Sh*t's Expensive/Affordability in Real Estate

In this episode, we unpack why so many people are feeling the pressure of today’s market — from rising costs to interest rates — and what it means for buyers, sellers, and anyone thinking about making a move.

It’s an honest conversation about the realities of real estate today.

The living you podcast is a conversation about life, real estate, and the journey of living you.

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Transcript

SPEAKER_00 0:01

And here we are, Rich and Jess Living You Podcast. We are coming into a beautiful spring. Today is 57 and rainy. I will take it because it's not cold. So, Rich, top of mind right now, we've been talking about gas prices this morning. Uh $4.10 a gallon in Oneanta. Um and it yeah, we we kind of think maybe we should start talking about the cost of things. Um affordability is a huge thing we talk about uh when we do market Mondays and just kind of look at the real estate uh industry in general, how affordable really is it? And you know, the price of gas factors in. So that would be our topic today. And Rich has done so much more homework and research and is so much more knowledgeable. So he's gonna case this time.

SPEAKER_01 0:50

Not the case this time. He's gonna lead the charge. We're just gonna let it rip. Um no, but we it is it well, it's super it's super in the moment, right? And we can we can kind of skirt the the reasons why at least some of these immediate prices are increasing. But at the end of the day, I think I think most people who are living an everyday life in the US are are starting to feel the pinch in various things. I mean, and this is not new, prices have been up for quite a while. Um, I I mean we're gonna have little anecdotes throughout this, Jess, but I remember, like, again, these are little things in life, but I used to I I love to I I actually grocery shop. I do my grow my own grocery shopping, and I'm I'm in the habit of going like multiple times a week. I don't I don't have the bandwidth in my life to go and just do like one big haul once a week. I'm just I'm thinking, oh, I I need this or that, I'll grab this or that, and then I grab a few other things. Anyway, just one of my things I like is Alfredo sauce. I like a nice, a nice jarred Alfredo sauce, like in my in my pantry. And so I was restocking, and I used to be able to get like one of these little jars for like a dollar like eighty-nine or something like that. Pretty typically up and down a little bit. And then I went like three weeks ago, the thick little jar was like $3.89. I'm like, why did this thing like more than double in price? Um Alfredo source.

SPEAKER_00 2:06

No.

SPEAKER_01 2:06

My like it's just a small example, you know, but but stuff like that is happening all around us. Um, yeah, and obviously with uh stuff going on uh overseas, we're now we're now seeing the oil prices increase. So everything's a pinch. And of course, Wortland Real Estate, and we hover in this in this world where we deal with both buyers and sellers. So we really do see both sides of it where you know we talk when we look at our data, we always see, especially right where we are, this continued price average, average and median home price continues to go up in a really healthy way, 7%, 8%, 10% uh compared to a year ago or whatever. So on this rolling basis, our values are increasing. Now that's great if you own a home, but uh conversely, it's not great if you're trying to buy a home. And you couple that with those other things we're just talking about, the everyday expenses of life. And then a lot of people in New York have been hit with uh highly increased electric utility bills this last year as well. Right. And everything is piling up. So we don't want to just do like a misery pod, but at the same time, it's just very it's very prescient for us to just realize that my goodness, like the the affordability index has been has been low. There is a tracked affordability index, it's just an algorithm, either way. It's it's the the data says it's hard to buy a home. Like that's what it says fundamentally. But um, we can go into kind of the combination. Like, as a how do we want how do we want to phrase this? If you're consulting a buyer nowadays in the market, how much do you talk about financial stuff? Does it come up? Should it come up? How much do you want to guide them? How much do you want to let them figure it out on their own? I don't know, where where do you take it?

SPEAKER_00 3:53

So it's interesting. My um my buyers in the last few weeks have sent me questions like, ask for the utility costs. Um, we had discussed doing that proactively anyway, and then it landed on the consumer where the consumer's like, yeah, can you find out, you know, and also sell service, you know, up here is a big thing if it's spotty and how's internet and sell service. Um, but yeah, I want to know the utility costs of this house as well before they even book an appointment. So I find myself doing a lot more upfront research on a property where it usually it's like, oh, this works, yeah, this looks good. Yep, it generally checks all the boxes, we're gonna go see it. It's not. It's let's look at what work has to be done. If it needs a roof, we're not even going to look at it. I'm asking people proactively. Like, I know the listing agent also can't really say, like, oh yeah, this house is trash, but they can be honest. There is a property condition disclosure form that is now required. Uh, used to be able to give a $500 credit as a seller, but now you really should fill it out. A lot of it says unknown, which is sometimes you really actually don't know. Um, but I'm finding I'm downloading that thing, I'm sending it ahead of time before we even make an appointment right now, uh, which I've never done before. So there's a lot more that's going into what is the home cost to run and what are the costs of repairs and what are the future costs of repairs before they even will walk into a house.

