Homeowners Stay Put as Rates Keep Remodeling Demand Alive

And now live from our smokehouse studio, it's time for Real Estate Jerky. All your real estate questions answered by our provocatively lean expert hosts, Edward "Ed" Parcaut, MBA, veteran and president of Lending for Living. We'll give you something to chew on. Real Estate Jerky is on now. Welcome to Real Estate Jerky. We give you something to chew on. I'm your host Ed Parcaut, MBA veteran and president of Lending for Living. Our studio is located right here in Modesto with our producer Mike Murray and we're proud to bring you the latest updates and insights on the real estate market in our community. Thanks to our partnership iHeartMedia and the station KFIV. You can tune in never miss an episode by subscribing to our podcast.

Stay up to date by following us on social media. Joining me today is Mike Kelly, Remax executive realtor and let's get going, Mike. Let's do it. All right, so we weren't here last week. Well, we were but not a live show. It was a replay because I was my had a my youngest son Blake had a baby which is their first daughter and our first granddaughter. So after I went to the wedding that I did in in Michigan, uh which I was the officiant on, we went from there, flew home, got in the car, drove up to Washington State and was there for about 5 days and then drove back home and it's been a whirlwind. That's a fairly long drive. Yeah. How many hours? Well, we left at right about 5:00 and got in about 7:00 but we had to stop a few times for my wife bought the Tesla Y or whatever.

And I'm telling you that no, that's the the Model Y. Um and I got to tell you that self-driving stuff is amazing because she had a Lexus and it had a thing would stay in the lanes and it would slow down everything but this you just said where you going? Boom, start and it just goes and it's amazing. So you got to rest a little bit? Not close your eyes but rest a little bit. You can't close your eyes, you can't hold your phone while you're driving, you can't do stuff like that because it was funny. Yesterday she's driving around and she's got I got a strike against me. I'm like what? Yeah, she's wearing a hat, she's short so the camera can't see her eyes so it doesn't think she's looking and it's like throws a thing on the screen, put your hands on the wheel, touch a wheel and she didn't see it.

I was like you got a strike. You can no longer use self the full self-driving for this trip. Yeah. And you get five of those, they take it away for a while. Yeah. And so I was so worried. I was so worried that it was going to happen to me on the trip and everything because I cheated. I had a little I told Marsha I go this is boring, I can't do anything and I'm like I want and then she found this thing where you can pop this little to put your phone on the other side of the steering wheel and so I mean I was looking but I was able to watch I watched like on the way up I was watching Hogan's Heroes, all this stuff you know just stuff I didn't have to pay attention to but I could laugh. Right. Hogan's I see nothing.

Yeah. Schultz. Oh my god. And so that's what you know that and a few you know and then I can watch listen to Fox Business and all that stuff what you know all that stuff it's right there and I can still I can see my email and everything if I needed to or whatever to reply or call somebody. It just gives me something but my hands are there to take care of it. It was funny when we left it was dark and I was holding my coffee both hands and it didn't say anything then and so right but it must have been because it was a black cup and it was dark, it couldn't see well and now they just did upgrade so they could see better during the dark and then you know what are you going to do? Yeah. So you you have to hold your coffee with one hand or put it in the cup holder.

Yeah, you you can't do both hands but what happened was later in the about once the light came up with I went by Starbucks which I haven't been to Starbucks forever and I was holding that cup you know two hands I was like please put your hands on the steering wheel because they can see. Yeah. Yeah. It warned you like beep beep beep and if you don't react to whatever it tells you then it's going to give you a strike and five strikes you're out. With my Audi um if you hit the bumps you know if you're on a very windy road you hit the bumps too many times it says it puts up a picture of a coffee cup with steaming coffee coming you know coffee steaming. Are you ready for a coffee break? No, I'll just try to steer better.

Yeah, this is just I'm and don't get me wrong, it's not perfect. A couple of issues with fire in so they're just an update yes this week and one of them was reacting better to emergency vehicles because did I tell you what happened? I think you did. Yeah, we're on our way down there was an accident or whatever and this truck's backing out that's not engine but just like a Ford F-250 but it's the you know must have been the Commander or whatever yeah and it backs up and it starts to go forward our lights turns green and the Lexus Lexus I mean the Tesla like okay time to go I'm like no it's not. And so that that and then it updated the so it it loves the tailgate. Oh does it? Oh yeah, bad. Wow.

