Competing With New Construction: How a Resale Still Wins | Market Update 197

Mike MIlls00:00:00

43% of home builders cut their prices last month.65% of builders are throwing in incentives.So if you're selling a resale home in Dallas Fort Worth right now, the house down the street isn't your only competition.The builder is.Today I'll show you how a resale still wins.And we're starting a new series on building your own AI assistant from scratch.Welcome to the Texas real estate and finance podcast.This is where we look at what's moving rates and housing here in Texas and then how to use AI to do something about it.I'm your host, Mike Mills, a North Texas mortgage banker with over 17 years in the business and the guy who's been running his whole life off a map this week.Now, I'm not up here to tell you I have it all figured out.I'm building this stuff in real time, and I'll tell you what works and what doesn't.So thanks for being here.I don't take it for granted.So here's what we got on today's episode.Right.Rates are at a six week low going into election week, with a big jobs report coming out this week as well.And I'll tell you what can move those rates.A buyer tip on why the credit score that you see on your phone isn't the one that the lender sees.I've got the housing numbers.And why builders slashing prices changes the game for every single seller.I've got a seller tip on what to do when Zillow and your realtor don't agree.And in Mike's mind, this week, hacked grocery store freezers in a data center made out of human brain cells.And for listing agents, the one line to use when a builder's rate is stealing.Your buyer.And then finally, the big one, Part one of build your own AI assistant, We draw the map.All right, but real quick, before we get rolling, if you're getting something out of this podcast, please subscribe and leave a review if you've got 30 seconds.That's how other agents find the show.And if you've got a buyer looking at a new build or a resale, send them my way.I'll run both payments side by side and you'll know which one actually wins.All right, let's get this show on the road.First off, let's start with the question that every realtor and every client asks me every single week.Hey, Mike, what are the rates?Well, for once, they actually went in the right direction.So according to the mortgage News Daily index, as of November 2nd, the 30 year fixed conventional sits at about 7.27.The 15 year fixed conventional sits at about 6.92%.The 30 year FHA is at about 6.91%.The 30 year VA is about 6.92 and the 30 year jumbo is at 7.52%.Now, these are market averages provided by Mortgage News Daily.Not a quote.Your actual rate depends on credit, loan type, down payment and a handful of other factors.So talk to a licensed mortgage professional like me to get your actual rate based on your actual situation.Compliance checked off.So last time we talked, the 30 year was at about 7.4%.And today as of this recording, it's at 7.72%.And that's tied for the lowest it's been since September 23rd.And back on October 5th, it hit 7.61%.That was the high for the year.And on a $400,000 loan, the drop from that high is about 93 bucks a month in principal and interest.It's not life changing, but it's moving in the right direction.So then you ask, well, what moved it?Well, the Fed met last week and they held rates steady.But it wasn't exactly a friendly hold.You see, the vote was 10 to 2 and the two who disagreed wanted to raise rates, not cut them.But the mortgage market barely flinched.Mortgage News Daily said that the Fed announcement itself had no effect.Which is the thing I keep telling people, the Fed doesn't set your mortgage rate, the bond market does.So what did the bond market do?Well, the 10-year treasury closed Friday at about 4.93% and it was right around 5% on Fed Day and above 5% just two weeks ago.And according to Mortgage News Daily, two things helped today.Oil prices dropped sharply and tech stocks fell again.And when stocks get shaky, money typically runs to bonds, and that helps mortgage rates.However, there was some challenging information as well.Today the treasury put out that it updated its borrowing estimates for this year.They said 618 billion for the last three months of this year and then another 800 billion for the first three months of next year.And that's more than $1.4 trillion in six months.And that's just new borrowing.That's not counting the debt.They're just rolling over.And when the government needs to sell more bonds, it has to pay to find buyers.And that is what pushes rates up.So today was kind of a tug of war.Oil and stocks pulled rates down, but borrowing pulled them back up.And lenders they just kind of held steady.So what happens next?Well, this week is a pretty big week.Tuesday, the day you're probably listening to this, is the midterm election.Now, I'm not going to tell you who you should have voted for, and I'm not going to guess who's going to win.But the question is, does an election actually move rates?Well, there's no clean pattern for the week after, but SAGE Advisory looked at decades of midterm years, and the 10-year tends to climb in the first half of the year and then fall in the second half, about 40 basis points on average.Their theory, just regular gridlock.You see, when Congress gets split big spending gets harder to pass and the bond market really likes that.But this year, the 10 years shot up in the third quarter.So it's a pattern, but not a promise.And if you look at 2014, the morning after the midterms, yields actually went up.But that same morning, a big jobs number came out as well.And then when a weak services report hit later that day, the yields came back down.And that's kind of the same week as this one.Election Tuesday data Wednesday.So what I can tell you is what the bond market usually