20 - Navigating the Home Inspection Period

Today your hosts Peter Murphy and Chase Clark take you on a dark and dangerous trip through the Home Inspection Period. here with the Buying Tampa Bay podcast. It’s a moment every seller dreads: You have a contract to sell your home, BUT there’s an inspection period. Your Realtor tells you that you’re not out of the woods until you get passed the inspection period because almost anything can happen when an inspector starts digging around. The inspection happens, then you wait in anticipation for the inspection report. Then it’s another round of negotiations again before you can move forward with your deal. Let your hosts be your guide through a process that can be filled with landmines.

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Transcript

Peter Murphy:  Hello, everybody, Peter Murphy, and Chase Clark here, with the buying Tampa Bay podcast. Everywhere you go, you hear dire warnings, these days of the imminent, crash of the housing market, a recent data points on inventory or prices is thrown out as proof positive that we're in for a meteorite collapse in the housing market of some magnitude that's similar to the crash that preceded, the Great Recession in 2008 and 2009 and people love to remind me of this fact too. I've got financial advisors and friends and ex friends and acquaintances all telling me to this crash is just around the corner and that I should hold on to my socks because of what's coming. But today with the same fervor as the naysayers and hopefully a little more evidence. We're going to tell you that the housing market isn't going to crash in Tampa Bay anytime soon. What do you think? Chase a little overconfident to us?

Chase Clark: Yeah, I don't know, man. It's hard to know what the Crystal ball is going to show over the next few months or even few years. But if you live here in this area and you've got your pulse on the housing market, it's hard to be negative. I mean, especially this time of year. I mean, these are chamber of Commerce weather days right here in January, right? Drove across the bridge. Last night. Beautiful open water, crystal clear, blue skies beaches. You know, one more, could you ask for, right? And that's what's driving, demand? And all these people flooding into the area. It's so hard to have a downturn, or a bubble bus, when there's so many people coming to Tampa Bay.

Peter Murphy: It demands a big deal, right? I mean, it's one of the things that are in our research over the last little while that has driven a ton of confidence on the part of most locals here, in the Florida area about the Florida market in general. But of course, Tampa and specific. It's hard to forecast, a doom and gloom scenario. When you have thousands of new of new homeowners, moving into the area every month, which is what we have here in the Tampa area. So, I think it should be said, right out of the gate between great weather and amazing economics and migration into Florida. We're talking about some local dynamics here, right? What we're saying does not necessarily apply to every state in the Union, we're talking about a Florida reality, the Florida housing market and more specifically the House, the Tampa housing market isn't going to crash anytime soon in our opinion because of some stuff. But other markets in the nation, may not be in for such a rosy outlook.

Chase Clark: Here. Yeah, you know, nothing there's a big difference between consumer sentiment and the facts of reality of what's actually going on in any market. Because if you turn on the local news every night and you're listening to rising interest rates, crashing stock market recession on the horizon, all the bad things going on, that's gonna play on your psyche, right? And so it's really easy to fall into this trap with the media of thinking, that doom and gloom is on the horizon that we're in a bubble. It's gonna burst and it's gonna be just like 2008 again. But there's so many reasons and I think several that we're gonna talk about today that we just don't think that's going to happen.

Peter Murphy:  So a couple statistics I think are really important just to throw out to you know first understand in general about Tampa Bay. I'm going to read these off my list. I wish I had them at the top of my tongue but in the Tampa Bay Area, we have three million people. That's just in the Tri-county area of Hillsboro and Pasco and Pinellas County about three million people and

Peter Murphy: Of that three million people that represents about 1.3 million households or…

Chase Clark: Here.

