their favor where if they do process a foreclosure after it’s lifted, the moratorium is lifted, the due process of foreclosure and put it on the auction platform or put it on another platform. Sheriff, sell platform. There’s so little inventory, the bank knows that they’re going to sell it for a really good price and probably recoup most, if not all, of their investment in the loan. So there’s just not going to be, you know, economic Armageddon. Again, I think this is just another way of looking at the data and coming to a theory that says there’s just not going to be economic Armageddon. Real estate’s not going to be the cause of the recession. It’s actually going to help the country through the recession, which is what it appears like it’s doing now. Fantastic stuff there and it’s great. Anything else on this slide before we move on?
Daren: No, I think that covers it there.
Josh: What types? I think this next slide is the types of foreclosures that are happening to tell us what’s going on with Fannie, Freddie stuff and the private stuff and where are foreclosures being processed and what loan types are the most out of the out of the pie?
Daren: Yeah. So this is this is kind of the same view as the last slide. But instead of geographic, it’s by loan type. And so the percentages there are percentage of year ago levels. If we look at USDA there, it’s the highest volume compared to a year ago. Thirty seven percent of year ago levels compared to nationwide, 30 percent and so volume. But USDA only accounts for about five percent of the volume on the Auction.com platform. I think the key, a key one here is FHA and that’s where we see the biggest weakness in. Even leading into the pandemic and in the mortgage market, those were the riskiest loans in the business during this housing boom that we’ve been given, the low-down payments and high debt to income ratio on those loans, and we are seeing those at thirty three percent of your debt levels. And again, FHA and Fannie and Freddie, USDS, those are all government backed loans that are subject to the foreclosure moratorium. But we’re still seeing foreclosures happening because of that vacant and abandoned property exemption.
Daren: FHA accounts for twenty nine percent of all of our volume on the platform. Fannie and Freddie is slightly higher. They account for thirty one percent of all volume. And 30 percent of year ago levels, so not quite as high as FHA, and then I think maybe a little bit of a surprise is the privately owned loans, which are not subject to the foreclosure moratorium, we’re actually seeing banks be more conservative with those and those are only at twenty eight percent of year ago levels, even though they could theoretically be foreclosing on all of those because they’re not subject to the foreclosure moratorium. Of course, some of them are in forbearance. So that’s another factor. But this is the mix. I think the takeaway for me here is that there’s not one loan type that is dominating. Actually, we do expect FHA is an outsized proportion of the market, if you look at originations, FHA only accounts for less than 20 percent of loan originations, but they’re accounting for twenty nine percent of foreclosure volume. So that’s one to look at. But other than that, I think the point is we’re seeing foreclosure inventory from all types of loans coming back again slowly, but it is coming back.
Josh: Yeah, interesting, interesting that the private and nonperforming loans that they’re not pushing harder to foreclose, considering prices are going up, but they might just be biding their time, assuming that prices will still keep going up and they’d rather work some work it out with the borrower than foreclose. And I know, like, we have a foreclosure that’s going on in Washington. And I saw your slide back a couple of slides ago. That was only about 11 percent of pre pandemic levels. And it’s driving me bananas because it’s a private loan that we made on an abandoned house. And the judge won’t process the foreclosure. We already have actually been granted the foreclosure at the foreclosure auction. We bought the property back and they won’t kick the borrower out because the borrower has claimed that they have llamas on the property, they have animals. And we even got an ejectment, meaning that the sheriff is supposed to forcibly move them out and they will not process the ejectment. So the guys are back in the house. We’ve been granted the foreclosure. We’ve already bought it back. We’ve already been granted an ejectment.
Josh: But they will not officially give us a title to the house. Let us renovate it. Let us put it on the market, because there’s llamas there. So you see all kinds of crazy stuff I hadn’t thought about. Is that in your slides, Daren? Fantastic stuff. So it’s crazy, some of the stuff that’s going on in the market. Let’s talk about population migration. I know this is your next slide. I’m always interested to see where people are moving. What’s your interpretation of net in a net out migration where people moving this? To me, the reason why I ask is it’s an indicator of or values could be going up. And if you’re thinking about riding the wave of potential growth, OK, where do we want to invest in where do we want to buy in where property values could go up because migration is moving in. Tell us about some of the areas that are doing well and some of the areas that are people are moving up.