SPEAKER_01 5:19

Yeah, I think that's well phrased. I think, yeah, I think everyone, everything in life has, you know, short-term, midterm, and long-term, you know, scope of whatever concept concepts. But especially with a house, as a as a buyer, in that moment, you've got to think, okay, I can I first of all, can I acquire this, right? That's that's your upfront funding, whether that's a cash purchase, whether that's a pre-approval for a mortgage. By the way, the mortgage lender will look at the total taxes. And typically, we don't go into like financing a ton, Jess, but when someone has an escrow payment, that is essentially the not to dumb it down too much, but that's typically uh the what you pay the lender once a month. That's your mortgage payment, but it escrows in both typically the the taxes for the property and the homeowner's insurance that you have to kind of get lined up prior to closing. So the you pay the bank once a month and they're cut they're then distributing the payments for these other things, they're holding in their little the little escrow account and they're paying them out. So so the bank essentially, if they're doing it right, they won't let you get underwater by having too much house for what you can afford. But the but they'll let you get pretty close. Um, I think again, I haven't looked at this in quite a while, but I think generally they'll let you go up to like a third-ish of your income, which again nowadays with everything else costing more if your income isn't going up. You know, it's gonna be it's gonna be pushing it. So um now I don't necessarily do a ton of financial educating with my buyer clients. Maybe I should spend a little more time on it, but I do definitely look at the taxes. I definitely help to try to assess the home for what I just said, those short-term projects, the mid-term projects, and then what is on the long-term horizon. Um, and then you kind of have to everyone has their their own mental calculus of at the end of the day, does this does this particular house make sense given all those things? And of course, it's everything else. It's the intangibles, it's the setting, it's does it feel right? It's is it the right size for my domestic unit, whatever, you know, whatever their context is. But also the financing has has got to be one of those big, big core parts of the puzzle. I can't just feel good and be a stupid financial acquisition, right?

SPEAKER_00 7:39

Yeah, I mean, the the monthly mortgage payment, like you said, is just one part of the story. And I think a lot of times people put a lot of weight on that. Can I afford that? Or sometimes not at all. Actually, to be honest, I I've had buyers not even, they're more worried about the purchase price. They have no idea how the actual purchase price and negotiating up or down even $10,000, how that affects the monthly. Sometimes really not that much. Um, so they might be quibbling over $5,000, even $10,000. Sometimes, I mean, it's a higher interest rate now, but sometimes it actually doesn't affect your actual output. You're not paying them $275,000 today. You're gonna pay that monthly.

SPEAKER_01 8:19

So watching that monthly, you're should be paying a lot more than that over 30 years.

SPEAKER_00 8:24

Yeah, absolutely. Yeah. And most people don't stay in their homes uh that long. But yeah, but they I think they have to consider that they really don't know a lot of times what that monthly payment is just based on what they're negotiating. Um, but they should now. It should definitely be something we remind them to look at. Okay, so what's the monthly payment look like at this, you know, offer? How did it change? How does it change if we go up 10,000? Maybe that's another part of it. And gas is 410 a gallon in Oneonto right now. So how much driving do you do? It's it, I think it is our responsibility because I think you said that in an earlier episode. It's sort of our responsibility to be able to ask those questions. It's not our job. We can stay right in our lane and just worry about the house, but as you know, that's not how I do business. That's not how you do business. We try to maintain relationships with these people um afterwards and make sure that they feel really good about where they are and what they purchased and how they're doing. So it's important, I think, to feel a little sense of responsibility of making sure month to month they're gonna be able to afford it.

SPEAKER_01 9:31

Yep. And you know, it's funny how everything is so interconnected. I I always think about now that we're we're harping on gas prices a little bit right at the moment, but I always think about like who does who does stuff like that impact the most? I always think of the contractor. I think of that that guy or girl with the truck that's going out and and they're working uh, you know, eight to five on site doing something, landscaping, roofing, siding work, whatever, fixing bathrooms, HVAC. And then from five o'clock to seven o'clock, they might have two clients they're gonna go and pop over and do estimates for. And then those estimates might be 30 minutes, 40 minutes, an hour from where they are all day, and they gotta fly around the those people though every there's hard working people out there, but those trucks are not inexpensive to drive. And I I'm just thinking like that quote they give you, part of it is is their their cost to get to your property and then and then to get back home and all that. Um it's a t and again, it's a tiny little anecdote, but I always think about that that core niche of people, and that's when this stuff, you know, buying the sandwich, buying the coffee, whatever, that stuff like it adds up. It hits the bottom line so much. I mean it hits our bottom line too. But uh and we drive quite a bit, but I at least we get to somewhat choose our vehicle. Now, I'm not gonna go into like a whole energy efficiency of vehicles tangent. I could, but um those big trucks, man, they are they're just they're just they have big engines and they they big engines need big quantities of gas. So uh I I can't imagine what some of those those gas bills are like right now. Um as I as I feel like and my moderately efficient Subaru cross-track, which I love, but it's definitely not a work truck.