cares about most, and that's the data.So Wednesday, the Treasury tells us how big its bond auctions are going to be.And bigger auctions usually mean more pressure on rates.And Friday we get the October jobs report, and that is the big one.A weak jobs number probably helps rates come down a little bit more, and a strong one could push them right back up.And right after the Fed meeting, the market was still betting on a rate hike in December, not a cut.So I wouldn't count on a big drop anytime soon.Now what do you do with all that?Well, if you have a buyer, this is a little window.Rates are the lowest that we've seen in about six weeks.So if the numbers work for them today, I wouldn't sit around waiting for another quarter of a point because that jobs report could take it away by Friday.And one more thing.If your buyer asks AI what mortgage rates are today, it'll give them a number with quite a bit of confidence.But if they then ask where that number came from and what date, a lot of times it's a few weeks old or it's a national average that doesn't know their credit, their loan or their house.You see rates move 3/10 of a point this month.So that tells you that old data can cost you real money.All right, moving on to Our buyer.Tip of the week.So you check your credit score on your phone, and it looks great.Then you apply for a mortgage, and the score the lender sees is lower.What happened?Well, the answer is there isn't just one credit score.There's really a bunch of them.And I don't mean credit bureaus.I mean models of credit scores.A credit card company sees one score.A car dealer sees an auto score, A mortgage lender sees a mortgage score.And then there's a score on your bank app or the free credit sites.And that one I call your consumer credit score.Same credit history mostly, but different ways of measuring it.So why would they be different?Well, in short, the answer is risk.Because if you stop paying your car loan, the dealership will just send a tow truck and take the car back.So that's a pretty low risk for a lender.And that's why a lot of people's auto score looks much better than their mortgage score.A house is a much bigger loan, and it's a lot harder to take back.So the mortgage score is built to be a little more strict.And in my experience, it's usually the lowest one you got.And that consumer score on your app, well, the way I see it, it's the most rosy picture of your credit.It's just a general estimate, and it's usually one of the better scores that you'll see.So what do you do with all that?Well, before you go house shopping, talk to a lender and get your real mortgage score.And if you're worried about a credit pull hurting your score, ask for a soft pull.A lot of lenders can check your score that way now, and it won't touch your rating at all.And really, even a hard pull every once in a while is only going to move your score a few points, if any at all.So if it's lower than you'd hope, there's usually time to work on it before it costs you.And this week on my mortgage YouTube channel, I go a little bit deeper on how lenders actually pick your score.So check it out.All right, moving on to our housing data for this week.So let's talk about what's actually happening out there, starting with the builders.You see, builder confidence just dropped to 29, and that's the lowest it's been since June of 2012.The National association of Home Builders own chairman said it was because mortgage rates had climbed to well above 7% in recent weeks.And this is showing in what they're doing because 43% of builders cut their prices last month, and that's the highest share in the last six years.And the average cut was about 6%.And that 6% has held steady for seven months now.And 65% of builders are throwing in incentives as well.Rate buy downs, closing costs, upgrades, you name it.And that's not new either.Builders have been at 60% or higher for 19 months straight.So the incentive you see on a builder sign isn't a special.It's the new normal.So the question is, did it work?Well, kind of.New home sales came in at about a 676,000 pace for September, and that's better than the market expected.But here in the south, where about six out of every 10 homes in the country get sold.But here in the south, where about six out of every 10 new homes in the country gets sold, sales dropped almost 7% from August.But the median price of a new home is about 400,000, and that's down almost 4% from a year ago.And the average price fell even more, almost 7%.And now there are more than eight months worth of new home inventory sitting on the market.And anything over about six months and buyers usually are going to have the upper hand.So what about resale homes here in Dallas?Well, nationally, prices are still up about 2% over last year.Heck, Chicago is almost up 7%.It led the country six months in a row.But Dallas is down less than 1%, and that puts us about 17th out of the 19 big cities tracked by Case-Shiller.So that's a good thing to know when your seller's cousin from up north tells them that prices are booming.It's just not happening here.So let's put that together for buyers.It's a buyer's market.You've got options, builders are discounting, and sellers are negotiating.But if you flip it around, if you're selling a home in Dallas Fort Worth right now, you're not just competing with the house down the street.You're competing with a builder who's cutting 6% and buying down the rate.So then how do you win as a resell?Well, two things.First, price it right.From day one, a builder can take a cut and keep going.Your seller probably can't afford to sit.And second, compete on quality.A lot of builders are trying to save money wherever they can right now.So a lot of the work on new construction gets done by outside subcontractors.And when everybody's squeezing