Peter Murphy: homes in our area. So it's a huge market, it's not the biggest market in the nation but with those three markets only we've got plenty of households, plenty of people in the area. Now, the growth rate in this region is just for Hillsborough County is expected to be 12,000 households per year for the next five years. So between now and 2016, we project in Hillsborough County that we'll see a growth rate of about 12,000 households per year. So it's very important to remember that kind of growth rate brings with it. Some intrinsic improved economics. Some massive new buying power an increased tax basis for the marketplace and all kinds of demand as you could imagine for our local housing. We're not in a market where people don't want to live. We've got lots and lots of people. Our size is our salvation and we continue to be desirable for people. Moving into the area, some important facts to remember right out of the gate.

Chase Clark: Yeah, and so when you look at that kind of demand with the number of people that are actually moving here, I mean these are not myths. This is not just something that you're hearing about, it's actually happening. You know, where do we get supply? Where do these people live right? For a while. We saw a huge housing boom. Here we saw builders building to beat the band. We saw apartments going up everywhere during covid that kind of slowed down and it slowed down for long enough that I think we're having a hard time catching back up, right? And so that kind of leads us into Well, where does housing value go a little bit based on supply and demand, Right? We've got so many people coming in, We've got shrink, We've got a shrinkage of supply compared to where it should be on a normal run rate and so prices have got to hold faster eyes. That's just the reality of economics 101.

00:05:00

Peter Murphy: Well, and add that to that reality. The fact that in our existing inventory, on the market right now, we don't have numbers of available listings to feed the influx of new resonances. So there's about 600 homes in this tri-county area that are on the market. As of right now that represent the median kind of home. And the median home that selling right now in Hillsborough County is a home. That's about three beds, two baths that's 1800 square feet and it's selling for less than 400,000. And so a home that meets that statistic there are only 600 of those homes on the market right now. So if we have an infant and that's in all that tri-county area, so often Hillsborough County alone, we have growing population of 1,000 homes a month and then create add that Pasco and Pinellas and so we're probably looking at close to double that there's nowhere, close to existing inventory to feed the demand for that increased that increased that projected increase

Peter Murphy: Apply in buyers. Meaning, builders have to be the band to build to beat demand in order to meet that demand. Boy. That was a tongue twister but you get the point in order to have enough homes to house. All these people moving in, We must have a surge in building in addition to a good stock of housing added to the market. And that is what we're seeing right now. But possibly nowhere,…

Chase Clark: Yeah, you know,…

Peter Murphy: close to what we need to see in order to meet the demand.

Chase Clark: there's several headwinds there because builders want to build, I believe, especially in this area where there is, is pent-up demand, but because we've grown so fast over the past 10 years in this area, county governments about a hard time keeping up with infrastructure and so they haven't been willing to release the kind of building permit, volume that these builders desire and that they need to meet this demand. And that just kind of adds fuel to that fire of lack of supply continued, strong demand for the product and so you know people are willing to bid up the price to get what they want.

Peter Murphy: Well, we did have some research and we have three major points that we think indicate that the housing market is not going to crash in Tampa Bay any time soon. And so let's go through those real quick for our audience today, and just kind of share what our findings are on that and increase. Maybe their confidence based upon some of these facts that were encountering. Number one, the foreclosure docket. Now, before closure docket is a current snapshot of foreclosure activity, but anyone who is in the market during the Great Recession

Chase Clark: Here.

Peter Murphy: Remembers a pact, foreclosure docket. I mean you would open up real foreclose and you would see what was being sold that day on the foreclosure courts and 50 or 60 properties. Every single day, in every single county we're going to auction and boy were these being snapped up fast and for low prices, right? We did a huge number of homes every day selling and that was because we had all kinds of default.

Chase Clark: and,

Peter Murphy: We had people who are selling these homes out equity. They couldn't hold on to them. And we saw just a huge volume of foreclosure cases in the foreclosure courts. How are we today? Compared to that reality?

