Latest / Real Investor Radio Podcast / Mini Breakdown | This Is Not the Spring Market We Expected
Transcript
- Craig (00:01) Hey, welcome back to Real Investor Radio. It's Craig Fuhr Jack BeVier coming at you today with a quickie. Jack, I don't know if I told you this or not, but I'm getting ready to put my house on the market. It's spring. We've talked about the spring selling season, Jack. And my wife and I, we built a house about 11 years ago in Howard County, getting ready to put it on the market. And one just went on the market last week down the street for way more than I was hoping that I would get for my house. Similar, it's a good comp and it looks like it's already under contract in just a few days so we can assume that they got full price. Now, just last week you sent Kyle and I an interesting article and let me see if I can find it. It was in MPA Magazine, Mortgage Professional American Magazine and the headline Jack was Brutal Spring Housing Market. Jack BeVier (00:32) Nice. Craig (00:54) in-store as home buyers await clarity on the Iran conflict. Now, I told you this right before we started recording today and Jack had this look on his face like, what? So NAR in November of last year, the National Association of Realtors, who by the way, Jack, are usually pretty spot on in terms of like their market predictions. I think they're generally decent. You know, look, the Delta is not that wide. But last year in November, late last year, they predicted existing home sales would rise in 2026 by 14 and a half percent. Jack BeVier (01:33) over last year. Craig (01:35) over last year. Jack BeVier (01:35) That's crazy talk. Craig (01:36) And I thought that that was a little bit of crazy talk. In fact, I thought it was probably about, I thought it was probably about 2X what we should probably expect for the year. Like maybe even little bit more. Go ahead. Jack BeVier (01:46) I think it's yeah, two X of like my most optimistic point of this year. Yeah. Just not today. Craig (01:52) Right. Right. And so all of that, their prediction, Jack, was based on interest rates falling and a 30-year mortgage rate of sub 6%, which we saw just very briefly in February prior to the Iran war popping off. Today, I think we're at like six and a half, six and three quarters for a third year, roughly. NAR is having their big conference next week. I'm anxious to see the president of the NAR is giving a big keynote and I'm anxious to see whether or not he gets peppered on that rosy 14.5 % prediction. But in addition to that new story that came out, Jack BeVier (02:19) Yeah. Craig (02:38) Jack, I found an article on Instagram that said home prices have fallen in 26 of the 50 largest metros over the past year signaling a growing opportunity for buyers and I did some open-claw research on all of that. But let me get, while I'm looking at all of that, what sparked, when you saw that new story in MPA Mag, What kind of sparked you to want to discuss that Jack? Like I really feel like we were, you and I, especially you, you were very, I wouldn't say bullish, but you were pretty hopeful about the spring selling season. ⁓ Mostly because of the mortgage backed securities that the administration was buying through Fannie and Freddie, which I believe is continuing. But we sure weren't predicting the Iran war Jack. And so, Jack BeVier (03:17) Mm-hmm. Craig (03:31) What are your thoughts on this MPA article and everything else here that we've discussed? Jack BeVier (03:36) I'm just generally in a bit of a curmudgeony annoyed mood at how all of this is playing out. It's been like the so the Iran war I'm annoyed because I'm annoyed because the Iran war led to a capital markets change, you know, higher indexes and higher credit spreads. And I'm extra annoyed because Craig (03:41) Yeah. Jack BeVier (04:00) We were going into that with this idea that, you know, the administration seems very committed to bringing housing affordability down because it's a midterms issue. And then this move is just canceling that sentiment out entirely and then some, right? We've not just not improved affordability. Affordability has gone down significantly. Like we're really working against ourselves here with this war. And I'm kind of doubly annoyed because I don't think that the market reaction to the war even makes a whole lot of sense to me. I don't understand how I think it's an overreaction. I think it's an overreaction. think New York doesn't like Trump and they're just like this guy's always like throwing us curveballs. And you know what? We're just going to demand super high spreads and indexes, know, risk premiums for for everything. Craig (04:32) You think it's an overreaction? Jack BeVier (04:49) And like, I think that the market is overreacting. think that the Iran war is not going to, should not be affecting the 10 year US treasury rate, which is the driver for mortgages. And so I not only am I annoyed at the administration for, for doing something that was counterproductive to their midterm success, I am frustrated with how the market is being stubborn as, in a result or, know, in response and so the whole thing just kind of has me all annoyed. I'm just like, this is just not really what's happening in the world right now. This is all like artificial This is an end. But in the meantime, I