SPEAKER_00 11:14

Yeah, my Jeep is not efficient. Well, I got 2019 Grand Cherokee is not not so bad, but if I do a lot of driving, I definitely feel it. And it was like 80 bucks to fill it.

SPEAKER_01 11:26

Yeah, that's that's how that's that's hefty.

SPEAKER_00 11:29

Well, there was a few years back, um, I was still in Queensland. I don't remember at what point it was happening, but gas prices had gotten really high. I remember it was like $110 to fill my Nissan Murano. It was like $100 or $110. I was like, and I remember thinking, oh, it's $100 to fill up my gas tank. And I guess I just from that point haven't really checked in on gas because it just went down. So I just then wasn't aware of it. But I remember that being like a height of like, you know, because I was in real estate, I've been in real estate 15 years. I've been driving around a lot, and in Queens, you don't go as much distance necessarily, but you definitely spend the time uh just idling. You can spend all your gas idling in traffic, but it was like a hundred bucks to fill up my gas tank. I remember that very clearly. Um, and that does significantly impact. And then up here, we had recently we had the whole the eggs, the eggs were eight dollars for a dozen. Um, it hits things, it hits random things. Um, sometimes it makes sense. You can kind of follow why it's hitting that. Um, but everything goes up unanimously, I think. Um, even if it's just a little, even if it's just a few pennies or a few cents, everything goes up.

SPEAKER_01 12:44

Yeah. This is a yeah, story time, but this shows my age, Jess, and we're not that far apart in age, but I remember pretty I'm pretty sure I'm accurate on this. When I first got my license, I was I would we're now we're gonna name drop all our vehicles, but I was driving an old burgundy-colored Plymouth Reliant K, a K car. And um, I was filling up gas, and it was 86 cents a gallon when I first had my license. I remember that. And I was like, even then, I was kind of like I don't know what everything the economy was obviously different, but I remember thinking as a 16-year-old filling up my tank, like, this is probably a pretty good deal. Like just thinking like future thinking. Like, I bet this won't happen much more in my life.

SPEAKER_00 13:26

And cigarettes were like a dollar fifty, a dollar seventy-five. Yeah, I remember that actually buying cigarettes for like a dollar seventy-five. And then I remember I remember having like 10 bucks to fill up. I had a Honda Civic. I think it was it was ten dollars to fill up my tank.

SPEAKER_01 13:42

Yeah, yeah, amazing. All right, so so back to the future or back to the present. Um so now that we're in this, we just talked about everyday life costs. We're talking about um tax costs and thinking about uh utilities possibly now. We've just in real estate, we've just spent probably the last the last like fully almost three years slowly getting mortgage rates to stabilize and to come down a little bit from when they had remember the good old days of the three percent, the two and a half percent back in the late COVID era, and then it it mortgage rates did spike. They they almost overnight they went up to about six percent or even seven percent. And then there was a long steady period for probably two and a half years, where it was right around six percent for the most part, up and down a little bit. And then we had just I think like a month or right before this uh Iran stuff, we had just uh gotten the national average mortgage to be below six percent for the first time in like three years, and then whatever, like geopolitical stuff happens, and now I think as of yesterday it's 6.46% and looks like it's trending upward again. So yeah, here's the thing, Jess. We are now we are MLS watchers, like we we watch the market like a hawk. Every day I I wake up, the first thing I do, I load up my my my data feed and I see what's on the market, what's new on the market, and there's a lot happening, it's popping off, it's it's early April, people are throwing their houses on the market, they think it's time to sell. This is what we've been predicting, this is the nature of a seasonal market, we know this. But what do you think is the real the real landscape of real estate this spring in upstate New York, given the fact that it seems like inventory is going to increase, people are gonna put properties of it up, but buyers who are in that mortgage bracket anyway are again, they're just facing all of this stuff. And now I don't have a calculator right in front of me, but you and I both know that every like tenth of a percent of a mortgage interest rate, that does. I know you just said that like a couple grand on the actual price doesn't move the needle too much, but also it does a little bit, and every tenth of a percent on a mortgage moves the needle quite a bit as well. So the more you do these incremental increases of of cost, it hurts. So do you think buyers are just gonna look for lower price point homes, which is possible, but also we're still seeing homes listed at what we both believe are, you know, relatively healthy, if not slightly unhealthy, like high price points. I'm just asking you, what do you what do you predict? What's your crystal ball for the for the spring-summer uh buyer cycle?

