Welcome to Mortgage Talk with Mark Harriston, the program that not only talks about
mortgages, taxes, and interest rates, but Mark and his guest talk real
estate trends and your home. He also answers your mortgage questions to help you
make the right financing or refinancing decisions. Now here's Mark, everybody, and
welcome back to Mortgage Talk with Mark Harriston. And I am your host today,
Mark Harriston, and I'm really glad to be back on the radio with
y'all to share some information today that you're going to really find a value.
It could be of great value. I've got a special guest friend of mine
named Chris Jacobs to be with us today. And I've known Chris for a
couple of years now and I really follow him from AFAR on Facebook and some
of the things he posts about the market. He's sort of our local savant
as far as as far as real estate figures and market trends and where we
are and where we're heading. And I really want to welcome Chris and I
can't wait to hear what he has to say today. So tell us about
you, hey, Mark, thank you for inviting me on today. You've
got Chris Jacob. I'm with Portico Real Estate, been a real estate practitioner
in Austin, Texas now for about seventeen years. Started really like we met
on Facebook because I started writing about real estate in the middle of the pandemic,
right, you know, the world had come to a standstill, and
well, I was at home, thought well, let me write about what's
going on. Awesome, and here we are today, and I've been around
a long time myself, and I find your information to be more helpful than
anybody that I see out there. So yeah, and you know, the
stuff I write about was really kind of came about because as we entered the
pandemic, there was no real time update in real estate. We knew that
everybody needed to stay home. Everybody trying not to kill your neighbors, you
know, or your family or your family. You know, you're stuck at
home. But I'm sitting there going I could be a part of the narrative,
or I could be a passenger in a narrative, And I said,
I wanted to be a part of the narrative. I started looking at how
can we do these reports? How can I do the research? What do
the analytics look like, Yeah, I pulled into my statistics that I barely
got through college with. And you study that in college, well, you
know you have an economics degree or I have economics, and you know you
have your your minor in economics, and you had to get through your statistics.
And I'll be honest, I struggled with statistics. Yeah. It's tough,
man, It's really tough. And what was interesting was is it was
intro to statistics that got me. I took it four five times. What
I mastered it this What I struggled with was the concept of manually doing it
because once we got past the intro, oh it's all done in Excel,
it's all done in analytics software. Really, all you need to know is
how to interpret it, right. You don't need to know how to figure
out or your your deviation. The computer does it all for you. Just
how to interpret it. Yeah, so I I kind of took that.
Let me use my interpretation skills and economic skills. Let's start looking at from
a macro theory on where are we going, what's happening and whatnot. So
wouldn't you consider real estate macro and micro Absolutely? You know, I talk
about Austin. Yeah. And when I talk about Austin, talk about the
MSA Metropolitan Statistical area that's Travis County, Hayes County, Williamson County, Cadwell
County, Central Texas basically. And I'll be honest, you want to know
what's happening in my neighborhood, I have no clue. I'd have to go
in and look. But I could speak to it on a macro because real
estate is hyper local. Yes, amen, you know what happens here is
a lot different than what happens Let's just go on one to eighty three and
two ninety Lamar and Konig essentially essentially two different markets. Yeah, and you
know I'm a more macro person, but I can get micro if it becomes
the task of do we need to sell a home? Do we need at
home? When you're when you're practicing as a realtor, when I practice as
a realtor, I can totally to get into the granularity. Absolutely, But
the reality is, if you asked me, I don't know, Well,
I've got a property in Westlake a rental property, uh in Westlake Hill or
not west of Hills, but in Lost Creek. And then We also went
a couple of properties out in Lakeway, and those are two, although they're
fairly close together, they're two two different markets, two different markets for sure.
