REality

Your Q2 Market Update

• Gary Scott

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The real estate market is finding balance with inventory up 27% across regions and over one million listings nationally for the first time since 2019. Despite more inventory, we're still in a soft seller's market with approximately three months supply, though competition among sellers is increasing as listings outpace sales growth.

• Inventory up 27% with over one million listings nationally for the first time since 2019
• Months supply of inventory at approximately 3 months in most regions, 5-6 months in mountain areas
• Days on market stabilized around 50 days, returning to more normal pace
• Pricing is critical - properties priced right still sell quickly, but overpriced listings face multiple reductions
• Sales pace up about 9% across regions during Q2
• Median price appreciation averaging around 2% with average price appreciation around 4%
• First-time homebuyers now averaging 36 years old and representing only 24% of transactions
• Intergenerational wealth transfers provide opportunities for parents/grandparents to help with down payments
• New construction and resale markets moving in same direction with builders offering significant concessions
• Interest rate buy-downs are effective negotiation strategies for both new construction and resale properties

Price strategically, understand your hyper-local market conditions, and don't fall victim to misleading headlines. For parents and grandparents, consider helping the next generation with their homeownership journey now, rather than waiting to pass wealth later.


Speaker 1:

Welcome to Reality Podcast Update second quarter 2025 with our always market update guest, tony Jarrett TJ.

Speaker 2:

Great to be here with you today.

Speaker 1:

I'm pretty pumped. I think you and I have had some conversations. I did want to share with our listeners that Tony and I have moved from the airwaves to the viewing waves I guess I don't know if that's what you would call it but so about every four to six weeks we're going to do a video, and Tony and I had a big time. It got posted last week and we're looking for a name. So I'm going to just go on the record that, if you've got a name, I like real estate unhinged. I've been told by marketing people that that's probably not the best real estate uncensored. Tony and I had a lot of fun fact fiction, perception, reality on the headlines that have been following our industry. So we'll talk a little bit about that today. But, Tony, we're going to jump right into the things that everybody I talk to is asking about, and so let's start with inventory and share some of your observations on Q2 trends as it relates to inventory.

Speaker 2:

Well, you know, back in our day when we came into business, it was always. The spring market is the second quarter and I will tell you, the spring market was really good to us with listings. Inventory has really increased across the board and you look at the six regions we serve, on average, we're seeing 27% more for sale signs. That's a really big increase, and the first quarter was also a very good pace too. So it feels like this first half of the 2025 has been a very good momentum for a lot of sellers coming on the market, which means buyers have a lot more options than they did last year when they start looking.

Speaker 2:

I will also tell you, new construction is increasing, so we're seeing both sectors of resale and new construction. And an interesting stat for our audience is that for the first time since 2019, six years ago the United States has seen more than one million for sale signs. That's kind of one of those tests that you say that's a threshold you want to hit. Well, we hit it, and it's been a long time since we've hit it, which means for most of our folks, there's a lot more competition now on the seller side, a lot of good options for the buy side. So it's becoming healthier and healthier, in my opinion.

Speaker 1:

So let's dig a little deeper into that, because one of the things that you and I talk about a lot is the importance of when we get a number like inventories up 27%. As Matthew Ferrara taught us five months ago, you have to understand the numbers that surround the number to really understand the impact of that number. So, in addition to inventory rising, the other number that we look at is months supply of inventory. Before we got on the air today, I said to Tony I ran into a neighbor yesterday and he says you know, gary, tell me what you think about home prices. And I said well, they're going up at a slower pace.

Speaker 1:

And he says I just you know everybody I talked to just says that they're not going to come down. And I basically said you know economics 101, it is supply and demand, and we're going to talk a little bit later about, you know, the importance of hyper local market knowledge and market data really important today, tony. But let's talk about month supply of inventory. In our regions alone we've got quite the gap. And then we also want to talk about some average and median home prices to see is there some relationship there? So let's go to month supply of inventory. Again, inventory is up Good sign. Month supply of inventory is up.

Speaker 2:

However, yeah, it's basically across the board right at three months supply of inventory. When you go into the mountains it starts getting more to five to six months, and you and I have talked about it before. Over and over, that four to six months range is very healthy, very balanced. When you go past six months you're starting to dip your toes into the buyer market pool. We haven't done that yet, but I will tell you we're starting to tip that way in certain markets. But three months supply of inventory seems to be the new healthy, the new balance. We've been floating between 2.75 and 3 for about six to nine months now, but it's slowly, each month, increasing just a little more, just a little more, just a little more. So again, nothing alarming but very healthy, yeah.

Speaker 1:

I think the two things that I would share is just a perspective or a benchmark. Back when the market was crazy in 20 and 21, it was like 0.8, 0.9 months yeah.

Speaker 2:

Like three weeks.