have to run a business and. And it's and it's and it's changed the it's made the operating environment more challenging. You know, it's DSCR rates are higher because the five year Treasury is higher. mortgage applications dropped 10 % week over week was the Mortgage Bankers Association announcement a week and a half ago, which is a humongous week over week change, right? And that is going into and that's right as the weather is breaking, right? We're having mortgage applications drop 10 % week over week as the weather is crossing 60 degrees in the mid Atlantic. Like, oh, that's brutal. Like Craig (06:01) Let me give you some quick stats to add on to what you just said there. Moody's predicted a 49 % chance for a recession this year. Average mortgage rate for a 30-year is 6.46%. That's a seven-month high. Sales prices in Austin are off 27 % in some areas. Florida Metro's 8 to 12 % year-over-year. Sellers versus buyers nationally. 630,000 more sellers than buyers. Wides gap ever recorded. Jack, I'd love to get your thought on this one. Is the cost of Dominion properties knows how to renovate properties? Are you seeing the cost of tariffs, which by the way is today, I believe is liberation day, first anniversary. Can you believe it, Jack? It's been one year. Can you believe that? It feels like yesterday. They're saying that the cost of tariffs on new construction is $9,200 per home. And you were right, mortgage applications just last week alone down 10, 10.5%. So those are some crazy stats. Tell me what your thoughts are. Jack BeVier (07:02) $9,200 the cost of home attributed directly to tariffs. That's the that's the stat. I haven't heard that I haven't felt that I felt I think I felt much more ice impact on labor than I have material then that I have tariff impact on materials. But Craig (07:07) Yeah, that's the stat. I don't know if it's... Does that mean less labor showing up at your jobs or just harder to find them because these guys are all getting deported? What are you seeing there? Jack BeVier (07:31) Well, like less, less softness in the labor market, right? Like, you know, I would think that lower, lower, lower inventory, fewer renovations happening would lead me to think that I should have more purchasing power as a buyer of labor. And the fact that ice has pulled a bunch of labor off the market and, or, you know, made them scared and the, they're not sitting outside of Home Depot. Not that we were hiring those guys themselves, but the trickle on effect of that. Craig (07:35) yeah. Jack BeVier (07:58) makes the guys that we work with more confident, you less scared, right? That they're that they've got competition. You know, they have less. They do. They have less competition. And so they're just like, no, no, no, the labor price is, you know, eighty five hundred dollars. And we're like, I give you seventy five hundred and they're like eighty five hundred dollars. It's like, you going to go? And so I'm just I got to tell you, man, I'm I'm just altogether generally annoyed between the tariffs that you're talking about right there. The that's bad for material prices. Craig (08:14) Right. Right. Jack BeVier (08:26) The ICE efforts have been bad for labor prices. We went in with this, we're going to buy down mortgage-backed securities, which I was just like, yeah, that's a little bit of like, hey, nice sentiment, but I don't think it's going to be like the thing. But then the Iran war has made it that we've actually lost ground on this issue. Dude, this is, this has been a not good for real estate business. Yeah, like this has been a not good for real estate. Like you're hitting me from all the sides, man. Like I'm trying to be, I'm trying to like not get. Craig (08:42) Yeah. It's friendly fire. It's friendly fire. Jack BeVier (08:53) you know, not not vote for my wallet, but hey, at the end of the day, humans tend to vote with their wallets and like I'm getting hit from hit from all sides right now. I don't love it. Craig (09:01) Dude, I'm driving across the city today, got to get a tank of gas. Should have bought it at Costco this morning, didn't. And I'm $4.35 for a gallon of gas here in Maryland. Of the governor of Maryland has been asked a million times, why don't you give a tax ominous fee for gas? No, why would we do that? They want us to feel the pain because November is coming fast. And if this doesn't get wrapped up and oil prices go from $120 a barrel back down to $40 to $60 a barrel, you can kiss, it will be the biggest bloodbath in the midterm elections that we've seen in years for the Republicans. I can guarantee you. Jack BeVier (09:42) That's what I feel. That's what I think is going to happen right now. Yeah. And, and I'm not sure what the off ramp is, honestly. So like he's it's, you know, we needed a, we needed a rebound year in the real estate space, 2025 sucked to be a flipper and landlord, right? Like this isn't helping. Nothing is helping right now. We're working against ourselves at the moment. And, uh, anyway, I'm frustrated by all of it. Craig (09:45) I do too. I do too. Jack, let me present one contrarian point of view to see if you agree with me. So let's say that the market continues to turn towards the seller, Jack, and the reason why it's doing that is because there's just a lack of buyer, there's just no buyer