Home Sellers Are LOSING ALL THEIR POWER

Right now in real estate, home sellers are losing most, if not all, of their power because the power that sellers had over buyers for the past several years has always been the same. It has been a very short supply of inventory. When a home would come up in a desirable area, boom, it would get snatched up, oftentimes over asking price. And that was all at a time when prices were lower and people could actually afford to pay over asking price if they really desired the home. Well, now those days are completely finished, at least in 80% of the country right now. Sellers no longer have the upper hand as buyers are starting to push back against these higher prices because the affordability is gone, guys. And there's a few questions that you guys have asked me that I'm going to answer in this video regarding the housing market, how much people are paying for selling a house right now, as well as affordability challenges. So at the moment, any buyer who is willing to make an offer and actually purchase a house, these buyers are asking for lower prices. They're asking for mortgage rate buydowns. They're asking for closing costs and help with repairs, different things like that to get the deal done, which is smart. Use that power in your favor. And I think pretty much in every case, people should be making low ball offers, okay? If they're asking $500,000, offer them $400,000. I don't even know what the house is worth. It doesn't matter. It doesn't hurt to just take a shot. The worst that can happen is they can say no or come back with their ridiculous number and then you decide if you want to try to play ball from there. But at least you'll get the conversation going and you would be surprised because a lot of sellers are in desperate positions right now. That's the other thing. That's the other power that sellers have had over buyers over the past several years is that sellers were in a good position. Nobody really needed to sell. They were just trying to cash in on the frenzy and make a sizable profit. But now more and more sellers are being squeezed by higher property taxes, higher insurance costs, maybe not even being able to get homeowner's insurance in some cases. And a lot of sellers who are selling today are also people who bought two or three years ago at the height of the market and are finding it almost impossible to afford their purchase. So they're in a very desperate position and they need to get out of the house because they literally can't afford it anymore. So offering them significantly less than what they're asking is not a bad thing. It's better than zero offers coming in. It's up to them if they want to play ball or take the offer, but at least you try. But we do have an affordability crisis in real estate right now. The median listing price as of July is $439,000, but the median household income only supports buying up to about $298,000. And that's with a 20% down payment, a 30-year mortgage at a 6.74% rate, which the rates are a little bit lower now. So maybe you can round that up to a little over a $300,000 purchase, maybe 315 tops for the median household income. But that's a pretty big difference between 315,000 of what the median household can afford versus the median listing price of 439,000. And today I'm walking in Mill Valley in a neighborhood called Tamalpais Valley. But this also means that 7 out of 10 buyers who would like to buy a home right now are priced out of this current housing market. So only 30% of working households that actually earn money can actually buy the homes that are sitting on the market for sale. And sellers are sitting there scratching their heads like, why is nobody looking at my house? Why is nobody making an offer? Why is nothing happening? Well, take a look at the stats I just told you. Only 30% of people in this country can even afford your house. So they have endless amount of options right now with over 1.1 million homes for sale, plus new construction. So existing home sales continue to crater. They're down an additional 1.3% year over year now. And inventory has increased for 21 straight months and is now up 25% year over year. The South and the Western regions of the country have seen the largest gains in inventory. And the Midwest and Northeast still face tight supply. They're about 40% to 50% below pre-pandemic inventory in many areas. But it is starting to turn around in a lot of those places too. But for now, as inventory remains low, you're still going to see prices go up as long as there's that inventory shortage in those areas. So sellers pretty much have no choice right now. If you want to sell a house, you have to be cutting the price in most areas of the country. Like for example, in markets like Denver, Los Angeles, Chicago, Miami, Austin, all saw about a 5% decline in listing prices over the past few months. And homes are sitting on the market even longer despite these reductions. And you have two types of sellers right now. You have some that are getting with the program and understanding the reality of the situation is that they need to cut the price heavily if they want to get it sold. And the other types of sellers are kind of in denial of where the market is at. They either list it for sale at the same price for months, if not even over a year. Or they just take the home off the market altogether and hope that if they try again in the spring, that magically it's going to be different next year. So to all of those unrealistic sellers out there, just ask yourself this question. Is my home going to be more affordable to those 70% of people who cannot afford it right now in a few months from now, in let's say March of 2026? Do you think they are going to magically going to be able to afford your house in six months from now? Just be realistic. Because if the answer is no, and you do want to sell or need to sell, then the logical thing to do is to just lower the price now and sell it now. Why wait until later and go through the whole same song and