Chase Clark:  Well, we're nowhere near that, right? Boy, I just had some fun memories of 2009-2010. You know, pulling that thing up every single day. And looking at that calendar I mean, it was, it was just like opportunity abounded while some were suffering, you know, and I think, you know, that was a sad time for so many people but a time of so much opportunity. And one interesting thing that I think is so different today than than back then aside from just the sheer volume of foreclosures that were available to buy at auction. Whereas today, we've got what, you know, two or three percent of that volume going on on a daily basis is that banks now or more willing to take these properties back. So even when these properties hit the foreclosure docket, I haven't looked at the actual statistics, but several days that I have looked at where the banks are taking it back, 50% or more of the properties, and not allowing them to sell because they feel like the properties worth more than

Chase Clark:  Investors are willing to bid for it. Well back in 2009 and 10 you didn't see banks taking back any properties. I mean maybe one or two a month it's because they had to clear their balance sheets they were in bad shape. They had regulators coming in and they had to get cash in the door to satisfy the reserve requirements that they had, which they couldn't meet back, then during the banking crisis. So you've got another competitor in the field and that's bank. So properties aren't selling nearly at the volume. They are even if they do hit the docket today but volumes are just way down, right? Way down for many reasons. But people are not having problems of forwarding their homes. Right now is really the message.

00:10:00

Peter Murphy: Well, that's exactly right. They there they have huge amounts of equity in their homes and so they don't want them to sell it foreclosure because if they do, then whoever buys that home up. Well, they're getting a really great deal in all likelihood. And the buyer is walking away from some serious equity that they have in the property and they're not wanting to do that. So we went back and took a snapshot of what some sales were over the last few days and it's not uncommon at all for us to see if foreclosure day where zero homes have actually sold at auction but maybe we see a day where one or two or three or four sell and what's in very interesting, dynamic, you'll see. When you look at these foreclosure dockets, is that four might sell but eight. We're supposed to sell. And on the last minute, four of those buyers, or those owners of those homes who are supposed to lose their home in foreclosure that day, negotiate some kind of the release from the lender.

Chase Clark: It.

Peter Murphy: They either get a stay of foreclosure or they file a bankruptcy. So they have time to Negotiate their mortgage, or they negotiate a modification to their mortgage. So that the more, the lender drops, the mortgage suit, the foreclosure suit. And so, a whole lot of activity like, that is going on. So that people's that borrowers, who are nearing and facing imminent, foreclosure are not actually going through with the foreclosures at all. It's not in anyone's best interests, and certainly not there for that home, to be taken off their plate. And so literally, we're seeing almost no foreclosures happen and in a given day, but where we do see foreclosures, What are we seeing in terms of the value of homes? Are we seeing these home? Sell at like steals of deals or people are picking up fantastic product, at great prices. Are we seeing something else?

Chase Clark:  Yeah, it doesn't appear. So I mean, you know, day by day when we look at what's available out there, you don't know what a home's gonna sell for in any given day. But then, when you look at what the auctions actually closed at, There are investors out there that are putting a lot of money at risk to buy properties. Very close to market value at the auction that still need a lot of work. And also still may be occupied by the borrower and have other costs with attorneys and eviction fees and things like that to go along with it. So buying it a foreclosure auction, number one is a risky thing to do so you would always expect to have some kind of significant discount to market value but we're just not seeing that these days. I mean you've got it, we've got several examples of the home selling for you know 85 to 90% of market value at the auction. and then requiring significant repair and that's just wasn't happening, you know, 15 years ago

Peter Murphy: So more than anything, it appears that people are using the auction as a opportunity or a place where they can actually buy a house relatively quickly. Because if you look at the public exchanges, well, there's a whole, not a whole lot for sale on the public exchanges right now and you can't certainly buy things very fast there. There's a window of time, it's required. Usually in excess of 20 days in order for you to close on a home that comes on the public market. Plus if it's any good you've got negotiation happening on it which is driving that price up. And so what it appears to be is an investors are using the up. Foreclosure auctions as a place to go to get a house today that they might need to spend money right now or to target at home. That's closing in their community which they really want to get their hands on. It's their familiar with it, for some reason they've been watching to watching it and now it's going to the foreclosure courts and they're buying that not a tremendous discount at all, but they're just getting their hands on a house. And for many investors that's an important thing to do. As they try to spend the money, they