confidence. People are just afraid to pull the trigger. Well, doesn't that present more transactional scenarios? Say again. Jack BeVier (10:29) You mean against the seller. You mean, turning against the seller. Craig (10:35) Yeah, well, yes, yes, of course, which, you know, so we've got more houses potentially on the market, not enough buyers to buy them that, you know, lot of those houses might be grandmom's house that needs some rehab and they probably weren't going to sell that well anyway to begin with because we've already talked about how like great houses in better neighborhoods are generally still selling, you know, fairly quickly, but like grandmom's house priced at the top of the market is never going to sell. You know, I think, you know, in a lot of areas right now, it's, it's, it's the days on market is approaching, you know, some of the highs that we've seen in the years past. However, the silver lining that I would love to get your thoughts on is doesn't that present more buying opportunities for investors who have their together? They've got their equity lined up. They've got their debt lined up. They've got firm operations and they can get out there and make offers at will. I think there's, I think it feels to me, Jack, in certain markets around the country that real estate investors who are ready to get houses for maybe less than they would have because of seller capitulation on price, I feel like we might see some of that in 2026. Jack BeVier (11:44) Yeah, I agree with that. I certainly agree with it. It's just a shame, right? Like such a self-imposed, the wealth destruction that results, that that implies, right? That, hey, yeah, but you can get really great deals buying houses again implies such a ridiculous amount of wealth destruction for those folks who inherited the house and needed to sell it or that that's just a shame, right? Like it's just hurting the main street consumer right in the wallet when that environment happens. Like, yeah, hey, can I pick up some rental properties? Yeah, sure. Cool. Like, that's great. But, you know, that shouldn't be like the policy goals that that's not the policy goals I'm rooting for. Craig (12:21) Yeah, I mean, I'm certainly not sitting around rooting for another 2008 to happen. But if there is a silver lining, there might be a couple deals that fall through the cracks that maybe, you you might pick up some different deals at the auctions. Foreclosures are definitely on the rise. You know, like. Jack BeVier (12:34) Dude, yeah, we're picking up stuff on the MLS, like. Craig (12:39) Yeah, it's like Jack BeVier (12:41) Crazy. And I thought that that was going to be, and I thought it was just like, oh yeah, that was just the winter and the spring will erase that. And now I'm like, oh no, that's just what we're doing now. We're making offers on stuff on the MLS again to keep his rentals. Craig (12:55) Just using the same old Trident True, it's been on the market forever. It looks like it needs help and some love anyway. Why not make a lowball offer? Jack BeVier (13:04) Yeah, yeah. Like, you know, it's day, it's day 50. It's day 80 hit them classic kind of classic plays. Look for softness, you know? Craig (13:12) Yeah, I feel you. I think if the conflict, which appears only to be escalating in some ways, if they don't get an end to that within... man, November will be here before we know it. We'll be back in our heavy coats and it'll be November and the season for campaigning, that's about ready to start in the next few weeks. Campaign is in full swing. And if Trump can't go out there on the stump and tell people that the war is coming to an end, everybody's coming home and gas prices should be falling because the Straits of Hormuz are back open again, it's like bloodbath of all bloodbaths in November. Jack BeVier (13:51) Yeah, he's freaking out, right? You can tell he's very stressed. He's very stressed. Craig (13:56) Yeah, a little bit. He tends to hide it fairly well, I think, but like the tweets from yesterday on Easter Sunday praising Allah, like I thought that was a little much. Somebody needs to take the phone away. Somebody just say, hey, Mr. President Trump, I'm just going to grab that phone from you. You go enjoy your holiday. ⁓ I wanted to talk second topic, second topic. Jack BeVier (14:14) Yeah. Craig (14:24) I had this thought the other day on, I went up to West Virginia University, which by the way, so my son and his buddies started a real estate fret and I think it's Rowe Epsilon Iota, R-E-I. And it's a nationwide fret and they started their own chapter at WVU. it's like, I think they have like 26 guys who are generally finance majors, maybe with econ. Jack BeVier (14:42) That's awesome. Craig (14:49) And then they just started a real estate minor at WVU, which frankly, I'm sure it was probably a little bit different where you went to school, but they're figuring it out. But I was asked to come up and speak, which Jack, don't do a whole lot of anymore, but it was, you know, obviously had a lot of experience flipping houses back in the day. And so I basically was telling them about sort of, there's three rungs of real estate investing, wholesaling, rehabbing, landlording. And that can be in any asset class. What are you looking? Are you looking for ROEF? ⁓ I told him that