You know, I've been I got a dollar the tax manager. Your
number one expence is a landlord. The tax property taxes are your number one
expenses. Oh my gosh, Yeah, what's up with that. Don't even
get me started on that one. That's yeah, I'm hoping we have some
some reality with our in Travis County. Obviously, this is where I'm going
to speak to because that's where you live, That's where I live. You
live close to the station, actually I do. I'm just it took me
six or seven minutes to get over. H Yeah, it was beautiful,
great area. I was just here, like, oh I live. I'm
like totally I'm there. I don't even have to like commute far right right.
Yeah, So, you know, the state was not the state.
The market had changed significantly year and we went from hyper crazy to kind of
slow, and right now we're trending at what could be considered some of the
slowest marketplaces we've had in Central Texas in twenty five years. Do you study
the country too, because I have broke friends around the country and their markets
are different, totally different. So I do follow I do, so I
do have no data feed for one hundred and ninety one hundred and ninety hundred
ninety four markets. I do kind of follow it because you know, as
investors and some of you guys, I didn't lead into this. I worked
predominantly with investors. I work with economic modeling for them, and as we
all know, mainly single family are into a lot of multi family, single
family. I've dabbled with multi family. Okay, I'm gonna be honest,
I prefer the single family. There's half the headaches compared to duplex, or
the quarter of the headaches compared to a four partus. Right, you know,
it's less an apartment much as an apartment. That's a whole other animal.
And you know, some of the things we work with our investors is
investors have a life cycle. You know, when you're young, you want
appreciation. As you're aging towards retirement, you want to focus on cash flow.
So you know, being now that I'm I'm touching fifty, I'm not
quite fifty, I'm just starting to sixty four. So well, I'm starting
to see my investors. Yeah, I'm starting to see my investors turning sixty,
right, their investment priorities change. Sure, So now the question becomes
do we reposition out of our single family assets and into do we go into
a read do we go into a DST? With those routs are real estate
investment trust they're traded like mutual fund, They're like a mutual of property.
And then there's a Delaware State Trust DSTs, which are a really neat product
that we're we're doing a lot of studying on and working with clients because a
Delaware State trust is really kind of unique in the sense that if you're an
investor, you have a single asset you're an owner in, but you don't
have the headaches of being the sole investor. Okay. So what's cool is
when you invest in a DST, you actually get to see the tangible asset
okay, that you were invested in. So it's kind of crazy because right
now, or last time we were looking through the portfolio last month, there
was two buildings on Rainy Street that were up for DST investments. Interesting and
they have you know, you might be need to be a qualified investor.
There's a minimum capital. There may be a debt servicing component, but it's
it's a neat product for investors as they kind of, hey, I still
want to be in real estate. I still want to maintain that benefit of
being in real estate. I want my next generation to have that step up
basis right, I'm passing in those the next generation can choose to continue to
Can you use a ten thirty one exchange to get you can on the ds
That what I thought, and that's what's hardly really kind of cool. So
we really kind of sidebarred here. I'm not a tax professional. For the
record, we should go on the thirty minutes. Yeah, you could totally
go forever. So the DST is a neat product because you get ten thirty
one in as you're entering the end of your life cycle and remove all those
headaches. A good example is a client right now who had five roofs taken
out with the hailstorm we had three weeks ago from Rushy Creek round Rock from
Wells Branch North round that. She had a pocket of homes there and the
hailstorms took out five roofs. And while we started digging into the policies and
they had a diminished value policy because most investors being chased into these you get
your useful life. What's left paid out, not the actual replacement costs,
because policies have gotten out of control, so we now have to pay for
five roofs cash because they were at the end of end of life. And
if yeah, you're an investor, you're looking at like, I need to
check my policies that I did that on my own investmentes. I called my
my agent, going, do I have actually I read that exactly, do
have cash value or appreciated value in my investments? And some were good,
some were bad, some had no other options. But you know, this
investor kind of looks at it, going, now, maybe the writing on
the wall that it's time to get out of day to day operations and move
more into the check shows up every month, and that's what the DST does
offer investors. Awesome. Yeah, well that's something we didn't really play on
exploring today now, Yeah, totally, but I love it. That might
be time for another conversation someday. Absolutely another time, But let's talk about
the market here in Austin, Texas or Central Texas. Yeah, Central Texas,
because you know, like I said, I've followed you around on some
of the things you've been doing as far as information to realters, and of
course I'm a mortgage broker, but I need to learn that stuff too.