Peter Murphy:  Allocated for that strategy. So interesting to see that dynamic. So really what we're saying in all of this chase unless I'm mistaken here is that we need to see a surgeon foreclosure filing along with a major loss in home equity, for the foreclosure markets to present, a significant challenge to us once again for us to look at this and say, Hey, this is imminent that we're dealing with a major housing crash sometimes soon. And what we're seeing is just nowhere. Close to that, we're not seeing the volume of homes on the foreclosure. And a docket, we're not seeing home selling that seem to be bereft of equity, and we're seeing people pay market value for homes. The foreclosure dockets do not present a current reality of a housing market crash.

Chase Clark:  Yeah, you know, and we've heard the term bubble so often over the past two years and how we've got this covid housing bubble, right? And they define the bubble as a rapid rise in asset prices and we have over the last two years seen rapid rises in home prices, throughout Tampa Bay. But so many people are looking to the foreclosure docket as the litmus test of the bubble bursting. Right there, they're looking for that event to happen. We're foreclosures balloon and therefore the bubble bursts. And we have a huge correction to the market. And you know, I think we're definitely saying we don't see that yet and we probably don't see that coming in the future either because of all these dynamics we've discuss

00:15:00

Peter Murphy: Right. And even if we even if we're concerned a little bit about default, which we are we suspected if there is a widespread recession and accompanied job loss, you might see an uptick and default and default takes about a year for it, to hit our foreclosure dockets.

Chase Clark: You.

Peter Murphy: We're saying that. Even if that reality that or that that dynamic is a reality, it's a year plus out. And that gives significant time for various market factors to kick in which would alleviate this concern. For example, we might not see a continued drawn-out, high interest rates on mortgages and so if we see mortgage interest rates fall in 2023 and demand, take up for homes naturally and people who might be facing default due to foreclosure have an option to list their home for sale on the market. And for there to be ordinary market buyers, that would come to that come to the rescue and those scenarios and take those homes off their hands. So a lot can happen in a year that would dramatically improve the prospects of foreclosure for People who might be affected by a recession today.

Chase Clark: Yeah, that's true. And so what we see flight from the area when that happens, that'll be the question, right? Is, Will people leave the Tampa Bay market and head to a tertiary market like Central Florida or somewhere like that, where they might see a 10 to 15% reduction in their cost of housing. You know, that that'll be the question and so much of this is predicated on. Are we gonna have an economic downturn in this country? How hard is it gonna hit unemployment? And are we gonna have a wage and affordability issue when it comes to housing for people in Tampa Bay and so much of that is up in the air. But when we look at those dynamics in the in the economy right now, it's so resilient. I mean, unemployment is still at the some of the lowest levels. We've seen interest rates are falling. Affordability is kind of hovering, you know, right where it should be. And so all that's kind of looking up. As far as you know, are we gonna have catastrophic default? The economy is doing us a lot of favors right now, saying, probably not.

Peter Murphy: Well, reason number two that we suggest there might not be a crash in the housing market anytime soon. They're probably won't be a crash. Is this concept of inventory levels and climbing prices, right? So we keep hearing that we're in a really big bind right now, because inventory levels,

Peter Murphy: So incredibly low and because so few homes sold last month, really? That's that, that's the common by word is that 40% decrease in home sales, this last month and everyone there's like, Oh my, we're in for a housing market crash. But what we thought we would do is take a look at a representatives, a zip code in Tampa Bay one that kind of has a nice mix of homes and it might represent. What's going on generally in the market. So, we went and looked at the new Tampa, Zip code of 33647 and that includes Tampa Palms and West Meadows Cross Creek, much of New Tampa live oak, things off of that extension of of Bruce B Downs. If you're familiar with our area, it's all the suburban homes that are in that area. Lots and lots of housing. So, what we discovered was that as of today, there were a hundred and two active homes for sale in that area. And in the first quarter of last year, 184 homes, sold. So, compared to last year, 43% fewer homes for sale

