Podcast 314: Major Backlog

We’re looking at the housing markets and availability of service contractors to keep up with the demand.

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Show Transcription:

Eric Worral: (00:00)
Hey, everybody. Welcome back to another episode of RentPrep for landlords. I am your host Eric Worral, and this is episode #314. Today, we’re going to be talking about the subject matter of beware of the backlog. And what I mean by that is that we are going to have a serious backlog of inventory, service providers and all sorts of things affecting real estate investors that are going to be happening in the next weeks as the country starts to slowly reopen. So we’re going to talk about that right after this.

Voice Over: (00:34)
Welcome to the RentPrep for Landlords podcast and now your host, Eric Worral.

Eric Worral: (00:38)
So as usual, a recent article is what kind of spurred this spot here. I found an article from keeping current matters.com that was posted some of these websites. They put the date on when they posted the bottom, it was posted on May 27th, 2020. And the title of the article is Why This Summer Is the 2020 Real Estate Season. And reading through the article actually kind of got me to think about my own experience of what’s going on with real estate right now. And I’m sure a lot of you are experiencing this as well, where a lot of businesses have been shut down and are now in the process of reopening and something that I’ve been working through is we had some really unusually warm temperatures in May here in Buffalo, New York temperatures were getting up into the high eighties.

Eric Worral: (01:23)
And what I did is I said, you know what? This is enough. I need AC in my house. I got pretty good tree coverage. I do get some shade, but when it starts getting in that, that range, it’s a little bit much, especially with having four people in the house, it’s just like, how many window AC units do I possibly want? So this kind of took me down a path of getting estimates. So I started reaching out to companies and every one of them saying the same thing, like our estimates are three weeks out. I got one that was able to come out, but he was three weeks pushed out as far as installation. So I keep running into this where I’m like, well, if your estimate is three weeks out, how far are you booked out an actual construction or installation?

Eric Worral: (02:00)
So what I’ve been finding from at least my personal experience in a local Buffalo market is that contractors are very backed up, which makes sense, because I know a friend of mine she was supposed to have a kitchen contractor come in and remodel her kitchen and then COVID happened. So they couldn’t do it. And then they’re also getting people, probably requesting quotes and estimates while that’s still happening. And they couldn’t actually service that. So we’re seeing as a massive backlog of service providers and what they’re able to do. So as a real estate investor, I think that’s important to consider because if you are looking at potentially purchasing a flipped or your you know, a buy and hold rental, and you’re not somebody who does everything yourself you may want to consider how maxed out your service providers, your contractors are.

Eric Worral: (02:46)
Cause if they’re really maxed out, you may want to take whatever you think, your scheduled a time that it’s going to take you to you know, renovate this property and you might need to add 50% to it, or, you know, double that time timeframe. So getting back to that article too, it’s talking about why this summer is the 2020 real estate season, right? And this was written by, let’s see if they gave me that information. They do not.

Eric Worral: (03:09)
It says that with state home order, starting to gradually lift throughout parts of the country, data indicates home buyers are jumping back into the market after many families put their plans on hold due to the COVID-19 pandemic. What we once called the busy spring real estate season is shifting into the summer in 2020 summer is the new spring for real estate.

Eric Worral: (03:27)
So Joel Kan, Economist at The Mortgage Bankers Association said the following applications for home purchases to continue to recover from April sizable drop and have now increased for five consecutive weeks. Government purchased applications, which include FHA VA and USDA loans are now 5% higher than a year ago, which is an encouraging turnaround after the weakness seen over the past two months. So if you’re looking at I think the society saying for may there’s a 5% increase in applications for home purchases compared to the previous year which makes sense, cause you have this backlog of people that were sitting and waiting kind of for things to clear up. And then it says, additionally, according to Google trends, which scores search terms online searches for real estate increased from 68 points the week of March 15th to 92 points last week, as we can see more potential home buyers are looking for homes virtually.

