Renting vs. Owning: Purchasing power and mortgage rates in the Albuquerque market

(Transcript Snippet): “Tracy:

Tego, what’s the latest on purchasing power and mortgage rates.

Tego:

Mortgage rates are still really low.

Tego:

You know, we’re still hovering in that all-time low range somewhere in that 3% range for a 30 year fixed mortgage. And I want to just caveat that because it depends on if it’s a conventional, a FHA loan, how much down payment, what your credit is, you know, there’s a lot that goes into that, but, but you know, it’s a net 3% range. And just to put this in some sort of pers perspective, right? If you’re, if, if you’re buying a house today and that home is $300,000, okay. And you’re getting at 3% mortgage, and the estimate is that you’re going to be paying about $1,265 a month for that mortgage. And that’s, you know, just calculating with a down payment and stuff. Are you going to be 1265 a month?

Tracy:

Can you believe 300,000? You can have a payment, right? Yeah. Right. Okay. But if the interest rates go up to like three and three quarters or four, what would that say? Well, this is to

Tego:

Put this in perspective. If you were to buy that, if, if you were trying to keep that same payment of 1265, now you’re going to be closer to a $270,000 house to get the same payment at a 4% mortgage rate. So that, that, that interest rate has huge influence on how much you can buy or how much you can not buy. You know, if, if you’re looking at it from a monthly payment standpoint. Right. And so that’s why, you know, today, again, in this 3% world that we’re living in, you know, we were talking about this last year, Tracy, where we’re saying, okay, well, even if home prices go down, if you’re locking in at 3%, you’re still ahead. Even if prices go down in a year in interest rate, go up and yeah, it’s this whole thing. So and then we had the conversation that came up at our team meetings. It’s like, well, they want to wait

Tracy:

Because I always want to wait and see what happens in the next six months with interest rates and house prices. And I’m like, okay.

Tego:

And that’s fine. That’s fine. Yeah. No, I mean, it, you know, I think sometimes people think we’re just sitting here and saying, everybody’s got to buy home. Well, I do believe that because I think home ownership is probably the, well, not probably it is the number one way for, for people on the lower economic scales to move up in economic scales is home ownership, home ownership versus renting is definitely affordable housing.

Tracy:

Right. Right. And so the difference for sure don’t

Tego:

Know where I was going, but I got a little off track there. Cause I’m so passionate about that whole idea, that home ownership is, is a big deal. And I know what it was, Tracy is, you know, if you’re ready to buy then. Yeah. Yeah.

Tracy:

And if you find the right one, so you can say, I’m going to wait six months, but if the right house becomes available and you’re able to see it and make an offer and get it, then go for it. Right. Right.

Tego:

And if you’re not ready, that’s, that’s fine too. You know, and if you don’t know, where are you going to be living a year from now? And maybe, maybe our Albuquerque, isn’t where you’re going to be. That’s

Tracy:

Fine too. Of course it would be a great rental house. If you decide you need to leave. But you know, the whole thing is don’t let the fear hold you back. I think, I think a lot of us have this fear and we let it tell us ourselves not to make good decisions because it’s thinking the things that protecting us. Yeah.

Tego:

Well, it is, it is. And, and, you know, logic, what did they say? Logic is great, but it doesn’t motivate us to decisions. But for me, I need to see the numbers. And when you look at the numbers at renting versus owning that the math is clear as is owning is always a better long-term investment. If you’re planning on being there for a few years, right. Or more so for sure,

Why staging still matters : Maximize the sale value of your Albuquerque home

(Transcript Snippet): “Tego:

Can we talk about home staging? How’s that for a transition? So we had a Nicole Rorem with Sookasa home staging in our office last week. Nicole is great. She’s been tops one of the top stagers in Albuquerque for, for a long time. And so first off, Tracy, what stage w when we say staging?

