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Jeremy Larkin and The Larkin Group @ Keller Williams Realty can be reached by calling 435-767-9821, or emailing firstname.lastname@example.org.
Jeremy: Good morning. How are we doing, folks? I am here. I am alive. I have got a dead laptop. I am not sure why it is dead. But guess what? Does that ever happen?
Mike: All the time.
Jeremy: So batteries actually die on these things –
Chantry: Only when you need it though. Right?
Jeremy: Yeah, I know. It is okay. We will plug it in and we will be good to go. I have got Chantry Abbot this morning with Guild Mortgage. Chantry, good morning.
Chantry: Good morning.
Jeremy: Give me something good. What is the greatest thing that is happening in your life right now?
Chantry: Oh man, the greatest thing that is happening in my life. I just went to, my son’s doing, he is four –
Jeremy: Got it.
Chantry: — and so yesterday, I snuck out of work a little early and well, at about lunch time. Snuck out for a little break, and he is in a gymnastics class.
Jeremy: Oh man.
Chantry: And he totally digs it. Somersaults and all that.
Jeremy: I have got a 17-year-old who always referred to her gymnastics when she was that age as nastics.
Jeremy: Something like that. It is pretty fun.
Chantry: I have been telling him that the Ninja Turtles do gymnastics, so he is really into the Ninja Turtles.
Mike: He is sold.
Chantry: Yeah, he is in that really learn his stuff.
Jeremy: That is amazing. I love this. Well, so that is your great thing this morning. Isn’t that great? You know what? Let me tell you what is going on great in my life, by the way, folks, is I hauled two kids off to school this morning, and I think they were both just about late. We are talking about scratching the, oooo, the very edge. One went over to Tonaquint Intermediate and another to Dixie Middle, and once upon a time they were four. They were four years old. And there you have it. We got up. So but those guys, these two dudes and I actually, all four of the kids, we went up to Bryant Head this last weekend –
Chantry: I was actually going to say they are probably bummed they were not going skiing today.
Jeremy: Yeah, they probably were. They probably were. Bryant Head missed the snow on this storm, but we were there this last weekend, and if anybody out there is thinking about getting up to the mountain, it is actually looking really, really good for this time of year. I am shocked. Salt Lake had 14 inches or something overnight. I saw that. But it is pretty good for December, I do not know what the day was, tenth.
Chantry: When do Washington County Schools get out for the Christmas Break?
Jeremy: So the kids will get out the Friday before Christmas which seems like it is the 21st or second.
Chantry: So that would be a week from tomorrow?
Jeremy: Yeah, the 21st. So a week from tomorrow. These kids are seven days left, and then they will have ten days off. Look, it is the most wonderful time of the year. The fun thing with Christmas break is that you are actually excited. For all you parents out there, I think you know what I am talking about. It is actually exciting. It is fun to have the kids home, and a lot of parents are off of work at least part of that time. A little easier than summer. Summer you are thinking, we have got a whole two months of this stuff, don’t we? Now what am I supposed to do with these kids?
Jeremy: And if you are working mom or a working dad –
Chantry: Yeah, how do I deal with that?
Jeremy: That gets really busy. Really, really busy. Here we are. We are all on our own plane with our kids and Mike has got his kids grown. Mine are kind of in between and you have little, a little child. And that is where we are at. So Chantry and I are going to be talking about, this is exciting, okay. It is funny that bad news is often exciting. It is just so bizarre what is happening in some of these real estate markets. Right?
Chantry: Right. It is going to come as a surprise to most probably. Right?
Jeremy: Yeah, absolutely. So we are going to talk a little bit about what is going on in Dallas, Texas. Frisco, Texas. By the way, Frisco, Texas, outside of St. George, fastest growing community in the United States of America. And just crazy. There is a Toyota plant there and jobs. We are going to talk about what is happening with the real estate market. And the teaser for our listeners out there: builders making hundred thousand and bigger dollar price reductions on their listings, offering real estate agents trips and travel all over the planet to sell their homes. Some strange stuff going on out there.
Chantry: Yeah, the trip to Mexico caught my eye.
Jeremy: Oh, is that what got you excited? Did you want to move out there?
