The Market is Hot! But Where is it Going?

2020's real estate market was wild, to put it mildly. Now that we are well into 2021 the next big question is, where is this crazy market going?

On this weeks episode we brought in real estate agent and market expert Jeremy Peterson. He gives a review of what happened with the market 2020 and how that relates to past influxes in the market. He also shares his insight on where he sees the market going. This episode is loaded with great information for what you can expect from the market throughout the rest of the year.

You can listen to all episodes of Agent Vs Lender on Spotify, Apple Podcasts, Stitcher, and Google Play. If you love Agent Vs Lender follow us on YouTube, Facebook, and Instagram for all bonus content.

Transcript

Ron Pippin: 0:00

Welcome to another episode of Agent Versus Lender. And today we have Jeremy Peterson with us. Jeremy is a local real estate broker. He's a real estate investor. He is I think he manages like a bunch of different properties. If you're looking for anything within that realm, Jeremy's the guy. But the reason why I have Jeremy on today is we want to talk about today the market, about what's going on in real estate, what the markets like, what it's been, what it's been like, and maybe where we're headed. And Jeremy is the guy that I know that the charts and the graphs and all the details and keeps a really good handle on that. And so we want to talk to Jeremy today about what can you expect in the real estate market in the coming months and where we've been, and and what's happened during COVID. Where we're are today, and maybe what you can expect in the future course you know, that's probably a guesstimate. But But if Jeremy but if but if anybody knows, Jeremy, be give, we'll give you a good good handle on that. So well, for you for that, Jeremy.

Jeremy Peterson: 1:12

I think I am. I think I'm ready.

Ron Pippin: 1:14

Okay, cool. So let's look well, I'm just gonna turn it over to you. Where have we been? So before COVID, kind of give us just a really brief, you know, where we're where are we moving?

Jeremy Peterson: 1:26

So, so the real, I guess I'll start in 2012, because that was when that was the end of our last down market in real estate. And it actually, if you look at the the go back, it was almost on the calendar year. So January 2012, is when things started to turn around and improve after four really bad years in the market. And so the market was recovering or began its recovery in 2012. And plotted along in 2014. things kind of softened up a minute where we thought we might actually start to see prices start falling, but they they held steady, and then just kept climbing. And so we've had consistent price growth. With the market, we've had consistent sales volume growth, from 2012 forward to today. So it's really just been a story of consistent. And well, up until recent history till COVID. It's been a story of just consistent and healthy price growth and sales growth. And, and most of that was driven by the fact that that our economy was growing jobs were growing. At the same time builders weren't, you know, we're not keeping up with the supply that was demanded by the market. So prices have just gone up relative to all these good economic fundamentals, and a shortage of housing stock. So that's the that's the pre COVID story in a nutshell, that takes you about eight that's about eight years of market history in 30 seconds. And you know, and then we had COVID, right and in COVID. So 2020 we, you know, things, there were some rumblings and in February of 20. about maybe there's some issues in China that might be causing some stir, that didn't really affect the housing market much at that time, until the lockdown came locally in mid March of 2020. And then the market it was it was significant and quick. But there was a panic for about two weeks in the market. As we saw listings, active listings accelerate. I actually contemplated selling some of my property, I ended up abandoning some homes that I had under contract to buy as investments, because the uncertainty was so severe. And also based on what we knew about COVID. At the time, you know, we were talking about maybe a 5% reduction in population based on that, and that just that sort of uncertainty seemed daunting and, and scary. So we sort of went into a bunker for a minute. But that lasted about two weeks, really until about April. And then even though we were under a lockdown in April locally, the real estate market kept plugging along and then began to take off as far as sales volume and in prices. And so we began an exponential increase in housing prices starting really in April of 2020. And that trajectory has continued up until recently, and so,

Ron Pippin: 5:05

a couple things that you said back before COVID, you said there was a healthy, there was a healthy market. Healthy market is just consistent growth. That's not it's not like this giant upward trajectory. It's just kind of just consistent growth. What 3 or 4%? ish per year? Does that sound about? Right?

Jeremy Peterson: 5:29

So well, we were growing faster than that on an annual basis. So our so our prices were appreciating between, oh, eight, somewhere between eight and 15% annually.