Tracy:

So staging is, you know, part of the process of prepping the home for showings, right? And it can mean a lot of things it can mean going in and having yourself go in purge, put half your things away and staging your house. But we’re talking about a professional stager, right? We’re talking about a seller, hiring somebody to do one of many things. A stager can come in and just kind of walk through the house and give you things to do, change that paint, move that chair out of the room, get rid of that rug, whatever carpet and say, kind of give the seller a bullet point list of things they should do to maximize the sale value of their home. Right. And to appeal to most buyers. But some stagers, you know, like Nicole does almost anything. She can add a piece of furniture that you might not have to supplement. She has, she can stage a vacant house. She can stage a backyard, but or give advice on how to do it, or even, you know, take some of your furniture away and help you get it in storage if you need to. Right. So,

Tego:

Okay. I’m going to,

Tego:

Especially in this market where we know it’s a extreme sellers market, it’s been an extreme sellers market. It’s going to continue to be an extreme sellers market, at least for the distant future. So the home’s going to sell why stage, why spend that extra, you know, thousands of dollars to stage

Tracy:

It, right. Well, there’s a lot of reasons, right? So one is you should net more right. We’ve seen. And Nicole shared a couple of examples, and I know of a few others too, where the home was on the market, didn’t sell and came off the market. They staged it, put it back on the market, sold with multiple offers. And we don’t see a lot of that these days. We saw one where the house was under contract fell through, got staged in the interim, went back on market, then got multiple offers, 10,000 higher than where they were under contract before when the one fell through and the staging more than paid for itself. Right?

Tego:

Aging Tracy. When we talk about a lot of times, when we think of staging, we think of a vacant home and putting furniture in there to make it feel comfortable. It’s just like a model home that you would see at a, at a builders example. And I think in those cases, it’s pretty obvious, you know, somebody touring a vacant home, it’s cold. It doesn’t feel

Tego:

There’s not a whole lot of energy in the room and you can’t visualize

Tego:

The space. Sometimes you’ll go in a room and you go, how do we put furniture in here? I don’t understand it so that the staging takes away a bunch of those objections for potential buyers or

Tego:

Buyers that maybe just can’t, can’t see it, right.

Tracy:

It’s really hard to know a vacant an empty room feels small compared to a staged room or a room with furnishings in it. It really changes the perception and the feel greatly for people. And a lot of people, I mean, I’ve seen it over and over the, over the years, people can’t visualize their things in a house or how to arrange furniture, groupings, and things. And the stager can really make it to the maximum of how the house could look. And so, yes, we think of an empty house and having someone bring furniture in, but it’s somebody that already has a fully furnished house, a stager can come in and make suggestions. Stager can, you know, sometimes half the family’s already moved and you need extra furniture just to finalize what’s left. Right? Yeah. There’s just lots of things or just advice, help picking things, help choosing colors. I know a stager recently helped a client that bought an, a house that didn’t have any furniture just help them shop for furniture because they’re so good

Tego:

At yeah. Well, they’re, they’re interior designers

Tego:

Is what they are and they’re, you know, they’re taking that skill and putting it into merchandising the property to, to sell. Right. Yeah. What else did you have on your list, Tracy?

Tracy:

I was thinking about some of the homes we have coming and we have quite a few homes that are going to be on the market here in the next week from two twenty two hundred and twenty 5,000 in Rio Rancho to an amazing house in the far Northeast Heights for 995,000 fabulous newer construction, just a gorgeous I think it’s somewhere in the 3000 range. I can’t remember, but a variety of homes coming on the market with our team, as well as others. It seems like it’s going to be a really good time. If you’re looking for a house we CA we can help you. You know, we have solutions Tego. When we meet with people who want to buy and sell at the same time, we can do the whole guaranteed that their house will sell so they can move forward and buy a house, not contingent on their house selling. So when your house is in the median range or below for price, we can guarantee we would buy it if it weren’t to sell in time for you to close on your new home. So we would be happy to talk with you about that or any other options that we have.

Language in Real Estate : Key terms in Albuquerque’s market

(Transcript Snippet): “Tracy:

We were talking about this over coffee the other morning, right? Like we typically do our morning coffee where we talk real estate.

