Rent Gets Relatively Cheaper as Buyers Look for Leverage

Good morning everybody. I'm Ed Parcaut here with Mike Kelly, Real Estate Jerky Daily, and we'll see how long it takes him to get pixelated. I got lights on this time. I'm slow. It's taking forever for Instagram to wake up. I dove into a deep old hole yesterday. Of what? Mud? No, um propositions and stuff like that. Oh, oh, you're trying to find the one I asked you about. Yeah, yeah, I've got it. I've got it. Okay, well, we'll get there. Hold on. Why don't you tell your numbers first, and then I'll get into my stuff, and then we'll do that right at the end so we keep everybody here. Okay. Okay, let's do these. So today's the 29th, isn't it? Because we got a whole bunch of stuff at the end about California.

Yeah, we got we got uh it's the 29th day of September, so this is 238 closings since the first. 238 I bet you there's going to be another 10 tomorrow. Um yeah, maybe another 10 tomorrow and then uh the next three days uh straggler of twos and threes. So look at that. We are cooking with fire. It's gas, but okay, whatever you want to call it. Yeah, I know. It still makes a fire. Well, you got to get a fire somehow. You got to have kindling or something to Can't start a fire. Okay, I don't need to sing it. Dow's down about 296 right now. The 10-year sitting at 5. 28, yes, and then the rates are worse by 28 basis points. Oh. 26 Sorry. It's moving all over the place. It's fast. It's undulating. Yeah, so and I was looking reading some stuff to see if I want to talk about it.

Uh so our bonds are breaking support and so rates are going to get worse before they get better. Um that's just what I'm seeing out there and that's just kind of what my the new brain and MBS Highway is saying. Who's going to tell you? Yeah, is what's saying is lock cuz there is five in 10 chance it's going to get worse than it is the one in 10 that it's going to get better over the next two weeks. Well, that's nice. Yeah. So Monday oil uh oil ran hard then gave back. The WTI touched about 96. 5 so $96. 50 and now settled at 92. 60. Brent settled at 105 and 28 cents. Why the spike? Well, it was over the weekend President Trump we talked about yesterday said about we're not going to take that off.

We're not going to do that. Saudi Arabia also got its East-West pipeline back up to about 3. 5 million barrels a day. It was at 5 million before. So that helps with the route of Hormuz. This morning Brent's down a little bit and then also tankers are loading in the Saudi Saudi Red Sea terminal again, so that's good. Uh they're saying that oil shipments are back to almost 70% of pre-war levels. Wow, 70% Well, if they keep working around this and finally, you know, stop the Houthis, Iran won't have a choice except to help, you know, let's finish this. And I guess the in the US and Iran are talking to mediators separately. Oh. What are you what are you going to do this weekend? I don't know. What are you going to do this week?

I thought maybe I thought maybe I would just uh pretend like I want to stop things and and continue to do what I've been doing the whole time. So All right, as we know Fed funds uh Feds in September 16th they uh raised the Fed funds rate from 3. 75 to 4%. So a quarter, the first hike since 2023. Lisa Cook on Monday said AI, I don't know how this is, AI and higher oil prices will keep pushing inflation up in the coming months. Cuz I think AI is the cost of AI like data centers and the amount of money they're spending and the fact that when we pay 20 bucks or 100 bucks or 200 bucks for quad or yeah or that that's only like a drop in the bucket. It's not even close to a Yeah, it would be in a jack-in-the-box kind of way like if everybody paid $20 everybody in the entire Well, I do it I do it for free.

And then I get a lot of, you know, the other stuff. All right, so right now the Fed funds futures is saying that there's going to be a hike in October at 66%. The betting markets are saying 68%. It was 71% yesterday dropped down. Hike in December is at 90% for Fed funds rate futures and betting market is 78%. Yeah. So you're going to so you're saying they're going to raise it. Well, here's the other thing. So poly markets, you know, betting all those things. It says Iran oil route back to normal by October 30th or 31st. 4% thinks that the odds are 4% that that's going to happen. That's not very good odds. No. November 30th, 13%. December 31st, 22%. Yes, that is correct. 22 Oh. So about a one in five chance Hormuz is back to normal by New Year's.

Oh happy day. That would be crazy. Well, it would be no that's do we have to say that this is the new normal? Yeah, well then remember rates are driven by oil and war right now and uh not anything you did. The only thing you can control is whether you lock or not and you should lock right now. Exactly. Especially if you get you get like 19 alerts that morning. Well, you know, when I get in here and it's not even seven yet and I'm already got alerts that's a problem. Yeah. Alerts alert, yeah. That's scary scary times. It's not scary but you know. It's just it's goes up down, up down, up down. Um one of the things they talked about is remember I or I should have said I talked about a long time ago the spreads in between the 10-year and the interest rates.

