Why are House Prices not Tumbling due to Covid (HA 1272)

Steven Butala:
And there’s some variable in there that you have overlooked. It could be a plant just closed. It could be, there’s all kinds of stuff that goes on, but that’s what split testing is designed to smoke out without having you parachute in there and talk to people and figure it out. So why fight it? Maybe in this partnership that you guys have, you have him do the mail and you do some other stuff. I don’t know. Go ahead.

Jill DeWit:
No, I’m just curious though, too. He said, it’s exception of our own info. So wait, scroll up. I don’t want to pick on Palani, but I don’t know. Is there even something interesting there? Because we have found that using local information makes a difference.

Steven Butala:
Local phone numbers.

Jill DeWit:
Yeah, so it could be something that he’s doing because you said name, phone, address, business name. Not picking on you Palani, but let me just … It could be something as you’re mailing a real rural older town community and they see a name like Palani. Palani, and it’s really long they can’t pronounce it. Let’s just say, I don’t know, but it could be something just simple like that.

Steven Butala:
Well that, and along those lines-

Jill DeWit:
I don’t want you to change who you are, but I don’t know, it’s just an idea. And his name is Bob Smith and they know 18 Bob Smith’s. Maybe they just like … I don’t know. And in a little town in rural Georgia and they see that name, maybe it’s a name like Opie or something. Not kidding. I’m dealing with an attorney whose first name is Opie. And I’m like, “I haven’t heard that name in a while. And I didn’t know that name was still around, and maybe we’ll have a loving response to the name Opie.” I don’t know.

Steven Butala:
We just recently started doing mail with local phone numbers. So we’re sending mail out to, let’s say Ohio with an Ohio phone number. That’s forwards to all of our old phone numbers and we buy the phone number so we own it forever. We have also realized too through split testing that Jill, because she’s a female, gets a much better response than a male does in a like kind split tests. So we do split tests too, but we don’t argue about it. I don’t care what the reason is. If she gets a better response, great. You can’t argue with a lot of this.

Jill DeWit:
And there’s obviously a little something.

Steven Butala:
We live in this world right now where people demand … I’m going to vent a little. We live in a world right now where people demand to be accepted for who they are. So think about that for a second. If I just came on this show and the other shows that we have, or the webinars that we do, and every time I’m in front of the camera, I’m exactly the same person I am the first half hour that I wake up in the morning that Jill sees. The person that Jill knows is not this person right now.

Jill DeWit:
Nope, far from it.

Steven Butala:
And it just wouldn’t work. People want that.

Jill DeWit:
I’m kidding.

Steven Butala:
No, no. Look, people don’t want that. When you’re in Rome, do as the Romans do. So you have to play to your audience and give them what they want, within reason. So there’s a cultural thing that’s going on right now about being accepted for exactly who you are. And if you talk to anybody, any actor, anybody like Oprah Winfrey, I’m telling you, the person that you see on a screen, that’s not that person. So just think about that. What is that?

Jill DeWit:
I’m posing.

Steven Butala:
Look, man, we’re here to make money. We’re here to get a great mailer response, flips some property, talk on the phone to people and tell them what they want to hear within reason. And you can’t do that by jamming your agenda, whatever it is, down someone’s throat. Split testing is great. Today’s topic, why are house prices not tumbling due to the COVID? This is the meat of the show.

Jill DeWit:
I bet though that our two reasons are very similar. I have two.

Steven Butala:
You go first.

Jill DeWit:
Really?

Steven Butala:
Yeah.

Jill DeWit:
Okay.

Steven Butala:
I just spewed my stuff all over, all over the microphone.

Jill DeWit:
Why don’t you pose for a few minutes?

Steven Butala:
I will not Vanna White this. I bet people don’t even know who that is.

Jill DeWit:
That’s good. All right, so here’s what I think. I quickly jotted down two. I’m sure there are several more, but I have two. One is A, I think there are plenty of federal programs that are delaying the inevitable.

Steven Butala:
What kind of programs, Jill?

Jill DeWit:
Programs like, you don’t have to pay your rent right now, and you don’t have to do this right now.

Steven Butala:
Oh you mean the government is interrupting pure supply and demand?

Jill DeWit:
Pretty much. And you won’t get a credit ding, and this won’t affect this situation, and we’re not going to foreclose on you for X amount of days. So I’m just talking big picture. We don’t need to get into details, you know what I’m saying?

Steven Butala:
And we do have the same stuff. She means forbearance program and the termination, or the disallowance by the federal government for banks, mortgage companies to foreclose, because of this COVID, this hardship thing. Unprecedented in the history of this country. Has anyone said to a bank, any government entity has said to a bank, “Hey, we know that your customers are not paying and we’re not asking you, we’re telling you, you can’t foreclose on this.” What they’re doing is building a house of cards, in a pretty dramatic way.

Jill DeWit:
Now my second reason is that some markets, again, based on history, there are some markets that just aren’t hit as hard. And I was on a webinar last week about this. And we talked about the places that are not … The companies and the environments that are doing okay, and some very well, like industrial and tech. So when you have some of those areas around there, those people, they’re not losing their jobs. They’re not closing up shops. They’re not retail. They’re not a mall. I hate to think what’s going to happen with Mall of America and all that real estate around there. I mean, I feel bad.