And so they just did an upgrade update to stop that. So they're going to be at least one car length behind? Yeah, not so close. I mean like dude you like the tailgate. Driving like my wife. And I know we're not supposed to be talking about you know because I was not against electric cars. I just was against forcing us to get electric cars. If you want to get them like my wife wants it really because she can get in the car because they work and she doesn't have to she can just go to work and she doesn't have to worry about how tired she is if there's something she doesn't react enough to because it's got like so many cameras. Yeah. Well, I didn't tell you this but on when we went to the airport the first time I used it to drive over to San Francisco airport and you got the um the toll right and so normally I go through me 25 mph because you don't pay you just go through it.

Yeah. Did you It it it uh threaded that needle at 56 mph. We both look at each other and go oh man that was a little that was a little shocking. Yeah and you know it's you've got the same distance on both sides of the vehicle that you do in a lane but when you have those those buildings those you know the little huts where people used to sit in and collect your cash um it is a little uh how you say in my country uh nerve-wracking. Nerve-wracking. Yeah. Well, I've seen when we you come back from Vegas and they do the uh they used to check you know at the state to say hey do you do you have anything to declare? Thank God I'm back because I don't have any money. You know what I'm talking about? Yeah, the declare place.

Well, I've seen a car crashed into one of those little barriers yeah so they were in a hurry. Yep. Oh. That's a big hurry. All right. Well, what else we going to talk about? You're listening to Real Estate Jerky. I'm Ed Parcaut, MBA veteran and mortgage advisor at Lending for Living alongside Remax executive realtor Mike Kelly. So I mean it's amazing what we but when I was in Michigan I looked at uh real estate while I was there because that's how you pay for your trip um and make it tax deductible but it was it it's amazing like my daughter and her you know her my brother my son-in-law whatever it is her husband. Yeah. Uh they have a house they bought 250. It's a decent house um but it's close you know it's probably half a mile from the a lake but if once you go from that to the lake you're talking like 900,000.

Really? Yeah, same house, same everything. It's amazing how expensive it is the closer you are to the lake. Wow. Water. Yeah and what you can see and and then when we were in Washington State uh and at my son's in Yelm I looked at because he's going to be transferring and what he could sell the place for and in 4 years time basically they went backwards about $25,000. Oh, bummer. Yeah, but I mean the positive thing is he's got a low interest rate. They could just assume that loan and it's pretty close to what the value would be. Get them off the hook. Right and they don't have to add VA funding fee, they don't have to add anything so it's just Realtor fees? I'm a realtor. Yeah, or that. But I'm not licensed in Washington.

Right, that they don't have to add any of that. They could just assume it through the lender and there you go. Very low cost uh way to purchase a home. Yeah, because that's and for him it's a win-win and for them it's a win-win. I wish we could do that short sale you're doing the same way but that assumption would be like 425,000. Yeah and uh that no worky in this market right now um and believe me I I keep looking at that home thinking why? Why is it so expensive or why did they sell it? Why did they purchase it? Um because the agent that they had originally pushed uh I would say found that house for them. Well, I remember it was a flip a very good agent in the Modesto area. Oh, was it a flip?

Yeah. Well, actually it was I think a rental owned that he fixed up and got rid of the rental so it wasn't really a flip but he did do you know a lot of the things to make it more appeasable to your eye. I don't know what that would be. Well, I if you walked through it you would think you didn't do anything. Right, I did walk through it. I think there was new carpet and you know when when carpets new and fresh and the walls are freshly painted you know it looks a little bit better. I don't know what they were touching the walls up with um before they moved out because it looks like uh a glow stick. Well, they have those they had a bunch of kids. Well, then that's what the kids did. And then they have it also child with special needs and I'm sure they did whatever they want you know it's you don't Well, it's hard.

Yeah, that's that's that that makes life tougher. Much harder. I know. I had one. Still do. Much harder. Lots of love. Yeah. Get your real estate and mortgage questions answered by the experts at Real Estate Jerky. Contact us at radio@realestatejerky. com. You can call me Ed Parcaut at 209-404-1915. Reach out to Mike Kelly at 209-968-5633. Um you know real estate is regional by what's going on. Some places can be up and some places can be down. The volume of what happened with Texas and Florida and all that stuff during the pandemic and then all after that and then how that they depressed a little bit. Well, I think Florida is starting to come back and I also think Texas is starting to come back a little bit.