Daren: Yeah, and this is great data from CoreLogic that CoreLogic did, Zillow also did a recent move, a report that’s actually not quite as detailed, but shows a similar trend, which is and we were seeing this before the pandemic, to be honest. But the pandemic has accelerated it, which is movement from the coasts and toward the interior of the country is kind the big picture. So the red there is outmigration. Blue is in migration. So people are fleeing the coast, going to the interior. The main driver of that, even before the pandemic was affordability and pandemic has accelerated that because you have the affordability factor, it’s much more affordable to buy a home. And let’s say. One of those one of the red state of one of the red areas there, let’s say Tampa or even Lakeland, Florida. Much more affordable to buy there than it is, and I just realized that reverse this by using I reverse the colors, the bottom section to be blue. But anyway, it’s much more affordable to buy in Tampa or Lakeland than it is in Los Angeles. And on top of that, if you have a job in Los Angeles, you may now be able to move to Tampa and still work from home. Right. And buy a much bigger house. So that’s, I think, really the short story of what’s happened here with this migration. And in twenty twenty and it’s pretty clear you just kind of squint at this map and you see people are fleeing the coasts and going inland.
Josh: People are going inland. People are going to places that are more affordable like a lot of those markets. And we talk about affordability multiple times today in Florida. Jacksonville has always been affordable. Lakeland, Tampa, you know, it’s not as expensive as Miami. It’s not as expensive as Naples, let’s say, obviously, Dallas, San Antonio, the kind of those kind of areas, South Carolina, North Carolina, Georgia, a lot of stuff in the southeast is much more affordable. Also, I’m sure there’s just some taxes. A lot of the bigger cities have more taxes. Chicago, Seattle, New York, L.A. taxes are higher state income tax. Of course, Florida has no state income tax. I think does Texas have state income tax?I can’t remember.
Daren: Texas does not. And actually Washington doesn’t either. But it’s interesting. You look at Washington. And people are leaving Seattle, but then you do see. The immigration and places like the little blue dot there is right by Idaho, Spokane, so people are moving inland from the high priced markets, even in a state like that, to the inland markets.
Josh: Yeah, so a combination of affordability, taxes, some could be policy. I think it’s fair to recognize all the riots last year, some of the defunding of the police. I think that was unsettling to some people that wanted to move out of large cities and wanted to move inland or move to the suburbs. And then, of course, like the point you made, Daren, where people just don’t have to live in a major city in a high-rise condo to do their job because they’re they don’t have to live and work in the city anymore. They can live out in the suburbs. They can move out, let’s say, from L.A. to Riverside or from San Jose to Las Vegas and still do their job and live just more in a sprawling suburb than in a downtown high-rise All of those things are just being exacerbated on top of affordability, which is I think probably the number one reason is just I can’t afford it anymore. It’s just eating up too much of my paycheck to live downtown. So really, really good information. So if you’re in a real estate investor, look at the slide. And again, what am I thinking? I’m thinking Midwest, Southeast. I’m thinking Texas. Those are happening. But don’t give up on areas like the suburbs of L.A. People are moving to Riverside, don’t give up on the suburbs of New York, New Jersey. Right. There’s a lot of migration. Those directions primarily what you’re seeing is people just leaving major urban areas for all those reasons we mentioned already.
Daren: Yeah, I think that’s those are really good points. And I think the good news for investors a little bit is if you compare this map to the volume map, there’s where the inventory is coming back, at least somewhat correlates to where people are moving. And so there is some more inventory. If you’re looking in the southeast and Florida, we’re starting to see the numbers come back there. By the way, I just want to mention Texas is low and we expect it to be higher in terms of inventory coming back. The reason for the low inventory there, I think primarily is because of the there was some natural disaster declarations as a result of the cold snap that they got there, which I’m sure Ohioans would have just dealt with.
Josh: We would have, built for that stuff.
Daren: But anyway, that that postponed some of the foreclosure activity there is that the FEMA came in and did some natural disaster declarations. We would expect that to bounce back as a result of that in the next few months.