SPEAKER_00 16:22

I have never had a crystal ball for this market. This market is so weird because again, we have that whole second home market that infiltrates the primary market. So we have all of it. We have um, I have very low-end buyers, you know, they're they they don't have a lot of money, um, and it's uh gonna be a struggle for them to buy something and they're having a hard time. Like they're even like thinking about waiving inspection just because they can't pay an inspector. So the stepfather's gonna come and inspect the house. Uh so I, you know, I have those people that are are struggling because prices get pushed up every year, like like we were saying, and the interest rate matters and the down payment matters, and those things matter. And if you are a buyer in that situation and you try to go for an FHA or government-backed loan, the house has to be perfect. Well, it's not because in this market, you know, $120,000 house might need a roof. It might have a lot of peeling paint. So, so there's that that going on um every day, as well as, you know, people that um are in a slightly higher, you know, the 375 kind of range, 250 to 375, you know, people who have careers up here and they're moving around. And and then I have a downstate buyer for $500,000 and you know, poking around in the same neighborhoods that these people are poking around in. So it's and so that downstate money's real. Those people have money, and you know, it's cheaper up here for them in comparison. Although I really haven't found that it's that much cheaper. I mean, rent is cheaper here, but I haven't found that and houses might be cheaper, but overall cost of living is doesn't feel that much cheaper, actually.

SPEAKER_01 17:58

You mean like the the the grocery shopping model? Day to day, yeah.

SPEAKER_00 18:01

Day to day it's pretty much the same. Absolutely, it's pretty much the same. I mean, I'm sure you can find, you know, local businesses, which I do think we should find and and we should patron. But um if you go to like the big box store, you go to Home Depot or Hannaford, it's the same freaking price everywhere. Um, so I uh so the question, what's my prediction? I think it's gonna continue to be this wild, wild, wild, wild north, not in the west, um, where you just have all these different factors at play, but everyone's gonna get affected. So the second home market, if things get too expensive or things look wonky, you know, in the geopolitical landscape, they won't buy. You know, if um they feel like something could be going wrong or whatever, it's a it's a luxury purchase. So they just won't buy. Um, so that I feel like then that at least that layer kind of could drop off if things really get weird um in the world and too pricey. The luxury purchase comes right off.

SPEAKER_01 19:07

Um Yeah, we don't want it to get too weird. Yeah.

SPEAKER_00 19:09

We don't want it to get too weird. I mean, it definitely got weird after the election. A lot of people paused. Um, and you know, going into the uh the new the new presidency, a lot of people pause. The people just always kind of wait anyway, like around elections and things to see what's gonna happen. Um so I it could be another weirdo. We've had lots of weirdo years. It could be another weirdo because we have all these different pressures from all these different price points and markets. Um, and you know, people, um, what they can afford, what they can do. It's it's such a wide spread that I think we're gonna continue to have all this weird pressure we've had. Prices may still go up, but inventory might still stay low. People are coming out, but they all what I've noticed and in my small experience right now with just the spring market is a lot of sellers are they have to they have to sell to buy. So your buyers are walking in with a property as well. Like, hey, I can buy this, but I have to sell this. So I I'm seeing more contingencies, I think, than mortgages. Um actually.