Texas coming back. Yeah, but I mean just the rent their taxes are just so expensive and I thought you know we were bad and if you watch the news or the commercials there's that one that's talking about Massachusetts which is the high second highest taxes tax rate in the country and nowhere on there was California. Really? Yeah, they're at 23% for the tax rate. Massachusetts? Yeah, yeah. 23%? Yeah. They got to learn how to spend their money better. Yeah, well they got to stop paying for everything. All right, so let's talk about nationwide numbers first. I have it over here somewhere. Uh this so last week end of last week inventory went to did it go up or down, Mike? It went down. Good job. We must have talked about this before.

It so went to 865,709 nationwide. That's 7,224 less than we had before. Uh-huh. Median list price is down by $335 to 448,665. Median days on the market has not changed. It's 63 days on the market. Price reductions is up almost another half a percent to 41. 44%. So in a few weeks where it's going to be half of all things on the on the market will be a price reductions. That's crazy. That's price at right. Yeah, that's that's Yeah, but think about it. I mean sellers this is not a market to dip your toe in the water and see if you can sell a property. Listen to your agents and agents don't be so hungry to get a listing and you'll say anything to get it. Right, and that's the problem. Yeah. Because they'll they'll they'll okay you want to do that?

Okay. Okay, we'll list it and then we'll do in a few weeks we'll lower it. Yeah, we'll lower it and then guess what the seller doesn't want to do? Lower it. I'll just take it off. Okay, I'm glad I spent that money. Realtors I mean realtors spend money as soon as they take a listing. Sellers do not realize that because we don't say hey we're going to spend some money marketing this thing. It's just part of what we do. It's in our marketing presentation but they sellers don't understand there's a cost associated with it out of pocket cost. It's funny um and we'll move on. Uh that's that's not funny but that is the way it is uh and I can see that and with the nationwide numbers the way they are and they're going down the there is also another number we have to worry about.

There's like 350,000 uh FHA and VA properties that are in other properties are over what's that underwater and then also that um getting you know foreclosure and the whole process you have one that's a short sale that you're doing. Yeah. And that's just happening out there and people are going, why is that happening? Well, things are happening, people have to move, people have to do certain things and they're not able to sell those property even though that even though uh equity is at the highest it's ever been. There's still some properties, but you have to remember we normally have in a normal market 250 to 270 in foreclosures nationwide in a year. The thing is this year we're up about 100,000 of that.

Right. 100,000 more. 100,000 more. So that's just how things are going to be moving forward and they're saying is it going to get better? Well, it's not going to get better until rates get better and we're going to because that's when people can sell and you're going to see more things happening. People who are buying right now have to buy and need to buy. And people who really need to sell uh are pricing their properties correctly. Or holding on to them. Yeah, and remodeling, hanging out. There all that there's that I'm just but renting them or something like that. Yeah. Cuz I have one of our clients you referred me, they're going to rent their two properties and then buy this next one. Yeah.

Yeah. Yeah, and they really should hang on to those too um for just just in case for just an oopsy doopsy. What happens if things change? You know, you've got you've got if they're not happy with each other or if if later on down the road you need additional cash, you're still within the the um definition of the primary the primary residence. You can sell one. The payments are so cheap. Oh, and that thing I just saw a thing about your 500,000 to a million that's like it's going in front of them now finally to be to be voted on. And what that thing what that what is that, Mike? Yeah. Finally. Yeah. The the 1030 or 1034 is what it used to be called, but the capital gains tax. Yes. Yeah. So raising the 250 single to 500 for real estate, right?

For real estate. Per Sorry. Principal residence. You can sell if it passes, you now have 500,000 tax-free Per individual. for for individual or a million for a couple. Um What if you're three? Do you get 100 1. 5 million? If you're in a thruple? What if it's three people owning the property? Uh I I I don't know. I think it I think the tax law says per Individual. you would think per individual. Because it says or a couple, but if you're not a couple Right. Well, you're triple like you were saying. You're a thruple. Yeah. Maybe you get a million five. That would be nice. Well, and then you might want to why don't we we'll see that when if that when that passes we'll look into that because actually I wonder how it is now.

We'll look into it. Yeah. You know. Yeah, it's not something you commonly think about um because I'm not I'm not in that lifestyle. It says individually. Yeah, individually. You're listening to Real Estate Jerky. I'm Ed Parcaut, NBA veteran and mortgage advisor at Lending for Living alongside Re/Max Active Realtor Mike Kelly. All right, so we talked about national numbers and we talked about what's going on with the foreclosures right now. What's going on locally in in California? Well, our our our state numbers we look at uh two different uh sources of information. Redfin says that we're at 106,880. Now that's just single-family homes and they also say that that's down 6% year over year um which makes sense.

