Where did all the houses go? Episode #307

Hello. Welcome to Todd Miller TV. The subject today is Where Did All the Houses Go? No matter where you are especially if you’re in the western part of the US, California, Arizona, or Nevada, there’s very little inventory if none for properties. We’re at historical lows. In Orange County, they’re at 30-year low for inventory, San Diego County, super low, and Phoenix and Vegas, the same thing, super low.

And there’s a couple for reason for that. So I’m going to go through them in detail. Now, typically with real estate, it’s never one thing. OK. There’s never one thing that causes ups or downs. There’s always a bunch of things. OK? So the lows of inventory now are being caused by a number of factors.

These are the number of factors. Number one is REO. Now, there’s a lot of properties that have not – that people haven’t made payments on in a couple of years and they’re just sitting there. They haven’t had a notice of default filed for whatever reason either laws have changed or banks have offer, whatever reason. The house is sitting around and those can’t be transacted because the actual person can’t really sell them unless they do a short sale. Some people are just saying, “Well, why should I do that if I’m living here for free?” So we have that whole part of the market gone. OK?

The next thing is the recent inventory is the lowest because a lot of people are upside down and they just – when they’re upside down, they get scared and they just – they don’t want to sell, they don’t want to deal with the short sale. It’s a hassle. The heart – to them, it’s a difficult process. When a person wants to sell their house, they want to sign a piece of paper, hand to real estate agent and let them do all the work and then sign an offer. They don’t want to do any work.

So now that they’ve got to gather financials and stuff, a lot of people just say, “I don’t want to do that.” Even though it makes sense they should be doing that, they’re not doing that. OK?

Another reason is because economy is not really great. There’s a lot of uncertainty. When there’s uncertainty, people don’t want to go out there and buy another house. They don’t want to sell the one they’re in and buy another one. When the economy was really good, 2004, 2005, people had no problems moving around laterally, “Oh, let’s move out of this house and buy a bigger house.” OK. So that’s part of the problem. OK?  Where did all the houses go?

So those are three things. Now, here’s a fourth thing, investors. You’re probably saying, “Well, how are investors part of the problem?” Well, it’s easy. When a house comes on the market, an investor buys it. Investor homes on average sell at a lower rate than owned and occupied homes. And this is why. Investors tend to be long-term. Investor will buy a house and rent it out for years and years and years and just collect the rents forever.

So investors have been in the market for the last three years buying up all these properties for cash and sitting on them, wait for them to appreciate. And you’re probably saying to yourself, “Hey well, that’s great but – so in three or four years, they’ll start selling.” Well they will but here’s another part of the problem.

Let’s say, you moved into a house as a homeowner, an occupant and you got that three percent FHA Loan that you didn’t have to put any money down on. You got the super low payment, 500, 600 bucks a month. And then in three or four years, you decide you’re going to move out of town and you come to me and say, “Hey Todd, I want to sell my house.”

The first thing I’m going to say is, “Have you thought about renting it?” because I’ll sell it. I have no problem with that. I have no problem helping you sell it and taking the cash if you need it. But I’m going to ask you, “Have you thought just renting it and collecting the difference between your payment-rent every month of 300 bucks and having cash flow every month and then selling it ten years or never selling it maybe just having cash flow for the rest of your life?”

And a lot of times – so there are people that are going to do that because right now, when you buy a house at super low interest rate, you’re going to be able to – it’s just you’ll never going to lose money. You’re always going to be able to cash flow that property.

So these investors who have bought these houses, that’s going to lock down inventory. So you got REO properties that are locked down. You have resistance to people wanting to do short sales which is locked down and then you have a lot of investors or potential investors who have locked down properties then you have the economy and you have people not wanting to move and all of those things combined have created this really tight-locked inventory which is causing prices to go up.

So I thought I would share that with you. It’s never one thing. It’s always a bunch of things. In this case, it is a bunch of things and all have happened sort of at the same time just like we had that perfect storm back in 2006 and ’07 that caused all REO properties hit and the prices to start their downward plunge. We’re having the opposite side of that so to speak.

So anyway, I thought I’d share that with you and that is my update for today and hope to see you on another video. Thanks.