Real Estate Market Update Dec 5, 2023: Bitcoin Soaring, Rates Fall, New Loan Limits, & Homes.com

Mike MIlls (00:00:08) - Howdy there, all you Texas realtors? It's your slightly groggy host, Mike Mills, coming to you with the latest edition of the Texas Real Estate and Finance Podcast. Today I bring you the real estate market update for the week of December the 5th. Why the grogginess, you ask? Well, I had a little rendezvous with a sinus surgery yesterday, and the anesthesia left me feeling like I took a detour through another dimension. But fear not, I'm here to get you up to speed and on with your week in no time. So what's on our agenda for today? Well, stocks are climbing in bitcoins on a wild ride. Is the economy back in a bull market? Well, we'll take a look behind the curtain, see what's really going on. And mortgage rates are sitting pretty at four month lows. Are we looking at return to a low rate market? Loan limits for conventional and FHA loans going into 2024 were recently announced, and I'll fill you in on the details in realtor. Lawsuits are cropping up left and right these days.

Mike MIlls (00:00:55) - I'll bring you up to speed and let you know when we can expect a verdict in the Burnett case. And if you stay tuned till the end, I'll give you a deep dive into homes and what it offers for real estate agents. Could it be positioning itself as a national MLS? But before we get started, if you find this market update helpful, please be sure to hit the Follow and Subscribe button on your podcast platform. It means the world to me and helps me continue to bring you insightful conversations with top real estate professionals each and every week. Now let's get on to the update. So I keep saying every week on this podcast that the economy's not really doing that. Great. So why is the stock market and Bitcoin reaching their highest levels of the year right now? There's a lot of confusing data out there going around and markets don't seem to make sense. So what's going on exactly. Well let's start with the stock market. So right now the typical hedge fund this is a vehicle that manages a massive amount of funds in the US, holds about 70% of its portfolio in just the top ten stocks of the S&P 500 right now.

Mike MIlls (00:01:47) - And these stocks are primarily tech stocks driven by the excitement of AI technology. You see, the top seven stocks in the portfolios are up 20 times more compared to the other 493in the S&P 500, and the market has not been this top heavy in a very long time. It's at an even greater concentration of tech stocks than we experienced during the dotcom bubble in the early 2000. So could we be in an AI bubble and what happens in the market overall if these stocks move into bear market territory? If there is a big correction on the horizon, many of these hedge funds are going to be out of business. But as of right now, they're sailing pretty high. Now Bitcoin and gold just moved in opposite directions recently. You see gold typically goes down when the market's doing well and up when the market's doing poorly. Because when the market's doing poorly people will move their money to a safer spot like gold in order to protect their assets. So they don't lose money in the stock market crash. But gold and Bitcoin have actually been tracking together for several weeks, which is a little bit odd.

Mike MIlls (00:02:39) - But gold recently took a sharp 5% decline from its all time high, losing 675 billion in market cap. And Bitcoin is up massively since the start of the year, based primarily on the expectation of the spot ETF that's been filed by large institutions. In fact, Bitcoin jumped $2,000 in 24 hours above the 41,000 mark threshold for the first time since April of 2022. It's up 175% higher than it was a year ago. And as of today, as I'm recording this, it hit $44,000 per Bitcoin. Many believe it may be on its way to $100,000 for the year, but there could also be a massive correction headed our way too. We'll just have to see. The approval of this ETF will make a big difference. GDP for the third quarter was actually revised up from 4.9% to 5.2%. Are we to believe all these numbers or is this just the federal government feeding us good information to make sure that we all have good spirits in an economy that doesn't seem to be treating everyone the same? Now, some information opposed to this.

Mike MIlls (00:03:34) - Everything's doing great narrative that we see out there. US factory orders fell 3.6% last month. It's the biggest monthly drop since April of 2020. You guys remember what happened in March of 2020, right? You see, when factory orders are down, it's just another indicator of a slowing economy. Recently, Spotify announced that they were laying off 17% of their entire workforce in an effort to cut costs. In total, they've laid off 25% of their employees since the start of 2023. This is on the heels of last month's Citigroup announcement, where they were laying off 10,000 employees. Layoffs continue to pile up. US federal debt is nearing $1.1 trillion. To put this in perspective, in 2023, defense spending was 821 billion, of which they can never fully account for. By the way, the Pentagon has actually failed a congressional audit six times in a row, but I digress. Currently we have rising rates and falling tax revenue, and I don't know a way that the government can manage this debt under the current situation.

Mike MIlls (00:04:28) - The JOLTS report was released this week. This is another indicator of the healthiness of the job market. The market was expecting to add 9.4 million jobs, but instead only added 8.7, and the jobs report from last month was revised down. This is the largest drop in job openings since March of 2021, and as of April of 2022, there were around 12 million job openings. That number is down all the way to 8.7, and over the next few days, we'll get more job data. That'll just give us a greater indicator of where the economy is headed. And the US economy may not be in great shape, but we're better off than China right now. Moody's downgraded China's sovereign credit rating from stable to negative. They cited risk of persistently lower economic growth. Their ongoing real estate crisis was a really big reason for the downgrade, and given that we're living in a global economy these days, if China's economy downgrades significantly, it can certainly affect the US economy as well. Now let's check in with the latest interest rate news.

