Market Update - Zillow Just DOWNGRADED It's Housing Market Forecast (Interest Rates, House Prices, Inflation & The Housing Market)

Jeb Smith (0:03): Welcome. It is Wednesday, which means it's the educated home buyer live, our opportunity to answer your questions about the housing market, about mortgage rates, about the economy, about anything in your life. What's that's why we're here, Josh, to to to just be a sounding board for people to to to talk to.

Josh (0:24): I'm just happy that Wednesday's claim to fame is no longer wings. It's the educated home buyer life. There you go. So with that, guys, if you're new here, we'd

Jeb Smith (0:34): like to start the show by going over some charts, talking about what's happening, with inventory, with demand, with interest rates, kinda driving the housing market to some degree. And then we get into answering your questions. So the earlier you get in and put your questions in, the better opportunity you have to get those questions answered. Because we kinda go in order for the most part. But with that said, let us know where you're watching from to start and, any questions you have.

Jeb Smith (1:03): And that way when we get out of the live portion of the show, we can answer those for you guys. Josh, anything you wanna get off your chest before we dive in tonight, Josh? Anything bugging you

Unknown Speaker (1:12): this week? Nothing bugging me. I'm I'm punch drunk. It has been it has been a week. We've had, we've had some interesting files, and, we've learned a lot.

Unknown Speaker (1:21): So it's been great.

Jeb Smith (1:22): Learned a lot. It's always good to be learning. Alright, guys. So, tonight's episode is, you know, labeled or titled, Zillow downgraded the housing market. And they just came out with their newest forecast basically saying that year over year home price growth from essentially, you know, what March to March is going to be flat, 0% across the board.

Jeb Smith (1:51): Now understand they're looking at a nationwide average there, and we're gonna look at I don't know if we put the oh, we do have a chart here that's gonna go over some of those markets here in just a moment. So to get a better idea of what they're talking about, so March 2026 to March 2027. The middle, that yellowish color basically means the home prices are gonna be flat. So you can see there for the majority of The United States, a lot of flat markets out there, a lot of flat ish markets out there. Whereas the red shows declining markets or what their expectations are for declining markets.

Jeb Smith (2:23): And then your blues, which would typically be cold are hot in this chart. And so a lot of those are primarily all of them, Josh, outside of a couple and maybe North Carolina there near Charlotte is what I'm seeing. But most of them are in the Northeast where the really the only place you're seeing any year over year price growth. Anything you wanna add to that?

Josh (2:46): Yeah. No. It's definitely there in the Northeast. And I always remember here, this is a nowcast. Zillow, they call it a forecast.

Josh (2:54): They don't come out and say it's a nowcast, but they should call it a nowcast. It's just like GDP now. GDP now is not an attempt to tell you this is what GDP is going to be. It's based off of the data to date. So a month or two ago, they're saying, what, one to 2% appreciation, and now they're saying zero.

Josh (3:11): If rates drop, they're gonna come back and say it's gonna be up one or 2%. If rates go up, they're gonna come back and go, it's gonna be even worse. It's gonna drop.

Jeb Smith (3:18): I I think their last forecast actually had it at at point 5%. So half of 1% was their last forecast, and now basically taking it down to zero. So between a half and zero, I mean, are we really talking about a real move? Not really. But it's it's a headline.

Josh (3:33): And it gets clicks. It's a headline, and it it does its job. But also remember, next month when it's something different, better or worse, they were not wrong. It's what the data says today.

Jeb Smith (3:43): Sure. Absolutely. So with that, let's take a look here at inventory. Week over week, we saw a decent size increase. Went from 724,000 single family, homes to 743,000.

Jeb Smith (3:57): Whereas last year we were sitting at 719,000. So we're up 3.28%, Josh. And, we did a podcast today that'll publish on Monday where we were talking about some of the inventory stuff. And at one point last year, Josh, we were I think about this time last year, we were 33% more inventory than we are than we were the previous year. So in 2020 what's this year?

Jeb Smith (4:20): 2025, we had 33 more 33% more inventory than 2024. This year, we only have 3% more. So noticeable decrease in that, active inventory coming to the market. And, you know, we we dive into that in detail. So if you want more of that, make sure you check next week's episode because we just talk about that supply constraint out there and what it's doing to the housing housing market overall.

Jeb Smith (4:47): But we always like to look at Orange County and Huntington Beach where we're located. Orange County moving very close to where we were last year. I mean, we're back on top of that line. I didn't put the increases in there. I did.

Jeb Smith (5:00): I just didn't put the charts, behind them. But it was just over a 1% increase week over week with that inventory sitting at 4,080 properties, in Orange County. That's all properties, condos, townhomes, single families, everything. And Huntington Beach actually saw a decrease, of just over 6%. I went from 260 properties down to 245 properties.

Jeb Smith (5:23): So you can see there on that chart, we're kinda lock in step with, the, last year, the inventory last year, and then you see that just noticeable drop there, on that chart. Still plenty of time to to to to rebound and come back up, but we're losing time in this spring housing market, which is not concerning, but concerning to some I

Josh (5:44): a I have a couple of thoughts here. Jeb, one is that this is an example of how all markets are different. If we look here nationwide, we can see that that line, the blue line there, is is well above last year, and it's been there all year. Now both of these, Orange County was kinda tracking with the national, and then it hasn't as the red line has got closer to that green and Huntington Beach has dipped below that. So we could bore these folks with why though that is.

Josh (6:13): It doesn't matter. It's just that all of your local markets are going to look different than this chart. The other thing I was just thinking today is last week we only had 1,500 new homes come to market. This week we had 20,000. So I don't know.

Josh (6:25): I don't know what the difference was, but I was thinking that it would be awesome if they did like a twenty one day moving average, something here to just smooth this out so we could really get a look at at how it varies from year over year. And then I started thinking, I said, this is our data right here. We could make our own twenty one day moving average and smooth out our charts and see what we're looking. So maybe I'll play with it this week. We'll we'll give that to to Claude Design to make some very beautiful twenty one day moving average charts that are smoothed out

Jeb Smith (6:53): a little. There you go. So one of the reasons that inventory is not increasing in any meaningful way is that we just saw an increase of, what, 900 or so properties over the same time last year. Last year, sitting at 77,000 this year, 77,900. So not really seeing a big increase partly due to rates, partly due to, I think the war.

Jeb Smith (7:17): I think that is having an impact. We had winners in a lot of markets kinda pushing out the spring buying season, which has delayed some things. And now you could just have all of this uncertainty out there in the market, and I think that has put some pressure on, people just putting their homes on the market and and becoming active. So continue to watch it, continue to update you on that front. But we like to look at pending sales as well.

Jeb Smith (7:41): 73,000 versus 71,000 last year. Again, interest rates are lower this, time now than they were this time last year, so that is helping pending sales. But I personally believe that if we had more property, sales would actually probably be higher because I think there's some pent up demand not able to find property. And I know that because I have clients where we're not finding the property that we need and therefore we can't go pending until we're able to do that. So that lack of inventory is also pulling back or holding back pending sales, if you will.