Ron Pippin: 5:41

That was pretty consistent over over like nine or 10 years?

Jeremy Peterson: 5:45

yeah, yeah, that was consistent. In fact, I just ran a chart just a few minutes before a meeting here, that, that shows the month to month increase or decrease in house prices, or price per square foot is how I measure it. And when I put a trendline over that information, what it basically shows is that, from 2012, up until 2020, the average increase in home prices was somewhere between zero and 1% each month, on average, that changed in 2020. To where, you know, we're approaching 2% each month. So, so definitely, you're definitely off trend for 2020. With the with this, and also considering that the 2012 to 2020 timeframe, was a little bit off trend for for Utah in general before that, because we just had seen growth spurts like this for this long. Or when I say growth, I mean your price increases this steady, this intense, and you know, this, this consistently. So, so yeah, so it's been really an unprecedented time in the market. And you've got, you know, is, is an interesting thing that happens during this, this kind of a market is that you get a lot of market entrance. So you get a lot of new realtors, a lot of new loan officers, a lot of new people coming into the industry to service the volume of transactions that are occurring. And also because it seems easy, because, you know, you just I just show up and fish jumping, you know, you put your boat on the lake and the fish jump in your boat. You don't even need to put any bait on it on your hook, you just show up and the fish jump in. But, you know, as we know, that doesn't last forever, for those of us that that lived through 2007 and 8, we know that you know that things change. And you know, those who've been in the business even longer than that, you know it there's an ebb and flow to this business for sure.

Ron Pippin: 8:02

Sure. So one other thing that you mentioned was that that I think we're probably going to get into is builders weren't keeping up, though, you said prior to COVID builders weren't keeping up. So what do you mean by that?

Jeremy Peterson: 8:22

So So the way to measure demand is in the formation of new households, because new households need a place to live like. And there's different ways, you know, there's wonky ways to define that. But think of it like a 20 year old kid moves out of his parents house and wants to get an apartment. Or maybe he gets married and wants to, to find a house for him and his new family or something like that. And so that's that's the formation of a household. And when you have, or you have a family or somebody that moves out of state into the state, that's that's household, that's a new household that needs a roof over their head. And so when you have in migration, and then you have people becoming adults and needing places for themselves to live, they don't want to live in their parents basement anymore. That creates demand, you know, and so therefore, we need to have rooftops to house these people. And builders, builders. Well, there's a couple of factors. One is that their profit margins, their profit margins have been squeezed on smaller builds. And the availability of the available availability of land is limited and so they have to buy either land in an area that can be zoned high density to build townhomes are some high density housing, which is very limited because communities in Utah have a suburban feel to them and they tend to shun higher density. projects. And, you know, or the, or they could buy a quarter acre lot in a suburb and build, you know, a four or $500,000 house on it, which has the profit margins, they need to keep their business going. So that's mostly what they've been doing is building bigger housing that you know, for move up, move up, buyers, and the starter homes have been lagging behind. And so. So the other factor, too, is that these guys almost got killed in the downturn in the Great Recession, like their businesses, they almost all went bankrupt. And most of them are still having a bit of a depression or a mindset where they're just not going to put themselves at risk like that again. And so they've scaled down, where they were, where they were going gangbusters before the guys that did go gangbusters before in the boom before the recession are out of business. And the guys that survived, did so by the skin of their teeth. And so they know that if they extend themselves too much, and there's some sort of credit crunch or some surprise that that that gets them that they're if their credit lines dry up, they have no capital to build, they're out of business. So they've been playing it safe and keeping themselves from being overly exposed to debt, which means they can only build so many houses at a time.

Ron Pippin: 11:21

So not keeping up in a nutshell, that just means that there's far more demand then then there, they can, then they're willing to or they're able to build.

Jeremy Peterson: 11:34

So so the numbers that I've seen, is it. And I haven't, I haven't seen these numbers recently. So I can't speak to presently. But I do know at one time, maybe two or three years ago, the backlog or the excess demand for housing was about 40,000 housing units. And at one time it also it was winnowed down to about 25,000. So they were making headway. You know, the excess demand was being chipped away at but it was going to be several more years before we reached equilibrium.