costs, craftsmanship can usually be the first thing to slip not every builder, of course, there are still some great ones out there.But in my opinion, a lot of homes just aren't built like they used to be.So a resale with good bones, a mature yard, and a neighborhood that's already finished has something to sell.And if you're buying a new build, don't skip the inspection.Even on brand new construction, get your own inspector and do it before the walls close up if you can, because a fresh coat of paint can hide a lot.So whether you're buying or selling, know your numbers and know your competition.Because right now, the builder down the street is the competition.All right, moving on to our seller, Tip of the week.So you're thinking about selling and you already know what your house is worth because Zillow told you or you asked.ChatGPT.Now, I use AI every single day.I actually teach it to realtors.But on pricing your home, it's just guessing.Hex, Zillow's own website, says its estimate for a home that isn't on the market misses by about 7%, and that's just the median.And on a $400,000 house, that's almost 30 grand in either direction.And half the homes out there Ms. Buy More.And you know what?ChatGPT is generalizing too.Because unless you know how to prompt it about your neighborhood, your house, its condition, and what actually sold around you, you're not going to get a good answer.And a good realtor already knows all of that.So what do you do when Zillow and your realtor don't agree?Well, you could let AI explain the gap.And the best agents I work with will do this right there at the listing appointment.They'll show you what ChatGPT guessed with nothing to go on.And then they'll give it the real sales, the condition, the neighborhood, and they'll ask again.And a lot of times, you'll watch it land right about where your realtor did.Now, that's not AI checking your agent.That's AI showing you why your agent's number is the right one.So why does all this matter so much?Because the goal is to sell at or above your original list price.Price it too high out of the gate, and you'll probably cut it.And once you cut it even once, that's where the discount requests start piling up.Buyers see the cut and they want more of it.So that first price cut can cost you thousands in the cut itself and in every negotiation after it.So pick that number with your agent.You can Check it with AI if you want to, but get it right the first time.All right, moving on to this silly little brain of mine.Now it's that time again.The part of the show where I empty out whatever's been rattling around in my head for two weeks.No outline, no theme, just the stuff I couldn't stop reading.And let's start with the price of, well, everything.Since December of 2019, consumer prices are up about 31%.That's straight from the government's own inflation data, which you know is on the rosy end of what it actually is.Food is up about 35%, rent about 34% and groceries about 33%.In car repair, that's up 56%.So if your mechanics bill feels like a mortgage payment, you're not crazy.And speaking of bills that feel like a mortgage, KFF says the average family health insurance plan through work now costs $28,000, 300 a year.And workers pay 7,400 of that themselves.And that's up 9% from just a year ago.So did paychecks keep up then?The Bureau of Labor Statistics says that the median full time worker now makes about $1,200 a week.And that's up one and a half percent from last year while prices were up three and a half percent.And one economist ran the numbers and real wages actually went backwards at the bottom, the middle and the top.But it could be worse.You could not have a paycheck to worry about anyway because Microsoft just offered buyouts to 60,000 employees.That's roughly 20% of the company.Different teams, VP level and below, but still more than a quarter of Microsoft.So then what's Wall street doing about all this?Well, they're betting against it.Bloomberg reported that hedge funds were shorting stocks about 5 to 1 over buying them in October based on Goldman Sachs data.And the short leverage on Goldman Sachs books is at the 99th percentile over the last five years.But here's the weird part.US retirement accounts just hit a record 51.2 trillion per the Investment Company Institute, up almost 8% in just three months.So wages go backwards and the asset pile hits an all time high.So if you own assets like for example, real estate, you're doing great if you're living paycheck to paycheck.It's a different game with different rules.So where is the big money going?Well, a lot of it's coming to Texas.There's about 89.5 billion in data centers under construction in Texas right now.According to Industrial Info Resources.And the biggest one is the Stargate campus out in Abilene.It's a building with 1.2 gigawatts of AI.And those robots have already come to Texas as well, because Tesla's robo taxi zone in Dallas grew to about 81 square miles this summer, per the trackers who follow it.So there's driverless cars all over the streets right now.And speaking of technology doing things it shouldn't, the AP says that hackers broke into supermarket freezers this weekend in Sweden, Belgium and Luxembourg and cranked up the temperature.One store in Sweden had its unit set to 122 degrees, and France got hit the same way last month.There was hundreds of stores involved.So somebody out there is fighting a war on frozen pizza, and I need to know why.And for the last one, you knew I'd have a weird one for this.There is a company in Australia called Cortical Labs, and they grow real human neurons from stem cells onto computer chips.And they're running a data center on it.So there's 120 of these units in Melbourne and a small 20 unit prototype in Singapore.And daily staff swap out the fluid that keeps the cells every 24 hours.So