Tego:

That’s welcome to the Venturi Household. Yes, yes, yes.

Tracy:

We probably just shouldn’t talk about the things that need to be done around the house. We’ll just talk real estate. But we were talking about all the words that, you know, we weren’t using until recently, very often they weren’t in our general lingo, right? Yeah. Yeah. Well, in one of them

Tego:

Is the word equity Tracy. And that obviously that is a word we’ve used for a long time. And we’ll continue to use in, in the world of real estate. It’s just that equity has exploded in the last year for, for many homeowners

Tracy:

We need to say what equity is.

Tego:

Right. Right. So

Tego:

Here, here’s the, here’s the definition, the value in your home above the total amount of liens against your home liens, as in what you owe, right? What you owe to the bank or whoever,

Tracy:

And you might have a first, a second, a home equity line that you’re using. So it’s everything that you, you have value in above what

Tego:

You have, what’s your equity, right? So,

Tego:

So it, it, it has, I mean, and I know that the study that, that came out and I’ll just throw the stat in here is in New Mexico in the last year was about $23,000. The average homeowner gained in equity,

Tracy:

Significant number for, you know, your personal wealth growth, for sure. And

Tego:

Just the last thing on equity, it grows two ways. One, it grows by just a price appreciation in the market over time, as well as you paying off your principal every month, you’re putting a little bit toward that. So the equity is a big one contingency. Tracy, let’s talk about that one. That one, again, it’s been around, but it’s in the middle of a real estate purchase in the transaction. That’s something we deal with all the time, right?

Tracy:

Purchase contracts have a lot of contingencies in them, right? That’s not just one. It’s not just contingent on selling a house, but there’s a lot of contingencies that are New Mexico purchase contract. There’s a financing contingency. There’s an earnest money. There’s you’ve got a list. Go

Tego:

Ahead. I’ve got a list. So there’s an appraisal contingency. We’re going to talk about appraisal in a second. Assessments and titles. So that’s different title work to find out what what’s going on with the property in, in ownership. And if there’s any assessment against the property, meaning stuff that needs to get paid. There’s an insurance review. That’s a really big overlooked one, right?

Tracy:

Right. For prop, for property insurance. Right. Making sure that the house, isn’t what we would call a lemon. Right. Just like the old days, you know, we don’t hear that about cars anymore. Really cars being a lemon. I’m sure it still happens occasionally, but how’s, this can be sort of a lemon. They, the insurance industry feels like if you’ve had a couple of claims on a house there’s wrong with the house. Right. So, and that stays with the house even when you sell it.

Tego:

Yeah. So insurance review is one of the contingencies. And then, and then there’s a bunch of other things that the buyer has the option to review about the property.

Tego:

Right. Right. I mean, it can

Tracy:

Be from septic, well, water, all sorts of different things that it could be. Right. Right.

Tego:

If it’s a solar system, right. If you’ve got a solar solar system that sounds like, you know, pretty Spacey, a solar panel, photo-voltaic electrical generation system on the house. We did have a lot

Tracy:

Of solar space type things going on in New Mexico where the last Texas,

Tego:

Texas. Yeah. Speaking of space. And then,

Tego:

You know, I think one of the, just, just to wrap up this, you know, on contingencies, one of the biggest one is the inspections, the actual inspection of the property, as well as the survey of the property. Right. Another word

Tracy:

That we’ve used a lot this year, that wasn’t common is escalation, escalation

Tego:

Elation, or, or what we call escalation clause. What does that mean, Tracy? So an escalation

Tracy:

Clauses, when there’s multiple people wanting a home and somebody might say, I’ll pay X over, up to a certain dollar amount and they’ll escalate their offer based on what the other offers are.

