The Future of Homeownership: Insights from the Property Brothers

Hey folks, Dan Ferrier here with your closing bell for October 25th, 2024. Some mortgage rates, hey, let's just say they were completely flat today. They didn't do anything. The bond market, you know, it shot up a little bit this morning and then came right back down into place. But I want to show you the economic calendar for next week. Next week there is a huge amount of information that's going to really affect the markets. And then we got the Property Brothers. Remember the Property Brothers on TV? Well, we're going to get their take today on how they think the housing market is going right now. So without further ado, let's get over to it. So the economic calendar for next week. Now this is next week. We have to focus in on what the Fed is focusing in on, okay? Because they're controlling everything right now. So they have two mandates. Basically, they were created to control two pieces of our economy. One was price stability, which is aka inflation. And the other one was to just keep the job market at full employment, okay? Whatever that means. So right through here, here's what next week's calendar looks like. This is the most important things. I filtered this down to a triple A filter. And we have, on Tuesday, we have the Jolt Report, okay? The consumer confidence that will play, you know, into something. But the next day we have the Jolt Report. What the Jolt Report tells us is actually how many job openings there are. Now we know that there's a job market right now that's kind of in question, you know, because it looks like people are still getting jobs. But there's a lot of people laid off and continue to be laid off. And then you had port strikes, and you have strikes all over the country. And then you had the hurricane. So the jobs numbers right now are kind of contentious. But we're going to pay attention to what the job openings look like next week, see how that runs in. And then we get to the numbers. Okay, so then on Wednesday, we have ADP payroll numbers. I don't really trust their numbers. But it'll come out on Wednesday, and we'll go through them and see how accurate they are this time. Because the last time I think they were way off. So we monitor them every time and just to see how it comes in. And it does move the markets. But then we have the GDP. This is the GDP, how much production we're getting out of the country. So these are going to tell us a lot of information. And then here we go, we have initial jobless claims, that's going to tell us the true numbers from the Federal Reserve. And then we have the PCE. The PCE is the number one, basically inflationary number that the Federal Reserve monitors. So we have job reports, we have inflation reports, and the whole mix. So next week, we'll be market movers. This week, there was really nothing, no meat on the bones to really do anything. But the market still had, well, let's just say it traded in a range this week. So right now we're seeing the bond market right through here. But I do want to give you this caption. Now here's the comment I'm going to get a lot down below. They're going to say, Dan, this lady is, she works as a housing builder. So she's going to be completely, you know, positive about housing. Well, you have to listen to her whole context behind this. So we'll listen to her. Then we're going to look at their stock price, because they're a builder. And a lot of people are saying, well, builders, they're going to go bankrupt, and everybody's going to go out of business. So we're going to look at their financials. And then we're going to see what the property brothers have to say about all this. So let's get to the interview. And then we come back, I'm going to let you know what the property brothers are telling us. So take it away. Time will turn to housing. This week, we did see September new home sales hit their highest level since spring of last year. But remember, the existing number fell to the lowest in about 15 years. Our next guest is a major player in home building and joins us after delivering an earnings beat on Wednesday. Let's bring in Taylor Morrison, CEO, Cheryl Palmer. Cheryl, great to see you. What a week in terms of the macro prints. Did either one of those data sets lead to a change in a housing narrative? No, I don't think it was as much as a surprise as it certainly came off. We had, as you know, Carl, we reported a wonderful quarter. And really, when we look at the activity through the quarter continue to rise with September being our high point. So there's a lot of reasons for new home activity today. But we've talked so many times, we're just under sheltered in this country. So the need for housing is real. What do you think is going on in the mind of someone who was like, oh, I see the Fed's beginning to cut, I'm going to start watching mortgage rates and looking for more listings. And then to see it reverse a bit. Does that does that kill enthusiasm for good? Or do you think they'll just continue to be patient? Confusing message for the consumer, because you're right, when the Fed cut rates 50 bits, not everybody has a full appreciation of what happens with the 10 year, what happens with the Fed, the difference between the long and short end of the curve. So honestly, there was a lot of excitement about rates going down. And that wasn't exactly the case they moderated. And then as you know, they went up, as we've seen in the last couple weeks, but we're still in a very different position than we were early in the year or last year. And you know, new home builders have tremendous tools to be able to help these consumers get a rate to a place where the monthly payments manageable. You have a pretty good diversity. So what are you seeing across the income spectrum, the you know, first time buyers, like, who is responding well to these lower mortgage rates? And who is still holding out? Yeah, it's a great question, Sarah. And we are seeing a difference by consumer group, I'll start with location really mattering today. And the quality of locations and access to, you know, employment and transportation and services. And then, so this is where I always say, you know, a lot of times when you watch a video, they're like, and the markets crashing, crashing, crashing, crashing. And then they tell you, well, we're in Austin, Texas, or we're in a sector of Florida. But what you have to understand is the country's huge. And