there's a data center made of human brain cells.And we're all out here worried about mortgage rates and the price of groceries, and someone's building a computer out of brains.There is so much going on right now that it's nearly impossible to keep up with.But that's why this segment exists.Just one more glimpse into the dark, dark mind of mine.So, thanks for hanging out in here with me.I always need a little light to help guide me through it.All right, let's move on to our agent tip for this week.So you got a listing, and the buyer you thought was yours just walked into the model home down the street, and the builder is offering a rate that your seller can't touch.So how do you compete with that?Well, I hear this from agents every single week right now, and I get it.A rate with a five in front of it sounds a heck of a lot better than a rate with a seven in front of it.So then what do you actually say to that buyer?Well, I start with one line.The incentive ends, the price doesn't.Because a lot of times nothing about that rate is free.So say the builder spends $20,000 to buy the rate down on a $400,000 house.Well, that 20 grand had to come from somewhere.And a lot of times it's sitting right there in the price of the home, or worse, the quality of the build.Now, builders aren't necessarily doing anything wrong.It's just math that they're following.They have a margin, and they spend it where it sells the most houses.And right now, that's the rate.So the buyer gets a great payment, but they pay for it in the price.So when does this actually catch up with them?Well, when they go to sell it, especially if it's less than five years.Because nobody pays back your buyer for the builder's incentive.And the next buyer's appraiser sees what you paid for the house.They don't see the coupon that came with it.And then once the builder sells out of that neighborhood and moves on, the comps in that neighborhood are now resales, priced by the market.So that buyer could be selling against a number that was propped up by a rate deal.But your listing has a real price because what you see is what it's worth.And if the payment is still the sticking point, then have the buyer's lender run both side by side, the new build versus your listing.And that's a call I'm personally always willing to make.So the next time a builder's rate pulls your buyer down the street, remember the line.The incentive ends.The price doesn't.All right, moving on to our final segment for this week.I want to start with a confession.My brain is chaos.I got a mortgage business, a hot work studio, a podcast.I have content on every channel out there.I've got CE classes.I run the booster club.I have my family, my health, all these things.And I'm juggling all of it every single day.And for the last few years, AI has been helping me one task at a time.Write this email, build this blog, fix this spreadsheet.And every time, I'd add a skill here, a project there to make it work just a little better.But I still didn't have a big picture laid out.So that's what we're starting today.It's a new series, build your own AI assistant.And step one isn't very technical at all.Now, what do I mean by build your own assistant?Well, think about it this way.You get to be a powerful CEO, and you have one person dedicated to you 24 hours a day, seven days a week.They take down your ideas.They schedule your day.They break big projects into smaller tasks.They track your work, and they keep you on point.And they're always there.They never sleep.And that's what people are usually talking about when they reference AI agents right now.Because an AI agent is like a new assistant that you train to handle a job on their own.You give them a goal, the tools to do it, and a way to check their work, and a rule for when to stop and ask you to approve.Now, under the hood, it's just a series of tasks detailed out, managed by an automated task that feeds into loops.And this next term I'm going to teach you is all the rage in the AI agent world right now.And I built it on my own before I even understood the concept.And I'm talking about graphs or maps, so what a graph is, at least in this sense.It's a map of your life and a flow of work, to put it simply.You see, the boxes in your map are steps, and the arrows that connect them say what happens next?And some arrows loop back so a step can run again until the work passes a check.And there's a popular framework for building AI agents called LangChain, and it explains this pretty simply.It says that nodes do the work and edges tell it what to do next.Nodes being the shapes and edges being the lines.But hang on to that for a second because we're about to draw a map that works the same way.Now, where do we start?Do we build the agent first?Well, almost everybody thinks that the order goes agent, then project, then you start asking it questions.But in my opinion, in my experience, it kind of works better in the opposite direction.You see, a question is basic and fundamental, but a question or idea doesn't do anything unless you act on it.So you can ask AI to research something or help you with a task, but if you don't log it somewhere, it gets lost in the mix.And a project is a place for ideas or tasks of a similar kind.Real estate, marketing, content posting, business planning, whatever kind of project you want.And a few episodes back, we built one of those together, the six pieces of a project.And go back and listen if you missed that.Now, inside those projects, you start building your skills and your automation based on what you already do and the tools that you have to do it.And this is where the agent comes in.So building what seems backwards makes the structure start to build itself as you go.But before you get deep on any of that, you really need a map.So what's the map?Well, every good