Remember it on normal it's between 1. 60% and to 1. 80%. Uh we are at last week 1. 98%, so we're over our normal spreads again. So that again that means there's a little premium in there. And if we had 2023's worst spread with today's 10-year our rates would be 8. 58 not 7. 3. Well, that's no bueno. Well, that's good. That's a good thing we're doing. So we're doing Yeah. No, if if if we had those things that would be no bueno. You're right. In 2025 worst spreads we the rate would be 7. 99. So we're better then in 2025 with interest rates because of the spread right now. Well, that's good. I like that. Yeah, I do too cuz we could be eight point something and and we all sitting around going God, I remember when when I could sell a house.

Um that's putting a positive spin on things. Thank you, Ed. No problem. Rates are up about $84 a month from a week ago on a $400,000 loan. Youch. That's that's the difference between food for some people. That's the difference of uh having multiple coffees a month. Uh two home prices reports came out this morning both for July. Case Shiller national was is up 1. 9% from a year ago up 1. 6% last report and up 3% for the month after seasonal adjustment. The 20-city version the one that some outlets quote was up 2. 5%. So if you take a lot of the other cities out and only like the 20% cities then it's up by 2. 5%. So that's what we're going to do. That's a big if. We're going to do that. Okay, do it that way.

FHFA uh is up 2. 6% from a year ago up 2. 3% Oh, that it's up 2. 6% from a year ago and up 2. 3% from that point and up three-tenths for the month. FHFA only counts conforming loan limits and skips cash deals. So the other one was cash everything else. Everything jumbo everything else. Existing home sales for August uh came out September 10th and it's at 3. 98 million annualized pace down 2% for the month and down 1. 2% for the year. So first time that we've been under 4 million since June of 2025. The median price that they say is 429,100 up 1. 6%. That's 38 straight months year-over-year gains. Supplies at 4. 9% months or 4. 9 months not percent. It's the highest in over a decade. So remember prices are a big ship.

They turn slowly. Rates are a speedboat. They can turn fast. Yes. I like how they throw these little things in here for me. Wow. Yeah, just to help you understand it in layman's terms. That's right. Uh apartment so rents came out apartment list for September. The new rents fell one-tenth in September first month drop since January. This is normal. September is one when rents start their seasonal slide. Uh it's a small slide. I don't care about anything else they want to say. Rates are flat. Home prices are up about 2% and rates are at seven and a half. Renting got it relatively cheaper this year and that's the conversation your first-time homebuyers are having at the table. Yep. Yeah, I could pay someone less than rent.

So how can you Right. Well, we've always said that. Yeah. Yeah. Well, that one little time when you couldn't. Yeah, that was the pandemic. Exactly. Oh man, it's so much cheaper I should just buy. It's the same. I should just buy. Yeah, yeah, just buy. So with fewer buyers uh writing offers right now that's your leverage. For who? For buyers. For buyers. Yes. No competition. Correct. What we've been saying for three years. The folks who shop while others wait usually get the better deals. They do. We had one more uh thing came out this morning. Jolts job openings for August kind of a soft read. Uh came out at 7. 08 million. They expected 7. 23 million down 256,000 from July. Hiring rate is at 3.

3% near the lowest since 2011. And these are all if you take out COVID. These are all non-government jobs. Uh it's all jobs. Yeah. Okay, it's all all all jobs. Yeah. Quit rate is at 1. 9% tied for the lowest since 2014. People aren't leaving jobs because nobody's poaching them. Yeah, nobody's poaching them and there's not another one to go to. No, there isn't. You just got to stay where you are. Consumer confidence came out 81. 9% expected 90 down 6. 7% from August revised 88. 6. So basically what we're seeing is we're having a soft job market and soft consumer confidence and that is why the bonds we're doing better earlier today and not necessarily right now. Yeah. Yeah. Cuz they woke up. We have a Wednesday PCE inflation and inflation report.

That's the producer personal consumption expenditures. There's the word I was looking for which is what the Fed's favorite gauge. Thursday's manufacturing numbers jobless claims Freddy Mac Friday is September jobs report and that's a big one. Plus there's supposedly a pile of Fed speeches coming out. Inflation? Oh. Yeah. Tomorrow your governor Newsom has the deadline to sign or veto bills on his desk. House bills including ADU measures are in that pile. Anything he doesn't act on becomes law without his signature. Also November 3rd ballot proposition 1 a 10 billion affordable housing bond. And only 1 million will be used. The rest of it's going somewhere else. Exactly. And you know everything I been looking at um nobody's in favor of that proposition 1.

The realtors are uh California Association of Realtors but uh it doesn't make sense. Before you get into your thing state numbers car put the August statewide single-family median at 901,420 up 1. 6% from July basically flat from a year ago. Yeah. Yeah. Yeah, I know they were projecting it earlier this year 950. So basically in California prices didn't move. The payment did. Yeah. Same house last year almost 600 bucks more a month. Just because of the interest rate. Well, that's a $900,000 home. Yeah. Exactly. Yeah. Yeah, so the are you are you ready for this? Yeah, cuz I only have the Mr. Beast thing that we don't want to talk about again. Okay, okay. AB 1738 it'll go into effect in January 1 of 2028 but it's supposed to be like the video call building inspection law.