Speaker 1:

Yeah, and interest rates were two and a half two and three quarters three, so we clearly have a different market. I love that Tony brought up 2019. And you know, while we certainly prepare when we're talking about Q2 numbers, I wanted to talk about 2019 just because, you know, when we think about the last five years, there's been anomalies throughout. Right, there was COVID and then there was inflation in June of 2022 that drove the interest rates. And the one thing you and I talked about recently is it is hard for us to believe, you know, june of 22, three years and two months and one month ago, you know, we've had interest rates in the sixes sevens for three years, after we had experienced sevens for three years after we had experienced, you know, in those low levels of twos, threes and fours. And so let's talk a little bit about a possible shift in a tradition.

Speaker 1:

Historically, six months was Tony and I can see each other. I'm identifying an equilibrium on a graph with my hands. Again, I refer to Matthew Farrar. He's a guy that we have a lot of respect for and he gets us thinking about our business. He shared with us that maybe four months in today's market is yesterday's six months. Any thoughts on that, as you've kind of studied the marketplace, tony.

Speaker 2:

Well, I think it goes to the level of buyer pace that we've had for the last few years and it also goes to the level of pace of inventory. Even though we just said we've crossed 1 million, that's still down compared to where we were way back 10, 15 years ago. And there is another trend out there of certain homeowners who just aren't going to sell anytime soon because they've got their mortgage rate locked in under 4%. In fact here in North Carolina 76% of every homeowner in the state of North Carolina is under 5%. 68% is under 4%. So that group of people is probably sitting.

Speaker 2:

So if we ever saw rates go back down and you saw that unleashed, I think we could get back to an inventory supply of closer to that five and six. But because we just don't have the inventory count like we used to in years past. To Matthew's point, I think it's kind of reset and we're going to talk about resetting again on price here in a minute too. But reset seems to be another word that I'm starting to enter my vocabulary a lot lately.

Speaker 1:

Yeah, but I know when we did our first quarter update, it was a, I think you said a softening seller's market Soft seller's market Yep.

Speaker 1:

Soft seller's market and a balanced buyer's market. Yep, you know, I think reset is a really. It's funny. I used it last week maybe four times in four very different scenarios. We got to reset, and reset is not a bad thing. It's about taking all the information you have around you, reset to whatever your goals and objectives are today.

Speaker 1:

So one of the other questions we get is do we have a housing bubble? And I'm only going to tie this in, tony, because you mentioned the one million listings. The other thing is from 2019 to 2024, homes appreciated on average 57 percent, and I know we've got this huge percentage of people that have over 50 percent equity to no mortgage, et cetera, et cetera. So I just want to give everybody a comparison to the financial crisis, two very, very different things. There were 3 million listings, not 1 million listings, right, and the average price had gone down 25% to 35%, not up 57%. So again, I want everybody to keep in mind and to understand that what happened in 08, 09, and 10, and what's happening in 24, 25, and we'll talk a little bit about 26, they're totally different dynamics, and I think one of the things that people have said in the past is the financial crisis was caused by the housing industry. The housing industry today is kind of a byproduct of the economic environment and the headwinds that exist both nationally and globally.

Speaker 1:

Let's move. We got a lot to cover today and always, always great stuff that you bring. You are such a great student of the market and we always say numbers are interesting but if you do something with them, they can be impactful. So I'm going to challenge our listeners today, tony just shared some mortgage numbers. We're going to share month's supply of inventory. I want you to take a couple of the numbers that we shared today and figure out a way, strategically and intentionally, to build it into your presentations either buyers or sellers, to help generate some business, to help educate. We have to be educators today, tony, because, as our video shared before, we had so much fun on the headlines really not necessarily capturing the essence on the headlines, really not necessarily capturing the essence. Let's move days on market, another one of the key indicators of the housing industry.

Speaker 2:

Days on market for the whole regions, or most of the regions, average around 50 days. So I will tell you the second quarter was the first quarter I've tracked in almost two years where days on market actually stopped, leveled off, stabilized and maybe even decreased some in some markets, which means the spring market picked up a little bit. It's been climbing, but again you got to keep perception. It was climbing from seven days on average, which was not normal, it's back to 45. So you're talking about a month and a half, basically just under two months on average. And then when you go up the mountains you're probably looking at more like 60 to 70 days, a little longer, but nothing alarming. And again, most if you go back to years past of a healthy market, probably 50 to 60 days back in our days was what we consider normal, a normal speed. If I'm a police officer shooting a gun at a house getting sold for highway patrol, it would be 50 to 60 days was by normal. You're in the right speed limit, if you will.

Speaker 1:

I'm going to go back to one of the great conversations you and I had, tony, before I came back. You're talking about the real estate market and you said the real estate market is going 100 miles an hour and the speed limit is 70. That's how the market was. I think what you just said is the speed limit is 65 and the real estate market is 65. Yeah, that's right. In 2008, the speed limit was 65 and the real estate market was 35. So that analogy that you shared with me before I came back, I used over and over again Like we were going at 100 miles an hour and the speed limit was 65 or 70. That was what that market was, and then when we think back, like today, we're going at the speed limit. You know and I think that's a really good analogy that I stole from you. So I'm surprised I remembered it. That was like five years ago but you remember that?