dance again? And I always tell people to follow the home builders. Look at what they're doing. Well, what are they doing? They are ramping up price cuts even further. In fact, home builder price cuts are at a five-year high right now. About 40% of home builders reported in September, which is this month as I'm filming this, that they are cutting prices, guys, 40%. And that's the highest share in over five years. And home builder sentiment continues to tank because one year ago, home builder sentiment was at 41. As of today, it's sitting at 32. And these are scores out of a hundred. And of course, they're being optimistic for all the wrong reasons. Everybody is hoping for this Fed rate cut. And they're hoping that this upcoming Federal Reserve rate cut is going to be the game changer for them. And the reality is this, the fact that home builders are slashing the prices right now, 40% of them tells you that they're kind of all out of options. That was the last resort for a while because they would do things like mortgage rate buy-downs. They would give incentives for people to buy the house. Well, if you buy it, we'll give you a free car. We'll give you a bunch of free cabinet and countertop upgrades and flooring upgrades if you buy the house at full price. Well, now they got to do all of that stuff and cut the price just to be able to get the house sold. And just to put into perspective, just one month ago in August of 2025, only 37% of home builders were cutting prices. And now it just jumped in one month to 40%. And the average price reduction was 5% in September, which has been unchanged over the last year. But remember, all these home builders that have been reporting that they're cutting prices over the past year, and they say that the average price reduction was 5%, how many times have they got to reduce it by 5% to get it sold? That's a data point that's not being reported here. It's not like they've only lowered the prices by 5%. In some markets, they have lowered prices by 20% or more. They're not giving you the cumulative price cuts here. They're just giving you the average price cut when they make a price cut, which is 5%. And they're still using sales incentives to get homes sold because about 65% of these new construction homes sold in September were sold with the sales incentives, which include a mortgage rate buy down, where the builder will temporarily lower your rate. And buyers are still falling for this. They're still accepting this as a reasonable concession to buy a home, which I think is just laughable in 2025. Because we've already gone over how people have been burned by these mortgage rate buy downs, people who fell for this scam three years ago and now are facing the full mortgage payment. A lot of these people have to sell, guys. They're realizing that they can't afford the full cost of the house three years later, especially after lifestyle creep comes into play. Given the current outlook and the current state of affairs, I see a 0% chance that anytime soon, things are going to turn back in favor of sellers, guys. Things are going to remain in favor of buyers indefinitely right now, probably for years to come. Look how long we were on this upshot in the housing market. Ever since we had the pandemic, home prices were on the rise, essentially, and very substantially. It took five years for things to kind of turn around and start to shift. How long do you think it's going to take before we get back to some sort of equilibrium? We could be looking at five more years of the market turning in favor of buyers before we see any sort of resemblance of a normal market. And some of the questions I've been getting from you guys lately, and some questions I received in my email, is how much does it cost an average seller to sell a home today? And I wanted to kind of go over this a little bit to give people an overview of what you might be looking at if you want to sell a house, especially people who maybe bought a house 20 or 30 years ago and are kind of out of the loop. Well, the largest expense, if you're going to use a real estate agent, is going to be the real estate commission. The typical commission these days is the 5% to 6% range of the home's final sale price. And I know we had a big lawsuit last year, and sellers are no longer technically required to pay a buyer's agent commission, which is true. But you'll often find that you end up in a situation where you might be willing to pay that, depending on the situation, especially now, if you want to get the house sold. So even though it's not a requirement, be prepared for a situation where you may have to pay that in order to have things work in your favor. So on a $420,000 house, let's say a 5.5% commission, you're looking at $23,100. And that's usually going to be split between the buyer's agent and the seller's agent. Then, of course, you have closing costs. Your title insurance and escrow fees are going to be about half a percent to 1% of the sale price. You're going to have attorney fees, if it's required, between $500 and $1,500. Transfer taxes, which vary highly by state and local municipality, can be anywhere between 0.1% and 0.5% of the sales price. Then you're going to have your pre-listing things you got to do. Any type of maintenance or repairs, maybe. That could be up to $5,000 or more. If you choose to do staging on the house, which a lot of places around here decide to do that, that can cost you an extra $2,000 to $4,000. And then, like I just said, a lot of buyers are demanding seller concessions right now. That can be anywhere between 1% to 2% of the sale price of your home. Then you have moving costs. If you're doing a local move, $1,500 to $3,000. If you're doing a cross-country move, it could be $5,000 to $10,000. And even though that's not a direct selling expense, it is the cost to sell and relocate, no doubt. So the estimated total cost to sell a median price home of $420,000 in 2025 is about $30,000 to $45,000, which ends up being roughly 7% to 11% of the sale