With Terry Story, a 30-year veteran with Keller Williams located in Boca Raton, FL
Steve spoke with Terry Story, 30-year veteran at Keller Williams Realty. During this week’s Real Estate Roundup, Terry talked about a small dip in housing sales. The good news? It’s both a buyer’s and seller’s market. Find out why below!
A Small Dip In House Sales
The housing market saw a little softening in the past week. This means that sales as a whole are down around 5% from last year. On Wall Street, that’s comparable to a “crash”, but the truth is that it’s just a little bit of a big deal in the housing market. It’s really just an indication that the market is in the beginning stages of the traditional cyclical shift. It’s been a seller’s market. It’s becoming a buyer’s market. The power shifts constantly from seller to buyer to seller and so on. One or the other is always a little more in control, to one degree or another.
Answering The Famous Questions
The famous questions are: “When is a good time to buy?” and “When is a good time to sell?” Well, at the moment, the answer to both questions is, “Now!” First, let’s start with buyers. It’s a good time to buy because interest rates are low. Houses are more affordable, the key thing that a buyer should be looking at. And as for sellers? They should sell because it’s important for them to get out while the market is still at a high point. Terry summed up the current market as “a win-win for everyone.”
Negative Growth And A Bifurcated Market
The median price of homes is up nearly 4% from March. So, the notion that homes are “affordable” is somewhat questionable. But the reality is that it’s a market correction, a de-acceleration of the rate of appreciation, also known as negative growth. It doesn’t mean that anyone’s underwater in their home, only that the natural rise in home prices is slowing.
It’s also a notably bifurcated market right now, which means that lower-priced homes are selling at a distinctly different rate than higher-priced homes. The lower end—up to right around $1 million—is very hot right now. Homes priced higher than that are moving a bit slower.
Steve noted that first-time home buyers were responsible for about 1/3 of all home sales in March. The economy is stronger now and more people have jobs and are in a position to buy. You throw in the current low-interest rates and you’ve got the Goldilocks scenario, in other words, thing are “just right.” The average age of the millennial generation is rising. As they age, that generation moves more toward becoming home buyers rather than renters. It’s just kind of the natural push of demographics.
Baby boomers and now some Gen Xers have previously been downsizing, but not this cycle. People in their 50s and 60s aren’t giving up their homes as frequently as in the past in favor of active adult communities. They’re not freeing up inventory in the housing market. The big reason for this? If someone in their 60s, for example, wants to downsize from a $1 million home to a $500,000 home, they just aren’t finding property they like at that price. Another deterrent is that they’re finding out they’d be paying about the same amount in property taxes on that half-million-dollar home as they’re currently paying on their million-dollar home.
A Success Built On Buying Real Estate
Steve and Terry discuss an article about a highly successful real estate mogul and full-time firefighter, who in his early years as a student at Eastern Kentucky University decided he didn’t want to pay rent anymore. He bought a 3-bedroom, 2-bath house for $117,000. He put a small down payment on the place using savings from a lawn mowing business he ran in high school and made the leap from renting to buying. He industriously refinished the basement with two more rooms and a bathroom, then invited three friends to rent from him. From then on, he lived rent-free and accumulated equity in the home.
From that point, he went on to become a fireman and married one of the top salespeople at Keller Williams, who was able to find him large apartment properties at 10-20% below market value. He used his existing equity credit line to invest in more properties, properties that are now worth tens of millions. He’s truly made a business out of jumping from being a renter to being a buyer. It wasn’t a “get rich quick” thing, but something he gradually and methodically built up over a number of years. It just goes to show how profitable owning real estate can be.
Disclosure: The opinions expressed are those of the interviewee and not necessarily United Capital. Interviewee is not a representative of United Capital. Investing involves risk and investors should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions. Content provided is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered tax, legal, investment advice. Please contact your tax, legal, financial professional with questions about your specific needs and circumstances. The information contained herein was obtained from sources believed to be reliable, however their accuracy and completeness cannot be guaranteed. All data are driven from publicly available information and has not been independently verified by United Capital.
Steve Pomeranz: It’s time for Real Estate Roundup. This is the time every single week we get together with noted real estate agent Terry Story. She is a 30-year veteran with Keller Williams located in Boca Raton, Florida. Welcome back to the show, Terry.