Speaker 2:

Yeah, I did use that. I forgot about that one. That was a good one.

Speaker 1:

It was a great one because you know when you can put it in other terms, people can understand it. Like I think back to this conversation I had with a guy yesterday, like that would have been a perfect picture that I could have painted to describe the real estate market, picture that I could have painted to describe the real estate market. So, days on the market, it's interesting. Again, everything is perspective. You remember when we shifted in June of 22, kind of out of what I call the 24-month spring market that was created by the pandemic, and people didn't get an offer in a week and they were panicked, right. Remember that, yeah, and so now it's about make sure we set realistic expectations. We're going to talk about pricing, because pricing absolutely is, in my estimation, in my view, the single most critical aspect of this real estate market and we'll talk about that a little bit. Let's go to sales pace. Talk to us a little bit about what the second quarter brought kind of across our footprint.

Speaker 2:

Well, it was positive, which was good. The sales pace was right on average of about 9% up across all the regions. Mortgage rates did stabilize. In the second quarter We've been floating right around 6.75. We've been hearing it's a 7% market, actually a little bit less, and there's some other products that you can get a little lower than that even and my word in the first quarter was uncertainty, my word in the second quarter has been stabilization. So it's really been steady, especially since about Mother's Day into the end of June.

Speaker 2:

You saw the pace of sales pretty good. Now you did a picture a minute ago with your hands. I wish our audience could see me. I want everybody to think about these two trends though Listings up 27%, sales up 9%, and if you saw a picture of a graph, you know those. And that pace continues. They're going to widen more and more and more, and that word of that picture to me would be competition. As a seller, you've got more people competing against you, but the buyer pace has not changed. Pace has not changed and I think that's a fundamental shift that's happening, that we've shifted to balance. But it could shift the other way if that trend continues. But the good news is is buyer. Sales activity has been positive and I worry about these headlines that say things are off. They're not off, they're just not going at the same pace as you've described earlier at the same pace as you've described earlier.

Speaker 1:

Interesting, tony. I went to three open houses over the weekend, all in the neighborhood that I live in Lake Norman and condominium and you know one of them has been on the market for 100 days. One of them it was the first day and I went into the open house and two of the three listings were ours, which was great, and what I learned is that I think that the one that I went in yesterday, that was the first day they're going to get three offers today. The other one, I can tell you right now, is not price right, I can tell you that, and it was listed by another broker and I went in you know way, dressed down, you know cargo shorts and a Tommy Bahama shirt, and I introduced myself and I just said to the guy I said you know, you don't know me from Adam, but here's what I would recommend. I would recommend a price reduction, not 3000, not for that but and let the market drive it. I said you're here and I'm again, I'm using my hands, you're up here, I think you should be down here and then I think you'll get there. And I said every day this thing is on the market You're losing.

Speaker 1:

So I get a lot of activity, I get a lot of activity. I said I know you have a lot of activity. And then I said to him and this is a topic you and I talked about on our video is, you know, have you studied the competition in the hundred days you've had the listing to see what other listings have sold? And I could tell this guy was fairly new and he said I didn't do that. And I said you know, I think today the best comp is the competitive listing, active listing, not necessarily a comparable, just because the world is moving quickly On the same breath.

Speaker 1:

Another listing had sold in two weeks. Same complex. When they are priced right, they sell. And again, I don't think every seller wants to hear that and I know there are examples where that's not exactly true. It's pretty true, it's pretty true. Let's talk a little bit about pricing from your perspective. I think the other data point out there that we got to pay close attention to is what percentage of active listings have already had a price change. Why don't you share some of those thoughts?

Speaker 2:

Well, let's start with price appreciation. I will tell you two stats. Median price is averaging somewhere around 2% in our markets. Average price appreciation is averaging around 4% and I really want the audience to think about the difference. The median price is where the middle is. It's where the I always call it the heat index. It's where most of the activity is happening. The average is taking the very best, the very highest, the very lowest, and giving you and sometimes that can skew some numbers, depending on your neighborhood, your market, like you were describing. But I will tell you that we're seeing a couple trends out of this. One is the level of appreciation at 2% is healthy, but it's a lot slower than what we've been accustomed to the last three or four years, and I think that's what your example was describing. I have the same exact example with a neighborhood I live in. There are two homes on the street of open houses that I've visited and one you can tell immediately is over price. Well, the other one's closed and gone and the other one's still sitting there, and this has been over six months. The other one was gone in two months. This one's sitting six months and it's like there's two different markets right now Let me give you two trends I'm seeing.

Speaker 2:

One is price reductions. So you sent me a headline last week and it said the number of housing markets with falling home prices jumps to 110, up from 31 markets. 110 up from 31 markets. Think about that for a second 110 markets now have falling home prices up from 31. And then it says among 300 largest metros, these 110 markets are seeing home prices fall year over year. Well, if I read that, I would think, okay, here's my moment. Prices are dropping. I'm going to jump back in the market because prices I hear the word crash when I read that. In fact, I just gave you a stat it's up 2% on median, it's up 4% on average. So it's price reductions that are up, not price crashes, not price drops. It's price reductions because our clients God love them are going in very aggressive into a market feeling that they could get a good price and then they're reducing. And of all the indicators I can give you, price reductions is the number one, most active stat that we see in every market that we serve right now, and it's because we're missing the mark a little bit.

