Big John Talks! Housing Inventory
Updated: Jul 20, 2021
Happy New Year, everyone! Long time no talk, and that's on me, but I'm happy to be back! Let's dive into housing inventory and how it affects the market today.
Welcome to big john talks Your guide to everything business in Columbia, South Carolina. Good morning, South Carolina and the Midlands. This is big john talks with john Hinks with lending path mortgage. It has been a while since my last podcast, and then all sincerity, what a crazy November in December. We're talking elections, we're talking about movements and markets, growth within the company and inconsistency on my part in keeping up with my podcast, and got a slap on the wrist from my friends and co workers saying, john, we want more podcasts, why have you not state office? So my, my pledge to you is to continue being a little bit more consistent with the podcast and staying on top. And, you know, honestly, it just was one of those things that got on put on the back burner. And it shouldn't have had a lot of comments. And people wanted to hear more about what we were doing and more about the market because it is such a crazy market. And I figured, you know, this was a great platform to do that. So here I am. It is a 15 in the morning, it's February 5 2021, happy new year, I think you can still say Happy New Year, if Larry David were to have like a rule of etiquette, he would say, you know, 60 days, you can keep saying Happy New Year, 60 days, that's what I think the number would be 60 days, in February, I think you lose the Happy New Year slogan. So happy new year is going to be a great year 2021 I know, we are all facing, you know, so many different obstacles that are out there. And, and it has been quite the year to pivot pivot turn, reposition. And those are the best words I can come up with. But today's topic, what I would like to really talk about is a is is is an issue in the housing market, not just in South Carolina, but across the nation. And that is inventory. inventory is basically houses that we can choose from I mean, we are having a shortage of inventory across the board. You know, we have you know, you have resale, which is you know, someone selling their home that they've lived in, in an established neighborhood, and values are up. And then you have new construction, which is, you know, behind to be 100% honest with you, and why is new construction behind. There's a lot of theories out there, I can tell you I have a lot of friends that are builders, and it's not them. You know, but I read a really good article and talking about the 57 year of of new home construction, you know, on average, this country builds about 725,000 new homes per year in the US 725,000 new homes. That is a growth of new population I'll tell you in so in 2007 Well, we went below that mean, and that was just based from the economy. Builders were going out of business money dried up, there was no money for builders to build. And it only it really only came back above the mean, back in 2018 and 2019. So for 12 years, we were short, we were short, on average are about 400,000 homes per year from the inventory. And why? Why were we short? Well, the answer is simple subcontractors.
Those folks went out of business 12 years ago, and we forgot about them. We totally did not invest in the trades that are needed in order for us to build homes and the subcontractors, as great as they are cannot keep up. They're in demand. I mean that goes that goes from framing a house to plumbing a house to building a pool. I mean, you can talk to any pool person right now and you're lucky if you schedule something now they can get you in this year period. So it is a quite the it's not an enigma, it's it's quite easy as a sub contracting business. Not to mention that cost of lumber and so forth materials have gone up sky high. lumber itself is 60% more now than it was a year ago. And that really just has to come down for the supply chains up in the Northwest. I mean when you freeze those guys for a couple of months because of COVID they're going to be behind they're not going to be Making the wood but when the woods coming down, the demand is getting higher. So the prices are gonna go up, you know? You know, we just don't have an excess inventory right now. So what you really do have is you have quite a few people that are out there looking for homes, and there's no homes available. the luxury of being a little picky now has kind of gone away. So how do we fix this? How does? How does the real estate industry in the mortgage industry pivot and I can talk about that for the next few minutes. And I'd like to dive more into this topic and start bringing on some guests but my first suggestion morning, anything else as far as like what something that I can provide to to the housing industry in any other mortgage professional can provide to the mortgage industry is the pre qualification letter, in my opinion is almost, it's just dead, you really need to have a pre approval you really need to have a thorough underwrite of any buyer that comes in offers that come in cannot be weak anymore, they have to be strong offers and part of a strong offer, not only is what you pay him for house, but a strong offers really coming with, you know, the the mortgage officers saying I have vetted this loan, I have done my due diligence, I have answered the 19 questions that are needed to be asked in order for me to be able to prequalify a client. And this person will close on this home in 30 days, barring anything that's way out of the ordinary, of course, but it would not be because of credit income or assets and so forth.