Ron Pippin: 12:06

Okay. Good to know. Okay. And I'm sure that plays into what we're going into, because I don't think we got into COVID yet. Did we

Jeremy Peterson: 12:15

know we haven't touched? Well, we talked a little bit about the exponential growth in COVID. Okay, and what's happened there? So we could talk a little

Ron Pippin: 12:23

menuing on where did the market go? Where did we?

Jeremy Peterson: 12:26

Yeah, well, so. So yeah, the whole COVID year was interesting, because now, with everybody working from home, home becomes a place that you you're spending a lot more time, people are more interested in what home has to offer. Because they're spending so much time there. And so then you get people willing to spend more on houses that they want, because they know that they're going to be spending a lot of their time there. And at the same time, not only with COVID, but also with the political cycle. After the 2020 election, we saw a huge amount of migration occur into the state, from other states and other surrounding states that there was a major change in direction after starting in around November, December. of 2020, with with price growth, and what we saw was a lot of very cash flush buyers, from out of state coming in, to then compete with local buyers for these homes that are here. And these cash flush buyers were crowding out local buyers from market. And yeah, that was something that's happened within the last. You know, it's it's been within the last six to eight months, or actually slightly more, maybe 10 months this has been going on. But that was a spigot they got opened after, you know, that started in November 2020. Because I remember distinctly shopping with buyers, and bumping into for the first time some bidding war where somebody was willing to pay $20,000 over list price and guarantee it with cash. You know, I'd never heard of I always fantasize about those kinds of things, but but never experienced it. You know, and, you know, always seemed like a hypothetical situation. But it became very real very quick. And that's become the norm up until recently.

Ron Pippin: 14:29

Well, it also became even worse than that, because it wasn't just $20,000 or list price. It was 20 or $30,000 over appraised value. Yeah, you know, you have a list price of x. That doesn't mean your appraisal is going to come in at that point. So they're willing to guarantee with cash, anything over the appraised value because as a lender, we're going to look at not necessarily the list price, but what's the house worth? So we take we look at either the appraised value or the or the purchase price, whichever is less. That's the value that that we use in order to finance homes. And people were willing to spend 20-30,000. And sometimes in the higher price points even more over that appraised price, which means they have that cash. And you're right man, I just saw so many first time buyers just getting squeezed out of the market.

Jeremy Peterson: 15:26

Yeah, I my most recent sale, I just closed on a listing here in downtown Ogden, we put it on the market, we had four offers in three days, we listed the home at 420. And our high offer was 460. And they guaranteed $40,000 in cash above about appraisal. And, yeah, it just, it just takes your breath away to see those kind of figures. But one of the things that this does, though, is it It puts a floor underneath the housing market. So a lot of a lot of buyers are saying hey, I'm gonna wait until the market comes down. And that's not how that's not how the market not how the real estate market works. Because even though you know, the the prices may be high, those those prices are underpinned with a mortgage. And people don't want to walk away or pay to sell their home, they usually want to walk away either breakeven are with cash to go on to their next home. And so if they can't get their price, they just won't sell. And they'll wait, you know, for the market do that stock market. On the other hand, it goes up and down, because that's all just pure cash. But yeah, but we appear to have repriced the market during this latest run up. And we've kind of hit a new, a new price level, where things are at.

Ron Pippin: 16:57

So those people that decided to wait until prices come down, and I had multiple people tell me the same thing. And and I caution them about, well, a couple things is one over time, I think I ran some charts here not too long ago that showed what the price prices were over the last, I think 80 years. And there was only seven, seven or eight times where we had declining markets. And most of those were weren't very big, huge declines, they were you know, had the Great Depression, you had the one and 2007 2008 and that most of them were just little blips, they weren't huge declines, right, rest of the years where we're an increase in prices. So the flaw and wait till the prices come down is that your your you have to think that we are, we are in an over an overbought market, or that there's a depression or recession in the near future. And I just don't know that that's a, that's a really great strategy because of of oh, and one other thing is is, is even though those, the prices came down, and even the one in 2007, when there was about a year and a half or so two years of decline in the market, and it only took three or four years before you were back to that same level. And then from there, it's just gone. It's just gone past, right. So so there's the flaw I'm thinking I'm gonna wait till the prices come down is, is the chance of that happening is not really high.