Jack BeVier would come. I'll drive. You and I will drive up three hour drive. We'll get a couple beers afterwards. And I'm telling you that if there was one guy who would love to come up and talk shop with some smart kids, like they're all great guys, like great kids. And so it went like this. So I said, hey guys, Jack BeVier (15:19) I looked it up. This is so cool. Row Epsilon Iota, founded in... That's really cool. Craig (15:42) The owner of the company that I worked for inspired everybody to learn AI. And I was like, and I'm going to try to do the same for you tonight when you're doom scrolling on your phones. Give me a half hour. Give me one half hour where you learn about programming with AI. And then I talked to them. I'm like, and here's, here's what you're going to do. You're to go right on the Google Gemini. You're going to go to any gravity. You're going to start an open AI or a Google account. It's all free. can bang on that thing pretty hard until you hit a paywall and I said to them, what if you decided that you wanted to use agentic tools to be a wholesaler? How hard would it be to scrape Zillow, to scrape Redfin? Like you can literally open a browser now and open Claw or Claude code or even Google Gemini will just scrape all of that for you right in the browser. And so I said, think about it guys, like pick an area. find out every single house and every single seller and then figure out if any of those might be good deals that you can make offers on. And I explained to them the A to B to C transaction with wholesaling and dude, they were very engaged, asked a lot of questions. I was there for two hours. I think it was really only scheduled for about 90 minutes. And they said it was the best meeting they've had so far. So what are your thoughts though? What are your thoughts on Jack BeVier (16:59) Do this. Craig (17:03) using AI to scale a wholesale operation. Jack BeVier (17:08) How are you going to get, I mean, from a lead gen perspective, I get that that makes sense to me. city still sitting across the kitchen table is how you get that deal done though, right? Like I could see pulling together databases like list stacking, right? Like list stacking was popular, whatever, four or five years ago. And I could see the. Linking databases together via API has become so ridiculously easy. Like you just literally paste the URL and say, hey, here's the database that I want to like pull stuff out of. so finding all the publicly available data that can be indicators of distress in some way, or, you know, a tired motivation, I'll put it that way, just even just motivation in some way, I think has gotten a lot easier. And before those were like really, you especially if you were if you were in major metros, there was a company that had figured that out and they tied it together and they were selling that list. But if you were in a secondary or tertiary market, no one to connect to those dots because the databases are obscure and the and so there's no money in it because there's only like, you know, there's only 30,000 houses in this county. So I'm not going to put I'm not going to put the infrastructure together given how much it costs to code. to write Python scripts, I'm not going to spend any energy on a county that's only got 30,000 people in it. But now you just freaking paste the URL and say, hey, connect this county. it figures out all the indicators of motivation. I think you could build out some very bespoke, really cool databases that are feeding you real-time leads. Hey, this guy just got a high grass citation. Craig (18:33) Let me, let me. Jack BeVier (18:48) And, and I had my open collage or research. found his phone number and he's a swimmer at the local club here called the man. Like I could really see that really bespoke, highly personalized marketing. You could really take it to the Nth degree now, given that the research aspect of it is so automatable. Craig (19:08) Right. Now, me, let me to getting back to your point from five minutes ago where you're like, yeah, but it's still that part where you have to sit across from the across the table from the homeowner to make the offer to negotiate the deal, to look at the house, things like that. But given the nature of the business, Jack, how it's not mom and pop anymore. And there are certainly guys across the country who have figured out how to have maybe not nationwide wholesaling operations, Shaq, but certainly regional. Wholesaling operations where they don't necessarily have to sit across the table from you they can figure out of you know a much more techs techie way to meet with you to discuss the transaction I just think that the the industry by the way, my message to the guys was like look It's still gonna be a needle in the haystack if you try it and you're competing against like guys like Jack BeVier who can make an offer in 10 minutes Whereas it's gonna take you a little bit longer to figure it out. But like you'll learn But for the guys who have been doing it for years, who've solely been, know, like we can, Jack, I can think of a few companies right here in our market alone that are very large wholesaling operations. What would you, like, I think that these tools, like you said, they'll help you find the motivation much faster. But I think for the guys who have really