Market Outlook: Deflation in a Recessionary Market with Daren Blomquist – EP 380

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Inflation’s finally coming down, but we’re not out of the woods when it comes to the possibility of a full-on recession by year’s end. For real estate investors, what does that mean?

It’s a tough question to answer, but I’m always so grateful to have Daren Blomquist, VP of Market Economics at, hop on with me to break it down for us. In short? It’s a good time to be looking at lower-end properties, but approach expensive single-family homes with caution–especially on the West Coast!

In today’s episode, Daren and I dig into what he’s seeing in his high-level KPIs, what’s happening in the housing supply, distressed housing markets and consumer spending trends. You’ll also hear why it’s a good time to be cautiously bullish as you hunt for new deals to add to your portfolio.

Key Takeaways with Daren Blomquist

  • Why the macro economy looks good despite higher mortgage rates and home prices trending downward.
  • How the distressed market is fairing with delinquency and foreclosures.
  • The indicators showing the highest probability of a recession since 1981.
  • How post-COVID spending and inflation have put consumer debt at an all-time high.
  • Why default rates could rise with home equity values are dropping while consumers are relying on credit with high inflation.
  • The factors that are triggering major price cuts on homes for the first time in years.

Daren Blomquist Tweetables

“It feels like we’ve been calling for a recession for the last two years and it hasn’t happened yet.”


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Josh Cantwell: So, hey guys, welcome back to Accelerated Investor. Hey, it’s your host, Josh Cantwell. Excited to be here with all of you again. I’ve invited my good friend and long-time commentator and guest of the show back today. His name is Daren Blomquist. He is the VP of Market Economics at And he comes on the show at least once a quarter to help us understand some of the high-level macro statistics and KPIs, what’s going on in the marketplace. And then also, at times, we’re able to drill down into some micro statistics to talk a little bit more about what’s going on in the market.

I’m positioning myself, so everybody knows before I bring Daren on. I am positioning myself as we look at, one of the key things I’m looking at is our CPI numbers. So, when I look at inflation in the last few months, inflation has come down. Or if you look at this last month, the reading that just came out was 0.2% on an annualized basis. You multiply that times 12 months, that’s 2.4% inflation growth. That’s where the Federal Reserve wants it to be. So, if we can get and stay at that or less, you’re going to see the Federal Reserve stop raising rates. And then, if by the end of the year we’re into a recession, which we’re going to talk about with Daren the probability of recession here in a second, you’re going to see the Federal Reserve have some reasons to start lowering rates and maybe doing some cuts in the federal funds overnight rate.

Now, a couple of things that go into that from a commercial perspective, from commercial apartments perspective, is that if the market feels like the Fed’s going to begin to cut rates and there’s a more likelihood of a recession, what will happen is, is that bond yields will go down, which means that interests on commercial loans will go down, which means that cap rates will go down, which means that values will go up. So, the commercial and the residential markets are not really correlated. One of the things I want you guys to understand as Daren and I talk today is that when you look at the federal funds overnight rate and single-family homes and single-family foreclosure starts, we’re going to talk about all that today, now that’s very different from what we’re seeing in the commercial multifamily space.

There are reasons to pay attention to both because a lot of our audience are both residential investors and commercial multifamily investors. We’re paying attention to both. But just because the federal funds rate goes up doesn’t mean it’s going to impact single-family and multifamily the same way. So, that’s one of my messages to all of you today as you listen into our show. And with that being said, I want to welcome Daren back to the show.


Josh Cantwell: Daren, thanks. I know you’re traveling. You’re carving out some time from Colorado today, so thanks for popping on.

Daren Blomquist: Yeah, glad to be here. Thanks, Josh, for the opportunity. Always good to do that.

Josh Cantwell: Yeah, you bet. So, guys, go visit for all of your property purchases. Look for their foreclosure inventory and all the properties that they auction off, both at their physical auctions as well as their online auctions. And don’t forget to visit with Daren at That’s where Daren posts a lot of his data, KPIs, and information that you’re going to be seeing today.

So, Daren, let’s talk first about this market dashboard. Every time you’re on the show, we kind of talk quickly about some high-level KPIs. And so, tell us a little bit more about manufacturing index, consumer sentiment, unemployment, home price appreciation. Some of the high-level metrics that you’re tracking, what stands out to you today?