Mike MIlls (00:05:19) - So the fed has stated that they're going to continue to be restrictive on rates until they feel comfortable that high inflation is possibly behind us. And even though Jerome Powell thus far has done everything he said he was going to do. The market is currently pricing in for rate cuts for next year. Currently on the CME Fed Watch tool, there's a 15% chance that there could be a rate cut as soon as January and a 50% chance that they would begin in June. But every single rate forecast for rate cuts thus far has been wrong since March of 2022. So don't hold your breath. This is part of the reason why you're seeing the stock market in the crypto market have such big gains. You see, overall, the markets feel that the fed will be easing rates soon, and investors want to get ahead of it by putting their money back into more speculative markets. But you see, if we're just barely getting to a place where we're getting inflation under control, then why would the fed cut rates, especially when they're telling us that they won't? So unless we have a major economic catastrophe, I'd be surprised if they cut any rates before the summer of next year.

Mike MIlls (00:06:15) - And with all this news of possible rate cuts, mortgage rates dropped to around 7.125% on average last week. That fell almost a quarter of a point from the week before, and we're getting close to inventory levels at 2022. But it's starting to trend down again. And much of that inventory is in new homes that are not yet completed. Meanwhile, mortgage delinquencies continue to be at their lowest levels in history, but home values overall are doing great so far. For 2023, home values are up 6% on average. Case-Shiller, Fhfa, CoreLogic and Black Knight all have about a 6% appreciation across the board, but currently housing supply is 40% below the historical average. So even though it's starting to tick up, it's still well below what we've seen in the past. In fact, pending home sales just hit their lowest level in history. In October, they fell 1.5%, down 6.6% from last year. To put this in perspective, pending sales are 10% below where they were right after the housing crash in 2010 and 3% below the pandemic low when the whole economy was shut down.

Mike MIlls (00:07:15) - Also last week, conforming loan limits were officially announced. Now, a conforming loan limit is just the maximum allowance for the loan. In order for the loan to not be considered a jumbo loan and keep it as a conventional loan, so conventional loans for one unit properties, the maximum loan limit was raised to $766,550. FHA loans were raised to $498,257. In most parts of the country. The county that you live in often matters on what the loan limit will be for FHA, and this coming on the heels of the 6% appreciation this year so far and is expected to grow next year by 3 to 4%. And now everybody's favorite real estate lawsuits. So on Friday, a three judge appellate court panel in D.C. heard oral arguments from both Nar and the Department of Justice on whether the federal agency will be able to reopen its probe into the trade group. The investigation is the same as the others regarding Na's clear cooperation policy and participation rule, and according to sources, the judges seem too inclined to allow this case to reopen.

Mike MIlls (00:08:13) - So this could mean that the Department of Justice is also nipping on Na's heels, just like all these other lawsuits. And just last week, a Coldwell Banker franchise in Seattle was another brokerage to announce they will not renew its Nar affiliation in 2024. This after Redfin Anywhere in Remax, also took a step back from Nar this year, and the Mueller Commission lawsuit filed in Illinois is not expected to go to trial until late 2024. So we won't get a judgment or anything from that lawsuit until later this year. And right now, a final ruling in the Burnette case is not expected until April or May of 2024, so we're still going to be left up in the air as to what the direction is going to be from the courts as to what's allowed and compensation between buyers and sellers agents. These lawsuits continue to cast a big shadow on an already struggling real estate market. So, as promised, I want to dive into homes. So first, let's start with a little history on what homes actually is. Well, as of the start of 2023, homes was the fourth largest real estate portal by traffic market share in the US.

Mike MIlls (00:09:09) - And right now it's it's in the number two spot ahead of Realtor.com, Redfin and just behind Zillow and Traffic. The company provides real estate marketing and media services, including brand advertising, property listings syndication, reputation management and lead generation. The current owner of homes, CoStar, purchased the group from Landmark Media for $156 million last year, and for anybody not familiar with costar, CoStar also owns loop Net. Loop net is a commercial real estate listing site as well. They host warehouses, businesses, any type of commercial property for sale you can find on Loop Net, so they're like a listing service for commercial property. Now, currently, if you want to become a member of homes as a real estate professional, you can sign up for free. There is no cost. So my wife is a real estate agent and she recently signed up for homes. And when she did, I wanted to take a little bit of a deeper dive to see what they offered to agents. As a service. So first off, it pulled all of her data from the local MLS, so all of her current listings were already uploaded into the site.