Jeb Smith (8:15): Percentage of properties with price reductions, 34.6 or something compared to 35 last year. Looks very similar to to what we saw last year. Again, not something really to worry about. Very normal. You can see there for the most part, nothing concerning here or to be alarmed with at this juncture.

Jeb Smith (8:36): Then we take a look at the spreads, Josh. We often talk about spread between the thirty year and

Unknown Speaker (8:40): the ten year. I think

Jeb Smith (8:42): we were just like two zero five last year when this chart was printed, it was at two. I'm not sure where we are today. I'm not sure if you threw another chart in here, but you know, ideally if we can see that spread continue to tighten and come down there, that will allow interest rates to move without the ten year without the ten year moving. And we're gonna see a chart of the ten year. I think Josh, you throw one in here.

Unknown Speaker (9:05): Did you

Unknown Speaker (9:05): throw your ten year chart in?

Unknown Speaker (9:06): Yep.

Jeb Smith (9:07): Yeah. And my my view of the ten year, Josh's view of the ten year aren't really hand in hand. I think there's a possibility for it to go higher. Josh thinks we kinda stay in a range. But either way, if this can improve and we can get some improvement in that ten year, it can, it can definitely help rates come down.

Jeb Smith (9:24): And on the other side, if the ten year goes up and this can improve at all, it can keep interest rates the same without much changing, which

Josh (9:32): is kind of of what we've seen over the first half of the year here. You know, the ten hasn't really improved much, but rates haven't worsened all that much. We had a couple weeks where they were up over over six and a half. But in general, pretty good right now.

Jeb Smith (9:47): And, Josh, you know, you're you got this real median wages up here. One of the things that Zillow said in that article, where they said, you know, where they they changed their home price their home price forecast. They said that they expect affordability to improve because home prices are slowing and or home price growth is slowing rather and wages are continuing to increase, which is going to improve affordability. So we're taking a look at that right now.

Josh (10:13): I don't even need to talk about this chart. That's exactly why I put it in here. Everyone likes to talk about, oh, the current generation just screwed. The baby boomers screwed everything up. Well, if we look here from 1980 to nineteen ninety five ish, the baby boomers' heyday when they were in their primes in the workforce, real wages went nowhere during that time frame.

Josh (10:31): If we look at an actual wages, obviously, were getting increases every year, but inflation was just eating it alive. So this is adjusted for inflation. It's 35% higher wages than where we were in 1995. And why is that? 1995 was about the time when the leading edge of baby boomers started retiring.

Josh (10:49): So that was a giant generation. A large amount of supply of labor started removing itself from the labor market, and now there are less and less qualified people. Now it'll be interesting to come back in five years. Some people think that AI is gonna make people unnecessary, and that would make this chart look very different. But the reality is if you talk to any business owner in almost any qualified industry, their biggest lack in their business is good people.

Josh (11:15): People that show up, that work hard, that are committed to the business. So from that end, I I look at this and say, someone that wants to show up and and do a good job, you're you're gonna be fine, and you're going to probably do better than this chart. And that does, as Jeb said, when wages go up in real terms, home prices have been coming down in real terms because they have not been keeping pace with inflation the last couple of years. It doesn't feel great. You don't have this, oh, I don't wake up tomorrow.

Josh (11:41): But you know what? Homes are just way more affordable. But you get two, three more years of this, you you won't hear as much of the talk of no one can afford a home. This I I threw it in. This is really just an inflation commentary here.

Josh (11:54): So China has built 39 nuclear reactors. If we add up everyone else on here, they don't add up to 39. We have built none in The United States. That is changing, changing largely due to data centers. I would like to think that it isn't just data centers that got us to do this.

Josh (12:09): It decreases the cost of electricity, electric power. So from that perspective, whenever you get bad shocks like we have right now in in terms of of oil, not that they're these are directly related, hopefully, will see that we do have clean nuclear energy and that is ary or at least a disinflationary play going forward versus how we have powered The United States now. We just need to get our ourselves on the list here and actually build a few of them. This Jeb, you remember that when the tariffs hit, we see liberation day. These prices go up, and everyone is saying, oh, this is gonna be a huge inflationary shock.

Josh (12:50): And you say, no. It is a onetime reset to prices. So what we're seeing is prices are at a new higher level, but they are not still continuing to trend up. So different people look at this, and and the dotted lines are saying the pre tariff domestic price trend. Well, the trend was from January 2024 to January 2025, and the scale of this, this is like a data crime.

Josh (13:12): We went from one to point nine six. In the big picture, we zoom out, it was essentially flat and then we definitely had an increase. But again, as everyone said, rightfully so at that time, this is a one time adjustment to prices. So after a year, that inflation will work its way out. Same thing with oil prices.

Josh (13:29): If this time next year, oil is still the same price and gas is still $5 a gallon, you no longer have inflation. You have new higher prices. Doesn't mean anyone should be happy about it, but none of these things are are long term changes to inflation. We like to look at this. This is the Cleveland Feds Nowcast, for CPI and PCE for April.

Josh (13:48): Both of those decreased a tiny bit, point o two week over week. We need them to, like, cut in half, so it wasn't that kind of movement, some but some improvement. The March NOW cast for PCE did not change. So at least we're not seeing that rapid worsening that we had been seeing. Where do we see this translate to?

Josh (14:07): This is the aggregated probabilities for the Fed, and we are now down to June 2027. So over a year away before so July before we tick over to the markets seeing seeing a probability or a greater likelihood of of lower rates than where they are right now. So obviously, a million miles between then and here and there. What when I start seeing something like this, Jeb, when it's like a 100% for next week's meeting and then 97%, 94, almost 94, I look at that and I go, whenever a market is that certain of anything is generally where it changes or turns. Now the turn could be negative.

Josh (14:43): If you're right, Jeb, and rates were to spike higher, if you look there, there's a zero probability of a Fed hike. And and I don't think that's that's real world. I think there is a chance that that could happen. It is unlikely, but it could happen. So this when I see this, it tells me that the markets are a little too confident that they know what's going on.

Josh (15:01): This is a zoomed in view of of the ten year. We were in, you know, from February 29 until the very first part of of April here, we were in a very defined up channel that broke. We were hoping we were in a green down channel, but didn't really happen. We just broke that up channel going sideways here from is it four twenty five to about four thirty five in there? So as Jeb said, he if we zoom out, there's a bigger chart pattern here that he does not like that could portend higher rates.

Josh (15:33): I don't know that I see anything here on the horizon that is telling me lower rates. I think that yellow sideways trend there probably continues. What does it mean in real terms? 6.32, no change in last week, down point o one in a day. Basically, same story for FHA and VA where they're hanging out under that level.

Josh (15:52): And we have clients that we're locking at lower rates than this. Again, well qualified borrowers are gonna get a little bit better than this even though this is sort of the price for perfection. Seven eighty credit score, 20% plus down that you see there.