Peter Murphy: That's a big number. That's the kind of number that everyone's talking about that represents a housing market crash. But here's the reality Econ. 101 teaches us that a shortage in supply leads to increased pricing not a crash. So chase is that what we've actually seen have? We seen pricing go up in response to this drop in inventory or you…

Chase Clark: Yeah. Well percentages are dangerous right you know a 43% sounds like a big number…

Peter Murphy: nail biting isn't going down.

Chase Clark: but in reality when you look at the actual numbers you know a hundred and two homes for sale 184 homes sold in the prior year, you're talking about a geographic area. And this zip code were 200,000 people live, you know, there's a lot of homes in this area and to only have 102 active homes on the market right now. Far below what this area is going to need to sustain normal, turn of move-ins and move outs, not to mention the new people that want to move to this area.

Chase Clark: So you're you're exactly right. I mean shortage of supply you know, is going to lead to increased prices. So you know, the median price right now, being 213 dollars, a square foot up 4% year over year from 204 Square. So we've seen this, you know, it's not the 15 20% increase as we saw during covid year over year, but four percent is a very healthy rise in price for any geographic area. You know, and one year's time so are we churning in the right direction?

00:20:00

Peter Murphy: Well, 4% is an interesting number,…

Chase Clark: I definitely say so. And a lot of this is because of supply and demand.

Peter Murphy: right? Because Realtors in the Housing and National Association of Realtors has long, put out 4% as a normal real estate growth appreciation rate. And so, if what we're saying is that right now in the midst of a market where interest rates have been at least for the last few months on the rise and we're getting the constant drum beat of an impending recession and people are preaching housing market, correction, like it's the end of the age. We're still dealing with a normalized appreciation rate of homes.

Peter Murphy:  And that's a remarkable thing. You would think at the very least, we would be in a market where home prices are even and if we went out there and pulled the general populace, my sense is that people would tell us that home prices are rapidly falling, which is not the case at all. We're looking at this market and we're seeing an increase in home prices over this time. Last year. Now we are seeing a small flattening from peak pricing and so peak pricing hit roughly the summer of 2022. And here we are in January of 2023. And we've seen a slight softening from peak pricing somewhere around the 1% mark. But man,

Peter Murphy:  That is not a housing market crash. That's not the precursor of a housing market crash. A 4% increase in home prices year over year is nothing close to a housing market crash. What we're seeing is is that we have a shortage of inventory people can't buy homes. People are reluctant to put their homes on the market because, well, they don't know what we're going to be dealing with from buyer demand. If interest rates, remain high and so they're holding their homes off the market. And that's why we're seeing such a decrease in inventory by. We're seeing so few homes. So, because simply put, there isn't enough to buy, but what is selling is selling at higher prices. Unless I'm totally misreading this higher prices does not make a home crash.

Chase Clark: No, it makes a market softening. That's what it does, right? It says, so some people we get like this, right? So we saw the year over year inflation rate. It almost 7% right? For the CPI South So if you've got inflation last year, like I think it was six point eight. Six point nine percent and home prices only go up four you're like oh no home price they're not keeping up with inflation.

Chase Clark:  But it's so dangerous to lock into very short periods of time when you're looking at trends in any market, right? And that's no different for housing. I mean, if we go back to 2019 and you look at the beginning of 2019, to the end of 2022, we've got an awesome run up in housing prices, during the end of 2021, in the first part of 22, but 2019 started out very stable, and, and the end of 2022. And so far, beginning of 2023 again, very stable. So, that's what markets do, right? They go up, they go down, they they become fiercely steep and then they kind of table off a little bit. And so we are seeing a softening, right? We can't go out and demand top of market price and have bids coming in over ask like we could back in the summer. But does that mean that home prices are dramatically falling and are they falling below where we expected them to be before this giant run up? You know, I think most people would say no.