Jeremy Peterson: 18:50

Right. And the only, the only thing I could think of is that, as far as you know, from a buyers, why a buyer would wait would just be preparation, right getting enough savings, getting their financial house in order enough that they're ready to jump when the market opens that door opens for them to, to do so because you know that this latest run up has been so fast. That is outpaced people's ability to prepare. You know, you can't save fast enough to get that downpayment to make sense because it just you know, now the down payment requirement is, you know, 30% bigger than it was a year ago. And, and so you you know, if that trend were to continue, you know, you would never be able to get into a home but that actually, you know, a little foreshadowing here that that opportunity's probably going to be coming up again soon. So anyway,

Ron Pippin: 19:43

that's another very good point that I've made with other people as well as like, you know, unless you're putting away $1000-2,000 a month. You're not keeping up you're actually going you're actually losing ground. So but but maybe the markets going to shift and maybe you can share some of those insights with us as, as we come out of COVID. Kind of where we are now. And maybe where we're headed.

Jeremy Peterson: 20:11

Yeah, so. So one of the things that I mentioned in one of my on little market updates that I did in June, was I titled it unsustainable extremes. And in, in June, we're talking about Mays figures. So in May, we had increased 35% year over year in pricing, based on price per square foot, which just is mind blowing, because off, you know, people would wait 10-15 years to see that sort of price appreciation. And so for it to happen in one year, is it's jarring to see that kind of figure, obviously, and just like talking about saving money for a down payment, and if you can't save fast enough to keep up with the pricing. Like that's, that's really discouraging. But, but that, that momentum, that rate of change is so high that it's not natural, and it can't, they can't sustain itself like that in the long term. So So right now, Weber County, on average is sitting at $196 a square foot. That's that's average, you know, that's all the neighborhoods put into a big pot together. And, and,

Ron Pippin: 21:37

you know, to put that in perspective, I bought my house six years ago, and I was just I don't know if you saw me doing something, or I would just calculating what I paid per squares for it at $83. At $83 per square foot, per square foot. And now that's how much it's $196 a square foot. Yeah. So it's more than doubled in in six years. Yeah. Yeah. Yeah. It's, it's like 150% and almost in. Yeah, really?

Jeremy Peterson: 22:07

Yeah, really. It is. Yeah, I sold. I sold a house recently. On Jefferson Avenue, 20th block of Jefferson and Ogden. I sold that home in 2009 as an estate sale. And my clients paid $100,000 for it. It was a it was a brick bungalow. It was grandma's house had blue shag carpet in it. 1950s kitchen, and some linoleum flooring, but otherwise a cute bungalow. You know, in a nice, quiet neighborhood. So fast forward. We just sold that home. Now, keeping in mind, I had the home listed back in 2009. And I think we had it on the market for about four months. I listed it. Yeah, it was hard to sell. It was hard to sell. And we finally we finally found a buyer who take it and they we had it listed at 110. And we've we sold it at 100. We finally dropped the price enough to get it to clear the market. Well, we listed it at 225,000 at the end of June. And we had 17 offers in three days. And it sold for$305,000 cash. Yeah, and virtually the same home. Right, same kitchen, same shag carpet. They did put in some new windows and a new roof over that period of time. But but other than that virtually the same home. And yeah, so just just a remarkable, remarkable increase. So one of the things and you mentioned earlier that you felt like we're at an inflection point in the market. And I, I felt like that back in June, like I'm like this just this is just too crazy. It's, you know, it's been getting crazier and crazier and my tolerance for crazy, I've been desensitized now, like, you know, nothing surprises me anymore. But, but I felt like okay, that the market, at some point has to say, we're just not going to do this anymore, because we can't. And so that actually is bearing out right now and some of the charts that I put together that that there has been, we have reached the limits of what the market can do. And so, in May, we were at 196 bucks a square foot, June. We're at 196 bucks a square foot and July. We've held at $196 a square foot. So for the past three months interesting. Yeah, there has been no price movement over the last two month period. And the first week of August is also seeming to support this, this trend is that we are plateauing on plateauing on price right now. If you look backwards, and you say, Okay, well, where were we? Where were we in August of 2020? versus August 2021? Well, sure, it still looks like there's a huge price growth, you know, from from a year ago, this time. But what we're finding or what I'm seeing in the charts is that we're in a, we are decelerating very quickly, because on a month to month basis, we're not going up. So the elevator may have reached the top floor. And now we're, we might chug sideways for a minute. And the reason that, that this causes me to ask, Well, why, you know, why are we chugging sideways? Now? How come it didn't happen earlier? Or why didn't happen later? And how is that related to the big run up that we saw, and some of this, I believe, has to do with just the amount of stimulus money and just printing of money that's, that's washed over, washed over the market. And, and people have just taken those resources and funnel them into the thing that they think is most important, which in this case happens to be, you know, housing, and, and transportation. That's the other factor too. So, you know, so that, so right. Oh, the other thing, too, that you you've probably felt this, that might be why you're alluding to the fact that we're at inflection point. Is that July 2021. So last month, saw a I got it written down in my, my notepad here. I don't