Chantry: No, I will just take a trip there. That is all.
Jeremy: Actually I was just saying to Texas so you can start –
Chantry: I could sell some houses out there.
Jeremy: So we are going to talk about what is going on with the real estate market and really the US housing boom coming to an end and what that means, and whether you should be alarmed, and whether St. George is next. November was a very strange month for everyone in the real estate market, both in sales, real estate sales and in lending, that is what Chantry does. He is with a company, Guild Mortgage, and they have worked with us for so long, at least coming up on a decade and do such amazing work. Of course, what they do is help people find the money they need to purchase a home. And they have worked with, I do not know, certainly dozens and probably more like hundreds of our clients over the years. Right?
Chantry: Yeah, hundreds. Yeah.
Jeremy: Hundreds of clients.
Jeremy: And you have been doing mortgage lending, I like to tell people home lending in a way because sometimes people out there in the public are like well, I do not. Do you know what I mean?
Jeremy: But mortgages or loans for people purchasing homes for how many years?
Chantry: It will be 13 when the calendar turns.
Chantry: Crazy. It was 2006.
Jeremy: This is wild. So let’s do some history. So thirteen, 2006, 2008 is when they really say the bubble burst.
Jeremy: So we are decade. We are having a ten-year anniversary, and we talked a little bit about this on our show last week. So you read these articles –
Chantry: That I did.
Jeremy: — that I am talking about? Should I give folks the highlights? Let me give you the headline for this article. It is Bloomberg, and we will post this into the Facebook comments. If you are not watching us on Facebook Live, you can catch us at Facebook dot com slash Jeremy Larkin. The way it sounds, J-E-R-E-M-Y, Larkin, L-A-R-K-I-N. Facebook dot com slash Jeremy Larkin. We are streaming it live. We stream it live every week and then we post this over to the Larkin Group Facebook page. Of course, if you are listening to us on the radio, you are either on 890AM or 94.9FM. So our Facebook listeners, if you want to get on the radio, you can hop to 94.9FM, 890AM.
Chantry: If anybody wants to, I have got my phone. I am going to see if there are any comments. I just barely thought of it.
Jeremy: Oh beautiful, beautiful.
Chantry: So if anybody wants to comment on Facebook, we will answer the question.
Jeremy: Yeah, I love this. Yeah, if you guys have questions, specific questions for Chantry who is doing lending, specific questions for me. So let me give you the headline: Free vacations, $100,000 discounts, home builders get desperate with hot markets cooling and mortgage rising the industry turns to incentives to boost sales. And of course, Bloomberg paints this in such a dramatic fashion, do they not? A real estate broker in suburban Dallas is raking in freebies this year. Trips to Lake Tahoe and Santa Barbara in California, Cabo San Lucas in Mexico, and a dude ranch in Wyoming. The home buyers he represents are cashing in, too. They are winning price cuts of more than $100,000 on top of free upgrades such as media rooms, cabinets, and blinds. This feels a lot like, when you hear this, some stuff we saw here a long time ago.
Chantry: Sure, yeah.
Jeremy: Doesn’t it? It goes on to say the generosity flows from an increasingly desperate home builder market. Hot markets are cooling as fast as interest rises, and this is where they really throw the drama on here. Some flare. In the great housing slowdown of ’18, it is like they have added, they have created their own term, shoppers are reclaiming the upper hand after years of soaring prices that placed most inventory out of reach of many families. Everyone is hungry for buyers, he says. What do you think, man? When you see that, what are your thoughts?
Chantry: So sure, has the market shifted a little bit? Absolutely. Is that an extreme version of it? Yeah, of course it is.
Jeremy: For sure.
Chantry: But anybody that follows the housing market, it is kind of interesting. It has been very similar to the stock market. So those of you that follow the stock market have noticed some things have changed over the last couple of months, quite significantly. And we have noticed that in the real estate market. But it had to. It was out of control. This summer, all of us were looking at each other going there are no homes for sale.
Jeremy: It was weird. It was ridiculous.
Chantry: Buyers have no, buyers have no control. And it was not just prices that were that were crazy. It was terms. It was like they could not ask for anything. They had to close really fast.