Chase Clark:  Does it feel good if you're trying to sell your home now? And wish you would have sold it last summer. No it doesn't and so that does play into the psyche of every seller thinking Well okay I missed the market I missed the peak right but so many people miss the peak it's it's the anomaly for people to hit the peak and I think that's an important thing for people to learn and not get discouraged by when they're looking at a market. Then maybe feels a little bit less exciting than it was six months ago.

Peter Murphy: So we're in a whole market here in Tampa Bay that is received roughly. There's the receiving end of 10 years of home price appreciation, studies home, price, appreciation, and three years of extremely strong and outsized home price appreciation. So what we're really going to have to see in order for us to attribute a market, correction or a substantial market. Correction to Tampa Bay is we're gonna have to see a drop in home prices year over year a big one enough with price trajectory. So that means downward falling of prices substantial enough to erase many years of appreciation. Depending on when the average person has bought their home. And right now, the average duration of homeownership is an excess of seven years. So you're imagining for yourself for most folks to be in a really tough bind. They must see turn downward trajectory of home prices for a long enough period to erase all of their games and that is many percentage points of price.

00:25:00

Chase Clark: You.

Peter Murphy:  Line. Let that happen for a long enough period of time and you might have a scenario where a market correction in a more substantial, one could ensue but a 1% drop from peak a 4%, rise, that is absolutely not where we are. It's reason number two or I just don't think we're gonna see a correction in the housing market or a crash in the housing market anytime soon here in Tampa Bay.

Chase Clark: Yeah, see me. Ask yourself. So if you're a homeowner, why are you concerned, right? Why are you concerned that prices are no longer going up 10 12, 15 20% every year, right? And you may be looking at your home equity thinking, Oh, you know, during covid. I took out that fifty thousand dollar heloc, so I could put in a pool or put in an outdoor kitchen or remodel my home, my bathrooms, whatever. And so I took on that additional debt to my home and now my equity is not rising. Like, it was, you know, I took that out kind of on the forecast, the things would keep going and I really wasn't doing any damage to myself from a, a net asset position by taking out this, he lock well, you know, you're still in a good spot, you know, don't panic, right, you know, homes haven't dropped 30% and one month like they did back in 2008, right? We don't see that happening. It's not going to happen for all the things we've talked about now, plus the fact that people do have a lot of home equity and home equity is that

Chase Clark: That protects homeowners from being foreclosed.

Peter Murphy: Right. Home. Equities Point Number three, right? I mean, this is the third point, why we're not going to see a housing market crash? I mean, think about the last 30 days, in our last 90 days, in our local market, right? We've seen somewhere along the vicinity of 400 homes sell of those. 3,400 homes 2400 that's 72% of all the homes that have sold in the last 90 days have sold with either cash, financing all cash, purchase or conventional financing, A conventional financing scenario, is a person who's got to put down at least five percent for the value of their home. But many conventional loans are an excess of 20%. So let's put that into raw numbers right out of the 20 of the 3400 sales. Last month, 700 of them were all cash people who just put down cash and bought their house that a single mortgage and the remaining 2400 of them are sorry. They're remaining. It's actually 1400 of them. We're purchase.

Peter Murphy:  Conventional financing. That means people have a ton of equity in their homes. I mean a whole lot even if they've taken out an equity line of credit to fund a remodel or a pool addition, they're still looking very, very well as far as the percentage of equity they have in their home, compared to its value.

Chase Clark: That's right. You know, some recent statistics put out by the Department of Housing and Urban Development, say that across the board. There's approximately 15 trillion dollars of home equity in the United States. 15 Trillion in a housing market that is worth approximately 26 trillion dollars. That means on average a homeowner has around 57% equity in their home. That's a pretty amazing number, right? Considering that most people only put 20% down at best. Some people only put three percent down when they acquire their home.