Ron Pippin: 26:45

I don't think I actually said we're at at at some kind of a point where an inflection point, I think I actually mentioned that to you prior to the podcast. So. So for those listening. I actually talked to him just really briefly before the podcast and said, Man, I think there's a shift going on right now. And I said, but don't don't tell me the answer. I must want to be surprised. So. So I will do anything for eyes.

Jeremy Peterson: 27:13

Yeah, so he said a lot of other things that I won't mentioned, too. I can't repeat. But so so our sales volume for July was down 27%, year over year, transaction volume for July is down 27%, which is huge. That's that's a headline number that that is the biggest number since I actually haven't gone back to compare it. But I would say probably back to 2011 or 10. that big of a transaction drop. Obviously, the different scenario, because the transaction declines back then were related to a breakdown in the finance sector and all kinds of economic problems. This is, you know, we have the opposite problem. Now everything's so good. And yet we're having a transaction breakdown. You know, so that is

Ron Pippin: 28:09

that just because there's lack of inventory, or is there's no

Jeremy Peterson: 28:12

inventories are the same. So I mean, the active number of listings, and I just checked today, active number of listings available today is the same as last year at this time. So it's not it's not a short shortening of supply. It's, I think what has happened is we've reached this point now where we're interest rates were dropping and consistently dropping for a period of time, which was driving up sales volumes. And transaction volumes, rates have reached the bottom, at least right now they're kind of just chopping sideways a bit. So that that momentum to get people into the market. You know, now we're just dealing with, with one of those scenarios where you say all things being equal, right, interest rates are being equal now. And so now all things being equal there, people are looking around saying I can't afford it now. And and buyers that would be drawn into the market from declining rates are staying out because they're just like, Hey, you know, if rates were point lower, I could get in but I can't because they're at, you know, 2.9% that's just too high for me.

Ron Pippin: 29:21

Okay, so which is a good question. So I'm sorry to cut you off. You're good. But it brings but it brings up a really good point is that even though the price of homes have gone up, your drains are still really low. They just like you said they are they are like bottom. Um, and so they don't think they can afford it now. rates are going to go up. I mean, we're we the government is still buying. They're still buying a bunch of the mortgage backed securities, which is what he wrote down And they were supposed to stop doing that a while ago. But they continue to do that. And they're supposed to start tapering that off again. And so once that once they because they're they're the major buyers of mortgage backed securities, which is where we get a lot of our rates from. So if you don't have buyers for mortgage backed securities, your rates start to go up. And and as they start start easing off of those buying the buying of those mortgage backed securities rates are going to go up. I don't think you can afford it now at 2.9%. It's going to be worse when it gets three and a half, or 3.9%. So what I don't know, and maybe this is a good question for you is if rates go up, and maybe I'm like jumping way ahead, because I know that we we haven't gone through our whole scenario of coming out of COVID. But But when you get to this point, remember to answer the question of what is that going to do to pricing? If rates go up? You don't have to answer that yet. Because we haven't gotten to the end of your coming out of COVID stuff. So but but that's a good question to answer at some point.