I mean there we are low inventory. And then realtor. com um looks at everything single-family one to four. One to four means duplex, triplex, fourplex and townhomes and condos 155,517. Um it's it's still, you know, we were at 250 in the heyday. Uh so we're low on the inventory scale continually low. New Haven, Michigan's calling me. Um Because they heard we were talking about them. Yeah, we're talking about them. And they want they said let's give them something to talk about. So Oh, aren't you Aren't I selective? I know a couple songs. Yes, you are. Um so inventory is low. And locally if we go to just the Stanislaus County Okay, you ready for this? You holding holding on to your chair? 760 active properties on the market.

That's from $0 which not heard of, but to the highest in the county. Uh and currently for the month of August we are on fire. We've closed 71 homes. Yeah, well, what did we end up closing last year last month? Do you something? Last 252 is what I remember. That's about 100 less than the months are yeah, exactly. Each month. So and, you know, now we've got all those new excuses. People are going back to school. You've missed the the window. Yeah, the worst so in April March and April, which is usually not the top, um we had more closings. Usually uh May, June, July, August are much better months. Right. All the months that are on fire, yeah. Yeah, and they and they aren't this month. Um that's too bad.

So did you do California and local? Okay, I stopped listening to you when you started talking. Yeah, I did. Yeah. It's funny. It's funny. I I can look over, you know, in in the monitor and I see these eyes just kind of gloss over and I think No, what I'm doing is like cuz I I went through the see Yeah, because what I wanted to go back to was the so what happened is Ice Ice Baby released the August mortgage monitor report this week and the story is a good one or whatever, but mortgage holders equity hit 18 trillion for the first time on record. That's what I was talking about. So 11 trillion is tappable across 47. 5 million borrowers. So there's a lot of equity out there to go do something, buy another house, go get that second If you want to go, you know, and a lot of that's in California and you want to go buy that house you eventually move to or retire to, do it now.

Uh it's but once you look at this roughly 212 Right. thousand dollars apiece, you know, that have that that you have equity in there. Annual home price growth also hit 14-month high at 1. 5%. However, the story number two is what we were kind of talking about earlier, but I wanted to go more in default and more depth than thank you default because I'm on my about 813,000 borrowers are underwater. Okay. Depth. What? Yeah, up from 44% from a year ago and roughly 320,000 are both underwater and behind on payments nearly double a year ago. Here's the part that really matters. Okay. Around 85% of those underwater of the 83 813,000 of those underwater loans were originated 2022 or later. So they're from 2022 to now, not before that.

About 75% of those are just borrowers used FHA or VA financing loans from 2022 forward now make about nearly 35% of all active foreclosure inventory. Wow. Yeah, and so if you look at the uh FHA loans 90 days plus late or in foreclosure, that's 5. 7% of that in June of them in June. Uh new VA defaults second quarter of 2026 up 25%. New FHA defaults in June up 15% and borrowers entering default overall it's actually down 4% overall. Uh but that there's still these numbers that we have out there. So that's a lot of properties that potentially could go bad, but that's still nothing compared to 20, you know, our the great recession and what we saw back then cuz those are 250,000 properties go on the market a week.

This is total 813,000 properties. Wow. So it's a lot. It's like a four it's like three years of foreclosures. Well, people like, well, it's it's, you know, it's it's a, you know, not a big deal. We we'll get through this. We'll get through this if rates come back down, we get through this war and everything else. We'll things will take off again and people can sell and whatever, but these people probably need help. The positive thing about the FHA and VA is they have to work with them. They can put up the 12 months of payments into another loan to where they can stay in that property which they don't have to pay on that loan until they refinance or sell that house. And so now VA has it also which they didn't have it before.

Well, all we can do. This is Real Estate Jerky on PowerTalk 1360 KFIV and I'm Mike Kelly, Re/Max executive realtor right beside Central Valley's Ed Parcaut, NBA veteran, mortgage expert and president of Lending for Living. And we were discussing foreclosures, properties that are kind of going underwater, stuff like that right as we were also discussing how many people have more than $212,000 worth of equity in their home. So the dichotomy is kind of crazy. Right. Oh, that's how that works. And actually if you relook at the numbers, FHA defaults are starting to go down current, not the past ones, but current. But VA is actually increasing. Okay. And you got to remember a lot of vets who buy are so back up a lot of the active duty people who buy, they have to transfer every three to four years.