Daren Blomquist: Well, just as maybe obvious in looking at this, the market, the macro economy is doing very well, at least based on these factors. I don’t actually have inflation in here. I probably should CPI, but you see four greens, which is good for the economy and housing market, two reds, and three yellows. So really, overall, despite the shock to the economy and the housing market caused by the rise in interest rates last year and mortgage rates specifically, the economy and the housing market have been proven to be very resilient, especially consumer sentiment has proven to be resilient. That’s in the green. Unemployment rate, the jobs market has held up very well.

And then when you look on the distress side of things, seriously, delinquent rate has stayed low, pretty much near record lows. And foreclosure starts have actually risen since the pandemic when there was a foreclosure moratorium, but they’ve kind of plateaued out at even below pre-pandemic levels, so I’m marking those as green. And then the manufacturing index, now that is yellow because anything below 50 is contracting manufacturing market, and so, that’s why that’s marked in the yellow because that has dipped below that 50 level. So, that’s a little bit of a cause for concern.

And then the other thing and we can talk about this more in a second is where we’ve seen things turn a corner is home price appreciation, depending on whose numbers you look at. And of course, local markets make a difference. That home price appreciation has gone negative nationally, at least according to NAR, and it has done so for three straight months. So, that’s why that’s in the yellow, 3.3% down year over year in May. And that also is having a trickle effect on home equity, which is that real estate net worth there. That’s why that’s in the yellow.

Homeowners still have a ton of home equity built up over the last 10 years because of rising prices, but that has turned a corner and started to come down. And I have a graph about that in a second, but that’s in the yellow. And then, the two big red flags are the interest rates rising. That still makes a difference in the market and that in part is tied to the yield curve being inverted, which has, at least on a technical basis, been a very key sign of a recession. And so, those are the two big red flags that we have in the economy right now.

Josh Cantwell: And the yield curve in the 30-year, this goes back to my opening comments and that the Fed funds rate directly impacts residential mortgages because that’s what banks lend money to each other on an overnight basis. And so, the Fed funds rate impacts that. The Fed funds rate also impacts bridge lending for commercial real estate.

Bridge lending for commercial real estate right now is almost nonexistent because the rate’s gone up to 8.5%, 9%, 10% for new construction starts and for bridge lending for things like multifamily. The yield curve is where you’re seeing the bond rates, where short-term bond rates are higher than long-term bond rates. They should be the opposite. And so, right now they’re inverted, and that’s been a sign, as Daren mentioned, of a recession that’s coming. If you remember, we started raising rates. The Federal Reserve started raising these rates back in March. And now, we’re into July. And a lot of this data is through May, June. So, it’s a little bit trailing on a 36-day basis.

And so, that 30-year rate for mortgages is although staying high, Daren, I think the reason why houses, there’s still such a supply problem, and home prices have it really drastically gone down, they continue to go up through last year, and now, they’re starting to flatten out and come down at least a little bit is because people don’t want to trade out. They don’t want to trade out of their 3.25% or 3.5% or 4% interest rate loan, buy a new house that’s much more expensive than it was three years ago, and then slap on a 6.5% or a 7% or a 7.5% mortgage. So, there’s just not a lot of inventory right now still.

So, over the last four years, the amount of the inventory that’s been on the market has been significantly low, but for multiple different reasons, like in 2020, we were in the middle of COVID, so nobody was selling because nobody was going out doors, right? 2021, people were still not selling. 2022, rates start going up. 2023, rates are high, nobody wants to sell with all their equity. What I’ve heard from so many people, Daren, is, well, sure, I could sell my house and make a huge profit, but where would I go, right?

Daren Blomquist: Exactly, yeah.

Josh Cantwell: Because houses are so much more expensive and rates are so much higher. So, that’s some of the stuff that I’m hearing on the street that goes along with Daren’s commentary for some of the things that he’s saying. Daren, as we move on to recession risk, all of this leads to ultimately, are we going to be in a recession? Because if we’re in a recession, the Federal Reserve is going to have more of a desire to cut interest rates because they’re trying to achieve a soft landing, slow down the economy. What’s interesting about the slide, my eyes just popped out of my head when I saw this about 10 minutes ago, that we have the highest recession probability percentage since 1981. That’s still higher than 2008, 2009. How is that possible?