Josh: Awesome. I know we just got like one or two slides left. And I know we’re running short on time. And we’ve got another obligation as I do. I believe we’re on our last slide here or that might have been it.
Josh: I have more stuff. But I think this is the last time we had talked about.
Josh: Really focusing on. Daren. I know you guys have an area where we’ll make this slide deck available to my members inside of some of our membership sites if you guys want to get access to it. But I know, Daren, auction.com has areas where people can log in, they can get an account. Tell us about that. They can enter the newsroom. They can see all this information you guys publish. Not only do you have lots of properties to sell, actual physical inventory to buy. So, of course, my subscribers and members should go to auction.com register and then look at their inventory to buy. But also this data is regularly available. Daren’s on all kinds of different news outlets producing this information that you can get directly from their site. So there are some places that our audience can go engage with your company and get this information, register for an account and get the news
Daren: In terms of this kind of research and analysis that I do. It’s all under auction.com/inthenews. In terms of finding actual properties to buy, which is which is probably one of the most interest to a lot of your subscribers is you just go to auction dot com and you can start searching right away. There’s it’s not a subscription-based service or anything. It’s free to use. You do have it. If you end up bidding on a property, you have to register to bid. And then if you win the bid, you have to you have to pay for that property. But it’s free to go in and search. And we do a couple of things. Is we have some of this inventory I’ve been talking about that’s starting to come back, and on top of that we have it ties into something you said earlier. We have banks approaching us who are interested in being more proactive in selling properties in foreclosure.
Daren: And so these may not even be short sales, but they may be homeowners who can’t make their payments, but they even potentially have equity in the homes and they want to sell and traditionally they would list those on the market and they are doing those, they’re listening those on the MLS, but the banks are actually coming to us and also posting them at auction dotcom, because they’re finding they can sometimes get a better buyer base of investors who are willing to act quickly on these properties. And so that’s a new type of inventory you can look for. We call it we call those foreclosure sales. And so those are even before it goes to foreclosure where you’re and it may be a short sale or it may be an equity pre foreclosure sale where the homeowner just needs to sell those. Those are that’s a new type of opportunity that’s available on the site.
Josh: Fantastic, fantastic stuff, man. You guys are always innovating, always bringing great information to the entire community. And I appreciate you carving out some time just for my subscribers and for our accelerated investors there. And so, as always, thanks for joining us. For all my subscribers, make sure you go to auction.com and specifically auction.com in the news to engage with a lot of Daren’s material, something you should be checking out really on a monthly basis. And, you know, we’ll have Daren back again very soon, maybe next month and certainly once a quarter to share this type of information. So, Daren, again, just much appreciation and gratitude. I appreciate carving out time for us on Accelerated Investor.
Josh: Absolutely. Always good to be here and hear what you have to say too, Josh.
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Coming at us with solid data, Daren Blomquist, the VP of Market Economics at Auction.com attempts to explain what on earth we’re seeing in this market. If Daren could sum up the current state of the real estate market right now, it’d be the explosive combination of millions of Millennials hitting homeownership age, plus conservative home building for the last decade, plus crazy low interest rates, and times it all by government stimulus checks.
Foreclosures are still below pre-pandemic levels, but they’re starting to come back depending on the strength of the states’ consumer protection laws.The rising home prices will protect any homeowner who’s headed for foreclosure, allowing them to sell and avoid a short sale. Real estate and the rising prices look poised to help the country go through the recession.
Daren’s going to cover in detail how these four issues are affecting investors:
- Low inventory
- Housing affordability
- Foreclosure projections
- Population migration
On average, it’s taking a home 20 days to sell. Combined with a 30% drop in inventory, you can see why bidding wars are driving up the price of homes in neighborhoods around the country. But for new homeowners, this price increase is starting to squeeze them since wages are no longer keeping up with home prices. You can check out more of Daren’s work at Auction.com where he offers detailed analysis for free.
- What’s the status of the foreclosures clogging up the courts for the last year?
- Home prices are up 16%, but with interest rates factored in, it’s not as bad as you might think.
- If you’re catching this only on audio, you’re missing out on some amazing slides that Daren’s showing over on YouTube.