Jeb Smith (16:04): Alright, guys. So that is the charts. Now is an opportunity to get your questions answered if you have any. That's truly why we're here is to not to talk, but to answer your questions. This started, what, five years ago, Josh, on the original channel and just as a as a kind of a test, if you will.

Jeb Smith (16:28): And people continue to show up and show up and show up. And at some point, I think we had four or 500 people on here at any given time. And then as the housing market has slowed and kind of moved sideways, people don't have questions anymore. We've answered them all. All the questions on the internet have been answered.

Jeb Smith (16:43): But if you're going through something right now, you have questions, something specific, it's a good time to put it in. Doesn't matter if you're buying or selling or trying to invest. Otherwise, Josh and I stare at each other and it looks awkward and the show doesn't really last very long. So Josh, anything you want to we got we got some we got our our normal Michigan listener in here. Actually, Minnesota rather, and now we have a a Michigan.

Jeb Smith (17:08): So we've got the the the middle of the country in the North covered, and then we got Louisiana. So we've you know, big space, big gap there at the moment. But if you have questions, put them in. Otherwise, Josh, I don't know what we're gonna do here tonight. We're gonna this will be the shortest episode we've ever done.

Josh (17:25): Otherwise, we're going to wing Wednesday is what we're, yeah, we're gonna go to wing Wednesday is what we are going to do. You know, we we did talk a little bit about on the show today, and I think this is interesting. People will be shocked to hear this. We have some listeners to the show. They are in Florida.

Josh (17:40): They are making an offer. We talked to a listener that we closed probably two months ago now, and they were able to go and cut the price 10% from the asking price and get a 6% seller concession. They're like, yep. That's Florida. That's how that's how Florida works.

Josh (17:54): But we have another Florida buyer, found seven offers on the property. They have offered 35,000 over list price and they're being asked not to remove their appraisal contingency, but to guarantee that they would cover some of an appraisal shortage. So I'm not saying that Florida miraculously turned around and that's normal for Florida, but a desirable property that a lot of people liked. So even in the slowest of markets, the desirable properties are going to go and have a much more demand. So your mileage is always going to vary depending on where you are and the type of inventory that you're going after.

Josh (18:30): Those beautiful turnkey HGTV homes, they're going get interest. So just thought those guys might might like to hear that or might be interested in hearing it whether they like it or not.

Jeb Smith (18:39): Good. We got our listener from Louisiana asking, do we see interest rates going down in the next month? And Josh, if I had to answer that question today, right, we're we don't have crystal balls here. But my answer would be no. I I don't see an opportunity for interest rates really to do much.

Jeb Smith (18:57): I think, you know, if if the war gets you know, if if we're able to get an agreement and that confirms and, you know, and everything is good there, I think, yes, the ten year probably comes down a little bit and interest rates probably mitigate a little bit, but I don't see a big move happening either way. I don't see us getting back what we gave up in order to get there, if that

Josh (19:20): makes sense. How many times have you heard, Jeb, that, yeah, gas prices go up fast and they come down slow? Well, mortgage rates are are pretty similar to that. Right? We we saw them spike pretty quickly.

Josh (19:29): We've recovered some of that. I don't see a path to rapidly lower interest rates. You would have to have I mean, what do what do we talk about with the Fed is watching? Not that the Fed controls mortgage rates, but they're looking at the same things that bond investors are that buy mortgage backed securities that then dictate the interest rate that you're paying. They're looking at the labor market and the labor market has weakened but it certainly hasn't crashed and some of the data shows strength.

Josh (19:55): I've got a guy on Substack that John Berger that goes deep in that data and he's like, it's just telling me mixed. I'm not looking at bad news, I'm not looking at good news. It's just a mixed bag. So you don't have a a labor market crashing, and we have inflation in the mix, whether it's a onetime price adjustment to new higher oil prices. And as we just said, that even if oil prices dip, if they go back to $75 a barrel tomorrow, which was $10 higher per barrel than it was before this, it still takes its time to work its way back through the system.

Josh (20:25): So we're sixty then sixty, ninety days away from anything better than what I see as sideways, and the worst case is what you see as you get the opposite shock, and it pushes us out of the range to a higher interest rate level.

Jeb Smith (20:38): You need transparency, guys. You need clarity, and the muddy I mean, the water is very muddy at the moment. And so until that that clears up, I think you got much the same, which means interest rates kinda just doing its thing, kinda just bouncing sideways for the most part. Up an eighth, down an eighth, up a quarter, down a quarter type thing. Josh, the difference between market value and tax value.

Jeb Smith (21:02): And where would anybody even see those things, if you if you will?

Josh (21:07): Well, market value is what someone's willing to pay for your house. The only reason you really find the market value is when you put it on the market. But we will have people like this is this is funny. My my father-in-law, Angela's dad, did something that this is shows that these numbers are not accurate. He used this to his advantage.

Josh (21:25): He owned a an apartment building with a few family members, and those family members came to him and said, we need out. We need money. And he goes, okay. I I can buy you out. And he goes looks up and goes, here's the assessed value.

Josh (21:39): I'll give you that. And since you need money in a hurry, we'll take a little haircut on that. Well, in reality, it was a big apartment building. It was worth probably 2 and a half million dollars at the time. The assessed value was, like, $800,000.

Josh (21:52): So the assessed value, depending on where you are, is very, very different and can be way behind where the current market is. You know, for us here in California, it's usually pretty accurate. Your your actual tax assessment is limited based off of of prop 13. It can only go up 2% a year, but they have a value in there because they wanna know if you get a spike in values, can they ever do a catch up in the future if you had a period where they weren't even getting their 2%? Some states, like when you look at it, it'll say the assessed value, well, there's a millage rate where you have exclusions, you have a homestead, various different exclusions.

Josh (22:30): So for the most part, looking at them doesn't tell you a whole heck of a lot and to know exactly how that number is arrived at, you probably need to talk to your local realtor that knows, hey. This state, this county, this is how it goes. They're on top of it. They fall behind. This is what's included.

Josh (22:45): This is what's excluded, and this is what you can expect as a homeowner. You know, of these states, when you hear these things, these big shocks jab that it's going up, some some of these states don't even assess every year. They do it every two to four years.

Jeb Smith (22:56): Well, Josh, I would argue that the assessed value is accurate in the sense that if you look up on tax records, there's a there's an assessed value on there. And what happens is they they're giving the land a certain value. Most of the time, the land value that they're giving is much below what the land's actually worth in these cases. So the assessed value of what you're able what the tax record show and what you're able to sell that property for are considerably different. So just understanding But you just

Unknown Speaker (23:23): told us the assessed value is accurate.

Unknown Speaker (23:25): No. No. I said it's far from accurate.

Unknown Speaker (23:26): Oh, okay.

Jeb Smith (23:28): Yeah. It's not accurate. And that's what I meant to say. If I said the opposite, I'd I apologize. But no.