Speaker 2:

There's another trend that I can't track. I can's because we're missing the mark a little bit. There's another trend that I can't track. I can't tell you what it is, but we are seeing it and it's a term called delisting and it's sellers who are so aggressive. They sit on, like your example, they're just sitting there for four or five months with very few showings and then they remove it off the market. So we're seeing another trend of listings just coming off the market because sellers are just not in today's market, they're not ready.

Speaker 2:

And I know I have told some agents tell your seller, maybe let's give it two or three years and then come back on the market because you're not in today's market. Let me give you an example, and this is I can't tell you how often we're seeing this. So I meet you today, you're the seller and you tell me I ask you, gary, what do you think your house is worth? And you tell me 400,000. And I'm like, okay, that's interesting. My observation, based on the comps, based on the relevant properties, based on the active properties, is 375. You and I are 25,000 a piece, but I'm going to give you that moment Now, when that moment is, is that we go on the market for 400.

Speaker 2:

The stats, based on what you and I've been talking about. If we had hit it right at 375 and sell it with under 40 to 50 days, we're probably going to get a full price, that soft seller's market with concessions. We're probably going to average 98 to 99% list price to close price. So that 375, it's probably going to land you an offer around 370 to 371. But that's not enough. You want 400. So we go 400, we try it and here's what happens Nine out of 10 times yeah, there's one time you might get lucky in a certain neighborhood, a certain price point, but nine out of 10 times you're going to sit there for four to five to six months You're going to start reducing your price and let's talk about list price to close price ratio when you price it right at 98 to 99,.

Speaker 2:

If you don't and you start reducing it, one price reduction starts equating 2% to 3% variances. So think about it If I go to two price reductions now, I'm going to 4% to 5% variance. If I go another and another, you see where I'm going. And if you have to reduce it two to three times that leading indicator? We just saw. You're talking about an 8% to 10% variance. That leading indicator, we just saw. You're talking about an 8% to 10% variance and in that example I gave you 400,000 times 10% is 40,000. I were at 360. Would you rather me bring you an offer at 370 or an offer at 360? That, what I just gave you, sounds so simple, but for some it's very. I want to try, I want to test, I want to see and it just can backfire on you pretty quickly.

Speaker 1:

Well, not only that, depending on when they bought it. The other question Tony is and this is the one I used the other day with a friend of mine was selling a house in Lewisburg, pennsylvania. So he called me and he said I got a question for you. He says I got a realtor, but I want to ask you because, well, at the end of the day, I have no agenda. I'm not, you know, I'm not right and you know. My question to him was when you bought the property in September of 2022, how much did you put down? And then, how much are you going to sell it for? And his $45,000 investment in three years brought him back $161,000.

Speaker 1:

So I'm going to piggyback on your great analogy, which would say when did I buy it? What did I buy it for? And this is the other number that people really miss, in my view, and I've missed it when I've transacted real estate is. It's not. I bought it at 360 and I sold it for 400. It's how much did I put down and how much did I like? What is my return on my cash? We get fixated. I may have only had a price appreciation of 10%, but that over time, you know, my 45 might become $161,000. You know what is my cash on cash.

Speaker 1:

So number one, your analogy is what did I buy it for? Number two is how much did I put down? And then number three is you know what's the time value of money for those extra three, four or five months? I love your analogy. Every price change is 2%, I do, you know. Just take your 400. At your 400, two price changes takes you at 5% of four is 20,000. You're down to 380. And you think in the first, you know, month or month and a half, you could have gotten that other, that 371 to 372.

Speaker 2:

But here's what we can't calculate in that two to 4% each time you do it is the psychology of the buyer, Because the longer you sit on the market and the more times you reduce the price, the buyer is sitting there going what is wrong with this house? And you don't get a do over. In my words, you don't get a do over for pricing. Once you price on the market and you put there and sit there, you don't get to do it over. And now I've got buyers who are going to bring you an offer. Most likely I've seen it lately with agents who start getting their sellers to reduce and then the price is I'm sorry, the showing start increasing. That means you're hitting where you need to be. The market's telling you where you need to be, but watch the offers.

Speaker 1:

They'll come in less and less and less because you've lost your advantage.

Speaker 1:

Interesting example, tony, looking at three different condo units here, right, and so one just came on the market.

Speaker 1:

One is a buy owner, a guy I know needs to move, and another has had five price changes in 120 days. Yeah, so I'm the buyer, I'm the average buyer. So am I going to get caught up in that one-day listing right, where I might get caught up in it if it's priced right, if it's at X, I might have to pay 105% of X. Or am I going to go to that one with five price changes and really get a price change right and maybe that makes it worth it right? Or do I go to the by owner only because it's a friend, and do you navigate that so like? I think those are the examples to your point. As a buyer, when I look at a property that's had one or two or multiple price reductions number one, there's a problem with it, and then number two, if I make an offer on it those people have to be motivated, like that's just my opinion. Yeah, whether I'm right or not, that would be my belief.