Steven Butala:
Jill, we had the exact same two points. And I can’t recall when we both had the exact same two points without … We don’t ever share this stuff before the show, just to see where we’re coming from. So here’s some stats. Approximately 30% of the people, so this is June 18. Now in the early days of June 2020, approximately 30% of the people who had mortgages either didn’t pay or partially paid. So that’s a mudslide, landslide, horrific statistic. Usually it’s like 6%, two to 6%. And then the banks in normal times are allowed to do something about that two to 6% where there’s negative repercussions for your actions, whether it’s credit score or-

Jill DeWit:
You’re losing your house.

Steven Butala:
So to throw on top of that, this new concept called forbearance, where if you do pick up the phone and tell your bank, “I’m not going to pay.” They say, “Okay, great. We’re not happy about it. You’re not happy about it. The rule says you have 30 to 90 days to not pay. We’re going to tack it on the back of your loan for you. And that’s fine. Oh by the way, we’re going to charge you the interest all the way between now and the next 30 years on that new principal.” So we’re staving off the wolves here. The wolves are at the door. So what’s going to happen? That’s why it’s not tumbling. And if you look at the stats, these last two or three months have been the single lowest months in foreclosure rates ever, because they’re not allowed to foreclose. Banks are not allowed.

Steven Butala:
So let’s just say for academic exercise, you stop paying in March. And then you have 90 days of forbearance and 90 days until foreclose. They’re going to allow the banks. So you have six months to a year before the real waterfall of foreclosures and the decay of house pricing goes down, pretty dramatically. Then to throw on top of that, we have the lowest mortgage rates ever right now. And the highest demand because of population growth, ever. So there’s this propped up concept of affordable housing. That term has been pushed down our throats for a year. And I don’t believe most of it’s true. I believe that there is affordable housing, it’s just not where people want to live. Really. Think about that. There’s a ton affordable house.

Jill DeWit:
Oh yeah, there is.

Steven Butala:
You can buy a house, a nice house, for $20,000 in Southern Illinois. You just don’t want to live there. You want to live by the beach or whatever.

Jill DeWit:
Or where your family is, or where your doctor is, or your dry cleaning is. Whatever it is.

Steven Butala:
You can’t stop foreclosure and allow people to not pay for months and months and months without some huge negative repercussion. This is an election year. And I think after this election is over with, however it goes, I don’t care actually how it goes. That next person that’s going to deal with it is going to pull out those stops.

Jill DeWit:
So it’s coming. I guess that’s a big thing. So what are we doing about it?

Steven Butala:
Are you asking me?

Jill DeWit:
Yes, will you please share?

Steven Butala:
I’m sitting here with the little smirk on my face saying, “I know this is going to come.” I’m talking to investors. I’m honing up my, how I look at data to find out where these places are, because Jill’s absolutely right. The neighborhood that we live in, isn’t going to be Affected by this. Maybe 2% or something like that from a price erosion, but there’s neighborhoods in every single MSA that are going to be dramatically affected based on demographic. And one of the other things that’s different about this recession more than any of the ones that I’ve ever seen or been involved in, is that the people that who are infected … Infected. That’s Freudian. The people who are affected economically.

Jill DeWit:
Wow.

Steven Butala:
The people who are effected economically are in one-to-one ratio with business closings. Businesses are still closed. Restaurants.

Jill DeWit:
Yeah, retail.

Steven Butala:
Retail, hair salons.

Jill DeWit:
Nail. We don’t have nails here. There’s a lot of personal things you can’t get down here.

Steven Butala:
Those people typically don’t live in homes.

Jill DeWit:
They’re apartments they rent.

Steven Butala:
Yes. So there’s that component that we don’t know exactly how that’s going to play out yet.

Jill DeWit:
It’s going to be interesting.

Steven Butala:
Yeah.

Jill DeWit:
Happy you could join us today. Excuse me. Every Monday, Wednesday and Friday, we’re over on the Land Academy Show. Get to know your script. And here on the House Academy Show, we are here Tuesdays and Thursdays.

Steven Butala:
Tomorrow the episode on the Land Academy Show is called Life Restarts When you Leave. What the heck is he talking about now? You are not alone in your real estate ambition.

Jill DeWit:
It sounds like a divorce situation.

Steven Butala:
It is.

Jill DeWit:
Oh, let’s not talk about it now. I’m going to write down my own notes for tomorrow when we sit and talk about this.

Steven Butala:
Here for you and all the listeners.

Jill DeWit:
This sounds pretty drastic. This is scary.

Steven Butala:
I just want you to think about this and we’ll talk about it tomorrow.

Jill DeWit:
Okay.

Steven Butala:
Think about every time you’ve either been forced to leave something or left on your own because you just didn’t want to be there anymore. Whether it’s a social relationship, high school, college, maybe a job situation. You either leave because you want to, or you’re asked to leave. And then think about the next year of your life. Did your life get better?

Jill DeWit:
It’s kind of funny. I like to think about that. I want to spend some time with that one.

Steven Butala:
Did your life get better after that?

Jill DeWit:
Why were you asked to leave? Let’s analyze that.

Steven Butala:
Jill has a little anecdotal thing that she talks about, about leasing out library books in the back of the class, and then how she was asked to not do that anymore.

Jill DeWit:
Oh yeah, that’s good.

Steven Butala:
It’s a good story. We can start with that tomorrow.

Jill DeWit:
Okay, good. That’s quite a-

Steven Butala:
I think you were asked to leave because of that.

Jill DeWit:
Oh, it was hilarious. I got in trouble.

Jill DeWit:
The House Academy Show remains commercial free for you, our loyal listener. So wherever you’re watching, wherever you’re listening, please subscribe and rate us there. We are Steve and Jill.

Steven Butala:
Information …

Jill DeWit:
… and inspiration …

Steven Butala:
… to buy undervalued property.