Jeb Smith (23:33): I said it's basically it's wrong, in the sense that the land value is worth much more than what they're actually assessing you for on those tax records, or what the number they're using up there for the value of that land. Now when you're getting taxed on it, that's a whole different thing. Like property taxes are entirely different because of how that that's based off purchase price and some other things. But if you're looking at title records, they give a value of that. That number is not accurate.

Jeb Smith (23:57): So just understand when you're going to sell your property, don't use the number there. Have an agent come in, give comparables of what homes have sold for to give you an idea of what your home is worth and not using a number that's coming from, you know, public records on on tax assessments.

Josh (24:13): Oh, a lot of times, Jeb, and a lot of times this audience is buyers versus sellers, first time They wanna know what are my taxes gonna be? This is where you do need an expert realtor that knows how it's done in your area. We operate in 36 states our team is licensed in, and most of these states are not super clear and transparent. So we're having to dig in. When you say, hey.

Josh (24:31): I'm looking in this county. We're gonna go there and do some research on exactly how the taxes are calculated there. For the most part, most states, you are going to take over the current owner's taxes. So if they pay $3,000 a year, you're gonna pay $3,000 a year. But you still wanna know how it's going to adjust and what can impact them in the future.

Jeb Smith (24:48): Alright, Josh. Does a lender require a bigger down payment when you're buying a primary home if you own other properties?

Josh (24:56): So Fannie and Freddie have a limit of 10. So they 10 financed properties. Outside of that, you're gonna have to go nonagency. So when you when you get out to those extreme limits, you can start running into some stuff there. But, no, for the most part, you know, we have a a listener in Indiana right now, and they wanted to put 5% down.

Josh (25:14): So they have a residence. They're going to buy a new home and that's gonna be a rental and it's 5%. I've had the folks we were talking about in Florida, other listeners, they own two rentals and their current home. They're gonna convert that. That'll be three rentals.

Josh (25:28): They're gonna put more than they're gonna end up doing 20% down, but that wasn't a Fannie requirement. We went through it, they originally inquired about 5%. We looked at it and yeah, no problem. So for the most part, no, lender is not gonna require you to put more down unless you are a very successful landlord and you have many, many properties.

Jeb Smith (25:43): Alright. We've got someone in Michigan, actually in the Grand Rapids area asking Josh a very specific question. You can answer this how you want. They gave their income of 71,000, no debt. They currently have 18,000, looking to have 30,000 for a down payment asking basically what house price they should be looking at and what they should be doing to prepare.

Josh (26:08): We got a whole episode we need to record on this in terms of what you can afford. I can't tell you what you can afford. I can tell you what is possible, what you can qualify for. So let's make it easy on Josh and say it's $72,000 instead of $71,000. We got $6 a month.

Josh (26:25): Fannie Freddie will say you can have a 50% debt to income. So you could have up to a 300 or $3,000 monthly payment. But let's say you have a $500 car and $500 of

Unknown Speaker (26:35): student loan In this case, he has no debt.

Josh (26:37): He's got no debt. Okay. So in his his situation, you could have a $3,000 payment. Doesn't mean you should, means you could. With if you're going FHA, which in in your area, you're probably gonna be if you get to $30,000, you're gonna have more than three and half percent down.

Josh (26:51): You're probably not gonna do FHA. If you have no debt, good credit score, this sounds like conventional. But if you were going FHA, that's 47%. If you're a veteran and you're going VA, there is no maximum debt to income ratio. We can go back to our favorite story that Jeb and I closed one at 71%.

Josh (27:06): But a $3,000 monthly payment roughly would be your max. Just super rough numbers for doing here on the show, it's about $6 per thousand. So you'll get north of 400,000 at that, but that that's gonna be like max max. You know, some people know

Unknown Speaker (27:23): But that doesn't include property taxes in the whole thing. Right?

Unknown Speaker (27:26): The the $6 per thousand should should

Unknown Speaker (27:28): Okay. It includes it. Got it. Okay. Yeah.

Unknown Speaker (27:30): Alright. Rough idea. So Josh Very rough. Should they do to prepare?

Josh (27:35): They should reach out and and go through the numbers and and get a a road map. Because the thing that I would say, never wanna pressure anyone to do anything when they're not ready. But whenever I hear someone saying, I've got a I've got a chunk. I've got $18, and I could probably buy a $300,000 house. No problem right now, but I want $30,000.

Josh (27:52): You say, okay. Well, what's happening in your market? If nothing's happening in your market and that $300,000 house is gonna be $300,000 this time next year and you just feel better about it, then that's a great plan. It's the right time for you and your life. But a lot of times, you know, that $300,000 house, by the time you're saving 12%, if it goes up two or 3%, you didn't quite make up the ground that you you thought you would.

Josh (28:13): So, starting that process, going through the numbers, figuring out where you're gonna be, you know, we talk about talk to people all the time. I've been prequalified. Okay. Cool. What were you qualified for?

Unknown Speaker (28:24): 300,000. Okay. And how much money do they tell you you needed to have? We didn't talk about it. Which loan program is best for you?

Josh (28:30): They didn't even say. And what was the total monthly payment? I don't know. Those are really important numbers so that you know. You know, a lot of times that figure is I'm only comfortable with the payment with 30,000.

Josh (28:40): People are sometimes shocked and unhappy that $6 per thousand, with another $12,000 down, you're saving yourself about $72 a month. It doesn't make a huge and appreciable difference. But the only way you know is by going through these conversations, having those numbers, and getting that road map built.

Jeb Smith (28:55): There you go. Dixieland says that he recently married his girlfriend of fifty years. So I have some questions there just out

Unknown Speaker (29:02): there. How do you have a girlfriend for fifty years?

Jeb Smith (29:04): No. No. Why would you marry after fifty years is my question. I mean, it's worked for fifty years the way it is. Why change anything?

Jeb Smith (29:10): So I I would like that answer if you could put it in there. But it says we're both on title. Now that her name has changed, do we need to update her name on the title of the home, Josh?

Josh (29:20): You don't need to. It is not a bad idea. Let's say horror of all horrors, you guys are driving down for date night on Friday and a bus comes through and kills both of you. Your errors that you're dealing with are gonna have to prove that this person with this name is the same person on the death certificate. That's an extreme and morbid and unhappy example.

Josh (29:41): I should have found a good happy example somewhere up here in my brain, but I did not. So it it's it's a best practice, yes, to update it. Is there any practical reason why you have to? No. Alright.

Josh (29:54): Question.

Jeb Smith (29:57): For somebody watching in Lancaster, Pennsylvania, Ocala, Florida, housing market. Watching in I watching in two housing markets potentially. I don't know. The Internet says Florida produces more house for money compared to the Northeast. How true?

Jeb Smith (30:14): I don't know that I understand that question. They definitely build more housing than the Northeast. That's a fact. So more housing just in general because they have more available land, the opportunity to do it, so on and so forth. Do you understand something different there, Josh?