Daren Blomquist: Yeah. And there’s a lot of economists now who are backing off of their recession calls who were calling for a recession last year. So, despite this kind of historically pretty accurate predictor of a recession are pulling back because it just doesn’t feel like we’re– and a lot of other signs are not pointing at a recession, but this has reliably predicted a recession pretty accurately over the last seven or eight recessions, as you can see there. And this is a derivative of that yield curve, and it’s put out by the Federal Reserve Bank of New York. They calculate the probability of recession in the next 12 months. So, that’s 70.85% probability of recession. That’s actually from May of 2024.

So, that’s saying in May of 2024, there’s a 71% probability of recession based on that yield curve that we just talked about being inverted. And so, it is what it is. In many ways, a lot of economists actually are not believing this recession predictor this time around. I still tend to say, “Hey, look, we’re probably going to have a recession in the next 12 months.” But it’s a little bit harder to say that right now because the economy has proven to be so resilient. And it feels like we’ve been calling for a recession for the last two years and it hasn’t happened yet.

But as you can see there, this has been the highest probability that we’ve seen over the last two years. I mean, it did spike right around COVID and there was a brief recession related to the pandemic back then. But yeah, I mean, at this point, just to be fair, there’s a lot of folks who think that this is not going to be an accurate predictor of recession or it’s going to be extremely mild recession. I’m still going to put my money on this because it has been so reliable in the past.

Josh Cantwell: Yeah, I think you’re right. I think we are going to end up in some technical recession two quarters in a row of contracting GDP. Last quarter, it was only 1%. So, it was coming down from 3% to 2.5% to 2%. It’s down to 1%. There’s so many different factors that go into this thing. But ultimately, we have lots and lots of jobs available. Because of the deglobalization of the world, a lot of the jobs that in the past had gone overseas, they’ve all come back to the US. So, you have a different reason now why the US economy feels really strong because so many jobs have come back to the US, whether it’s the war in Ukraine, whether it’s the threat of China, whether it’s the chips in Taiwan. People don’t really believe in just shipping jobs overseas anymore. A lot of countries are bringing those jobs back.

And because of that, we’ve seen this influx of jobs. Last month, actually, the job report came out. They’re expecting 240,000 new jobs. There were half a million new jobs created. And our economy has been resilient, even though interest rates are high and partially because there’s so many big jobs coming back to the US. And so, that’s a factor that really was not happening over the last 20 years. Last 20 years, if there was a recession and jobs were going overseas, now you have this recession possibility, but jobs are coming back to the US, which gives people an opportunity to make an income and to avoid a recession because there are so many people with jobs and with good incomes. So, I think that’s a major factor.

Daren Blomquist: The labor force participation rate is another major factor. I don’t have it here anywhere, but it has still not bounced back to its pre-pandemic levels. COVID caused a lot of temporary shifts. But there are some a little bit more long-lasting shifts. And I think one may be that there are some folks who just decided it wasn’t worth it to try to do those, especially, I think, in the service sector, some of those jobs that they were doing. And so, you just don’t see that participation rate in the labor force. Now, maybe a recession would force some of those people to jump back in and try to find a job. But that’s one of the other factors that is helping to keep the job market tight is not as many people are even looking for a job.

Josh Cantwell: Yeah, yeah. Now, one of the things that you’re tracking here that I find interesting is consumer debt. And you and I were talking before we hit the record button, and back when COVID hit, everybody was saving all their money, and the savings rate was at an all-time high. It was huge. Nobody was spending any money because everyone was afraid. Now, three years later, everyone spent all their money. There’s very little savings, and they’re racking up debt like crazy, actually at a record high.

And the last time you kind of saw this on a major scale was before the 2008 crisis was where people were really racking up a lot of debt. So, now, our spending habits have pivoted. And I’m curious, as you look at these, what is this? What story does this tell you, Daren? And if we take on too much debt, whether it’s credit card debt, auto loan debt, mortgage debt, home equity debt, do we get ourselves into a debt bubble that ultimately helps burst and again, push us into recession? I guess, how does debt relate to possible recession risk?