Chantry: They had to make offers sight unseen. Just weird stuff that just is not really good for a buyer.
Jeremy: No, it is not good for a buyer at all. And one of the challenges we have in real estate is anytime that the market turns to where one group has the serious upper hand, either a seller’s market or a buyer’s market, it is going to create weird dynamics.
Chantry: Not good. Yeah.
Jeremy: And this is not good either. What we are hearing about in Texas. Definitely, when Bloomberg and Wall Street Journal and, and, and start running articles saying that the housing market is coming to a massive halt in Dallas, it scares people.
Chantry: Yeah. Especially what happened ten years ago. We all think oh, can that happen again.
Jeremy: Excuse me, yeah, there is just no question. And we do sit here wondering what will happen? Like coming up here, it is interesting. It says, let’s talk about some things that are issues that slow the housing market down, and we will answer the question whether St. George is next. Rising interest rates –
Jeremy: — and we are going to ask you specifically about that. Trump did a tax overhaul that caps the, places caps on tax deductions for mortgage interest. That is an issue. Right?
Jeremy: They are hurting really like high tax areas. New York, massive high taxes that really hurts those people. 4,000 new condo units listed for sale, will be listed for sale in 2019 in Manhattan they said.
Jeremy: In Manhattan.
Jeremy: Not in New York City. Right?
Jeremy: 4,000 new condo units. You have got, okay, they talked about Austin and San Jose, California. Austin, Texas. San Jose, California. They have put, like immigration restrictions have kind of slowed down high-skilled workers coming into those markets. Some of these places are now less appealing to your Chinese buyers and your foreigners. We do not see as much of that here.
Jeremy: How often have you ever seen a foreign buyer try to get a mortgage?
Chantry: It is really rare. Occasionally we will get the Canadians because they love the warm weather here.
Chantry: Really honestly, some of them, it is the first warm place south.
Chantry: So if you are heading south –
Jeremy: It is.
Chantry: — on I-15, boom, first warm place, really nice, great spot.
Jeremy: That is a great point.
Chantry: So we get a little bit of that. But it does not drive our market by any means.
Jeremy: No, not at all.
Chantry: But to your point, with the rising interest rates and home prices as we know just continued to go up and up and up, it is all about affordability.
Jeremy: It is.
Chantry: It really ends up being to a point where if prices get too high, rates go up, it is just not affordable anymore. So there has to be some sort of a shift back to normal.
Jeremy: There absolutely does. So what you are saying is, from your perspective, this housing, the great housing slow down of 2018 is not a problem.
Chantry: Yeah, let’s understand one big difference.
Jeremy: Yeah, let’s do.
Chantry: In 2006, do you remember the loan that they called the Stated Income/Stated Asset?
Jeremy: Oh, for sure, I do.
Chantry: Okay, so what this was was you are sitting across the desk from a mortgage guy and they say well, you need to make $10,000 a month, Mr. Schoolteacher. You make $10,000 –
Jeremy: So what would he do?
Chantry: — a month, correct? Wink, wink. And then all of a sudden, the deal is closed. You did not have to document anything. It was insane. There was no common sense, greed, crazy, stupid, whatever you want to call it. Loans were getting done to people that just should never have gotten the loans. Period. End of story. And so, it made everything go out of control, and these people were doing it knowing that they could not afford the house payment. They just thought –
Chantry: They just thought if I do this, I can hang on for a year and then I will sell it and make all this money because my neighbor did that.
Jeremy: right. Right.
Chantry: And so let’s do that. I know I cannot afford a $2500 house payment. My neighbor just did it, and we can sell it in a year, and we can do it for a year. Pull it out of our retirement. That is what was going on. See people were getting these loans they could never afford. Ever.
Jeremy: Not a chance.
Chantry: They never even thought –
Jeremy: Not a chance.
Chantry: The people did not think they could afford them. So now the total difference is loans are tough. Loans are, it is hard to get a loan. People that get a loan, by the end of it, they are tired of all these rules and giving us pay stub after pay stub and bank statement after bank statement and all this stuff we have to dig into, and absolutely the whole point of it is to make sure the mortgage industry feels like this person can actually afford this house payment.