Another thing that I feel that has been working that I'm not sure people are crazy about is there are a lot of offers with a contingency, which means I have to sell my home in order for me to buy or be able to buy your home. And that scares sellers away. Well, if that scares sellers away, it really shouldn't. Because inventory is so low, you put a house on the market, you can kind of get rid of it pretty quickly, I would think 45 to 60 day contracts could be possible on contingencies. Because you're you're offering the opportunity to be able to put the house on the market. And give yourself that 15 days to go under contract and then negotiations and do the due diligence of the home inspections and so forth. And then you have a solid offers, I'm selling this house, I have equity coming out of this house, I have a strong downpayment coming in on the house, and then therefore puts you in a stronger position. Now, real estate agents may just like turn their head a little bit and say, well, john, there's gonna be other offers on that house. And there's going to be cash offers and so forth. And that part I get I understand, but in those unique situations, I do think a contingency pre qualification could happen. A lot of times I'm asked does it have to be contingent, so I'm calculating that income ratios withholding the house at the same time, which leads into something called recasting. So for the public that if you don't know, let's say you own a house that's worth 500, and you only have a mortgage on it for about 300. So when you sell your house, you're gonna net maybe 170, somewhere in there 175. And then the new house that you're buying, you have a pretty hefty mortgage on maybe 400,000. And you really didn't want that high of a mortgage, you wanted to take the equity from the house that you sold, and you really wanted to be able to plop it down on a big down payment on the next house. But because the market has such low inventory, and there's multiple offers, you don't have that luxury to try to sell that house at the same day or before you buy the new one. So what we do is we do something called recasting. And recasting is quite popular now and I'm starting to see servicers are way more accepting of it is by the house and then sell your house and then the equity, you plop it down on the principal loan amount. And what we do is we do something called a recast. And a recast basically will change the payment to reflect the new principal balance without losing the interest rate. And it does recast it which means it starts to amortization schedule over again but at a lower payment. So then you do have the equity that's in the house. And you do have the lower payment and it's done without what we would call a refinance. So those are some just a couple of ideas that I really love talking about as far as what a mortgage officer can help provide. I'm going to have a guest speaker hopefully next week, talking about what an agent expects on making an offer on a low inventory house. I was asked to remind also that we have something called delayed financing for you cash buyers that are out there that if you want to fast closing and you have the cash to be able to buy a house, we can definitely do delayed financing 30 to 60 days later after the fact. So that will allow you to put a mortgage on a piece of property without going through the process. So it makes your offer stronger. So lots of options to try to position yourself in a better way to be able to close some loans and
you know, pivot, that's the word that's the word for the day is pivot. How do we how do we position ourselves to buy houses? If you are looking to sell a house, I don't know if there's a better time in the market than I've ever seen to sell a house right now to sell a home. You buy a new home and you need a mortgage the rates are super low, still don't know if they're going anywhere anytime soon. I'm not gonna try to predict that. But they're all signs are showing that great time to buy a house because the rates are low. Lots of cheap money out there. And, you know, that's basically the gist of it. It's a great time if you're on the fence to hop off the fence. If you need help with a real estate agent that can help you with that, you know, reach out to me. My website is www dot john Haynes Jr. Calm or big john talks calm. And this is john Haynes with lending path mortgage. And I look forward to talking about next week's topic with an agent talk about this crazy inventory. Big john talks. Talk to you guys soon. Thanks for listening to big john talks. Check out more episodes at bigjohntalks.com