So with what we're in right now, that's why they're having problems. They're transferring, but they can't sell the property because they still owe about the same or or or more than what they owed on it originally when they bought it. Right. And the rents won't cover the mortgage. No, not from 2020 not from 25 on. Yeah. Yeah. Which is sad. I mean these guys fight they're for us um on a daily basis and then we get into a situation where they get transferred and they suffer. So that when I was creating this clock it was like picture it. 18 trillion dollars of equity is the ocean. 800,000 underwater borrowers is a rip current. The ocean is fine. You still don't want your clients swimming in that particular spot.

And the spot is 2022 to 2025 purchase 3. 5% down in Texas or Florida. So that's where the biggest problem is. Um if you look at geographically uh the negative equity is concentrated in Texas and Florida shocking and the same two states topping that well below asking the California and Northeast showed low negative equity readings. Our borrowers bought in 2022 to 23 have appreciation underneath them. Theirs do not. So they don't have that same appreciation we got like when 20 if you go back to 2021 and 2022 in our area we went up 66% over those three years. Yeah. So That's that's a lot. Well, it's just telling you that Texas and Florida is going to have issues. And we always talk about this, but nobody did.

We said it. We were like, okay, everybody's moving these places and it's usually like a three-year event. It's like everybody who moved from the Bay Area out here, I'm getting away from the bay because I don't have to work. I don't I can do tell or whatever community whatever. And now they have to drive and now they're moving back, they're doing certain things. Well, that it's a three-year there. They all everybody moved from certain places move. There's this amazing things are so cheap here and then they raise up all those prices. The taxes in Texas you every 10 years your taxes will double if the appreciation's happening in there. And California doubled the values of all those homes. So people who live there like I can't afford it anymore.

So they're looking, you know, some of these states are looking at let's take away property tax at 65. We don't have to pay it anymore. I think they should do that. Right. Yeah, I do too. I do too. But the Teachers Association will fight that. Cuz they Of course, because they can't indoctrinate our kids to not care about their parents if they don't have that money. Right. What? Is that what the what? Yeah. All right. I'm just trying to see if there's anything else on that. All right, that's pretty much that for there. That was a lot of information. Well, I just, you know, even though that's happening, we're nowhere close to 2008. So don't even think it is. Um and then we were given another article from and this is the one I was trying to find the homes are selling below ask in 38 of the 50 biggest US cities.

Okay. Did you find do you have that one? I I I'm looking for it. It's right here. Yeah. All right, so I couldn't get I couldn't get the actual article to come up. It's a CNBC article. I know it's my fault because um You got to subscribe to them. No, I just needed to go over here. So 10 largest average discounts from asking price were Orlando, Florida was only 2. 48%. That's not that big of a deal. That's not that big of a deal. And I'm and so this is what I hate about these articles. Oh, these were terrible in these markets. Um so the difference between number 10 and number one is 2%. Miami is 4. 66%. That's not a lot difference in a house. If I listed it for 500,000 and if I that's $25,000 difference Right.

Right. Yeah. in the purchase price and that's really not that. It's less that but that's just an easy round number for me. That's how you just Yeah, these numbers don't look That's like when you were asking me to qualify those people the other day and you're like we're going to do this and I just said I'm doing 500,000 and you asked me what's their payment? Here's I gave you and then you're like we're going to do 500,000 what's the payment? It's the same because I've been I've been quoting you 500,000 since you first started talking to me. Cuz I know how this works. Everybody goes in at a certain thing then everybody wants to go up and then they go what's my payment now? It's the same payment.

Isn't that nicer than Yeah. Yeah, I like it when you predict the future. It's not predicting the future. It's just you know there's multiple offers on a property and they're going to write. We know we're going to go if you're writing an offer for 485 more than likely you're going to be at five something. Yeah, and too bad we had to be at at five something and then it just started feeling wrong. You know how you when you get that sense that nobody's going to negotiate in good faith later on down the road if something were to come up um you you're like uh yeah I'm trying to put a square peg in a round hole and they're both the square peg is a lot larger because you've seen those games where the square peg fits in every hole, right?

No, I never seen that. It's hilarious. Is that a new game? No, it's not a new game. It's one of our old when when I was a child you know the with everything was made out of wood and glue. Yeah, all your toys were wood. Wood and glue. And so were your teeth. Well, I had those replaced. You're you're listening to real estate jerky. I'm Ed Parco, MBA veteran and mortgage advisor and lending for living alongside Remax executive realtor Mike Kelly and we've been talking about you know the difference. I just the fact that we're seeing uh 38 of the 50 biggest US cities you that Yeah, but we we just said there was 41% of all properties out there has price reductions. Uh that probably is all states. Right.