Josh (30:30): The thing, Get it gets you more home for the money on a price per square foot basis. Yeah. Most of most of the Southeast is gonna be a much lower price than in the Northeast. So it's not really a function of of Florida. And there's just that there's a lot more that goes into it than that.

Josh (30:45): So if you're deciding between Pennsylvania and Florida, I wouldn't look at it and say that that one is a better economic deal, but the the reality is you're going to probably get for the same or a much lower price. In Florida, you can get a bigger, newer, nicer home.

Jeb Smith (31:00): All right, good stuff. Someone, Sammy Boy's asking, FHA first time home buyers, how is that rate compared to others? So I wanna be very, very clear here. FHA is not just for first time home buyers. A lot of people associate it with first time home buyers because there's a minimal down payment because they allow lower credit scores.

Jeb Smith (31:18): It has nothing to do with first time home buyers. But overall, Josh, FHA rates compared to conventional rates, how do they how do they line up? For

Josh (31:30): well qualified buyers, FHA is gonna be three eights to three quarters of a percent better. Doesn't necessarily mean it's the right loan. Most times it will result in a lower monthly payment, But let's say we're comparing three percent conventional to three and a half percent down FHA, the conventional's less. Right? I save a half a percent.

Josh (31:45): That $300,000 house, I need $1,500 less. If you have a lower credit score, you with the FHA, you have, let's say, typically about a half percent lower interest rate than you would on the conventional. And no matter what your credit score is, the monthly mortgage insurance is point 55%. So all in, including your mortgage insurance, you're about where the conventional loan is. But you have an upfront mortgage insurance premium of 1.75%.

Josh (32:11): So again, using that same $300,000 example, you got about a $5,000 larger loan. So you put $1,500 more in, but you owe $3,500 more than the guy that did the conventional loan. So the question is married couple or two people buying a home, two brothers with 800 credit scores buying with 3% down are gonna have very low mortgage insurance, point two eight, point three one, something like that. If those same two brothers have six sixty credit scores, conventional, that's gonna be like over 1%. And so you go, you're absolutely going FHA.

Josh (32:43): So you gotta look at it all in. Most of the folks that I've been dealing with here recently that have been looking through that, we've had people on the higher end of the credit scale and they look at it and they say, I'll take a $20 higher payment to have a lower loan and to not have the mortgage insurance on it for the life of the loan. So there's not a right or wrong answer. I'm not dogmatic about it. We need to go through it and make sure what makes the most sense for you.

Jeb Smith (33:04): Alright. I've got someone here, Omar, who's in Ventura, Builders offering $40,000 in incentives. His question is, should I take the fixed 4.99 and all closing costs paid, or should I go with a three two one buy down then refinance with a conventional loan, Josh?

Josh (33:26): If someone's offering you a thirty year fixed at 4.99, you take it. That I mean, doing a doing a buy down that you're gonna have to refinance versus the permanent like, we've gone through this. When we did our forecast this year, Jeb, what would it take to get rates under 5%? It would take a sea change in what we are seeing right now. Could it happen?

Josh (33:46): I can absolutely. Jeb can absolutely pencil out for you how it could happen. Sure. I'm not projecting it or predicting it. If you could get me under under 5% and it's a fixed rate just and the builder's paying my closing cost, lock it up and and move on.

Jeb Smith (34:01): But Yeah. And and I'm assuming that 40 k incentives they're giving you is what's getting that rate down to 4.99 and paying your closing costs. So understand it's not free. It's it's being paid in in some way one one way or another. But, yeah, it sounds like a sounds like the the right deal, and I would definitely take the the fixed rate.

Unknown Speaker (34:22): Young Lou?

Unknown Speaker (34:23): Young Lou o six.

Jeb Smith (34:24): Young Lou. Thank you guys for the content. I have an FHA loan for new construction. Finish is set for August. Lender is telling me interest may be closer to current average.

Jeb Smith (34:36): I find this strange. I don't even know what that means. Should I find shop the lender close to lock or should I or close to completion for a better rate? By the way, this is without points. So Josh, do you shop it around?

Unknown Speaker (34:55): Do you lock it? What do you do?

Josh (34:56): Well, the question comes back. If your your situation is similar to Omar's and you're getting $40,000 or $15,000 or $62,000, all of which I've seen from the builder, you're not shopping shit. They're giving you a bunch of free money, and they're gonna give you a lower rate than than anyone else is going to give you. But if they're not giving you any incentives, there's zero incentive to go with them, and they're telling you it's going to be the same in August. We just went through this.

Josh (35:22): I don't know what rates are gonna be in August. We're only talking, as crazy as it sounds, a hundred and twenty days away. We were saying for the next sixty to ninety days, sideways or worse

Unknown Speaker (35:32): is probably $20,000 towards closing costs.

Josh (35:35): Yeah. So what are we shopping? No one else is giving you $20,000. There there is no shopping. You're going to take what they give you.

Josh (35:42): So I mean, the more important question is why are they not explaining it to you in a way that you can understand? Rates are gonna be about the same. Why? Do you have a crystal ball? Is this magic?

Josh (35:50): Do you guys just are you gonna lock it for me and we know it's not gonna get worse or and or I can float down? Like this what what you're being told or at least the way you're explaining to us doesn't make sense. You are not shopping because no one else is giving you $20,000. You're gonna take what they give you. That doesn't mean that they shouldn't explain it to you and you shouldn't fully understand it.

Josh (36:09): And we've gone through this about 57 times on the show before. That 20,000 thousand dollars in the real world is probably 12 or $14,000. But again, Josh or any other independent lender is not giving you 12 or $14,000. They've had everything and inflate it to tell you that they're giving you more money than they are, but it's still far more than anybody else is giving.

Jeb Smith (36:28): But here's where I'd push back. They say they're giving him $20,000, but if they give him the same interest rate that you can give him or provide to him, and that's the and and that is what it is. And they're telling him that that 20 grand's being used to give that rate, then there's really no incentive being offered at all. Right? So you need something for some sort

Josh (36:46): of comparison. In your hypothetical, yes, but I don't I don't ever see that. It's it's always You need a base rate. We're gonna cover all of the closing costs, and then we're gonna use this to buy the rate down. And that's why the 20,000 isn't a real 20,000 because they'll say, well, it's a point and a half to get you that rate.

Josh (37:01): And you're like, it's not a point and a half to get that rate. Zero points to get that rate. So that's why that number is inflated. But generally, it is a real number. It's just not nearly as large.

Jeb Smith (37:11): Well, here's what I would tell you to do. I would tell you to get a quote from someone else with no points what that interest rate is so that you have a baseline when you go to lock your rate so that you have something and what the builder's offering you so you have some some comparison. I I think that's that's fair.

Unknown Speaker (37:27): That's my thought. No. Absolutely. And what I would say, you don't you don't even have to shop. You don't need to you don't need to like, just info with the educated home buyer.