Jeremy: Well, right. You need to make $10,000. You know it is funny you ask that because I happen to be making $10,000.
Chantry: Oh, that is weird timing, right?
Jeremy: Actually, it is 12,000. Well it is funny you would say that because I just got a text from my boss. My income was raised.
Chantry: Yeah, exactly. Right.
Jeremy: It is like this is incredible. Right? It is amazing how everybody seemed to have the qualifications during that time to do this. Right?
Chantry: You did not have to get anything. It was just whatever you said, get a loan.
Jeremy: Well, okay, so the big difference now, that Chantry is saying, we have got Chantry Abbott here with Guild Mortgage here in St. George, we are talking about the great housing slow down. I love this term. I think I am going to run with it. That Bloomberg News has put out of 2018 and we shared, if you just picked up the show, the fact that, and good morning to everybody on Facebook, and good morning to all of our listeners. Thank you so much for your support. Talking about the fact that in some of these housing markets it is slowing down. So we saw massive, they are giving away vacations and crazy incentives and free media rooms and free upgrades and free cabinetry. And they are giving away, they are reducing prices a hundred to two thousand dollars on these expensive homes by the way. Just to be clear, Chantry, I think people need to understand this. They are reducing the price of seven to hundred million dollar homes by a hundred thousand dollars.
Chantry: Right, yeah. It sounds really –
Jeremy: These are not $300,000 homes.
Chantry: A $3,000,000 house had $100,000 reduction.
Jeremy: Yeah, so let’s be clear. However, what Chantry is saying here is that the difference between ten years ago as the housing market kind of catches up to itself, is that people are actually qualifying for the loans, aren’t they?
Chantry: I have not done a loan since 2008 that was not like extreme documentation of being able to make the payment. It has happened. People still have stuff happen in their life, and they are going to have short sales or foreclosures or fire sales. I have to get rid of the house. For the most part, these people are affording their payment barring a catastrophe, and that was not the case then. So that is where, sure, are we going to have a slowdown? Yeah, we needed it. We needed it.
Chantry: It was a bummer for homebuyers. There was not anything for sale. It was a little bit out of control, and I do not even necessarily mean prices were out of control. I just mean there were not enough, you sit down with a buyer and you go here are the two homes that are available. Which one do you want to buy? The seller has all the control in that situation, and that is just not good.
Jeremy: It is not good at all. And the sellers are like this is great. So, let’s put this in perspective for our local people. I have a comment. I have an observation and a question. Let’s start with the question. The prevailing 30-year interest rate today if I went to get a mortgage is what?
Chantry: About four and three-quarters.
Jeremy: Okay, so it is four and three-quarters percent to get a home mortgage today, typically. Assuming fair credit and all that stuff, good credit. Okay.
Chantry: Somewhere in there 5% —
Jeremy: Good credit, by the way, we are not talking 800. Just thinking if you have got 700 –
Chantry: Four and three-quarters, 5%, whatever.
Jeremy: Okay. Yep. What is the average interest rate that people have paid since they started tracking interest rates to borrow money for a home?
Chantry: Great question. So the mortgage industry as we know it, Fannie Mae and FHA, and it has been around since the 1950s we will say.
Chantry: It is a little over 8% is the average rate over that timeframe to current. And that is taking in current day when they have been crazy low, which is throwing the average off, right?
Jeremy: This is crazy.
Chantry: So the government made interest rates lower than they should have. Even counting that, the average is still over 8%.
Jeremy: This is, okay, this is going to be fun. Typical person comes in your office today and wants to buy a $300,000 home, which is the average home in St. George right now.
Jeremy: It is actually 330, 340, but I am going to say 300, okay, because I think the average is skewed because of higher –
Jeremy: Really is 300.
Chantry: Take out the extremes.
Jeremy: Yeah, the stuff that people are really affording. If they buy a $300,000 home, your typical client, just no specifics, what is their payment? Like the typical payment? What is the most average payment you send out of your office?