been leaning into operations and streamlining operations so they can operate in multiple states, I think those guys are going to have one hell of a competitive advantage if they learn how to use these tools in the way that I think can be used right now. Jack BeVier (20:40) Yeah, I like it for the tertiary market idea also like we're like going somewhere that you know, you yeah, you live in Denver. Great. But like, man, it's really, really, really hard to like pull a deal off market in Denver, but you can go out to, you know, six counties over and you never drive out there. But the but you know, you can you can put together systems now just by speaking it into existence that used to take a lot of energy to tie together. I'm getting really excited about that. Craig (21:10) I'm actually, I'm actually shocked that you hadn't thought of this, as a scalable model for wholesaling. if you could get like, I totally get you what you're saying. Like, like you still believe it's a face to face hand to hand business, right? Like you want to be in that house to kind of understand what the rehab is going to be to make the deal with the homeowner or the seller. You believe that. Jack BeVier (21:36) Yeah, I guess maybe a slightly different take on this. I'm not sure that I want to scale a wholesale operation. Not that it can't be done, is it like, but is it a sustainable, like, you know, wholesaling is still a business that's based off of the idea. It's either, it's two things, right? It's serving an underserved market, right? The real estate agents can't solve these people's problems. It takes specialized expertise to deal with a hoarder house with title issues. Craig (21:44) Not you! Jack BeVier (22:03) that where they need a lease back for 60 days, right? Like the real estate agent is just completely ill equipped to handle that. That makes total sense. There will be wholesalers to solve those complicated, difficult problems. Period. That will always exist. I believe that will always exist. But the segment of the wholesaling market that's based off of asymmetries of information where you sit across the kitchen table and you get a vibe together with the seller and then you say, hey, I'll offer you 150 for something that you think that you know that you can sell for 165. and there's nothing really wrong with the situation. They just, you just have somebody who wanted an easy button and you're getting it cheap because of the, because you know what it's worth and they don't know what they have that piece. I think that that is going to continue to close and close and close. Like the market, the world's going to get more and more efficient, I think. ⁓ and so the asymmetries of information portion of wholesaling, I think is going to get harder and harder and harder. Craig (22:51) Yes. Jack BeVier (22:57) really difficult problem solving is going to persist. But is that the scalable part of it? I don't know. I think that might not be the scalable part of it. That's the local part of it. The scalable part is the exploiting asymmetries of information part. And I feel like that might be closing still. So I don't know that I love, you if you're like, hey, I'm, you know, doing an IPO for a scaled wholesale operation. I might be like, I don't know. Craig (23:03) Yeah, yeah, yeah, yeah, yeah. Jack BeVier (23:22) That sounds like maybe maybe that sounds like a scaled flipping operation. Just not that great of an idea. Probably my take. Craig (23:28) Yeah, I'm with it. feel it. All right. Well, I think that's two great episodes that we can get out there for folks today. I appreciate everybody listening. All your comments, anything that we may have missed, please feel free to reach out. ⁓ Yeah, please. Jack BeVier (23:44) Hey, by the way, you gotta you gotta you gotta plug this real estate fraternity more man. It's I'm looking at it. It's row epsilon iota.org. They got chapters now it this is it's only a couple years old. This is a new thing. So if you got a kid that's going into school or is it one of these schools Virginia Tech University of Kentucky USC Ohio State University of Washington. I mean, this is no joke. These are real. Indiana University, UVA, Michigan, sorry, Michigan State, USC, UCLA, UC San Diego, Wisconsin, NYU, Penn State, Michigan and WVU. Like you got a nice good thing going there. They got some they got some momentum. That's very cool. Craig (24:18) It's. I've always told my son, Jack, it's not just about the books and getting straight A's in the books. It's about the network that you build while at school might be the most important thing of all. When you've got a deal 15 years from now and you need a guy that comes in with some equity, you've lined up the debt, but you need that buddy of yours that might have a couple extra dollars in his pocket. There's your network right there. So ⁓ I know they'll be listening because that was required. Jack BeVier (24:43) Hear that? Craig (24:48) required listening for them was Real Investor Radio Jacks. So they'll be hearing this one and it's a shout out to the boys at WVU and they're psyched to have you come up and speak. I already told them you're a done deal. Jack BeVier (24:55) Nice. Go Mountaineers. Craig (25:01) All right guys, we'll see you on the next one that's real investor radio for today. We'll see you