Eric Worral: (04:22)
So that’s a pretty good, cool tool. If you are ever interested in looking at trends in a market you can go to trends.google.com and you can under something like real estate landlord or different terms like that. And you can see how that search term is trending. So what this is saying is, you know, mid-March it had 68 points and then now it’s a 92 points and it’s, it’s based actually on like an overall score. And so what I mean by that is it’s not like that means you, you got 68 searches or anything like that. It’s actually taking the whole entire internet and what people are searching for. And it’s giving you an idea of where people’s attention and focus is at during that time. Cause it’ll give you a chronological timeline of that term too, which is really neat.

Eric Worral: (05:08)
So like if you put in something like a fidget spinner, you will see this massive spike because there was this like cultural phenomenon, like two, three years ago, and then it’s gone, right? But if you are looking into things and as far as real estate, Google or trends.google.com could be an interesting tool because you know, if you think there’s going to be a trend in a certain aspect of real estate, you can kind of search to see if other people are searching for it. And if there’s demand for that as well. So there’s just a little tip there.

Eric Worral: (05:36)
Going back to the article. It says, what’s the opportunity for buyers. So another reason buyers are coming back to the market, even with forced unemployment and stay at home orders is historically low mortgage rates. Sam Khater, a Chief Economist at Freddie Mac indicates that for the fourth consecutive week, the 30 year fixed mortgage has been below 3.3% giving potential buyers a good reason to continue shopping, even amid the pandemic as stage reopened, we’re seeing purchase demand, improve remarkably fast now, essentially flat relative to a year ago. So with mortgage rates at such low levels and States gradually beginning to reopen, there’s more incentive than ever to buy a home this summer. So what’s the opportunity for a seller while finding a home to buy, whoever is still a challenge is the spring sellers. I removed many listings from the market though. More people are now putting their houses up for sale this month as compared to last month, current inventory is still well below last year’s level. So that is really interesting because what we’ve established is that in the past month, that applications for a homeowner up 5%, but that the actual inventory is down. So of course, you know, it sounds like we’ve got high demand, low supply. So they’re actually, surprisingly might be an opportunity for sellers. I apologize if you hear the pounding in the background, that’s my son hitting the door, hopefully, the mic isn’t picking it up, but you know how it is work from home.

Eric Worral: (06:53)
A lot of people are dealing with extra noises and distractions than not normal. So I, going back to this, there’s a nice quote. It says, according to last week’s weekly economic and housing market update from realtor.com. A weekly housing inventory showed continued tightening. New listings declined 28% compared with a year ago and sellers grappled with uncertainty and hesitated, bringing homes to market total listing has dropped 20% year over year, a faster rate than in prior weeks. Leaving very few homes available for sale as time on the market with 15 days slower year over a year asking prices moved up 1.5% year over year. So if you’re thinking of selling your house this summer, now, maybe your best opportunity was so few homes on the market for buyers to purchase this season may be the time for your house to stand out from the crop trusted real estate professionals can help you list safely and effectively keeping your family’s needs. Top of mind, buyers are looking at are in your house, maybe at the top of their list.

Eric Worral: (07:49)
So I found this pretty interesting because I think at least from my perspective, the general consensus I had was that district really knocked the real estate market down for awhile. I’m just thinking, you know, the uncertainty things, right? Like who’s going to get approved for a loan. If you just lost your job is one part of it. But then also if you just lost your job, you probably don’t want to spend a ton of money buying a house and then having to fix it up and all that kind of stuff. But this is saying that right now the demand is up prices up, but inventory is low. So if you have been thinking, if there is that one, you know, you know, you’re looking at your portfolio, maybe you got eight units and there’s that one that drives you nuts maybe right now will be a time to test the waters and see what it might do on the market because there’s people looking out there, but that’s all I’ve got for you this week.

Eric Worral: (08:33)
Guys. I apologize. I probably should have said at the beginning, but I got a little bit of raspiness in a throat. I learned a valuable lesson last Friday is don’t try to start working out again by jump roping outside because I’m pretty sure I made a wind tunnel of pollen into my face and then just got like killed with allergies all weekend. But I’m feeling much better today day, which is great. I’m not taking allergy medicine and all that jazz. So I’m feeling good about that. And yeah, I always appreciate you guys listening. I look forward to catching up with you next week and I hope you have a great week. Take care.