that's why a lot of times we'll have Altos research Mike on here, because he can you can actually plug in your zip code and pull the housing data from that. So when you're looking at things in a broad scheme of things, you have to take in all these things into consideration. She does a great point, right here, basically dissecting, you know, different price classes, different market areas, different income levels, different stages of life with people. So she does a fantastic interview. So let's let's bring it back. As we think about the different consumer groups, certainly that first time buyer today is more challenged, they don't have some of the levers to pull, they don't have equity in their home to be able to bring to the table, the cost of living today, not just mortgage rates, not just housing prices, but everything is, I think, disproportionately impacting them. We're seeing great strength in the move up. And we're seeing great strength and what we call our resort lifestyle business. And, you know, our resort lifestyle, a very small percentage of them take even take loans. And that was actually our greatest pace or year over year increase was our active adult business. And honestly, in a very unseasonal in an unexpected season, but also great strength in that move up because there's reasons they, you know, there's life changes, there's needs for relocations, there's family expansion, and we're seeing real move up. The other interesting, I think, thing that we've really, I think, seen more significant is just the reason consumers today are picking new there. Well, in our own research is that the number one or two reason that they're coming to our communities because they've made a decision that they want new and not resale. And if you look at the age of our inventory in the country today, it's nearly 40 years. And the cost of what they're learning about and inspections, I think, is really benefiting the new home market today. Does that mean you have to spend less on marketing? I mean, they just talk about marketing and things like that. She hit it right on the button. We have a lot of first time homebuyers struggling. But we have others that are they're selling their homes, moving to the next level, and they're putting down a ton of money. So you have to take all these dynamics into consideration. So fantastic interview, I got to give her that. So let's get over to their stock price, because people keep saying, you know, all these builders, they're going to go out of business and all this other stuff. They just reported really good earnings. Look at their stock price. I think it's up 28%, almost 30% this year, this year, year to date. So not it doesn't look like a company or a stock that that's really going to you know, that's going to go out of business anytime soon. So the that's basically the take on the home builder side of the equation and existing home sales. We know people are landlocked or house locked on those rates. So existing homes aren't coming into the market. And then when she said the average age of a house is about 40 years old, that's on the market. We're seeing that because we're getting a lot of a lot of inspections are failing. And what she said was perfectly on it. We usually have, we usually don't have much fallout at all. But the fallout we do have usually comes with inspections and the people selling they're like, I'm not going to fix that stuff. And the people buying are like, well, I'm not going to buy this house with these issues. So what she's had, that's why I put it on here. She was on tune every which way she went. So now let's get over to the Property Brothers. They are in the news today. You can see it right through here. This is the biggest difference in today's housing market, according to the Property Brothers. And what do they say? I don't think people realize the shortage of homes that are out there. So there is truly there's truly a shortage of homes, folks, that can't be you might say down below, oh, every all the statistics are lying and everything, but it is what it is. The median home price is 412,000. But here's what they had to say down through here. Many factors make it hard to buy a home today. But one of those is the biggest difference is today's market is housing a shortage. So there is a shortage. I don't think people realize the shortage of housings that we have affecting. So what they're also saying, I think it was down through here, give it another 20 years and literally nobody, no young person will be able to buy a house. This is kind of getting to the point where the have and have nots I talk about a lot of times where a lot of people are saying, well, you know, the rich are getting richer and well, it's things like this. It's financial instruments that a lot of the poor aren't being educated on, not in school and not in high school, they have no plan. And so they don't, they're not able to do this, especially if they don't have a, you know, a household that can educate them on this. Okay, so that's, that's one big piece. And that's why I'm trying my best to teach you guys on real estate, how the bond market works, even how stocks are starting to work. So my goal here is to be like Professor Dan and to teach you guys all about this stuff. But they even said, you know, if you continue to wait and wait and wait, you might never be able to have buy a house. When I was growing up, I bought a small little house. I was 23 years old. It was all I could afford. It was $1,100 a month of payment. And I stayed there for eight years, sold it, made some money, put that money down on my next house, stayed there for eight years, sold that, made more money, parlayed all that into the house I have now. And I love the house I have now. So that's what a lot of people did. And that's what, you know, if you get on a budget and you start figuring this out, you might have to go on that path. You can't go from a one bedroom studio to a three or four bedroom, you know, 3000 square foot house. And I'm not saying that's what you're looking to do. But that's that I hope you get the gist of what I'm saying. So you see a lot of times where it's like, oh, inventory, it's spiking. So here's here's the basically the poster children that all the people that are saying there's way too much out there that are going to point out they're going to say, well, look, San Diego's their inventory is 50% higher than what it was in Tampa Bay. So but let's look at you're