Housing Market Predictions for 2022 (HA 1624)

Transcript:

Steven Jack Butala:
Steve and Jill here.

Jill DeWit:
Hi.

Steven Jack Butala:
Welcome to the Land Academy Show. Really the House Academy Show today. Entertaining real estate investment talk. I’m Steven Jack Butala.

Jill DeWit:
And I’m Jill DeWit. And, we are broadcasting from the valley of the sun.

Steven Jack Butala:
Today, Jill and I are talking about housing predictions for 2022.

Jill DeWit:
I like to say I was asking this question too, to you earlier. I’m like, “I know you read up on all this stuff. You’re really current on all this stuff. What the heck is everybody saying?” I’m personally dying to know. I have my thoughts, but I want to know what your thoughts are and what the general opinion is.

Steven Jack Butala:
So, it’s the fourth quarter, it’s October 2021. It’s a fourth quarter where everyone who’s got any type of involvement in any market, whether it’s a stock market or commodities or anything else or weather or anything, makes predictions for next year. And housing is no different. So, Core Logic piped in Fannie Mae, of course, which is the mortgage insurance backed federal government scenario, which allows a lot of mortgages to happen. So, they all have predictions and I’ll talk about them in a minute here.

Jill DeWit:
Cool.

Steven Jack Butala:
Before we get into it, Hey, by the way, it’s all good. In my opinion, it’s not hockey stick straight up. It’s good. Slow growth.

Jill DeWit:
Spoiler alert.

Steven Jack Butala:
Before we get into it, let’s take a question posted by one of our members on the landinvestors.com online community it’s free. And don’t forget to subscribe on the YouTube Land Academy channel and comment on the shows you like.

Jill DeWit:
Jason wrote, you guys talk all about houses a lot lately. If we buy and sell land, what is the point of this? I’ve renovated houses in a past life with success, but decide it’s not worth it in the end.

Steven Jack Butala:
Amen to that.

Jill DeWit:
Yeah.

Steven Jack Butala:
So you’re in the same boat as almost all of us, probably it’s a logical conclusion to look at the things that I think suck. We talked about this a couple days ago.

Jill DeWit:
Like Monday.

Steven Jack Butala:
Yeah. What sucks about renovating houses is that… Pick window treatments. I always come back to that. If I hear the word window treatment, I’m not going to get involved in it financially. And so, I’m sorry that you had to go through that welcome to the land investment business.

Jill DeWit:
I’m sorry. you had to go through this. Okay.

Steven Jack Butala:
The housing market is very closely tied to the land market for a few reasons. The biggest reason is that when house values go up, people have extra money. When housing values go up and I’m going to get all kinds of comments on this wages generally go up. Compensation or equity generally goes up. Wages in themselves are so untied. So tragically disassociated with house values. It’s staggering.

Jill DeWit:
It’s weird.

Steven Jack Butala:
But in general, from an economic standpoint, not an accounting or reality standpoint, economic, that’s not reality. That’s just economics equity values go up when housing values go up. Which means there’s more access to more disposable income on a macro level, which means people have access to more money so they can buy and sell land. Number one, this is a good question.

Jill DeWit:
I like the pen on your finger. I’m like, I could just see… you know what’s going to happen. Our post production guys are going to poke arrows that what’s with the pen?

Steven Jack Butala:
They will now for sure.

Jill DeWit:
Yeah, they will because I just said it.

Steven Jack Butala:
Number two when housing, it was funny for a while. Jill.

Jill DeWit:
Okay.

Steven Jack Butala:
When housing goes up like this, there’s a need for more housing, people sell their house, they got to move somewhere else. So land, it gets utilized for new housing and we’re in a real strange situation right now where new housing, because there was such a crash and because the publicly traded new housing development companies like toll brothers and stuff got really hit hard for overbuilding. They really have chilled out for the last 10 years. And so now here we are, it’s 2021 and there’s a huge need for new brand new housing. It’s a separate sector from used housing, which we all understand and it’s under built and so they need land and it’s driving the prices up, which is great for us. Today’s topic, housing market predictions for 2022. This is the meat of the show.

Jill DeWit:
That’s funny you say that. I was just reading an article about a bunch of land coming available here in our state where they’re linking to free ways. Like the city of Phoenix is going to open up some land, not previously for sale.

Steven Jack Butala:
I saw that too.

Jill DeWit:
And they’re linking two freeways. And then of course we’re all like, oh, that looks like potentially a path for growth.

Steven Jack Butala:
I’m on those lists, those mailing, those article a list too. And I’m seeing month over month, there’s constant record breaking price per acre sales for property. In fact, there was one yesterday. It was actually in a county in Phoenix and it was owned by a fund and institutional fund. Which got me thinking, I wrote a bunch of notes on article. It’s like we could start a Land Academy fund and easily start knocking these properties out.

Jill DeWit:
I don’t think that’s crazy.