Tego:

Yep. Yeah. So that’s, that’s become very common now in, in, you know, if in this competitive market, if the, if you’re writing offers. So let’s talk about the last one. Okay. Virtual showings, virtual showings, obviously that’s an that’s that

Tracy:

Started like last spring, pretty much,

Tego:

You know, we had done that before just with FaceTime and other stuff like that for COVID. But now it’s become much more common where somebody will want to see the home, but they can’t either they’re out of state or whatever reason can’t go see the home in person. So the, the buyer’s agent will go to the home and pull it up on their phone

Tracy:

Or the buyer who’s not able to go to the home, just looks at the virtual tour online and feels like they toured it a lot of times. There’s not even a buyer’s agent that goes to the house on their behalf. Yeah. Right. Yeah. There’s a lot of ways to tour him virtually these days. Appraisal,

Tego:

Tracy, let’s just talk about appraisal again. Appraisal has been around forever and first off, what and why on an appraisal? So

Tracy:

An appraisal is for the lender. Typically it’s not usually done with cash unless, you know, the buyer really wants one, but for loans it’s often required so that the lender can get a baseline and feel like they’re making a good loan, that the house is worth what they’re going to be lending on it. Now these days we’ve seen appraisal waivers from some lenders. They have some automatic system where they put the property in the price that’s coming, the buyer’s qualifications, their credit score. It’s not just the house, but the whole package. And they might say, they’re putting $200,000 down. We don’t need an appraisal for this loan.

Tego:

Well, th there is, that’s one of the challenges in our market right now is getting appraisals done. They’re just so backlog can be, can be a challenge. So what about waiving an appraisal and an appraisal gap? Tracy, those are two kind of new terms, not new, but they’re much more commonplace now. So appraisal waiver, what’s that appraisal waiver

Tracy:

Waiver of the contingency. So they’re saying we probably will still need an appraisal, but even if it comes in that I’m paying more for the house and the appraiser says it’s worth, I’m still going to pay the price. We agreed upon

Tego:

The appraiser set the value of the home.

Tracy:

That’s a set up question. I now, so the appraiser gets a copy of the contract, which a lot of people don’t realize. They’re just trying to appraise it for the agreed upon price. But if they don’t see other data out there that it justify it for the bank, they’re going to appraise low, but no, the buyers set the value of home and what people are willing to pay. The appraisal is there to justify the loan amount for the lender.

Tego:

And so an appraisal gap is that comes in. If you have an appraisal come in lower than what the buyer wants to pay or offered. Right. Right.

Tracy:

So we might be under contract for 200,000. The appraisal comes in at one 90. The gap is $10,000. And some of the offers we’ve been seeing lately, somebody might say, I’ll pay 5,000 over appraised value if the appraisal comes in low. So they’re kind of limiting how much extra they might be willing to contribute if the appraisal is

Tego:

Got it. Got it. Okay. Well

Tego:

That was our rundown on some of the terms out there, but if you ever want to talk about you know, some of these terms you hear in real estate and you’re not sure what the heck they’re talking about, give us a call 5 0 5 4 4 8 88, 80 inventory Realty group with Keller Williams Realty. And just on the side note, Tracy, we were talking the other day about some of these terms when you’re talking real estate investment investing in real estate, which is you know, there’s a lot of that going on. A lot of people are, you know, understand the, the, the value of real estate as an investment. I’m a big believer in that myself and you are as well. But the, you know, some of those terms like cap rate, internal rate of return gross rent, multiplier, net, present value, you know, there’s all these different terms. And when you start getting into net world that are, that are just, again, it’s like a whole different world. I

Tracy:

Was going to say, we could do 10 shows on just that world. Right. The, all the other ways to look at it and all the other terms and the creative ways to finance deals and just lots of lots more about that. Yeah.

Is Albuquerque’s Real Estate market slowing down?

(Transcript Snippet): ” Tego: Tracy. I want to just go back to the thing about is the market slowing, because like I said, there has been some news stories out there implying that maybe the real estate market’s slowing down and it really isn’t even nationally, even in some of these other markets, because w th the story that’s actually out there is that inventory is starting to grow a little bit in some parts of the country. It’s not that the real estate market’s slowing down

Tracy:

Well, and I bet you have stats to prove what’s, you’re about to say, well, what I, I just, you know, it’s that time

Tego:

Of the month where it’s mid, mid month, I wanted to see where we were for July this year versus in particular July last year, because July last year, July, 2020 is when the real estate market just went nutty.