Josh (37:35): Send us over the loan estimate they gave you. I'm happy to look at it, and it takes about two minutes to go through it and tell you in the real world how much money is this $20,000. I had a friend a couple years ago, and and we couldn't couldn't even come close to matching it. The builder said, we're giving you $30,000. We went through it.

Josh (37:49): It was $18,000. It's still $18,000, and ain't nobody else gonna give you.

Jeb Smith (37:54): Yep. Yep. Yep. Good stuff. Alright.

Jeb Smith (37:58): We got someone here saying, don't want to Jennifer. Jennifer doesn't wanna lowball an offer but wants to stay in their budget. Is 50,000 below selling price a bad thing to do? Here's what I'll tell you. $50,000 if you're buying a $5,000,000 home, probably not a bad bad low ball at all.

Jeb Smith (38:19): Right? $50,000 on a $150,000 home, that's 33%. That's a huge thing. So it's all relative. Right?

Jeb Smith (38:26): So you you need more context. I would say look at it on a percentage basis. And what where are most homes in your market selling below the asking price? Here in Orange County, 92648, which is the zip code that I'm in right right right down the street here. We're at about 97, 97.6% of the list price, the sales price to list price ratio.

Jeb Smith (38:51): So homes are only selling about two to two and a half percent, 3% max under where they're listed. Okay. So if you came in and $50,000 was 10%, that might be a huge, you know, slap in the face to the seller. Also, how is that home price compared to where it should be? Is that where it should be priced and it just doesn't fit your budget, therefore you wanna offer less?

Jeb Smith (39:15): Or is it overpriced and, you know, $50,000 gets it back into where it should be because that's what really matters. So worry less about the dollar amount and more about what you're actually buying and where it, you know, is priced relative to where it should be priced. My advice. Best way to find a rental property, Josh. A good place for a rental.

Jeb Smith (39:39): I mainly mean, wanna make sure it will be occupied. So, you know, here's the thing. It's, I think you should only invest in markets that you're familiar with. Right? You know, investing across state lines and other markets just to find a good rental that you think will work, but you don't understand the market.

Jeb Smith (39:59): I think that's a good way to end up hurting yourself in the long run. But if you understand the market and you know the market well and the property cash flows and that sort of thing and you have a good agent who can kind of, you know, tell you what it'll rent for and show you some comparables of where things have rented. And that gives you a kind of a good idea of, you know, what you should expect. And then you can see, okay, other rentals in that market, this is how long it took them to go, you know, under contract or, you know, get leased or what have you. And that way you have an idea of how long it could potentially be vacant.

Jeb Smith (40:33): But here's what you can't control. You can't control vacancy, right? People can, you know, stop paying for any reason. People can end a lease after a year or what have you. And it could take you months sometimes in order to get that occupied again.

Jeb Smith (40:47): So there's no guarantee, but you have to look at markets where there's strong job growth. You know, I would say revitalization, re gentrification, people want to be there for one reason or another. Those are the markets you want to invest in versus markets that are just cheap where you can buy a cheap rental to buy a cheap rental. That's not how I would approach it.

Josh (41:09): But I I think you just invented a term of regentrification. Did I? What did I say? You you said regentrification.

Unknown Speaker (41:16): Oh, I did. Yeah. Okay.

Josh (41:17): We we gentrify it, and then we're gonna do it again. We're we're going a different direction this time. The first time we gentrified, then we got the same result.

Unknown Speaker (41:24): We just finished what you started.

Josh (41:26): So, Jeb, while you were doing that, I've been on a hunt here, and I did look up, and you've probably looked this up before, 06/25/2020. The first time these two doofuses talked to this camera live on your channel, and we look like 32 years younger. So apparently doing this every Wednesday is aging us in dog years. That is for sure.

Jeb Smith (41:46): That is that is certain. Yes. So June 25. So we're almost at six years. Holy cow.

Jeb Smith (41:54): That's a long time. I I said I would quit after six years, Josh.

Unknown Speaker (41:57): So I don't I I We're very close. Here. Yeah. I'm looking at the transcript from that first show, and I

Jeb Smith (42:02): don't We we get we need a countdown. A countdown that says this is it. Is it typical for a lender to say the rate is the national average? No. There's no there's no no one should be using a national average as a rate, in my opinion.

Jeb Smith (42:19): I never said that, Josh, when I was a lender. This is the national average, and you should take it.

Josh (42:24): Yeah. No. That's the the rate's not the it's never the national average because, any one lender is not ever gonna be the average. You should ask them, so you're what you're telling me is you are an average lender. You guys are just average.

Josh (42:37): You're not the worst rates, but you're not the best. You're just average. And I should use you only because the builder is giving me $20,000 to settle for your average. Just mess with them. Just tell them.

Josh (42:47): See what they say to that.

Jeb Smith (42:49): There you go. Give it a give it a whirl. Alright, guys. Any more questions? Been on forty three minutes at the moment.

Jeb Smith (42:58): There's 80 plus of you watching, and no questions. No questions, people. Just just a bunch of listeners here. Do us a favor. Find any value.

Jeb Smith (43:09): Hit the thumbs up. Consider subscribing if you have not. And, you know, Josh and I don't talk about ourselves enough here, but I actually sell houses. Josh does loans. We would love the opportunity to to guide you through that process regardless of where you are in The United States.

Jeb Smith (43:25): I have a network of agents can refer you to. I probably refer somebody every day to an agent across the country. Would love that that opportunity if if you don't have an agent. And Josh does loans in 30 plus states. So if you'd like to get in touch with either of us, that link at the bottom there, jebsmith.net forward /start, we'll get you in touch with us.

Jeb Smith (43:44): Josh, we recently did our blueprint, which is our workshop, our home buying workshop, taking people from a to z during that that that process. And I don't know if we're gonna put that episode out there, Josh. I thought it was good enough to to publish the episode. I don't know if we're gonna do it, but, there might be a landing page or something here shortly, a quiz or something you guys can go to to, to get some more information. So we'll keep you in the loop on that.

Jeb Smith (44:11): And, also let us know if there's anything on the podcast you want us to cover. Right? Separate from this channel. On the podcast, deep dive into topics. Right?

Jeb Smith (44:19): We've done essentially everything at this point because we've been doing it for three years. But, you know, the the best episodes come from you guys because that's the information you wanna hear. You're our avatar. So if you wanna know it, chances are somebody else wants to know the same thing. So if there's something you want covered, let us know in the chat.

Jeb Smith (44:35): We got another question here, Josh. Well, here's one. I'll let you answer this one. Well, you have done this to some degree. What do you think of buying a rental property with friends?

Josh (44:50): Let's say that I had a conversation this last week with another listener. I'm not going to say their names. Even if we just use first names, no one would know. But he bought a fourplex with his brother, and his brother was the manager. Joint bank account, shared the financials at the end of the year, filed the tax returns, they split the profits, deducted everything accordingly.