Yeah, I mean that's it has to be it works that way cuz I mean before you know it's going to be half. But we knew you and I both knew that Florida and Texas was having problems for the past 8 9 months almost a year now. Right. Almost a year, yeah. And I'm going there uh end of the uh the 21st or that weekend. I'm going there to the Dallas of April August. Florida? No, Texas. Oh, Texas. Okay, Dallas. Dallas. Dallas is in Texas the last time I checked. Well, yeah. Dallas Cowboys Dallas Cowboys I wasn't looking at the words you were saying. They don't show up on the screen. I know they don't. Hey um how much time we got a little bit of time, right? Yes. So, Governor Newsom is it is who's trying to be at his best uh signed AB 1923 23 on Thursday requiring Fresno County to place the better roads safe streets initiative on the November ballot.

It passed the proposal um would allow a half cent sales tax used to fund roads and other forms of transport. I wonder I really do wonder with the horrible shape that most of our roads are in California um where these these tax dollars really go. It's pocket. Yeah, somebody's pocket other than the people that pave new roads or put a new slurry seal on which is a band-aid. Um this kind of stuff drives me crazy especially in light of all the fraud that's going on in California which I think they say is now at like $246 billion of fraud through the NGOs. Can I just get 1% of it? Yeah, give me yeah I would be fine with that. All right, well I want to talk about positive. Uh millennial housing report where they're buying homes and where they're still renting.

Uh millennial home ownership increased by 74% in 5 years. That's a big percent. Well, they didn't have anything before. That's true. They were still in the basement, right? Yeah, top 20 metro areas with the greatest increases in millennial home ownership are led by sunny regions Florida and California of course cuz where else do you want to live besides California? Nowhere. Um unexpected urban hubs such as Dallas, San Antonio, Philadelphia, New York also made the list with ownership growth rates at reaching 90% or higher. The number of millennial renters also grew uh almost modestly 5% over the last 5 years to reach a total of 12. 6 million households. Florida stands out to be the most significant gains in millennial renters cuz things are very expensive in Florida.

Right. Um that was a 34% increase. The highest concentration of millennial renters remain in coastal powerhouses such as Los Angeles, San Jose, California, New York and San Francisco. I don't know why they have to throw San Jose, California. Is there another San Jose in the United States? Um no, there's one in Mexico. There might be one in the United States. Yeah, well I don't know. It probably a like New Mexico or something like that. Yeah. So, yeah probably in New Mexico. That seems like it makes sense. Yeah. So, the 74% were are we talking rental through the whole thing? It's on everything. It's just thing the home ownership rate for them. Okay. Okay. Cuz you got to remember these people skew this stuff.

Yeah, they do. Yeah, they say well they're but that's renting and that's versus buying that's everything. So, it's included everything in there. Yeah. I guess if you're a renter it it's you're not a homeowner. So, you say you're a tenant. You're what? A tenant. So, millennial home ownership in California uh there's the top 11 they they looked at. Los Angeles has 29. 9% of uh millennials owners. So, household ownership in 2023 387,212. Uh millennial ownership in 2018 was only 223,000. I just talked to one the other day that I just was referred to me by a agent I mean a past uh rotary guy. It's his daughter and she was in LA. She worked in the fashion industry and then they moved up here and she's been to telemarketing you know not telemarketing she's been telecommuting.

Sorry, I got a frog in my throat. Rivet. Um and the the problem is when she moved up here she went self-employed because the the company's not in California. Here's what people understand. So, a lot of these people get laid off and they get picked up by another company from Canada or somewhere else and they're like oh California uh we don't do employees in California we only do uh we only do contract workers. Correct. And so she's only been a contract worker for about a year and 2 months. Oh. So, that makes it tough. Yeah, they wanted to buy the house that they're in. I'm like you the problem is I understand I said and also the way you're getting paid right now they're paying you but you're you're going to be paying like I don't want to say 45% we got the 15% self-employment tax plus the other stuff.