Tracy:

This was right after COVID right? So March, April, may, June, July, all those people, June, June is

Tego:

When all of a sudden everybody decided it was time to buy a house in there. We hadn’t had any listings in April, may of last year

Tracy:

Was pretty much shut down. So I didn’t say

Tego:

Any, it was half the number of new listings. Yes.

Tracy:

My point is July last year, despite COVID was a record month, it

Tego:

Was the busiest closing month on record for the Albuquerque area, July of 2020. Right? Right now, July of 2021, pendings are up 15% over last year, just in the first 15 days. And the number of closings is about equal with, with last year right now, the number of homes on the market, it’s down 23% just versus last year. So yeah, we’re less houses on the market. We’re it’s not slowing down. That’s

Tracy:

Not in our market. No, no. So,

Tego:

And there was you know, I don’t know, I know you saw Tracy, but you all might’ve caught it, that there was a story in the journal this week where Stephen Hanway does the real estate beat, I guess, if you would say, and he called me and got a couple, just, you know, put a few quotes on there. One of them was there’s, you know, like I said, the story that there’s more homes in the inventory starting to come in, and there’s more homes on the market and I cautioned him and I’m glad he printed it, that, that it’s maybe just seasonal cyclical that, you know, we’re going to have a little bit of build this time a year. And I think it’s gonna, you know, just kind of stay flat and probably declined throughout the year. So if you’re out there thinking of buying, if, if you’re thinking that you’re going to wait until more homes come on, the market later this year, probably not going to happen is, is my call on that. So I’ll just say

Eddie:

That. Yeah, because I mean, that wasn’t as clear as that I would like for it to be hearing you. So what you’re saying is cyclically every year about this more homes are basically delivered. They hit the market, but even though those homes are coming onto the market, it doesn’t mean that there’s going to be more opportunity, more houses, more inventory, necessarily that is going to get absorbed right away.

Tego:

It is. And I don’t see generally what happens. Inventory builds up until July, August, if you want to say that, right? So the number of homes available and then come July, August, it starts to drop off all the way through till February. And that’s just a normal seasonal pattern for our market.

Eddie:

Those are free. So I imagine those are kind of presale. Are they not reconstruction training? You brought on new con construction people on board. Several times, you’ve had several home builders who’ve come on. There’s like people beating down their door or something like that. I mean, this is something that you guys work on. You can take people to places where, you know, that inventory is going to be rolling out. And I got to, I got to say, that’s, that’s worth a, what do they say? A bird in the hand? You know, that really is a good opportunity there to jump in. And another reason to pick up the phone and call a Tigo and Tracy Venturi 4, 4, 8 88, 88, that’s 4, 4, 8 88, 88. And we are alive this morning. So if you want to know and get a heads up on where that might potentially could be and delivered, all depends upon the city of your city or Rio Rancho. Just go ahead and give them a call. Thank you for clarifying that. Yeah,

Tego:

No, no, thanks. And I want to just bring in one other stat. I don’t want to, I don’t want to confuse people, but, but again, this whole story of, oh, you know, home prices are going up way too fast, which I would, I would tend to agree with. And, and we’re going to have a bubble and prices are going to explode and go down. And one of the things we have to look at always is supply versus demand, right? That drives everything in, in pricing, on, on any, any product in, in homes in particular. And what I found is right now, we have about 1100 homes on the market in July of 2007. That’s when let’s say the bubble burst back in the day, when, when home prices started to decline in 2007, at that time, we, we didn’t, I’m trying to say this. So so it’s more succinct, succinct, and not, not complicated. There were S we had over 7,000 homes on the market, in the greater Albuquerque area in July of 2007, when prices started to go down

Tracy:

Another way to start to shift until we had over 7,000 houses.