Josh (45:15): And a few years back, the brother said, I don't wanna do this anymore. I want all the money. I want the bank account. Closed, cleaned out the joint bank account, opened his own, said no, you don't get any financials and apparently he also moved and didn't let his brother know where he is in the world right now. So now these folks, very well qualified, want to buy a home of their own and there is nothing they can do because we have a $5,000 rental payment out there that is bringing in positive cash flow that wouldn't if we if it were the paperwork were handled properly would not impact them from buying in any way shape or form.

Josh (45:47): So that's your, I guess it could be a worse case scenario than that, but it's close to your worst case scenario. Best case scenario is it all works out great. I own a rental property in Long Beach with a very good friend of mine. So I guess second mother, she and I flipped 40 homes together and we found this in the middle of doing that, we found this four plex and it has been great. We sit around and smile and chuckle about what a great job we did and that's sort of your best.

Josh (46:14): So I can't tell you that you shouldn't do it. I would just say that it can work out well. It can work out not well. I would have everything in writing. I would have an operating agreement.

Josh (46:23): I would be super clear, and I would never let anyone else have any control of anything. But that's me. I'm a control freak.

Jeb Smith (46:29): Well, there you go. Question, what do I think about Southern Riverside County, Menifee, Murrieta, Paris, Willamard? You know, I don't follow those markets a lot, but what I do know is I have a buddy that owns a termite company out in that area and he just tells me how many inspections he's doing on a daily basis from properties that are changing hands. So I think it's relatively, it's moving. I don't think it's, it's not as bulletproof as say Orange County in the sense, you know, it's not as it's more susceptible to to price declines as things slow, that sort of thing, but we're not seeing that at the moment.

Jeb Smith (47:13): So I think it's it's doing a lot of what we're seeing here. Home prices kinda moving sideways more so than anything else, but I actually have a a listing coming up in Murrieta here in the next month or so. A big listing actually for for that area. So I'll be able to tell you then when we put it on the market how it moves, But we're

Unknown Speaker (47:31): probably Large or expensive?

Jeb Smith (47:34): Both. I don't know. It's I mean, for that area, it's it's like five bedrooms, three 3,500 square feet or so. Pool, spa, fire pit, something like quarter of an acre or maybe half an acre. I forget all the details, but, pretty large property.

Jeb Smith (47:54): So I'll be able to give you a better idea at that time. Josh, does private school tuition count towards your DTI? No. Because it's

Josh (48:03): not an obligation. You you didn't sign a contract that your kid has to go there. So, you hit the skids, something happens, mama loses her job, and you need to cut the budget, you can put the kids in public school. You don't have to keep them there. So kind of the rule is the lender is looking for what obligations do you have that you can't get out from under?

Josh (48:22): Your car, you gotta pay it or it gets repoed. Know, student loans, things of that sort that you are contractually bound and obligated to pay And that's sort of the reason why things like your cell phone doesn't go on there because you don't need a cell phone. You probably really want it, but you do not need a cell phone to live. You could cut that off tomorrow. So that's kind of the rule for what's gonna get included in your debt to income or not.

Jeb Smith (48:47): Alright. Somebody's asking about auction houses. Do you guys have any videos on auctions step by step? Also, the mortgages, would I be able to get a loan before and then go in? Most of in my experience, auctions, most of the time, it's it's, you know, people coming in with cash, but there are auction properties where you can go in and get a loan.

Jeb Smith (49:10): Understand that a lot of auction properties require you to put a deposit in up front, some sort of deposit in. And so each one works a little bit differently. I haven't done any videos on it, just because I auctions don't benefit me in any way. I mean, unfortunately, you can't use a realtor most of the time on auction situations. So I I kinda stay away from them.

Jeb Smith (49:33): But yeah. I I I truly don't know all the details at this point, and they could have changed since the last time that I was messing with any of that stuff. So, know, kinda pay attention to the the fine print in each one of them because it's it's all a little bit different. Anything you wanna add on that, Josh? I don't know if there's anything I'm missing there.

Josh (49:54): For the most part, you're not getting financing. So the reason why those are good deals, why they're discounts, if you've ever been to so there's a couple different types of auctions. There's auctions on the courthouse steps, which is 99 times out of a 100 the way this happens because things aren't going back to the banks where they can go and do an auction. Like, if look at auction.com, they're generally telling you this is what's gonna show up at the courthouse steps. Sure.

Josh (50:13): And if they're going to sell there, so a couple things, there's like a reserve price. The lender is gonna say bidding starts here. So it's usually less than the home is worth but not appreciably less. Sometimes it's more. So it just people go, yeah, no one wants to bid on that so the bank just gets it back.

Josh (50:28): Sometimes the bank wants it. But from from that, like it is pretty rare that something comes up, there's enough of a discount, someone has had the time to research it and there's so few of them right now. Like in 2008, 02/2010, there were hundreds of them. There were more homes than there were people with cashier's checks cause that's what you have to do. I remember I was going to the guy with the the big guy there looked like he was homeless, but he had cargo pants on and each pocket in those cargo pants had a wallet, an envelope like this that was full of different denominations of cashier's checks cause you have to give it to the auctioneer Like, finish all their auctions and if you won one of those properties, you go over to the side, you sign it, you give them your money, and he would break out here's 50,000, 50,000, 50,000, and here's your $310,000 for that house.

Josh (51:15): So that's generally why those discounts are there. They're taking on the risk of no title insurance, no inspection, it might be occupied, all of those things. And hearing about auctions in Riverside County, I had someone reach out the other month, Jeb, that they were hearing about the auctions in San Diego County, property tax option auctions. Like, did you look at the list? Like, 80 of them are timeshares.

Josh (51:36): No shit. People didn't pay their property taxes on their timeshare. They don't want their timeshare. You didn't want their timeshare. And then when you go and look through it, of the 20% that were real properties, most of them were vacant land, garbage commercial properties, things that no one wanted.

Josh (51:51): So I just there's there is not an appreciable amount of homes that are going to foreclosure that are being auctioned in Riverside County right now. And if they were, you couldn't get them because you don't have a stack of cashier's checks to go to the courthouse Maybe

Unknown Speaker (52:03): they do. Maybe they're just asking questions.

Josh (52:05): If they do, then they are in business. You can get a deal. The very first house that that I flipped in 2008, we bought it from someone that bought it at the courthouse steps. He did that. He had the money, and we were able to then do the title research.

Josh (52:17): Ten days later, he paid I wanna wanna say he paid $2.50 for it, and we gave him $2.65. So for having that money and owning that property for like eight days, he made $15,000. So it's possible, people do it but it's not common for especially for someone buying for their home.

Jeb Smith (52:36): Sure. Question here. Just wanted to thank y'all for the info oh, no question at all. Just a comment. Just wanna thank y'all for the information.

Jeb Smith (52:43): It has really helped me understand in Phoenix. So appreciate you watching. Appreciate the support, and showing up and telling us that, that helps us out. If you haven't done so, leave us a review on, Spotify, on Apple, on the educated home buyer podcast. That that helps us more than anything else.