You're going to pay so much in taxes it makes no sense for what you do to be self-employed unless you have an actual business. And she's like yeah they're telling me I need to have a get a corporation and all this. I'm like why don't you just find a local job for about 60 grand and have a nice day. LLC. Yeah. And she was going to be go with somebody local but then she had this opportunity and I'm like you should have went cuz if you go pick up something right now as a as a employee from self-employed to that I'll finish that up on the other side. Yeah. Okay, I I cannot wait. Real estate jerky power talk 1360 KFIV is always bringing you the latest information on the real estate industry and some other things.

If you have any questions or comments about our discussion today feel free to email us at radio@realestatejerky. com. I can't talk today. It's time to go. Fourth segment and I'm done. All right, so I was talking about one of my new clients and we're going through the numbers that she was referred to me and she's a millennial. She's from LA originally. Right. They couldn't buy the you know they would have been able to buy down there with but they didn't have enough income. They moved to Modesto. They tried to buy right away but they didn't have the income. Same thing. I talked to a mortgage broker or some other lender back then and they told me I had to wait for at least being in business for 2 years.

True, but you're going to need to show income. So, it's really two tax return years. Right? In the first year tax return right in the first year she only claimed 2 months. So, there's not you know so if you average 2 years for her it's not really going to work. But bottom line what a lot of people understand is when they go from an employee to a contract worker you are now self-employed. But they're paying me my salary. I understand. I get that. Yeah, that's that's what that's what happens is the people go but they're paying me my salary. But because they're not paying you as a W2 wage earner you have to pay your taxes now. You have to do all this stuff. You are considered self-employed. Period.

There's nothing we can do about it. And she's not self-employed as a corporation or LLC or It didn't didn't even matter either way she it could be it doesn't matter how she's still not 2 years. And I was explaining to her and this didn't come out really well on the other side is I said so I had an architect who came to me and he was self-employed. He wrote off everything showed like 30 grand of income and I said you know if you went to work for an architect firm and but right now today I could use that income as a W2 wage earner. Right? You go get he goes what? I go yeah he goes I've been getting hit by a couple of these companies that want me to come on there. And so he went and got a new job for 120 grand a year able to buy the house right away because we you don't have to the what people understand is when you go from a wage earner to a self-employed you have to have 2-year history that you can actually run a business and pay yourself and you make money and all that.

But if you work for somebody you don't have that same 2-year history which is really weird but that's how that works. I know. Uh we haven't caught up with the whole gig economy and everything else that's going on there in the lending world. Uh and she couldn't do it you know the DSCR cuz they don't have 20% to put down. There's many things that she couldn't do. They want to do a regular loan with 3 3 and 1/2% down. You have to then do regular job stuff. And so I explained that to her. I said but what you could do is get a family member to come on as a non-occupying co-borrower to help you qualify and that's what they're probably going to do. Keep going. Right. Okay. Long story short just be careful when you switch jobs switch careers and now you're a contractor cuz this is not the first time this has happened.

I helped some other clients buy and the the wife was very upset that she couldn't use her income. Well, I said well you're no longer a employee. Yeah, you're this because she went to a company in Canada who was like you're in California we're not paying tax. We're not doing W2. Yeah, we're not all the makeup. Because that's what's wrong with California is because of the employee laws and everything else a lot of companies will not even come here with stuff. They're like it's not worth it for us. We'll stay here make enough money and we don't need to deal with California people. Right. Usually you have to produce like 40 times more than what they're paying you for um and then you're going to feel like you're overworked.

Well, it's just sad because it's it's because of California laws and um when we were in uh Michigan we were at uh what's that not Betty Crocker what's that uh that restaurant that uh people go to that has all the food and everything I uh anyway it's a restaurant. I was asking It's a restaurant with all the food. Well, I can't think of the name. I always want to say Country Crock but that's not it. Oh, uh Cracker Barrel. Thank you. Okay. Yeah. Anyway, we were eating there and I was talking to the waitress and they make 4 bucks an hour. That's it. But the rest is tips? Yes. Okay. So, they survive on tips? Correct. But in California that's not how that works. Are they taxed on their tips? Uh no, because taxes they don't get taxed on tips anymore.

Okay. Because of the the brand new big bill. Yeah, the big bill that's ruined everybody's lives I understand. Well, yeah cuz so many people are so upset. But all right, so back to millennials that we took us down this whole road. They were talking about millennial home ownership in California. So, Los Angeles increased by 29%, San Jose by 34%, San Diego 35%, San Francisco by 37, Oxnard by 44%. Check this out number six on the 11 list Modesto 47. 8%, Fresno 47. 8%. So, how did Fresno get in front of us if it's the same percentage? Wow. Cuz they had more cuz it's home ownership number number percent wise not just percentage. Sacramento 50%, Stockton 51%, Bakersfield 51 and Riverside, California 53.