Jeremy: Okay, so let’s call it $1650 a month. So the average mortgage payment that someone is coming out of Chantry Abbott’s office, Guild Mortgage, when they go in there and they hire them to help them get a loan, it is $1650. Chant, just for fun, and I am putting you on the spot, if interest rates went from 4 ¾ to 8%. Today we are 4 ¾. Eight is the historical average. If they went up by 3 ¼ points, what would that payment 1650 be? Just as a guess.
Chantry: I will do the math, but I am going to say about $400 a month higher, probably over two grand. At least probably.
Jeremy: So we are four –
Chantry: I am going to do the math.
Jeremy: He is going to do the math. He is going to do some math. So let me put this in perspective as he playing around here. He is actually just making his move on whatever, what is the game that everybody plays? It is almost like Scrabble that they are playing with their friends.
Chantry: Oh yeah. Words –
Jeremy: Words with Friends. He just needs to make a move on Words with Friends and he will be back on. If interest rates right now, because we are going to tie this in, because we started the show by saying that the housing market is falling apart in Texas. I do not know if it is falling apart, but wow, it has kind of shut off overnight. If you read the article I linked in on Facebook to Bloomberg, you will be fascinated at the way it reads. If rate were today at the historical average interest rates for you to buy a home, your payment would go up by an average of $400 for the typical homebuyer. From 4 ¾% what is the number?
Chantry: It is about 500 actually.
Jeremy: Five hundred. Okay. This is even better. Thank you for adding some excitement.
Chantry: So about a 3% difference on that scenario is almost $500 a month.
Jeremy: So it is very simple where we are going with this. So the question is what are rates? 4 ¾%. The simple point is that this is absolutely a time that is still a great time to be buying a home. Now, here is the observation I wanted to make. We are seeing the For Sale By Owner sign go up everywhere in Washington County –
Jeremy: — in the last 30 days.
Chatnry: It is easy. Let’s just sell it on our own. Right.
Jeremy: Have we noticed historically, gang, that consumers are always six months behind every trend?
Chantry: Yeah, yeah.
Jeremy: We are always six months behind.
Jeremy: Now here is the reality –
Chantry: We all know that guy. Oh, my buddy made a bunch of money in the stock market. I am going to hurry and jump in. It is like you missed it.
Jeremy: Yeah, you missed it. Right? So what is going to happen with most of these people selling their home by owner, and I have to be very honest about this, we are needing to reduce the price of most MLS listings right now to get to them in line with what the market is really supporting, and we have talked about this for a month because sellers have been asking more than the market would support. Values are not really going down.
Jeremy: Right? In St. George. People have simply been asking more than the market will support.
Chantry: Well, what people do and I think this is where you are getting is their house is realistically worth 300, but they think, you know what, I have heard it is crazy.
Jeremy: I will do it at 325.
Chantry: There is nothing out there. Maybe we put our house up for sale for 330 and see if we get it. And if we get it, really cool, let’s sell it.
Jeremy: You know what? Let’s just go 600 and see what we get. Okay, but they are not going that crazy.
Chantry: Let’s just put it up for sale at 330, 350, and we get that. Cool, we will sell.
Chantry: And that is not what is going to happen now.
Jeremy: Right. So the For Sale by Owner, where every professionally marketed agent listed is being reduced, most of the For Sale By Owners are not going to have success right now, and it is going to be hard, and that is going to be frustrating.
Chantry: Every time I do a mortgage and there is a For Sale By Owner, the buyer thinks he is going to get a deal. There is no real estate commission, so I am going to offer him super low.
Jeremy: The buyer wants the deal. So folks, if you want to reach out to Chantry Abbott at Guild Mortgage, 674-1090?
Jeremy: Best number, 674-1090, and Mike will give you our contact information. Have an amazing week. Get your Christmas shopping done and check out the article we linked on Facebook about free vacations for realtors in Texas. No free vacations here that I have seen.
Chantry: There is one for Mexico, I think. I do not know when that was.
Jeremy: Okay. All right, man.
Jeremy: There is a dude ranch vacation.
Mike: Dude. All right. You have been listening to St. George Real Estate Morning Drive. For information, call 275-1690 or find them online, Sold in St. George dot com.