price of the home. Which is another reason why people who bought two or three years ago, who are looking to sell right now are taking massive, massive losses. Just because, look at that. Your home had to go up in value at least 10% just to break even on the selling costs. And how many people had a 10% appreciation in just the past two years? Not very many. And another question that was kind of similar to this that was asked to me by Susan is, what about luxury properties? Are people who own homes that are worth $2, $5 million paying these 5% or 6% commissions? Well, sometimes, but in most cases, they're not. Even though the industry standard is between 5% to 6%, usually on luxury listings, the commission is negotiated a lot lower because luxury listings have a lot more competition. A lot more agents want those high profile listings, not only to boost their ego, but because the commissions are a lot higher. So on a luxury listing, commissions might only be between 2% or 4% maximum of the total selling price. It could be 2% to the listing agent, 2% to the buyer's agent, or sometimes it even goes by a flat fee. It could be on a sliding scale, for example. It could be 5% on the first 1 million, and then only 2.5% on any amount above that, which can really save the seller a lot of money if you're selling a $5 million house, for example. As if it was just the standard 6% on a $5 million house, guys, you're talking a $300,000 commission, which is just kind of insane. I've seen people get that in Miami, but those days are kind of coming to a close. And not only is there higher competition, but a lot of real estate agents who are trying to make a name for themselves in the luxury market, they will voluntarily take a much smaller commission to say that, yeah, I had a $10 million listing, and use that as leverage to try and get more $10 million listings in the area to show, hey, look at me. I can do this, and people trust me to sell a house of this caliber. And if you're somebody who owns a house that expensive, you'd be really smart to use a flat fee agent, those MLS brokers that only charge you a few thousand dollars or whatever to put it on the MLS. You can save yourself an absolute fortune. But the reality is most luxury listings don't do that. They opt for the full dog and pony show. They go with the luxury listing agent. They do all the luxury promotional material because you know all the rich people need to be finessed. You have to be courted along the way to buy the house. You have to feel like it's home. Obviously, I'm being a little bit sarcastic here, but at the same time, I'm not, because all that stuff is mostly true. Hey, anybody want a Spider-Man puzzle? I'll save it for the kiddos back there. Maybe they'll want it. Hey, you do? Yeah. What's your name? Clay. Hey, I'm Michael. Hi, Michael. Good to see you. You know, if you take a look up on Carrera Drive, there's an example of the difference in house price sales. There's a house that came on up there at $1.7 million. Okay. And I think it was 10 days before Oh, really? The sign that says sale pending. Okay. And there's another house that's going on the market up there. How quickly they sell. You can see all the kids in this area. Yeah. There's all these people, these young Gen X families here. Uh-huh. They're buying these little three and twos here. These are going for over a million dollars. These houses. These tiny little houses. Because of a couple of things. We've got the school right over here. It's always the school, isn't it? And the park and this store down here. Have you been in there? The Good Earth? Yeah. I've been there several times. I knew those guys back in the 1960s when they did their first store in Fairfax. Okay. So when that old market went into disrepair, they thought that they'd come in and take it over because you go up to Fairfax. You've been to the one up there? No, I haven't been to that one. What is that one up there? They were going to put in this affordable housing bullshit here, but I fought it. Oh, yeah? Got the neighborhood. It was a very divisive thing to get them to bring this market down here. But this is a probably their two stores and probably the top of the line food that you can buy. This food store has probably put at least a quarter million dollars worth of equity on every house. Along with inflation and the money printing. Yeah, the money printing. Yeah, I'm very clear. You're right about that. Well, what's happening here, I think, is that to get out of the city and to come someplace where you can walk and it's safe. I mean, think Charlotte, North Carolina. People are willing to pay a nice premium and in the city, you know, what do you can buy for under two? So yeah, not only that, but you're still dealing with a lot of safety issues no matter how much you spend over there. And here you can actually find people in the rest of America don't get it. I think what people don't understand, Clayton, is how does anybody here afford these houses? I think that's kind of the big mystery. You know, people get that they want safety and good schools for their kids. But how do you afford a two million dollar house as a working family? You know, if you can answer that question for all of us, you should know they're your neighbors. You'll get the prize. Somebody must be helping them. Well, before you go, tell me, tell everybody what you like about my channel. What I like about your channel is that first off, you're willing to confront the actual issues and walk around towns and talk about what America is facing today. America is facing a kind of financial ruin. And I think you'll probably be brave enough to follow the story. And the story is heading, it seems, at the digitization of the debt. And it kind of comes back to where are these people getting money? All of these people are involved in the tech boom. And not just necessarily directly, but indirectly. I don't know how much bitcoin money is in this neighborhood, but there could be quite a lot. And you're a beneficiary of