I feel sorry for the people in Bakersfield. Yeah. That is like the worst place to you know the name tells you everything. It does tell you You are everything. Yeah. You're listening to Real Estate Jerky. I'm Ed Parcaut, MBA veteran and mortgage advisor and lending for living alongside Remax executive realtor Mike Kelly. If you have questions or comments for us, feel free to reach out by emailing us at radio@realestatejerky. com. All right, so that's what the millennial home ownership means out there, which is good. I'm glad that they're able to purchase and I'm glad that they're able to buy. Everybody should be able be a homeowner. That's how it should be. Yeah. Yeah. And what did help Right.

And what helped this week was the fact that inflation came in as expected. Um we're not going to see rates, you know, the likelihood of the next time the Fed meets to raise rates is not likely going to happen, which is good. Which is good. Yeah. But until this oil gets back down below where we were or back to where we were That was like in the '60s, right? It was 75. Yeah, '60s. Very close. Yeah. Um then we're not going to see these rates go back down. Rates are up a little bit and that's just how it is. But these are average rates. We just got so spoiled with the pandemic rates that people think that's where rates are supposed to be. That is not where rates are supposed to be. Rates in are in a good economy where things are really good, taking off.

This is where rates are. You make more money to pay the higher rates, interest rates and the whole nine yards. Yeah. Yeah, it's we were in an abby normal um climate there before. Okay, duck Mr. Frankenstein. Yeah. I could do all the all the lines if you want me to. Okay, who can't? I think only Uh millennials. I'm sure their parents made them watch it. Well, 74% of them are um buying homes, right? Yeah, but they're not watching those movies. No. It's just not funny to them. Well, it just, you know, it's just what you grew up on. Yeah. You know, certain movies, certain This stuff was hilarious. Blazing Saddles included. That was horrible. I don't care which Yeah, I'm sure you also liked Monty Python.

Yep, yep. I uh I was in my teens in the '70s. You weren't born yet, right? Good for you. Uh yeah, I was born. Very nice. Uh so cost of living in all 50 states is up. That's all I'm going to say. I'm not going to get in the whole thing. You know, I'm not much time. Uh but it's just Let's back up. I want to go back to one more thing we talked about earlier in the show. Record equity is huge in the United States. There is so much money in in equity out there for people. Um 18 trillion home equity. That's a lot of equity out there for people and stuff. The two states that are having the biggest problem, we talked about this before, Texas and Florida. Yeah. And Florida. Uh and that's not only do you have those issues with buying and having your house at a certain thing, you also have that insurance problem in in Florida.

Texas not so much. But I just I just can't do Texas or Florida, the heat. No, that humidity would kill you. You'd you'd wither away. Wouldn't wither away. I just it's not my thing. Yeah. My skin would be so moist, but that's be so with everything else. Yeah, it's it's it's uncomfortable when you sweat while taking a shower. Well, that's just like when we were in Michigan, the humidity, you could fill it just there. Yeah. It wasn't super It wasn't super hot. It was like in the '70s and then, you know, 80 82. But then the day of the wedding, it luckily it was rain raining, so it was so much better. We were inside in the barn. Yeah. Paul, who's in the barn? I don't know. I don't know that one. Uh speaking of that, did you know they remade the Little House on the Prairie and it's on Netflix?

Why? I don't know. I have no idea why they did that. I didn't like it when it was out originally. And guess what? That's a wrap for today, folks. Yeah, thank you for listening to us. We really appreciate you. Uh if you like what we do here, please let other people know. Share, subscribe to our podcast. Uh we also do this Monday through Friday on Facebook, LinkedIn and YouTube. Uh but again, thanks for stopping by. If you have any questions or you need anything, you reach out to us by radio@realestatejerky. com is our email. Give me a call, Ed Parcaut at 209-404-1915. Reach out to Mike Kelly at 209-968-5633. If you missed any of the show, don't worry, you can catch up via podcast wherever you find your favorite podcast at.

We're proud to live in a country can still build personal wealth through home ownership. Join us here on Real Estate Jerky. We always give you something to chew on every Saturday at noon and Sundays at 3:00 p. m. on Power Talk 1360 KFBK. Mike, thanks for being on the show today. Oh my gosh, is it really? Glad to be here. Thanks for tuning in Real Estate Jerky. We'll talk to you next week.