Speaker 1:

I think some of us call that word desperate at that moment. Tony, I love your analysis of that article. Again, you and I had a great time talking about the headlines and making sure that no one comes to any housing conclusion on a headline Right the one that I shared 31 to 110, it would have sounded like the average or median sale price in all those markets was down. No, it was up less. I want to go to our marketplace because you sent a great summary, I think. If I'm not mistaken. I want you to look at the triangle and I want you to share with our audience the sales unit growth and the inventory unit growth of the triangle, and then I want you to share with them and me the median and average sale price, because I've got an observation when I looked at each of our regions and I just want to test it with you and test it with our audience. So just look at the triangle if you can share those numbers.

Speaker 2:

Well, the triangle region, based in the second quarter I'm referencing our notes the inventory in that market was up 32%. In fact we almost crossed 20,000 for sale signs in the triangle region and the sales pace increased over 4,500 units. So it was up 12%. But when you look at the price, the median price and the average price, it was actually down. Now it was down really, really tiny. The median price was down like 0.7. So under 1%, not even 1%, and the average price was $4.59.

Speaker 2:

Well, you have prices stabilizing, decreasing just a little bit, but you've got a double-digit sales price of sales unit pace move. So that tells me that's a very healthy market. And when you see a headline, like we just talked about, that prices are falling, well, you don't have 12% growth in sales pace by buyers. That tells me there's buyer confidence. I do think there are many sellers now probably reducing I don't have that stat reducing their prices to meet that 12% gain. That means people are getting it right and, as your example I've always said the asset is working. Sellers are making a profit. They're making appreciation. They're just probably not getting as much as they were in the pandemic that gain. But the house is worth whatever it's going to be worth, but it's a very healthy market.

Speaker 1:

Right. Well, and then, as I looked at those numbers, it does appear that the median and average sale price in some of our markets is up two, two and a half, three, three and a half, four, four and a half, and their sales pace is not up 12%, it's up 7%, 9%. And then the month's supply of inventory. As we talked about the high country and the Asheville Mountain region, their prices are up, I think 2.6 to 2.8 to whatever, yet they're at 5.7 and 6.1 on the month supply of inventory. So I think it's really important to pay close attention and I said it earlier in our conversation, tony and I want to stress this at this moment, the real estate market, in my view, has never, ever, been more hyper-local.

Speaker 1:

The irresponsibility of any of us making a general statement about the market without asking questions, of who's ever asking us the question to understand what, the kind of what, the intention of their question is. I think back to this conversation I had yesterday. If I replay it, I would have asked him three more questions before I gave him my opinion. Right, but you know he jumped right at me and said you know I've talked to every expert says prices aren't coming down. Well, again, go back to the headlines, let's see. The next thing that I think we want to talk I know we want to talk about is another article, article that I found over the weekend that really speaks to a conversation that our chairman, pat Riley, has been having for two years. Let's share some information. Tony, I know you know the answer to this the average age of a first-time homebuyer in the year 2024 was what? 36 years old in the year 2024 was what? 36 years old, and that the percentage of total sales in 24 made up of first-time homebuyers was.

Speaker 2:

Well, that's a good question. I'm sitting there processing my mind. You tell me it was 24%.

Speaker 1:

Yeah, thank you, typically a third of every sale. When you look back historically, 32 to 36% of every transaction was a first-time home buyer. I don't know where the average age went, but I will tell you this. I think back to the home price appreciation over five years. I could honestly tell every 38-year-old that they wish they had bought at 33. They wish they had bought at 33. And again, so one of the things I'm going to read you a stat that most everybody is familiar with. But how do we use this in conversation to create some opportunities?

Speaker 1:

This was Wall Street Journal. The great wealth transfer Across theS. Baby boomers and the silent generation are set to pass between $. Their heirs, with Gen X expected to inherit 30 million or 30 trillion, excuse me, millennials 27 trillion and Gen Z roughly 11 trillion dollars. And so our chairman, pat Riley, has been on the circuit. Parents and grandparents on the circuit. Parents and grandparents, instead of leaving $84 to $90 trillion, help out today with a down payment for your children or grandchildren to begin their journey with the American dream and creating generational wealth.

Speaker 2:

Let's spend a minute on that creating generational wealth.

Speaker 2:

Let's spend a minute on that. Well, the IRS tax code. I haven't looked at 2025, but last year it was just under $18,000 that you could gift a family member, or gift anyone for that matter, and have no income tax on it. So if my spouse and I wanted to buy a house and I look at my mom and say, mom, would you gift us each $18,000? Suddenly I've got $36,000 in my pocket. That would probably be a good down payment for a house. And then you, in my opinion, you, combo it.