Jeb Smith (53:06): In fact, Josh, we need to ask for that more. We need to ask for reviews on the podcast, not just Google reviews, reviews on the podcast. Jeb So that's what we're doing right now, Josh. We're asking for that right now. We should people on.

Unknown Speaker (53:20): They should all go to Spotify. Are you frozen?

Unknown Speaker (53:29): Yeah. Much like recording the podcast today, I have no idea what you just said. But, Jeb, what if these two Look at these. What if these two handsome young men asked you to go leave a review for the podcast?

Unknown Speaker (53:40): Wow. Look at that guy on the right. What is going on with them? Holy cow. Or the left or whichever side you're however you're watching this.

Jeb Smith (53:47): Jesus. That guy looks young.

Josh (53:49): That is shocking. I did not realize that my beard was that dark five and a half years ago.

Jeb Smith (53:55): That was that was this off was that this office? Yeah. No. We had we were doing this before this office.

Josh (54:02): Yeah. So, no, twenty twenty twenty wasn't that. I was in the back office back over there. This is before we renovated the office and everything. We still have the the ugly mini blinds and everything.

Jeb Smith (54:11): You've gotta go you've gotta go is this on which channel did you pull that from? Mine or

Josh (54:16): or the entire homebuyer? Yeah. From yours. No. Educated Homebuyer didn't exist till 2022 till two years after this.

Unknown Speaker (54:22): Wow. Alright. I I think I think there's further back than that.

Unknown Speaker (54:27): Well, go go hunt them. Maybe in studio you can see them on your on your channel. I can't do it next time.

Unknown Speaker (54:33): Because I don't wanna I don't wanna waste valuable time here while we're unless you wanna answer.

Josh (54:37): These folks love looking at pictures of young Josh and Jeb. Alright.

Jeb Smith (54:41): So when deciding between a condo or townhome in a beach city like Huntington Beach or a single family home is somewhere slightly inland like Lakewood, what do you recommend? I would say first off location is the most important thing in real estate in buying a house. Right? But sometimes we can't afford to live where we want to live for one reason or another. Josh wants to live in Malibu.

Jeb Smith (55:06): I'd love to live in Corona Del Mar. You know, I mean, maybe Josh would like to be in Corona Del Mar. The reality is I can't really afford what I want in that market. Therefore, I'm here. I'm here in Huntington Beach, and I'm happy here.

Jeb Smith (55:17): But that said, I think settling between a condo and a single family home, two different types of property entirely. I think you need to first kind of start where you want to be, right? So if you said, hey, Jeb, this is our budget. This is where we want to be. And Huntington Beach was where you wanted to be.

Jeb Smith (55:35): I think we look at what you can get in that market. And then from there you make a determination. Are you okay with the choices that you have? And you gotta take it with a grain of salt because inventory is low right now, supply is low. And so what you want might not be on the market, but we have to just kind of have that conversation to say, Hey, listen, you know, this were on the market, this is where it would be priced.

Jeb Smith (55:56): And does it fit within your price range? And if the reality is yes, and it kind of checks the boxes of what you need, bedroom, bathroom count in the area that you wanna be, then I think that's a reasonable choice. Now, on the other side, if you can't get what you want, bedroom, bathroom count and all of that, then yeah, you probably need to go a little bit further out. Do I automatically go all the way to Lakewood? No, I probably start looking at communities closer as I move my way up to Lakewood so that I'm as close as I can be to that location without just going completely out of the way.

Jeb Smith (56:29): And the reason I say that is because I was meeting with some clients today who ideally want to be in Huntington Beach. And we're looking in Huntington, Costa Mesa, Fountain Valley. These are local markets here and not really seeing what they want. And they said, Hey, we're willing to consider some of these other markets. And I said, what have you thought about like West Garden Grove, Westside, Westminster?

Jeb Smith (56:48): Like these are markets where essentially you can get the same house that you could get in Huntington Beach for probably $200,000 less in like West Garden Grove versus Huntington Beach. Like that's what I would do versus going all the way up to say a Lakewood, right? And if you still can't get what you want, then maybe you continue to move up there. But locations, everything. If you're buying a home just to buy a home and it's you're you're not buying in a location that you want to be in, you're going to regret that drive and everything that has to do with it because it's just not going to be ideal.

Jeb Smith (57:21): You're not going to enjoy coming home every day because, you know, that's a there's a big difference between Lakewood and and Huntington Beach and since and and just the drive alone. Right? So traffic adds up. I mean, that twenty, thirty minute drive could be an hour easily, and that can get really frustrating depending on the time of day. So have a conversation with somebody that knows the market, knows the area, and kind of let them guide you and, you know, help you make the right decision for yourself.

Jeb Smith (57:46): Not make the decision for you, but help you make the decision.

Josh (57:49): That that big picture is the important part that you said. No one can answer this for you. It's all pros and cons, trade offs, and Jeff just laid it out, and you need to figure out what is the most important to you. We had someone chime in with a comment. Javier Javier said, Huntington Beach HOA is expensive and still going up every year.

Josh (58:05): Well, Javier, we can take the Huntington Beach off of that and say HOA's are expensive and still going up every year. So it's really condo versus SFR. And and I mean, it's not that bad. Jeb, you've been in your development about fifteen years. What what's happened to the the Blues since you've been there?

Jeb Smith (58:23): It, you know, it it went up, and then it went down a couple years, and then it went up. And, I mean, it's it's up now compared to when I when I bought it. In fact, it's gone up the last couple of years, but I also look at the economy. I was on the board for a long time or for four years, not a long time, but four years. And I know what goes into these HOAs and what they have to spend money on.

Jeb Smith (58:45): And as soon as I see a real world cost, like in my own budget going up, I automatically know that in order to cover that, the HOAs got to go up. Right? And so you just have to understand when you're buying in a homeowners association, there are things that they have to cover and things are going to get more expensive over time and you can things could be anything, right? Lawn care. It could be, you know, depending on what they cover in that community, whether it's swimming pools or maintenance or tree trimming or whatever over time because of inflation, everything is going to get more expensive, which means your HOA dues aren't going to continue to go up.

Jeb Smith (59:20): And that's just the reality. So something you got to factor into your budget. But with your buying in an HOA, it's important to look at the reserves of the community so that you're not getting these huge assessments. Right? That's what you're trying to avoid in these in these situations is communities that are having large assessments because they're they're not properly funded.

Jeb Smith (59:39): And you don't need a an association to be a 100% funded, but you need something. You need strong funding overall just in case issues do come up because it happens. So anyway, Josh, we've been on an hour tonight. So this is where I'd like to take a minute and ask a favor. If found any value, hit that thumbs up.

Jeb Smith (59:57): Consider subscribing if you haven't done so already. And if you would like to get in touch with Josh and myself, use that link at the bottom of the screen, jebsmith.net/start. Until next time, buy right, borrow smart, build wealth. Adios.

Unknown Speaker (1:00:09): Amigos. Amigos.