Chase Clark:  But over time with appreciation and with continued pay down of their debt, they've accumulated 15 trillion dollars of equity in this country. Right. You know, that's an amazing number astounding, right, and what's crazy, is so much of that is being stored as a retirement account for so many Americans, right? That's our biggest asset is our home and it's our biggest source of income that retirement is going to be or inheritance to pass on to our children. Is this equity peace in our home? I mean it's staggering numbers, you know, when you think about it as a whole of what we have in this country and what housing has done for people and can do for people in that regard.

Peter Murphy: It's an absolutely huge number and to put real numbers on it. I mean, there's reports all over about what that number could actually be. But one that I read recently was the average home buyer has 185,000 of equity in their home. The average homeowner that's a huge amount of money 185,000. And so, when you have a median home sale price is somewhere in the 400s. Right now, you've got the average homeowner with almost half of that home value is equity in their homes. They're very, very well positioned. But you know what shakes everyone in their boots is that we get these reports about a correction in home prices. Let's say home prices fall from peak by one, two, three, four percent. And then they look at these multiple trillions of dollars of home equity and that's a splashy headline, isn't it? The housing market loses 50 billion dollars in home equity this month as home prices fall, three percent from peak, right? That's the kind of absolutely dishonest completely alarmist reporting that we get all the time.

00:30:00

Peter Murphy:  Our flagrantly, unhelpful media, as they tried to ramp up fear in equity, but the equity picture is not a fear-based picture right now. Generally speaking for most folks, the whole equity picture is a wonderfully wealthy picture there their household wealth is heavily connected to that, but it's a very large number for most people in America right now. Unless you're a person who's bought your home at the absolute Peter Peak of the housing market four, or five months ago, right? You're a person. Maybe who that home equity picture doesn't look quite as good for right now. What do we say to people like that? I mean for we've been saying it since the start of this podcast, Be patient. Don't rush a selling decision just because of a splashy headline saying that you've lost some home equity, Hold on, Even if you bought at the peak of the housing market, a duration of time will pass where you will be very well positioned in your equity picture. It's just not going to

Peter Murphy:  Be fast. It might be a few years. It might be as many as 10 years, just hold on, and don't make a hasty sale decision. That would put you underwater in that equity equity picture.

Chase Clark:  Yeah, you know, and I think one thing to reassure people is when you look at the fundamentals of owning a home. You know, what's the first rule of real estate rights location location, right? Think about where you own your home. And think about how many people are moving to this area and think about how much vacant land there might be or really not be around you to build additional homes. There's probably not a lot of vacant land to build homes around you, people want your location.

Chase Clark:  So that inherent demand for what you've got is going to continue to make your asset more valuable over time your assets going to increase in value. So patience is the key, right? What we go through some some peaks and some some troughs Of course, we will in the market but with all the things we've talked about that we have going for us here in Tampa Bay with all the people moving to Florida for the wonderful economic environment that's presented here, with the bustling and expanding new airport. We have that allows travel in and out of this area. The beach is the base. All these things, there's so much inherent value in Tampa Bay. That has just started to be realized over the last two years and you know, starting with the covid pandemic. and so, Don't panic. There's, there's plenty of people in this market that want your home and will be willing to pay what you paid and even more, if not today, in the, in the days and the years to come,

Peter Murphy: Well, one of the key elements of the last housing market crash was defaulted, mortgages with insufficient equity, we had people who could no longer afford their home, their mortgage. They didn't see a way out because the value of that home was well below their their equity picture. And so, they, pretty much was a liability to them. It was not an asset at all. And so those people default it at higher rates than people who had equity in their homes. That is not the place where at today, and in order for us to see a major surge in foreclosures, we're gonna have to see a massive erosion of home equity, almost the tune of 50%, In many cases given that the median sole price is somewhere around 400 and the median equity is 185 People have got to lose almost 200,000 value $200,000 in home equity before they're in an underwater position, which is not even the most dire prognosticators are saying,…

Chase Clark: You.