Daren Blomquist: Yeah, absolutely. I think that a lot of what you said is the story here and I think the credit card debt chart tells it the best here is that during the pandemic, you see that dip in credit card debt. People got a lot of stimulus money and were saving, weren’t spending as much. And so, they didn’t have to rely on credit card debt to get them through. But that stimulus has worn off. And now, you’re seeing that credit card debt spike back. It’s now back above pre-pandemic record levels.

And the increases that we’re seeing are record increases year over year. And so, to me, that is showing that it’s not in and of itself a bad thing. Actually, in some ways, you could argue it’s a good thing that the consumer is confident in spending money. But to me, what it’s showing is there’s some stress on the consumer.

The consumer is having to rely more on debt. And I think that’s probably a reflection of inflation. Things cost more. And so, they’re having to spend more on their credit card. They get into debt for that. And so, that becomes a problem when they get overextended. And as you’re showing here on this slide, they start defaulting on that debt.

Josh Cantwell: Right. You have too much debt and they can’t afford it, right? Then they default. Then it becomes a problem.

Daren Blomquist: Yeah, and that’s exactly what we’re seeing. So, if it was just that first slide, well, the consumer spending more, they’re putting more on their credit cards, that’s not necessarily in and of itself a bad thing. It actually is propelling the economy. It’s probably going to help GDP. But then when you see the delinquency rate spiking on top of that, that then is a cause for concern that consumers are getting overextended. On this slide, the two key ones to look at are that credit card debt and auto loan delinquency rates.

And these are short-term delinquency rates. We’re not seeing this trickle into the 90-day delinquency rate yet, but it is an early sign that we’re seeing some spiking 30-day delinquency rates, particularly in credit card debt and auto loan debt. And that could be a little bit of a canary in the coal mine. Those are now back to pretty much their pre-pandemic levels in terms of short-term delinquency rates, whereas if you look at the mortgage delinquency rates, those have spiked, but they’re still at 30% below their pre-pandemic level.

So, right now, we’re seeing some of the distress show up in credit card delinquencies and auto delinquency. Auto loan delinquency rates hasn’t spilled over into mortgage delinquency rates so much at this point, but still, definitely, some signs of stress there in the debt market.

Josh Cantwell: Yeah. And you wonder if the person who may be not a homeowner yet, this is one of the things that can read through the tea leaves here is that people who have credit cards and auto loans but not a home that they got money from the government coming out of COVID and they got used to that. Now, everything’s more expensive.

I will tell you the story real quick. I was looking at 752 units of apartments yesterday. I went to three separate sites. I was out in Aurora, Ohio, was on my way back. I saw this little ice cream and burger shop. And I’m like, “That place is going to be really good. It’s going to be one of those little hot spots. Amazing ice cream and burgers.”

Daren Blomquist: I love those places, yeah.

Josh Cantwell: Yeah. So, I stopped and I started talking with the guy that makes the amazing burger, half a pound. It’s just this unbelievably good-looking greaseball burger. But then we start getting into the inflation discussion, and he tells me that a bag of potatoes for him to make French fries that used to cost 15 bucks now costs him $66 to run his business, and then it had dropped back down, but it was dropping down only into the low 50s. So, when he says, oh my gosh, inflation is only– like the CPI for this past month was only 0.2%, he’s like, listen, for my business for food, he’s told me about cooking oil is up 400%.

And so, if I’m a business owner or I’m paying for these kind of things out of my pocket to feed my family, I might have to throw that on a credit card in order to afford it because the cost of some of these things is so much higher than it was years ago. And that’s impacted mortgages for people that have mortgages, people that have houses, and that’s impacted their home equity. So, for one of the first times in a long time, really in the last 10 years, Daren, your reporting here looks like we’re finally starting to see people that have less equity in their homes. They’ve been building equity in their homes since 2010, 2011, which was the trough of the equity market for people had equity in their homes that grew and grew and grew all the way until 2022.

And now, it looks like for the first time, people’s equity in their real estate is actually starting to go down a little bit. Tell us more about this. What does this tell you?

Daren Blomquist: Yeah, I mean, it’s exactly what you said. And I think this is a really important milestone because when we see the equity start to trend lower, it tends to trend lower for a while. And so, to me, this is likely the beginning of a little bit of a longer-term trend where we’re going to see equity go down, and people, part of it is a psychological thing. Having that equity in your home, you know you have that kind of wealth even though it’s on paper, but then part of it is very real.