reinvention of the money system. Well, it's nice meeting you, Clayton. Thanks for watching my channel. Thank you. Shout out to Clayton for stopping to say hello. I haven't ran into anybody in a while, so I'm glad that he stopped and watches my channel. And I always appreciate every time I run into one of my viewers who is willing to stop and say hi. Well, let's go back to home affordability here for a minute. Earlier, we talked about how only about 30 percent of Americans can afford all of the homes that are listed for sale, right? And that's not a very good outlook, especially if we look at comparably of how affordable homes used to be in the past. For example, in the 1980s through the 1990s, anywhere between 55 and 65 percent of homes were affordable to a median income household. Guys, that is more than double of what's affordable right now. And that's with mortgage rates in the 1980s, anywhere between 12 and 18 percent for a lot of people. In the early 2000s, before the bubble actually formed, still 50 percent of homes were affordable back then. Post Great Recession, after the big real estate crash, a whopping 75 percent of homes were affordable because home prices dropped so far and mortgage rates fell at the same time. So if you were a home buyer between 2010 and 2016, that was like the perfect time to buy a house in most of America. So the fact that we went from anywhere between 50 to 75 percent of homes being affordable on the U.S. housing market to only about 20 to 30 percent today, that is pitiful. It's no wonder why houses are just sitting on the market. Like Clayton was saying, you know, people around here are spending two million dollars or sometimes a little under for these tiny little houses, but even he doesn't know how they can afford it. I don't know how they can afford it either. I think he's right. I think he said that a lot of them must be getting help. They probably have family money. A lot of them probably have deep connections into the Silicon Valley world here of cash, right, somehow. I don't know what, but maybe it's just flat-out corruption. I don't know. I wouldn't be surprised at any of it. But the fact remains that people who buy houses in this neighborhood, and even take a look around, guys, this is not really the nicest neighborhood visually. You know, you have the power lines here above ground. They're very ugly. These houses are very small and old. Most of these houses are like under 1,500 square feet. A lot of them are three bedroom, one bathroom for the whole family. Imagine spending two million bucks for that. But people see the value in it because of the school, and they want to be a walking distance to the Good Earth store, which is just straight in front of me, right over there. That's the store that Clayton was talking about. This has like a bunch of, you know, high quality food and stuff in there. And I've been in there several times. I go there to buy this yogurt that I can't find anywhere else, but the food is very expensive. I don't really buy anything else. But yet at the same time, we're seeing some reports come out to say that housing affordability is actually starting to improve now. According to First American Analysis, they found that there's been a 3.1% year over year improvement in housing affordability, which now marks five months of consecutive gains. And this confirms what I've been telling people that now is a better time to buy than it has been in the past few years. But it's still not a great time to buy, but it does show us that things are getting better and affordability is improving when adjusted for inflation especially, because you have home prices coming down in many cases, inflation still going up. And when you combine that rising inflation with already nominal price drops, there's some serious discounts to be had out there already. Rising incomes are a small part of this puzzle, but definitely not a big part of it. People's incomes are still not enough to keep up with inflation right now. But it's funny because there's all this conflicting information out there, okay? You have a company like First American saying that home affordability is improving, but according to the U.S. Census Bureau, the cost of homeownership is still going up right now. So they're saying that the median monthly owner costs increased 3.8% from 2023 to 2024. And from 2022 to 2023, it was a 3% increase. But they are factoring in your mortgage, your taxes, your insurance, the whole shebang that it costs to own a house, not just your mortgage payment. And we know that the taxes and insurance have been rising pretty substantially as well over the past few years. Whereas First American, they're likely just looking at your monthly mortgage payment and seeing those payments come down and seeing wage growth increase a little bit. And that's how they're coming up with this increased affordability. But when you look the whole picture of what it really costs to own a home, it definitely is getting more expensive to be a homeowner, not cheaper. And that's another reason why buyers have so much negotiating and bargaining power in 2025. Because people are like, listen, if I'm going to jump into this mess, and I'm going to pay for all the stuff necessary to keep this household going, I want a substantial discount. Because not only does that make it more worth it to take the risk for me, but it's likely the only way I can actually afford to buy your house. But personally, I'm happy that the tide is finally turning. Even though I own real estate, guys, and if I wanted to sell, I would have to take a lower price than I would take a year or two ago. I think overall, this is a good thing for the country. This is what people need right now. It's nowhere near enough yet, not big enough discounts to jump back in, but we're on our way. So if you enjoyed this video, make sure you subscribe to the channel. And if you don't want to wait for my next video to come out, check out this one on the screen right over here, and I'll see you in the next one.