So tell us a little more about what's happening right now in the fall of
twenty twenty three. Well, the fall of twenty twenty three is turning into
an interesting moment in real estate. So what we're seeing in Central Texas is
we're seeing and this really kind of surprised me this fall, given all the
circumstances marketplace, we're seeing pending sales increasing over twenty twenty two, really,
and that's so encouraging, it's really encouraging. But when we peel that onion
back, because you know, every market's got a different layer, sure,
we're finding that they're predominantly biased towards new construction versus resales. Is because the
financing packages. Financing packages, you know, the bottom of the bottom of
the bottom line is consumers when they are first time home buyers, when they
are entering the marketplace in home ownership, that payment is the most important thing
that they have every month. That's right, that's right. And if you
go into a consumer well we're sorry. Interest rates have changed every it was
every point in movement, and interest rates affects financing by about twelve percent,
eleven twelve. Yeah, it's a big one. It's a big move.
And if you consider we've gone from three to eight, three to eight inside
twenty five months less than that, yeah, year and a half, it's
a it's a scary shocking. It's a shocking. Yeah, it's a big
shock. And if you kind of think about historically, and we're going through
this growing pain in Austin right now. So I don't know if we're you
know, I had this conversation last night with a great investor out of Boston.
He's got fifty doors in central Texas, and he's like, are we
truly losing value at the lower end of the market or are we truly just
seeing an absence of higher and home sell That's a good question, and it's
a great question because we think back to the Great Recession. Terrytown just became
a ghost town. Nothing sold. Yeah, and it's like, well,
did they lose value or were they just holding onto houses? Well, they
were holding onto houses, they weren't being foreclosed on. Those sellers were like,
we can wait for better times. That's right, Well wait, we'll
wait. Yeah, And I think what we have coming off of the this
is where every homeowner in Central Texas needs to put their hat on and think
objectively, is if you bought or forget when you bought, if you refinance
your home or finance your home from twenty to the early twenty twenty two,
about almost a two year period, almost a full two year period, those
mortgages are assets. Yes, yeah, they absolutely They are not a liability.
And I have two mortgages under three percent myself. Who cares what the
values do because the death servicing is so cheap. And it's an interesting proposition
because we're taught that mortgages are liabilities. Mortgages are you know, if you
listen to Dave Ramsey, pay your home off as fast as possible. But
right now, these sub three mortgages are priceless. And I believe that when
we look back, because hindsight's always twenty twenty twenty to twenty twenty two ill
regards to what values is done, will have been the prime buying season in
Central Texas. And what we're experiencing right now is just the hangover that was
caused through the sentergy in that period. And yeah, some values are down.
You know, my personal residence, if I downe to pen paper,
I'm probably down a couple hundred grand from the peak, from the very peak.
And the peak was probably early twenty twenty two, would you say,
yeah, late twenty one, something like just thereabouts. Let's call that the
Q one twenty twenty one Q two. Yeah, right, yeah, that's
right, you know that. But it is what it is. It is
what it is. You know, I've got a great rate. I don't
have a sub three, but half of I'm half of what it is today,
Oh for sure, you know, and I kind of I'm one of
those like I didn't believe it throwing money at refinancing and refinancing because it was
just like, all right, how long are we left in the house?
What is recovery period? And we're sub four? Who cares? Right exactly?
You know, that's a great rate. You can get a ten year
trade, you get a one year treasury right now on an investment at five
and a half percent, that's right. You know, ninety days are pushing
six. Yeah, I mean it's it's it's pretty interesting times. Well,
it's really interesting and you know, we talked about where does Austin go from
here? And the question becomes are going to continue to lose value? We're
not going to continue to lose value, I feel in the and that goes
back to that micro conversation. Does goes back to the micro conversation. So
I feel like we get two liptus tests as to what values you're doing in
Central Texas, and one that I push out there for everybody is average values.