Steven Jack Butala:
Instead of buying for 30 and selling for 90 or 100, like we do all day long. How about buy for 30 million and sell for 40 million?

Jill DeWit:
Right. I’m good with that.

Steven Jack Butala:
The next week.

Jill DeWit:
I know exactly.

Steven Jack Butala:
All it takes is somebody on the phone for you to call it? Who’s going to buy it.

Jill DeWit:
Exactly.

Steven Jack Butala:
Wow. Well, we got off of topic there. Land prices, especially in semi-urban environments are directly tied to housing directly. So here’s what the feds say what’s going to happen next year for, for real estate values in general, 8% increase. Fannie Mae says it’s about an 8% increase national annually. Yeah. And I’ll get to regional in a minute. That’s a great point. Okay. But just for a perspective since 1987, up until COVID, it’s been an average of four years. So double the growth this last year, closer to 20%. So you’ll see there’re tricks in all these numbers. All you see in the market, and I’ll talk about the source of these numbers. The source of the numbers are millennials. They’re the writers of all these articles. And so it’s in between the lines of all these articles is tragedy, tragedy, tragedy.

Jill DeWit:
Right?

Steven Jack Butala:
Instead of isn’t this great, let’s enjoy this while it lasts.

Jill DeWit:
Why because they’re just like the sky is falling. They just don’t think It’s not going to last.

Steven Jack Butala:
Because young people, it’s not millennials. It’s all young people, even my generation want to live in cities.

Jill DeWit:
Oh, okay.

Steven Jack Butala:
They don’t want to live.

Jill DeWit:
Oh they’re complaining because it’s going up. And then they’re not able to buy at the time.

Steven Jack Butala:
I can’t afford. Well guess whose buying and I’m going to rant for a second. She brought this up.

Jill DeWit:
They already bought it, people that already bought are excited.

Steven Jack Butala:
Millennials sell property to each other in urban areas. So who’s to blame for not affordable urban properties, themselves.

Jill DeWit:
Understood.

Steven Jack Butala:
And the people that sell property, a millennial sells a property, makes more money than the person who’s trying to buy it. And who’s upset about it. Whose fault is that?

Jill DeWit:
Yeah.

Steven Jack Butala:
No one’s fault.

Jill DeWit:
Exactly.

Steven Jack Butala:
Good for the seller. Maybe it’ll motivate the buyer millennial who’s really, wants to be able to afford the house that they can’t afford. That’s what makes the world go around. Maybe they might have to move out into the suburbs for four years, save some money with every paycheck and come back, maybe get a side gig and go buy the penthouse of their dreams downtown.

Jill DeWit:
Yeah.

Steven Jack Butala:
Tough luck fella. I’ve never lived where I wanted really wanted to never, because I couldn’t afford it until now. Fannie Mae says eight percent-ish; 4% annual in comparison to 4% annual. Mortgage rates are about 3.1% now, they should go to 3.4%. There’s no surprise there.

Jill DeWit:
I saw that.

Steven Jack Butala:
That’s all still good. Zillow is a little more optimistic. They think it’s going to be 12%. And so…

Jill DeWit:
The national average increase is 12?

Steven Jack Butala:
Increase of prices. Housing prices are value. Okay. And then core logic is I believe this is publicity stunt. They came out at 2% just so they could get in the news. They just want to get in the news.

Jill DeWit:
Like bad publicity is publicity? What the heck?

Steven Jack Butala:
So nobody’s saying it’s going to go down. That’s what’s important here. That’s the real takeaway. And let’s just say it is going to go up, but it’s not going to go up like 20%.

Jill DeWit:
Right.

Steven Jack Butala:
Like it did over these last couple of years. Let’s just say two to eight percent and that’s real safe. Now to Joe’s point earlier, those are national numbers. If you live in Southern California, it’s not going to be 4%. I’ll tell you right now, it’s going to be closer to 10 or 15 or more. If you live in Central to Southeastern Michigan, it might go down. It’s been going down the there for years. I can say that because I’m from there. So I’m not knocking that area specifically, but regions really matter. So here at land academy, we’re all about bringing it right down to the zip code to see what’s what that’s going to happen and believe me that data exists. And you can pretty rationally look at the national statistics in general and really spend some time on it and find out where that little market is wherever you are investing, what it’s going to do.

Jill DeWit:
I agree. Now you made me think about this. Like people submit deals to me to look at, right? So I’m looking at stuff all the time, all over the country. And I’m wondering like you guys, I see people looking at numbers, but they’re missing one other key factor, which is days on market right now.

Steven Jack Butala:
I thought you were going to say missing a zero, or adding a zero on your case.

Jill DeWit:
Exactly.

Steven Jack Butala:
Take a zero off this. It might be a good thing.

Jill DeWit:
There is a lot of those, some of that’s going on, but what it is though, if you don’t take a zero off and the days on market are great. We can work with that. But some people are missing that point. So I just thought I’d take this moment to say knock it off. Just kidding.