If you do get into trouble, you can tap that home equity to help. And if there’s not as much equity there, then you have less of a cushion to get you through times of stress. And so, yeah, the big milestone that stands out to me is in the first quarter of this year and this is data from the Federal Reserve as well, actually, household net worth data, which they include real estate net worth and mortgage data in there. And so, we calculate the equity off of that.

But in the first quarter of this year, that home equity, both as a dollar amount and as a percentage of the asset value was down on a year-over-year basis for the first time in more than a decade. And you can kind of see that with the chart there. We’ve seen several quarterly decreases. The green line kind of turns a corner there, you can see several quarters ago. But now, for the first time, we’re down on a year-over-year basis.

Yeah, this is an important milestone that that equity is not there. Just at the same time as we’re seeing some of the stress show up and some of the consumer debt that we just looked at, and so, that combination for me is a sign that we are likely to see some continued increases in delinquency rates on the mortgage side. And I think what you said earlier is spot on that homeowners are less affected by all of what’s going on because the mortgages that have been taken out even over the last 10 years, but especially even over the last three to five years, have had for the most part, extremely high credit scores, extremely lower DTIs. So, these are not folks who are as susceptible to the whims and waves of the economy. And so, that’s part of why we don’t see that mortgage delinquency rate jumping as quickly as the credit card and auto loan delinquency rates. But still, with this home equity coming down, that is going to put even more stress on homeowners as well.

Josh Cantwell: Yeah. The mortgage equity has always been the great backstop for most people to avoid default or foreclosure on their home. I could borrow against it. And for a long time, people borrowed against it. And then if their equity starts to go down and they can’t borrow against it, then it’s like, oh my gosh, the great backstop of my financial position is dwindling or gone. And that will create some more distress and then ultimately lead to foreclosures.

Daren Blomquist: I mean, to your point as well, in addition to that foreclosure piece you just mentioned, it could take away some of the motivation to hold onto your home. For those people you talked about earlier who they have this low interest rate, they don’t want to sell because they’re in this low interest rate. And if they sold, they’d have to buy, find somewhere to purchase. But if you lose the equity in your home, that may take away some of that incentive to not sell. And so, there may be some more motivated sellers in the market as a result of that dwindling home equity.

I don’t want to overstate the dwindling home equity. It’s turned a corner, as you can see from that chart we just looked at, there’s still a ton of home equity out there to chop through before we get to a point where a ton of people are in trouble, but I do think that’s the beginning of a little bit of a longer-term trend right now.

Josh Cantwell: Yep, I agree. And the fact that it’s the first time in roughly 10 years, I think it’s worth noting for sure. Tell us more about some of the volume of delinquencies, people going into foreclosure that is starting to uptick. You’re starting to see some more significantly delinquent mortgages that are happening again, especially in the kind of first-time home buyer, FHA market, those kind of things, I’m assuming the foreclosure moratorium. And there just hasn’t been a ton of foreclosures because of the moratorium, number one.

Then there was a lack of supply, so prices were going up and still has lack of supply so prices continue to go up until now. But there is starting to see some cracks in the inventory that’s going to create an uptick in foreclosures over the next couple of years. It’s not anything super alarming right now. But tell us what you’re seeing in the delinquency area.

Daren Blomquist: Yeah, I think really quickly, there’s two pieces to it. This is one piece. This is really what I would call as the overhang or the backlog from the pandemic moratoriums. So, the bars here are just basically properties that have come out of all the foreclosure protections that stemmed from the pandemic and are still in trouble. And even though that red line, which is the overall seriously delinquent rate, has come down and has plateaued at a pretty low level, the number of those people who are still in trouble, kind of what I call this backlog from the pandemic has grown, it’s about at 518,000 as of May of this year. And that has been going up over the last couple of years.

So, you have on one hand, this backlog, 518,000 folks who have come out of the pandemic and are still in trouble despite all the foreclosure protections. And then the other piece of it is the emerging distress. And we kind of touched on that with what we’ve talked about so far with some of these delinquency rates starting to increase, at least short-term delinquency rates on mortgages starting to increase. And that’s, I think, on slide 13 if you go real quick, that the most risky mortgages in our market over the last 10 years really have been FHA. And we are starting to see the early payment default rates on those FHA loans spike. That’s on the left-hand side there. They’re three times the pre-pandemic level, up 14% year over year.