Well, average values, that's not a term we hear very often.
We hear a median. We'll hear median, and there's two schools of thought
on median versus average. Meeting tells you it ignores the luxury sales. It
tells you kind of where the true marketplace is. And I kind of look
at the average, going, well, really, what's the average sales doing?
Because that's the net value of the marketplace. But also on my side,
I have a little number I don't share with people, and it's the
dollars per square foot and that helps eliminate some of the luxury swings and others
and helps us normalize on our square foot Those numbers are down about twelve percent,
okay, which is reasonable. That's very reasonable, considering the cost of
money is sixty percent more than it was. Yeah, yeah, a year
and a half or two whatever the present it is. It's a lot.
Yeah. So I empathize tremendously with the concept of losing value, but at
the same time that payment can never be replaced and it's unlikely that I see.
I couldn't agree more. Man, That's why I'm holding on my hot
properties. I'm not trying. I'm not selling these things, you know,
And I kind of work with these you know. I've got new time investors,
We've got people who want to be investors. And I believe this,
this this marketplace we are in are going to create a new generation of investors
that didn't know they wanted to be real estate investors. That's right. And
these inexpensive mortgages, they're going to want to upgrade at some point, They're
going to want to do things. Well, they're like, well, I
can't get rid of that loan, right, I'm going to put a runner
in the house. And now you have two properties. You've got one that's
providing cash flow and you've got one subsidizing your next house. Yeah, I
just I just talked to client this morning about that they live in around Rock.
They right, they're free and clear, so it's a little bit different
conversation. But they want to move up, They want to keep their properties
around. Absolutely, why not keep it and let it like cash flow and
subsidize your next home? Absolutely? So I think, you know, in
the near term, I think we you've got. The question becomes is who's
in the marketplace and won't lie? And right now I think our biggest ones
are new college grads graduating, wanting to get out of apartments, You're getting
married, starting a family's first time buyers, first time buyers. It's a
tough time to buy. But the reality is is if we sit down and
objectively look at what was a cost to own a home, September of twenty
twenty three was the most expensive period ever to buy a home this century in
America in terms of price or in terms of death servicing. Death servicing,
so your down payment and then your monthly payment, that's right, taxes at
all, in taxes, this is the most expensive period it's ever been.
So I stand by my old adage in Austin, yesterday was the best day
to buy. Today's the next best day. To buy. Yeah, that's
right, and then that tomorrows is gonna be more expected. I couldn't agree
more man, And I want to speak to a little bit around inventory levels
because a lot of friends of mine around the country say they don't have a
lot of inventory where they are, and that could be in California possibly,
or it could be in Colorado or got friends and even in Dallas. But
what do you see our inventory levels here? So we're we're blessed and honestly
with a lot of inventory. Right now, we are sitting on about four
and a half months of supply, which means if we had no new listings
at the marketplace, based on our current rate of consumption, it take us
about half a year a third of a year to everything to supply absorbed.
Okay, and how many units? How many properties? Would you say?