Jeremy Peterson: 31:08

Okay, yeah, that that is a good question. And I actually, I might just answer it now, because I've lost my place. Okay,

Ron Pippin: 31:15

I'll have to come back to that.

Jeremy Peterson: 31:17

But, but yeah, so there is a balance between when buyers purchase a home, they're not purchasing a mortgage amount, or a price, they're purchasing a mortgage payment, most buyers, right, a cash buyer is a different deal, they'll come into cash, and they dictate their price. But and that's usually, you know, they usually get a discount, because it's cash, but a buyer most most buyers are going to borrow, and then therefore, they are super sensitive to monthly payments. So if interest rates were to go up, I actually have a chart that I keep, where I say what is the chart says what would house prices be if rates were six and a half percent? Like, you know, a just a wonky chart that I keep, but like, what would that look like, and it would be basically a 30% decrease in in home prices, declare the same mortgage payment at today's prices, right, like, you're just that interest would just increase those payments to a point that you couldn't afford it. So I, for political reasons, I don't believe that they that the powers that be will permit interest rates to go up too much, there might be some things that they can't do to prevent it from happening. But I think they're going to do pretty much everything they can to keep things from going up too much. And the reason being is that the collateral damage that would happen from them going up, you know, rapidly or spiking about, you know, three 4%, something like that would be catastrophic to the market, you'd basically would go down to minimal transactions happening, because based on everyone's incomes, right now, they just couldn't afford the payments. So nothing would happen, everyone would just sit around and stare at each other. You know, you might see a lot of seller finance transactions or something like that, that might might happen. But outright sales using using loans would be hard, because they're just nobody could afford him at that at that moment. So if rates do go up, they might go up gradually and slowly to allow the market to digest that. But there really isn't. And also, because of the amount of borrowing the federal government has done, just in general, that overall interest rates, if they were to go up means that the budgets federal budgets would be consumed with interest payments, which means they couldn't spend the money on other things like social programs and whatnot. And so there's just everybody's pretty much in agreement that low interest rates, keep the music going. And if they were to go up too much, that would be a problem, right? The political and the political implications of of a negative outcome from interest rates going up, I think is too high. The read those risks are too high for policymakers. So they'll, they'll keep they'll keep up low as much as I can. But but but in the meantime, you have this increase in prices that have outstripped in wage and wage growth. Right, and that can't go on forever. No, so yeah, so so what does, you know? So really, what, what does that look like moving forward that, you know, with with this, you know, with this scenario, and part of it, one of the reasons I going back to going back to our plateau that we're seeing right now, the question being Why, why is that happening? I think the reason that's happening right now, is that all that additional money that's been in the marketplace has now been injected into the general market, not just housing market, but everywhere. So now all the things that a household needs to operate like transportation, you know, insurance, food, energy, you know, utilities, these sorts of things, those things are going up as well, in price, and now they're bumping into those things are now bumping into the cost of housing, right, because you have a finite amount of dollars available in your budget each month. And, you know, if you could, if everything else was cheap, you could, you know, scrimp to get your house price higher. But now, if everything else is starting to claw away at your disposable income, that you're otherwise going to assign to housing, well, then that suddenly puts a damper on your willingness to pay more, because you got to spend the rest of your budget on these other items that you need to survive.

Ron Pippin: 35:56

So um, and so for those that are listening, as mentioned a couple times that he has all these charts, and he puts a lot of them into a newsletter. If you are not wrapping this up yet, because I. But I just wanted to, if you if if you want to get hold of Jeremy, and subscribe to that newsletter, which which I highly recommend that I get his newsletter every time it comes out. I read it. So how would How would they would they just go to your website to sign up for that?

Jeremy Peterson: 36:32

Well, they actually, usually what I do is it's very personal list. So I don't, I don't I don't spam people. Usually, you know, somebody, if somebody is a client, or not even a client, but just somebody who wants information or whatnot, I'll usually get their email address and just add them manually to my newsletter list. I have about I have a database of about 1000 clients that I keep in touch with each month through newsletters. So yeah, if somebody just wants to send me an email, maybe you can put a link to the email here or, you know, somewhere. Yeah,

Ron Pippin: 37:09

yeah, I'll do that. Like, we can put a link in the podcast, or maybe we'll flash across the screen or if you're on YouTube, we'll put it on there. Flashing across it. You'd have to be watching on YouTube. So yeah, yeah. Yeah. Well, well, we'll put a link somewhere.