So they're going to take simple um things that most people are not getting uh permits for like a water heater exchange or a Oh, this is what I saw yesterday. I had no idea what it was. HVAC exchange. Now they're thinking that because um permits will be less expensive and quicker um more people will be like more likely to get um uh permits for those systems which would include such things as water heaters, HVAC systems, reroofing, minor electrical work. He says including panels. I don't know that that's minor. Um and a few new circuits, minor plumbing, stuff like that. I don't know why you'd have to get a permit for a smoke uh and carbon monoxide detectors. Uh, because they're in California. Well, you don't get a permit.

You just have to have them. But anyway, so instead of waiting putting in a call, waiting for an inspector to come out and check things off, uh, you'll be able to do it on like a video call or a video conference. Have it all be done. Uh, supposed to be, um, more timely and less expensive. And then you asked about AB 2166 which he vetoed. Um, that was a housing construction bill aimed at making it easier to finance factory-built components for apartment and multifamily projects. Um, but it didn't become law so it doesn't really matter. They were just trying to speed things up and make things easier to to, um, to build manufactured homes. However, they wanted the state to take the responsibility for all the underwriting.

If something were to go belly up, the state would make everybody whole. And so, uh, Governor Newsom said, nope, we're not doing that. No, because only I get whole. Yeah, only only when my winery burns down or whatever the hell it was. Only when my only in my, uh, three wineries when my accounts are in that one bank do they have to make sure Do they have to make sure that bank survives. Yeah, what a jackwad that guy is. I mean, and the fact that we all let him get away from with it. Oh, it's not even sorry to hear about. We don't let him. The It's just a Democrat controlled house and and When when some party controls when one party's permanently in power and absolute power corrupts absolutely.

And that is what's going on. They have absolute power and they it's corrupted. Yep. Yeah, it needs to change this voting November 2nd. Well, it needs to, but it But you know what? Republicans who stay home and do not vote elect Democrats. Let's just get out of the state. Yeah. Move. We are. We're trying. We're trying. Actually, I have many people trying to come back now calling me. Yeah. Yeah. Karen was talking about, you know, getting out of California that it's getting stupid and I said, well, autograph babies are in Colorado. It's not much better. It's worse because everybody thinks it's better. Yeah. Yeah. That's the difference. The the outlying communities are pretty red, but the inline Denver and the big cities are very, very blue and very crazy ass liberal.

Yeah, well, that's what happens when people leave California and they go to other places. Yeah. Instead of just moving to the next place and then being like the next place because you move to where You mean assimilate? Yes, that's correct. Yeah, not whatever people does. No. So those are the facts, Jack. Tomorrow we'll have some state numbers and, um, local numbers again. We'll see what happens on the 30th. Remember I talked about Mr. Beast's house yesterday, right? Well, this kicker, picture it. Yeah. Somewhere in North Carolina, Mr. Beast is staring at a buyer from every wall. The bond market's staring at Friday. Both are making people nervous. Who wrote that? Uh, that was AI. Uh, for your client, the murals are a weekend with a paint roller.

At $1. 61 a square foot, the bones are what you're looking buying. So basically the house, Mr. Beast's house in Greenville, North Carolina is 250,000 for sale. Four bedrooms, two bath, 1,500 square feet. Every room is painted head to toe in murals of YouTube star Mr. Beast. Yeah. Yeah. And and ZHC, I have no idea that is. Every room and that's about yeah, so you could buy this place pretty inexpensive. And if you don't want to buy that place, you can still buy Ron Ron Propeel's place? Yes. But wait, now what you pay? The difference Well, it's close. So that one's uh, 250,000 and the other one's 25 million. So you still got the first two fives in each one. Yeah, it's just it's an either or. Yeah, I think I'm going to go with the 2.

5 or 25 million or whatever it is. Just a few zeros differently. Just a few zeros. Yeah, it's the same buyer. Wow. Yeah. But do they have to get homeowners insurance? So what I would do is if you're an investor, I would buy the Mr. Beast's house and then turn it into a Airbnb. Yeah, for the freak factor. Yeah. Yeah. God, could you imagine waking up and seeing Mr. Beast staring down at you from a wall? Somebody would like it. Yeah. Somebody could do go in there and do videos and think feel great about it for a while. It's a pretty expensive Airbnb. All right. Yeah, not for 250. True. That's cheap. All right, make it a great day. We'll be back tomorrow and Enjoy everything September. Yeah, and uh, if you are buying, reach out.

Yeah. Oh, and remember, yeah, we got a 9-day warming trend. Oh, jeez. You're going to love it. I hate it. This this will be it. This will be the last warming trend and then we'll go into cool and then another warming trend before the 31st. Yeah, exactly. Indian summer. This is just got us keep slapping you in the face because you want the nice cooler evenings and nope. All right. I like it. Yeah, well, somebody does. All right, make it a great day. We'll be back tomorrow. Bye. All right. Make it a great day. Bye.