That is about ninety seven hundred single family homes if I remember in the Austin
MLS in the well in the five county area, and I use a hybrid
of data, so that is there's in the five county area, there's three
mlosses. Okay. So yeah, so that's probably yep, six times over
what it was of the peak during what's interesting is we've got infinite amount of
inventory compared to just eighteen months ago. And even when we go back and
look at okay, where were we post dot com bust in Austin, we're
still doing better than then. You know, we look at post Great Recession,
We're still doing better than then. It's just the cost of interest for
mortgage lending has gotten. I mean, it's doing what it needs to do,
yeah, and it's going to work itself out. But when you talk
nationwide, you go and look at that, I think it was ninety seven
percent of marketplaces or trading above pandemic peak values. Wow. And that is
really a function of the lack of supply. And it goes back to why
do I need to upgrade? I got two and a half, I've got
three, I've got three to three quarter and you're telling me it's going to
be eight. Yeah, I'm okay. Here, honey, you want a
new bathroom that's cheaper than moving? Yeah, honey, you want a new
kitchen cheaper than moving? That's right, that's right. Yeah. And according
to the Mortgage Banker Association stat I assume it's true. They said that over
fifty percent of purchases in the second quarter of twenty twenty three were first time
buyers. I totally believe it, and I did too, because we see
a lot of on my end, a lot of our clients are first time
buyers well, and I believe that. We go and look and if we
look in Austin, thirty five percent thirty three point five percent of pending sales
in the last year have been new home build uh huh. And what we've
seen the new thirty five percent thirty five percent. So if you think about
that, new build traditionally hovers in the eighteen to twenty one So is those
marketplaces changed? And you've seen this As a mortgage lender, sure you can't
compete with the builder. No, no, not now, No, there's
no way. And builders are cash flow. They're just working on cash flow.
They're focusing on can we keep the doors open, try and keep the
lights on, trying to keep our debt servicing away for better days, you
know, but let's sell something what we can. We've got to get to
the other side. And what's been really interesting with new builds is we're seeing
them pivot, just like they did with the Great Recession, just like they
did with Post dot Com. Is they're building stuff people can afford. Yeah,
and I look at that as a a investor, just like it's good
to see people being homeowners because we don't want to go. It would be
horrible to see the United States migrate to like some European countries like Switzerland,
Yeah, where eighty percent of houses are owned by corporations, right right,
Well here, you know, it's still the American dream. You can own
a home. Absolutely, you can go out and get it. It may
not be the perfect home. And even though I don't participate in the in
the new home mortgage world because they have their own lenders typically and they have
their own financing packages, you know, there's certainly nothing wrong with buying a
new home. Now, the downside of that potentially could be if you have
to move for the next few years, you may be stuck with your competition
being built. That's right, So that's true, that's something to consider.
That's the big risk with new builds. Yeah, well, a resale that
they alreays built out. And yeah, if it's like like I tell everybody,
if you pull into the neighborhood and all you see is it's going to
be a while before it's gonna be a wild it's just gonna be a while.
But if you could pull into a new home community and you're surrounded by
built out neighborhoods like Cedar Park, if you can find a new first start
home in Cedar Park, that'd be a great place to do it. If
you're looking at elegant, I might be a little guarded in my opinion.
They're going, hey, this is a ten year old. It's maybe a
fifteen year old. But even Maynor, like, let's look at Maynor.
Maynor and the Great Recession took a beating. They got beat up really bad,
and it took them eight years to recover those values. But they did,
and it's like, wow, Maynor can do it. Anybody can do
it. Yeah, it just takes time. And with the way Central Texas
is growing, you know, real estate is a long haul investment. It's
not a short term liquid investment. And that's the way people need to look
at it. Yeah. Yeah, it's also the infrastructure. You know,
it used to be a hassle get the manor not so much anymore with two
ninety. No, it's what you get off two ninety and you have one
stop light and you're in Maynard exactly versus all the stoplights that used to be
all the way down there. It was terrible. So what brought me to
Austin in two thousand was applied materials. Okay, And I drove that two
ninety road for seven years. Every day it was it was light, the
light, the light, Oh my gosh. Well and then they started putting
more lights on and that just made the commute that much worse. Yeah,
and now I drive by there and I go. Seventeen years ago I left
my job. Yeah, and here I am today talking real estate on a
radio show. I love it. I love it. I love it.