Jeremy Peterson: 37:26

Yeah. And we do have our YouTube channel too, which is they can subscribe to the YouTube channel, our YouTube channel, which is just the best real estate, and that's where all of our information is.

Ron Pippin: 37:38

That's Victor Victor that. So Victor, Edward. Anyway, v. b as in Victor E. Sta. Vesta?

Jeremy Peterson: 37:48

Yep. Yep. Hard to say. But that's all right. That's only because

Ron Pippin: 37:54

that's me. Everything's hard for me to say. Yeah, yeah. So yeah, you know, you were you were talking about? We're just, I think, where you're wrapping up, kind of where we're at, where does the market? So I'm still a little confused where the markets going. So well, we're coming out of COVID. And prices seem to have plateaued? I don't know, builders. Seems like builders are still building a lot. And but interest rates or interest rates haven't gone up interest rates are still low. What does that look like for the future or what?

Jeremy Peterson: 38:32

So builders are benefiting right now from the fact that lumber futures are coming down? Right. So material costs are they were at this painful, painful high, and now they're coming back? I mean, they're still painful, but not nearly as much. And so they're able to operate and, and and build now, like, you know, without worrying about their margins being totally destroyed. The, you know, I think builders are going to, as long as there's excess demand, they will continue to build. It's just a question of, you know, what their margins look like and what land is available for them to build what product? Right. So I think that that's going to continue, we're going to continue to whittle away at the excess demand. The, the market with this with this apparent plateau, like I could be totally wrong, and things skyrocket next month, or something for some reason, but my gut tells me that that's not going to happen, because, again, most of this happened as stimulus money was being injected into the marketplace. And as interest rates were being maneuvered down, right. So this, this all has kind of all happened at the same time. We're not going to have the injection of free money like we saw before. Right? That's that's over with for now. And, you know, there's another infrastructure bill going on right now where they're going to put another half trillion dollars into building projects or whatever, that that might squeeze up prices a little bit because those projects will take away the construction labor from housing and steer it over to roads or, or you know, other than gobble up labor, basically and steer it in other directions. But so that might be a construction on how long it takes to build a house, and maybe even the price a little bit because wages might need to go up to compete to keep the guys there swinging hammers and, and framing houses. But, but not like it was with just giving, you know, dropping $8,000 and everyone's bank account and saying, Hey, have fun, you know that that period of time is over? I think what? Well, there's, there's a couple of thoughts with if we, with the COVID thing not quite being over, like right now, it seems like the last two weeks, sentiment has just completely tanked. As far as, you know, their, you know, people's optimism, because now we've got this delta, quote unquote, variant running around. And then you will we have all the negative press, it seemed like it just turned on like a switch. And suddenly the sky is falling again. From that, I think, you know, experience has taught us it's not the black plague. So it's not that scary, but it's annoying and inconvenient for sure. And that might might impact the way the economy responds, because, you know, travel and a lot of hospitality businesses who are just getting ready to open or are going to be hamstrung by that. And Ogden is one of those two, like, you know, we're, we're kind of a small tourist destination. So we are 20 history particularly might be impacted by what's happening now. But they may or may not, we'll see that's going to be coming up. But but there's a couple thoughts. One was that the high price of housing might, it might be a leading indicator, and because pricing is sticky, in housing, that will have this high plateau. And housing will just kind of hang out there for a while and wait for wages and other things to catch up to that point. And then what we might see is transaction volumes just lower until that point that things start to equalize that might that process could take, you know, it could take years to actually to to catch up all things being equal. But I don't see all things being equal in this market. I think there's a lot of things that there's a lot of volatility and different different aspects of life that could impact things, you know, in one way or the other. So what what it is, I don't know. But another scenario might be that, you know, the economy starts to sputter because this delta thing lasts longer than we would like or it actually starts to metastasize into something more serious. And then if that were to happen, we would go back into a another scenario of, you know, lockdowns, and, you know, maybe people not working. And then, you know, I don't know how they would do another round of stimulus. But you'd probably have another read rinse and repeat of this cycle. If it were possible, but I just don't I just don't know how you spend all that

Ron Pippin: 43:27

money. Yeah, I think that's a whole nother, like a whole nother discussion of what the what the American people even allow us to. They would want us to go into a lockdown if would they be able to pull that off again? Because there's there had been so much fall?