Peter Murphy: is likely. Here we will see a price correction potentially from peak, it will not do Anything to erode equity in a meaningfully substantial way for most people and we're simply not going to see a crash in the housing market because the home equity picture is way too good for most.

Chase Clark: Yeah, so much of this is really psychological. You know, when you go back to it Three years ago we were buying homes in the Temple Terrace area for 160-165 a square. You know, that was that was Max appraisal three years ago now we're at 2:20 a square. We're up 35 40 percent and for people that have been around a long time, that seems like an outrageous increase, right? It seems like Wow you know I paid 250,000 for my home.

Peter Murphy: If?

Chase Clark: Why would someone want to pay for 50 for it now right? Those kinds of head games are interesting, right? But they exist and they affect the psychology and the psyche of people in the market and they get people thinking that things shouldn't be the way that they actually are, right? And that's why in this episode, we're trying to address some of these statistically factual fundamentals of where the market actually is and why it's there, right? So many, so many media outlets are trying to get everyone to think about the extremes, but really in reality,

00:35:00

Chase Clark: Everything comes back to market fundamentals and why things have happened the way they've happened and with supply, with demand, strong economy, home equity, all of these things bundled together, you know, present us with a pretty good picture right now. A pretty good picture. Now in a pretty good picture going forward. This is not 2008. I have I have not been able to get a ninja loan in 15 years, right? Right.

Peter Murphy: Thank goodness for everyone.

Chase Clark: Yeah. I mean like Yeah what was it 23% In the last 90 days? 23% of home purchases in Tampa Bay were for cash.

Chase Clark: Entirely cash, right? And another 72%, put at least five percent down that wasn't happening.

Peter Murphy:  Right.

Chase Clark: In 2008. We're putting nothing down and we had no job, right? We had a decent credit score, we had no job and we had nothing to put down and we still got a home. No one's been able to do that for a long,…

Peter Murphy:  Yeah, it's such a scary.

Chase Clark: long time.

Peter Murphy: That's a scary reality that that was going on. That's not where we are today, anywhere close to it. I just like to remind listeners and I think this is where this is my piece of advice to you. As you're listening to all of this, and then you're juxtaposing this against everything that you're hearing in your social media feeds. And on the news, real estate is a long game, right? Time will heal mistakes, that you make in your real estate decisions, whether that's investing in real estate or in your primary residence. So, I've been at this for 23, 24 years, many people in who are listening to this show of an ad for a lot longer than that and every one of them will attest to you.

Chase Clark: If?

Peter Murphy: Just hang on. If you're concerned, if you're worried, take a step back, take a deep breath. Turn off some of the day saying news and allow the markets to play out, allow the scenarios of of whatever it is. We're in for right now. As far as a recession goes to run its course allow demand economics to continue to buoy the market as they will watch as Florida continues to make Good economic policies, that attracts great demand into our state. And all those factors will lead to a correction and a recovery in your pricing in the years ahead. Just be patient and don't panic, it's going to be okay. And I think the three reasons we've given are absolute iron clad reasons why you do not have to be worried in a crash in that Tampa Bay housing market anytime soon.

Chase Clark: Yet, if you're sitting on home equity, just remember that at the, if the economy does face a downturn, and a recession does come by chance being in a fixed asset and having equity in a fixed asset is where everyone will tell you to be. Okay. So sit on your home equity, use it opportunistically, but be careful, and you may not want to put in the stock market because you talk about a volatile market where you can lose everything overnight. That's your market.

Peter Murphy: It's exactly right. Chase? Where can people go to learn more about all this?

Chase Clark:  Hey, check us out at homeprop.com.

Peter Murphy:  It's been a blast always great talking with you about these really important things. And until next time, you take it easy

Chase Clark:  All right, have a good one.