Speaker 2:

What we're seeing right now in our market is we go back to where we started with that soft sellers market. We're seeing a lot of sellers getting full price but taking that discount, if you will, and giving it back to me in the form of closing costs. So if I can get a down payment assistant from my family and get the seller and the negotiations to pay some of my closing costs and let's think about the average $400,000 house, which is the sweet spot right now You're probably looking at anywhere from $12,000 to $16,000 in closing costs Well, I could get all that financed or gifted, sorry. Second is that you also could buy down rates. So instead of a reduction of $10,000, have that seller buy my points down two to two and a half points. Get me down to a five, four and a half 5% mortgage rate over the next two to three years. To an arm.

Speaker 2:

You combination those things and the buzz right now is housing affordability, especially that buyer. You talked about that first time home buyer. Well, there are methods right now that you could lean into between family and your agent to help you negotiate. That will get you into homeownership actually probably easier than you think you could. So there are definitely some opportunities and we've already seen your trend. Already Some of the agents have been telling me we're starting to see some of our buyers come in with gifts or the families giving them the money. So I don't know about you. I need to get adopted somewhere. I need to find that family member that I can join that family.

Speaker 1:

I've shared the story many times that while I love Pat Riley's message, I don't like giving it when my children are in love. But I think here's the other piece of it and I really like where you just went. One of the reasons builders have had some success is because they're buying down the interest rate. So maybe I go in at $400,000 and I maximize the contribution and I buy down. Maybe I put half towards buying down my mortgage and half towards some closing costs. Like, just don't think about a traditional negotiation, take your six and three quarters down to five and three quarters. It is interesting.

Speaker 1:

I did read an article because I know what did we say back three years ago. What'd they say Date the rate, marry the home, date the rate. And one of the things that's happened is we always said interest rates are temporary and because it's been in and around the same percentage for three years, some people that bought three years ago, two and a half years ago, that kind of figured they would rebuy. They're in a little bit of a, they're kind of caught because it hasn't done maybe what we all maybe thought it was going to do. But think about as a buyer in your negotiation. Get that rate down. Get that rate down as part of the negotiation.

Speaker 1:

Seller will feel good because they're getting their price Right. There's some psychological effect of that. So, this great wealth transfer, how can you our listener leverage that knowledge in a way that you're comfortable sharing with that first timetime homebuyer without, I'll say, kind of inserting yourself in a familial financial situation? But the need to. If you think about $84 to $90 trillion and you think about $40,000 to help somebody get into a home that's your child or your grandchild, there just seems to be an opportunity to help. I'd like to move that first-time homebuyer age back into the high 20s, right, and we got to get it from 24% to 32%. That will be super healthy for the real estate market.

Speaker 2:

Well, and I think the question to add to our vocabulary is have you considered asking for a gift from a family member, a parent or a grandparent, that would help you with your down payment? And with lender approval? You got to have the lender go through this, but it's something that we have not talked about in the last few years, but it's a great point.

Speaker 1:

Tony, I know you just did a great road show with one of our colleagues who really is shared from a new construction perspective that you think our audience really should pay close attention to, kind of thinking about Q2, but more importantly, as I kind of create my plan for Q3 and beyond, yeah, and let's give him a shout out.

Speaker 2:

It's Jason Smith with our Smith marketing team. He's my partner in crime this last roadshow we did. He handled all the new construction while I handled resale. Our takeaways are a few. One is the new construction market and the resale market are going in the same direction for the first time in over a decade, and what I mean by that is during the pandemic. It's kind of like the cars the new cars versus the used cars. New construction got really, really knocked out in 08, 09. And it's been a slow recovery. Well, during the pandemic, all the resale homes kind of moved so quickly off the market. The builders came back in strong. Now we're running together.

Speaker 2:

Second is concessions is the big thing he talked about. Second is concessions is the big thing he talked about. I don't know why this is a number, but he and I both believe $10,000, especially in a certain price point, seems to be about the average concession that could be right now. You can get some really good appliances, blinds, curtains. You know there are a lot of things you can get or you can apply it to like you talked about a buy down, you can apply it to like you talked about a buy-down and some of our builders do have partnerships with some mortgage companies that they just have some really strong mortgage rates but they are getting. Now let's go back to our stats. With resale 98, 99%. Builders are still getting 100. The average was 100, but they have a lot more concessions than the resale. And, depending on when you go into a new construction inventory for a buyer today, if you're going into a new subdivision that has finished product, you might get a better deal because builders are wanting to move those inventory right now.

Speaker 2:

Now the custom build, you're probably not going to see any differences right now as far as an advantage because you're custom building it. The other side of that is everything has gone up. We talk about the tariffs, we talk about immigration, we talk about all that the cost of building a new home. I know I'm going off a fast pace here, but this was a number that really threw me.

Speaker 2:

That Jason told me 10, 15 years ago you could really go anywhere and price a new construction about $150 to $175 a square foot on a custom build. Today that number, based on everywhere he's been $275 to $300 a square foot. So we talk about the real cost of building a house. It's really doubled in the last, say, 15 years and that's a sticker shock for people who come in and go I want to custom build a home. Their expectations of what they can get versus what it's really going to cost is a process because of that. And when he told me that I was like $300? He said, yeah, $300 a square foot to build that $500,000 three-bedroom, really customize it the way you want to and it's just expensive today. But the inventory of new construction. You're probably going to get some really strong advantages in shopping today.