SPEAKER_01 20:16

So it's interesting, excuse me. It's interesting, Jess, because we've again, people joining us might not, you know, we don't throw up maps and stuff. And if you're listening, you don't you don't see anything anyway. But we're in this really I love our area for a lot of reasons. And and by the way, you should love your area, right? Wherever you live, love it. Um but uh but we're it the spread of our uh territory that you and I basically cover as agents has everything from a very strong second second home market that's you know within two to two and a half hours from New York City drive. That's a very doable drive for most of your your New York City people that that have saved money and they can buy a home, a second home with cash. So that's a that's a very uh I don't want to say it's a like a a core yeah, it is. I guess it is sort of a core pool of clients for our real estate business. And and those people have that's always like you just said, it's discretionary that purchase or that sale, but also people are always doing it, right? So there's always people almost without fail, unless we're in a real like hammer depression or something, but there's going to be people that have to they want to get away, they want their summer home, whatever the heck their model is, they're gonna be able to do it. So we go from that on one like a geographic corner, two and a half hours, easy peasy. People are are going crazy for those properties, and then we cover everything from probably four ish hours from the city where you get a lot less of that. That hour and a half extra drive is is a clear delineation of price decrease, and just people don't want to do that extra drive. Now we have other metro areas, and we have other reasons why someone would buy in that four. Our geographic section, but that does tend to be a little bit more primary homeowners, and like you're saying, these primary homeowners again, generally, probably their average or median price is lower than those ones I just mentioned. And if you own something, you got and you want to buy something new, you gotta sell the thing. And I was just having this conversation, and it's been the same conversation for years with a lot of people. It's yeah, you know, I would love to sell, but if I sell, I'm gonna get a high price, great, but look at the prices of the things I want.

SPEAKER_00 22:32

Where am I gonna get the price?

SPEAKER_01 22:33

The things I want are also high, and so it's a it's a it's just everything just popped up, and everything for us is staying up. Uh, there are parts of the country that that hasn't stayed that elevated, but we're we're very much there. So my prediction for this summer, actually, not mine, the a lot of the national vendors and the the you know, the the Zillows and the Realtor.coms and the a lot of the the economical gurus of real estate are predicting for now they're downgrading their predicted number of homes sold in the US for 2026 to be like 3.96 million, which is a really low, a really low number. Like a healthy year would be about 5 million. So you're almost 20% down from a a robust, like high, no, or not even like high volume, but a mid-volume, a healthy transactional market where buyers are buying, sellers are selling, the train is chugging along the tracks. The train is slowing down a little bit. And I'm not too worried about it.

SPEAKER_00 23:37

And we can't, I don't know the suggest.

SPEAKER_01 23:40

I'm not too worried for us because of where we are, because I think we have that buffer of that that discretionary funding is still there. And we excuse me. And we as agents, we just have to know how to, you know, find the business, I guess, in a sense. But but for people, right? For people, I think it's hard. And I think that there will be less properties sold, even though we're seeing more and more houses listed. That means our inventory, the number of houses available, is gonna keep going up. I do think there's gonna be a continued days on market trend. I think there's gonna be a continued uh inventory increase, meaning buyers have more choice. Generally, when buyers have more choice, they get to negotiate a bit harder and they get to, you know, talk you down a little bit or be a little bit more picky on what they'll accept. So I think it's gonna be I don't have any worries for me personally, but I do think it's gonna be a little bit, it's gonna be a little bit of wow, there's a lot of houses to look at. Interesting, which we haven't had for a long time. We've had super low inventory. So um I just think that's my prediction. I think that uh I think locally it'll still be pretty steady compared to the last two years, which were also two slow years. So I don't think we're getting fast in real estate anytime soon around here.

SPEAKER_00 24:55

Yeah, and I think um just to put in perspective, what did they what did we do last year was what the 4.1 they had been saying 4 million homes sold in a year was a very low place to be. And they had kind of predicted that this year we'd be over the 5 million, people are gonna come out, they're gonna list our houses. Um, and then obviously interest rates spiking up, you know, and all the other things going on, gas, eggs, everything.

SPEAKER_01 25:23

Electric.

SPEAKER_00 25:24

Electric, yep, that could that could lock us up a little bit again. So um it's like every time I feel like we we deserve a balanced market, it gets taken away. But again, I think there is no way to know. There's no way to predict any of this because it does, it does seem like none of it makes a lot of sense anyway. It hasn't made sense. So it's interesting, but I think the message to drive home is do your homework if you're looking about buying, do your homework, ask a lot of questions, find out what it costs to run that house. Um, make sure you get a pre-approval before you're looking at stuff. Talk to your lender, have a good, a good lender that don't go to Rocket Mortgage. I know this is like a national public. Don't like go to somebody local or go to somebody local in the area that knows the area. Just do a little bit more research, put a little bit more effort into that, understand what your monthly payments are gonna be. Um, and if you're a seller, just if you gotta sell, yeah, you gotta get out there. Just it feels uncomfortable, but your home has to be in contract before someone is gonna take you seriously as an offer on the other side. So it's tough. It's tough. But um find a good realtor, interview people, suss them out, like we always say, and uh and we hope everyone has a great spring market, regardless, and that everything you need to do, you get to do.

SPEAKER_01 26:41

Yep, absolutely. All right. Thanks for talking, Jess. We will catch you on the next episode. And thanks for listening.

SPEAKER_00 26:48

Thank you.