going to you will have some areas and look at this most of it is in Florida and California. Okay, but if you look at the rest of the country, pretty big country, not everybody's there. So you go down through here. And here's what the numbers look like. But if you really want to look at the housing inventory, go to the Fred just go in Fred, straight through here, Fred, that is a federal government, how many active houses are listed, what only gives you kind of back to here. So you really can't. But if you look at this trend, get my head out of the way real quick, you're saying, Okay, that's low. It's look, it's starting to uptick way, you know, a lot. But if you look at history, well, this only goes takes back, let's go back further to see, you know, how bad is it? Here's where it is. So we go back to the 80s. Here's where the 80s are. Here's where we are today. Look at the inventory, nowhere ever in history, other than right through here. Had we had this less, or this low amount of inventory. That's our problem. So until people really face this, and then yes, houses are going to get more expensive as it goes in, because scarcity, and then you also have insurances and everything else adding to that and compiling to that. But as the property brothers say, you know, is, is this going to be the point where, you know, if you keep putting it off and off and off, I'm not, I'm not trying to FOMO or tell you guys, you have to buy a house. I'm just saying this is one piece of building your wealth. So, you know, let's, let's go over to the stock ticker that we've been trying to educate you guys on and what's going on with stock. So let's go over to that section here. We're going to plug in Yahoo finance, uh, tuck that bit. Let's see what our stocks are doing for today. So if you guys are new to the channel, you don't know really what I'm talking about. What I started about about a month ago is I'm like, let's start educating you guys on, you know, stock market. If somebody says, well, you know, the Dow Jones was up today, or the NASDAQ was down, or the S and P had a great day. Do you look like, okay, that's fantastic. Or do you look like what in the world are they talking about? So what I started doing is creating a portfolio, just to educate you guys on how stocks really work. Okay. So we created these five entities and we're just, we were going through to see how they're doing. So we picked these about a month ago. Let's just break it down real quick and to see how these earnings are going. We will go over these in detail next Tuesday on a stock talk Tuesday with Dan, but you can see right through here. Here's, this is about, let's say these, these, we bought these about 45 days ago. Okay. Here's the returns that you're getting. This is actually a combination. It's an ETF. I mean, I'll, I'll, this is what I'm going to really explain to everybody on, on next Tuesday. An ETF is a basket of stocks. Okay. So this is an ETF that holds utility stocks. So I'll just go through this one real quick. The reason why I bought this is this is a good instrument to own for utilities when the federal reserve is in cut mode. Okay. So let's look at how's this done so far this year. Well, the stock is up 20, I think it says 26% this year, but one of the nice things through here, we want to see what kind of yield it's providing us. So if we go down through, let's see where the yield is. It's offering us a 2.2 0.7% yield. So even as the stock does absolutely nothing, nothing at all, doesn't move, you're getting a 2.7 yield. So let's look at over a year's time. It's up 38% over one year. So you've got a 38% return plus, you know, also some, some yield here. This is what people are buying. And then you can go over here and see, you know, what's, what does this account hold? So when you buy one share of foodie FUTY, you're actually buying shares in all these companies. Okay. And that's why diversification is the key, especially if you don't have, you just have a finite amount of money to use for investments. But what I want you to do is learn how to do this. Where do you do it? How do you analyze these things? And that's where we go over on talk stock talk Tuesdays with Dan Frio. So make sure you check out next Tuesday's event. We're going to talk about ETFs and how I use them to build my portfolio. I'm not telling you guys how to do this. I'm not telling you to follow my lead. I'm not a financial planner. I'm not a stock broker. This is completely educational purposes. I want you to understand how this stuff works. So that is my report for today. If you want to reach out to me, my name is Dan Frio. No, I'm not a stock analyst. I'm not a stock broker. I'm not a financial planner. I'm just a mortgage guy. I've been doing this for 35 years. And I love it. I love helping people get into their first house. I love, you know, explaining to people how all this works. So if you'd really like, you know, kit glove service from the day of application, the keys in your keys in your hand, we'd love to work with you. The good news about me, I'm licensed in all 50 states as well as Puerto Rico. And I'm also a mortgage broker, which means I'm set up with about 50 different lenders right now to help you guys no matter what the program is, I should have, I should have the ability to get that program for you. And no matter what state you're in, I can help you as well. So the first thing you do is go to the rateupdates.com. If you're buying that first house, and as we heard, first time homebuyers are limited on the amount of money they have when they're buying a house, check out the grant finder right up there. There's two grants programs up there for you to check those out. You can go through there and in probably three to four minutes to find out if you qualify for any of these. But if you want to go to the next step, hit the apply now button and that that'll take you on I don't care if you're looking to buy that first house, maybe buy your first investment property, maybe even just refinance, check us out. If you prefer to call that's how I would do it. I'd call scroll down to the bottom of our website. There it is our 800 numbers 844-775-5626 or you can reach me personally. It's me at Dan at the rate update.com. So thanks so much for watching guys. God bless. Have a fantastic week. And the main thing I want to do know is to learn something this week. And that's the most important thing. So thank you so much. I'll see you next week. Bye bye.