Similarly, 30-day delinquency rates on those FHA loans are up 47% from a year ago. So, even though look at the red line there, seriously, delinquency rates are not– that hasn’t translated into seriously, delinquency, which is 90 or more days late, but that short-term delinquency has come up. And so, that’s a sign to me that we’re seeing some emerging distress.

So, you have the 518,000 people who are still in trouble after coming out of the pandemic. And then, on top of that, you have this emerging distress. It’s really a result of people buying at the top of the market and now losing some home equity. And as you know, with FHA, you’re only buying with 3% down. And so, if you lose a little bit of equity, you’re very quickly underwater on those loans.

Josh Cantwell: Yeah. And some of those same people could be the same people that are piling up debt in delinquency on their car loans and their credit cards and those types of things because they bought probably at the top of the market. And now, again, that backstop of home equity, especially in the FHA area, we only have 3.5% down. There isn’t much equity at all as a backstop if price is correct, 3%, which you said they did earlier about 2% to 3% for the first time in a long time on a national basis. That just wiped out your 3.5% down. Now, you have no equity left and you’re using your credit cards. And now, you’re starting to see some default in those kinds of areas.

And so, all of that being said, those are some of the indicators of what’s going on in the marketplace, some indicators of what’s happening with the Federal Reserve, indicators of what’s happening with inflation. Real estate investors seem to be unbelievably persistent and optimistic, though, on your platform and throughout the country. My friends that are flipping houses are still flipping houses. My friends that are in wholesaling, rehabbing, acquiring rentals, they still see a lack of supply.

I mean, honestly, some of them, I think, are nuts to think that they’re just turning a blind eye to the fact that prices have to come down, but at the same time, we have this undersupply that can only be corrected by building more. And if you have really high costs of new construction financing and bridge financing, we’re not going to be building more. From an apartment perspective, the only place that really, you’re starting to see apartment values come down and a lot of new construction being built is Phoenix. So, we expect on an apartment basis, on a commercial multifamily basis, that the rent rates in Phoenix are actually going to be flat or go down, which means values will go down in Phoenix because you have a lot of people moving there, but you have so much demand, but you have a lot of supply coming. That’s one of the few markets that actually has a lot of supply coming on line.

Most other markets don’t have nearly enough supply from a commercial multifamily perspective. And you can say the same thing about housing. We know from a housing perspective, there’s just not a lot of supply. If interest rates come down, I think people will start to trade out of their existing home and sell. They’ll feel good about that, that they can buy their next home and it’s not going to be the 7% mortgage. Maybe it’ll be at a 6% or a 5.5%. People can stomach that. I think that’s what we’re going to be at next year.

But real estate investors are continuing to say, “Look, there’s not a lot of supply. So, if I can get a house at any kind of discount, I can wholesale it, I can fix it, I can flip it.” I know you’re seeing a lot of that same type of optimism on your platform, Daren. So, tell us a little bit more about what you’re seeing on your program.

Daren Blomquist: Yeah, I think the best way to summarize it and this is in talking to one of our buyers recently, just they’re cautiously bullish, they’re bullish about this market. And all the lines and bars on this are different metrics of demand on our marketplace, specifically on And you see all of them in the latter half of 2022 dips pretty dramatically. Our buyers did pull back and got more cautious because of the shock to the market because of the rising interest rates.

But now that things have stabilized a bit, they are coming back, and all of those lines and bars have bounced back, as you can see on there. I think where I still see the caution taking place is if you look at the green lines, which is basically the way that they’re bidding, and sorry, I didn’t spell this out very well, but the WB there, that’s the winning bid. So, the way that they’re bidding relative to the estimated full market after repair value of the homes, that has bounced back, but they’re still cautious. It’s still quite a bit below what they were bidding at the peak of the pandemic frenzy and even below what they were bidding back in 2019.

And so, in terms of pricing, our bidders are being a little bit more cautious, but they have definitely bounced back in terms of quantity demanded, the sales rate. And one of the things is our sellers are actually much better than they used to be about responding to the market. And so, one of the reasons you see that sales rate, which is the percentage of properties that sell, go down is not only are buyers willing to pay more, which is the green line, but our sellers have adjusted their pricing lower as well because of the reality of the higher mortgage rate environment that we’re in.