Terry Story: Thanks for having me, Steve.
Steve Pomeranz: So it seems to me that the news is that the housing market is softening a little bit. What is that?
Terry Story: Yeah. So sales as a whole are down about five percent from a year ago, so, yeh. It’s only five percent.
Steve Pomeranz: That’s all. You know in Wall Street terms?
Terry Story: It’s a crash.
Steve Pomeranz: When something is down five percent, it’s a lot.
Terry Story: Yeah, I know. It’s a little bit of a big deal. And really, it’s not so much that it’s a big deal; it’s just an indication that the market is starting to shift. And we’re in the beginning stages of it, markets are all cyclical, and we’re starting to go down from a seller’s market to a buyer’s market.
Steve Pomeranz: Okay, so the power is shifting.
Terry Story: The power is shifting. Somebody’s in control. So if you ask as a whole how is the real estate market, it’s great. You know why.
Steve Pomeranz: Why?
Terry Story: Your famous question. When is the good time to buy?
Steve Pomeranz: When is the good time to buy, Terry?
Terry Story: That would be now.
Steve Pomeranz: And the best time to sell?
Terry Story: That would be now. And really, the truth of the matter is that is the answer because as the buyer, the interest rates are very low.
Steve Pomeranz: Yes. Affordability.
Terry Story: Affordability. And as affordability should be the key thing that a buyer is looking at. For a seller, why should they sell? Because the prices are going down, so they got to get out while they’re still at a higher part of the market. So it’s a win-win for everyone.
Steve Pomeranz: Okay. But actually, the median existing-home price for all housing types, as I read this in March, was $259,400, up 3.8% from March of 2018. So there’s a little bit of a conundrum or paradox here.
Terry Story: Right. And the truth of the matter is what we’re seeing is the market is correcting, which is normal. It’s a de-acceleration of the appreciation amount.
Steve Pomeranz: Right. Negative growth.
Terry Story: Negative growth. We are not underwater or anything like that.
Steve Pomeranz: No, no, it’s nothing like that. It’s slowing down.
Terry Story: So it’s just pulling back.
Steve Pomeranz: But actually, these averages are very misleading because it’s a very much bifurcated market, meaning that the low end sells differently than the high end. What’s going on there?
Terry Story: That’s right. Well, the lower end is, you know, flips like crazy.
Steve Pomeranz: It’s hot.
Terry Story: It’s hot hot hot. Depending on your market place, in our market place, a million dollars would be luxury. That’s really where we see a slowdown and then we’re balanced from like six to …
Steve Pomeranz: It’s balanced, yeah.
Terry Story: But definitely you can see the trend is on the downward side.
Steve Pomeranz: What’s interesting is the first-time home buyers were responsible for 33% of sales in March, wow.
Terry Story: Yes. And a lot of that has to do with, let’s face it, the economy is strong. So they have jobs. Interest rates are low, so those two factors.
Steve Pomeranz: It’s Goldilocks, we call it the Goldilocks scenario. Not too hot, not too cold, just right.
Terry Story: But just right. And also, these millennials…okay, so we talk about millennials all the time. Well, the millennial average age is getting older, right? We’ve been talking about them for 10 years, so if you took a 20-year-old, they’re now 30, so there should be more of them buying.
Steve Pomeranz: Yeah, no, absolutely, the demographics are an inexorable push of the economy and housing in a certain direction. That’s one of the really, the main positive features of buying real estate is you’ve got this demographic push behind you. The population of the United States is expanding, generations are getting older, and they’re buying.
Steve Pomeranz: But it’s interesting because the old model used to be that baby boomers, let’s say, the older people and even now to a degree the Gen Xers or the Millennials as they get older or the Gen Xers who are right behind the baby boomer generation. They usually downsize, but they’re not downsizing this cycle.
Terry Story: That’s right, and we’re seeing that. So I’m looking at people in their 50s and 60s and they’re holding on. They’re not giving up their houses and going into the active adult communities.
Steve Pomeranz: Why is this important?
Terry Story: Well, it’s important because it’s not shaking up the inventory. So if these folks are staying, holding on to their homes, then it’s not freeing up that inventory. So we really need them to just get out of their homes, their big homes, give it up, and move to the 55+ communities.