Speaker 1:

It's interesting. I told you I had a chat with a guy yesterday and he threw out. It was so interesting. You say that he threw out. He said I find it hard for me to pay $300 a square foot for new construction. It's so interesting how those same numbers right. So let's move off new construction. One of the things that I look at all the time and I looked at it this morning is I'm a big fan of University of Michigan, consumer sentiment and the reason I'm a fan of it is because it's one of the few economic indicators that doesn't tell you what happened in the past.

Speaker 1:

It does its best to predict kind of consumers' beliefs and behaviors for the future. Now let's call it what it is, just to give you a little education. 84 to 90 is like really good. You know, in March and May of 19, it was over 101. The June of 22, obviously, inflation at nine one, interest rates topped at seven and then 8% it was at 50. And so what's interesting is we've had five straight months of consumer confidence growing. But again, it's all about perspective. It went up in July. It went from 60.7 to 61.8. So while it feels better than 50, it certainly doesn't feel as good as 84. And here it says the sentiment is highest in five months. But consumers remain cautious without visible assurances from some of the issues, whether it be war or trade policy and some of those things. Yet one of the other things that I think is important when we think about the housing industry is what are the other?

Speaker 1:

markets doing Because real estate is an investment To many people, it's their number one single investment and gosh knows it's performed very well right since 2019. Just for our listener, you know, through six months the Dow's up 4.2, the S&P up 7.1, and the NASDAQ up 8.2%. So you know, again, there are headwinds and tailwinds as we evaluate. You know one of the things I think about often, with the Dow at 43,000, tell this story over and over again, tony my sophomore year at Bucknell, I was in a money and banking class and in February it was 1,034 was the Dow, and by the end of the semester it was 1,176. We had been given this money to invest, to see how we did against the index.

Speaker 1:

Right Now, I'm not suggesting today the Dow is the be-all, end-all. A lot of people will kind of look at the S&P as a much more kind of specific measurement. But again, I think we have to remember there's headwinds and tailwinds and I think you mentioned earlier they call it the interest rate lockdown. You know there are people that bought, got an amazing interest rate. They realize today, tony, that maybe the house they bought wasn't the perfect house, but they got caught up in it. Their circumstance changes. They have children, they. You know a lot of things happen, but the good news about our industry is there are still 10 reasons that people want to and need to move and it does look like we're on pace again from a national perspective to hit that four million existing and kind of 650, 690 new. You know I think everyone was hoping it'd be five total, five, one total, five, two total. You know we're going to be at four, seven total between new and existing. I did read recently that Lawrence Yun has I think I pronounced that right.

Speaker 2:

I always use that up.

Speaker 1:

Chief Economist for the National Association of Realtors is kind of going out saying that 2026 should be a really good year in the real estate industry. I don't think you and I are ready for our predictions for next year. But let's take a minute as we wind down. Tony, just what you think from your perspective on the second quarter. Do you see anything changing dramatically? Or, excuse me, the third quarter? Your crystal ball tells you what in the third quarter.

Speaker 2:

Well, just based on the activity we're seeing in all the markets across the board, I think third quarter looks to be, in my opinion, going to be the best quarter of the year. So typically, traditionally in our market, second quarter is always the best because we call it the spring market. We always have that momentum. The first quarter dictates where the second quarter is going to go, and the first quarter was a little slower off, more than we thought it was going to be, and I think a lot of it was around some uncertainty as we talked about in the economy the second quarter I think things leveled off, stable at all. I mean we had mortgage rates, didn't move. The stock market recovered from its first quarter, came back up, so that helped some confidence.

Speaker 2:

Job growth We've had a lot of job growth announcements in the Carolinas, which has been very good for us. But I think, just based on the stats third quarter, more listings in the sales space we just looked at slowly growing I do think third quarter is going to be strong, a lot better, and I think some of these stats we've been talking about are probably going to start leveling off. They've been going up, up, up every quarter for about two years now, shifting back to balance. I think the key question and I'm not smart enough to even answer this question are we going to dip our toes into a buyer's market? That's the number one question and I don't see that right now. I think it's going to stay balanced, but if some of these trends just continue, you could dip that way. But the third quarter, I don't think we will. I think it's going to stay a lot of what it is right now. It's simply a good time right now period for buyers and sellers, based on the numbers we're looking at.

Speaker 1:

So I was just about to say what you just said, and that is I contend that it is a very good time to buy any very good time. I believe that I think as a seller you know I still have an inventory is to my advantage. Month supply of inventory is to my advantage. The number of buyers still to my advantage. I better price it right, I better declutter it, I better stage it, I better do all the things. I better not rely on the closing of four months ago or two months ago, but look at my active listing inventory and see what I'm competing against today or Saturday when I have my open house. And as a buyer, I've got more choices, which means that I'm going to be able to not get caught in the frenzy of a Saturday where I've got to make a decision, and I think that's good. I get to study the market a little bit. We've just shared a strategy for buyers to use your negotiation to buy down an interest rate to give you more comfort from an affordability perspective.