Just one other comment I make on here is our properties are selling at maybe $150,000 to $200,000 and reselling for maybe $250,000 to $300,000 and that’s very general. The markets can vary quite a bit. But the main point I want to make here is that when our buyers are flipping these homes or renovating and renting these homes, they’re providing affordable housing inventory. And so, in that affordable space, you have a $250,000 home that you’re selling pretty much anywhere in the country that is going to sell like a hotcake, even with our higher mortgage rates because it’s kind of in that lower tier affordable segment of the market.

Josh Cantwell: Yeah. Where people can still afford it, 6% mortgage, $200,000 is still high, right? It’s still 6.5%, 7%, 6%. But there’s just not a lot of inventory. We also know that home builders are not building any inventory in $150,000 to $300,000 range. They just can’t because the cost of materials, cost of supply, they can’t build anything in that $100,000 to $300,000 range. They’re building everything now in the $350,000 to $500,000 and upper range. So, you’re not going to see any new inventory to supply those first-time home buyers and that affordable market is pretty wild.

Daren Blomquist: Yeah, that’s largely first-time home buyers that our investors are reselling to our first-time home buyers. And so, you also don’t have that issue of that first-time home buyer having to sell their current home to buy that first home.

Josh Cantwell: Yeah, absolutely. Last slide here is this home price correction risk calculator. Tell us a little bit more about what this means. What are you seeing as far as kind of a prediction, if you will, and risk of correction in certain markets throughout the country?

Daren Blomquist: Yeah, this is just taking the data that we just looked at at a national level in terms of our demand metrics from our buyers and localizing it down to a local metro level and basically saying the biggest weight here is on that pricing metric that the amount that our bidders are willing to pay relative to after-repair value and comparing that to what they were willing to pay back in 2019, kind of using 2019 as a benchmark. And so, the areas where our buyers are being a lot more cautious and that winning bid is quite a bit below what it was back at that 2019 benchmark. That’s the red. That’s where I think our buyers are saying these are markets that we think there could be a more significant price correction. And so, we’re baking that into our bidding on the platform so that when we go to resell these homes, we’re not caught with our pants down.

We are building that home price correction into our acquisition price. And so, that’s where the red is now. I didn’t have time to throw this in, but I just updated this last night after I had already sent you the slides. And we’re seeing some of that red actually shift more toward the East Coast and actually a little bit away from the West Coast. So, this was earlier in the year. Our buyers, a lot of the red is on the West Coast. They were baking in a home price correction. And we’ve already seen that materialized. We’ve seen the home prices in places like Phoenix, and I call Phoenix the West Coast, I mean, the Western United States. And San Francisco, we’ve seen the home prices come down there by double digits. That’s materialized.

Now, what we’re seeing is a little bit more of a shift to the east. But actually, the other shift is that our buyers have– there’s less red on the map now. So, they’re seeing a little bit less red on the map. Buyers, I think some of our buyers think the home price correction has actually already happened and we’re past it. I don’t know if that’s true for the long term, but at least for the short term, things have stabilized, and so, they’re more confident in the market.

But there’s certainly still a lot of red on the map. And the one I have highlighted here is Atlanta, where our buyers are still– there’s a lot of demand. We’re selling a lot of properties in Atlanta, but the bidding has become more conservative relative to pre-pandemic levels. And so, we do think that indicates that the buyers there are baking in a home price correction.

Josh Cantwell: Yeah. I tend to feel the full correction of the market is not going to be drastic, but it also has not taken full effect yet. We all know that it takes about nine months from when the Federal Reserve raises rates to the time where it takes its full effect. And if you look at last summer where the Federal Reserve raised rates, 75 bps, 75 bps, 75, 75, that was last summer, June, July, August, September, roughly. It’s getting into now that 12-month mark since that time. And when we saw some 50 bp to 25 bp correction since then, just now, you look at my other screen, I’m looking at houses in Florida, right? And you’re starting to see now properties with significant price cuts.

I’m looking at properties between the million and $3 million range and you’re seeing properties with major price cuts of $300,000, $100,000, $200,000, properties that are 300 days on Zillow or 150 days on And so, you didn’t see that a year ago. And so, this is kind of the first time you’re really starting to see. Now, again, sellers had this overinflated opinion of what their house would sell for, especially when rates were at 3.5% or three and a half.