Steve Pomeranz: What do you think is stopping them?
Terry Story: I think there’s a couple of different reasons. I think that a, they don’t see anything that they like for the value because prices are high. They’re looking at property that, for example, in our marketplace, if you own a home and, let’s just for argument’s sake, is a million dollars and now you’re going to buy a home for 500,000. Your taxes, that alone, your taxes are probably going to be the same because you’ve been in that million dollar house now for 25 years and we have here in Florida this homestead. So your taxes can’t go up more than three percent a year. So now you buy a house for half the amount, pretty darn close to having the same tax amount.
Steve Pomeranz: Okay, so that’s a big deterrent.
Terry Story: That’s a deterrent.
Steve Pomeranz: Yeah. I want to talk about this one article that we both read and this is how to become, how to make a million dollars in real estate investing. Now, this is not one of those get rich quick ideas, but it’s a real experience from a young man who was paying his way through college at Eastern Kentucky University. His name is Jason Richter. And he said he got tired of paying rent. He felt that he was getting poorer every month and the landlord was getting richer, so he decided to do something special which was very simple. In Richmond, Kentucky, where everything was pretty affordable, he bought a three bedroom, two bathroom house for $117,000. Put down a $4100 down payment and used the savings from his mowing business that he ran while in high school.
Steve Pomeranz: So that’s number one, he made the leap that so many people don’t make from renting to actually owning equity and being an owner.
Terry Story: At a young age.
Steve Pomeranz: Yeah. But he did more.
Terry Story: Yes, he did.
Steve Pomeranz: He finished his basement himself and then he added two more bedrooms. He finished it by adding two more bedrooms, another bathroom and invited four of his friends to rent from him and that paid his mortgage and expenses while he lived rent-free.
Terry Story: Okay, so there’s no wife and kids. He turned his house into a frat house and rented it out. Good for him.
Steve Pomeranz: Okay, perfect. Good, perfect, right? Okay, why not?
Terry Story: Exactly. I don’t see any problem with it.
Steve Pomeranz: I think one reason it’s harder to do today is that, first of all, finding a house at that price is difficult.
Terry Story: Right.
Steve Pomeranz: You could buy a condo, but I don’t think you’ll be able to finish-
Terry Story: You’re going to be able to put four …
Steve Pomeranz: Four people in a condo. But nevertheless, it’s-
Terry Story: It’s the principle.
Steve Pomeranz: It’s what he did that I think is the lesson here. Long story short, he did this over and over again, and he said he’d never, besides from his first house, he never put a dollar of his own money into it.
Steve Pomeranz: And then he became a fireman and then he married one of the top salespeople in Keller Williams, your company, right?
Terry Story: Yes, yay.
Steve Pomeranz: And she is one of the top salespeople. So now she’s getting him apartment sales, like 93 apartments, you take it from there a little bit.
Terry Story: Yeah, so she’s finding him property 10 to 20% below market value and those are probably short sales and foreclosures because, no, we don’t have an inventory that’s here, investors these are all the discounted property, just for you. It doesn’t work that way. And then he tapped into his line of credit. So he didn’t use his own money; he had a line of credit that he used to purchase the property. So he did a lot of good … a lot of things right in order to get to where he is.
Steve Pomeranz: Now his properties are worth eight figures, you guys can do the math at home. And he’s got a career as a firefighter and he’s got this secondary career as a real estate mogul. I’m impressed.
Terry Story: Yep. He did a lot of things the right way and over time. That’s the whole thing. That’s really really key.
Steve Pomeranz: He said this is not get rich quick; he’s holding these properties for 10 years and longer.
Terry Story: That’s right. And he also has a staff now of 20 people, so there’s a lot of work that goes behind it and a lot of checks being written out.
Steve Pomeranz: He’s made a business out of it.
Terry Story: Absolutely.
Steve Pomeranz: And I do want to talk about that sometime in the future, if you’re going to do something like that, what it means to actually make this into a business, but we are out of time. So as being out of time, I want to thank Terry Story for being with us. Terry is a 30-year veteran with Keller Williams and she can be found at TerryStory.com. Thanks, Terry.
Terry Story: Thanks for having me, Steve.