Steven Jack Butala:
So why, why is this all happening? Why is it constantly going up? Number one and most importantly, and this is what’s so different. So very different than any market I have ever experience in my 54 years. This generation will add 4.8 million people. There are 4.8 million people turning 30 starting this year through 2025.

Jill DeWit:
Wow. Okay.

Steven Jack Butala:
And then it doesn’t die or drop off on like a cliff. It just starts to erode a little. So it goes from 4.8 to 4.7, six, five, and eventually goes back down to rational growth numbers.

Jill DeWit:
Okay.

Steven Jack Butala:
There’s just more people in a really good way. They’re more educated. They work at home, that’s number two. They understand computers and can do their job successfully from home and have proven that since COVID and during COVID that’s here to stay.

Jill DeWit:
Yeah.

Steven Jack Butala:
Everybody thinks they’re all going back to work. We’re not going to go back to work. There’s a certain level of education and job description that will never go back to work in an office. They might have zoom meetings. They might go in once a week, a month, but they won’t go back. And so they need a bigger house to live in.

Jill DeWit:
And they see the value.

Steven Jack Butala:
And they also need new refrigerators and just a better environment and they can afford it.

Jill DeWit:
Right. They’re not going to be crammed in an apartment in downtown because they have to be. And they were doing that.

Steven Jack Butala:
And then the trifecta is mortgage rates, they’re the lowest they’ve ever been ever.

Jill DeWit:
Isn’t it great?

Steven Jack Butala:
My parents bought a house. I can remember this. My dad was an accountant, so all I heard was numbers, screaming numbers all day long, not in a good way. 17% mortgage, the first house I bought in Detroit was a 7% mortgage. This was in the late eighties, early nineties.

Jill DeWit:
Right, it’s amazing.

Steven Jack Butala:
We’re in the two percents now with good credit and a rational down payment, you can get a 2% mortgage.

Jill DeWit:
It’s awesome.

Steven Jack Butala:
That’s insane.

Jill DeWit:
I agree.

Steven Jack Butala:
Insanely good. So it’s all good. In my opinion.

Jill DeWit:
Thank you.

Steven Jack Butala:
We’ve had too much rapid growth. I think it causes inflation and a bunch of other stuff. I would love to see four, five, eight percent growth next year with consistent growth numbers in the regions that make sense. You’re going to see higher numbers in Florida, higher numbers in California, higher numbers in Arizona. Arizona was 30% by the way.

Jill DeWit:
That’s better than what I saw, maybe it was our little zip code. I think I saw our zip code 20%, but Arizona 30, this is awesome.

Steven Jack Butala:
That might be a little bit too high. It’s going to cause some problems. But I believe it’s all good news. Except for those few people that are whining about affordable housing, because they just can’t keep up in life. If you can’t afford the house that you want, that’s an indication of another problem, not the real estate market.

Jill DeWit:
Happy you joined us today. Five days a week, you can find us here on the Land Academy and House Academy Show.

Steven Jack Butala:
And on this episode on the Land Academy Show as if this wasn’t enough.

Jill DeWit:
Yeah.

Steven Jack Butala:
It’s Jack Thursday. And I’m going to talk about distractions from success. You are not alone in your real estate ambition.

Jill DeWit:
Did you get it out? That was good.

Steven Jack Butala:
Now that was like 10% of what I had to say, but I have to keep it to 15 minutes.

Jill DeWit:
You can add some right now.

Steven Jack Butala:
Oh, save it for the Thursday call.

Jill DeWit:
Okay, on the third with the members?

Steven Jack Butala:
Yeah, because we talk about this on the Thursday members call and we’re going to get into it with regions real specifically within regions, because that’s what we’re all about here is land investors. We’re great, the national [inaudible 00:14:01], the national average is, it’s been eight percent. It’s going to be, it’s been, yeah. We know four percent. It’s going to be eight percent next year. How does that help me in central Ohio for example, it doesn’t.

Jill DeWit:
Right.

Steven Jack Butala:
But that’s not what this show’s for. This show is for just explaining in my opinion or our opinion what’s possible. And so digging down into central Ohio may or may not be a good place to buy land.

Jill DeWit:
Right.

Steven Jack Butala:
It’s not, by the way.

Jill DeWit:
Yeah. Hey speaking, if you’re wondering what we’re talking about by the way of this Thursday member call. Every Thursday, we’ve been doing it for years now, have a closed Zoom time with our members. All of them. It goes an hour or two it’s every Thursday at three o’clock Pacific time. And we look at deals. We talk about this stuff. It gets really specific. If you want to be a fly in the wall, you sure can. We will. We will love to have you, so just send an email to support. I’m sure you’re going to see the link right now or see the email support@landacademy.com and just say, Hey, I want to get into a Thursday member call and see what this is all about. And we’d love to have you.

Steve & Jill Together:
We are Steve and Jill.

Steven Jack Butala:
Information.

Jill DeWit:
And inspiration.

Steven Jack Butala:
To buy undervalued property.

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