Speaker 1:

So we're going to close out, tony, we're going to do a little role play to our video, which we don't have a name for, but for today, until marketing tells me it's going to be about four times a year. Tony and I are going to do a video. We did a 24-minute video. The other day it surfaced on social media. Tony and I laughed. We said you know we never listen to these, that we do. And we both watched that one and we both text each other. That was kind of better than I thought it was going to be.

Speaker 1:

But our whole topic was read a headline and then disprove it. So let's give our listeners a little taste of what we talked about. So this is from realtorcom, july 17th. Today is the 21st. I want everybody to think about what we talked about Inventory up month, supply of inventory average three Prices up average two to four. There's all kinds of good, healthy, balanced news. Here's the headline Buyer pessimism over economy sends chill through the summer housing market Okay.

Speaker 1:

So that's the headline and it says summer typically sees a surge in home sales. We had a very good June. We've gotten off to a good July. The first quarter was not particularly good. In the second quarter the spring was a little delayed. I think is that's because I'm going to agree with you that I think the third quarter is going to feel much more like the second quarter.

Speaker 1:

So if I'm reading, I think about this and Tony and I got laughing because there was one article called Charlotte is a lose lose real estate market. Tony and I rewrote it to it's a win-win. And we talk about reset. We love the one about mortgage interest rates surge and Tony used a great example that you know surge was when it went from three to seven. That was a surge. You know six and a quarter to six and five eighths and you know it doesn't say surge up, like they could have surged down and again headlines are really problematic. Yep. So, tony, based on all the data you've studied and shared, you've been out on the road. Buyer pessimism over the economy sends it chill through the summer housing market just fact or fiction.

Speaker 2:

Fiction, just the complete opposite of everything we just said. I mean, it's just the numbers. Don't support that headline period. It. Here's a headline for that. Your paper is insanity, you know who wrote this, so anyway.

Speaker 1:

So I'm going to give, first of all, thanks to our listeners. Tony and I love doing this every quarter. Tony does a great job of really digging into the numbers. Let's wrap a bow around it. Tj, give one, two or three things for each of our listeners to really take to heart going into Q3 in their business. Give us a couple of takeaways and then I'll do the same and we'll wrap a bow around today's reality podcast.

Speaker 2:

Well, I'll give you two. One is pricing is the most critical and most difficult thing we're doing right now. But to get houses priced right in the beginning with the right condition is going to equal success. I mean, think about that Two or three years ago you could put whatever price you wanted on a house and just see what happens. You cannot do that anymore.

Speaker 2:

And the second is is I think this affordability is a big trend, meaning that I think there are many buyers today shopping by mortgage payment, monthly mortgage payment more than they're shopping the price of the house. And if that's the case, I need to be positioning that property for the monthly payment. I need to be putting materials in the the monthly payment. I need to be putting materials in the house that at this price, we will help you with this mortgage, we will buy your rate down, et cetera, et cetera. Because that is what is the sweet spot for a lot of buyers today. Especially when I'm shopping rent to mortgage, how do I position it differently? Because I've got to attract that buyer that, as we, you and I talked about that 36-year-old, it's a big deal and there are certain houses, certain neighborhoods that are going to attract that buyer. Position, that property for that Affordability is a big deal right now. Those are my two takeaways of what I'm seeing in this market.

Speaker 1:

Well, I'm going to double down on pricing, right. I'm going to double down on active competitive listings. You have to have a master's degree in it. And then I love your pricing analogy. I wrote down here when we buy cars, we buy for monthly payment, not the price of the vehicle, right? And what I heard you just say is in our industry, which has never really been built that way, is becoming built that way to some degree.

Speaker 1:

So my two takeaways are as a consumer, because one of the things about this particular podcast is we hope it gets to the consumer is. Number one is get with your trusted advisor, get with your real estate professional and learn the business, learn the numbers, understand your hyper-local marketplace. Don't fall victim of headlines. So that would be number one. Number two is think about, depending on where you are in your journey, if you are a parent or a grandparent who has the capability to help son, daughter, grandson, granddaughter in their home ownership journey.

Speaker 1:

I'm going to encourage you to evaluate that rather than leave them money over the next 20 years, and that could be the greatest single investment that you make in number one, in our economy today, but, more importantly, in your family. So I'm going to take a page out of Pat Riley's book about give now, not then. I love pricing, I love affordability, and make sure that you don't fall victim of headlines, but that you understand the content. Within TJ, it is always a pleasure have a great day and I can't wait for our next Real Estate Unhinged where we're going to go live with a video clip here, hopefully in the next 30 days.

Speaker 2:

Thanks for having me Enjoyed it. I hope everybody has a great week.

Speaker 1:

Yep Listeners Thanks. Without you there is no us. We appreciate you. Take care. Have a great week.

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Gary Scott

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