company starts with a mission and a vision, and your life shouldn't really be any different.You see, you start with the things that matter most in Your life, your pillars.So here's mine.It's me in the middle and 12 pillars around me.Now, number zero is systems, how everything gets built and wired.It's kind of like the brain for how the agents work.Then my pillars are mortgage agents that I'm building, hot works, content, teaching, and then the life side, money, family, booster club, health, et cetera.And my weekdays go to my income pillars and my evenings and weekends go to my life.And if you're in our industry, real estate is obviously one of your weekday pillars and probably your weekend ones as well, like most of us.But then once you've established that you work down from there.So let me tell you about one leg.One of my pillars is content, and I'm on every channel out there.But each channel has its own best practices for posting.What works on TikTok really doesn't work as well on LinkedIn.So instead of holding each piece in my own head, I had AI research the best practices for each platform.Then my main systems project organized all of it into a map.And then once I could see it, it simplified everything in my mind.And I determined in order to create my content, I needed four main sources.My buyer videos for my YouTube channel, my agent AI videos for my real estate channel and the podcast, my market updates and my guest episodes.And every other piece of content that I built gets repurposed out of those four.So on Sunday now I know I need to pick four topics for the week, and then I take those over into a writing project that I built that turns into scripts and blogs.Then I carry those over to my content repurposing engine and that feeds every, every channel.And each channel that I publish to already knows what it needs because we set it up per platform.So why would you use a map instead of just a regular document?Well, I'm a very visual person and I think most people are.And a document full of text just doesn't do what a map can do at one glance.And now I can look at the map as I build.And I know what I have and what I don't.So that way I don't lose track of things and they don't fall away.And oh, by the way, it isn't just me that prefers the map.Your AI works better with a map.Also, if you handed a giant document, it can easily lose track just like anybody else.In fact, researchers at Stanford found that these models tend to miss things buried in the middle of very long text.Now, the models have gotten better since the study, but Many lines can still get very confusing.And a map keeps it all on the rails because, you know, here's where you are and here's what's next.Now, it won't stop AI from making something up inside of a step.So every step still needs kind of a check, but you can build that too.But pointing your AI to a map is a better way to keep it on task.Now, I'm not saying skip the basics.Learning AI on simple tasks first is how you get good at it.That's step zero.But once you get into a flow and you're using it on a regular basis, you can't have things falling through the cracks.And that's where the map helps you keep on track.Now, when I built my map, how long did it actually take?Well, I used AI to help me build it while I was watching the cowboy game one weekend, which right now is a miserable experience if you're a Cowboys fan.But no time to get into that message.So what's the first thing that you should build once you have the map?Well, I suggest building something to catch all of your thoughts and ideas, because remember, an idea doesn't do anything unless you act on it.So set up your AI So when you say the word capture and talk, it logs the idea in one singular place.One sheet, one doc, same spot every time.If your AI can connect to a sheet or a dock, great.If it can't yet, just keep it running in the chat called capture and dump everything there.And when you do this for a little while, you'll be amazed at how many ideas you were losing to to the ether.Now, we'll come back and I'll teach you how to organize all that later in the series.But for now, we just need to build the map.So what do you do this weekend?Well, think about your life and all the things that you do.Then ask AI to interview you.If you've been using any of the large language models for a little while, it already knows quite a bit about you.The interview fills in the gaps and confirms what you actually want to map.And oh, by the way, I wrote a prompt that does exactly that for chat, GPT, Gemini or Claude.It reads what it already knows about you and interviews you one question at a time, groups your life into pillars, and draws your first map.So if you want it, shoot me a text or an email and I'll send it over.And if you're on Claude, I've built it as a skill.Now, in the next part of the series, we're going to fill in the rest of the map and I'll show you how to connect these pieces until you've got a true assistant running everything.And this week on my YouTube channel, I go step by step through building the map so you can watch it come together.Now one last thing before you go build if you can't check it, don't automate it.The map comes first so you always know what you're checking.So that's the week.Rates are at a six week low, but the election and Friday's jobs report can move them.Either way, builders are cutting prices.So if you're selling, price it right and compete on quality.And remember, the incentive ends and the price doesn't.And this weekend, draw your map.If you want my prompt to get started, text or email me and I'll send it right over.And if this one helped, send it to someone who's juggling way too much and needs a bailout.And until next time, be good humans.Just keep grinding because life is what you make it, so make it great.See you later.