Tego:

That’s a great way to put it. So, so if you were to just go with that, that one metric, and I know that’s just one thing we would need six times more inventory that was, we say, you know, homes available on the market than we currently have before we start to see a shift in pricing.

Tracy:

And we could see a shift in pricing well, before that, of course, but that’s what the history was. We were over 7,000 houses on the market before we started seeing prices come down. Yep. Back in 2007. And

Tego:

I’ve been saying this now for month and month, I keeps saying we could have four or 5,000 homes, 6,000 homes on the market tomorrow, and still not be in a, a buyer’s market.

Tracy:

And, you know, it could shift, let’s say we have 4,000 on the market, but interest rates change drastically. We could see price changes. We just know from what we hear politically through the economy that they’re not planning to do major changes in, in the interest rate. Right. So that’s part of our, where we were going. We’re going to talk a little bit about the second half of this year since we’re into it now, right?

Tego:

Yeah. And, oh my gosh, you know, how do we do this? We go so fast. We’ve just got so much to cover. So Tracy, let’s just talk about a few predictions from the experts. I’m going to say that the air quote experts. Yes. I think 2020 nevermind. I’m not going to go there. I was going to talk about experts in, in the year 2020. So what, what are the real estate, you know, prediction makers, you know, what are they saying about the market tracing? What are they saying about mortgage rates? Let’s say,

Tracy:

No, they say mortgage rates will likely increase a little bit by the end of the year, but a little bit, we’re not talking anything major. Right.

Tego:

And based on the announcement this week, it doesn’t look like there’s going to be much. I mean, I know that the fed rate is not necessarily tied to mortgage rates. It’s more about the 10 year bond yield that, that ties to mortgage rates. But, you know, as long as the 10 years, under 2%, we’re still going to see really low mortgage

Tracy:

Rates, right? Another end of year price appreciation, Tigo

Tego:

Price appreciation from a lot of the different groups out there. So Zelman and associates, which is one of the big consulting firms in the real estate space there, they’re seeing 10% year over year for 2021 nationally 10.6% mortgage bankers association saying over 10% national association of realtors, our association is saying 9% Fannie Mae and Freddie Mac. Fanny’s got it at 8% Freddie, Mac’s got it at 6.6. So, you know, everybody is predicting an increase. I saw some numbers from another consulting firm just this week. And they’re seeing 20% year over year increase in median price, which is a little bit different than total price appreciation, but you know, home prices are going up and, and, and, and back to that whole thing about the market and the market slowing, I think the one thing that will slow this market down is we just get way too far ahead of ourselves on home prices, where people can’t, you know, they just can’t make it work. You know it, and then you got this whole thing, Tracy, it’s like, well, everybody’s got lifts somewhere, either got to rent, or you’ve got to buy, or you got to live with family or whatever, right back to the whole conversation about, you know a multi-generational

Tracy:

Housing. Right. And what we know is rent, rent rates have gone up significantly too. So even though the home prices have gone up, it’s still mostly cheaper to buy than to rent for the same type of house. There,

Tego:

There is so much research and there’s so many good studies that talk about how, you know, home ownership, let me put it this way. Home ownership, owning a home is affordable housing compared to renting. Right, right. Plus building a nest egg.

Tracy:

What about inventory for the rest of the year? I think nationally, yeah. What the experts

Tego:

Are predicting is nationally that there’s going to be a slight increase in the number of homes coming in into the market. We’re, we’re seeing that in a lot of other parts of the country I’m going to make the call here locally that we’re going to go through the end of this month into August. Inventory is going to stay flat, maybe increase a little bit and then start to decline.

Tracy:

That’s my call. Okay. bottom line, bottom line

Tego:

Is that, you know, mortgage rates are going to stay flat or go up slightly, no big spikes in the future. Inventory is going to go up slightly, but, but not enough to really create a, a buyer’s market, you know, unless, you know, some, some places around the country, but we’re not seeing it here. And, and for the most part, everybody’s pretty optimistic about the real estate market.