Jeremy Peterson: 43:47

Yeah, yeah. So that's so so that's, that's a volatile. You know, that's a volatile, volatile issue. I, I don't even I'm sorry, I even broach the topic.

Ron Pippin: 43:58

That's why I said that's a that's a whole nother You know, that's a whole nother conversation because we could delve into all kinds of stuff there. Yeah. So we will we will, we won't do that. Yeah, we want to end this thing on a happy note. Right. Right. Exactly. So, so what what what's your suggestion? I mean, housing is high. I mean, is expensive. I mean, compared to three four years ago, it's, it's, it's pretty pricey.

Jeremy Peterson: 44:28

Yeah. Well, if, if we have options, if How will you know I'm, I'm in the real estate game for the long run. Right. I'm not a speculator. I'm not a I'm not a turn and burn. Kind of real estate developer. I'm not a I'm not a flipper. I have I have flipped homes in the past, but that's not my preference. Like I like to buy and hold and one of my You know, from an investment standpoint, I bought one, I bought a four Plex back in March of 2007. And I, I, I took a home equity line out on my personal house and put all that money into the building to read rehab it. And I estimated back then that it was going to be worth after I fixed it up about $285,000. And I completed the rehab in July of 2007. The company I was refinancing with went out of business. About a week before I was supposed to close my loan, we found another lender, and we close the loan with that lender. Two weeks later, three days after we close the loan, that lender went out of business, and then all the lenders that were able to refinance my loan, were out of business after that. So I had a very, like, I would have been in big trouble, had I not completed that refinance, like, like I needed to at that time, because I had a really bad loan with that particular property. I then watched that property go from$285,000 to $180,000 in value over the course of the next three years. And today, that property is worth over a half million dollars. So, so yeah, you

Ron Pippin: 46:32

know, came out ahead, but you were best because you're a lover, and you didn't, because it was a long run,

Jeremy Peterson: 46:36

yeah, because in the long run, it's gonna work out. And so this is what the advice I'd give buyers is if if they're, if they have a two year plan, it's not long enough, right, when they get into a property, they should have at least a five year plan, if not a 10 year plan or for the home. Because you just don't know what the markets going to do. But but the benefits of owning are going to, they're just going to be a blessing because you're going to get the amortization. So you're going to be paying down the principal balance. Even, you know, while someone else is waiting for the market to drop. a buyer who buys now is building equity, by paying down the principal each month. You know, plus they're going to get the tax benefits, which a person is waiting around for prices to drop isn't going to get. I tell people owning a home is like having a child on your taxes, you know, you just get this nice, nice interest deduction. And in the case of real estate investment, it's depreciation. So if you if you're empty nesting, buy another house, you know, get a rental property, I will keep your taxes low. Yeah, plus the you know, all the benefits that the ownership of homeownership entails. You know, and the experiences that come with it. So, so waiting around, you know, I would rather start the amortization clock right now, then wait around for five years hoping for an opportunity to get a lower price that may or may not materialize.

Ron Pippin: 48:08

Yeah, hope is a terrible business strategy. It is a bad strategy. Yeah. Yeah. So, Jeremy, always a pleasure. It's always fun to talk to you. You like you just, I just bow to you, man. It's just like, worthy. Right. Right, exactly. So I appreciate you coming on here and sharing some of your wisdom with us. And it's a good way to get hold of you if somebody wants to get a hold of you.

Jeremy Peterson: 48:40

Best way to get a hold of me is to call 801-390-1480 I'm around town just if I don't answer I'm either on the phone or on a podcast with Ron. So just leave a message.

Ron Pippin: 48:54

Perfect, awesome. And to get hold of me and my team, you can always get hold of us at 801-628-7667 and we look forward to talking to any of you any questions. Just just give us a call and we'll help you out. And I will catch you next time on another a another episode of agent versus lender