Mike MIlls (00:10:06) - Once we gave her information and they put her on there. So currently the site gives all the information about the area and the county, the schools and parks. It's got something called a crime score, a bike score and a sound score kind of tells you what the area is like and if it's loud, if there's a lot of crime, if you can get around everywhere relatively easily, it's actually got a mortgage calculator on there that I played with a little bit and it's pretty good. It takes the taxes that are listed on the MLS information. So sometimes that data can be a little misleading depending on what the realtor puts in there. Now in my wife's case, she does a diligent job about looking for taxes, so they were very accurate in the system. But in many cases you won't necessarily find accurate real estate taxes all the time. So you want to be sure to check that before using the calculator. And if you're calculating mortgage insurance for less than 20% down, I don't know the accuracy is that great either.

Mike MIlls (00:10:54) - It shows you similar sold homes in the area. It gives you the deed history of the property that you're looking at. It gives you the mortgage history of the property that you're looking at, listed right on the page. It pulls this from public from public data. So it isn't something that's necessarily private. It doesn't say who holds the mortgage. It just tells you how much the mortgage was taken out for. And of course, at the bottom it gives all of the agent's contact information. Now, if you sign up as a realtor on the site, you can go in and create your own profile. You can put your headshot in, you can write a bio. It'll let you put in all of your social media platforms. It'll ask you how long you've actually been doing real estate, and wants to know the number of years you've been a realtor. It tracks how many sales you've done, your average sale price, and lists any awards and designations that you wanted to. And another kind of cool feature is that it has neighborhood pages.

Mike MIlls (00:11:38) - So if you're looking in I live in Dallas-Fort worth, so if you're looking in Arlington, if you're looking in Mansfield, or you're looking in Southwest Fort Worth, it'll actually have realtors that have sold the most amount of homes in that particular area. So if you're looking to become like the realtor of a particular market, you can advertise yourself on those neighborhood pages and promote yourself to sell that neighborhood a little bit more effectively than maybe other realtors that don't work in that market as much. It allows you to create a CMA for your clients, that you can communicate with them directly on the site, and you can share your listings directly to social media from the site, so you don't have to create a new post. It'll actually share directly from the site to your social media page. If you link the to. And if you list your open house in the MLS, it also has a separate line item on the home page that lists all the open houses in a particular area that you're looking. So the question is, is homes positioning itself to be a national MLS? Well, I don't really know.

Mike MIlls (00:12:28) - What I do know is that it is taking a big leap and a lot of money to move ahead of Redfin and Realtor.com, and it's not far behind Zillow. And currently the model is built as such that as a listing agent, if you go on there and you have your listings show up and you've registered for the site, it will give you leads for people that are looking at your listing in particular. And the thing about these leads is that when someone goes to your listing page and requests information, that lead is yours as the listing agent, it does not get sold to other buyers agents. So it's not like the Zillow model where those leads are up for grabs and they sell a lead 4 or 5 times over to different agents. This particular platform gives you the listing agent, the lead. So if someone comes to that site looking for information on your property, it'll provide you with their phone number and their email contact. Now, currently, none of this is a charge. It's all free. You don't have to pay to do any of this.

Mike MIlls (00:13:21) - Now, typically what you'll see is anytime a company is trying to gain market share, they will do things for free, and they won't charge anybody until they have a sufficient enough market share that the demand is there, that they can begin charging for their services. Now, what's that going to look like is anybody's guess. I think we're still probably 12 to 24 months away from them, establishing a strong enough foothold to really start charging what they feel like their service would be worth. And all of these lawsuits and how they shake out, are going to play a big role in determining how much or when homes can actually start charging for what they do. And as it currently stands, if these lawsuits keep coming and Nar goes bankrupt and they ruled that the local MLS are being non competitive, then who or what is going to fill those MLS roles? C houses are still going to be bought and sold. The process and method in which it's done just may look a lot different in the next 12 months. And right now, homes is trying to position itself as much as it can to be the company that fills that role.

Mike MIlls (00:14:16) - So if you're a realtor and you're not familiar with homes, I would suggest you start to become familiar with it, at least for right now, because there's no costs involved. It doesn't require anything other than you for other than you to interact on the site. And since there's so much uncertainty in the market going forward, you've got to try every little thing you can to make sure you have a good foothold if and when things start to change. Well, folks, that wraps up a real estate market update for the week of December 5th. I hope you found a day's information helpful in your real estate adventure. Friday. I will be here to help you get your mind and body right for 2024. You can't work without a sharp mind, and you can't have a sharp mind without a healthy body. And I have an agent coming in to tell you her secrets of staying healthy and managing your business all at the same time. So make a New Year's resolution to join us on Friday and remember your support.

Mike MIlls (00:14:59) - Means the world to me. So if you've enjoyed this market update, please don't forget to hit that Follow and Subscribe button on your podcast platform. It's like giving me a virtual tip of the hat. Sorry if I was a little rundown today. Just fresh off of a surgery from yesterday. It wasn't a bad one. I just had to go under general anesthesia, so I've been a little bit out of whack for the last 24 hours, so I appreciate everybody that stuck through this one. I think it'll probably be a quick one. We'll see once I get it all edited, but I appreciate each and every one of you. And as always, be good humans. Keep your boots on the ground and your eyes on the horizon, and we'll see you next time.