Now, I think everybody started to realize, wow, if rates are at 7%, people are not going to give me the value that I thought. And I think especially at these higher end properties, again, that’s not typically where investors are participating, but on the higher end properties, there are some major, major properties sitting on line much longer. It’s a major price cuts happening. Personal opinion, not based really off the data necessarily, but taking all the data using my personal opinion, I think that now that we’ve seen that home equity number turned a corner, like you said, I do think that trends down for a while, probably a year to 18 months, especially if rates stay where they’re at, maybe the Federal Reserve doesn’t raise rates, but they also don’t reduce them very much for the next 12 to 18 months. I think that everybody, there’s some shock, especially at the higher end properties and prices start to come down.

On the lower end properties, like you said, Daren, I think it’s very different where you don’t have a lot of supply, you don’t have a lot of building, you still are going to have people that want to move out of an expensive apartment, will rent a lot of apartments, obviously, thousands of them. Our rent rates are continuing to go up. And so, people are going to get to the point, where like I don’t want to pay this much for rent anymore. I want to buy. And so, they’re going to want to continue to buy at that lower end, and that’s going to push prices up.

So, I tend to think there’s going to be two buckets. There’s going to be that lower, more affordable, let’s call it $350,000 to $450,000 and under. That market continues to appreciate. I think things at the higher level, half a million and up, will have a major pullback. That’s what I’m betting on over the next 12 to 18 months in my own business. My wife also wants us to buy a house in Florida, so I’m actively looking.

Daren Blomquist: I was wondering about that.

Josh Cantwell: You knew that was coming. Well, listen, Daren, we’ve got to wrap up the show for today. Listen, I appreciate you carving out some time for us, especially while you’re on the road. You’re speaking at a conference today. Tell us about the conference that you’re speaking at.

Daren Blomquist: Sure. It’s an organization called ALFN, which is an organization of foreclosure attorneys. So, I get to speak really actually about a lot of these same topics to those foreclosure attorneys. Of course, they’re looking very heavily at the distress side of the market because that’s where their business comes from. So, looking forward to sharing with some of this data here and also learning, I always learn from folks who are on the front lines of the market and they a lot of times are seeing the foreclosure volumes come through. So, looking forward to learning what they have to say to me as well.

Josh Cantwell: Yeah, fantastic stuff. Guys, again, go to to check out all the properties. They’re up for sale, up for auction. Create a profile, take a look at that platform to buy your next investment property. And as always, go to, specifically for market reports, KPIs, and some of the data that Daren and I shared today. Daren, thanks again, my friend. You’re always a wonderful guest. Thanks for jumping on the show.

Daren Blomquist: Awesome. Thank you, Josh.


Josh Cantwell: Well, there you go, guys. I hope you enjoyed that episode of Accelerated Real Estate Investor. Don’t forget to like, subscribe, rate, and review, that way we know if we’re doing a good job for you. I hope you appreciate that data, especially for those of you that are single-family investors, residential investors making the pivot into multifamily. I think there’s a lot of reason to continue to be bullish, especially on the less expensive, lower end of the market.

The more affordable side, I would be very cautious investing in properties that are over a million dollars or over a half a million dollars. Focus on those lower end, more affordable homes and continue to focus in the south, the southeast if you look at the home price correction risk slide that we talked about with Daren. Again, not a lot of risk in the middle of the country, the Midwest, Kansas, Missouri, Kentucky, Ohio, Indiana, Arkansas, Mississippi, Florida, Atlanta, some of those types of areas, South Carolina, not a lot of home price correction risks there.

There is a lot of home price correction risks in California, Oregon, Washington, Colorado, especially Denver, New Orleans, Minneapolis, Minnesota, some of those types of areas, Upper Peninsula of Michigan. So, again, interesting to see that a lot of those areas with home price correction risk, not only are they in the West Coast, but also their politics are not necessarily supportive of landlords. I think that’s a great correlation and a great way to end the show.

So, again, rate, review, like, subscribe. And again, if you’re looking for some help in your real estate investing business, some coaching, mastermind, partnering, go visit us online at Talk to you soon.

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