I love it. I'm loving it. Well, tell me more. What
else you got do you want to share? Before we got to get off
here, We got a few more minutes before before we uh, before we
move on. Let us if somebody wants to contact you, tell us how
to do that. So my name is Chris Jacob. I'm with Portico Real
Estate. My cell phone is five to one two nine eight three three one
three two. I've got a little Facebook group called housing Report. Are you
just type housing report in your search bar, there'll be a little squiggly line
on that's my group. Come join us. There's almost six thousand people in
there. We talk real estate, we converse, we talk about the hiccups
where the market's going. Kind of like this about a larger scale, but
on a larger scale, it's kind of that's how I met you. Yeah,
and yeah, that's that's Are you still doing some Facebook lives? I'm
still doing some Facebook lives. We do those about every other week. I
just did one last week. Because you know, I'll be honest, I
made a comment about a year ago and someone said we're going to see four
percent rates in Q one and being economics my background in Q one of twenty
twenty three, okay, we were going to see this. This was middle
of Q three, twenty twenty two, right right. And I'm a firm
believer in the government tells us exactly what they're going to do. You just
have to listen. And if you had listened to Jerome Powell at the Federals,
or if you had listened to yelling things weren't looking so hot. No,
And I honestly did a knee jerk comment to someone saying we're going to
see fours in Q one twenty twenty three, going, we're going to see
eight percent before we see four and unfortunately we saw eight percent. That's where
we are. But now, yeah, and it's It was a sombering moment
because I didn't wake up and want to you know, project we needed eight
percent, right. I just was like, oh, I'll say something just
as ridiculous, right, right, I was. I'm actually a little surprise
rates for where they are. But again, it is what it is.
Well, you know, we could talk about that real quick, because that's
just something I find really fascinating. So I didn't study mortgage backed securities until
last summer. Yeah, started learning about the cupon, started learning how they're
traded, right, And one of the things I learned was the mortgage backed
security and the ten year Treasury have been in a forty plus year dance.
Absolutely, year, absolutely, and it was usually about a two percent spread
at one point and eighty bitsy bits. I usually used two just from X
it easy, and we're covering like three and three and I know it's way
above. It's above. And it's kind of weird because the question is why,
and everybody believes we're having a recession, but we've yet to see a
recession. Right, And so I believe these underlying investors are front loading those
mortgages expecting rates to go down. That's what I'm thinking too. And I
think as soon as we see interest rates stabilized, and when I mean stabilized,
we get back to that one hundred and eighty bits. Yeah, I
believe Austo will blow up again. I do too. I think that it
won't take much. It won't take much because if we just drop one point
one point two points, that's a thirteen percent cheaper mortgage. And as soon
as the markets return to a more normal also just gonna shoot up. That's
why I tell everybody today is still the cheapest data buy real estate in Austin.
I couldn't agree more, you know. And everybody says survived to twenty
five, thinking well, twenty five is are going to be a year?
I said, no, thrive right now. There's potential right now, there's
opportunities right now, there's there's one hundreds of opportunities. And I talk with
investors every day and you know what, we may not be doing something today,
but we're preparing ourselves for tomorrow. Yeah, that's right. Even if
you can't be a first time home buyer today. Be it interest rates,
be it sales price, be it the three and a half percent down payment.
Things will get better, things will change, and just be aware of
what the market's doing. It ebbs and flows, man, it ebbs and
flows. And you cannot time the valleys and you cannot time the peak,
No, sir, We try to do it. And like my advice I
gave last week was there's a lot of volatility and rates. Lock by yeah,
and if it floats down, relock, yeah, exactly, Just refinance
it. Just refinance it and go from there. All right, Well,
we got to wrap this thing up. Man. We could keep going for
the next several hours, but I can talk all day. Guys are going
to throw us out of here pretty quick. So sir, thanks again Chris
for sharing all that, and to your listeners, to our listeners, we
appreciate you being with us and see you next week. Yes, sir,
thank you for bringing me on. You're welcome. This has been Mortgage Doock
with Mark Hairston. Mark is a mortgage advocate with Texans Mortgage Source LLC,
offering personalized mortgage solutions, fast customized quotes, great rates and service with integrity.
Contact Mark at Markhirston dot com, Mark Hairston dot com. You can
call our text mark at five one two seven eight nine sixty nine sixty seven.
That's five one two seven eight nine sixty nine sixty seven and come back
next week for more mortgage talk